Calling global brands: Kenya govt plans to dispose of 11 hotels

In the divestiture plan, hotels up for grab include Ark Ltd (5.6 per cent), Golf Hotel (80 per cent), International Hotels — which owns Hilton Hotel — (40.5 per cent), Kabarnet Hotel (98.2 per cent), Kenya Hotels Properties (33.8 percent), Mountain Lodge (39.1 percent) Mt. Elgon Lodge (39.1 percent), and Sunset Hotel (95.4 percent) will be up for grabs.

The government stake in hotels with existing brands and are in good condition — such as Hilton and Intercontinental, Mountain Lodge Ltd (TPS Serena) and Ark Ltd (Fairmont Hotel and Resorts) — will be prioritised for existing shareholders through pre-emptive rights.
The plan is also hoped to help the country spruce up its tourism sector, one of its leading hard currency earner.

Global hotel chains in big push into Nairobi market

Several global hotel chains seeking to tap into the growing number of tourists coming to Kenya have lined up huge investments for Nairobi in the next year.

At least 10 local hotels are under construction in Nairobi with investors hoping to cash in on the growing demand for accommodation and conference facilities  as the government fumbled on its plan to sell 11 hotels to private investors.  

While several global hotel chains are said to be eyeing the government-owned facilities lined up for privatisation as their launch pad into Kenya and the region, others like European giant Rezidor Hotel Group, owners of the Radission brand, have made known their plans.

The Belgium based Rezidor said it would set up a 126-room hotel in Westlands, Nairobi, to be complete by 2012, renewing its global battle with Hilton Hotels, a main rival in Europe and Middle East.

The Rezidor Hotel Group has several hotels under development in East Africa including one in Addis Ababa, Ethiopia, set to be open before the end of this year. The chain is also constructing a 256-room hotel in Upper Hill, Nairobi and another in Kigali, Rwanda. Listed at the Stockholm Stock Exchange, Rezidor joins Starwood Hotel & Resorts, which trades as the Sheraton and Southern Sun of South Africa, among the leading chains making inroads into Kenya. 

Late last year, Southern Sun took over ownership of Nairobi’s Holiday Inn, signalling the growing interest by foreign brands in the East African market with Kenya as their gateway. Best Western International, Inc. (USA), one of the world’s largest hotel chains with more than 4,000 hotels in 90 countries will set up a 96-room hotel in Hurlingham.

The Korean HwanSung Group plans to open a HwanSung Hotel with 150 room capacity near the Jomo Kenyatta International Airport. Ibis an international hotel brand owned by Accor Hotels, the world’s leading hotel manager and market leader in Europe, is also set to open a 140-room-hotel in Nairobi.

Nairobi Upper Hill Hotel, backed by local investors, is puting up a Ksh1.6 billion ($17.9 million) facility that opens in September 2011 with a capacity of 50 rooms and five conference halls.

“The facilities; will be ready by September, we are currently fixing the roof,” said Wahome Muotia, the hotel’s chief executive officer and owner, adding business conferences were an all time market as the regional integration process takes shape and companies expand across the region. Other local investors eyeing the industry include the Aberdares Group that has expressed interests in setting up a five-star 120 -room hotel in Nyeri Town at a cost of Ksh4.5 billion ($50 million).

Malezi Group is constructing a 70 room four star hotel in Upper Hill at an estimated cost of Ksh1.1 billion ($12.2 million).
The investments come at a time when Kenya is planning to sell seven of its hotels to private investors, but the project seems to have stalled.  Tourism Minister Najib Balala had told the East African the hotels will be developed as a chain in a plan that will help the country raise its tourism profile. In total, the government plans to sell its stake in 11 hotels, among them the Intercontinental and Hilton Hotels — among Kenya’s most profitable hotels and part of Nairobi’s architectural landmarks—in the coming months, through strategic partnerships or share issues.

Most of these hotels, managed by the Kenya Tourist Development Corporation, have been run down over the years and are struggling financially. The sale could open up a fresh avenue for global hotel chains seeking to gain entry into Kenya, as they expand their presence in Africa. News of the impending sale of the hotels is said to have excited the market and elicited enquiries from major hospitality management companies and private investors keen to cash in on Kenya’s attractiveness as a major tour destination.

“Should there be an opportunity for Rezidor to partner with the Kenyan government on state -owned hotels we will seriously look at it,” said Andrew McLachlan, Rezidor’s vice president of business development for Africa and Indian Ocean Islands.

