Hotel Market Study

The hospitality industry in Africa has experienced notable growth, and the number of branded hotels on the content is still growing. Although on a growth trajectory, the maturity of the sector remains immature when compared to more developed nodes, such as the Americas, Europe, and Asia. A portion of owners in Africa are first-time hoteliers and require professional assistance when undertaking a development project.

For this reason, a hotel market study is common place within the industry. A study, done by a reputable hospitality consulting firm, such as HTI Consulting, highlights the viability of a proposed development project through a detailed analysis of the current levels of hotel supply in a region and the projected levels of demand for the proposed development.

There are two primary sides to a market analysis. Firstly, it will assess the current levels of supply within the chosen region. This is an important part, as it provides insight into the competitive environment, highlighting trends and performance seen within the market. When conducting a study, a hospitality consultant from HTI Consulting will typically spend a week in the given destination, meeting with various managers to gather insight and data around performance, market trends, and future outlooks for the industry.

Once a thorough understanding of the hotel supply has been undertaken, interviews with the various sources of demand are conducted. This is the second phase, and enables consultants to project the anticipated future demand for the development by testing the proposed location, concept, facilities, positioning, and rate structure within the market. A key output of a study is the projected performance the hotel is likely to achieve. These performance indices lay the foundations for the hotel operations and overall viability of the project.

Once the base performance has been established, the costing and financial structures incorporated occur as the final part of the process. During this final phase, consultants will gather information on expected construction costs, financial gearing of the project with regards to the equity and debt portions, as well as on future developments that are likely to take place within the region, which are all important inputs when assessing the projected returns of the establishment.

As this is considered the final phase of a study, a detailed financial model and report will be produced, assessing the overall viability of the project with current and future trends incorporated into the study.

Overall, this process provides an owner, as well as interested financiers and potential operators with an understanding of the current market performance, the projected demand levels of the proposed development, and the overall financial viability of the project. HTI Consulting has undertaken more than 350 market study projects throughout the African continent, having worked in more than 40 countries. This has provided the firm with a wealth of knowledge around the trends seen within the African hospitality sector.