Gilbert Espitalier-Noël – CEO of ENL Group

“Choose the right partner and conduct thorough due diligence”

East Africa’s hospitality and tourism sector is brimming with untapped potential, as highlighted at the recent “Powering Africa’s Sustainable Growth” conference, organized by BLC Robert & Associates, in partnership with ALN. A dedicated panel session brought together prominent voices from the industry to discuss strategies for growth, challenges, and collaborative opportunities between East Africa and Mauritius. Moderated by Julio Garrido-Mirapeix, of ThirdWay Partners, the discussion featured insights from Jason Harel (BLC Robert & Associates), Ross Evans (Hemingways Hospitality Group), Mita Vohra (Sarova Hotels), and Gilbert Espitalier-Noël (ENL Group). The panellists explored themes ranging from the importance of strong partnerships and skilled teams in overseas ventures to innovative financing models and regional synergies. With a focus on leveraging Mauritius’ financial and legal expertise, and East Africa’s cultural and natural allure, the session underscored the mutual benefits of collaboration in transforming the region into a global tourism powerhouse.

Moderator Julio Garrido-Mirapeix, Affiliate Partner, ThirdWay Partners – Gilbert, you were the CEO of Beachcomber, which is one of the top groups on the island, you’re the CEO of ENL Group, and you have practical experience in investing out of Mauritius. I think that it would be very useful for the audience if you could share some of those experiences. 

Gilbert Espitalier-Noël – CEO of ENL Group – Indeed, I was the CEO of the Beachcomber Group for eight years, and Stéphane Poupinel is now the new CEO. I am the Chairman. I had the chance and the opportunity of coming in 2015, when the group had invested quite a bit in Malacca, in Morocco, at the end of 2008-2009, based on a very strong Mauritian balance sheet, and on the basis of very strong operational cash flows.

The panel, earlier, was mentioning what lessons can be learned from investments, and at the time, the board didn’t choose to do an acquisition, and we went for a pure greenfield project. In a country that’s 17,000 kilometres from us, 17 hours flight – because you must go to Dubai or to Paris – and obviously, with hindsight, everything seems easy, but I can say that it was very complicated. We invested more than 200 million euros into that project at the time, based on a relatively small team, and one of the key lessons is when you move abroad, even in an industry that you know extremely well, choose your A team. Very often, people have got a fantastic operation, and they’ve got their A team in Mauritius, and then you start something abroad, and you put maybe your B team, your C team. You’re moving into a country that you don’t know, with partners that you don’t know. Choose the right partner and conduct thorough due diligence. We had a problem with our partner, who was from Morocco. After a year, we had to buy him out, and we found ourselves on our own, in Morocco. We had not re-financed the investment, meaning that we had not finalized the whole financing of the investment when we moved into it, and we ended up having to transfer a lot of money from our Mauritian balance sheet. 

Another advice is to make sure you’ve got all your finances in place when you venture out of the country, and ring fence your investments based on your investment in that country. This will eliminate a huge amount of risk. Our Mauritian friends would know. For each member, that was a relatively traumatizing experience, which really made our group far more indebted than it was, and when I came in, I said that this is just too difficult. 

The hotel had been operating for about two years and losing a lot of money. We went out to the Accor Group to help us manage the hotel, which they do for us now. We had also launched a property venture at the same time, which was also very difficult, but we kept on managing. 

Make sure you’ve got all your finances in place when you venture out of the country, and ring fence your investments

After more than 10 years, we’ve repatriated our first dividends and sold half of our inventory property, but it’s a very difficult and painful process. Clearly, greenfield, on a scale such as this one, is dangerous when you don’t know the country in which you are setting foot. Your partner is key. This is something we can discuss; how Mauritian operators and East African operators can work together.  

Moderator – I believe that you had a more positive experience in Seychelles. Is that correct? 

Well yes, it was a different experience in Seychelles. We launched the hotel in Seychelles in 2001, and it worked quite well. But in Seychelles, we had to redo the hotel completely when I came in. It had not been renovated sufficiently, it was not operating very well, and we went for a different model. There was a Club Med at the time, in 2016-2017, but I was looking for a large hotel in the Seychelles, and we didn’t necessarily want to reinvest a huge sum and take the operational risk ourselves. So, in Seychelles, we went for a redevelopment with them. We moved the hotel from 87 suites to 300 rooms, and we’re renting it out to them. It’s a very good financial investment; we turned a losing venture into a seriously profitable venture. 

We’ve seen a few models, but as one realizes, investing in tourism and in hotels is a very capital-intensive venture, and I think financing is something we need to discuss. 

Moderator – When you do business in other jurisdictions, you need to get the right legal and commercial advice. Jason, you have spent a bit of time very kindly talking to me about why you feel that there is a real opportunity for Mauritian operators to do business in East Africa, and how East African operators can benefit from the relationship. If you can, please elaborate for the audience.

Jason Harel – Co-Founding Partner – BLC Robert & Associates – They are complementary in key product offerings, but also in terms of marketing. In Mauritius, for instance, we don’t really have the U.S. market, which is obviously available in Kenya and Tanzania, because it’s the only place they’ll be able to come for a safari holiday. With regards to Mauritius, they’ve got alternatives, and they can go to the Caribbean and so on, which is closer to their home. Combining holidays in East Africa and Mauritius as a one operator move or on a joint venture basis might work, obviously, if air access is also available. That’s one possibility. 

