In order to bring about economic growth, develop local human resources, as well as cultural and natural heritage – while reducing the ecological footprint of establishments to a minimum – the Serena Hotel Group relies on an ethical framework, in-depth risk analyses and a policy of constant innovation. The Group is banking on the assumption that very few locations are unsuitable for tourism activities.
The Aga Kahn Fund for Economic Development (AKFED), one of several Aga Khan Development Network (AKDN) agencies, implemented a new form of tourism through the Serena hotel chain nearly 40 years ago. Serena is owned by AKFED subsidiary Tourism Promotion Services (TPS), which strives to bring best practices in social, cultural and economic development to some of the poorest and remotest areas of the world.
By permitting global travel the hotel industry plays an important role in developing countries through promoting connections between countries and people, which is why TPS chose to develop its hotels in countries relatively excluded from globalisation. While some countries face political difficulties that slow the development of their tourism industries, others have transport problems that restrict their accessibility. In these countries, developing hotels is an important challenge that requires the relevant expertise. Opportunities provided by tourism in terms of positive social, economic and environmental impacts motivated AKFED’s involvement via TPS. The convergence of good profitability and these impacts, social, economic – through local employment and locally produced goods – and environmental – through the respect of simple rules – was deemed entirely possible.
Creating infrastructure in remote areas
Serena hotels are located in remote areas where there was little or no previous tourist infrastructure. The strategy of the group is to show the world that no place is too far or too dangerous for tourists.
Barely a year after the guns fell silent in Afghanistan, the Afghan Government asked TPS to transform a war-scarred 1940s property into a world-class hotel to accommodate foreign diplomats, NGO representatives and other visitors. At the height of the crisis in 2005, scores of international journalists and aid workers descended on the town of Kabul, where they were surprised to find a world-class hotel.
Using local contractors (over 900 skilled Afghan craftsmen) and materials, the project team created a traditional, USD 30 million structure with 160 rooms and 17 suites, able to withstand an earthquake and boasting one of the world’s most advanced fire prevention systems. The team followed Serena’s philosophy of modern technology combined with excellence, and careful research into local cultural traditions – all despite the war conditions that existed at the time. The hotel employs 400 permanent staff.
While such a project may appear too risky for private investors, Serena’s Afghan example shows that the perceived risks are much higher than the real risks. Given local demand and the political will of the Afghan government, and thanks to a sound risk analysis, the project faced no more than the usual risks of hotel investments.
Limiting social and environmental impacts in undeveloped regions
The strategy of AKFED is to implement high-quality hotels in remote regions and to make them accessible worldwide, while highlighting the social and cultural environment, and giving priority to local employment often through training members of local communities. This philosophy is built on the understanding that while mass travel has made even the remotest corners of the world accessible to tourists, growing numbers of visitors places a huge burden on local environments. The presence of these hotels in remote areas requires the implementation of specific programs to treat waste and water and to mitigate the effect their massive use of electricity could have on the surrounding population’s access to power.
To mitigate these effects, decisions to construct new hotels are never taken hastily. They follow a meticulous assessment of a project’s environmental impact, measuring the benefits of development, such as job creation, the economic stimulus of construction and sourcing, and the outreach into health and education, against the hotel’s ecological ‘footprint’. These assessments are conducted by external experts. While TPS has never renounced a project following the results of an assessment, all actions recommended are followed through. An example is the use of the water source at NgoroNgoro Serena Lodge (Tanzania), which would have negatively impacted water availability for the Masai population. Serena consequently invested in a five kilometre pipeline at considerable cost to draw water from an alternative source. Also, at Amboseli Serena Lodge (Kenya), the experts recommended a wetland system for effluent disposal, and this was incorporated into the project.
This environmentally friendly approach has earned Serena numerous awards, including the Skål International Ecotourism Award and East Africa’s Most Respected Company Award.1 Serena Hotels won the 2008 Skål International Ecotourism Award in the Global Corporate Establishments category, which includes contributions made towards conservation of the environment and cultural heritage, community involvement and benefits, educational features, and innovation. In addition, all Serena properties are recognised by global environmental bodies sponsored by the Travel and Tourism Council. Kenya’s Amboseli Serena Lodge has won several awards from organisations that foster eco-tourism and responsible tourism, for reforestation efforts in the Amboseli National park.2
Likewise, culture is an essential part of the ethos. Rather than presenting a homogenous experience typified by standard rooms and materials, each hotel sources materials locally and undertakes careful research to ensure that the design reflects local traditions. Similarly, developing local skills is encouraged through frequent training programmes, and employing expatriate staff is minimised. Priority is placed on hiring and training locals for employment at all levels of the organisation, including senior management, with local people currently making up 97% of the staff.
