Global hotel chains in big push into Nairobi market

Sunday June 26 2011

An artist’s impression of the front view of Upper Hill Hotel. Picture: Courtesy

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.

A spot-check by The EastAfrican shows at least 2,500 new room capacity will be created in the next year in Nairobi alone.

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.