SANDTON, South Africa—Europe has long been the stronghold of smaller, private hotels, while global chains have dominated in Asia and North Africa. But what is the best hotel format for sub-Saharan Africa?
Joop Demes, CEO of Pam Golding Hospitality, posed this question during the “Regional operators and privately branded hotels” panel at the recent Hotel Investment Conference Africa.
Demes said smaller, private hotels have lower overheads, are quick in decision making and flexible with regard to marketing and capital expansion. They also tend to operate in creative ways, especially during difficult times.
Their disadvantage is that they lack the market penetration, purchasing power and depth of management of the large global chains, he said. They are not able to offer the same loyalty programs their counterparts do, don’t have the same ability to do research nor the resilience of the bigger groups.
The two sectors, however, tend to compensate for their shortcomings. Independent hoteliers work together in consortia to offer loyalty programs and chains develop their own boutique hotels, referred to as “collections,” Demes said.
Shingi Munyeza, group CEO of African Sun Hotels that originated in Zimbabwe, said smaller regional hotels have a local competitive advantage because they have a better ability to understand the environment in which they operate.
A big brand does not add value at an iconic location like Victoria Falls in Zambia, he said. The location is strong enough to attract business.
He said bigger groups don’t custom tweak in terms of guest expectations of a location.
“Look at what the location offers,” he advised. Certain brands work better in certain locations.
He said a global brand would not work well for a property that targets business travelers, for instance.
Leisure travelers, however, “don’t want to experience London when they are at Victoria Falls; they want a local touch,” Munyeza said.
Partnering in Africa
Neil Bald, managing director of African Hotels and Adventures, said the group has an intention to grow in Southern Africa. When negotiating contracts, executives are finding Africans want to work with Africans, and locals have better access to suppliers.
He also said one needs a certain resilience to operate in Africa that global groups don’t always have. There’s also high cost and long tenure of contracts with global operators.
José Ventura, former VP of business development in Asia/Pacific, Middle East and Africa for Preferred Hotel Group who recently joined Australian StayWell Hospitality Group in charge of business development, said this group is following a different approach. It has $1 billion in assets and is not afraid to invest if a proposition meets its criteria. Executives strive to find the right partners who understand the local market and locations. Earlier this year StayWell announced a joint venture with the Mantis Collection in Southern Africa.
“We don’t pretend to understand Africa. As in the Middle East and Asia we get a local partner and grow in that way from a regional operator in Australia to a global group,” Ventura said.
William Perry, global head of hotel asset management at CII Holdings, said when targeting international travelers the group considers global brands. For secondary locations the company prefers local brands to bring in local business.
“In Cape Town, the Hilton brand really helps to bring in business in the winter,” he said.
He said global brands work well in cities and private hotels work better at iconic locations like Victoria Falls. He pointed out that global brands often cap average daily rate in the light of customer expectations.
Ventura said in the right location consortia of independent hotels can definitely compete with global chains. Preferred, for example, has more than 30 sales offices throughout the world that assist members with sales and marketing, even though the company doesn’t manage those hotels.
“There is definitely room for smaller players, but the right property and the right location will dictate the decision,” he said.
Ideal room size?
Demes said global chains do not consider hotels with less than 120 rooms.
Bald said AHA operates lodges as well as city hotels with 50 to 60 rooms and is moving into the market for bigger corporate hotels in capital cities. The company acquired the Three Cities Management Company, which more than doubled its portfolio from 20 to 43 properties across the country and made it the second-largest hotel management company in South Africa. AHA will scale down on acquisitions for the time being. Exceptions may be made if distressed properties become available, Bald said.
Munyeza said African Sun does not consider hotels smaller than 100 rooms as financially viable due to the cost of infrastructure. In West Africa, hotels have to provide their own services like electricity and water.
Ventura said StayWell does not set a minimum size.