WINDHOEK, Namibia — Domestic and international hotel brands are growing more prominent in Africa, with their ability to leapfrog far ahead in providing markets with sophisticated, well-run hotels and resorts that have high exit values.
At the Africa Hospitality Investment Forum, four hoteliers underlined a very strong case for continued hotel branding in the continent, especially with franchise deals increasing there.
Bani Haddad, founder and managing director at Dubai-based Aleph Hospitality, said nine years ago the hotel pipeline in Africa was 20% franchised.
“Now it is approximately 65% franchised,” he said.
African hoteliers and investors understand that buying a hotel is all about its value at the exit, panelists said.
Hamza Farooqui, founder and CEO at Sandown, South Africa-based Millat Group, said the inclusion of a brand gives a hotel deal two times or even four times return on investment.
“It also gives confidence to guests and investors. Simply, pricing is better, and if you start working with one brand, then the entire pool can be accessible. Added to that, banks, maybe naively, prefer giving loans to branded hotels,” he said. “We have moved from being ego owners to hands-on, conscious owners.”
Increasing brand adoption among African hoteliers has taken time, but the results have paid off, said Haddis Tilahun, founder and chairman at Windhoek, Namibia-based United Africa Group Investment.
“Brands are partners that tell you what to do with your own money, but they also come with the experience. In local markets, there is a skills transfer, and there also is huge value in having a 25-year deal with them,” Tilahun said.
Amith Khanna, head of franchise for India, the Middle East and Africa at IHG Hotels & Resorts, agreed. He added not all of Africa is open to franchises, naming Egypt as one market where management contracts continue to be dominant.
“There is no difference between management and franchise for guests or staff. We see third parties [white-label hotel firms] coming into the picture when a market matures,” he said, adding that the overall picture of Africa is that more and more markets are growing more sophisticated.
Even white-label management companies mull over the need to partner with a hotel brand, Haddad said.
“We ask, what is the investment required? Market dynamics plays a part, and also if there is a need for system distribution. Then, does there exist a possible uptick in [average daily rate] that a brand might help?” he said.
As African hotel markets mature, growing brand partnerships will permit easier and quicker access to development opportunities.
“Trust is a very powerful commodity and allows you to ask for additional help and services. We regard Hyatt as the library, and I am the librarian, asking if I can please get the best book on [food and beverage] or whatever the subject is,” Farooqui said.
Farooqui added his firm is not only the biggest franchisee of Hyatt Hotels Corp. in South Africa but also the owner of its smallest Park Hyatt hotel, which is in Johannesburg.
But brand affiliation does not work unless a market possesses adequate infrastructure and decent accessibility, panelists said.
Airlift remains one of the chief concerns in the continent, as it has since the AHIF's debut in Casablanca in 2011, and most probably before then.