AccorHotels’ Mantis deal shows potential of Africa’s hotel market

The Pearl Valley Hotel by Mantis in South Africa. Photo credit: Mantis

AccorHotels is the latest global hotel company to strike a deal in Africa's hotel segment, a growing sign of the continent's perceived potential as a travel market.

The French company is launching a strategic partnership with South Africa-based Mantis Group, a collection of privately owned, managed and branded properties, wherein AccorHotels will buy a 50-percent stake in Mantis, adding 28 hotels to its portfolio and strengthening its presence in Africa.

AccorHotels sold off 55 percent of its real estate business for €4.4 billion euros in February to fund the deal and further its growth in emerging economies. The company already has 96 hotels with 14,438 rooms across 19 countries in Africa, and its pipeline in the region has 27 hotels with 4,780 rooms across 11 countries. Beyond the 28 hotels that Mantis manages, the company also has a network of branded hotels and residences worldwide. 

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“With this strategic partnership, we are reinforcing the Group’s footprint in Africa and we have access to a brand with strong roots and heritage, recognized for its commitment to preserve the environment and its prestigious credentials in the hospitality space,” Sebastien Bazin, chairman and CEO of AccorHotels, said in a statement. 

Branded Growth

This is only the latest move from a global hotel company to grow its presence in Africa. Four years ago, Marriott International acquired Protea Hotels in a $210-million deal, increasing the company’s African hotel inventory to a total of 140 properties with about 24,000 guestrooms. The brand now includes 90 hotels, and Marriott has continued expanding it across the continent. In February, Marriott brought the brand to North Africa with the Protea Hotel by Marriott Constantine in Algeria.  

InterContinental Hotels Group also recently made its debut in Algeria with the 242-guestroom Holiday Inn Algiers - Cheraga Tower hotel, and last year, an affiliate of Hyatt Hotels Corporation entered into a management agreement with Société d'Investissement Hôtelière for a Hyatt Regency hotel in Algiers, the first Hyatt-branded hotel in Algeria. 

Sub-Saharan African hotels have also attracted attention. As of late 2017, Carlson Rezidor Hotel Group, now Radisson Hotel Group, had four upper- and mid-market hotels in the pipeline for Kenya set to open by 2020. At the same time, Marriott had signed seven new hotels in East and West Africa.

Radisson Hotel Group's five-year development plan identified five Tier 1 Cities in West Africa (Lagos, Abuja, Accra, Abidjan and Dakar) where Andrew McLachlan, SVP of development for Africa & Indian Ocean, said the company saw “scaled growth opportunities…across the luxury to midscale hotel segment.” McLachlan also said that the company has been eyeing hotel conversion opportunities in the continent with the plan to reposition the hotels under its management, particularly those that may be showing sub-par performance.

“Much of the future branded pipeline will be driven by the operators’ mid-market brands,” Xander Nijnens, EVP, hotels & hospitality group Sub-Saharan Africa, JLL, said in December. “In the long-term, the bulk of hotel demand for these hotels is projected to come from domestic and regional travelers.” 

In 2016, Marriott and Rezidor both opened hotels in Kigali, Rwanda. Rezidor also opened a Radisson hotel and convention center in Togo and announced it was developing five Park Inn hotels in Angola. That same year, Hilton announced a new Hilton in Nairobi, along with plans to build the first modular construction hotel in Africa—the 280-room Hilton Garden Inn in Accra. The company also planned a 350-room Hilton at Lagos International airport. 

Africa's Appeal

The brands' demand for an African presence is understandable. STR calculated that in 2017, occupancy in African hotels grew 5.6 percent to 58 percent as ADR rose 7.4 percent to $104.15 and RevPAR reached $60.43 after a 13.4-percent increase.  

There is also plenty of room for hotels to grow. As of January, STR calculated 4,386 hotels and 522,098 guestrooms open and operating across Africa—but the continent's pipeline only has 146 hotels with 26,030 guestrooms under construction, another 40 hotels with 7,551 guestrooms in the final planning stage and 121 hotels with 22,562 guestrooms in the planning stage. 

This creates a strong opportunity for more branded hotels across a range of markets—urban and rural alike—and for soft brands to partner with independent hotels across the continent. With demand growing, this is a prime time for investors and developers to start signing deals.