The second possibility is that obviously, we’ve acted for several operators in Africa, opening their sales and marketing offices in Mauritius and taking the bookings in Mauritius, and then having a back-to-back arrangement with the companies in Kenya, Tanzania or Uganda. That’s very possible because the bookings are mainly on a B2B business model, the contracts are done between the Mauritian company and with the operators, and there is substance in Mauritius in terms of the bookings being taken in Mauritius and the head office of the marketing being in Mauritius. All that sort of generates a significant amount of money in tax savings and so on, though obviously, the necessary transfer pricing studies need to be done to ensure that the tax authorities in the country can defend against them. We know that they are getting more and more aggressive in terms of scrutinising those tax structures. 

From a structuring point of view, on the commercial side, there are a lot of avenues to explore and to take advantage of. 

Moderator – In Mauritius, you have 1.3 million people, and you have more tourists than population. Hence, you have a shortage of professionals. There are some 26,000 Kenyans working in Dubai, for example, and that would seem to be a real opportunity, because you have the training capabilities and quality experience. Can you expand on that? 

Jason Harel – One of the big problems which the tourism industry has in Mauritius is obviously a shortage of labour and qualified personnel. East Africa has got an abundance of qualified personnel, which may need to be trained. The hotel groups in Mauritius often have training academies. To take these people from East Africa to bring them to Mauritius to be trained with the culture of those various groups, and then to send them back to their African operations or even to take them here, obviously seems to me to be a strategy to resolve the labour issue which Mauritius has. In kitchens, for instance, they are operating at 60% of the required number of personnel, which is a huge issue. 

Mita Vohra – Board Director and Head of Sales, Marketing, Revenue and Distribution – Sarova Hotels – Kenya has the most amazing people. That’s one thing we do not lack. The hospitality level is off the charts. You regularly have guests bursting into tears because of what teams have done for them without any orchestration by any of the senior people in the company. You have the Maasai tribe. It’s just incredible! You walk around the property with them, they know every single tree, what it stands for, what it’s good for, what it’s not good for, and it’s such an ease with which they do all of this. When I was first going to the Indian market, I was like, ‘oh my God, they’re going to torture our staff,’ but my goodness, they love our staff because they are so amazing. Whatever they can do to make an experience better for a child, an adult, or anyone, they will do that.

The communities there are so important, and it would be the same for Tanzania and Uganda. They just have this energy that is so pure and so wonderful. 

I am very well-travelled, but my goodness, when I go to our lodges, or any lodges there, or wherever I stay, you just feel this. It’s overwhelming. I would say that it’s a very good training ground in Kenya, and maybe you should send some people over. I’m literally saying that the hospitality is amazing. 

Moderator – Ross, on the issue of finance, how challenging is it to get finance or to expand into new facilities and acquire new assets. Is the Mauritian banking system a possibility? 

Ross Evans – CEO, Hemingways Hospitality Group – As a group, we’ve had some conversations with MCB in the past. We’ve got funding out of South Africa now. It’s property finance, and the structures are much more facilitative, I suppose, for the investment that you’re trying to make, whether it’s Capex in your existing assets or its new acquisitions. But I think a lot of the Kenyan banks had it too good for too long, and they sort of sat on their laurels a little bit, if I’m honest, and now there’s more competition. Whether it’s from Mauritius, from South Africa, or from nature-based financing, it is getting easier in the different jurisdictions. Kenya being an example here, the ability to transact on land titles is extremely painful. I know that in Rwanda, the entire land registry is digitized. You can transact a land title in a day. In Kenya, for example, we did a refinancing last year, where we were six months delayed, basically, because of issues with the land registry. So, it’s just a process that you must work through, and I think everyone needs a bit more patience, regardless of what you’re trying to do. Whether it’s acquisitions, refinancing, all sorts of capital-related activities, that will just take longer than you might expect. Regardless of how good your lawyers are. 

Moderator – Gilbert, do you want to talk about finance? 

Gilbert Espitalier-Noël – It’s interesting to see how the industry has evolved in Mauritius. Most of the hotel groups here – and it’s part of the fact that they have family control, or partly family control – are quoted on the stock exchange. The financing has become more and more dynamic, and you don’t finance hotels only with ordinary shares and ordinary debt on the other side anymore. We’re getting into more sophisticated structures, which could be interesting. When you finance a property, it’s a different asset class, then you can get fund managers or pension funds, life funds, or the operator could be renting the property. 

To look at investments in Africa in a big way, at least for our group, only because you invest and then you manage, could be a difficult and very costly exercise. If you split the asset into different classes, you could tap in a more diverse range of investors, and take less risks. That’s quite important.

Ross Evans – Just to add, the benefit of that is obviously that tourism marketing in South Africa is hard currency, so it supports those sorts of structures.

Moderator – Mauritius, in my mind, is ahead of the curve when it comes to financial structures and SPVs, and I think that in East Africa, we have a lot of things to learn from the island.