Want a deal at the kill?

Want a deal at the kill?

So you’re ready to make a killing in East Africa? And I don’t mean lions.

The savvy investors are gathering like vultures and tiny predators at the kill. Next month in Berlin several deals may consummate at ITB, one of the two most important tourism conventions each year. It’s sort of the tourism calendar’s January and comes right after the World Economic Forum’s tourism competitive report is released.

Investors are usually from Europe, less often from America, and recently, China. They are less likely this time to come from South Africa, because South African tourism has been less effected by this downturn than East Africa.

When civilian and diplomatic workers are excised from U.S. travel, Africa is the area which has experienced the greatest growth last year (over 26%), and I’m presuming the bulk of this is to South Africa.

So while South Africans have played an important role in tourism investment in East Africa in the past, I don’t think that will be the case this time. They’ve got to tend the farm and the rains are good.

My ripe pickens are the property collections of &Beyond, Sarova, three or four pieces of the 6-piece Fairmont hotels, the Selous Safari Company (SSC) and some or all of Heritage. All of those except SSC could be managed into some stellar quick returns by the right team getting a fire sale price and then exploiting the current upturn.

&Beyond in East Africa is currently a financial sinkhole. It’s also the mostly luxurious and arguably the best-known consortium in East Africa. But it has complicated ownership in South Africa, has come to or is coming to the end of its tax exempt statuses, has invested heavily in its South African properties and none in East Africa, and the signs are all there: buy me!

&Beyond is a classic case of becoming too big too fast at just the wrong time. It will take some clever group to turn it around, but I think it’s possible.

A possible player is Geoff Kent’s Sanctuary Lodges, although it probably doesn’t have the capital required even in this depressed environment. It might also create a conflict with Sanctuary’s alter-ego personality to &Beyond. AND there is still a lot of bad blood over the litigation between the two companies over the & (the Ampersand used by both companies’ marketing).

Local interests, like Cheli & Peacock, could make a good fit, but C&P has expanded pretty quickly over the last two years and taking on something so big could sink the ship.

The irony with &Beyond is that it is so big and so good that it might have conceptualized itself right out of the East African market altogether. If South Africa itself weren’t doing so well, there might be South Africans like Colin Bell who would expand their experiments in East Africa by sweeping up &Beyond’s remains, but that looks unlikely this year at least.

Sarova has invested heavily in the last few years and upgraded some quiet little properties in the Mara and Nakuru, only to suffer the world economic collapse at the end of the business plan. Their properties are good, but the company is a neophyte in the industry with poor marketing. The rumor is that Asians (and not from Biashara street) likely from Hong Kong are looking hard.

The Chinese are the mystery players. Their heavy investment in Tanzania’s TAHI properties through one of their discarded oil company practioners went bad, and right now they continue sending lots of tourists but seem indifferent regarding investment. But the pressure for Chinese vacations is explosive. This just might be the fit.

Fairmont is the old duke trying to figure out what to do with his unused castles. Although a Canadian company, it was the team in Dubai who pushed for and orchestrated the purchase of the Lonrho properties, and they now know better than ever why Tiny Roland had such a hard time off-loading them in the first place.

The Norfolk is performing, and dreams persist with the Mt. Kenya Safari Club. But the Aberdare Country Club and The Ark have been taken off the Fairmont website, and the Mara Safari Club will be axed shortly.

I actually love these properties but I couldn’t advise anyone to buy them. The safari dynamic is changing quickly, and properties like these that rely on a road circuit rather than a flying circuit will become poorer and poorer performers. If anyone knows how to move the Aberdare Country Club lock-stock-and-barrel into Udzungwa National Park, they’ve got a winner!

But I have a feeling that the price might be so low that even local Kenyans might make the buy.

It would take an investor with great patience to offload the SSC from the long-time Tanzanian business family of the Dobies. It’s a great small set of properties which enjoyed a monopoly for years, but the area in and around Dar and the Selous has suddenly built way too much capacity. In ten years that could change. And it could be a steal if the Dobie family realizes it should return to its root business of transport and car sales in the exploding Dar market.

And Heritage, well that’s a mystery, a mixture of passion, local Kenyan ownership, and miserable returns. It’s too big, its attempt at a two-tier marketing level (kids/families and the older luxury market) just isn’t working and yet it continues to present a happy face. Its new website is dynamite. Reduced to its best performers I think it could be a really good company.

Individual holdings that may change include the unopened Chem-Chem in Tarangire, the new Kempinski Bilila in the Serengeti, Saruni in the Mara and certainly a couple properties up in Laikipia and beyond where the drought was so bad.

Potential buyers for these are very small investors who love Africa, and there are plenty of them.

It’s an exciting time if you love Africa, want to invest and think you know how to manage very unique and often disparate properties. As we say, we’re thundering out of the valley and the peaks look quite attractive not too far down the line!