The announcement last week that Lonrho had signed a master franchise agreement with easyHotel in Africa marked a move for the group into the continent's nascent branded budget sector and a potential return to its prominence as a hotel operator.
Lonrho has extensive interests in Africa, including holdings in the agricultural and freight sectors, with the group's Fly540 budget airline, which is based in Nairobi, likely to feed into its planned estate of EasyHotel sites.
The company currently has three hotels in Africa – in Mozambique, Congo and Zimbabwe – with the group planning to build its estate of three- to four-star accommodation for business tourism in "strategic locations".
Earlier this year Lonrho Hotels appointed Ewan Cameron as CEO, joining the group from African Sun Hotels, where he led the non-Zimbabwe business. He has also worked with Intercontinental Hotels Group in the region. The group is planning to expand through management contracts, lease agreements and joint ventures, Cameron commenting that it had the potential to "once again be the business traveller's preferred hotel in Africa".
The deal with easyHotels was done through a wholly-owned subsidiary, Lonrho Budget Hotels, with plans to open the first site in 2012, with more than 50 hotels to open by 2016. The group is anticipating that the schedule will be aided by the brand's suitability for rebranding existing hotel properties and the conversion of existing buildings into hotels.
David Lenigas, executive chairman of Lonrho, said: "Lonrho is already a significant brand name across Africa. We believe that combining it with the easy brand, which is well-known for highly successful budget operations; to create the Lonrho easyHotel chain will satisfy the growing demand from consumers across the continent. Each Lonrho easyHotel will provide quality, clean, safe, consistent, and branded hotel accommodation from as low as $29 per night."
The opening schedule will focus on African destinations already served by easyJet, as well as other large cities across the continent.
Sir Stelios Haji-Ioannou, chairman of easyGroup, said: "The economic development of the African market, supported by the significant number of foreign visitors, large scale urbanisation and the growing disposable income of the one billion people in the domestic market, clearly provides demand for a safe, value for money, budget hotel chain of consistent, predictable quality."
Although Lenigas drew attention to the profile of the easyHotel brand, the group will also use the Lonhro Hotels name and will manage 80% of the chain, raising its own standing.
The announcement came as Lonhro changed its listing in London from AIM to the main market, a move, it said, opened it up to new investors, as well as being "a significant step in the further progression of the group".
The company, which flagged-up its ambitions in the sector with a presence in Berlin at the International Hotel Investment Forum this year, has the experience in the sector, dating from its time under Tiny Rowland, when it was known as the London and Rhodesian Mining Company.
Rowland built up the group's hotel holdings, under the Princess and Metropole chains, which at its height had hotels in the US, UK, Mexico, Caribbean, Mauritius and Africa. However, after Rowland was ousted by Dieter Bock as CEO in 1996 (the hotel portfolio built up by Bock's Octavian King Holdings is now on the market following his death) the company started to sell off many of its businesses which were seen as non-core after the decision was taken to focus on the mining business.
The group had originally looked at a flotation for the Metropole and Princess businesses, but after receiving approaches from several hotel companies it sold the Metropole chain to Stakis for £327m in 1996, resulting in a loss of £87m after write-offs and buying out a 33% stake which had been sold to the Libyan Arab Foreign Investment Company, for £251m.
Six of the town hotels in the Princess hotel chain were then sold to Prince alWaleed for $560m, after his Kingdom Hotel Investment group acquired the group's Kenya portfolio in 1995.
HA Perspective: That there is opportunity in Africa seems clear. Lonhro commented in its second-quarter results that it had trouble keeping up with demand for its airline and was opening its third hub, in Ghana, in October.
Now the company is looking to the economy hotel sector to further exploit the growing domestic economy. Rather than try to develop its own brand, it has decided to adopt an already established name via the master franchise route.
History has not been kind to most of these kinds of master franchise relationships as many of the US brand owners who have come to Europe over the years will testify. Perhaps easyHotel is a distinct enough offer to justify the master franchise fees. Perhaps the varied economies across Africa are ready for franchising. Perhaps the tie-in with the airline will generate an adequate customer base for franchisees.
It is a tough one to call and the only real example of a similar approach is Tune which is allied to AirAsia. Tune has so far succeeded in breaking into the UK market after a strong start in its domestic market of Malaysia.
If these budget airline
tie-ups do indeed take-off then it should help drive hotel franchise markets generally. Perhaps.