Starwood Hotels: Greater risk not being in a market than being there before time

The St. Regis, Mauritius

Starwood’s St. Regis hotel in Mauritius

Starwood Hotels and Resorts – a company which has been operating in Africa since 1971 with the opening of the Sheraton Cairo – currently operates 34 hotels in the continent with over 10,000 rooms in 13 countries, with another 24 properties under development. The company owns brands such as Westin, Sheraton and St. Regis.

How we made it in Africa spoke to Hassan Ahdab, the vice president and regional director of Africa and Indian Ocean operations for Starwood, about the company’s operations in Africa. Below are edited excerpts.

*Marriott International has recently agreed to acquire Starwood.

What is Africa’s appeal for Starwood?

Unprecedented economic growth, a rising middle class and rapid urbanisation are fuelling the demand for travel and the need for good-quality lodging. Africa is still an under-hoteled market with under capacity in most cities. We position and differentiate our brands from a lifestyle perspective and that gives us the opportunity to operate multiple brands within the same city as well as multiple hotels under the same brands in micro markets within larger cities.

Who do you cater for?

Our lifestyle brands cater to leisure, corporate as well as MICE (meetings, incentives, conferences and exhibitions) travel and is across luxury, upper-upscale and upscale brands. The dynamics of the market helps us decide where we operate which brand. Our development mantra is right brand, right location and right partner – and this in many ways decides which brand we put where.

What do you look for when deciding to enter a new market?

We see great potential for luxury and high-end resort development in Africa given the abundance of natural resources and unique destinations. While many of these destinations are well known and well supplied – such as Mauritius and Seychelles – there are many more that are under-served.

The other great potential for hotel operators lies in setting up a network of hotels in the key cities that attract business travellers. These cities may well be able to support luxury hotels in some instances but also upper-upscale and upscale hotels. For example, Addis, Nairobi, Accra, Luanda and Maputo still lack good, international quality lodging to handle the growing business traffic.

Hotel development relies on good infrastructure and connectivity. You can build and operate great hotels but if people cannot get to them easily and safely, then the hotels will fail. Critical to hotel development is therefore an airport and easing of visas for business travel. With many new airports under development across Africa, including major new airport developments in Angola, Kenya, Nigeria, Rwanda and Senegal, we believe new opportunities for hotel development in these countries should open up.

Mali is generally not a country on Africa’s investment map; why did you decide to open a hotel there?

We have had a history of entering new markets and leveraging the first-mover advantage. We believe there is greater risk in not being present in a market than in being there before time. We want to be able to establish ourselves and open the destination for more international travel and visibility and thereby own the upswing.

Do the perceived risks of operating in Africa match the reality? 

In just one decade, The Economist has gone from referring to Africa as “the hopeless continent” to a “rising star”. Portrayed by the world as hopeless, futureless, poverty stricken, corrupt, underdeveloped, and dangerous with health, safety and security concerns rocking the continent from time to time on the one hand  to a continent full of opportunity, housing seven of the world’s top 10 fastest growing economies.

Weakening currencies such as the South African rand and the Nigerian naira continue to be a challenge. The decline in the oil price has plunged Africa’s oil and gas industry into dire straits, a situation exacerbated by factors such as uncertain regulation, corruption and the prospect of political and social instability. And while the sentiment vacillates with headwinds at every turn, the forecast gets better. Given the volatility of the world we live in, being agile and being able to adapt to changing situations is key to our success. We continue to be cautiously optimistic and stay focused on trend lines rather than headlines.

And not all of this is a true reflection of how blessed the continent is. The reality of Africa surpasses all perceptions.

What are some of the other challenges the hotel industry faces in Africa?

Slow pace of hotel development: The pace of hotel development in Africa is comparatively slow and sometimes challenging but the long-term demographics of the continent are promising. While opportunities abound, infrastructure and regulatory challenges create a bottleneck.

Talent crunch: To find, train and retain talent is one of the biggest challenges facing the hospitality industry today.

Infrastructure: Hospitality development is not for the faint hearted. Infrastructure, licensing, regulatory clearances, land acquisition continue to be a bottleneck for hotel development and growth in a relatively under-hoteled market.

Access and connectivity, are another challenge that we face. You can build great hotels but if accessibility to these hotels are not easy, how then do you justify the investment?