Expansion into Africa has rarely been the first choice for scaling international brands. For years, global players in the restaurant and hotel sectors have approached the continent with caution, often opting to explore the Asian markets, or else to focus solely on South Africa.
But this will soon no longer be the case. As the Asian markets mature and Africa starts to become a global economic powerhouse, businesses will increasingly look to the continent as means to access further growth. As the world’s most rapidly urbanising continent – by 2040 its urban population is set to double to one billion – African countries are undergoing major economic and social reform, making it one of the key areas of interest for business leaders and investors around the world.
Where once limited infrastructure, political instability and a lack of development were barriers to economic and commercial growth, now the continent is beginning to welcome international investment and global brands are penetrating its markets.
As such, we can expect African expansion to be a key item on the agenda of every multinational brand in hospitality and leisure. For businesses from quick service restaurants to luxury hotel chains, unlocking Africa will undoubtedly be key to ensuring the next phase of growth.
“For businesses from quick service restaurants to luxury hotel chains, unlocking Africa will undoubtedly be key to ensuring the next phase of growth.”
Of course, there are African countries that have played host to a fruitful hospitality industry for years, welcoming international brands and boasting a string of immensely successful homegrown businesses. South Africa has set itself apart from other regions in terms of economic development, and as such has a thriving hospitality sector: 80% of Yum! Brands’ African KFC sites are in South Africa, and its hotel industry is predicted to generate a turnover of $1.1bn by 2022. Many international players have also set up shop in Morocco and Egypt, both popular tourist destinations. Burger King, for example, has 25 locations in Egypt and Morocco and 51 in South Africa.
In the rest of the continent, where global hospitality brands have been tentative to enter the market, the barriers to success are well known. In developing or currently urbanising countries, insufficient access to quality infrastructure or in some cases basic utilities can make it unfeasible for businesses to set up shop. These factors, combined with perhaps more limited access to talent and well-capitalised partners, has meant expansion into Africa has not been for the faint hearted.
International companies have also suffered from a lack of brand awareness in Africa. While brands might be ubiquitous in some parts of the world, they are unheard of in many African countries, meaning that businesses need to establish brand credentials from scratch – a mean feat even for the biggest global chain.
KFC’s foray into Zimbabwe provides an apt case study of the stumbling blocks faced by multinational businesses looking to roll out into Africa. The brand entered the market in 1991, but was closed only nine years later after the franchise holder failed to operate to Yum!’s standards. In 2013, KFC took another crack at the whip with an outlet in Harare. The Harare store traded well until supply chain issues caused by the ongoing economic crisis led to the site running out of chicken, and ultimately forcing it to close.
Despite these challenges, recent economic and social reform has waved in a new era of hospitality in Africa. The international winners in the region are those cracking the franchise model by adopting agile strategies that are unique to the geographical location and socio-political environment of each new site.
“The international winners in the region are those cracking the franchise model by adopting agile strategies that are unique to the geographical location and socio-political environment of each new site.”
The hotel sector, for example, has seen a flurry of international activity in the last few years, in part driven by the burgeoning middle class, increased business activity and growing number of flight routes into the region. In particular, Marriott and Accor are leading the way, with 149 hotels and 114 hotels in the continent respectively. Both businesses have succeeded by primarily acting as operators, not owners, for their branded hotels and putting rigorous training programmes in place for their local staff.
The future looks bright for the African hotel sector, and PwC predicts that hotel revenue in Africa will increase 7.7% to $3.4bn by 2022. A quick look at some of the world’s biggest chains confirms this view: Hyatt has announced plans to double its hotel estate on the continent, Marriott is set to increase its African portfolio by 50% in 2023, Hilton is planning major expansion and Radisson has expressed interest in doubling its presence in the French-speaking African markets by 2023.
The quick service restaurant industry is also flourishing in Africa, with the Yum! Brands empire leading the pack. The group has successfully rolled out thousands of KFC sites and recently hundreds of Pizza Hut sites in the region, with a focus on providing affordable products featuring locally-inspired menu options, such as KFC’s jollof rice available in Ghana.
As Africa becomes a thriving battleground for the global hospitality industry, one must not overlook how important it is for brands to operate with an awareness of their responsibility to the communities they’re entering and their potential customer base. In restaurants, numerous ethical concerns have been raised about fast food’s impact on the rising obesity levels in urbanising Africa. In Ghana alone – where choosing KFC for lunch every day is an indicator of social status and wealth – obesity levels have risen 650% since 1980.
“As Africa becomes a thriving battleground for the global hospitality industry, one must not overlook how important it is for brands to operate with an awareness of their responsibility to the communities they’re entering and their potential customer base.”
There are also questions being raised about the sustainability of multinational hotel chains setting up shop in Africa – both for the environment and the local communities. Leading by example, Hilton has recognised these concerns and made pointed commitments to protect African wildlife, source local goods and services, mitigate against human trafficking, reduce its water consumption and invest in local youth training programmes.
Unlocking Africa is the last, and most difficult, piece of the puzzle for the global hospitality industry. But despite the significant business and ethical obstacles, the continent offers an exciting opportunity for those brands willing to embrace the challenge.