OBG talks to Ulrich T Eckhardt, President of India, Middle East & Africa, Kempinski Hotels

Interview: Ulrich T Eckhardt

How does the relationship between owner and operator differ between Europe and Africa?

ULRICH T ECKHARDT: In most cases, owners in emerging markets like Africa rely heavily on the know-how of others and they expect a higher degree of involvement from the operators. In Africa, owners seldom get involved in hotel development and operations and use asset managers more heavily than they do in European markets. Contracts in these emerging markets reflect these intensified relationships between owners and operators, as they are often more operator friendly in terms of remuneration to compensate for the higher level of operator expertise that is required. In some cases operators may also garner higher compensation due to the volatility of the earnings expectations.

How does West Africa compare as an investment destination to the Middle East and Asia?

ECKHARDT: Traditionally the Middle East and Asia differed greatly in their luxury hospitality offerings. In the Middle East, luxury hospitality is expected to include costly building materials and sumptuous décor that reflect elevated service levels. For many years the classification of luxury hospitality in West Africa was given to hotels that simply offered clean rooms in secure surroundings, with functioning hot water and decent food with a slow view towards higher-end service and product. Many of these hospitality offerings in West Africa were built in the 1970s and 1980s, with minimal refurbishment in the intervening years and few new developments since. This has certainly changed in recent years throughout the region and is nowhere more evident than in Ghana. Ghana is in a league of its own in the region in terms of its hospitality offering.

What is the significance of high-end hotels in regions with only modest leisure visitor numbers?

ECKHARDT: Ghana is largely a corporate and emerging meetings, incentives, conferences, and exhibitions (MICE) destination. However, as more international brands open hotels in Ghana, it also has the potential to become a leading leisure destination for intra-regional travellers. Luxury hospitality offerings can stimulate growth for both business tourism and leisure in markets across the globe. Ghana is no exception.

Kempinski chose to expand into Ghana because we are confident in its potential to develop a globally recognised hospitality industry. Luxury hotels offer corporate, MICE and leisure guests dining, meeting facilities and spas, among other amenities. Food and beverage, in particular, is an important component of a luxury hotel’s revenue and popularity, and also one of the best ways to gain recognition in a new market, particularly in the period immediately following the launch or opening of a hotel. It goes without saying that amenities like these are important not only for serving guests but also visitors, as day visitors will be equally important to the sector’s growth. Properties such as Kempinski Hotel Gold Coast City show Ghana’s potential to become a major hospitality hub in the emerging markets of Africa.

What are the most common causes of delays in hotel development in African markets?

ECKHARDT: Unlike many of its neighbours, Ghana is a relatively safe and democratic country with low levels of corruption. Ghana also has a hard-working, hospitable populace who contribute to the development of the country, which is why it has fared so well in terms of its growth over the past few years. Nevertheless, Ghana, like many other emerging economies in Africa, faces some of the same challenges that lead to delays in hotel development. Financing remains an issue for development in emerging economies worldwide. In Africa building materials and construction inputs are also often unavailable on the local market. When local procurement is a challenge, operators rely heavily on imports, and in these markets, soft infrastructure bottlenecks and red tape inhibit the importation of technical goods and critical materials, which is a particular concern for the owners and operators of luxury hotels.