Addis Ababa’s rapid growth deemed sustainable
10 FEBRUARY 2016 8:54 AM
Ethiopia’s capital Addis Ababa is the poster child of African hotel development, with several international hotel chains and the capacity to absorb additional supply.
ADDIS ABABA, Ethiopia—Addis Ababa, the capital of Ethiopia, is primed for quick growth with almost every international brand hotel company targeting it as a growth opportunity, according to sources.
Carlson Rezidor Hotel Group is one international hotel firm with its sights firmly fixed on Addis Ababa. It opened its first property there, the 204-key Radisson Blu Addis Ababa, in 2012 and work is underway for a second, the 165-key Radisson Blu Plaza, Addis Ababa, set to open in 2017.
Elie Younes, Carlson Rezidor’s senior VP and head of group development, Europe, Middle East and Africa, told Hotel News Now that the city’s strong suits include “a combination of good demand and poor supply, a population of five million people and (its role as) a huge economic hub with investor appetite.”
“We believe the dynamic there warranted another Radisson Blu,” he said.
“Radisson Blu has the biggest pipeline in Africa, so why not capitalize on that and the synergies between the two (Addis Ababa Radissons),” Younes added.
Neil George, SVP, acquisitions and development for Starwood Hotels & Resorts Worldwide, is very upbeat on Ethiopia’s future, too.
George told HNN that Starwood’s No. 1 criteria is to find the right sites and partners but that until recently there was a lack of qualified developers in Addis Ababa.
That has changed, George said.
“We’ve seen the emergence of local Ethiopian developers and institutions taking interest in the hospitality business. Ethiopian Airlines wants to put a hotel in, as does Ethiopia’s airport authority,” George said.
Daniel Ruff, Wyndham Hotel Group’s president and managing director, Europe, Middle East and Africa, said that Addis Ababa is buoyed by double-digit real gross domestic product growth over a number of years, extensive infrastructure improvements and increasing international tourism arrivals.
Ruff added that the country’s graduation from a singular focus on non-government organizations to a thriving destination for agriculture, mining and manufacturing played well for hotel chains that had a “family of brands like ours that cater to a variety of needs and budgets.”
“Brands like Ramada are ideally positioned to grow in the city due to the increasing demand for quality, internationally branded accommodations,” Ruff said.
Sources said a big reason why Ethiopia is performing well is the success of its national carrier, Ethiopian Airlines, which has helped make Addis Ababa a business, governmental and administrative hub, but China’s shaky economy could slow growth in Ethiopia.
Wayne Troughton, CEO of Cape Town, South Africa-based consultancy firm HTI Consulting, said China’s economy does cast doubt over Addis Ababa’s future growth but that the Ethiopian capital has sufficient sustainability to absorb its noticeable pipeline.
Starwood’s George also believed the market is sustainable.
“Addis Ababa has evolved and can sustain varied supply, and not just for the two standard options of luxury and budget,” George said. “It is a highly desirable market. Supply will inevitably see dips in occupancy in the short term as the marketing engines of all these new brands kick in, but over the medium to long term, it is a healthy destination.”
Destination on the up
The first international hotel to arrive in Addis Ababa was the 372-key Hilton Addis Ababa—opened in 1969 by Emperor Haile Selassie. It was joined in 1998 by the 294-room Sheraton Addis, a Luxury Collection Hotel.
For many years, those were the main hotels. Then, the Radisson Blu Addis Ababa came four years ago.
Several properties have either opened or been added to the pipeline since then, including:
- Golden Tulip Addis (90 rooms; Louvre Hotels Group), opened in 2015;
- Marriott Executive Apartments Addis Ababa (202 rooms; Marriott International), opened in 2015;
- Ramada Addis (136 rooms; Wyndham Hotel Group), opened in early 2015;
- Crowne Plaza Addis Ababa (210 rooms; InterContinental Hotels Group), to open in 2016;
- Pullmann Addis Ababa (330 rooms; AccorHotels), to opened in early 2017;
- Best Western Noah (121 rooms; Best Western International), no opening date as yet;
- Best Western Plus Abyssinia (168 rooms; Best Western International), no opening date as yet;
- Courtyard by Marriott Addis Ababa (215 rooms; Marriott International), no opening date as yet;
- Four Points by Sheraton (506 rooms; Starwood Hotels & Resorts), no opening date as yet.
That quick growth does not have analysts overly worried.
“Addis Ababa has a very good base and infrastructure. It is economically robust, with a good mix of business and leisure tourism. I think the market can absorb the new supply,” Troughton said.
George said Starwood has additional plans for the city, including renovations to its existing Sheraton.
“The Sheraton has been extraordinarily successful for us and the owner, and it is a certainty we’ll bring in other brands. The Four Points (by Sheraton) announced recently will have the most keys in the city, and over time other of our brands will come in,” George said.
George said the company could eventually bring in the Westin and Aloft brands, although no further deals have been committed. He said Aloft in particular has potential because the brand has “tremendous legs in Africa, where the demographic speaks to Aloft, with its young and massive workforce that has grown up with iPhones and appreciate good design.”
Data from STR Global, HNN’s sister company, shows that year-to-date December 2015 occupancy in Addis Ababa was 57.8%, down 5.5% from the 61.2% occupancy seen in 2014.
Troughton again stressed Addis Ababa’s market dynamism is enough to weather this drop, which he added might not be caused by additional supply.
“(Average daily rate) has gone up in local currency approximately 15%, and the Ethiopian currency is stable, so looking at both of those books, it looks good,” Troughton said.