Accommodation quality is on the up, despite concerns that a flurry of new developments could lead to an oversupply

For years, travellers to Accra complained about the quality of accommodation. Room and service standards were often poor, while prices were high, particularly following the discovery of oil, which in turn led to an influx of business travellers. This situation is now beginning to change as a growing number of four- and five-star hotels are opening in the capital in addition to other major centres. But this activity is not only focused on urban business tourism: new resorts are also springing up, while older ones are being refurbished along the coast and in the interior.

Supply And Demand

Hotel room supply in Ghana grew at a compound average rate of 8% between 1998 and 2011, according to the leisure sector consultancy HVS. Growth was particularly strong towards the end of that period, after the discovery and as Ghana rose to become one of the fastest-growing global economies. Even with supply growing, strong demand pushed up average rates for high-end hotels in Accra from around $150 to $180 between 2009 and 2012, according to HVS, while revPAR (revenue per available room) rose more modestly, from around $125 to $135.

As of mid-2014, the top-end hotels in Accra offered rack rates of $350 a night, though these were often offered at a discount of up to $100, Patrick Fares, the managing director of Royal PF Holdings Holiday Inn, told OBG. Rack rates for equivalent hotels in Takoradi were around $250 per night, with the price more commonly being around $180-210. Smaller two-star hotels in Takoradi could command prices of $80 to $100.

Slower Year

Hotels experienced a slower year in 2013, particularly in the top-end segment, which is dominated by business travellers. This was caused by Ghana’s broader economic cooling, as oil output fell short of expectations, investors became wary of an uncertain political situation after a disputed election in late 2012 and delays affected other projects, such as the Ghana Gas Infrastructure Project. Bruce Potter, general manager of the Holiday Inn Accra Airport, told OBG that business activity was already easing before the Supreme Court Judgment, as investors bided their time to see the shape of the future government and of the economic policies it aimed to enact. Takoradi, the centre of the oil industry, was particularly affected. “Business activity slowed in 2013 while awaiting the Judgment. Beginning in October, hotels saw a resurgence in business tourism, which we expect to continue throughout 2014,” Potter told OBG.

However, hotel investors have continued with most projects, aware that a short-term slowdown will not detract from Ghana’s long-term strengths as a business and leisure destination given the solidity of demand. “Hotel strategy has not been heavily affected by economic changes in 2013,” said Fares. “The Protea continues construction in Takoradi. The Golden Tulip is also being built, while the Best Western has been completed. Hotels often have to be ahead of the curve.”

Hotels in Accra and other major cities show average annual occupancy rates of 75-85%, with the best located and equipped hotels faring most successfully. HVS expects rates for top-end hotels to remain around 70% from 2014 to 2016, with prices creeping up over $200 and revPAR also rising. It is bullish about the outlook. “We consider Accra to be an important emerging market within Africa, with much potential,” the consultancy said in a September 2013 report. “The country is set to become one of the leading tourist markets on the continent, given its strategic geographical location, political stability, expanding economy, growing infrastructure and diverse tourist attractions.” Arrivals will rise further in 2014, although hoteliers will also be aware of downside risks to the economy, particularly the deficit and over-reliance on fluctuating commodity prices, as factors that could affect their business.

Big Players

Local brands still have a strong presence on the Ghanaian market. These include the 104-room Labadi Beach Hotel; the African Regent, near Accra Mall on the Accra-Tema Motorway; and the Fiesta Royal, also on the motorway, with 100 rooms. Major international brands present include the Movenpick, which opened its 260-room, five-star luxury hotel in the heart of the city in 2011. The Holiday Inn Accra Airport has 168 rooms and opened in 2008, just as the economy started to boom; the airport area is a favoured location for accessibility and one of Accra’s most pleasant districts. The 109-room Best Western Premier Airport Hotel is nearby. The refurbished 238-room, four-star Golden Tulip is another Accra landmark, owned by local developer GLAHCO, but operating under the brand of France’s Groupe du Louvre. The 269-room Kempinski Hotel Gold Coast City will be the latest addition to Accra’s luxury offerings. Expected to open by the end of 2014, the Swiss chain claims that the hotel will have Accra’s biggest rooms and 1700 sq metres of meeting and banqueting facilities, as well as a spa and 7000 sq metres of retail space.

