Marriott’s global CEO bullish on Africa: R2bn Protea deal just the start

One of the most exciting stories on the African continent at the moment is R200bn Marriott International's purchase of South African-based Protea Hotels. It speaks of so much more than an international acquisition in an industry that was heavily affected by the 2007 global recession. It is a story of the African continent coming into its own, battling through the growing pains of poverty and political instability – the middle class is growing, quickly, and with that comes a realm of opportunities and possibilities that the world hasn't seen for a long time. Arne Sorenson, only the third CEO in 86 year old Marriott's history, estimates that 100m new travellers will be entering the market in Africa. Marriott's acquisition is the group's first step toward tapping that market. This piece is sure to make you feel more optimistic about the future of Africa. Especially as it taps into the buoyant mood of the head of the would's largest listed hotel group – a man who is a bit of a celebrity on Wall Street thanks to a strongly rising share price. – LF

ALEC HOGG: Arne Sorenson is the Chief Executive of the R200bn Marriott International Hotel Group. He's visiting his global group's latest acquisition – the South African headquartered Protea Hotels. Arne is a little bit of a hero on Wall Street at the moment. Marriott's share price, since he took over two years ago, has been going in one direction – upwards. Well, we spoke to him this morning about his thinking on the acquisition and the group's African expansion strategy.

ARNE SORENSON: I have been here before and I'm thrilled to be back. We have the general managers of all the Protea Hotels coming together for meetings, starting this afternoon at Arabella. It is just a real treat to be able to come here and welcome them to be part of the Marriott family, but also to be welcomed by them and to be a presence now in South Africa, which is a place we wanted to be for a long, long time. It's great to be here, finally.

ALEC HOGG: You've been with the group since 1996 and running the business for the last two years. Just by way of a bit of background on Marriott, it was interesting to note that in the 86-year history of the group, you're only the third Chief Executive.

ARNE SORENSON: Yes, that's right. My predecessors are J.S. Marriott, who was in the CEO chair for 45 years and then Bill Marriott (or J.W. Marriott Jr) who was in the CEO job for 40 years. They are tough shoes to fill. Something tells me that I won't make it for 40 years.

ALEC HOGG: You also aren't a Marriott, which I guess, is also unusual for the group.

ARNE SORENSON: It's obviously the first time that a non-family member has been CEO. The family is really an important part of our business. They own about 25 percent of the company's stock and in many respects; the family makes the company more personal to our folks around the world. There are about three-hundred-thousand or so folks who wear the Marriot name badge every day in four thousand hotels around the world. It does put a human face on it, so while I'm not a family member, I'm really blessed by continued family involvement in the business, which is a good thing.

ALEC HOGG: And it's an interesting business, going from the Ritz Carlton, which I've had the privilege of staying in, in Chicago to the Fairfield Inn in Omaha, which I'm not so sure I had the privilege of staying there. From right at the top to…I won't say the bottom end, but basic budget hotels: I guess that would make Protea, which also has a great divergence, an interesting fit for you.

ARNE SORENSON: Yes, Protea is a very interesting brand. As we've looked at hotels across South Africa, we see that Protea does have three brands obviously, with African Pride and Fire & Ice, but the core Protea brand has a fairly broad range in quality, depending on the precise market it's in, and it's been perfectly appropriate – the way it's developed here. It's a very strong brand with a good focus on customer service. It fits into our portfolio in what we would say in the United States, as an upscale (not upper upscale or luxury but certainly, well above economy and budget) and we think that positioning is about the right positioning for us.

ALEC HOGG: Are you going to use the Protea Brand into Africa?

ARNE SORENSON: We will certainly use it into Africa. We have projects underway in a number of markets such as Ghana and Uganda. We're obviously in 10 sub-Saharan African markets with Protea already. One of the things that's been quite interesting is we already hear from some of our partners in the Middle East, that they have an interest in bringing Protea to the Middle East as well. We'll see how that develops. Certainly, our immediate focus is to make sure we do the transition well and we grow in sub-Saharan Africa with the brand as well as with the other brands we've been working on for the last few decades really, in this market.

ALEC HOGG: Arne, perhaps you could give us a little bit of a feeling into your strategy on acquiring Protea – a small deal at one percent of your market cap – rather than perhaps going a lot bigger for something like Tsogo Sun, which could be available, and that was at a R32bn market cap. Just tell us the reason why you might have started small.

