May 14, 2012
Donald Booth, United States ambassador to Ethiopia, believes that US brands are very good in Ethiopia but very rare. Having spent two years of his three-year term, he wishes to see more brands from his country come to Ethiopia. Most recently, he has witnessed the openings of two giant US companies, General Electric (GE) and Hewlett-Packard (HP), and, to his pleasure, a renowned US lodging facilities brand, Marriott, officially announced its arrival in Addis Abeba, this week.
Marriott, founded in 1927 and joining the hotel business 30 years later, is the third US hotel chain to enter the Ethiopian hospitality industry after Hilton and Starwood through Sheraton. It has also become the fourth franchisor company to make its presence in the country. Marriott International Inc, a company that owns 3,700 properties in 73 countries, is extending its footprint into Ethiopia, after reaching a hotel management contract agreement with Sunshine Business Plc.
Sunshine Construction Plc, which is owned by Samuel Tafesse and Fetlework Ela, has a 95pc share in Sunshine Business Plc while its sister company, Sun Sister, owns the rest. The company dedicated its already constructed building, located near Meskel Square on Jomo Kenyatta Street, to the first hotel in Ethiopia under the brand of Marriott Executive Apartments.
Built on a 2,700sqm plot of land, the Executive Apartments will have 108 rooms, a restaurant, a swimming pool, and a fitness centre. The hotel will contain 95 single bedrooms and two presidential suits. It will also have a meeting facility with a capacity of hosting 80 people and a parking space to accommodate up to 50 cars. The apartment hotel will cost 33 million dollars and is expected to be operational next year.
“The hotel apartment will mainly serve people who come for meetings and stay for two to three months. But, it will also give services to those who rent a room on a daily basis,” Samuel Tafesse, managing director of Sunshine Construction Plc, said in an exclusive interview with Fortune.
The second hotel, named Courtyard by Marriott Addis Abeba, will be situated adjacent to Bole Medhanialem Church on Cameroon Street, behind the three residential villas of Samuel and his family. Marriott introduced its first Courtyard hotel, a lodging option for business travellers, in 1983.
Addis Abeba’s Courtyard Marriot is to lie on 4,200sqm and cost an estimated 38 million dollars. When it is opened for service, planned for April 2015, it will have 215 rooms, a meeting hall with the capacity to accommodate 1,200 people, a swimming pool, and a full-fledged fitness centre.
The Courtyard will have 144 king-size bedrooms and 57 double bedrooms. According to a source, the size of the king-size bedrooms will be larger than the standard for a Courtyard due to local industry requirements. Like the Executive Apartments, two presidential suites will be part of the Courtyard and 13 suites will also be included.
The two hotels, expected to have five stars, will be under Marriott’s management, according to the contract agreement signed between Sunshine and the hotel chain company on May 10, 2012, Radisson Blu Hotel, another international hotel located on Marshal Tito Street.
Hundreds of invited guests, including Tadelech Dalecho, state minister of culture and tourism, and US Ambassador Donald Booth, witnessed the contact agreement signing by Samuel and Alex Kyriakidis, president and managing director of the Middle East and Africa for Marriot International Inc.
“The hotel management contract agreement gives full rights and responsibility for Marriott to manage Marriott – Sunshine Executive Apartments and Sunshine Courtyard by Marriott Hotel,” Samuel told the gathering.
The hotel management contract agreement is one type of model in operation for hotels and is usually a long-term arrangement. Such agreements give full control of management to the hotel operator, which is responsible for the day-to-day running of the hotel. In this type of agreement, the owner of the hotel is supposed to pay a fee to the management company. Neither Sunshine nor Marriot were willing to disclose the fee amount, citing confidentiality on their agreements.
“Our responsibility starts from recruiting and training people, ourselves, under Marriott standards,” Mr Kyriakidis told the media. “[We are] bringing the operation to life, choosing the food and beverage concepts, bringing in the reservation technology platform, and supporting the hotel sales and marketing both locally, regionally, and globally as well.”
Marriott, a company that was involved in food and related supply distribution and senior living services businesses, shifted its focus to hotel ownership and management in 2002. To put more emphasis on lodging and hospitality, the company created Marriott International Inc in 1993. Marriott International Inc started operations in the Middle East and Africa region in 1980.
It currently owns 39 properties in 11 Middle Eastern and African countries, of which eight are operated in three African countries. In recent times, the interest of international hotel chains and airlines in the African market has showed a dramatic increase, according to media reports. Marriott, however, developed a strategic plan to get a piece of the pie from the new frontier four years ago.
“The whole global hospitality industry is late in coming to Africa. But, I think this is nothing more than having the right opportunity at the right,” Mr Kyriakidis explained.
Marriot seems to have realised the opportunity in Africa and selected the next five years as the right time. In addition to the two hotels that will be opened in Addis Abeba, the company announced that 19 hotels that hold Marriott’s different brand names will start to give services in eight African countries by 2017. The hotelier will open five hotels each in Algeria and Egypt, alone.
Egypt is the top tourist destination in the Middle East and Africa. The growing African middleclass coupled with the development of infrastructure has attracted the world’s top travel and tourism operators to the continent, according to Kyriakidis. The African Development Bank (AfDB) reports that the middleclass accounted for 34pc of the African population in 2010 and is expected to grow from 355 million to 1.1 billion in the next 50 years.
When people cross into the middle income level and they have disposable income, one of the first things they like to do is travel, Kyriakidis believes. Their movement gave birth to the idea of the need for a hotel product, he says. For the managing director, Ethiopia is no exception to this continental drive.
“We have been looking at the current supply situation to meet the needs of both domestic travellers and international visitors to Ethiopia,” Kyriakidis elaborated. “We see an acute shortage in hotel rooms for the city of Addis Abeba. That is really the start of journey.”
Before the journey began, Marriot and Sunshine, wrestled through four years of tough negotiations. For Sunshine, the process even dates a little further back. Prior to their decision to negotiate with Marriot, they developed criteria to select a management company. They then shortlisted seven other hotel chains and started making enquiries for more information. Based on the information they gathered, they assessed the companies’ financial statuses and human resources management capabilities.
“By every measurement Marriott stood out. They were also swift to respond,” Berhanu Bekele, head of the Hotel Development Division at Sunshine Business Plc, told Fortune.
Despite Sunshine’s satisfaction of the portfolio of the management company, Marriott officials chose to be very careful before they reached any agreement. Working in a market full of hotels and brands and coming from countries that have a lot of knowledge of the hospitality industry, their Ethiopian experience was quite unique for them. Kyriakidis recalled those years as an “education process,” and justifying the slow pace of the negotiations.
“In a market where the hotel industry is very small and the branded hotels are very few, the discussions with the owner will take a longer time,” Kyriakidis said. “In our experience, anyone who signs something very quickly usually cries many years afterwards.”