Marriott International, Inc. (MAR - Free Report) completed the acquisition of South Africa-based Protea Hospitality Group, thus becoming the largest hotel company in Africa. With the acquisition, announced in Jan 2014, the Maryland-based hotelier nearly doubled its presence in the Middle East and Africa region to more than 160 hotels. The company shelled out roughly $200 million for the transaction.
Protea Hospitality Group — a world-renowned hotel chain in Africa — focused mainly on hotel management, leasing and franchising. It operated through three brands — Protea Hotel, Fire & Ice! and African Pride Hotels collection.
Protea operated around 116 properties with 10,184 guest rooms across South Africa and 6 countries in Sub-Saharan Africa including Malawi, Namibia, Nigeria, Tanzania, Uganda and Zambia.
With the completion of the acquisition, Marriott took over the Protea hotel chain in South Africa as well as the properties in the Sub-Saharan region. However, Protea retained a number of minority interests in some of its hotels. Thus, 45% of Protea’s total rooms will be managed by Marriott, 40% will be franchised and the rest will be leased.
Africa: A Booming Market for Tourism
The continued economic growth of the emerging markets in Africa and the growing middle classes with sufficient disposable income have improved tourism in Africa.
In fact, according to the United Nations World Tourism Organization, the African tourism industry grew at an average rate of 6% during 2013, driven by continued growth in the Sub-Saharan region. Further, Africa’s GDP is expected to witness more than 5% growth over the long term.
These factors and the greater resilience of the emerging economies to recession has strengthened Africa’s growing dominance on the world tourism business and its potential as a hospitality market. In our view, Marriott stands to significantly gain from this acquisition as it emerges as a formidable player in the African region.
Stocks to Consider
Marriott currently carries a Zacks Rank #2 (Buy). Another stock in the same industry that is performing well is The Marcus Corporation (MCS - Free Report) . In the broader leisure services sector, Las Vegas Sands Corp. (LVS - Free Report) and MGM Resorts International (MGM - Free Report) are also worth considering. All these stocks carry the same Zacks Rank as Marriott.