Indian hospitality group sells 90% stake in Zambian hotel business to UAE investors

The US$18m deal highlights the growing importance of Gulf money to African markets, and the challenges facing the hospitality sector post-Covid

The Taj Pamodzi Hotel in Lusaka, Zambia.

Taj Pamodzi Hotels Plc (LuSE:PMDZ), the only listed Zambian hospitality group, announced last month that it has a new majority shareholder. Tata International Singapore Pte Limited (TISPL) sold its 90% stake in the business to ASB Hospitality LLC, a subsidiary of Dubai-based investment company Albwardy Group, for US$18 million. The deal highlights the growing importance of Gulf money to African markets, and the challenges facing the hospitality sector post-Covid.

Taj Pamodzi Hotels Plc operates the 192-bed five star Taj Pamodzi Hotel in Lusaka, Zambia's capital. TISPL had originally engaged in sale talks with another Tata Group company Indian Hotels Company Limited, and then latterly with Protea Hotels Zambia, a local rival business, before selling to Albwardy.

Pandemic problems

Like other hospitality businesses across Africa, the Covid pandemic decimated Taj Pamodzi Plc’s finances. In 2021, the company's auditor even raised concerns that it would struggle to continue as a going concern. It recorded net losses of 4.4 million kwacha in 2020, 37 million kwacha in 2021, and 19.8 million kwacha in 2022. It however managed to turn a net profit of 2.25 million kwacha in 2023.

“The pandemic caused serious harm to the hospitality industry in Sub-Saharan Africa and brought the sector to its knees,” notes Lethabo Setata, Founder & CEO at Africa Diplomatic Real Estate Consulting. “Post-Covid, hotels like the Nairobi Hilton Hotel in Kenya and Protea Hotel by Marriott in Cape Town (Victoria Junction) closed their doors.”

Post-Covid market trends

Four years on from the first Covid lockdowns, the sector has changed in significant ways but is looking up. According to the 2023 Hotel & Hospitality Confidence Index, hotel occupancy rates in Africa are showing a steady increase (49.3% in 2022 vs. 32.2% in 2021) which aligns with the global average increase (56.2% in 2022 vs. 43.7% in 2021). The survey forecasts a continent-wide average annual sectoral growth rate of 8.68% over the next 5 years.

“We're seeing increased preference for three star hotels, especially in South Africa. This could be attributed to the Airbnb effect which has helped increase competition at the lower end of the market,” says Setata. “Adventure tourism has also been gaining traction and is becoming more appealing to millennials. In addition, countries like South Africa have become more aggressive in bidding for MICE (Meetings, Incentives, Conferences and Exhibitions) business.”

According to Statista, African hotel revenue is expected to reach US$13.8 billion by 2027 with North Africa leading the way. The Confidence Index also notes that the new experiences sought by travellers align with broader trends such as ESG, digitalisation, nature, wellness, and medical tourism.

Investment opportunities

Given recent market headwinds such as rising interest rates in developed markets, capital raising has become more of a challenge for hotel-focused investors. “Some of the financing gaps are increasingly being filled by global financiers like the International Finance Corporation which has invested US$160 million in the half a billion dollar Kasada Hospitality Fund,” according to Setata. “Investors with significant dry powder are enjoying heavily-discounted acquisitions.” 

In addition, the Confidence Index notes that global hotel and hospitality brands are also considering both first and second-tier African destinations with the goal of identifying suitable business partners and sites to launch new projects.

This has been the case in the Zambian market for a few years now. Many of Lusaka's premier hotels have international links.

Protea Hotels Zambia, although owned by Union Gold Holdings Limited of Zambia, is part of the Marriott International family, Intercontinental Hotel Lusaka is owned by LSE-listed IHG Hotels & Resorts, Radisson Blu Hotel Lusaka is owned by a consortium led by Chinese state-backed Jin Jiang International, and Neelkanth Sarovar Premiere is a joint venture between Tanzania-based Neelkanth Group and India-based Sarovar Hotels & Resorts.

Taj Pamodzi: Better off unlisted?

Over the last 10 years, the Taj Pamodzi Hotels Plc stock has remained largely stuck. Its share price has appreciated a paltry 18% over the decade, in part due to its limited free float, and the company's inability to generate significant amounts of cash consistently which would drive positive returns over the long-term.

Over the same time period, Zambia's annual inflation averaged 10.86%, significantly higher than the annual percentage increase in Taj Pamodzi's stock thus eroding significant amounts of would-be value accrued to stock investors in the business.

Looking ahead, these challenges are only likely to remain given how competitive the Zambian hospitality business has become, and the state of the sector post-Covid.

In a recent note, management said it was optimistic about the future and was committed to “maximising revenues and minimising expenses in the long run.” But given the market environment, it remains to be seen how the company can transform itself sufficiently into a stock that’s worth buying.


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