Hospitality and hotel development time double in frontier markets
Investors must be realistic about the challenges of countries like Sudan
Aboudi Asali, CEO, HMH (Hospitality Management Holdings), says the company has learned that instability and local restrictions can double the development time of hospitality and hotel projects in frontier markets such as Africa.
Speaking at the recent Gulf & Indian Ocean Hotel Investment Summit (GIOHIS 2018) in Abu Dhabi, Asali stressed that new markets opening up in Africa were an exciting investment prospect, but operators such as HMH needs to educate investors of the risks as well as the lucrative potential of the low supply-high demand scenario in such countries.
“At HMH, we have found that investing in frontier markets is not in line with any other markets,” he warned. “If it takes one to three years to develop hotel assets in a developed market, it can take twice that amount of time in these particular countries which can be prone to instability and have challenges such as foreign ownership restrictions, currency limits, local funding and registration requirements, and different standards of corporate governance and financial reporting.”
Founded in 2003 and with a niche as a ‘dry’ hotel operator, HMH has solid experience in Sudan, where it currently has two properties in the capital Khartoum as well as another hotel in Port Sudan and an additional hotel set to open soon: “Despite this pioneering presence, we feel the market still remains under-exploited and as a group we can benefit by committing to being there for the long-haul,” stressed Asali.
“From our experience, I would say those elements that have assisted us in hotel operations in frontier markets are a willingness to work closely with national and local authorities and the provision of training for staff in the country – while among challenges are currency fluctuations and airline access to the country.”
