The hospitality industry in Africa is set for rapid growth that will create thousands of new jobs and supporting infrastructure on the back of about 200 000 new hotel rooms expected in the next five years.
As an overview, consider the data released by STR Global in October last year, which provides a wide range of hotel statistics from around the world. According to their Middle East and Africa hotel development pipeline data, there are 493 hotels being built or in the final planning phase, which in the next two to three years will create nearly 120 000 additional rooms.
And that’s not counting the hundreds of hotels that are in the early planning stages in sub-Saharan Africa.
But why are the largest international hospitality brands so keen to expand into Africa, and why have so many of them failed to make the impact they had hoped in economies that are growing much faster than most other countries in the world?
The answer is quite simple: doing business in Africa is not for sissies.
Africa offers unique challenges to development that are rooted in decades – even centuries – of economic depression, and these circumstances still shape the thinking and trading practices of many African nations. This makes it very difficult for international companies with cookie-cutter formulas to walk in and succeed.
And business does want to come here. It’s not difficult to see why if one looks at the untapped mineral and energy wealth spread across the continent, which in turn spawns a host of supportive industries.
For a quick overview, study some of the gross domestic product (GDP) growth predictions across the continent:
n Nigeria has a predicted GDP growth of close to 7 percent for this year;
n Ghana, with its Jubilee oilfields, is likely to exceed that at closer to 8 percent;
n Uganda, which has discovered oil in the Albertine Rift Valley, has a GDP growth outlook of about 5.5 percent; and
n Rwanda’s agriculture-based economy is forecast to grow by more than 4 percent.
Coupled with this growth, though, comes the multinational corporates’ insecurity about massive investment in emerging markets, and it’s not unfounded.
Last Monday, Brazilian central bank chief Alexandre Tombini predicted that the “vacuum cleaner” of rising interest rates in the developed world would force emerging economies to follow suit. And in the subsequent three days he was proved right; India’s central bank has raised interest rates, as have Turkey and South Africa.
Emerging economies that were previously complacent are being picked off by developed markets while they are scrambling to defend themselves.
And all this brings one back to my original point that doing business in Africa takes nerves of steel and a lot of know-how.
There are two ways for international groups to set up shop.
The first is dive in and pray that the power and recognition of your brand will bring sustained business. Many groups have tried that. Some have succeeded, but many have failed miserably.
The second is to use local knowledge and create partnerships with African companies that have grown and thrived here.
The Protea Hospitality Group is undergoing just such a marriage. Marriott International has bought the company and intends to retain the brands that have succeeded in Africa for 30 years. Marriott has recognised that to rapidly expand its market share in sub-Saharan Africa you have to know how to conduct business in a unique economic landscape, and that knowledge can only come from experience.
Protea Hospitality has 116 hotels with 10 148 rooms in seven African countries. With the Protea acquisition, Marriott becomes the largest hotel company in the Middle East and Africa region, nearly doubling its distribution here to more than 23 000 rooms. At the same time Marriott plans to develop 25 new hotels under its various brands in Africa with a total of 4 655 new rooms.
Like most other global hospitality companies, Marriott sees the untapped potential in Africa and wants to put down roots.
The “why” is easily explained by the UN World Tourism Organisation, which reported that Africa saw about 52 million international tourist arrivals in 2012 (the latest figures available), a 6 percent increase over the previous year. The UN Commission for Africa pegs the continent’s overall growth for this year at 5.3 percent.
What this means is that there will be a fast-growing number of corporate travellers across Africa in the next five years.
Perhaps the most pleasing result of this process is the rise of the African traveller. The Protea Hospitality Group has already seen a large increase in the number of domestic, cross-border and cross-continental travellers in the past three years.
Other multinationals wanting to enter Africa’s vibrant, exhilarating and sometimes scary business environment could do worse than to learn from Marriott and seek local partners with African expertise, which will ultimately grow their revenue base and boost Africa’s development.
That way, everyone becomes a winner.