Marriott International on Thursday announced it has signed a letter of intent to acquire the brands and management business of Protea Hospitality Holdings for a price reported at more than US$200 million. Cape Town, South Africa-based Protea operates 116 hotels with 10,184 rooms in seven sub-Sarahan Africa countries.
The otherwise non-binding letter of intent includes provisions that the parties will negotiate exclusively with each other. The parties stated that they plan to sign definitive agreements by year-end 2013 and the transaction could close in the first three months of 2014.
The deal would make Marriott the largest operator on the continent (by number of hotels), nearly doubling Marriott’s distribution in Africa to more than 23,000 rooms, and would also provide Marriott with an operational platform and management team to accelerate its expansion plans.
“Other operators had been looking at Protea, but didn’t pull it off,” said Trevor Ward, managing director, W Hospitality Group, Lagos. “Talking to some hotel chain development guys today, they clearly see this as a threat in terms of greater competition.”
Marriott, which currently operates 10 hotels in northern Africa but none south of the Sahara, reportedly will keep the three Protea brand names on a majority of the hotels, maintain the current staff and introduce its booking system, rewards program and infrastructure.
Protea Hotels, founded in 1984, manages, franchises and leases hotels across the Protea Hotels brand (104 hotels), comprising the lifestyle boutique Protea Hotel Fire & Ice! brand (two hotels) and the superior deluxe African Pride Hotels collection (10 hotels). Protea operates 80 hotels in South Africa and has a significant presence in Malawi, Namibia, Nigeria, Tanzania, Uganda and Zambia.
Alex Kyriakidis, president of Marriott International for the Middle East and Africa, said, “The development cycle for opening new hotels in Africa is typically long due to the challenges posed by emerging infrastructure, so joining forces with Protea Hotels and their highly respected management team is the strongest way to jumpstart Marriott’s footprint in Africa.”
Kyriakidis told HOTELS on Friday that he considers this deal a “huge win-win.” He said Protea, by virtue of its size, had a hard time extending its brand further. “By putting the two organizations on the same platform, it create a huge opportunity for growth, rebranding, conversion.”
Kyriakidis added that he expects the Protea brand to extend north to Middle Eastern countries where Marriott is limited due to existing territorial agreements. “Major investors are already reaching out to talk,” he added.
Arthur Gillis, chief executive officer of Protea Hospitality Group, said, “Aligning with a global giant such as Marriott ensures we can realize the group’s full potential for all of our stakeholders.”
Going forward, Gillis told HOTELS he has been offered a position on the development team reporting to Kyriakidis and said there is so much work to be done and opportunity using the Protea platform. “Every single owner has said to us, ‘Wow. Look at this great opportunity. Can I rebrand or build more.’ We have loyal owners and others are already coming at us to work together,” Gillis said.
Kyriakidis said any rebranding of existing Protea hotels is “a work in progress and a key priority.” He said the team needs to protect and preserve what Protea has built and that he wants Marriott brands represented in the major cities. “In doing that we have a number of our brands at our disposal and we will work to see what the best propositions are for owners,” Kyriakidis said. “Most important, now we have the team I believe is the most respected in sub-Saharan Africa, and that is the key thing we are investing in.”
Joop Demes, managing director of Pam Golding Hotels, Cape Town, said that Marriott has for years has been constrained in Southern Africa in terms of rolling out the Courtyard brand due to it being a registered as part of the City Lodge Hotel Group. “This transaction will give Marriott access to a trusted and well known, 3- and 4-star brand (Protea Hotels and Fire & Ice),” he said. “Protea’s 5-star owners, currently branded as African Pride Hotels, will benefit greatly from this transaction and I expect a number of these hotels to be re-branded in the next 12 to 18 months. There will also be a significant upside for the Protea and Fire & Ice hotels that are pre-dominantly leisure oriented as they will reap the benefits from the impressive Marriott loyalty program, global sales and marketing offices and infrastructure.”