/ 5 October 2012

Africa ripe for hotel bonanza

Chris Nassetta, chief executive of Hilton Worldwide, said of the relentless expansion at a press briefing held recently at the Hilton Sandton: "We have a good base [in Africa] with over 30 [hotels] and 19 more in the pipeline. But in another five years we will have more opportunity to expand and build that base. We are here because we think demand is here; growth is strong."

Additional hotels will be built in South Africa, where the group has added a luxury hotel brand, and there will also be new developments in Chad, Sierra Leone and Uganda.

The Hilton is not the only group expanding in the region. One of its main competitors, the Carlson Rezidor Hotel Group, which operates the brands Radisson Blu and Park Inn by Radisson, is set to build 47 new hotels between 2010 and 2015.

"We are the fastest-growing hotel group in Africa," said Andrew McLachlan, vice-president of business development for Africa and the Indian Ocean islands.

South Africa-based Protea Hotels also has 10 new hotels planned for different capitals on the continent.

Tread relatively
The Hilton, whose elite brand is synonymous with the high-class life of the West, ventured where others feared to tread relatively early in the history of international hospitality. It first forayed into Africa in the 1960s, coinciding with the era of independence.

In Ethiopia, Emperor Haile Selassie courted the Hilton group and the international recognition it afforded. Regarding Ethiopia as a politically stable country, the Hilton opened its doors in Addis Ababa in 1969. It stood its ground through subsequent years of civil war.

"Then we played a different role," said Jan van der Putten, Hilton Worldwide's vice-president of African and Indian Ocean operations. "At first it was a meeting point for heads of state to celebrate the Organisation of African Unity, but then it became a meeting point for aid workers and everyone who was willing to help. Now we are back to hosting people for economic development and leadership."

Van der Putten considers the pioneering spirit is still alive, but he suggests that competition is stiffer than before. "It is great to be the first," he said. "Eventually other hotels will follow, which is fine."  

The appeal of African markets for the hospitality industry has been buoyed by the economic downturn and limited expansion opportunities offered by European and American markets. The relatively undeveloped hospitality industry and the soaring growth rates predicted for the future mean that emerging markets such as sub-Saharan Africa offer the expansion opportunities international hotel groups need to keep their brands polished.

Bureaucratic restrictions
Van der Putten also noted the growing amenability of governments and looser bureaucratic restrictions. He said that having an international hotel brand such as the Hilton in a country was an encouraging sign for foreign investors and a possible driver of investment.

McLachlan said that, along with economic growth rates, one of the chief questions asked was whether the country had had a second term of democratic elections. So far, the outlook is bright, with countries such as Sierra Leone and Liberia entering the pool of eligibility.

The Hilton and Rezidor hotels in Africa are owned by local parties that bring the capital and operational know-how to navigate the bureaucratic and commercial landscape. The groups lend their brand and act in a managerial capacity. The partnerships operate in varying combinations of public and private.

"If the democracy is young, the new government will be pushing for expansion, but in the mature African countries we generally partner with private companies," said McLachlan.   

Van der Putten acknowledged the stronger entrepreneurial class coming to the fore in sub-Saharan Africa – many of whom are investors who have made their money internationally and are returning to their home countries to invest, such as Hilton's Nigerian partner Transcorp.