New York – The Middle East and Africa have distinct
advantages offering companies a wealth of opportunities—if their travelers to
the region are willing to adjust, be open-minded and assume some risk. At the
same time, corporate travel managers can prove themselves valuable by being
regionally knowledgeable and finding creative solutions to problems not easily
solved by conventional methods.
"If you missed the boat to China, this is the boat you
should be on," Lonrho Hotels CEO Ewan Cameron said of Africa during a
panel discussion here at an Association of Corporate Travel Executives
conference in April. "It is the fastest-growing part of the planet today."
The continent of Africa has an estimated population just
over 1 billion, according to World Population Review. The World Bank in October
estimated that Sub-Saharan Africa's economy will have grown by 4.9 percent this
year, with nearly a third of African countries growing at 6 percent and more.
Africa also boasts a growing middle class. According to the
World Bank, 22 states with a combined population of 400 million officially have
achieved middle class status (per capita income above $1,000), and 10 countries
representing 200 million people are predicted to do so by 2025 should current
growth trends continue. "This means they have disposable income and they
have the ability to make discernable decisions as consumers," Cameron
said.
Africa also has demonstrated evidence of progress toward
stability, according to Cameron. "It's encouraging for business and gives
you a sense that there's a destiny," he said. "It's something you can
bank on."
Meanwhile, the Middle East's advantage is its location "in
the middle of the new silk roads" connecting the "big, new economic
streams of East and West, and South and East, and South and West,"
according to Emirates vice president of sales Matthias Schmid. That benefits
the region by leveraging economic growth in Asia, China and Africa.
Connecting The Dots
The entire region, of course, is not without challenges.
While Africa is well-connected via international routes operated by such big
airlines such as Air France/KLM, British Airways, Emirates, South African
Airways and Turkish Airlines, it lags in terms of domestic connectivity,
competition and safety.
"Aviation in Africa comes with risks," said Lonrho's
Cameron. For example, the continent in 2012 had 13 aircraft accidents, up from
eight in 2011, according to the International Air Transport Association. To
mitigate safety concerns, travelers often will fly through Europe to get from
one side of the continent to the other. "If you can access one of the
European hubs—Heathrow, Schiphol, Charles de Gaulle—then it gives you some
sense that you can apply international regulations of aviation," Cameron
said. "If [airlines] are not flying to those airports, I'd be very
hesitant.
"You need to be very clear which carriers you buy with,"
he added. "There are no safety nets. If something goes wrong in Africa, it's
very serious." To improve safety in Africa, IATA in November called on
African governments to adopt global air safety standards.
Meanwhile, more competition slowly is entering the
intra-African air market. For example, in November last year "low-cost"
carrier Fastjet began operations in Tanzania. Founded by EasyJet founder
Stelios Haji-Ioannou and managed by former executives from British Airways and
other European airlines, Fastjet now also operates to Johannesburg; Lusaka,
Zambia; and three additional destinations in Tanzania.
Sprouting Hotels
According to STR Global, more than 100 hotels have been
scheduled to open this year in Africa and the Middle East.
Major multi-chain hotel companies such as Accor,
InterContinental, Hilton and Starwood already have been well-represented in the
region. While some areas in Africa are better represented in global
distribution systems, some hotels in newer markets do not participate in those
distribution channels.
Cameron suggested travel managers lobby more hotels to join
GDSs. But many run on generators and accessing the Internet is a challenge,
dependent on connectivity from national telecoms. "This means that quite
often it doesn't work 50 percent of the time," Cameron said. "Every
one of our hotels is on a separate connectivity. It's very expensive, but it's
the only way I can get the hardware to connect."
Major hotel brands also are well-represented in the Middle
East. Unlike Africa, where infrastructure still is being developed, the Middle
East's infrastructure is more advanced, particularly in the Gulf countries,
according to Schmid. "All major hotels are present with high service
levels," he claimed.
Phone A Friend
Transportation challenges in Africa begin as soon as
travelers arrive at the airport. Those who look lost, new or naïve may prompt
customs officers to ask them more questions and search their bags more
frequently, according to Cameron. Having a "friend" who is familiar
with both cultural and federal customs, and can get travelers to their final
destinations more efficiently, has proven to be a valuable resource.
"It's about getting through security faster and making
sure you don't have issues," Cameron said. "You might think it's
being overly cautious, but to be honest, time and time again it's a very
essential thing and proves to your company that you as a travel manager can add
a lot of value."
