BETHESDA, Maryland- Forbes reports Marriott International recently reached a deal to acquire one of Africa’s largest hotel companies, Protea Hospitality Holdings. Protea is based in Cape Town, South Africa and operates 116 hotels in South Africa, Malawi, Namibia, Nigeria, Tanzania, Uganda and Zambia for a total of 10,184 rooms.
Marriott International, headquartered in Bethesda, Maryland, is paying more than $200 million for the brand and hotel management business of Protea, according to The Wall Street Journal. The hotel industry giant currently owns 10 hotels in the North African region, but owns none in the sub-Saharan region. The deal would make Marriott the largest hotel company on the continent, skyrocketing it from its current position as the 13th largest hotel company in Africa. With its acquisition of Protea, Marriott would double its presence in Africa to over 23,000 rooms. Marriott expects to close the first deal in the first quarter of 2014.
According to Marriott CEO Arne Sorenson, the move appears to be prompted by the growing middle class in the region. “Africa has significant untapped potential for travel and tourism, both as a destination and source of new global travelers. The continent’s GDP is anticipated to grow at over five percent annually over the next several years which we expect will raise more people into the emerging middle class,” he said in a statement.
The deal is major news in the hospitality industry, but it does not come without its concerns. The Wall Street Journal reports Africa is one of the world’s most volatile regions, where coups and terrorist attacks can interfere with business ventures and ultimately force businesses out of the market. In October, for example, the Ugandan government was forced to raise its terrorist alert to maximum after receiving indications of an imminent terrorist attack by Islamist militants.
According to the World Bank, Uganda is a country with a poverty rate of over 24%. Other countries that will be affected by the Marriott-Protea deal, such as Nigeria and Zambia, also have high poverty rates, increasing the vulnerability of these countries’ national security. On the other hand, Africa has one of the world’s fastest growing urban areas and the gross domestic product in Sub-Saharan Africa is expected to grow by 5.7%, approximately double the projected world rate.
“Yes, you may get some volatility,” Sorenson said. “But there is a real need for hotels in Africa and in the fullness of time, we will do well.” Despite the risks, the positive factors in Africa show why it simply makes sense for companies to do business there.
– Cavarrio Carter