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Radisson Hotel Group betting on African growth as demand picks up
Radisson Hotel Group says it will go ahead with its plans to expand in its key African markets despite the COVID-19 pandemic.
Ramsay Rankoussi, recently named as the group’s new head of Africa development in June, tells The Africa Report the four key African markets he identifies: Morocco, Egypt, Nigeria and South Africa. He hopes to have between 10 and 15 new hotels, ranging from three to five stars, in each country within five years.
- French-speaking Africa has also become a higher priority, and the company hopes to add hotels in Senegal, Cameroon, the Côte d’Ivoire and the Democratic Republic of Congo.
Radisson, owned by a consortium led by China-based Jin Jiang International Holdings, now has just under 100 hotels in Africa. It aims to have 150 within five years. Radisson plans to stay in all the African countries where it is present, but some countries might need more localised management, says Rankoussi.
The company has been able to cut and defer 30% of costs, including delaying investments and closing restaurants. These have been “difficult decisions to take, but essential for business survival,” says Rankoussi. With government support, the company has so far been able to avoid cutting jobs, he adds.
Radisson Hotel Group is the marketing name used by Radisson Hospitality AB, which operates hotel brands in Europe, the Middle East and Africa.
- In April, Fitch downgraded Radisson Hospitality AB’s senior secured rating to BB- from BB, citing an uncertain credit profile once the coronavirus outbreak abates.
- Fitch says that there will be a “temporary tightening” of Radisson Hospitality’s liquidity in the second half of 2020, which the company should be able to address through capex and working capital management.
- The agency cautions that any support Jin Jiang could receive from authorities in China is unlikely to flow to Radisson.
Some hotels have been able to remain open and trade, for people in quarantine, or health workers and government agency staffers, says Rankoussi. Other hotels are now reopening and bookings are starting to pick up, driven for the moment by domestic leisure demand. “The start of recovery is already visible.”
- Any recovery in business travel, he says, will be for later. “People are still avoiding airlines.”
- So far, the company has avoided needing to find new working capital. Asked if that could change if there is a prolonged recession, Rankoussi said that the company “has been well backed” by its shareholders and that their commitment “has remained the same.”
- Radisson’s model has been one of organic growth rather than acquisitions. Rankoussi contrasts this with Accor which, he said, is “not capable of growing organically.”
More hotels may want Radisson branding as result of the pandemic, says Rankoussi, who also anticipates interest from local or regional chains that need access to larger-scale distribution. “There is a future,” he says. “There are still opportunities in Africa.”
Individual investors own all of Radisson’s hotels in Africa, he says, which limits the company’s financial exposure. The company will continue to focus on franchising and management rather than ownership. “We will find a new operational model.”
Successfully executing hotel expansion in Africa will need patience and deep pockets.