“Nairobi has an under-supply of quality mid market hotel rooms and outdated hotel inventory so we see an opportunity,” he added.

The hotel capacity in the country currently stands at 50,000 rooms but the growing international tourist numbers look set to strain the supply. Mr Balala said with government and private sectors investment, the hotel capacity would double by 2015. Recent entrants like Crowne Plaza, Ole Sereni and Tribe have added a capacity of 594 rooms. The upcoming hotels are expected to  create new  capacity of at least 2,111 rooms by 2012 thus raising Kenya’s new bed capacity by at least 4000 in a five year span.

Projections by the Ministry of Tourism show Kenya will record three million arrivals in next three years.

Tourist numbers hit  an all time high of 1.1 million in 2010 earning the country 73.7 billion ($838 million). This was above 2007’s record performance earning the country $741 million. The earnings fell to $591 million in 2008 following the post-election violence but rose to $709.1 million in 2009.

To increase capacity, Kenya is also expected to include the private sector in its plans to build a  $11.4 million international conference facility in Mombasa from next year. The 3,000-capacity conference facility on a 10-acre piece of land is anticipated to boost Mombasa’s profile as a business tourist destination.

KENYA TOURIST BOARD, THE BEST TOURIST BOARD IN AFRICA  
The Kenya Tourist Board (KTB) was awarded the title of ‘Best Tourist Board in Africa’ at The Good Safari Guide Awards 2009, which were presented at the first night of Indaba 2009 at a gala dinner at the Hilton Durban on Friday 8th May.  Kenya Tourist Board came top in the ‘Best Tourist Board’ category due to its positive and tangible work for the country and its travel industry in 2008.

KTB won this prestigious award against the other nominated tourist boards of Gambia, Mozambique, South Africa and Zambia.  The Good Safari Guide holds these annual awards to recognise the outstanding achievements of the safari industry in Africa with the travel trade nominating all contenders.  A panel of travel trade professionals then declares the winner in each of the 16 categories.

Maryane Jordan, Acting Manager Director at the Kenya Tourist Board comments: “We are honoured to win the title of Best Tourist Board which supports our extensive recovery and stabilisation campaigns in 2008 to maintain and boost the tourism industry in Kenya.  This award is also for all our partners and all lodges, camps, hotels and tourism companies in Kenya who continue to provide and promote Kenya to the world.”

 Air charter firm eyes Kenya in new growth strategy
Luxury air-charter company VistaJet is eyeing Kenya as part of its expansion into emerging markets.

The company on Thursday made a stopover in Nairobi in the tenth day of its tour of Africa.

This comes three months after ordering Sh678 billion ($7.8 billion) worth of aircraft from Canadian airplane manufacturer Bombadier.

Deliveries of the aircraft are expected to begin in 2014. The 56 new planes will be used to form a new fleet that will serve the high-end aviation market in Asian and African countries, including Kenya, Nigeria and Uganda.

“We will soon dedicate aircraft flying Kenyans to all corners of the globe,” noted the company’s chairman, Mr Thomas Flohr, in a press statement.

VistaJet reckons that as the resource boom gathers momentum in Africa, there will be increasing demand for point-to-point flights.

Executives from multinational corporations will be criss-crossing the region and will need jets that can fly long distances that are not necessarily covered by commercial airlines.

The company is entering the local executive flying market even as competition heats up among the current players in this segment.

Growing demand for luxury aircraft is the drive behind the rebranding of  East African Safari Airline to Safari Airline Express  (SAX) by local aviation entrepreneur Don Smith.

In November last year, Mr Smith purchased one of Nelson Mandela’s former planes in an effort to boost the SAX fleet and attract more customers.

Nevertheless, VistaJet’s extensive network, larger fleet and its focus on intercontinental flights will give the airline a competitive edge against local players.

Nairobi Hotels: An Increasing Number of Properties
The supply of upscale hotel rooms in Nairobi is set to increase as local and global hotel properties plan to enter the market between now and 2014.

There are several hotel developments in the pipeline currently, with more investments expected as the number of tourists visiting the city continues to grow. The rising number of visitors is the main driver of demand for accommodation and conference facilities, which is expected to strengthen further in the coming years. "Several global hotel chains are expected to enter the market in the coming years as the number of tourists visiting Nairobi continues to grow," says a report by HVS London, a global hospitality services consultancy. There are at least eight hotels set for completion in Nairobi between the third quarter of 2012 and 2014.

