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

This article delves into the intricacies of hotel development in Africa, emphasizing the critical role of procurement strategies, collaboration with international operators, and the growing importance of sustainability.

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 in big cities; co-working spaces; and dual-brand hotels. Additionally, there is increased emphasis on environmental, social and governance (ESG) factors as well as sustainability.

Although Africa is a land of untapped potential, it does face a number of 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’s Expertise in Procurement and Project Management

Profica has extensive experience in the hospitality industry, having worked on hotel projects in various African countries. Through completing projects in 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, emphasised as the ‘three ‘P’s’, is actually how ALL aspects of the project are procured.

Aspects Of Procurement

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 consultants 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 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 developers 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 evaluate 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 require. It is essential to plan and coordinate the procurement process carefully to avoid any delays that could impact the project schedule. Consideration should happen on 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.

The Role of Collaboration and Sustainability in Success of African Hotel Development

With reference to international branded and managed hotels, collaboration with the hotel operator is crucial for a successful project. Ensuring that the operator is recognising 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. 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. Ensuring local content is a requirement, it’s equally essential to concentrate on transferring skills and actively participating to meet ESG objectives.

Strategies for Success in African Hospitality and Hotel Project Management

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 is clear that projects requiring rescue by project experts become significantly more expensive and time-consuming in the long run, making it advisable to prevent this situation by upfront planning and the appointment of the right team for the 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.

About Author and his Company

Tim White serves as the CEO of the Profica group of companies, a renowned Pan-African firm specializing in property and construction solutions. With a dedicated team of property and workplace experts and construction professionals, Profica has earned accolades for delivering exceptional development.They provide project and construction management services to prestigious clients across various sectors in Africa. Their track record reflects a combination of global expertise, local knowledge, and service excellence.