Tourism: The ‘Big Four’ hotel groups are more powerful than ever

By Loza Seleshie, Nelly Fualdes
Posted on Thursday, 5 May 2022 13:50

Model of the rooms at the Radisson Resort Saly, Senegal. © Radissonhotels

As a result of the crisis, Africa's four hotel industry behemoths now account for two-thirds of the rooms that will open on the continent.

Move along, there’s nothing to see? Despite two years of the pandemic that has seen a drop in hotel occupancy, announcements of the development of new establishments are well underway on the continent.

In the first quarter of 2022 alone, Hilton signed four new hotel projects in N’Djamena, Kinshasa and two in Douala, and opened the Hilton Garden Inn Casablanca Sud in March. For its part, Radisson has opened three units in Madagascar and is preparing to open another in Accra, two in Tunisia and one in Zambia.

Reda Faceh, Accor’s vice-president in charge of development, concedes that “some logistical supply problems may have slightly delayed the schedule of new openings.” However, the global giant nevertheless opened six new establishments in 2021, i.e. 1,013 additional rooms on the continent, excluding Egypt.

Power of the big brands

The sector’s specialists themselves are even surprised by its good health. Thus, Trevor Ward, managing director of the Nigerian firm W Hospitality Group, expresses his “astonishment” in the preface to his report “Hotel Chain Development Pipelines in Africa 2021” at the relatively low impact that the pandemic has had on hotel chains’ projects in Africa.

On the contrary, the situation seems to have benefited the sector’s giants. Accor, Marriott, Hilton and Radisson alone account for two-thirds of the rooms that will open on the continent, i.e. 54,773 rooms out of a total of 81,999, according to data from W Hospitality Group.

“In the requests, we have received for new projects, we have not seen a slowdown over the last few months, but rather an acceleration,” says Andrew McLachlan, Hilton’s executive director in charge of development in sub-Saharan Africa.

Although these new contracts respond to the observation of “a lack of quality hotels, in relation to demand, in many African cities,” according to Faceh, McLachlan also evokes a strategic shift in the mindset of hotel sector investors. “Some of those who wanted to develop hotels for their own account have changed their minds when they see the commercial strength of international brands and the speed with which they can adapt and relaunch themselves. They then consider it preferable to associate themselves with them,” he says.

Building loyalty among local players

The development of the major international hotel brands on the continent does not depend solely on these brands, which do not themselves own any establishments, but above all on local players, be they diversified groups, institutions or individual investors. Often, these are new owners, even though the objective of the large chains is – as far as possible – to retain them so that they can carry out a second or even third project with them in a given market.

“These investors want to be present in a sector that they have identified as profitable, but without being involved in the day-to-day management of an activity that is not their core business,” says McLachlan, who points out that Hilton’s African portfolio is made up of 80% of hotels under management contracts and 20% of franchised establishments, but no owned establishments. This is also the case for Accor, Marriott and Radisson.

“We could not achieve the sustained growth we are experiencing if we invested in our hotels ourselves. As it is, our development model does not require any capital. Instead, we invest in our resources, tools, teams and brands,” says Ramsay Rankoussi, Radisson’s vice-president for Africa and Turkey.

Mossadeck Bally, the founder of the West African group Azalaï, has also made this observation. The owner of his entire hotel portfolio to date, he is also thinking of moving to an asset-light model in order to accelerate his development. “We are in the process of canvassing hotel owners and potential investors,” says the Malian businessman who will open his future Dakar establishment at the end of the year and is advancing his projects in Niamey, Conakry and Douala.

Remote working and workation

The fact that African investors are perhaps “more accustomed than elsewhere to taking account of hazards in their business plans” contributes to preserving the development of the “Big Four” on the continent, says Faceh. This factor may explain why the pandemic did not discourage them too much. Neither the long Moroccan border closure nor the series of coups d’état in West Africa seems to have slowed down the ambitions of the players we interviewed.

On the other hand, hotel groups must adapt to new professional uses. Although they are not worried about the long term future of the events sector, they have taken note of the rise of the virtual. They have therefore developed their own hybrid (face-to-face/virtual) event platforms: Connect with Confidence for Marriott International, Hybrid Solutions for Radisson and AllConnect for Accor.

They have had to absorb the impact of remote working on a business clientele that increasingly wants to combine work with leisure time, hence the emergence of terms like workation and bleisure. “This generally means that most travellers will stay in the host country for a much longer period of time,” says Oz Desai, managing director of Corporate Traveller South Africa.

This confirms the shift towards hotel apartments and long-stay offers that have taken place in recent years. Thus, after the Adagio apartment hotel opened in 2019 in Casablanca, Accor is preparing to open a Novotel Adagio combo hotel on the Boulevard VGE in Abidjan at the end of 2023 and has signed for a future Novotel Living in Conakry.

“Before the pandemic, we had already made the strategic decision to develop each of our brands live, to meet a real market demand,” says Faceh, specifying that the crisis only popularised the demand for “more space.”

A longer process

But even though the projects are indeed there, “there is a considerable gap between a pipeline of projects that counts several hundred signatures each year and the few dozen actual openings of establishments in Africa,” says Ward.

“Even if things do materialise, they take much longer in Africa than elsewhere,” says Rankoussi, citing difficulties in accessing finance for investors, the supply of raw materials, administration and logistics. “The same project can take four to five years in Africa, whereas it will take two to three years in Europe.”

The major retailers have taken advantage of the Covid hiatus to clean up their project pipeline. They provide step-by-step support for investors “who are taken much more seriously by potential lenders if they have signed up with a major international brand,” says McLachlan.

Accor goes further by making the Kasada Hospitality Fund LP, which was set up with Katara Hospitality to facilitate financing for the sector, available to its partners. An initial $500m fund was opened in April 2019.

On a smaller scale, Hilton’s $50m Africa Growth Initiative Fund was also made available in 2017 to accelerate the conversion of hotels under the group’s brands.

Sources: Hotel Chain Development Pipelines in Africa 2021, Accor, Hilton, Radisson

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