AccorHotels has announced a USD1bn fund alongside Katara Hospitality to drive growth in sub-Saharan Africa.
The fund will target around 9,000 rooms across Accor’s portfolio of brands, as the company looks to return to its position of strength in the continent.
The fund will amount to up to USD500m in equity, of which Katara Hospitality and AccorHotels will contribute respectively up to USD350m and USD150m over the next five to seven years, with additional financing capacity reached through leverage and co-investments. It will target greenfield projects, brownfield projects and conversions of existing hotels through acquisitions.
The fund will also have a sustainable aspect, with the pair aimed to create the leading sustainable hospitality fund dedicated to Africa, bringing support to job creation, training, transfer of skills, local supply chain and communities in the region, operating in compliance with UN sustainable development goals.
Sheikh Nawaf bin Jassim bin Jabor Al Thani, chairman, Katara Hospitality, said: “We are delighted to have come to this strategic agreement with AccorHotels. It is evident in the recent times that Sub-Saharan Africa’s hospitality industry has made great strides, and follows the latest positive developments between the State of Qatar and Sub-Saharan Africa to enhance bilateral relations in different industries.
“Katara Hospitality is a government-owned organisation whose goals are naturally aligned to the country’s objectives; as the hospitality arm of the Qatar Sovereign Wealth Fund, we identify strategic investment opportunities in other markets; and we continuously optimise our international investments to make the best possible returns whilst at the same time safeguarding our economic future.”
Sébastien Bazin, chairman & CEO, AccorHotels said: “Having been present for over 40 years in Africa, we also know that there are increasing and sizeable needs for quality hospitality. Through this fund, we will match the expertise of Katara Hospitality together with AccorHotels’ world leading brand portfolio to accelerate our dynamic growth trajectory in the Sub-Saharan region. Above all, by this initiative, we demonstrate our shared intention to support sustainable development over the long-term on this continent”.
Trevor Ward, owner, W Hospitality Group, told Hotel Analyst: “This is a terrific announcement and a game changer if they can spend it, which I don’t think is going to be that easy, they are going to take a while to spend it. This has not been done before, although various people have talked about it. Hilton’s fund was for USD50m, but over 100 hotels.
“This is for acquisitions and greenfield and they will have to be opportunistic. There are hotels to buy, but we suffer from over-priced assets, people have a very inflated sense of value. For the greenfield, it will be around product delivery, how to get it done, finding the team which can deliver.
“Accor were dominant in Africa and in particular in North Africa and Francophone West Africa and then they seemed to whither a bit, partially because of poor-quality hotels. Then they shot forwards as a result of new leadership. Since the Angola deal they are putting their money where their mouth is – I have been saying for ages that the operators sneed to invest if they are going to keep moving.”
The end of last year saw Hilton commit a total of USD50m over the next five years to support the continued expansion of its sub-Saharan African portfolio. The company said that the funds were intended to support the conversion of around 100 hotels in multiple African markets into Hilton branded properties, namely into its flagship Hilton Hotels & Resorts brand, the upscale DoubleTree by Hilton and the Curio Collection by Hilton.
The trend for development funds from overseas operators in Africa began with Rezidor Hotel Group’s Afrinord fund, alongside several Nordic development funds.
According to W Hospitality Group’s pipeline report 2018 found that growth in sub-Saharan Africa was higher than that in the north, with a pipeline of 298 hotels over 120, up 11% on the year. Within sub-Saharan Africa, West Africa was the largest region, with 48% of the pipeline.
Across Africa as a whole, Marriott International led the pipeline, with 93 hotels, while Accor came in fourth after Hilton and Radisson, with 37 sites. However, Hilton and Accor delivered some of the largest increases in the pipeline, each delivering increases of around 2,500 rooms. In terms of openings, Accor opened the most last year, with 11 sites, followed by Radisson with five.
HA Perspective [by Katherine Doggrell]: Accor has been looking to reclaim its position in Africa, which saw it somewhat sidelined after Marriott International’s purchase of Protea, which was then strengthened when it acquired Starwood Hotels & Resorts. The French group’s 2015 Angola deal promised much but rather fell by the wayside with the drop off in the oil price.
The question, as Ward raises above, is what to buy? Accor’s recent M&A frenzy suggests that buying hotels one by one is not really its bag, but what is there to consume, or at least consume a chunk of? Tsogo Sun is currently splitting into a hotel management company, a gaming outfit and a property group with gaming and hotel assets, which is not overly attractive. The group’s recent purchase of 50% of Mantis would fit well with Serena in Kenya, but it is also looking to expand at the economy end of the market.
The Accor we have become used to is the one of chunky deals and sure, you may say that USD1bn is chunky and so would my bank manager. But what the group needs is a Marriott/Protea deal. Or a Marriott/Starwood deal. With the former-Rezidor’s position currently looking uncertain, now might be the time to swoop and enjoy an instant portfolio injection.