Boom Time

The world’s top ho­tel brands jos­tle for po­si­tion on the African con­ti­nent

Business Traveler (USA) - - FRONT PAGE - By Richard Holmes

Africa is the next big thing.”

That was the bullish sen­ti­ment from Michael Wale, pres­i­dent for Europe, Africa and Mid­dle East for Starwood Ho­tels & Re­sorts World­wide, when speak­ing to the Fi­nan­cial Times in 2014. And while he was quick to tem­per the op­ti­mism with a cau­tion that the ho­tel revo­lu­tion com­ing to Africa won’t hap­pen overnight, it’s clear that the hos­pi­tal­ity in­dus­try across the con­ti­nent is gear­ing up for a bright and busy fu­ture.

Per­haps the best over­view of the sus­tained growth in the ho­tel in­dus­try on the con­ti­nent comes in the an­nual Pipeline Re­port from the La­gos-based ho­tel con­sul­tancy W Hos­pi­tal­ity Group, which in 2014 recorded 215 ho­tels in de­vel­op­ment across 54 African coun­tries. While some de­vel­op­ments are yet to break ground, or build­ing may have stalled, the mes­sage is nonethe­less the same: African ho­tel de­vel­op­ment is boom­ing.

Sub-Sa­ha­ran Africa is cer­tainly the fla­vor of the month for most ho­tel com­pa­nies, with in­vest­ment from in­ter­na­tional com­pa­nies in oil and gas in­dus­tries spurring eco­nomic de­vel­op­ment, which in turn im­pacts the larger econ­omy fur­ther down­stream.

“Sub-Sa­ha­ran Africa is re­ally prov­ing to be the ho­tel growth story of the 21st cen­tury,”notes the re­port, adding that ho­tel growth“is shap­ing up to be less about the ma­jor mar­kets – with the no­table ex­cep­tion of Nige­ria – and more about the smaller, less de­vel­oped economies.”

For in­stance, South Su­dan has two ho­tels in the pipeline – in­clud­ing a Sher­a­ton slated for 2017 open­ing – while Liberia will see a Man­galis ho­tel open in Mon­rovia. Radis­son Blu leads the pack in the num­ber of ho­tels un­der de­vel­op­ment with 17, but is edged out by Hil­ton when it comes to the num­ber of rooms in the pipeline at 4,723.

“Equa­to­rial Guinea and the DRC have also not seen any pipeline ac­tion in the past three years, but this has changed with a planned Noom ho­tel in Kin­shasa (DRC), and two Kempin­ski ho­tels, in Oyala (Equa­to­rial Guinea) and Kin­shasa,”notes the Pipeline Re­port.

With only eight Kempin­ski prop­er­ties on the con­ti­nent,“Africa is now our pri­or­ity for growth,”notes Ul­rich T Eck­hardt, the group’s pres­i­dent, In­dia, Mid­dle East, and Africa.“Eco­nomic growth across a va­ri­ety of sec­tors con­tin­ues to at­tract more and more in­vest­ment in Africa, which will nat­u­rally in­crease the num­ber of busi­ness trav­el­ers to the con­ti­nent.”Kempin­ski’s new fo­cus on Africa in­cludes four ho­tels due to open in the next 12 months, with a new of­fer­ing in Ghana, and the brand’s third prop­erty in Egypt.

“There are many coun­tries across Africa that are show­ing en­cour­ag­ing eco­nomic growth, which in turn spurs the need for ho­tels of in­ter­na­tional qual­ity,”says Alex Kyr­i­akidis, pres­i­dent and man­ag­ing di­rec­tor, Mid­dle East and Africa for Mar­riott In­ter­na­tional.

And it’s pre­cisely those two words – ‘eco­nomic growth’– that are driv­ing the con­ti­nent’s in­flux of new ho­tel de­vel­op­ments.“Africa’s av­er­age GDP growth is some­where in the re­gion of

five per­cent, and many coun­tries are sub­stan­tially ex­ceed­ing that,”ac­cord­ing to Kyr­i­akidis.

With its re­cent ac­qui­si­tion of the Protea Hos­pi­tal­ity Group, Mar­riott cur­rently op­er­ates 125 ho­tels in 10 African coun­tries. How­ever, the group has plans for fur­ther ex­pan­sion, with over 30 ho­tels in its de­vel­op­ment pipeline, stretch­ing from Al­ge­ria to Uganda. The energy boom in Nige­ria and Ghana make them key des­ti­na­tions for Mar­riott’s ex­pan­sion, with agri­cul­ture and cop­per min­ing driv­ing fur­ther growth in Ethiopia and Zam­bia re­spec­tively.

