At the start of this year, Financial Times declared Africa to be “the new battleground for global domination among hotel groups.” The expected launch today of a $48.8 million Initial Public Offering (“IPO”) by Nigeria’s hospitality giant Transcorp Hotels indicates that Nigeria continues to be one of the top choices for investors in this industry.
The Nigerian hospitality industry is still in its infancy (contributing only one percent to the country’s GDP in the first quarter of this year) and is under-equipped to handle the rapidly expanding business travellers market that is an outgrowth of the country’s strong economic growth and billions in new investment dollars. Transcorp Hotels and others have made clear that their focus is on capturing this market. Already the owner of the largest number of hotel rooms in Nigeria, Transcorp Hotels plans to use the proceeds from its IPO to develop two new hotels in the commercial centers of Lagos and Port Harcourt. Both properties will be managed by Hilton Worldwide with whom Transcorp Hotel has a partnership.
Foreign investors are equally interested in deepening their stakes in the Nigerian hospitality industry and its growth potential. Last month, under its recently-acquired Protea Hospitality Holdings brand, Marriott International opened a new Lagos hotel which is specifically targeted to corporate travelers. By 2018, it expects to open five more hotels in Abuja and Lagos. Also active is Starwood Group which, by 2017, will invest $500 million to add five new hotels in Benin City, Ibadan, Ikeja, Ikot Ekpene, and Lagos. This proposed footprint expansion is notable in that it extends beyond the country’s capital (Abuja) and commercial hub (Lagos).
Additional competition soon may come from Angola’s sovereign wealth fund (Fundo Soberano de Angola) which has finally progressed to investing its $5 billion in assets. In a recent interview with Forbes, the fund chairman stated that the Sub-Saharan hotel industry would be an early priority. Considering that the fund intends to target business travelers and “focus on three- to five-star hotels in Sub-Saharan African capitals and other commercial centers,” it is a near certainty that Nigeria will be the destination for some of the as many as fifty hotels in which the fund may invest in the next three years.