This Day (Lagos)

24 November 2012

Nigeria: There's Tremendous Opportunity in Nigeria, Says Starwood Boss

interview

Starwood Hotels & Resorts Worldwide, Inc. is one of the leading hotel and leisure companies in the world with 1,128 properties in nearly 100 countries and 154,000 employees at its owned and managed properties. Roeland Voes, President, Europe, Africa and Middle East Division of the firm, who was in Nigeria recently speaks to Omolola Itayemi and Rebecca Ejifoma about Starwood's growth in Nigerian and other related issues

Starwood brand has over 250 hotels in 60 countries and still growing despite the recent financial crises that enveloped the world. Is the brand immune against this global financial crisis? What has been your magic wand?

We are the most global hotel company operating in 100 countries. We're seeing a transformation that's never happened in history of humanity; a billion people entered middle class in last 20 years with another 3 billion coming. Growth and development is spreading to almost every corner of the world.

Growth for our company is a direct result of economic growth and new infrastructure- not only from U.S., EU or Japan. About 75% of global GDP growth is outside of those markets. Three out of every four hotels we open will be in emerging or rapidly growing markets.

Starwood is not only the most global hotel company, but we have been operating for decades in these markets. We have a history of being the pioneer -- first western hotel company to open a global branded hotel in China, India, Middle East and Latin America. That early lead is why we are the leader in those markets today. We have relationships, reputation, brand awareness, and knowledge about how to get things done. In Asia, for example, we opened more hotels than Marriott, Hilton and Hyatt combined in the last three years running. We've been in Africa since the opening of Sheraton Cairo in 1971.

Le Méridien first opened its doors in 1979 with the Le Méridien Mandji in Gabon.

At Starwood, we have about 40 million guest visits, 330,000 guest rooms and about 200,000 people. About 1100 hotels operating in 100 countries, 9 brands and one loyalty program, SPG. We operate profitable hotels through our brands and by creating branded experiences.

We don't own 95 percent of the hotels that carry our brands -- they are operated on behalf of investors and owners around the globe. We bring global brands, global know-how, and global reservation systems to local investors and make their investments have the best return possible. Our philosophy in brands is so important because each of our brands has an individual personality and a certain type of traveler in mind. Then we make sure that the brand experience comes to life for each of our guests when they visit our hotels.

I will attribute our growth to a combination of factors such as having the right brand to cater for needs of the market that you intend to go into as an organisation. We have nine different brands and therefore we can choose; we don't have to force one single brand on each of the owners of the hotels. We always do this with a thorough market research, pick up the right brand and then advise the owner of what the right brand could be in order put up a befitting hotel so that is an important first step.

The second step is investing in local expertise and that means a local support, local management, local people who understand the market that we are trading in. They could be local advisers together with the local owners who bring their own expertise to the table and we make sure that you have the right combination between the global power of the brand and the management team together with the local expertise and very often the ownerships.

The third and one of the most important factors is finding the right partner. It can sometimes be difficult to find the right partners and it is only when you look back (like in marriage) you find out if you have made the right choice. We spend more time in selecting our partners upfront which has paid off, at least you saw during the presentation that we have relations that dates back to the 1960s in places like Kuwait where we are now hoping to extend in another 20 years; so you are talking about relations that has grown over generations which is fantastic to see and not only in Kuwait, the same thing will be here in Africa, the same thing in Latin America when you are going to the states. So, I think that, that is part of the magic now.

Now, how do you do that? That is where I think the magic of the resorts comes in and that is where the global network of sales expertise, global brand and power of networking comes in. Whether it's our website, reservation centres, marketing executives, excellent service or all these things brought together combined with what we call Starwood preferred which is our loyalty scheme which has grown double in Africa over the last few years.

What of the tension usually generated between owners and management companies sometimes in relation to profit sharing and other things?

I think that you have to be careful with those kinds of statements because if we look at the relationships that we have had, like I said before, those relationships have produced about eleven hundred hotels around the world and some of those are twenty-twenty five years back. I think that the truth lies in the fact that reality shows that those relationships have been good for us but basically it is normal that there is tension between the ownership and the management company which is normal more like in any normal relationship that will be. But I think that the proof that your statement is in a way correct is that we have had those relationship for so long with our existing offers and we are even building new hotels and the same thing applies. If we are not doing well, they will not be happy with the performance of the management and would have called an end to it but that's not the case here.

