East African hotel markets emerge from high supply growth cycle

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JLL’s annual East Africa Hotel Market Overview has given the latest update on the trends in the hotel sector of one of the highest growth regions in Africa.

The report says that following a peak in the economic and hotel demand cycle in 2014, supply growth in East Africa has been at an unprecedented high level over the past three years. The entrance of many global hotel operators has resulted in supply outpacing demand in many markets. The report highlights that the market is turning, and a shrinking development pipeline will see hotel performance begin to improve.

The report highlights hotel performance in Nairobi is expected to remain under pressure in the short-to-medium term due to more than 2,000 rooms having entered the market in recent years. Long-term fundamentals are strong, with demand growth driven by high tourist arrivals growth, public sector support for tourism, new air routes and corporate expansion.

Addis Ababa has a large new supply pipeline of up to 4,000 rooms, yet many of the developments are stalled due to a lack of hard currency funding, which should ensure that the pipeline realisation remains manageable. Kampala continues to show good market conditions with limited supply on the horizon.

Dar es Salaam has experienced a softening of demand during the past year and will need improved corporate demand, as well as a recovery in government demand to boost hotel sector performance. Kigali has seen the highest level of new supply recently with some high profile openings. The continued focus by the government to attract conferences and events will be critical to allow the market to absorb excess supply.“