The hospitality sector and its role in the value-chain is not merely a necessary accompaniment to economic growth or an afterthought to infrastructure development. It is critical to both – and a category that offers potentially life changing opportunities for thousands of Africans. For private equity investors, it is an opportunity to enjoy the long-term benefits of a fast-growing industry.
In April 2016, we acquired 100% interest in the InterContinental Hotel Lusaka, which is situated in Zambia’s capital. The 244-room hotel benefits from a strong image amongst international travellers and offers significant scope for expansion and repositioning. The hotel will benefit from planned refurbishments that will expand and reposition the asset, generating value added returns for investors.
Investing in the region’s growing hospitality sector is a low risk long-term strategy, which is why QG Africa Hotel LP – a US$500m investment vehicle – is targeting midscale to upscale hotels. The benefits to private equity investors is clear but what about the long-term effect on communities and jobs?
On the face of it, capital investment in hotels offers the prospect of significant job creation. The challenge for new operators is that international business travellers (the primary driver of growth in the sector) expect international standards of service. Operators must accept the responsibility for training local workers. At the InterContinental Hotel in Lusaka, we are faced with the dual role of creating exciting opportunities for ambitious, hardworking and talented locals, whilst committing to invest in on-the-job training. It is also our job to bring skilled management level employees from developed markets and – in the case of our hotel in Lusaka – use it as an opportunity to create a significant skill-set uplift for the local industry.
In Africa, countries that utilise their own workforce and showcase their cultural uniqueness (as opposed to imposing a bland and standardised ‘global’ hospitality experience with foreign workers), stand to gain a competitive advantage. Almost every aspect of the hotel experience is a potential opportunity – F&B that reflects local tastes and traditions, art and music in communal areas, local entertainment and cultural excursions turn a business trip into something memorable. This is what those of us investing in African countries should aspire to – partly because foreign customers often prefer an authentic experience – but also because it is the key to achieving competitive advantage.
Maintaining competitive advantage and commercial success also rests on reputation and responsibility. Hotel operators in Africa should consider their impact on local businesses, which is why wherever possible we should be buying local: locally produced furniture and art works, equipment, food, beverages and other operating items. This is important because it creates significant employment and wealth creation opportunities up and down the local supply chain. The presence of international hotel brands that operate to global standards also serves to raise the profile of countries and cities where they are located because they become known as the best-in-class in their own markets.
By introducing international standards to fast-growing cities and nations such as Angola, Ghana or Zambia, the hotel operator is making a significant long-term investment in the country. The long-term goal of most African nations is economic diversity and job creation but foreign expats who come to upskill local workers inevitably must leave. In this sense, through the hotel management companies it engages to manage its assets, is making a direct, lasting investment through years of training and development. This is the type of legacy that Africa needs and the socio-economic footprint that all of us seeking to make capital gains in Africa should aspire to leave behind.
Adrian Leuenberger is the Group Head of Asset Management for Quantum Global Group.