French hotel giant Accor and Qatar’s Katara Hospitality are set to make a major push into sub-Saharan Africa. A year after the plan was announced in July 2018, the capital management firm administrating the partnership has closed the initial Kasada Hospitality Fund LP, with $350 million contributed by Katara and $150 million by Accor.
The investment will be focused on acquiring assets in sub-Saharan Africa, and according to Kasada Capital Management CEO Olivier Granet that will include greenfield, brownfield, distress and other opportunities that will all be managed under Accor flags. Granet said he’s excited to be a part of the team assembled for the regulated fund.
“The origin of the fund is based on analysis on the market and what is needed,” he said. “There is a lot of expectation about Africa, especially sub-Saharan Africa, but the reality is that there is a limited number of hotels. We are an independent platform identifying opportunity and putting into place the right financing structure.”
Granet added competition for the new entity comes from only a few market players, notably in Morocco and South Africa. “South Africa has very sophisticated investors, but they are mainly focused on South Africa,” he said.
Accor CEO Sébastien Bazin reiterated what he said in the 2018 news release on the deal, noting African demand and travel trends point to “increasing and sizeable needs for quality hospitality.” He said the investment plan will be a difference-maker in the African hotel market.
“The money is in place and will attract the best people, who will wait to work with them rather than take on other opportunities, and Granet said there currently are between four and five times more hotels in the Middle East than in the whole of Africa. This is due to the difficulties of developing in Africa, and those obstacles still exist.
“There is a gap between the hotel companies and the local investors who wants to develop Africa,” he said. “(The latter) have some land, but for them to access financing with good conditions is very challenging. Banks and (development finance institutions) do have strong interest and the understanding that hotels bring in jobs and have a positive impact on economic activity, but to develop hotels one by one with local developers, they are not left feeling comfortable in that situation.
“You need a number of market players—designers, constructors, equipment companies—but to put the resources in place for one hotel at a time is challenging.” Kasada’s structure also gives it a noticeable advantage in Africa.
“(Kasada) acting as a co-investor to local investors helps bridge these gaps,” Granet said. “We are not reinventing the world, to be a new type of fund or a (real estate investment trust), both of which have been proven to be successful. What is new is that such a vehicle does not exist in Africa, at least of this size.”
In terms of geography, the three companies will focus on sub-Saharan Africa and key cities that provide for the emerging African middle classes. “We are looking at quality across all the market segments, but with a focus on economy, midscale and serviced apartments. It is about value for money and catering to a young population,” Granet said.
He said there is a need for internationally branded hotels, rather than independent boutiques, but all properties regardless of their styling will require social areas, bars and restaurants.
“One figure that strikes me the most is that the number of passengers in Africa is less than 3% of the worldwide number of passengers, and what with the expected population increase here, that percentage will grow,” Granet said. “We have very strong goals in terms of sustainable development and job creation. That also applies to creativity in construction, materials, water and energy and to be sure all of this is well-adapted to African markets. The idea is to push boundaries.”
The partnership might consider a second round of funding, but the initial focus is on the capital and opportunity already in the bank and on the table, he said. “We expect to raise double our $500 million in debt in the future,” Granet said.
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