Starwood CEO explains why he wants to build more hotels in Africa
Frits van Paasschen, president and CEO of Starwood Hotels & Resorts Worldwide, told How we made it in Africa that the secret to the company’s success in Africa has to do with entering markets as early as possible. “We like to say that we will enter markets before it is even obvious that we should be there because by the time it is obvious, we want to be up and running.”
Starwood is an international hotel operator with well known brands such as Sheraton and Le Méridien. Its presence in Africa spans back to the early 1970s.
“The fact that we have been in Africa for so long is by far, in a way, the most important platform from which to grow,” explained Van Paasschen. “It gives us a base of experience in markets; executives that know how to get things done; a reputation with customers and with government; and a familiarity of the brand among travellers – and that is the best foundation to be able to grow.”
Van Paasschen, who has visited the continent a number of times in the past, said his recent trip to Africa confirmed what he anticipated going in. “The first of which is that Africa is clearly changing and the development and the construction of infrastructure is under way. The second is that there is still quite a way to go and much development that still needs to take place.”
The next three years will see Starwood open 10 new hotels in Africa, taking its total footprint to 48 properties across 15 countries. However, what is ambitious is the company’s aim to more than double this number by 2020, although confidential negotiations are still taking place. “We would anticipate having close to 50 hotels by 2015 with an eye towards having 100 hotels in 2020,” said Van Paasschen.
Starwood’s leading markets in Africa currently include Egypt, Nigeria and Morocco. With five hotels already established in Nigeria, the company has plans to open an additional three hotels in the country, which Van Paasschen believes could potentially become their number one market due to its growing economy and population.
Starwood’s expansion plans go hand in hand with the market opportunities that are becoming increasingly obvious in Africa. “The number of hotels today in Africa falls short of demand in many markets and that’s a function of the fact that capital is in short supply or difficult to attain and in the past companies have under-invested in the opportunity in Africa,” explained Van Paasschen. “Today the hotel industry is catching up with this growth in demand. Some of the older hotels are in need of capital and renovation but – as importantly – there is a great demand for more hotels in the markets where economies are growing as quickly as they are.”
“The driver of our hotel business today in Africa is business travel,” said Van Paasschen. “I would say that with the exception of tourism into Egypt and Morocco. But for the rest we are looking at primarily a business-to-business driven growth in demand and that’s a function largely of the increased capital investment around building infrastructure, around the energy, and around materials exports – but also, at the same time, an interest among investors in finding other ways to participate in the economic growth in Africa. So what we are seeing are investors in other sorts of capital coming to markets in Africa to look at potential opportunities. And then finally we still see considerable business supporting government in the various markets where we have hotels in capital cities.”
The 10 new hotels that will be opened in the next three years are all in countries that Starwood has historically had a presence in. However, Van Paasschen’s recent visit to Africa was intended to look into expanding their footprint into new markets.
“Well there are a number of countries where – with the growth and development today – there should be an opportunity for us to expand and I would put Angola on that list as well as Ivory Coast and Ghana… We have many of our loyal guests asking us whether we have hotels there. We have customers expressing an interest so those are the three markets we would be very interested in,” Van Paasschen said. “In the case of Angola, especially of course because of the development of the oil business there and the rapid growth in the city of Luanda, that’s a market that today is very promising for hotels.”
The group’s expansion plans also include the opening of a Sheraton hotel in Libya’s Tripoli. This is in spite of having to close down an existing Four Points by Sheraton hotel in Tripoli last year due to the country’s political conflict. However, Starwood will be reopening the hotel within the next 12 months.
Starwood is not the only hotel operator who is increasing its presence across the continent. Over the past two years How we made it in Africa has reported on the entry and expansion of numerous multinational hotel brands – including Four Seasons, Radisson Blu, Marriott and Protea Hotels – into African markets. South African hotel group City Lodge also recently decided to venture into the rest of the continent for the first time with its entry into Botswana and Kenya.
However, it is clear that Starwood’s expansion plans voice what many experts and investors are saying about Africa: get in there now, before you lose out.