Chobe Holdings Limited (BSE: CHOBE) Part 2

Finding additional insight into Chobe’s proved difficult. I didn’t have high hopes going into this endeavor, but the business was interesting enough from what I’ve learned thus far. I decided the juice was worth the squeeze.

Reaching out to the business directly was at the top of my priority list. I went to Chobe’s corporate site, sent an email to the address provided, and waited to hear back. It’s been crickets. I’m still waiting for a reply.

MSCI has a Botswana index. I thought I might have been able to network and have a discussion with someone associated with the index. I clicked the link for the PDF about the index and my hope quickly turned to gloom. It hasn’t been updated in over a year. There’s only one business listed in the index, and it isn’t Chobe’s. A PM or analyst associated with it was not listed on the document. My guess is that the index was discontinued or consolidated into some other kind of category. I sniffed around MSCI’s site a bit more and found that Botswana is a part of their “Frontier Markets” index. I had no luck finding reports about the country or businesses listed on its exchange. Turns out that MSCI had a Botswana index. Moving on.

I tried finding well known investors in the country in hopes of speaking with them. Here’s how that went:

I reached out to several investment banks, funds, and investment managers that claimed to operate in the country. I explained that I wrote a newsletter, was looking for qualitative information on Chobe’s, and wanted to be as transparent with them as possible about what I was doing. I only heard back from one. They politely declined to speak with me.

I was a little irked at this point. I’d been reaching out to all these people and businesses for weeks and all I had to show for it was one email reply.

I thought about who could possibly have information in the U.S. about safari and tourism businesses in Botswana. Their consulate is in NYC, but I passed on going there. I think the representatives would’ve found it weird that some American guy with a newsletter was sniffing around about a specific business in their country.

I kept thinking about who else could have information about Chobe’s. I eventually thought of travel agents. I didn’t know if they could give me specific information on the business, but they could at least provide some general information about traveling to and inside of Botswana.

I contacted as many luxury travel agents with itineraries to and from Botswana as I could. The luxury travel market for Americans traveling to Africa must be vast because there are hundreds, if not thousands, of these businesses. They all kind of do the same thing too. I’m not sure how they separate themselves from each other, but that’s not the focus of my research.

My first call didn’t go smoothly. The representative asked what my questions were about Botswana. I told her who I was, what I was doing, and that I wanted to ask questions about safari operators in Botswana that her company worked with. She said she would speak to her manager and call back if they approved of the questions I asked. I never heard from them.

Another dud and more annoyance. It was becoming self-evident that my direct approach wasn’t working. I decided to back off and ask more general questions going forward. This approach worked a lot better, and I finally started getting somewhere. My method was simple. I would call a travel agency, and a rep would answer or call back. They would ask why and when I was looking to travel to Botswana. I tried to immediately defuse their sales pitches by saying that I just wanted general information about traveling to the country on a safari. The conversation would flow from there.

A few of the travel agencies had property in Botswana, but most of them were brokers who put itineraries together and made money if you bought a travel package from them. Their rates were high, often $1,000 per day, per person, which is almost double the prices that Chobe’s charges. Maybe this healthy spread is why so many luxury travel businesses exist?

Questions I included in the initial parts of the conversation were:

• Why is Botswana more expensive to travel to than other African countries?

• What allows safari and lodge businesses in Botswana to keep charging these high rates?

• What separates one safari and lodges business from another? What are their unique characteristics?

• Do these businesses work with you or does one have to book directly with them?

I finally started receiving some valuable information from the agents. They seemed like natural conversationalists and riffed about the positives of going on safari in Botswana. I would ask follows up questions here and there, but I mostly tried to listen to them and not prod too much. I learned my lesson from the first agency.

I’ve summed what I learned in the subsections (listed in italics) below.

Location, location, location

The location of a camp/safari site matters and travelers will pay for access to exclusive areas. Those traveling to Botswana want to go to places like the Chobe lodge, Chobe River, Okavango Delta, and the Kalahari.

Having the only permanent structure in the Chobe National Park and its access to the largest concentration of elephants in Africa may be more of an advantage than I initially realized.

Another advantage is access to water. Botswana is unique in that it offers safari experiences on or near bodies of water (Chobe River and Okavango Delta).

Restricted Supply

Almost all the agencies and reps I spoke to confirmed that the government of Botswana restricts the number of tourists it allows into the country for ecotourism and safaris. This confirmed my hunch in Part 1 of the writeup.

The government restricts the supply because it follows a low density, high value model. What does that mean? Having a low density of travelers allows Botswana to maintain these natural locations with as little impact from humans as possible. The high value parts of the model are the prosperous rates tourists pay per day to stay at lodges and camps. This model allows the country to maintain and protect its rich biodiversity and ecosystems. It’s the exact opposite of what we do here in America. We build as much industry around a beautiful natural space as we can and address the local environment and ecosystem only after there’s a catastrophic loss of plant and animal species.

Expensive Across the Board

Traveling on safari or going on an ecotourism trip in Botswana is expensive no matter when you go. Part of this is due to safari and lodge operators having to import almost all their supplies. Another part is that park and camp fees are more expensive than in South Africa. This makes me think these fees must be some of the most expensive, maybe the most expensive, in all of Africa. It’s also partly related to the previous subsection about supply.

Third, Botswana has luxury status amongst international travelers. I asked what kept people going back to Botswana year after year. Why not go to South Africa, Tanzania, Namibia, or other countries in Southern Africa? An agent told me that Botswana went upscale decades ago and has maintained this profile ever since. Having updated equipment, infrastructure, and a stable political environment are additional features that attract tourists.

International travelers are keen to this and then they promote their travel experiences to their friends who then go to Botswana. It’s become a status brand. Regarding American travelers to Botswana and the rates they pay to travel there, a travel agent told me candidly that, “They’re Americans. They hear their friends went on safari and had a great time and then they want to go on safari. They don’t care about the price.” There are a couple of lodge/safari operators that charge up to USD $5,000 per night, per person for their services during the high season which is the summer travel season in the United States and Western Europe.

Conclusion

The steps I took to obtain scuttlebutt on Chobe’s yielded some valuable information. There were two main takeaways. First, the luxury travel and safari market in Botswana is thriving. Second, all three subsections apply to and bode well for Chobe’s. It has lodges/safaris/camps in the premier locations in Botswana. It can’t help but benefit from a restricted supply of wealthy travelers who mostly don’t care about price.

There was a downside. I didn’t find what is at the core of Chobe’s robust financial performance. While the subsections above apply to it, they’re also beneficial to its competitors.

That truly differentiating factor remains elusive. I feel like I’m trending in the right direction, but I remain somewhat frustrated. I don’t know where else to look. Did I miss something obvious? Did I overlook it? Am I in the right neighborhood, but the wrong address?

Who knows? But I’m going to keep looking and will provide updates if I come across anything of note.

Thanks again as always for reading. If you liked this writeup, please feel free to share it and subscribe!

Please reach out to me at possiblevalueresearch@gmail.com, @PossibleValue on Twitter and @Heshy on MicroCapClub with any comments, concerns or questions. Lastly, don’t forget to tell someone that you love them.

*** Remember that this isn’t investing advice. Consult a trusted financial or investment advisor before making any kind of investment decision. ***

Disclosure: I do not own shares in Chobe Holdings Limited.