Marriott set for Africa takeoff
Continent expected to be a hospitality gold mine
IN ONE fell swoop, Marriott International is set to become the biggest hotel chain on the African continent by tapping into what is expected to become a hospitality gold mine over the next 10 years.
Marriott’s deal to buy out Protea Hotels for an amount estimated to be about R2-billion will ensure the luxury hotel chain an entrance of opportunity in to a sub-Saharan market where other international chains have failed to thrive.
Alex Kyriakidis, the president and managing director, Marriott International Middle East & Africa, said: “By 2050, one in four people on the planet will be in Africa. Overnight we will become the biggest hotel chain on the continent.”
Arthur Gillis, the CEO of the Protea Hospitality Group, agreed the deal was proof of the potential on the continent.
“We grew to be the biggest operator in sub-Saharan Africa, but we got to a point where we were running out of options for further growth, particularly in regions like Francophone Africa,” he said.
“We didn’t have much traffic from here to northern Africa, so we had decided to dominate our own region, which we did.
“But to grow and find further opportunities we needed international brand affiliation.”
This isn’t the first time Protea has been sold to an international group — and it didn’t work out particularly well last time.
In July 2007, the Australianbased Stella Hospitality Group bought 74% of Protea for R1.48billion with talk of it being part of Protea’s “global expansion”.
Two years later, however, the Australians sold it back to a consortium including Investec Bank for an amount believed to be far less than that.
This time around, Gillis said, Protea considered several partners, and found a perfect fit in Marriott.
“They are very specific, careful and measured in their approach. They carried out more research on the local market than anyone I know of. It was a logical partnership. Most chains have tried to enter Africa already, with varying degrees of success. Basically, they haven’t spent enough. They thought it would be easy, but it takes a lot of work.”
Gillis was adamant that Protea was not under duress, and had never put itself up for sale.
“Both parties started talking about the unrealised potential in Africa and the reasonable conclusion was drawn — that aligning ourselves with a global hospitality giant such as Marriott would ensure that we could realise our full potential. It’s as simple as that.”
Both chains are management specialists on behalf of owners, including governments and corporations.
“It’s the same model and busi- ness philosophy. They’ll simply run all the Protea hotels with the existing brands,” Gillis said.
Though rumours of the death of the luxury African hospitality industry have been peddled widely, it seems these are greatly exaggerated.
More upscale hotels are springing up in the continent than in any other hotel segment.
According to research from October’s STR Global Construction Pipeline Report, the development pipeline for the Middle East and Africa consists of 493 hotels with 119 850 rooms, the largest part of which are from the upscale segment.
This is a scenario that accords with the South African perspective: the five-star hotel segment had a national average increase in revenue per available room of 15.6% last year, with growth for 2013 until the end of August up 16.8% compared with the corresponding period last year.
However, Nikki Forster, partner at PwC, said many international and South African hotel groups were looking to the rest of Africa for development as there was limited scope for new capacity within South Africa. Grant Thornton’s Gillian Saunders said that getting a foothold in South Africa and sub-Saharan Africa was tough for international hotel groups, as the local brands had dominated.
Saunders said most international brands had less of a footprint than they wanted in Africa and all the major hotel groups — including Starwood, Hilton, Accor, Four Seasons, Kempinski, Carlson Rezidor, Movenpick and Marriott — had been looking at the continent.
Joop Demes, CEO of Pam Golding Hospitality, said overseas visitor arrivals, excluding visitors from elsewhere in Africa, rose 15% last year.
Statistics SA figures showed that for the six months to June, overseas arrivals had increased 6.1%.
While the 2008 financial crisis smacked many hotel groups, evidence from key tourist hubs including Sandton and Cape Town showed there had been a big recovery in recent months.
Demes said that hotel occupancy at five-star hotels in Cape Town had risen 10%, compared with last year. This had allowed hotels to increase their prices, especially at the five-star level.
Danny Bryer, a director of the Protea Hospitality Group, said Africa was the last frontier of hospitality development.
“Africa is one of the few regions in the world that has remained reasonably recessionproof for the past five years. We plan to double our representation to 10 hotels in Nigeria over the next five years.
“Ghana is another interesting prospect for hoteliers, as are Uganda, Zambia, Tanzania. There are in fact very few countries that aren’t ripe for hospitality expansion. ”