Published on : Saturday, November 9, 2013
PROTEA Hotels, one of South Africa’s biggest and most successful hotel operators, is being acquired by Marriott International, the US’s largest publicly traded hotel chain.Analysts expect the mooted acquisition to “shake up” the three-star and four-star hotel market in SA, while also giving Marriott’s Africa growth plans a major lift.
Marriott said on Friday night it had signed a letter of intent with Cape Town-based Protea Hospitality Holdings to acquire Protea Hotels’ brands and management business.Protea Hotels operates 116 hotels or franchises with 10,184 rooms in South Africa and six other sub-Saharan African countries. Protea’s brands include Protea Hotel Fire & Ice, African Pride Hotels and Protea, its largest brand.
The transaction, for an undisclosed sum, should nearly be double Marriott’s African footprint to more than 23,000 rooms, at a time when major global chains are looking to substantially ramp up their exposure in the continent.Marriott’s brands include Ritz-Carlton, JW Marriott, Marriott Hotels & Resorts and Bulgari Hotels & Resorts, among others.
As part of the deal, Protea Hospitality Holdings would create a property company to retain ownership of the hotels it owns, and it would enter into long-term management and lease agreements with Marriott for these hotels. Protea said yesterday it would also retain a number of minority interests in other Protea-managed hotels. The result would be that Marriott manages 46% of the rooms, franchises 40% of the rooms, and leases the remaining 14%.
Alex Kyriakidis, president of Marriott International for the Middle East and Africa, said the deal would be “the strongest way to jump-start Marriott’s footprint in Africa”. This was given that the development cycle for new African hotels “is typically long due to the challenges posed by emerging infrastructure”.
Protea Hospitality Group CEO Arthur Gillis said Protea “never actually was” on the market. But Africa’s “unrealised potential” prompted it to align itself with “a global hospitality giant such as Marriott” to realise its full potential.
Mr Gillis said the intention was for Protea’s brands and people “to remain” under the Protea group. He believed Protea was attractive to global operators given its “strong and recognisable brands in Africa”, and track record.The parties said they planned to sign definitive agreements by year-end, while the transaction could close in the first quarter of next year. The deal is subject to a number of conditions being met.