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African hotels move away from diverse partnership models

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The new Radisson hotel in Djibouti. Image credit: Radisson.

African hotels move away from diverse partnership models

Covid-19 has turned the business model of traditional hotels on its head. Here’s what the future holds.  

By Ramsay Rankoussi, Vice-President of Development, Africa & Turkey, Radisson Hotel Group

The impact of Covid-19 in 2021 has been significant. It has sent the world into a tailspin. Businesses in every sector are struggling to set themselves right side up. Thanks to global lockdowns and travel bans, which were put in place to slow the spread of the disease, the travel and hospitality industries are battling to stay afloat. African governments placed particularly harsh restrictions on travel into and around their countries for a long time, which was particularly difficult on the hotel industry and has seen many hotels having to reinvent themselves to remain profitable and relevant.

There are four main business models in Africa: owner-operated businesses, franchise agreements, hotel leases and management agreements. An owner-operated hotel is registered in the name of a single person or company although the business might also take on investors, while a franchise agreement grants legal rights to a privately-owned business to use trademarks and business systems after an upfront purchase fee is paid to the franchise, along with ongoing royalties.

With a hotel lease, a company usually leases the building and operates the hotel in whatever way they see fit. Management agreements, on the other hand, are when business signs with a hotel brand or management company to run its operations and the hotel is provided with direction, supervision, and expertise, not to mention the brand’s reputation.

These models each include several players, resulting in a diverse network of businesses that each have a say in how the hotel is managed. Some models make it difficult to fix any problems quickly as people who do not have the property or business insight have to be consulted on certain issues. And when too many parties need to be part of a decision, quick fixes to problems pertaining to the property, guest satisfaction and even hotel policy, are not possible.

There are, of course, pros and cons of each model. The decision usually comes down to how much risk the company feels comfortable taking on. However, more risk can reap more rewards.

Until 2008, there was little impetus to update the traditional business models. The industry simply made do with the options it had. However, the rise of online marketplaces for vacation and long-term accommodation rentals encouraged the industry to innovate to find new ways to grow the industry while remaining relevant to the needs of travellers.

Now, as the impacts of Covid-19 are set to reverberate for years to come, Radisson Hotel Group has developed Radisson Individuals, a conversion brand that offers smaller hotel operators the opportunity to be part of a global platform.

With people wanting more unique and memorable experiences when they travel, coupled with a conscious and sustainable mindset that dictates which corporations and businesses they support, Radisson Individuals offers consumers endless options while providing the hotel operators with the expertise of the Radisson Hotel Group.

While Radisson still operates largely under the management agreement model, it is creating opportunities for more participants to join its global brand with the launch of Radisson Individuals in 2020.

Radisson Individuals’ hotels are selected for their unique characteristics and personalities, offering guests an opportunity to discover new locations around the world, while always delivering Radisson Hotel Group’s high standards of quality combined with the local flavour of the member hotels. Smaller hotels benefit from the Group’s international awareness and experience while maintaining their own identity.

Radisson Individuals aligns perfectly with Africa’s move away from diverse partnership models. Instead, this model allows local owners to keep their hand on the wheel in respect of their establishments so they can make decisions, expand, reposition, or reinvest with greater ease of control.

Large hotel groups don’t need to reinvent the wheel to remain relevant, they simply need to adjust their business practices to be open to innovative ideas that align with the current needs of travellers and hotel operators.

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