Hotel group sees opportunities in Africa’s emerging industrial towns

According to McLachlan, business hotels in Africa are not just in demand, but they are also less vulnerable to the effects of political or environmental instability. Tourism orientated hotels, he explained, work with tour operators that work in 12 month segments, and political instability or an outbreak of a virus in a region can hurt their tourism accommodation business for 12 to 18 months.

“Whereas if it’s a business hotel and there is political instability or an outbreak of a virus, its only really going to slow a businessman down by probably 30 days,” stated McLachlan. “He is just going to postpone his business trip until the situation has calmed down before he has to go in and conduct his business. He needs to do business in that city so he is going to be prepared to go back into that market a lot quicker than a tour operator who is going to wait and see that everything is 100% fine and wait for the following 12 month segment before they actually put business back into the hotel.”

“So at the moment it’s more important for us to focus on business travel and that’s where there is actually a much higher demand,” he continued. “With the increase of natural resources in Africa, the increase in airlift, telecommunications; people are able to do a lot of business in different locations in Africa, a lot more than they were [doing] a couple of years ago.”

Advice to foreign companies

According to McLachlan, one of the best decisions the group made concerning their African expansion, was to set up a local African office. When Carlson Rezidor first entered Africa in 2000 with the opening of their first hotel in Cape Town, they were conducting their business from outside the continent.

“Between 2000 and 2006 we tried to develop Africa from Europe. The company during 2006 realised that if they wanted to be serious about Africa, we actually needed to be on the ground permanently and we established an office in Africa at the beginning of 2007 and since then we have added 42 hotels to the African market,” highlighted McLachlan. “So it took us six years to do eight hotels and then basically another six years to do another 42 hotels. So obviously having a presence on the ground in Africa was sort of instrumental in us being able to grow at the pace we have been able to grow.”

He added that this, alongside having their Africa development office operated by mostly Africans, meant that the group was able to react to opportunities quicker.

“The fact that you are on the ground and you sort of put your finger to the pulse, you actually pick up and hear things sooner than your competitors would,” said McLachlan. “And for people who are looking to develop hotels and they are wanting to approach a hotel company… you give yourself a sort of better head start than some of your international competitors and it puts you onto exactly the same playing field as your domestic competitors.”

Despite the African market being described as having “huge potential”, McLachlan said that it is not without its challenges. “I think our biggest challenge at the moment is the time it takes from when we sign a deal to when we actually open a hotel… So at the moment we are really trying to find ways to shorten that period, because often it takes four years on average for a hotel to be built, which is twice as long as it would take in South Africa or Europe.”

He added that there are a number of reasons for this, but generally a major cause has to do with the challenge of finding or training local talent and imports being delayed in ports or at border posts. “The challenge that we are having in a lot of these markets is you have to virtually import everything,” he explained. “You are not able to have the same sort of products sourced locally… So you got to try and work locally with your government and your local partners to try and make it as smooth and as easy as possible when you are bringing products into the country.”

In terms of markets with investor potential, McLachlan advises foreign companies to keep Nairobi (Kenya), Lagos (Nigeria), and Accra (Ghana) in their sights.

Carlson Rezidor is targeting 28 African cities which they have identified as having opportunities for business hospitality: Abidjan, Abuja, Accra, Addis Ababa, Alexandria, Algiers, Cairo, Casablanca, Dakar, Douala, Dar es Salam, Juba, Kampala, Khartoum, Kinshasa, Kumasi, Lagos, Libreville, Luanda, Lusaka, Malabo, Maputo, Mombasa, Nairobi, Port Harcourt, Tangier, Tripoli, Tunis.