How to run a lodge in the wilds of Africa [Forbes 2006 Investment guide]
Source: Forbes Magazine
Date: 12 December 2005
Author: Allison Fass,
Days after former bond trader Barry John van der Maas moved to eastern Zambia in May 2001, he paid court to Senior Chief Nsefu of the Kunda tribe. Word of the young Briton's arrival had already spread, so Van der Maas drove 12 dusty miles to the chief's village, knelt on one leg before the sitting chief and clapped in three sets of three. Once invited to shake the chief's hand, Van der Maas, then 27, explained he had acquired a lease on land just outside Zambia's South Luangwa National Park where he planned to run a safari lodge.
Van der Maas' four-room, eight-guest Luangwa River Lodge is now nearly finished. It is a one-hour flight from Zambia's capital, Lusaka. It borders the country's second-most-popular tourist destination, the national park at the southern end of the Great Rift Valley, which is home to the meandering Luangwa River, with its oxbow lagoons, huge termite hills (some as high as 15 feet) and even taller baobab trees. There are also leopards, lions, giraffes, antelope, monkeys, buffalo, hippos, crocodiles and 400 species of birds.
To build a luxury lodge from scratch on this hideaway, Van der Maas, his fashion-designer wife, Tara, and brother Sean spent $850,000. The design, engineering, carpentry, bricklaying and final touches took more than three years before the first guest could arrive. The Van der Maases lived out of a tent for the first six months and trekked as far as Johannesburg, a four-day drive, in search of fabric, mattresses, fixtures, plugs, sockets, plumbing and 60 tons of wooden poles treated against termites. Van der Maas hired 30 laborers to clear a dirt road through the bush so he could bring three loaded trucks into camp.
The lodge is now replete with five-star features like electricity, spa-style baths and high ceilings. Filet mignon and freshly baked bread grace the menu. Van der Maas buys whatever he can locally, but someone still has to drive 12 hours one way to Lusaka for items like champagne.
Van der Maas charges $400 per person per night (including food, alcohol and park fees) for the first three nights. He says that in his first operating year, beginning September 2004, revenue was $382,000 from an occupancy rate that was 40% in the early rainy season through December and 75% January through June. Costs for food, marketing and 20 full-time employees were $145,000. Van der Maas is spending another $150,000 to add a family-size suite and to buy more vehicles; with a swamp cruiser he can drive guests across the river into the park and cut out a 30-minute detour to a bridge. Of the $87,000 left over, he'll keep $50,000 tax free (a concession to inward investors) to start to recoup the investment and pay 35% corporate tax on the other $37,000.
He says he hopes to recover the investment in five years. Some of the return he will be happy to take in kind. "An African sunset silhouetting some elephants crossing the Luangwa will do wonders for the soul," says Van der Maas.
Believe it or not, Van der Maas had it relatively easy. In October 2000 he was able to buy an embryonic safari lodge project from an Englishman who had fallen ill before being able to realize his own dream. For $100,000 Van der Maas got a 99-year lease on 80 acres of land and a big head start, including years of negotiating with the preceding chieftain and obtaining permission from the Zambia Wildlife Authority, the Zambia National Tourist Board and the Zambia Ministry of Lands to put up accommodations for up to 24 guests. The deal even included a government investment license (still honored though the program ended) that allows Van der Maas tax-free imports worth up to $700,000 (he has $400,000 left). This all saved him years. "Nothing happens quickly in Africa," says Van der Maas. "There's lots of red tape."
One of the biggest obstacles in this kind of adventure is finding reliable help. You want a load of bricks to arrive when it is ordered, or a guard to keep animals out of a chalet, if asked. Susan W. Mathis, a 66-year-old Atlantan who owns Mateya Safari in the Madikwe Game Reserve, a three-and-a-half-hour drive from Johannesburg, recommends hiring an on-site manager who is knowledgeable about the way things work in Africa. As a woman, she had trouble getting workers to listen to her at first. "This is a man's world over here," she says.
It can take years to find the right land for a lodge. Van der Maas had stayed in 45 inns throughout southern Africa, learning about different countries and comparing large high-end lodges against small bush camps. He says similar plots in Botswana and Namibia could have cost upwards of $500,000. He had his eye on a beach resort in Mozambique at one point, but floods ravaged the country in 2000. Though not on his list, Kenya makes land ownership hard for noncitizens. Ancestral land claims can also be an issue in some countries.
Zambia is coming up in the world. Last year 515,000 tourists visited, spending $153 million, according to the Zambia National Tourist Board. That's one-third more visitors and 79% more money than just five years ago. Pay close attention to the sometimes tenuous political situations. Zambia is benefiting from the international opprobrium of Robert Mugabe in Zimbabwe, its southern neighbor. Be cognizant of currencies. South Africa's rand has risen by as much as 18% in the past 12 months against the dollar.