Development within an ethical framework
The Serena group makes strategic investments – not only in terms of financial returns but also in terms of impact on the economic development of countries – which many private investors might be reluctant to make given the risks perceived. Such investments, however, promise to produce a significant multiplier effect as their impact ripples through local communities.
While directly respecting social and environmental considerations during operations, the hotels can also have an indirect social and cultural impact. AKFEDdoes seek to generate profits but also acts as an economic development agency, as profits are reinvested in further economic development projects or are used to subsidise social initiatives. Consequently, companies such as Alltex and Frigoken in Kenya, for instance, in which AKFED has invested, have contributed to improving welfare with services such as on-site child care – for example, at the Alltex garment manufacturing plant – and healthcare. The social programmes of AKFED not only include health, sanitation, education and training, they also support employment and promote women. Rural areas are not excluded, as social services to farmers are provided, including basic education, healthcare and programmes for clean drinking water.
This ethical framework extends to respect for the ecology and culture of the regions in which the hotels are built. Often working closely with the Aga Khan Trust for Culture (AKTC), which is involved in a series of restoration projects in Asia and Africa, the Aga Khan Foundation, which is active in the health and education sectors, and the Aga Khan Agency for Microfinance, the hotels have proven to be economic engines within an integrated development strategy.
In Pakistan, for example, the Serena hotel in Quetta operates in a 17th century fort and palace restored by AKTC. It sources most of its furniture and furnishings locally, encouraging the development of local skills, while minimising the use of expatriate staff. In the same area, other AKDN agencies provide microfinance, offer skills training, construct sanitation and potable water systems, and show farmers how to boost crop yields.
In Zanzibar, Serena converted an underused 19th century telecoms building and the adjacent 18th century structures into a standard-setting hotel at the edge of the world heritage site Stone Town. AKTC, meanwhile, has restored 11 landmark buildings and rehabilitated the central public space Forodhani Park. The foundation has worked with the government to improve health care and early childhood education.
Kabul Serena hotel, in Afghanistan, is involved in cultural restoration, health care, rural development, education, microfinance and mobile telecommunications. Companies such as Roshan,3 Afghanistan’s telecommunications company, have helped develop Kabul University through donating a video conference facility and satellite network access to enable distance learning for academic staff.
This integrated, ethical approach to development makes Serena different from traditional profit-oriented commercial ventures in the tourism sector. Profits are often reinvested in other projects or special programs in order to stimulate economic activities and improve social and environmental standards. Serena hotels are designed to cause what the Aga Khan calls ‘a ripple effect’, one that galvanises the local economy and brings excellence and best practices to some of the poorest corners of the world. About one-third of purchases come from local communities surrounding the Serena units, boosting local economic activity.
During economic downturns or volatile periods, Serena’s policy is to retain staff, with lay-offs regarded as a last option. Even though profit maximisation is not the principal aim, TPS Eastern Africa (TPSEA)4 generated a double-digit profit margin in 2009 (Table 1). The Global Credit Rating Co5 (GCR) gave TPS EA an excellent rating and economic performance review, noting its resilience in the face of political volatility in Kenya. According to GCR, the company has consistently generated strong double-digit profit margins, notwithstanding the post-electoral crisis in Kenya and the global economic crisis that effected profitability in 2008. The strong recovery of the Kenyan tourism industry in 2009 was favourably viewed, with the resumption of historical trends anticipated. This was supported by the favourable turnaround in profitability for the months ending September 2009.
AKFED shows that profitability and development are two notions that can serve each other. However, to work, this compatibility must be based on a strong risk analysis. Calculated risk is an inevitable underlying element of the AKFED philosophy, since its motivation is to invest in poor and frequently unstable areas that present higher risks than elsewhere.
1 Skål International, the largest organisation of travel and tourism professionals in the world, initiated the Ecotourism awards programme in 2002 to encourage conservation and promote sustainable practices in tourism.
2 In Amboseli, Kenya, AKFED led a reforestation campaign that has planted more than 200 000 trees. The campaign was awarded a Green Globe commendation and an Environmental Award by the American Society of Travel Agents.
3 AKFED is the majority shareholder of Roshan. For further information, see issue 4 of Private Sector and Development.
4 In 2006, TPS has been restructured under the name TPS EA and listed on the Nairobi Stock Exchange as a public company with TPS (Kenya), TPS (Tanzania) and TPS (Zanzibar) as its fully owned subsidiaries.
5 GCR is the largest credit-rating agency in Africa, accounting for more than 60% of total African credit ratings.