Despite a challenging economic climate and a looming general election, major global entities in the hospitality industry still see South Africa as a big market with strong investment opportunities.
Arne Sorenson, chief executive officer of Marriott International, the US multi-national hospitality giant which recently launched its first AC brand hotel in Cape Town said there were quite a number of strong markets across Africa, with South Africa being the biggest market on the continent, followed by Egypt.
“So we’ve got nearly 140 hotels open in Africa and about 60 are in development. These are signed deals where construction is underway or is soon to begin and some are scheduled openings. So you can see the growth in those numbers which we are pretty excited about,” said Sorenson during an interview with the African News Agency (ANA) in Cape Town this week.
“I think at the moment and for the foreseeable future, South Africa itself is our biggest market in Africa. I suppose if you include North Africa, Egypt will be our second. When we look at the next few years, we would see a number of markets in Africa which are really quite strong but South Africa is a place we’re very optimistic about, notwithstanding the fact that last year we had water crisis and at the moment business is still recovering from that, but we think here the potential here is pretty strong,” he added.
Late last year, Marriott International announced its growth plans for Africa, revealing that the intention was to grow the portfolio of hotels on the continent to 200 hotels over the next five years.
Sorenson said plans have been put in place and the company was working with local partners in those markets, partners who have financial resources and local expertise and knowledge that they can put to work in getting the hotels developed.
Marriott last week opened its 7,000th hotel in Hong Kong and is looking to open a further 1,700 hotels across the world in the next three years. “Our estimate is that we will open about one hotel every 15 hours for the next three years. We employ about 730,000 people around the globe who wear our name tag every day.”
In South Africa, the company has close to 60 hotels open, including 13 in Cape Town, with five more under development in South Africa, two of them being in Cape Town.
“I think there are two trends that I would like to call out that are certainly in South Africa. One is about the growth of the middle class which we are seeing all around the world, including here. For the first time, there are people who have access to the sort of resources that allow them to have some discretionary spending. So many of them are deciding that travel is one of the things that they would like to experience,” explained Sorenson.
Secondly, he said there was a good reason to believe that the South African government would continue to value tourism since it was an engine for creating jobs and a major contributor to economic growth.
“And of course, country to country, that varies significantly. But it’s a strong global average,” said Sorenson, adding that hospitality companies were looking for long term investments and relied on assessments on long term investment risks and not necessarily on the political environment around the globe.
“This hotel opening here (Cape Town) will be operating for the next 25 to 45 years. The location is excellent and the product is excellent. Our partners’ assessments are not necessarily about what the risk will be six months from now, in particular political development, but it is about what the risk over the long term will be, especially is we were to end up in an environment in which there is no economic growth,” he said.
According to Sorenson, Marriott, as a major global company, was interested in building a business that made financial sense and would be sustainable from an economic perspective over the long term.
Asked what the Fourth Industrial Revolution (4IR) meant to Marriott, he said technology is increasingly relevant to every single thing a business does.
“It’s still a very evolving story. I think we still need to see in the next number of years how it will impact the industry. I sometimes joke that the only landline telephones left are the telephones in hotel rooms. We need to make sure that we are communicating with our guests through their mobile devices and one of the changes that is underway is allowing guests to bypass the front desks and open their room using their mobile phones.
Globally around 2,000 of our hotels have mobile check-in. I think we will use technology to know you better as our guest so that we can know your preferences, to know if you are a member of our loyalty programme or simply to understand your travel history, Sorenson added.
On the impact of home sharing platforms such as Airbnb and calls to regulate the sector, which has taken on the established bed-and-breakfast and hotel industries, Sorenson said that while such platforms had grown significantly and were a form of competition to the hotel industry, not all levels and quality of businesses were the same.