Other major hotel chains expected to open establishments in the city include Marriott, Hilton, ShangriLa and Radisson, according to HVS. With their global profiles and booking networks, they should be well placed in Ghana, and indeed some say that they will help raise the country’s profile and appeal to international travellers. Fares told OBG that brand loyalty is very important for international tourists, who seek out reliable brands, particularly in a new market such as Ghana.

Oversupply Risk

This wave of openings has led to concerns that there may be oversupply, but analysts and industry figures alike concur that current occupancy levels leave some scope for investment. HVS expects that the addition of 500 rooms in 2014 will put a little downward pressure on occupancy and thus room rate growth. However, this is expected to be offset by economic growth and rising demand for branded hotel rooms from international visitors.

Government efforts to shut down unlicensed and substandard accommodation are also expected to have an impact, albeit largely at the lower end of the market. “There is no question of oversupply now,” Sampson Donkoh, acting CEO at the Ghana Tourism Authority, told OBG. “If you look at arrival numbers and the events that are taking place in Ghana, you realise that we still have a gap that needs to be filled and that has not as yet reached the point of saturation.”

Challenges

Indeed, as HVS points out, a greater challenge may be ensuring that the projects are executed on schedule. Several of the major openings have been delayed, often due to planning and licensing issues. Another challenge for the international chains, both during construction and when the hotels are up and running, is ensuring that their standards will be upheld and the brands not damaged, which requires close oversight of building work and ongoing training of staff.

Attention to detail will also be increasingly important in the years ahead as competition rises between the new international chains and local boutique and mid-range options, and differentiation becomes more important. “Non-room revenues require more attention than most hotel managers allocate to it,” Adrian Landry, general manager of the Labadi Beach Hotel, told OBG. “In fact, non-room revenues often lead to greater room revenues. A good restaurant, for example, can be a good indicator of the quality of the rooms as well and might compel a restaurant customer to choose the same hotel for a room at a later point in time.”

Opportunities

While the high-end business segment in Accra receives the bulk of investor and media attention, other areas also show potential for growth. Takoradi is only the most obvious example. Donkoh highlights regional capitals across the country, and particularly in Kumasi and the Western Region, where there is activity in the two- to four-star range. According to Fares, there is a sizeable customer base seeking hotel rooms for $70-80 a night – these might include business travellers from smaller companies, and middle-class domestic and international leisure guests.

The emphasis of the National Tourism Development Plan (NTDP) on fostering tourism in the regions should offer opportunities for investors to develop hotels in underserved areas, as well as the main triangle consisting of Accra, Kumasi and Cape Coast, the initial focus area. Ecotourism resorts would be particularly favoured. The NTDP also prioritises cultural tourism, and specifically suggests the Spanish parador hotel concept as a model. Paradores are luxury hotels in palaces, castles, convents and monasteries, with historical buildings adapted as accommodation for well-heeled tourists. The plan says that Ghana could encourage “investor(s) to set up a boutique hotel chain in various cities and townships around Ghana” along parador lines, using local and colonial buildings of architectural merit.

Investors are already reaping the benefits of Ghana’s growing regional profile in the business segment, and increasingly in the leisure market too. If the planned hotel projects are completed, they will add to the country’s appeal by increasing its visibility as a destination. Indeed, continued growth in visitor numbers will mean greater business for hotels combining excellent management with a central location. However, levels of competition will increase, meaning that greater differentiation and continuing improvements in hotel facilities and services will be a priority in the years ahead.

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The Report: Ghana 2014

Tourism chapter from The Report: Ghana 2014

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