According to W Hospitality Group, a Lagos-based consultancy, Nairobi is seeing more activity than it has for many years. The firm, in a hotel pipeline research, says a 200-room Lansmore Hotel - Lonrho's new brand - is on the drawing board for Nairobi. Hotel properties under construction currently include the upscale 200-room Kempinski Nairobi, at Chiromo, set to open doors in the fourth quarter 2012. The property is being developed by Simba Colt Motors.

The mid-scale hotel market will be supplied by the 96-room Best Western in Hurlingham to open in fourth quarter 2012; the 126-room Park Inn (by Radisson) in Upper Hill set to open in 2013; and the 128-room Leisure Park Hotel in Arboretum to open in 2014. The 244-room Radisson Blu Hotel in Upper Hill and a 52-room Serena Nairobi expansion, which will open in 2013 and 2014 respectively, will service the luxury market.

Another under construction is the 98-room 14 Riverside Hotel along Riverside Drive, categorised boutique, set to open in the third quarter of 2012. Also in the pipeline is Three Cities Hotel, a South African hotel brand. The current total room count in Nairobi's upscale hotel market is about 5,000 with recent additions including 271 rooms opened in 2009, 421 rooms in 2010 and 70 rooms in 2011, according to the HVS research.

Supply of rooms in the upscale market is expected to grow over the next few years but with limited impact on occupancy levels and average rate growth. "We are aware of more than 1,100 rooms which are scheduled to enter the market before 2014," said Lucy Payne and Sophie Perret in the HVS hotel market snapshot for Nairobi.

Other hotel properties anticipated will contribute to this supply - including outside of the upscale market - is 150-room Boma Hotel by Red Court, 172-room Eka Hotel and 172-room Eastland Hotel. The World Bank in a June Kenya economic update said Kenya's trade in services has experienced growth, attributed partly to increased commercial presence of service suppliers from other countries through ownership or lease of premises such as hotel chains.

Government efforts to boost bed capacity seem to bear fruit as one of three specific goals for 2012 in the Vision 2030 is to increase hotel beds from 40,000 to at least 65,000. The government intended to revamp business-visitor offering by attracting high-end international hotel chains into the country. The number of bednights in Nairobi increased by a compound annual growth rate (CAGR) of 6.1 per cent in the decade to 2010 with the main source market being the UK, US and Italy. Arrivals from these markets picked up by 17, 11 and 10 per cent respectively in 2011.

Arrivals from China and India grew significantly by 31 and 24 per cent respectively in 2011, partly due to large construction projects such as roads being undertaken by Chinese firms. "Conference is one of the most rapidly growing sub-sectors in Nairobi, and indeed Kenya," say the HVS report. Leisure tourism is however being impacted by the kidnappings happening in Kenya's beaches, as source markets issue travel advisories to their citizens from visiting certain parts of the country.

Kenya tourism promises hotel sector better loan facilitation

A recent meeting of the Kenya Association of Hotelkeepers and Caterers got good news from the CEO of the Kenya Tourist Development Corporation, when she announced that the ceiling of loans, and related terms and conditions, were being reviewed with the aim of raising finance packages to a level now required to embark on the construction of new resorts, hotels, and tourist facilities.
It was also announced at the same time that the scope for financing would be expanded to venture into hitherto new areas of tourism developments like marinas, of which presently only one project at the Kenyan coast is being developed at the English Point overlooking the entrance to the old harbor. When complete, it will indeed offer a new range of services to visitors as well as an investment opportunity to own a piece of prime real estate, if only through a condominium, to foreign fans of Kenya.

INTRODUCTION

One in ten Kenyans depends in some way on the tourism industry for his livelihood. The industry creates considerable wealth for Kenya. As the seventeenth poorest nation in the world, Kenya needs more wealth creation. Per capita income is around $1000. Nearly half of Kenyans survive on less than $2 per day. Kenya desperately needs business and job creation in tourism and hospitality—and trained leaders to do this.

Kenya is a stable, but fragile African democracy. After more than two decades of political oppression and economic malfeasance, Kenya successfully achieved a peaceful transition to a democratically elected government. To succeed in its ambitions, Kenya needs more trained managers in its critical industries, like tourism.