Marriott International became the largest hotel company in Africa (according to published information) and nearly doubled its presence in its Middle East and Africa region as it completed its acquisition of the 116-hotel South Africa-based Protea Hospitality Group. The company now controls more than 160 hotels and 23,000 rooms throughout the MEA region, and operates or franchises more than 4,000 hotels in 79 countries worldwide. The company's pipeline of new hotels in the Middle East and Africa, including Protea's pipeline, is now more than 65 hotels and 14,300 rooms, including more than 20 hotels and 3,000 rooms in Sub-Saharan Africa.
Marriott's new Protea portfolio consists of 10,148 rooms in seven African countries including South Africa. The company now manages, franchises and leases hotels across the Protea Hotels brand (103 hotels), the lifestyle boutique Protea Hotel Fire & Ice! (two hotels) and the superior deluxe African Pride Hotels collection (11 hotels). In addition to 79 hotels in South Africa, Marriott's Protea portfolio also has 37 hotels in Malawi, Namibia, Nigeria, Tanzania, Uganda and Zambia.
Arne Sorenson, Marriott International's president and chief executive officer, noted that the acquisition brings Marriott an estimated 15,000 new associates at both managed and franchised hotels across Protea's portfolio.
Alex Kyriakidis, president and managing director of Marriott International's Middle East and Africa (MEA) region, said that Protea Chief Executive Officer Arthur Gillis will become Non-Executive Chairman, Africa Development for Marriott International, focusing on exploring opportunities for new African hotel growth for all of Marriott International's brands. In addition, Mark Satterfield, currently chief operations officer for Marriott International's MEA region, will relocate to Cape Town, Protea's headquarters, to act as business leader overseeing the integration of the two companies. He will continue to report to Kyriakidis.
When the acquisition was announced in November, Sorenson said that Africa has "significant untapped potential" for travel and tourism, both as a destination and source of new global travelers. "With the Protea Hotels acquisition, our expanded footprint should allow us to become the first choice of Africa’s rapidly growing population of young, sophisticated travelers, and drive loyalty to our Marriott Rewards program both within Africa and globally. Protea Hotels enjoys unparalleled brand recognition in Africa, and our combined portfolio of Protea Hotels and current Marriott International brands would create a platform for accelerated growth and new job growth in South Africa and across the continent."
According to Bloomberg, Protea is continuing to expand, building five-star and three-star hotels in Lagos, Nigeria’s commercial capital, adding 400 rooms to the 700 it has in the country. Danny Bryer, director of sales, marketing and revenue for Protea, said that the “surging Nigerian economy" has resulted in companies around the world seeking to do business in the country. "Demand for quality hotel rooms is expected to increase substantially over the next few years,” Bryer said.
As previously disclosed, Marriott paid approximately 2.02 billion rand, or approximately US $200 million at current exchange rates, which represents roughly 10 times anticipated pro forma 2014 calendar year EBITDA (earnings before interest, taxes, depreciation and amortization) excluding transaction costs.
As part of the transaction, the previous owners of Protea Hospitality Group created an independent property ownership company that retained ownership of the hotels PHG formerly owned, and entered into long-term management and lease agreements with Marriott for those hotels. The property ownership company also retained a number of minority interests in other Protea hotels. Marriott now manages approximately 45 percent of Protea's rooms, franchises approximately 39 percent, and leases approximately 16 percent.
Marriott expects that the Protea portfolio will be available for booking on Marriott.com or via Marriott International's Global Reservations Centers toward the end of May, and the hotels will join the Marriott Rewards guest loyalty program at a later point, to be announced.
Marriott does not expect the Protea acquisition to have a material impact on 2014 earnings, but the World Bank has estimated that Sub-Saharan Africa is expected to grow at a more than 5 percent pace through 2015.