With regards to the consequences and challenges accompanying the corona virus pandemic, the aviation and hospitality industry has suffered the most.
Travel bans and other mobility restrictions has had our airports, hotels and resorts all over the world vacant and unoccupied.
Millions of people are now obliged to stay put and give up international voyages for work, while some have bewailed the indefinite suspension of leisure trips and vacations.
One may curiously ask ‘well Jorge, in this case, why are you vehemently declaring that hotel investment is very exciting and appealing (HOT)’? certainly, it is a precarious adventure now.
Without an iota of doubt, I have credible reasons for saying so, and I hope that by the time I conclude this article, you might just concord with me.
Notwithstanding the current recession on the economy, I explained a few weeks ago that this is the best time for investment.
The ban on the lockdown which was declared by the president has been lifted. And although market recovery may not be rapid, history has proven that economic growth will occur without fail.
In no time, life will begin to regain its normalcy since countries will not be locked down forever.
In fact, recently, Emirates Airlines initiated an on-site rapid COVID-19 testing to its passengers. This was the first of its kind.
Soon, other organisations and companies will put measures in place to uplift consumer confidence and patronage and, given the blow the pandemic has dealt with the hotel industry, we can be rest assured that, it will not be exempted.
Now, let us narrow down to Ghana’s hotel industry, particularly in Accra.
According to a report that we have just received from HTI, our preferred partner in feasibility studies when it comes to hospitality, and data gotten from STR, a global hospitality data analytics firm, the average annual international hotel occupancy rate in Accra grew 22% between 2016 and 2019 and stood at 66%.
This growth despite the increased number of hotels in Accra, like Kempinski, Marriott, Kwarleyz, and Ibis’ rebranding.
Average daily rates in Accra, for the same period, increased by 23%, from ₵ 714 to ₵ 877, and the average revenue per available room (RevPAR) increased by amazing 55% to ₵ 578.
(A hotel’s RevPAR is determined by dividing its total room revenue by the total number of available rooms).
So, why is Accra one of the best hotel market performers in Africa? This is because of the large demand and few existing quality international hotels.
HTI and STR have classified Accra as one of eight cities in Africa with the highest RevPAR and one of three in West Africa, in addition to Abuja and Dakar.
Cities such as Nairobi and Johannesburg with significantly higher levels of investment in tourism development and infrastructure, were ranked with lower RevPAR (under US$60).
This obviously implies that, there is a lot of room for growth in Accra’s hotel industry to provide a wider range of options that suit different needs and budgets.
As Ghana continues to explore its untapped tourism potential, investment in infrastructure such as hotels, will undoubtedly grow exponentially, beginning in the country’s capital.
With this in mind, I want us to consider three major important reasons why investing in a hotel in Accra in the best investment today.
First and foremost, there are different kinds and sizes of hotels, from small boutique establishments to global hotel chains. As such, a hotel investment may not be as out of reach or beyond your budget as you might think, especially through a smart investment.
This usually involves a collective investment in a single, professionally managed hotel property.
A smart hotel investment is led by a clear strategy to maximize value, and increase a hotel’s income-earning ability and profitability to investors.
Secondly, unlike other types of commercial real estate, like residential property or retail spaces, hotels can adjust their room rates daily.
There is no fixed medium-to-long-term lease: each night is an opportunity to increase revenue by raising prices to match demand.
Although this means that the hotel industry is usually one of the first to suffer in an economic downturn (as is the case presently), it also means that it has the capacity to recover quicker than other industries.
Finally, hotels are a tangible asset to invest in. Unlike shares and bonds, they can be experienced by both investors and patrons alike.
They are also unique from other commercial real estate because of their operational nature, which offers the flexibility to enhance value and sustain customer loyalty.
And let’s face it, it’s sexy to say to your friends and network that you own or partially own a notorious hotel, right?
To conclude, please note that hotels typically have three major stakeholders – an owner, an operator and a brand (in some cases brand and operator may be the same).
For example, Devtraco Hospitality Holdings (operator), is constructing its first hotel in Accra in partnership with an international hotelier (brand) and offering Ghanaian individuals the chance to invest in this development (owner).
For now, this project is called the Pelican Hotel but very soon we will disclose the name of the international brand.
Investors will have the added benefit of enjoying complementary services in addition to a guaranteed return on their investment.
I urge you to explore and give some thought to investing in hotels in order to reap great rewards when business is booming.
As always, I will be happy to answer any questions you might have via email to [email protected].