Converting opportunities

Hilton are making a big statement in Africa, committing $50 million over the next five years towards the Hilton Africa Growth Initiative, in the form of around 100 hotel conversions. Hilton made the announcement at the Africa Hotel Investment Forum in Kigali, Rwanda in October, where editor Dylan Rogers took the opportunity to sit down with Patrick Fitzgibbon, Senior Vice-President, Development: Europe, Middle East & Africa.

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Along with Marriott and Carlson Rezidor, Hilton are the international group with the most impressive African hotel development pipeline, and the group already operates 19 hotels in the Sub-Saharan Africa region, with a further 29 in its pipeline.

This latest announcement just reinforces the notion that Hilton is betting big on Africa.

Those proposed 100 hotel conversions will total roughly 20,000 rooms across the continent, with Hilton likely to focus on just a few of its brands, in terms of working with independent owners to convert their stand-alone, non-branded hotels into Hilton properties.

“DoubleTree by Hilton is a conversion brand and has been very successful in this space,” says Fitzgibbon. “There will be more opportunities for this brand, as well as Hilton Hotels & Resorts and Curio Collection by Hilton, which is a step up from DoubleTree, in terms of being an upper upscale conversion brand. But, we will look across all our brands, including Hilton Garden Inn and some of our luxury brands.”

So, how did this all come about, and why the need to make such an aggressive play in the African development space?

“We saw that there were many independent hotels that had owners who had decided to invest in and develop them themselves, without the help of an international brand,” says Fitzgibbon. “In some cases they were first-time hoteliers who found it more difficult to operate the hotel and, in particular, fill it with guests, than perhaps they’d first thought.”

“Our whole rationale has been to find a way to attract those investors and get them to talk to us. We started to do a few hotels and realised that there was a much wider opportunity. So, it was more about seeing that opportunity and thinking about how we approach it in a more structured way, rather than on an ad-hoc basis.”

The scale and requirements of each conversion project will obviously differ, but if you crunch the numbers, you’re looking at an average of $500,000 per hotel. So, where do Hilton anticipate that money going, in terms of what’s required to convert these independent hotels into Hilton-branded properties?

“Technology, signage, maybe some collateral and assistance to re-launch the hotel, and in some cases some soft renovation,” says Fitzgibbon. “In some cases, owners will already have plans to spend and invest in the hotel to fit certain standards that we have. That’s things like wi-fi and the more mundane things, such as fire and safety, so that guests can sleep, safe in the knowledge that the international standards they are accustomed to are met.”

The branded hotel space is an interesting one, with Fitzgibbon able to put it in context, globally.

“The branded world has worked, and if you look at the US today, you’re probably looking at 75%- 80% of all hotels have some form of global affiliation and it’s growing,” he says. “In Europe, that was down around 25% when we started our growth journey 10 years ago. That’s now around 35% and heading for 40%, and all the new product coming in is branded.”

Hilton clearly aren’t put off by the current poor performance of some of Africa’s major economies.

“Whilst some economies may not be as strong as we would expect, the demand generators of travel are only really going to go in one direction,” says Fitzgibbon. “Hotels are long-term investments and you tend to ride the cycles and the ups and downs of every economy.”

Over the next six months, Hilton plans to open six new hotels in Africa: a Hilton in Cape Verde; a Hilton Garden Inn at Jomo Kenyatta International Airport in Nairobi, Kenya; a DoubleTree by Hilton in Hurlingham, Nairobi (already trading and open); Hilton’s first Curio on the African continent at Murtala Muhammed International Airport in Lagos, Nigeria; a Hilton Garden Inn in Lusaka, Zambia; and a DoubleTree by Hilton in Kigali, Rwanda – with the two DoubleTrees the first to benefit from Hilton’s Africa Growth Initiative.

That sounds like a pretty good start.