Euro­pean ho­tel group Ac­cor, with 91 ho­tels across Africa, is also ex­pand­ing, says Manoël Par­rent, op­er­a­tional mar­ket­ing di­rec­tor for Ac­cor in Africa and In­dian Ocean.“Our pri­or­i­ties are in Morocco, Al­ge­ria, An­gola, Nige­ria, Ghana, Ethiopia, Kenya and South Africa,”he says.

Sub-Sa­ha­ran Africa has moved to the top of the to-do list for Möven­pick Ho­tels & Re­sorts as well, and that is“where we are con­cen­trat­ing our de­vel­op­ment plans in the next five years,”says Stephen Banks, di­rec­tor of sales and mar­ket­ing – Africa for Möven­pick.“Africa rep­re­sents the fi­nal fron­tier in ho­tel de­vel­op­ment.”

Though the ho­tel com­pany is firmly en­trenched in North Africa, there are still op­por­tu­ni­ties in Libya and Al­ge­ria, Banks adds.“In the East, there’s Kenya, Tan­za­nia and Zam­bia, and in the West there are more op­por­tu­ni­ties with lack of in­ven­tory in Cote D’Ivoire, Congo and of course Nige­ria. In South Africa where the mar­ket is more ma­ture, op­por­tu­ni­ties still ex­ist, how­ever with rel­a­tively low av­er­age rates and many ho­tel com­pa­nies be­ing present for a num­ber of years, the po­ten­tial for de­vel­op­ment is less.”

In the in­flux of new in­ter­na­tional com­pe­ti­tion, those well-es­tab­lished ho­tel brands in Africa’s most de­vel­oped econ­omy see both a hope­ful mes­sage and a note of cau­tion.“Well, they’re all mak­ing their pres­ence felt,”says Rob Collins, chief mar­ket­ing and strat­egy of­fi­cer for South African ho­tel group Sun In­ter­na­tional.“I think it’s won­der­ful and I think it’s a vote of con­fi­dence.”

How­ever, Collins goes on to warn new­com­ers:“It’s not this utopia where ev­ery­one can come in. There are ob­sta­cles, and I some­times won­der whether or not it’s the ro­mance of de­vel­op­ing an African strat­egy, be­cause‘ev­ery­one else is get­ting into Africa.’Africa is the fla­vor of the month, prob­a­bly be­cause it had been left alone for so many years, and it’s now sud­denly seen as the con­ti­nent of op­por­tu­nity.”

Name Your Price?

But de­spite the boom, sup­ply has yet to keep up with de­mand – the An­golan

cap­i­tal Luanda, and N’Dja­mena, the cap­i­tal of Chad, re­main among the most ex­pen­sive cities on the planet for busi­ness trav­el­ers. In ei­ther cap­i­tal, a de­cent busi­ness-stan­dard ho­tel room won’t leave you with much change from $500.

With 18 ho­tels across the con­ti­nent, Best Western is another brand seek­ing new op­por­tu­ni­ties in Africa. Af­ter open­ing new prop­er­ties in Ghana, Benin, Nige­ria, Tan­za­nia and Kenya over the past two years, the chain also has agree­ments in place in Zanz­ibar, Ad­dis Ababa and Kampala, says Karl de Lacy, in­ter­na­tional de­vel­op­ment man­ager for Best Western In­ter­na­tional.

Ac­cra is another city ripe for de­vel­op­ment, with the top 12 ho­tels av­er­ag­ing 75 per­cent room oc­cu­pancy in Ac­cra, ac­cord­ing to Bruce Pot­ter, gen­eral man­ager of the Hol­i­day Inn Ac­cra Air­port. With sup­ply lim­ited to around 1,600 rooms per night – of which one-fifth are im­me­di­ately taken by the in­ter­na­tional air crews fly­ing into the city each day –“room rates are still high,”says Pot­ter.“We av­er­age $210 as a Hol­i­day Inn.”

Möven­pick op­er­ates one of Ac­cra’s two 5-star ho­tels – the other is Legacy Ho­tels & Re­sorts’Labadi Beach Ho­tel – and it cur­rently has a strong­hold on the down­town area, and will at least un­til Kempin­ski de­buts its 5-star prop­erty in the same area this year.

“We have seen our ho­tel in Ac­cra achieve very high oc­cu­pancy num­bers over the last year which is driven largely from cor­po­rate busi­ness in the bank­ing, con­struc­tion, FMCG and phar­ma­ceu­ti­cal in­dus­tries,”says Banks.“Nige­ria, per­haps, is an ex­am­ple of con­sis­tent de­mand due to the oil in­dus­try; how­ever with fur­ther oil dis­cov­er­ies and the huge min­eral de­posits in West Africa par­tic­u­larly, de­mand will be driven fur­ther by the cor­po­rate mar­ket.”

