What the super-rich will splurge on in coming years

The super rich in search of income-generating investments are injecting more cash into the hotel industry than offices, retail spaces and industrial buildings, says a wealth report.

The 2016 Attitude Survey by property management company Knight Frank says that a majority of super-rich are wealth shy and are unlikely to consciously display their fortune and prefer investing in student hostels, healthcare and hotels.

“Offices and hotels are predicted to remain the investments of choice, although warehousing and logistics could overtake shopping centres and high-street retail spaces,” says the report.

They invested Sh6.9 billion ($69 million) of personal cash in hotels compared to Sh1 billion ($10 million) in industrial buildings. The number of planned hotel rooms in Africa has increased to 64,000 this year, up almost 30 per cent compared to the previous year.

New figures from the W Hospitality Group Hotel survey says Kenya is set to have an additional 16 hotels out of the 365 in Africa. The new hotels to be mainly set up in Nairobi will increase bed capacity by an additional 2,956 rooms.

Kenya is ranked sixth in the list of African countries with the most hotel developments in 2016. Nigeria, Angola and Egypt are in the first three positions.

“The hotel sector has changed significantly, both in terms of volume and quality. This reflects the city’s growing importance as a business hub for East Africa, not just as a stopover point for tourists heading off on safari,” said Andrew Shirley, the Wealth Report editor.

Ole Sereni

The long list of the up and coming hotels in Kenya include, a three-and a five-star hotel to be housed in Two Rivers development. The construction of Park Inn by Radisson Hotels is also ongoing in Westlands while Ole Sereni has also invested Sh1.8 billion in the construction of another hotel.

“Investors remain confident about the future of the hospitality industry in Africa. Even when pummelled daily by low commodity prices, exchange rate problems, political challenges and poor infrastructure, Africa remains resilient,” Trevor Ward, the managing director of W Hospitality Group said.

Despite growing global interest in the sector, Africa’s most ultra high net worth individuals have lower appetite for hotels compared to their counterparts from Russia, Europe, America and Middle East.

Only six per cent of super-rich Africans invested in the hotel industry in the past 10 years, the Attitude Survey shows, predicting that if the trends do not change, hotels built in coming years will be entirely foreign-owned.

Africa’s super-rich interviewed gave a lack of experience as the deterring factor when it comes to exploring new investments. In future, less investments will go into commercial spaces as returns drop.

The report says that the value of commercial space is low in Nairobi as Sh100 million ($1 million) can buy 561 square metres of space, when compared to cities such as Capetown, Rome, New York and Monaco where it’s possible to purchase 255, 75 and 17 square meter of space for the same amount.

In coming years, the ultra-rich will put more money in luxury homes as other investment classes such as equities underperform, said Knight Frank.

The super rich will also splash out on collectibles such as artworks, coins, furniture, Chinese ceramics, wine, watches, yachts, private jets with a majority splurging on classic cars.

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