The secret of maintaining the kind of relationships that we are having is working on a day-to-day basis with the owners and ensuring that they understand what we are doing not only financially but also from the marketing point of view and from the customer point of view. By that, they will understand what kind of value we bring to the table. That is where some of our magic comes in and that is why you don't need to talk about what is said in the contract, you don't need to talk about legal situation. You talk about how good the business is doing and how we can make it even better.

What are the new things we bring? In all honesty, we bring new things where we have to bring things together around the world. We export, we educate our people in the field what the newest things are and that makes us more competitive. I think that one of the things that is important here is what we measure, which is the red pack penetration index. You know that it is a difficult word to say in the market. It means who is getting the most penetration in the market from the market point of view. In other words, who has the best occupancy and rates in a specific market whether the market goes up or down? If the goes down, you do better than your competitors. If the market goes up, you still do better than your competitors. If we can get that right and make sure that our people are better trained, better equipped with better tools than our competitors then we have performed well in the red pack penetration index.

Which continent has the highest demand for your hotels?

Africa is home to seven of the world's 10 fastest growing economies and the IMF expects Sub-Saharan Africa growth to reach 5.4percent this year. We're seeing major investments and remarkable improvements in infrastructure and technology, which are rapidly changing the macro-economic landscape. While there are still more flights to Africa from Europe than any other continent, airlines in other parts of the world are also starting to offer more and more direct flights. You can now fly direct from Houston to Lagos, Toronto to Addis Ababa and Beijing to Johannesburg. The International Air Transport Association trade group says air travel in Africa is up 10percent this year. We are encouraged to see the first low cost African airline (FastJet), set to begin operations at the end of this month with a goal of "democratizing air travel." This new demand and increased travel is outpacing hotel supply, which is in need of updating.

What we see in Nigeria is that the demand for our hotels are tremendously high and even when we add new hotels like this one, it doesn't take anything away from the other hotels but it just become a part of the overall market. So, that is what we see in countries like Nigeria; there is a tremendous opportunity for growth by bringing the hotels and by being able to bring customers. We will continue to grow that market and that is what we do for all our hotels. So, it is a circle that keeps going round. You bring more hotels, you create more demands. So, you need to have the basic to start from but in Nigeria you certainly have the entire good ingredient to make the market grow.

How can Starwood's expansion drive impact the country positively?

Let's look at Nigeria, for example, which is the company's largest growth market on the African continent. As you all know, the most populous country in Africa with the second largest economy and expected prolonged GDP growth, Nigeria represents tremendous opportunities for our expansion in Africa. And yet, today there are only 33 international branded hotels in the whole country. We operate five hotels here. One of things we're seeing is strong demand for affordable yet innovative lodging options. Plans are underway to open three hotels in the next three years. With these new hotels and others we hope to sign, we look forward to creating hundreds of new employment opportunities and investing in the training and development of new associates. There is a terrific base here for new hires. We're not just talking anymore about developed and established markets like Nigeria, Algeria, Egypt and South Africa, also up and coming markets such as Angola, the Ivory Coast and Ghana, where there may not yet be a 5-star brand, where the presence of a Sheraton, Westin, Aloft, or Four Points by Sheraton can make a real difference. As part of our strategy to grow in Africa, we're investing further in development, sales and the expansion of our SPG programme here.

Your hotels are in Lagos, Abuja and Akwa Ibom; where else do you want to go to?

I think that there are a number of destinations that have been announced and I will later tell you more about those destinations but we think that there is still more hotels to be built outside of those two big cities and even in those cities at least we use most of our nine brands of which part of them could be represented in both of those cities and beside other destinations. I think they could be like 5, 6, 7 or 8 different cities where we could have our hotels too in the not-too distance future including Ibadan, Owerri and others.

What will you describe as challenges Starwood has faced in Nigeria?

I think that for us, the most important thing and it is not a challenge to us because it is the same all over the world. It is finding the right partners and then continuing to grow together and that is not something that is specific to Nigeria alone. It is for our business where those relations are really very important; we have talked about some challenges before but I think that honestly in the overall scale Nigeria is a huge opportunity for us and similar things could be said of places like United States, Angola, Ghana and so on but for us Nigeria is the number two at this time which will become the biggest in the next two to three years in Africa.

Why are hotels in Nigeria more expensive than other countries?

Hotels are more expensive in Nigeria because of maintenance including fueling the generators sometimes for 24 hours a day. We also invest more in securing our hotels with more security personnel than in other countries we operate in. This is one of the reasons why we are presently domiciled in only Lagos, Abuja and Akwa Ibom for now but will shortly expand into other cities.

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