Who will compete with Airbnb in Africa? — Briefing for members of Quartz Africa — Quartz
Hi Quartz Africa members,
Before the pandemic, all eyes were on the promise of a growing hospitality industry in Africa. Jumia 2019 Welcome report (pdf) highlighted travel and tourism as one of the main growth drivers of the continent’s economy, and the sector contributed 8.5% of GDP ($194.2 billion) in 2018 , compared to 7.8% two years earlier. A few years ago, the hotel industry directly or indirectly employed 24.7 million people in Africa, which was the second fastest growing tourism region in the world, after Asia.
As covid travel advisories start to lift, that optimism is back, especially for travel to Africa. The continent currently has 75,000 standard hotel rooms, and Africa’s young and innovative population is taking advantage of increased internet access to explore new experiences. Increased urbanization, along with the implementation of the African Continental Free Trade Area and the Single African Air Transport Market, are expected to make intra-African travel even smoother. Already, visa waiver or visa on arrival policies are emerging in countries like Ethiopia, Ghana, Rwanda and Kenya.
On the accommodation front, the world’s largest hotel chains are in a billion-dollar race to capture the African market, and companies like AccorHotels, Africa’s largest hotel operator, with brands like Sofitel, Marriott, Hilton and Hyatt are developing locally. . In a pre-pandemic world, Airbnb had more than 130,000 listings in Africa and counted Nigeria, Ghana and Mozambique among its eight fastest growing markets.
But while global players have deep pockets and big ambitions in Africa, local hospitality startups still have some advantages, especially when it comes to mobile payments and the list of areas that lack internet connectivity.
Checklist
💡 The Opportunity: Africa remains an attractive tourist destination, and as covid restrictions ease, the momentum should build for local and international visitors alike. Cheaper rates, flexible payment options and the development of mobile money will also create opportunities, especially in short-term rentals.
🤔 The challenge: Around the world, technology platforms are reshaping the way people pursue travel and hospitality. But Africa still has limited infrastructure issues, including inadequate electricity supply and fragile internet connectivity. Other challenges include the lack of qualified reception staff and the difficulty in attracting and retaining workers.
🌍 The roadmap: African startups often struggle to secure enough funding to plant a flag and grow over time. There is a need for better strategies to attract VCs and convince more consumers in the African market to buy goods and services produced in Africa.
💰 The speakers: Airbnb is the most trusted platform for hosts and travelers on the continent. Other international players include Booking.com, Vrbo, TripAdvisor, Expedia, Homestay.com and atraveo; while Africa-focused startups include Nwanndo, Africabookings, Viatu and Kumba Africa.
By the numbers
Post-covid figures are yet to come, but here is an idea of the potential of the African hotel sector before the pandemic:
$570 billion: Estimated global hotel accommodation market value
5.6%: Year-on-year growth of Africa’s tourism sector in 2018 (pdf)
110 million: Estimated international tourist arrivals in Africa by 2027
74%: Share of international travelers who plan their trips online
75,000: Rooms available in hotels and short term rentals in Africa
$91 billion: Market capitalization of Airbnb, the world leader in short-term rentals
The case study
Name: bongalo
Based: 2017
HQ: Rwanda
Founder: Nghombombong Minuifuong
Last assessment: undisclosed
bongalo was founded as a way to book and pay for travel accommodation using mobile money, which is increasingly popular on the continent. In many African countries, getting paid on other major platforms is far from straightforward.
“For an average host on Airbnb in Africa, they [have] way to get paid, which is the Payoneer prepaid debit card,” says Bongalo founder Nghombombong Minuifuong. “They have to buy a Payoneer card, which is shipped to them, and they attach it to their Airbnb account. Every time there’s a reservation, they get a deposit on that card, and they have to go to an ATM, insert the card and withdraw the money in local currency, which is exchanged into the foreign currency.They pay at least three fees to get their money: exchange fee, card fee and Airbnb fee. [That’s part of] what we are trying to stop.
Bongalo caters to both customers, who can book their preferred accommodation on the platform, and hosts, who can list their rentals. The platform enables secure transactions that avoid multiple fees by using mobile money wallets and USSD confirmation codes. Minuifuong calls it “the Airbnb of Africa”.
Bongalo is currently made up of a nine-person team of developers, travel specialists, and marketers, and in 2020 has pegged its valuation at around $2 million. It has so far listed over 6,000 properties in Cameroon and Rwanda, where it operates, and processed 2,000 transactions. The company says bookings have grown at an average annual rate of 60% over the past three years, a figure that rises to 80% for signups.
For now, Bongalo’s only funding is through Google’s Black Founders Fund Africabut Minuifuong is keen to expand the startup’s reach to Ivory Coast, Senegal, Kenya, Ghana and Uganda.
In conversation with
After studying web development and business analysis at the Quanteq Institute in Bamenda, Cameroon, Nghombombong Minuifuong cut his teeth at an agricultural produce e-commerce start-up before a simmering separatist conflict forced him to flee Rwanda in 2017. In Kigali, he founded Bongalo and now serves as the company’s CEO . Here are some selected quotes from our conversation:
✈️ On facilitating travel in Africa:
“We decided to build Bongalo to focus on improving travel for the African continent. Once we provide you with a platform to book accommodation where you can stay for half the price or less than a regular hotel room, with more amenities and amenities, then travel becomes cheaper.
📋 On the regulatory environment:
“The regulatory environment in Rwanda is quite flexible and well organized. There is no bureaucracy and everything is really fast. Just go through the normal business legalization process. In Rwanda, it takes 24 hours to register your business and you can already start operating. I see this happening in many other African countries.
📈 On the company’s objectives:
“In five years, we want to be a unicorn and operate in no less than 20 African countries. We seek to generate very high bookings. We also want to create thousands of direct and indirect jobs through what we do and we work very hard to put these achievements into place.
Hospitality offers at 👀
Kasada Capital Managementan independent investment platform specializing in the hospitality sector in Africa, has acquired the iconic Cape Grace Hotel Cape Town this March, marking its first entry into the hospitality industry in South Africa. The acquisition was made in part thanks to a $160 million credit facility IFC and Proparco.
Vendeea Lagos-based startup that connects hotels, restaurants and food businesses to farms for direct, secure purchases 3.2 million dollars in a funding round in October. The round was led by a San Francisco-based venture capital firm Global Founders Capitaland Y Combinator, Hustle Fund, Liquid 2 Ventures, Hack VC, and Soma Capital also participated.
Plentywakaa secure Nigerian car booking platform $1.2 million in seed funding to drive its expansion in Africa and also announced the acquisition of the Ghanaian startup Stabus. The tour was led by The exchangea Toronto-based fund, and also included Techstars, SOSV, ShockVentures, Argentil Capital Partners, and ODBA & Co Venturesas well as angel investors.
More from Quartz Africa
📷 African Instagrammers are disrupting tourism
🏖️ Millennials’ search for experiences is driving Airbnb’s growth in Africa
🏡 Best Airbnb accommodations in Africa
🤝 What is the African Continental Free Trade Area?
🛫 What is the Single African Air Transport Market?
🎵 This brief was made by listening to “Journalistby Wams Klassic (Cameroon)
Have a very motivated weekend,
—Amindeh Blaise AtabongQuartz Africa Contributor in Yaoundé, Cameroon
A 🏘️ thing
As travel resumes after covid, hybrid work persists and ‘workations’ gain momentum, to research shows that short-term rentals in particular will be an increasingly preferred accommodation option, even surpassing hotels. In the $570 billion hotel market, short-term rentals are expected to affect $111.2 billion by 2030.
