Marriott International, Inc. has recently said it has signed a letter of intent with Protea Hospitality Holdings of Cape Town, South Africa to acquire Protea Hotels’ brands and its management business that operates or franchises 116 hotels across three brands with 10,184 rooms in South Africa and six other Sub-Saharan African countries. The transaction would nearly double Marriott’s distribution in Africa to more than 23,000 rooms, and would also provide Marriott with a proven operational platform and leadership team to accelerate Marriott’s expansion plans and solidify its leadership position in the dynamic and growing African hotel market. Protea Hotels, founded in 1984, manages, franchises and leases hotels across the Protea Hotels brand (104 hotels), comprising a full and diverse range of outstanding hotels and resorts; the award-winning lifestyle boutique Protea Hotel Fire & Ice! brand (2 hotels); and the superior deluxe African Pride Hotels collection (10 hotels). In addition to its industry-leading 80 hotels in South Africa, Protea Hotels has a significant presence in Malawi, Namibia, Nigeria,Tanzania, Uganda and Zambia.
As part of the transaction, Protea Hospitality Holdings would create a property ownership company to retain ownership of the hotels it currently owns (and enter into long-term management and lease agreements with Marriott for these hotels). It would also retain a number of minority interests in other Protea managed hotels. At closing Marriott would manage approximately 46 percent of the rooms, franchise approximately 40 percent of the rooms, and lease approximately 14 percent of the rooms.
Arne Sorenson, president and chief executive officer of Marriott International, said, “Africa has significant untapped potential for travel and tourism, both as a destination and source of new global travellers. The continent’s GDP is anticipated to grow at over five percent annually over the next several years which we expect will raise more people into the emerging middle class. With the Protea Hotels acquisition, our expanded footprint should allow us to become the first choice of Africa’s rapidly growing population of young, sophisticated travelers, and drive loyalty to our Marriott Rewards program both within Africa and globally. Protea Hotels enjoys unparalleled brand recognition in Africa, and our combined portfolio of Protea Hotels and current Marriott International brands would create a platform for accelerated growth and new job growth in South Africa and across the continent.”
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. The Marriott Middle East and Africa management team can deliver value and greater growth for Protea’s hotel owners by leveraging these terrific brands, represented by 116 hotels and more than 10,000 rooms in seven countries, with Marriott’s global sales, marketing and development infrastructure. We believe this would also result in more job creation in South Africa and across the continent.”
Arthur Gillis, chief executive officer of Protea Hospitality Group, said “Protea Hotels has grown organically to become the largest and leading hotel group in Sub-Saharan Africa. Aligning with a global giant such as Marriott ensures we can realise the Group’s full potential for all of our stakeholders. In Marriott we have found a perfect fit across culture, values and commitment to industry leadership which will ensure that we remain at the forefront of African hospitality.”
The otherwise non-binding letter of intent includes provisions that the parties will negotiate exclusively with each other. The transaction is subject to completion of due diligence, negotiation and execution of definitive documents, receipt of customary third party and governmental consents and approvals and satisfaction of other customary conditions for transactions of this kind that the parties expect will be included in the definitive transaction documents.
The proposed terms of the transaction are not being disclosed at this time. 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. In any event, Marriott does not expect the transaction would have a material impact on its 2014 results.