Rwanda's small hotels caught between lodges and auctioneer’s hammer

Friday September 4 2015

Medium-sized hotel owners in Rwanda have to

Medium-sized hotel owners in Rwanda have to fight for the few available clients with lodges that are coming up everywhere. PHOTO | CYRIL NDEGEYA | NATION MEDIA GROUP

By MOSES GAHIGI, RT Special Correspondent

Hotel owners in Rwanda, especially those in the medium-sized range, are finding the going tough with some falling under the auctioneer’s hammer for unpaid loans, Rwanda Today has learnt.

According to Rwanda Hotel Group, an association of medium-sized hotels, more than 100 hotels are up for public auction, after their owners failed to repay loans.

Some of the hotels up for public auction are Eldorado, Alpha Palace, Carl Hotel, Grace Apartments, Gulf Hotel, Eden Hill Hotel, Karisimbi Hotel and Sinai Suites.

Hotel owners are in a bind, having taken to the industry in response to government call to invest in hotels as part of tourism attraction efforts.

“Right from 2007, the government started calling upon the public to invest in hotels, saying visitors were coming. By 2013, we had added 6,500 rooms, from the 300 available in 2007... but we are now trapped.”

“Many of us took bank loans. After we built the hotels, we are not finding who to host. Our hotels are now being auctioned by banks at very low prices,” said Sylvester Mupenda, president of the Rwanda Hotel Group.

Mr Mupenda, whose hotel —Eldorado in Nyarutarama — is also being auctioned by Grofin after failing to pay back Rwf260 million including interest, said their predicament has been partly due to the high interest rates — between 18 and 25 per cent — and the shorter repayment time of seven to 10 years.

“This issue coupled with the persistent low occupation rate of the hotels, which stands at 1 to 5 per cent, it became impossible to pay back the loans,” he said.

He said they have been to different government authorities, including Rwanda Development Board (RDB), Ministry of Trade and Industry, PSF, and parliament, but to no avail.

“We have written to the president, we also shared with him what we think needs to be done such that these problem don’t happen in the future,” Mr Mupenda said.

Among the recommendations was that banks should give hotel owners a grace period of at least one year before charging interest, to give them time to stabilise their cash flow.

They also called for a reduction of interest rates, and a government guarantee fund for the hotel industry, like it is for the agricultural sector.

The government was also urged to help hotel owners by encouraging foreign investors into some of the hotels.

According to RDB, between 2013 and 2014, the tourism sector registered a three per cent increase in the number of visitors to Rwanda, from 1.14 million visitors to 1.2 million visitors, accounting for an increase in revenue from $293.4 million in 2013 to $303 million in 2014, contributing three per cent to the country’s GDP.

Although the numbers look glossy and progressive on paper, the picture on ground is different.

“We no longer get clients. The government comes and tells us to prepare, that it’s bringing guests from a conference. It even dispatches its officers here. We wait but end up with no client,” lamented Alex Bayingana, the proprietor of Alpha Palace Hotel, one of the hotels lined up for public auction.

Acting head of tourism at RDB Faustin Karasira said he would follow up on the matter.

“I understand there could be challenges. Some hotels are struggling because they have not attained the required standards,” he said.

Mr Bayingana cited unfair competition from lodges and guest houses, which have mushroomed near hotels.

“Many people are turning their houses into lodges in the same locality as hotels. People especially from the region and beyond opt for these, and hotels end up with no clients,” said the exasperated Bayingana.

He said most of these these lodges don’t pay taxes nor even use bank loans, which makes them charge clients as low as possible.

“Many of them charge Rwf10,000 per night, the highest being Rwf20,000 — even for people who come for conferences. This is making business hard for us” said Mupenda.

According to RDB, meetings, conferences and events (MICE) fetched over $50 million last year and could generate up to $150 million this year.

Over the years, the government has encouraged the private sector to invest in hotels and to increase the number of beds to match the demand of tourists and guests on business trips, as the country packages itself to be a conference hub.

The government has indicated that there is still a gap in the hospitality industry, especially the high end accommodations.

Established five star hotels like Serena, Kempinski and others like Lemigo, are at least getting more clients compared to their smaller compatriots.

Some of the upcoming global hotel chains in the country are Marriot Hotel, Radisson Blue, Radisson by Park Inn, Sheraton Hotel, Golden Tulip Hotels, Suites and Resorts, Kempinski and Zinc.