While the likes of La­gos and Luanda have long been key busi­ness travel des­ti­na­tions, Pre­ferred Ho­tel Group is fo­cus­ing on new and emerg­ing des­ti­na­tions such as Abuja, Ki­gali and Ma­puto, com­ments Caro­line Daniel, ac­count di­rec­tor for Africa. Pre­ferred also plans to bol­ster their foot­print“across Ghana and Tan­za­nia, where we see great po­ten­tial for growth. Over the next nine to 12 months, we ex­pect to welcome up to eight new mem­ber prop­er­ties from these ar­eas,”she adds.

With eight ho­tels fo­cused in subSa­ha­ran Africa, in­de­pen­dent op­er­a­tor Ex­tra­bold Ho­tel Man­age­ment is also look­ing to ex­pand, with de­vel­op­ments in Kenya, Mozam­bique and South Africa in the cards. And af­ter a few years of de­pressed in­bound fig­ures, it’s the num­bers of in­ter­na­tional visi­tors that are buoy­ing the growth.

“Our ho­tels with ex­po­sure to in­ter­na­tional in­bound travel have shown good growth in the past year, whilst the cor­po­rate and gov­ern­ment seg­ments in many re­gions have con­tin­ued to be un­der pres­sure,”ex­plains Xan­der Ni­j­nens, man­ag­ing di­rec­tor of South Africa-based Ex­tra­bold Ho­tel Man­age­ment.

Across the bor­der in Mozam­bique, Lon­rho’s Ho­tel Car­doso has also taken ad­van­tage of the spike in busi­ness book­ings in Ma­puto.“The num­ber of flights com­ing into Ma­puto has in­creased, so there’s been much de­mand for do­ing busi­ness in the cap­i­tal,”says Lon­rho Ho­tels chief ex­ec­u­tive Bren­dan Gillespie.

Lon­rho also op­er­ates a prop­erty in Gaborone – the Lans­more Masa Square - which has seen a surge in de­mand since De Beers moved their global head­quar­ters to the Botswana cap­i­tal. As a re­sult, “there’s a lot of bank­ing ac­tiv­ity com­ing into Gaborone,”says Gillespie, adding“the Botswana gov­ern­ment has a light touch, and is very sup­port­ive. It makes it very easy to do busi­ness there.”

Risk vs Re­ward

It’s a cru­cial ob­ser­va­tion – for while the ho­tel busi­ness is clearly boom­ing, it’s not all plain sail­ing. A new ho­tel de­vel­op­ment in the Mid­dle East will take three to four years from plan­ning to wel­com­ing the first guests, yet in Africa that fig­ure is closer to seven. And amid the lo­gis­ti­cal and per­son­nel chal­lenges of run­ning ho­tels – par­tic­u­larly in the lux­ury space – there’s no short­age of other hur­dles; sup­ply chain is­sues, oner­ous re­stric­tions on im­por­ta­tion of goods, cor­rup­tion and bu­reau­cratic in­ef­fi­cien­cies.

Hav­ing the right peo­ple on the ground is key to smooth­ing the path, hote­liers say. “We have been very for­tu­nate in Africa to have great part­ners who help us mit­i­gate ma­jor risks and en­sure that our oper­a­tions run smoothly. As ho­tel op­er­a­tors, find­ing the right own­ers is a key fac­tor in our ex­pan­sion strat­egy,”notes Eck­hardt.

Banks agrees.“Hav­ing de­vel­op­ment peo­ple who are fa­mil­iar with the ways of work­ing in Africa is an as­set,”he says. “As is a lo­cal part­ner who can en­sure the some­times bu­reau­cratic de­lays are short­ened by know­ing how things work.”

Nonethe­less, there’s been a no­table uptick in ho­tels cater­ing to the mid­dle tier of the mar­ket. Cit­ing cor­po­rate travel as the main driver of book­ings,“the mid-mar­ket seg­ment is show­ing the best growth,”says Clifford Ross, chief ex­ec­u­tive of the City Lodge Ho­tel Group, which has 51 ho­tels in South Africa, two in Kenya and one in Botswana.

“In our opin­ion, mid-mar­ket is a great long-term po­si­tion­ing as you are less vul­ner­a­ble dur­ing de­mand cy­cles,”says Ni­j­nens.“There is less of an abil­ity for your clients to‘trade down’, and you ben­e­fit from the lux­ury mar­ket com­ing down a tier.”

How­ever, high-end ho­tel groups are also cit­ing strong de­mand for lux­ury prop­er­ties.

“We can’t add des­ti­na­tions fast enough. In fact, in many cases gov­ern­ment lead­ers ap­proach us, cit­ing de­mand for lux­ury ho­tels to ac­com­mo­date the in­creas­ing num­ber of visi­tors or to meet fu­ture de­mand,”says Eck­hardt.