PepsiCo senior manager of indirect spend Michelle Thompson
agreed. Based in Dubai and a frequent traveler throughout the Middle East, she
said locals at airports have grabbed her bags without asking and offered help
in exchange for money. "It's a bit of a trap if you're not used to that,"
Thompson said. "It's just one of those things you need to be aware of if
you're organizing events or for normal individual travelers."
Because ground transportation in Africa is a "huge
challenge," Cameron suggested forging good relationships with
transportation authorities and hotels that can provide suitable logistics for
transporting travelers to and from the airport. He said he also has resorted to
arranging police escorts for clients' travelers—not through any formal
arrangement but rather by offering to cover officers' petrol costs. "They
did the escort for us, and we managed to get our VIPs to the airport relatively
quickly," Cameron said.
Middle East ground transportation also is a challenge that
often forces travelers to depend on private taxis and limos. Low labor costs
mean such services are affordable, according to Emirates' Schmid.
Cash Is King
Volker Huber, AirPlus International interim CEO, told ACTE
delegates that the more than 100 countries across Africa and the Middle East
have varying degrees of technology infrastructure and expertise to support
modern payment mechanisms. Countries like Israel, South Africa and Turkey are
more advanced than others, with corporate card usage reaching as high as 50
percent.
According to Huber, organizations that deploy travelers in
the region use a mixture of corporate, ghost and lodge cards, as well as
central billing. However, in countries that are not as technologically
advanced, cash remains king. Cameron agreed, saying it's not uncommon for
individuals to "literally carry a bag full of $10,000 to $20,000 in cash."
"Cash is one of the most important financial flows,"
Huber said. "Cash is very symptomatic of those countries where you still
find informal economies, corruption and bribery—it's all driven by cash."
The panelists and some audience members noted that Visa has
a high acceptance rate in Africa and the Middle East, followed by MasterCard,
while American Express has limited acceptance. "It's called 'American
Express' for a reason," Pepsi's Thompson said. An American Express
spokesperson subsequently told BTN
that the card network has "five bank partners that reach 60 countries in
the Middle East and Africa."
Advancing Mobile
Payments
Despite uneven technological progress, customer needs are
stimulating innovation in the region, surpassing the West in some respects.
Although many African countries originally did not have hardwired
communications, by 2011 there were 616 million mobile phone users on the
continent—overtaking the number of mobile users in Western Europe and the
Americas—according to Informa Telecoms & Media.
"It didn't take long to have two very intelligent
students in Kenya work out that telephone credit is effectively cash,"
Cameron said. "Rather than just sending money to friends and family, you
can start buying and selling things."
Since 2007, people have been able to transfer funds through
M-Pesa and similar mobile money services to pay bills and make
purchases—including airtime, flights and car rental—in countries where cash has
been the predominant form of currency. Clerks inside a small kiosk or "box"
take a user's phone to give or receive funds, explained Volker. By 2009, 9
million—or 40 percent of Kenya's adult population—had made an average of $320
million per month in person-to-person transfers solely through M-Pesa,
according to the World Bank.
"That's very powerful and that's ahead of where we are
in the West," Cameron said.
Embracing Cultural
Differences
Perhaps some of the most underestimated challenges when
conducting business in these regions are the cultural differences that exist
between the East and West, as well as within the regions themselves.
"The biggest challenge was coming in with a Western
mindset and thinking, 'Oh, yes, I can do the things I normally did in Australia
and it's the same,' " Pepsi's Thompson said. "It just doesn't work.
That's a bit of a trap, to think that we can just lift and shift."
Thompson urged delegates to be mindful of the many nuances
in each country. She said that although Middle Eastern societies appear
westernized—with tall skyscrapers, high-end department stores and "a lot
of trappings of western culture—it is not."
Meanwhile, because of the big investment opportunities, some
countries have a lot of expatriates from around the world. "Eighty-five
percent of the population are expats," Schmid said of Dubai. "Yes,
you have to deal with locals, but you also have to be able to interact with a
huge Indian population, the workers from the subcontinent and Westerners who
also do business in this area."
Sharia Islamic law also has proven challenging and in some
cases halted business in the Middle East, for example due to its prohibition
against charging interest. However, Schmid said a steady stream of new laws are
taking effect that allow foreign companies to conduct business in the Middle
East.
This report
originally appeared in the Dec. 16, 2013, edition of Business Travel News.