Serious about Africa
Hilton has a renewed focus on Africa, and a year on from unveiling its Africa Growth Initiative, which committed $50 million over the next five years to the group’s expansion of its Sub-Saharan African portfolio, President & CEO Chris Nassetta was in Nairobi for the Africa Hotel Investment Forum, where editor Dylan Rogers was able to grab a few minutes of his time to discuss – among other issues – Hilton’s new ‘Big Five’ project.
Q: What are your thoughts on the development space in Africa?
A: I like what I see. We've built momentum over the last 60 years and we now have just over 40 hotels in operation. Hilton was, if not the first, then among the first international brands on the continent, but the reality is that we didn't pursue Africa aggressively. Where previously development happened out of London, we now have development and operating teams on the ground. Africa has been identified as one of the most important emerging market growth opportunities. But growth takes momentum, which takes a long time to build. When I joined Hilton 11 years ago we had a small pipeline, and in the next five years we're going to double our presence. It's good, but not good enough. If you look at the population centres and their growth, not to mention inbound tourism that is set to double or even triple in the next 20 years, this is where much of the action, in terms of growth, will happen.
Q: Would you say the Hilton Africa Growth Initiative is significant in terms of Hilton’s view on Africa?
A: We would consider equity in some circumstances. We own 60% of the Nairobi Hilton, a deal we did 50 years ago. We are capitallight but we're injecting capital in other forms. The net result is the same; investment is investment, a dollar's a dollar. No matter what you call it, $50 million is $50 million leaving our pocket and going to help someone else and bridge economics where necessary.
Q: Is Hilton as serious now about Africa as it’s ever been?
A: I'd say we're more serious than ever before. It's not that people
weren't serious about it 50 years ago, but we weren't as serious about having a broad network.
I am convinced that a network effect matters. Being able to serve more customers' travel needs in the places that they want to visit builds loyalty. But that requires different products and price points and a lot of dots on the map. The more opportunities we can offer, particularly in Africa, the more of a network effect we create. The network effect is beneficial to the economics and market share of our business in Africa, but also to our global market share because so many people are global travellers. If you want loyal population of travellers, you have to start by building a business at home. At their home. So that when they leave their home, wherever they're travelling, they have a known and trusted network to plug into. You've got to put dots on the map and keep your products and services at a level that continue to please.
Q: Why is the mid-market segment in Africa such a hot topic at the moment?
A: Very simply: economics. The law of supply and demand. More of the demand for travel is coming from the middle class, which are the largest parts of any population, and what they can afford is mid-market, mid-scale brands. Even in the more mature markets of Europe and the United States, the growth is coming from mid-market.
Q: Will the Hampton brand be coming to Africa?
A: It will, but not yet. There are a couple of select deals that we're working on where we think it makes sense. But we will not roll out Hampton on a broad basis any time soon. We need to build
more of a network effect to make that work. So we'd rather support the Garden Inn brand until it's a strong network. We currently have two of these properties up and running, with 16 more coming. We want to create a greater awareness of the HGI brand and build up some loyalty, and then we'll think about Hampton Inns.
Q: What was the thinking behind Hilton’s Big Five initiative?
A: This initiative addresses some of the challenges that Africa, and the world, face. The opportunities ahead of us in this industry are spectacular, but there are also risks that we need to mitigate. The greatest risk is an unsustainable approach to the business. That we don't take care about the environment. That we're not great stewards of our destinations. That we don't attract and retain the right types of people, particularly young people, in order to do what we do best and deliver great experiences for customers. Our Big Five is a follow-on to our 2030 global goals, which is to halve our environmental impact and double our social impact. The Big Five is a play on Africa's Big Five, but if you look at the individual parts, it's a direct follow-on of halving environmental and doubling social impact. The wildlife one is fairly specific, since it's a huge reason for people to visit Africa. If we're not working together as stewards, there won't be as many reasons to come to Africa. Which is not good for anybody, especially the African countries. ■