Hospitality is a notoriously difficult business. The hours are long, profit margins thin and business conditions highly cyclical. Not surprisingly, it tends to breed very shrewd operators – the inimitable Sol Kerzner springing immediately to mind. Far lower profile, but almost as successful are Otto Stehlik, Arthur Gillis and their colleagues at Protea Hotels who, after yesterday, will be banking their biggest payday yet. Stehlik founded Protea in the mid-1980s as a 40% shareholder with the old Bankorp. The company had two Cape Town  hotels and the struggling KZN South Coast resort Sanlameer. The first management buyout involved removing the banking group. In 2007 Stehlik and his partners sold their business for R1.5bn to Stella, an aggressive Australian operation that subsequently went bust. As part of a consortium they bought Protea back in 2009. Yesterday the entrepreneurial hoteliers sold their group for the last time to multinational Marriott, but this time retaining the real estate, selling just the operating company and  banking 30% of a juicy R2bn (Investec owns 30% and a BEE partner the balance). For Marriott, this is confirmation of its belief in the Africa Rising story. The combined business will be comfortably the biggest hotel group in Africa. With 25 more Marriott hotels on the continent in development, it intends keeping it that way. – AH
GUGULETHU MFUPHI:  Marriott International has become the largest hotel company in Africa after completing its acquisition of South Africa’s Protea Hospitality Group. Alex Kyriakidis, President and Managing Director of Marriott International Middle East and Africa, gave us his comments. Let’s take a look.
ALEX KYRIAKIDIS:  We’re at a pivotal moment in the history of Marriott International and Protea in Africa. Both of us actually share a 35-year history in Africa. Marriott first started at the Cairo Marriott. That iconic hotel is still there. We have eight hotels today in North Africa, Egypt, and Algeria, but 25 hotels under construction in sub-Saharan and Southern Africa. Now, with Protea’s 115 hotels in seven countries, what it really means is that when we come together, we are now able to put out 125 hotels for our guests in nine countries in Africa today and when the 25 hotels open in four years’ time, that will extend to 16 countries in Africa.
ALEC HOGG:Â You buy the Africa growth story, no doubt.
ALEX KYRIAKIDIS:  Absolutely, we are totally committed to Africa. We are looking at a continent with a very young population. Particularly important to us now is the Gen X and Gen Y traveller of the future and really, the focus of what we’re trying to do here is to respond to the domestic and regional traveller in Africa by really offering a platform on Marriott International’s global infrastructure and all the benefits that come to that. For example, the Marriott Rewards Loyalty program, the distribution, and the Marriott.com reservation platform. By coming together, we’ll be the number one operator in Africa with nearly twenty thousand rooms operating in the pipeline. We’re very, very excited.
ALEC HOGG: Protea has a very aggressive Loyalty card. Is that going to be converted now to Marriott’s Loyalty program?
ALEX KYRIAKIDIS:  Pro-card will continue. We’ll therefore continue with Pro-card because as you quite rightly say, it is a very successful program, but Marriott Rewards will also be launched and over time, really, the guests will speak. However, the Marriott Reward program will come into play towards the end of this year, affording our 52 million loyal customers an opportunity to use and redeem those points as they travel across Africa.
ALEC HOGG:Â What about the branding of the Protea Hotels?
ALEX KYRIAKIDIS:  This brand of hotels, as you know, enjoys a tremendous reputation and really, brand recognition in Africa. As a result, the three brands being Protea, Africa Pride, and Fire and Ice, will really transfer onto Marriott’s platform, and they will continue in exactly the same way as the guests know those brands, but will have the benefit of the global Marriott infrastructure supporting those brands into the future.
ALEC HOGG: So they’ll still be the Protea Balalaika for instance, but operated by Marriott.
ALEX KYRIAKIDIS:  Yes, that’s absolutely right. It will be the Protea Balalaika and anyone going on Marriott.com and types in any city in Africa, whether it’s currently hotels by Protea, will be able to see all the Protea hotels come up on the screen, where up until yesterday that wasn’t possible.
ALEC HOGG:Â Do you intend to rebrand those hotels in time?
ALEX KYRIAKIDIS:  At the present time, there are no plans for rebranding. Rather, what we are doing here is leveraging the platform for accelerated growth, Alec. What I mean by this is…it’s really two things. 1. We can now offer our owners a legitimate presence in Africa. As of today, we have 250 highly respected professionals in the headquarters, in both Cape Town as well as Johannesburg, to support both the Marriott and the Protea Hotels across the African continent. This is huge, because for any investor and owner to know that there is real infrastructure and real support on the ground… What we’re looking for this transaction to do is actually accelerate the growth of both Marriott and Protea brands, across Africa, and the CEO of Protea, Arthur Gillis, will continue working with us and helping us thrive that growth in Africa.
ALEC HOGG: Alex, it’s a patchy record that Protea has. It started in 1984, management buyout in 1987, and then a deal in 2007 through the Australian Stella Group. They went bust two years later. Management bought it back in 2009. Doesn’t this worry you, that there’ve been so many ups and downs?
ALEX KYRIAKIDIS: Â Absolutely not, because I think that unlike the previous acquisitions, Marriott International is a 4000-hotel global organisation who really knows the hospital business, and together with Protea, we have both done an enormous amount of work to get very comfortable that one plus one is going to equal five, Alec.
ALEC HOGG:Â Have you bought 100 percent control of the business?
ALEX KYRIAKIDIS:  We have 100 percent control of the operating company. The Protea Group is separated into two vehicles: one is the property company, which owns some of the property assets. The other is the operating company, and we have acquired 100 percent of the operating company.
ALEC HOGG:Â So the properties themselves will not be part of this transaction.
ALEX KYRIAKIDIS: Â No, the real estate will continue under its current ownership structure, Alec.
ALEC HOGG: The price: you haven’t disclosed it. However, is it in the region of R1.5bn, which the Australians paid in 2007?
ALEX KYRIAKIDIS:  Well actually, it is now public, so I’m very happy to share with you that the investment is R2bn – approximately $191bn.
ALEC HOGG: So the consortium that got together, the BEE consortium – Investec, which had 30 percent and the management with another 30 percent – had another good return on their investment in the past few years.
ALEX KYRIAKIDIS: Â It seems a very good return indeed, Alec.
ALEC HOGG: What about from a Marriott perspective – the way you’re going to manage it or the way that perhaps, people who’ve used Protea hotels might see a difference in the future?
ALEX KYRIAKIDIS:  Well, this is where we think the excitement really lies for our future together. First and foremost, all the high calibre, superb people that the owners of Protea hotels know today, will not only continue with us, but will have superb career opportunities in the future. The 25 hotels under construction, which I mentioned earlier…we’re going to need twelve thousand new associates to join the Marriott International family in order to support those hotels.  South Africans have a great response in terms of travel across Africa, so there’s a great opportunity here for the Protea team to work more broadly within Marriott International and vice versa, so the people side of it is very, very exciting for us and we’re really looking forward to it.
ALEC HOGG:Â How many people from Protea will be joining the Marriott Group as a result of this transaction?
ALEX KYRIAKIDIS: Â In total – in the Lease Management franchise hotel – around fifteen thousand associates will either directly or indirectly, come under the Marriott family.
