The Marriot Group of Hotels and Rezidor Hotel Group — the owners of the Radisson Blu brand — in July opened in Kigali ahead of the African Union summit, joining a list of international chains looking to put money into Rwanda’s hospitality industry, but the pullout of Kempinski Hotels has put to question Kigali’s ability to host and sustain global hotel brands.
Before the entry of Marriott and Radisson, Serena was the only five-star hotel in the country. While the entry of the new players is expected to boost the country’s ambition to become a regional conference hub, experts warn that the size of the market may make it difficult for these hotels to break even.
Moreover, the global hotels have entered the market under management contracts, which may not stand the test of time, say industry players.
Kempinski pulled out of the Rwandan market earlier in the year, after it disagreed with Hôtel Des Mille Collines management, the owners of the Kigali facility. In 2014, Kempinski signed a management contract with Mickor Investment Holdings Ltd, the hotel owners, only for the contract to be terminated two years later.
Sacha Haguma, director of sales and marketing at Des Mille Collines, said the two partners separated when they realised there was nothing they were gaining from each other.
“I can’t speak for Kempinski, but it was a normal contract. This was a third-party company that offered a paid service, more of a retainer contract,” he said. “People don’t realise the fact that these companies don’t incur any investment on their side. All they come with is a brand name, experience and a distribution network. All costs are incurred by the owners.”
Seth Butera, director of the Rwanda Hotels Association, said the global hotel brands demand a lot, but the management cost is high. He said that besides the star power the global brands bring in, the market stands to benefit from enhanced quality of services and professionalism, diversity of cuisines, as well as general improvement of hotel premises.
Experts say that as Rwanda positions itself as a conference and tourism destination, with a number of high-end amenities such as the Kigali Convention Centre already in place, professional management will be needed if the government and the private sector are to get value from the facilities.
“This boils down to numbers: The operating costs are high for the big hotel brands, so there is a need for big volumes. It is time the Rwandan Development Board walked the talk on local tourism: There is a need for players to come up with a model that will have affordable rates for locals,” said Charles Haba, managing director of real estate firm Century.
“Make these facilities affordable to the locals; come up with a $100 package for Rwandans. You can’t just wait for big conferences,” he added.
He noted that only Lemigo has come up with a rate for East Africans, adding that it is local tourism that will drive the industry.
With the Marriott, Radisson Blu, Golden Tulip, Park Inn, Zinc and other hotels coming up, the gap for luxury hotels is closing, but industry players still wonder whether these big brands will have enough traffic outside occasional conferences to help them stay in the market.
“Occupancy is key to survival. You need a strong sales system to be able to fill the rooms, not once but constantly,” said Mr Haguma.