Brands expect rebound, changes for African hotels
 
Brands expect rebound, changes for African hotels
21 JULY 2020 8:54 AM

With a landscape dominated by high-net-worth individuals and families, the African hotel industry’s recovery from the COVID-19 pandemic will require professionalism and resilience from both owners and brands, experts said.

GLOBAL REPORT—Hotel owners in Africa are being mature, professional and resilient in the face of the catastrophic effects of COVID-19 on their businesses, according to brand representatives speaking at the latest virtual hotel-industry conference, Africa Tomorrow.

Change will happen across the continent, sources said, maybe most noticeably in the development of a variable P&L model.

Collaboration is particularly important in a geography dominated by high-net-worth individuals and families, speakers said on an online panel titled “How are the big operators working with their owners across the continent?”

Mark Willis, CEO, Middle East and Africa, at Accor, said brands need to understand the workings and pressures of African owners’ entire businesses.

“We’re working with them in their wider businesses, not just the hotel assets, with their lenders, banks, local authorities and governments. The focus is on the P&L, liquidity and cash flow, and all investments are on hold,” he said.

“The P&L review and adjustment is a huge task, and it has been done collaboratively,” he added.

Moderator Nick van Marken, managing director of Van Marken Ltd., and former global head of travel, hospitality and leisure at business advisory Deloitte, said globally operators are looking to unfix fixed costs. He questioned if third-party management, with its promise of passing savings on, would see an uptick in the continent.

“Will there be in Africa a general reappraisal of the business model?” he asked.

Elie Younes, EVP and chief development officer at Radisson Hotel Group, said he that not’s unlikely but is expected to be slow moving due to a generally higher cost of doing business in the continent.

“Again it is down to collaboration. This catastrophe has seen no variations based on geographies. By a large extent the situation is identical, and in Africa, pleasantly so, everyone has taken the lockdown, the hit, on the chin. There is no hostility among stakeholders,” he said.

But there is potential for change, speakers said.

“There will be some permanent adjustments, and some temporary ones, to the business model. In Beirut, where I am now, I had to walk through a disinfection tunnel. A tunnel! Things are quickly adjusting, and change will evolve from that one little example,” Younes said.

“Also adapted will be the zero-base approach in the way we have the business model. We need a variable P&L, and if we do not all do that, I do not think we as an industry will sustain. The winners will do this, moving from a fixed-cost business to a variable P&L, and this I think will be permanent.”

“Temporarily, I see a lack of brand proliferation,” he added.

Willis said he agreed that owners had been supportive in return.

“They have been super-realistic in what has been a very catastrophic period. Would they all be happy? I am sure there are some that aren’t, but we’ve had a dialogue, explained our position and dealt with any negative feedback in a positive manner,” he said.

He added the return of revenue per available room to 2019 levels most likely will take between 24 and 36 months.

“Something has to give in the meantime, and that depends on demand. We’re seeing short lead-on demand from staycations, and then some regional travel. Business will take more time, and that will hit our bottom line. Invariably, brands need to respond to the environment, so again, in a management portfolio, you need to be in acknowledgement of owners’ situations and liquidity,” Willis said.

“We slowly see demand increasing in domestic markets, but this is from nothing to something, be it from leisure or even some business. Where it is possible to travel intra-country, (guests) are,” he added.

African status
Radisson, Younes said, took the strategic choice to keep as many hotels open as possible in Africa, while always being aware of safety.

“In Africa, we have close to 100 hotels open or in the pipeline, and 85% to 90% are open of the 45 or so in the trading portfolio. I am not saying they are fully occupied,” Younes said. Accor is present in 32 of the 54 countries in the continent either with open or in-construction hotels, he added.

The business concentrates in Africa on three brands—Radisson, recently introduced to the continent, Park Inn and, mostly, Radisson Blu.

Willis said Accor was the first international hotel firm to bring a brand to Africa, and it now has 17 of its brands there.

“Of our 165 hotels there, 70% are open, and I think that is very positive. When we could keep them open, even in a soft manner, we did, and there has been a lot of community support,” he said.

Willis added that Accor had been assertive in its thinking towards the pandemic, not least in the harsh task of closing hotels.

“Over my many years in the industry, I might have closed 23 hotels over all those years, but then to close 140 hotels in 30 days in April is not easy,” he said.

Younes said the situation differs in different markets across the continent.

Of the larger markets, in South Africa—still in lockdown—airports are only seeing 0.5% of their usual demand, with only two airlines in operation. However, in one market in Nigeria, Younes said Radisson hotels had recorded 90% occupancy.

“Globally over the last three weeks, we have started to see more bookings than cancellations, with some 55% of what we saw at this time last year, but our hotels globally are running at approximately 25% occupancy,” Younes said. Radisson signed seven hotels in Africa in 2020, which is in line with former years, he said.

He said Radisson’s Africa hotel P&L is expected to be down approximately 75% compared to 2019. Willis said Accor expects RevPAR for its hotels in the continent to decline 75% to 80%, “which is catastrophic, but Africa, as we have learned, bounces back quickly.”

Willis added Africa, being six to eight weeks behind China in terms of COVID-19, did not feel the impact in earnest until May.

“So (for 2020) you have that extra piece of trading,” he said.

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