Per­haps diplo­mat­i­cally, Mar­riott In­ter­na­tional be­lieves“there’s sig­nif­i­cant room for de­vel­op­ment across both lux­ury and mid-mar­ket ho­tels,”says Kyr­i­akidis.“Be­cause in many coun­tries we’re prac­ti­cally start­ing from a zero base in terms of prop­er­ties of in­ter­na­tional stan­dard. The same holds true for coun­tries with more de­vel­oped hos­pi­tal­ity in­dus­tries, be­cause Africa’s economies are grow­ing so rapidly,”he notes.

“Our ex­pe­ri­ence in Ac­cra shows there is room for both ends of the mar­ket,”agrees Banks.“Rates in the 5-star ho­tel mar­ket in Ghana ap­proach $300, how­ever 4-star ho­tels in the same mar­ket­place can achieve $200 to $250 per night in peak sea­sons, driven by de­mand and rel­a­tive lack of sup­ply.”How­ever, he notes,“as the mar­ket ma­tures, the need for three and 4-star ho­tels will in­crease in emerg­ing mar­kets, how­ever at present there is cer­tainly a need for more 5-star ho­tels.”

“In­ter­na­tional trav­el­ers still pre­fer 5-star ho­tels, ir­re­spec­tive of price,”sug­gests Ross.“Lo­cal cor­po­rate travel is very much com­pany pol­icy-driven as to where they can stay and at what price point. This is re­sult­ing in some trad­ing down as a re­sult of rate.”

Time and Time Again

While the dis­cus­sion con­tin­ues around the health of dif­fer­ing ends of the mar­ket, the more sub­jec­tive per­cep­tion of value is mo­ti­vat­ing the hos­pi­tal­ity in­dus­try to make sure that guests get the sense their money is – or, at least, feels – well spent.

“With the pro­lif­er­a­tion of ho­tel brands and con­cepts, I think the best value of­fer­ing – price ver­sus ex­pe­ri­ence – will be one of the de­cid­ing fac­tors for cor­po­rate buy­ers,”says Ni­j­nens.“There will al­ways be a space for the lux­ury seg­ment, but the ma­jor­ity of cor­po­rate de­mand will be more value-ori­ented.”

A key part of the dis­cus­sion around value – and what room rate con­sti­tutes good value – comes down to a com­mon con­cern for cor­po­rate trav­el­ers in Africa: se­cu­rity.

“Com­fort, safety and se­cu­rity are needed when trav­el­ing in Africa and these are pri­or­i­tized over the rate by group travel man­agers and cor­po­rate trav­el­ers when se­lect­ing a ho­tel,”notes Daniel from Pre­ferred Ho­tel Group.

While se­cu­rity is top of mind for many trav­el­ers to Africa, there’s another ethe­real con­cept that’s per­haps even more valu­able: time. In the new eco­nomic rush for Africa, time is in short sup­ply for many cor­po­rate trav­el­ers. As a re­sult, world class roundthe-clock ser­vices and con­nec­tiv­ity are a pre­req­ui­site for open­ing the doors, not merely a nice-to-have.

“In many of our ho­tels we of­fer WiFi, 24-hour ac­cess to check-in and check-out ser­vices, in-room din­ing, spa ser­vices, a fit­ness cen­ter and the ex­ec­u­tive lounge,” notes Eck­hardt.

Sun In­ter­na­tional has tra­di­tion­ally fo­cused more on the lux­ury leisure travel mar­ket with en­ter­tain­ment and gam­ing as the main draw­ing cards. How­ever, at the Maslow Ho­tel in Johannesburg the group has paid plenty of at­ten­tion to busi­ness trav­el­ers with free WiFi through­out the ho­tel, a ded­i­cated busi­ness meet­ing hub and spa treat­ments tai­lor-made for cor­po­rate trav­el­ers.

High­light­ing key touch points for cor­po­rate trav­el­ers, Möven­pick Ho­tels & Re­sorts has com­mit­ted to of­fer­ing free WiFi in all of its ho­tels by 2015. And in a fur­ther bid to help trav­el­ers save time, Mar­riott In­ter­na­tional re­cently rolled out its mo­bile check-in and check­out ser­vice to 16 Mar­riott Ho­tels prop­er­ties in North Africa and the Mid­dle East, and“the plan is to ex­pand this south­ward across the con­ti­nent,”says Kyr­i­akidis.

“Africa is a sleep­ing gi­ant,”says Eck­hardt from Kempin­ski em­phat­i­cally.“And when it wakes up, the growth will be stag­ger­ing. That is why were are here, and we will con­tinue to ex­pand our pres­ence in Africa over the next five to 10 years.” BT

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