The Three P’s of Hotel Development in Africa: Procurement, Procurement, Procurement! Tim White, CEO of Profica

In the dynamic and diverse continent of Africa, the hospitality industry presents both immense opportunities and unique challenges. Developers are diversifying their product offerings to include branded residences and serviced apartments. There is a focus on food and beverage (F&B) in big cities, co-working spaces, and dual-brand hotels. Additionally, there is an increased emphasis on environmental, social, and governance (ESG) factors and sustainability.

Although Africa is a land of untapped potential, it does face several challenges when it comes to property development. These include limited access to professional services, infrastructure limitations, local real estate laws, government policies, social issues, political risks, lack of accessibility to finance, non-transparency in terms of governance, conflicts in certain areas, and safety and security concerns.

Profica has extensive experience in the hospitality industry, having worked on hotel projects in various African countries. These include Morocco, Senegal, Ivory Coast, Ghana, Nigeria, South Africa, Mauritius, Rwanda, Zambia, Zimbabwe, Mozambique, Uganda, Kenya and Ethiopia. Our teams have gained valuable insights into how to develop and project manage successful hotel projects across the continent.

We believe procurement is the cornerstone of success in the current African hotel space. In hotel project terms, procurement usually means the acquiring furniture, fixtures, and equipment (FF&E). However, the importance of procurement as the Three ‘P’s is actually how ALL aspects of the project are procured.

How one procures experienced leadership, international expertise, local knowledge, and funding requirements are crucial considerations. Materials, capital equipment, specialist items, and FF&E procurement are also important. Construction methodologies and solutioning the best delivery model is super important.

In Africa, developers are typically high-net-worth individuals or industrialists who understand business, but may not have in-depth knowledge about the hospitality industry. As such, they often require expert hospitality advice and assistance to manage their projects, from inception through to completion and opening.

Let’s delve deeper into the different aspects of procurement that contribute to successful hotel projects:

1. The Project Manager:

One of the most critical roles in hotel development is the project manager. It is essential to look for experienced project leaders who understand the complexities of the African market and can navigate the unique challenges it presents. They need to be adept at dealing with issues such as limited access to professional services, infrastructure limitations, and local real estate laws, among others. Decisions must be made regarding co-locating teams in one city or region, or procuring consulting teams from across different regions, to enhance efficiency and effectiveness depending on the type of project and delivery methodology chosen. In our experience, local in-country knowledge trumps hotel brand knowledge, but the ultimate goal is to have both.

2. Design and construction consultants

To ensure the success of a hotel project, it is crucial to engage design and construction consultants with international expertise AND local knowledge. These professionals are instrumental in navigating the different countries local statutory and building permit processes, building standards, construction methodologies, including local material and effectively managing diverse cultures, languages and ways of working in the various regions in Africa.

In addition, there is often a notable discrepancy between an hotel operator’s expectations of the consultant’s scope of services, versus what the developers have actually contracted and appointed.  Navigating this discrepancy requires clear communication and a mutual understanding of goals.

3. Selection of contractors

Choosing the right contractor is vital for the smooth execution of a hotel project. Whether it’s a Tier 1 (being the top tier of contracting companies in a country) or a Tier 2 contractor, competence and experience are key factors to consider. Local versus international contractors should be carefully evaluated. The contractor should have a proven track record in dealing with Africa’s unique challenges and opportunities and in particular be able to manage the procurement of suppliers and materials, getting them on to site as efficiently as possible.

4. The materials and specialist items

The availability of local materials is a significant factor in procurement. Leveraging local resources can lead to reduced costs and shorter lead times. However, it’s crucial to ensure the quality of these materials meets the project’s requirements and standards. Having a thorough understanding of local markets and resources is key in this aspect.

There is a possibility for developers to secure or pre-procure specialist items directly, which provides delivery and cost certainty. The developer’s project managers should assist with managing this early procurement of materials and equipment, generally related to mechanical, electrical, ICT, AV, and other high-value or long-lead items. This approach can ensure that the necessary material and equipment is available when needed. This early procurement process directly by the developer is a major risk management exercise and will also assist  with managing the budget and planning ahead.

5. The Furniture, Fixtures and Equipment (FF&E)

While it might be tempting for HNW developers to leverage personal or family connections in the procurement of FF&E, it’s imperative to ensure that any suppliers used meet the quality, cost, and delivery expectations of the project. Therefore, all suppliers, including those recommended by relatives or friends, should be evaluated based on their qualifications, experience, and ability to deliver.

Due to logistics challenges and longer lead-in times, direct or early procurement of capital equipment may be required. It is essential to plan and coordinate the procurement process carefully to avoid any delays that could impact the project schedule. Consideration should be given to the availability and cost of transportation, import regulations, and the reliability of suppliers.

While global brand standards are important, they must be balanced against local practicalities and costs.

6. Funding: Mind the gap

The funding requirements of a hotel project can impact how other aspects are procured. Being solution-focused and bridging the funding gap through hotel operator assistance can significantly contribute to project success.

With reference to international branded and managed hotels, collaboration with the hotel operator is crucial for a successful project. Ensuring that the operator is recognised in the country and can assist with closing the funding gap adds value to the overall development process. The operator should also align with the emerging trends in African hospitality, such as diversification of product offerings and an increased emphasis on sustainability.

It is not uncommon for a gap to exist between what the developer has available in terms of either land (typically at 10%) and additional cash vs the equity required for a hotel development (usually at 50%).

This requires a solution-focused approach, with operator assistance often playing a key role in closing this funding gap. The initial operator business plan aims to secure the owner/developer for the that operator and is usually based on a high level cost per key.

This high level business plan often varies once an actual site-specific design and cost is undertaken. Therefore, it’s crucial that owners undertake detailed feasibility studies early on to ensure the accuracy and viability of these plans.

With sustainability being a global concern, green requirements such as EDGE are more achievable today than ever before. However, achieving net zero carbon emissions remains a challenge that the industry must tackle. In Africa, the global requirements for environmental, social, and governance (ESG) factors often contrast with local abilities. While local content is required, it is equally important to focus on skills transfer and hands-on involvement to ensure ESG objectives are met.

Developing and project managing successful hospitality and hotel projects in Africa requires a deep understanding of the unique challenges and opportunities the continent presents. For a project to be successful, planning upfront is essential. This includes defining Africa specifications, streamlining technical approvals, securing direct supply items upfront, selecting experienced construction experts, and ensuring that teams work well together.

It’s obvious that projects that go wrong and need to be ‘rescued’ by project experts are far more expensive and time consuming in the long run, so it’s best to avoid this situation by planning upfront and appointing the right team for the right project.

By focusing on the three P’s of hotel development – procurement, procurement, procurement – and leveraging the knowledge of Development and Construction Project Managers with local experience, developers can set their projects up for success. With the right team, with effective procurement strategies, and with good collaboration with operators, Africa’s hospitality industry can thrive and contribute to the continent’s economic growth.

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