Katara Hospitality’s $350 million and Accor’s $150 million will give Kasada Hospitality Management the support to search for development opportunities across sub-Saharan Africa.
GLOBAL REPORT—French hotel chain Accor and Qatari sovereign wealth fund Katara Hospitality are set to make a major push into sub-Saharan Africa.
A year after the plan was announced in July 2018, the capital management firm administrating the partnership has closed the initial Kasada Hospitality Fund LP, with $350 million contributed by Katara and $150 million by Accor.
The money will be spent on acquiring assets in sub-Saharan Africa, and according to Kasada Capital Management CEO Olivier Granet—a former CEO of Accor’s Middle East and Africa region until October 2018—that will include greenfield, brownfield, distress and other opportunities that will all be managed under Accor flags.
Granet said he’s excited to be a part of the team assembled for the regulated fund.
“The origin of the fund is based on analysis on the market and what is needed,” he said. “There is a lot of expectation about Africa, especially sub-Saharan Africa, but the reality is that there is a limited number of hotels. We are an independent platform identifying opportunity and putting into place the right financing structure.”
Granet added competition for the new entity comes from only a few market players, notably in Morocco and South Africa.
“South Africa has very sophisticated investors, but they are mainly focused on South Africa,” he said.
Accor CEO Sébastien Bazin reiterated what he said in the 2018 news release on the deal, noting African demand and travel trends point to “increasing and sizeable needs for quality hospitality.”
“Most of the large hotel operators have announced asset-light strategies and a focus on operations, so we see a real opportunity to work and develop with local and regional investors,” he told Hotel News Now at the recent opening of a Jo&Joe property in Gentilly, France.
Accor itself has moved toward an asset-light model with the sale of 55% of its HotelInvest portfolio in February 2018.
Radisson Hotel Group is one of those asset-light firms in expansion mode in Africa. It recently announced three hotels in the Madagascan capital Antananarivo, which, along with one Accor-branded hotel, the Ibis Antananarivo Ankorondrano, will bring the country’s internationally branded hotel count to four.
David Harper, director of Leisure Property Services and a founder member of Hotel Partners Africa, said other vehicles are looking to do something similar to the Kasada-Katara-Accor alliance.
“I think their move is an absolutely exceptional one,” he said. “Accor has made huge gains down there, always in the Francophone market. (The alliance) has lots of money. Watch out, Marriott!”
He said the investment plan will be a difference-maker in the African hotel market.
“The money is in place and will attract the best people, who will wait to work with them rather than take on other opportunities, and thus it will likely obtain the best sites and owners,” he said.
The African hotel market has traditionally involved a lot of Middle East money, such as that from Saudi Arabia’s Kingdom Holdings, Harper said.
“So this is not an unusual move,” he said. “For Accor, I had anticipated a typical route of its investing $100 themselves.”
He added the Katara deal was a much better partnership.
“Accor has it owned,” Harper said.
Granet said there currently are between four and five times more hotels in the Middle East than in the whole of Africa. This is due to the difficulties of developing in Africa, and those obstacles still exist.
“There is a gap between the hotel companies and the local investors who wants to develop Africa,” he said. “(The latter) have some land, but for them to access financing with good conditions is very challenging. Banks and (development finance institutions) do have strong interest and the understanding that hotels bring in jobs and have a positive impact on economic activity, but to develop hotels one by one with local developers, they are not left feeling comfortable in that situation.
“You need a number of market players—designers, constructors, equipment companies—but to put the resources in place for one hotel at a time is challenging.”
Kasada’s structure also gives it a noticeable advantage in Africa.
“(Kasada) acting as a co-investor to local investors helps bridge these gaps,” Granet said. “We are not reinventing the world, to be a new type of fund or a (real estate investment trust), both of which have been proven to be successful. What is new is that such a vehicle does not exist in Africa, at least of this size.”
The partnership’s strategy will have not only classic business hotels but also ones that satisfy the stronger appetite for modernity, Granet said.
In terms of geography, the three companies will focus on sub-Saharan Africa and key cities that provide for the emerging African middle classes.
“We are looking at quality across all the market segments, but with a focus on economy, midscale and serviced apartments. It is about value for money and catering to a young population,” Granet said.
He said there is a need for internationally branded hotels, rather than independent boutiques, but all properties regardless of their styling will require social areas, bars and restaurants.
“Some countries do not have such a developed offer in their cities,” he said. “The new demand requires not only a bed to sleep but the ability to meet other people.”
Granet said outside of South Africa and the northern parts of the continent, the overall hotel landscape is lacking.
Other challenges are airlift and increasing weekend business, both of which Granet said will improve in the next few years.
“One figure that strikes me the most is that the number of passengers in Africa is less than 3% of the worldwide number of passengers, and what with the expected population increase here, that percentage will grow,” Granet said. “We have very strong goals in terms of sustainable development and job creation. That also applies to creativity in construction, materials, water and energy and to be sure all of this is well-adapted to African markets. The idea is to push boundaries.”
The partnership might consider a second round of funding, but the initial focus is on the capital and opportunity already in the bank and on the table, he said.
“We expect to raise double our $500 million in debt in the future,” Granet said.