Marriott International to Buy African Hotel Chain
U.S. Company to Pay $200 Million for Protea Chain

By Craig Karmin

Marriott International Inc. reached a deal Thursday to acquire one of Africa's largest hotel companies, a move that will make it a leader in the region that is seeing growth in tourism, business travel and an emerging middle class.

The Bethesda, Md., hotel company is paying more than $200 million for the brands and hotel-management business of Protea Hotels, a South African-based hotel operator, according to people familiar with the deal.

Chief executive officer Arne Sorenson confirmed Marriott's plans to acquire Protea, which operates 116 hotels in seven sub-Saharan African countries, but declined to discuss the price. Marriott, which owns few of the hotels it manages globally, won't be acquiring any of the African properties.

Marriott currently operates 10 hotels in northern Africa but none south of the Sahara. The acquisition would catapult Marriott from the 13th largest hotel company on the continent to the largest by number of hotels, according to Smith Travel Research.

After the closing of the deal, expected early next year, Marriott would have more than 23,000 rooms in 138 African hotels—stretching from Marrakesh, Morocco, to Cape Town, South Africa—that have opened or are under construction, the company said. "In one fell swoop, this gives us new brands, great talent and expertise to grow further," said Mr. Sorenson.

The big bet on Africa is the latest sign that Marriott and its U.S. rivals are increasingly taking their fight abroad—especially to emerging markets, where they see the fastest growth and have relatively small footprints in most countries.

While Africa isn't without risks, many of the continents countries are ripe for growth. For example, hotel room revenue in South Africa, Protea's biggest market, is soaring. PricewaterhouseCoopers estimates hotel and other lodging revenue of $1.6 billion in for 2013, up 42% from a recent low in 2009.

Starwood Hotels & Resorts Worldwide Inc., which operates the Sheraton and Le Meridien brands in Africa, says it expects to increase its African hotel portfolio by 30% to nearly 50 hotels by 2015. That expansion includes Africa's first two St. Regis hotels, Starwood's high-end luxury brand. The firm also revealed plans this week for hotels in Mauritania, Guinea and South Sudan.

Hilton Worldwide Inc. has 61 properties in the Middle East and Africa and the company has announced plans for additional hotels in Nigeria, South Africa, and a resort in the Indian Ocean.

Building and operating hotels in this part of the world isn't easy. Poor infrastructure in many countries makes transferring building materials or hotel supplies a burden, which can add years to a new hotel's construction time and increase development costs by 15% or more, according to a recent Ernst & Young report.

Africa is also among the world's more volatile markets, where political riots, military coups or terrorist attacks can disrupt plans or cause hotels to close temporarily. Marriott shut down a 370-room hotel in Tripoli in 2011 during the uprising in Libya. The J.W. Marriott hotel is being repaired and is expected to open next year, the company said.

But heads of some U.S. hotel companies suggest that the cost of staying out is also a risk. Frits van Paaschen, Starwood Hotel's chief executive, says 280 planned hotels—or about three-quarters of future Starwood Hotels—are in emerging markets.

"I would rather go in when it's not obvious to be there, than go in when it's too late," he says. This week, Mr. van Paaschen added, he is on a multicountry tour of Africa scouting for new projects.

These U.S. hotel companies point to Africa's rapid economic growth, new international flight routes, expanding middle class, and infrastructure investments by China. Sub-Saharan Africa alone has a population of more than 850 million.

The Economist Intelligence Unit, a research an economic analysis group, forecasts sub-Saharan Africa's gross domestic product to grow 5.7% next year, about double its forecast for world GDP growth. Africa also has the world's fastest pace of urbanization, with cities growing at 4% a year, according to the EIU.

"Yes, you may get some volatility," says Mr. Sorenson. "But there is a real need for hotels in Africa, and in the fullness of time, we will do well."

Protea began looking to become part of a global hotel chain more than a year ago, and had conversations with a number of U.S. and European hotel companies, says Arthur Gillis, Protea's CEO. He said Marriott appealed in part because the two companies were complimentary: Marriott has 10 hotels in North Africa and none in sub-Saharan, where Protea has all its properties.

Currently, Africa's largest hotel company is France's Accor, which has 113 African hotels and 16,351 rooms, according to Smith Travel Research. Accor didn't respond to requests for the number of hotels it has in the pipeline.

Protea has three hotel brands. There is the upscale African Pride chain, where rooms charge up to $300 a night, one of the priciest in sub Saharan Africa. It has a new lifestyle brand aimed at younger travelers called Fire and Ice, but the majority is called Protea, full-service, business-oriented hotels that range from $70 to $120 a night.

Marriott says it may convert a few select hotels to Marriott brands, but nearly all will remain Protea and employees will keep their jobs. Marriott will manage the hotels, and introduce its booking system, rewards program and infrastructure.

Write to Craig Karmin at