Egypt leads Radisson’s expansion into serviced apartments

By David Whitehouse
Posted on Monday, 21 December 2020 10:56

Cairo faces a glut of hotel rooms. REUTERS/Mohamed Abd El Ghany

Egypt is the top priority for the expansion of Radisson’s serviced apartment offer, Ramsay Rankoussi, vice-president for development in Africa and Turkey, tells The Africa Report.

Cairo is showing “very strong demand” for such apartments, which are now under construction, Rankoussi says from Dubai. Casablanca and Tangiers in Morocco and Nigeria’s Abuja are the next targets, with Johannesburg and Cape Town possible later additions, he adds.

COVID-19 has accelerated Radisson’s push to diversify its core hotels business. The company plans to more than double the number of its serviced apartments in Europe, the Middle East and Africa (EMEA) in the next five years. Such apartments currently make up about 10% of the company’s EMEA portfolio.

Serviced apartments have proved a “resilient business” during the pandemic, says Rankoussi. Globally, none of the company’s apartment operations have been forced to close because of COVID-19. The apartments are financed by third-party investors, which are often African individuals or family businesses, and then branded and managed by Radisson. They are easier and faster for contractors to build than hotels and can be completed in 24 to 36 months, says Rankoussi.

  • Serviced apartments are able to capture longer-term stays than hotels, he says.
  • They also require fewer amenities and staff than a hotel, and have greater operating efficiency.
  • While hotels will remain Radisson’s core business, Rankoussi expects that serviced apartments will account for around 15% of Radisson’s business in Africa in five years, from a minimal share now.

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Radisson, owned by a consortium led by China-based Jin Jiang International, operates about 100 African hotels. It aims to increase that to 150 within five years.

Hotel room oversupply

According to the 2020 Hotel Chain Development Pipelines in Africa report, the number of rooms in the hotel chain pipeline in Africa has risen 31% since 2016.  North Africa has seen the continent’s fastest pipeline growth, with 46%.

  • Egypt has Africa’s largest hotel room pipeline, with 17,163 rooms, more than double second-placed Nigeria.
  • Radisson has the fourth-largest pipeline in Africa, behind Marriott International, Accor and Hilton Hotels & Resorts.
  • Hotel room oversupply in Cairo is “slightly alarming”, the report says.  The “new normal” will be for oversupply of hotel rooms globally, it adds.

READ MORE Egypt VS Coronavirus: Tourism blow creates domino effect

There is a danger that oversupply will be lasting. Many people will not return to offices once the worst is over, and many business travellers will also seek the greater flexibility that serviced apartments provide versus hotels.

  • According to Colliers International, the pick-up in Egypt’s tourism locations has been slow and hotels have been operating at below 50% capacity. For the first three quarters of the year, Cairo’s hotel occupancy rates sank by 67%, Colliers says.
  • Yet the new supply is largely locked in already. Colliers says an additional 8,000 hotel rooms are expected in the Egyptian market by 2022.

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The performance of serviced apartments is more correlated with residential property than with the hotels business, says Radisson’s Rankoussi. That suggests Cairo’s pent-up residential demand is a good sign. Colliers says that in Cairo’s residential market, demand continues to outstrip supply and the city will need an additional housing 600,000 units by 2025.

Bottom line

Radisson argues that serviced apartments are a good way to diversify post-COVID risks to the hotel business.

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