ARNE SORENSON: Well, Protea was available, which I think is the first important thing to keep in mind. Arthur Gillis (one of the founders of the company) came to New York in the fall of 2012. He said he was thinking about doing something with the company. We of course, immediately took a look at it and liked what we saw. We liked the brand. We liked the distribution of hotels. We particularly liked the people because they bring us an expertise that we really – frankly – didn't have, in order to be successful in this market. Because the deal was available, it was one that we grabbed. That does not mean we won't continue to look at other things that become available. We're pleased to have this platform and I think it brings us a lot of the fundamental things we need to be successful here.

ALEC HOGG: Market commentators felt that you had a hard job to do at Marriott yourself, when you were put in command there to continue the turnaround process at the business, which has been through tough times since 2007. The fact that you're doing acquisitions now would, I guess, send a signal of its own.

ARNE SORENSON: Well, I think there's a lot of great stuff happening, both in the industry and at Marriott. Obviously, 2009 was a particularly brutal year. If you look at the way the recession hit in the United States, and in Europe particularly, we saw same-store sales down by 20 percent or so and those were stunningly bad numbers. Fortunately, since then in 2011/2012/2013 and now 2014, we see economies recovering in the United States. Finally, we see some recovery in Europe and as a consequence, we're looking very much towards the future. When we think about our strategy, there are two things that are really important for us to tackle. One is, we need to make sure we bring the dominance we've long had with baby boomers for example, the travellers to the millennial and the second side is that we grow with a global growth around the world. Both of those are part of our Africa strategy.

Obviously, in Africa, we see a burgeoning middle class for the first time, one-hundred-million new travellers probably – maybe more than that – that will travel within Africa and will travel out of Africa, to Europe and other markets around the world. We very much want to be part of that growth, whether it is driving travel here or driving travel abroad from here. When we look around the world, we see some of the same dynamics in markets in Asia and Latin America, with this growing group of travellers that we want to be there for.

ALEC HOGG: Arne, it's interesting again, reading the material you've written on LinkedIn, to see that you have an affinity for this continent. Not only did you write a tribute to Nelson Mandela the day after he died, but you've also been to the top of Kilimanjaro. I guess that also sends a message of its own.

ARNE SORENSON: Well, one of the great things about being at Marriott and being in this business is that we are really focused on people. Often, when you ask a business CEO 'who's your most important audience', the answer is 'first, the customer'. I don't mean to suggest for a second that that's the wrong answer, but at Marriott – for years – we have said our associates/our people come first because we can't serve our hotel guests without doing it through our people. As a consequence, we really need to be focused on their careers. We've talked for years/decades about creating opportunities for our folks. One of the most exciting things about being in a market like this, is these jobs are often just fabulous. For example, we'll be opening a Marriott hotel in Kigali, Rwanda shortly.

We've been working with a girls' school there called the Akilah Girls School, already taking a few dozen girls each year from that school, putting them in hotels that we are running in the Middle East, and getting them trained so that they can come back and be leaders in the Marriott hotel when it opens there. Those jobs are transformative for those young women. They will make our business that much more special because we can not only be there (obviously creating value for our shareholders), but we can also be there creating opportunities for those women and changing their families in a way that brings a meaning and a depth to our business, which makes it really special.

ALEC HOGG: I'm just trying to just get a view on your affinity for this continent. It was interesting to see that you were born in Tokyo. Of course, you work from Maryland in the United States, but you do seem to have more of an affinity for this continent than most U.S. based executives do.

ARNE SORENSON: Yes, I was born in Tokyo. My parents were Lutheran missionaries in Japan for 13 years. We then moved back to the States in the mid-sixties, but I grew up watching my father particularly, travel around the world, including (many times) to Africa. I have a box full of letters from him that he sent home in his travels around Africa. I've also seen African leaders come to our home in the United States. They were mostly church leaders and not political leaders, but they were folks who were keenly interested in the global community and how the global community worked. I grew up obviously, picking up some of that – maybe not always deliberately – but simply as a child would, watching what's happening in his family's house, but with a sense of what was going on in the world. Then, through friendships – I have a great friend in Tanzania whom we've been on safari with and my four kids have experienced Africa.

One of the greatest trips we've ever taken was to climb Kilimanjaro together. For those who haven't done it, I highly recommend it. It is not just a wonderful sight to see, but it's also a great experience to accomplish together with a family. Again, you see this market, which is rich with history, rich with optimism about the future, and really eager for change, which I personally love being part of.

GUGULETHU MFUPHI:  An interesting story, indeed. That was Arne Sorenson. He's the Chief Executive of Marriott International.