The company’s CEO remains buoyant on Africa’s future with a more manageable development pipeline and plans to expand further throughout the continent and beyond.
BARCELONA, Spain—Mangalis Hotel Group remains focused on adding quality hotel products across Africa in markets with high demand, suitable management partners and where airlines and investors have increased interest, according to its CEO Olivier Jacquin.
Mangalis still plans to meet its development goals across its three brands—upscale Noom, midscale Seen and economy Yaas—but has extended its timeline, Jacquin said. The original plan was to open 70 properties by 2019, but that has been scaled back to 47 hotels in operation and under development by 2021.
“When I joined, I saw that number was not realistic,” Jacquin said. “It is always good to challenge yourself, but we divided our goals in to priority one, priority two. The time it takes to secure finance, the time it takes to go to market all are a little bit longer, so taking these parameters into consideration, we decided to make the plan a little slower. I still think it is pretty dynamic, though.”
In the last few years, development in Africa has been hurt by the Ebola virus outbreak and the stagnation of oil prices, the CEO said. Despite these obstacles and his more practical stance towards expansion, Jacquin said he is convinced the fundamentals of Africa are excellent and will permit Mangalis to roll out its three brands across the continent.
High demand, little inventory
Mangalis has plenty of opportunities to grow in Africa, which benefits from a huge continental population with large hotel demand but low hotel market penetration, Jacquin said. This is especially evident in Francophone West Africa, where Mangalis started its drive and which remains a priority.
“Our second priority will be the sub-Saharan band, while next will be the rest of Africa. Then the Middle East, especially the United Arab Emirates, and southern Europe,” Jacquin said.
African hotel development also continues to evolve with the owner-operator business model, along with the move toward some franchising, Jacquin said.
“I strongly believe the management contract has real potential in Africa, but many owners do not know how to manage hotels,” he said. “Much of it is all plug-and-play, and owners want us to do everything from A to Z.”
Jacquin said Mangalis, a subsidiary of Abidjan, Ivory Coast-based Teyliom Group, has adapted its operations to meet this sea change.
“The original plan was to develop one-third of our properties as turnkey operations,” he said. “Now it is two-thirds, with a real focus on cost control … but we are signing a few franchises, too. Three have been signed this year, and there will be another three for our Yaas and Seen brands.”
One cost-control measure is Mangalis’ modular hotel construction, which Jacquin said Mangalis pioneered in Africa. Its 89-room Yaas Hotel Dakar Almadies was built via modular construction.
“It is the best method to maintain and control costs in the sub-Sahara, and to ensure (timely) delivery,” he said. “Eighty percent (of the hotel) is made outside of Africa, in the Dakar hotel’s case, Spain, and there is big demand for this.”
Adding high-quality assets into slowly maturing markets with low hotel-chain penetration is key to Mangalis’s strategy. Branded hotels comprise less than 10% of properties in sub-Saharan Africa, Jacquin said.
Mangalis has three hotels in operation: in Abidjan; Conakry, Guinea; and Dakar, Senegal. The company has 16 properties in development with a total of approximately 2,400 rooms, and nine in construction. Mangalis aims to open hotels in Angola, Benin, Niger, Republic of Congo and Sierra Leone. The properties will either be owned and operated or franchised to third parties, Jacquin said, with the company currently pushing its owned-and-managed phase.
Other nations on Mangalis’ radar include Cameroon, Gabon, Ghana, Kenya, Liberia, Mozambique, Nigeria and Tanzania, Jacquin said.
“There is much opportunity, as markets are still dominated by bad hotels,” he said. “Abidjan has a population of six million but only five branded hotels. Yes, there are some small independents of 20 rooms that are okay, but you pay a lot for them, for bad design and poor security.”
Jacquin said most African hotel markets need some time to catch up to other world regions.
“Maturity will come in (Abidjan), but for the next 10 years it will be all about development,” he said. “The capitals of Africa have a nice portfolio of 5-star hotels, but it is a small handful, but the ratio I like to showcase is the economy and midscale inventory. In the (Middle East and Africa) region, only 25% of branded hotels are midscale, while in the rest of the world that number is 62%.”
Among the many challenges in Africa’s hotel development, Jacquin said labor is one of the region’s biggest issues.
“I rue local competency. Human resources are not to the level we want to serve our clients,” he said. “There is a lack of hotel schools almost everywhere. We need to grow our own guys, not every time have to go out to ask a French or Swiss person. We have 12 hotel openings in the next two to three years. I cannot send one set of established staff to my newest hotel. A minimum of three years employment is needed to get the best out of people.”
Africa’s governments also need to be more involved and encourage hotel development. Jacquin said improving infrastructure is a necessary first step.
“Even the most developed (countries) have to rethink their chain of command,” he said. “When I see development, hospitality is never in the top five. Booming airlines are not supported. The level of service inside airports is bad, as is transportation to the city.”
Mangalis draws half of its financing from its parent Teyliom, but securing the other half from local partners and funds also comes with hurdles.
“Investors in the region are wanting to diversify their portfolios from solely having money in oil and natural resources,” Jacquin said, “but they have to become more mature and have their eyes on the ground every day so that projects simply do not grind to a halt. (Investors) have money and they launch into development, thinking they’ll find management later and with little thought as to location and construction. Feasibility needs to be upped all round.”