Hilton’s expansion strategy opens opportunity for local real estate players

As global hotel chains intensify their scramble for share of the African hotel market, especially with the continent’s sustained growth, Hilton Hotels and Resort is adopting a pragmatic approach that will more than double its presence in Africa in the next five years.
To this end Hilton is set to introduce 100 mid-market hotel brands across the African market in the next five years.
The global hospitality company has also committed $50 million to hotel product segmentation and expansion, which is going to be executed under its recently launched Africa Growth Initiative.
However, key to delivering the expectations of Hilton in the next five years are local partners, especially in the real estate business and local hoteliers who are willing to partner Hilton in the acquisition, reconstruction of real estate projects, and upgrading existing hotel properties to mid-market brands.
“There is clearly a market opportunity for them, but they should be able to offer their franchise and at least 20 percent equity to interested local partners, ” said Damola Akindolire, Executive Director, Real Estate at AM Facilities.
He noted that though high operational cost may put their margin under pressure, the market segment they are targeting is a viable one, especially since developers are rethinking the size of their projects and demand for services favour the mid-market.
Explaining the expansion model during an exclusive interview with BusinessDay at the recently concluded African Hotel Investment Forum in Kigali, Rwanda, Patrick Fitzgibbon, Senior Vice President, Development, Europe, Middle East and Africa, Hilton, said the $50 million is intended to support the conversion of around 100 hotels (roughly 20,000 rooms) in multiple African markets into Hilton branded properties, namely into its flagship Hilton Hotels & Resorts brand, DoubleTree by Hilton, Garden Inn and the recently launched Curio Collection by Hilton.
Explaining further, Fitzgibbon said the market segmentation is necessary to capture the needs of a hugely growing middle class, position for the increased travel within the continent and investment opportunities offered by the over one billion populace of the continent.
“Hilton remains committed to growth in Africa having been present on the continent for more than 50 years. The model of converting existing hotels into Hilton branded properties has proved highly successful in a variety of markets and we expect to see great opportunities to convert hotels to Hilton brands through this initiative.
Hilton’s idea is a brilliant one, according to MKO Balogun, CEO, Global Property and Facilities International, “this is a development that will help the real estate industry in Africa,” he said.
Balogun agrees that Hilton will find willing partners in Nigeria especially in the major cities including Lagos where demand for their brand is high.
“What this kind of deal does is to help create high standard of development which in turn helps the industry to grow.
“The chances for them are higher here in Nigeria than any other African country because of the size of the market and the volume of businesses transacted here.
“Again, return on investment is also higher here. So, Nigeria is waiting for them. We are ready for them,” he said.
Ademola Adigun, a hospitality expert, noted that Hilton is gaining market share at the expense of global brands like InterContinental which are not taking expansion seriously as their only outlet in Nigeria is struggling while the likes of Hyatt, Four Seasons and Kempinski are yet to berth on the continent.
With more than 570 hotels in over 100 countries across six continents, the MacLean, Virginia, United States of America-based Hilton Hotels and Resort is a leading global hospitality company.

CHUKA UROKO & OBINNA EMELIKE