The “Big Four” hotel groups are more powerful than ever
Go your way, there is nothing to see? Despite two years of pandemic which have seen a drop in hotel occupancy, announcements of the development of new establishments are going well 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 logistics supply problems may have slightly delayed the schedule for new openings”. However, the global giant still opened six new establishments in 2021, i.e. 1,013 additional rooms on the continent, excluding Egypt.
The power of big brands
Specialists in the sector are even surprised by his 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 small impact that the pandemic has had on projects. hotel chains. in Africa.
On the contrary, the situation seems to have benefited the giants of the sector. Accor, Marriott, Hilton and Radisson alone represent two-thirds of the rooms that will open on the continentor 54,773 rooms out of a total of 81,999, according to data from W Hospitality Group.
“In the applications we have received for new projects, we have not seen a slowdown in recent months, but rather an acceleration,” explains Andrew McLachlan, Hilton’s executive director of development in sub-Saharan Africa.
If these new contracts respond to the finding “of a lack of quality hotels, compared to demand, in many African cities”, according to Faceh, McLachlan also evokes a strategic change in the mindset of investors in the hotel sector. “Some of those who wanted to develop hotels on their own have changed their minds when faced with the commercial strength of international brands and the speed with which they can adapt and relaunch. They then deem it preferable to associate with them,” he says.
Retain local actors
The development of the major international hotel brands on the continent does not depend solely on these brands, which themselves do not own any establishment, but above all on local players, whether they are diversified groups, institutions or individual investors. Often, these are new owners, even if the objective of the big brands is – as far as possible – to retain them in order to carry out a second or even a third project with them in a given market.
“These investors want to be present in a sector which they have identified as profitable, but without being involved in the day-to-day management of an activity which is not their core business”, explains McLachlan, who points out that the African portfolio of Hilton is made up of 80% hotels under management contract and 20% franchise establishments, but no owned establishments. This is also the case for Accor, Marriott and Radisson.
“We couldn’t achieve the sustained growth we are experiencing if we invested in our hotels ourselves. As it stands, our development model does not require any capital. Instead, we are investing in our resources, our tools, our people and our brands,” said Ramsay Rankoussi, Radisson Vice President for Africa and Turkey.
Mossadeck Bally, the founder of the West African group Azalaï, also made this observation. Owner of its entire hotel portfolio to date, it is also considering switching to an asset-light model in order to accelerate its development. “We are in the process of approaching hoteliers and potential investors”, indicates the Malian businessman who will open his future establishment in Dakar at the end of the year and is advancing his projects in Niamey, Conakry and Douala.
Telecommuting and telecommuting
The fact that African investors are perhaps “more accustomed than elsewhere to factoring contingencies into their business plans” helps preserve the development of the “Big Four” on the continent, Faceh believes. This factor may explain why the pandemic has not discouraged them too much. Neither the long closure of the Moroccan border nor the series of coups in West Africa seem to have dampened the ambitions of the actors we interviewed.
On the other hand, hotel groups must adapt to new professional uses. While they aren’t worried about the long-term future of the events industry, they are acknowledging the rise of virtual. They have therefore developed their own hybrid event platforms (face-to-face/virtual): Connect with Confidence for Marriott International, Hybrid Solutions for Radisson and AllConnect for Accor.
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They have had to absorb the impact of remote working on a corporate clientele that increasingly wants to balance work and leisure, hence the emergence of terms like workation and bleisure. “This usually means that most travelers will stay in the host country for a much longer period,” says Oz Desai, managing director of Corporate Traveler South Africa.
This confirms the trend towards hotel apartments and long-stay offers that has taken place in recent years. Thus, after the Adagio hotel residence opened in 2019 in Casablanca, Accor is preparing to open a Novotel Adagio combo hotel at the end of 2023 on Boulevard VGE in Abidjan 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 directly, to respond to real market demand”, explains Faceh, specifying that the crisis has only popularized the demand for “more ‘space”.
A longer process
But even if the projects are indeed there, “there is a considerable difference between a pipeline of projects which has several hundred signatures each year and the few dozen effective openings of establishments in Africa”, specifies Ward.
“Even if things do materialize, they take much longer in Africa than elsewhere,” Rankoussi says, citing difficulties in accessing finance for investors, sourcing raw materials, administration and logistics. “The same project can take four to five years in Africa, while it will take two to three years in Europe.
Major retailers took advantage of the Covid pause to clean up their pipeline of projects. They provide step-by-step guidance to investors “who are taken much more seriously by potential lenders if they have signed with a major international brand,” McLachlan explains.
Accor goes further by making the Kasada Hospitality Fund LP available to its partners, created with Katara Hospitality to facilitate financing for the sector. A first fund of $500 million was opened in April 2019.
On a smaller scale, Hilton’s $50 million Africa Growth Initiative Fund was also made available in 2017 to accelerate the conversion of hotels under the group’s brands.
Sources: Africa Hotel Chain Development Pipelines 2021, Accor, Hilton, Radisson