Kenya will give existing shareholders priority when putting up three top-end hotels for sale, potentially locking out hotel chains angling for a piece of the hospitality industry in East Africa’s biggest economy.

Tourism Minister Najib Balala said the government will make an offer to the shareholders to exercise their pre-emptive rights in November, in the hope of completing the sale in December.

Following approval by the Cabinet a fortnight ago, the Treasury will now offload its 40.7 per cent shareholding in International Hotels Kenya Ltd, which owns the Nairobi Hilton, and a further 33.8 per cent in Kenya Hotel Properties, which owns the Nairobi Intercontinental. The government has also approved the sale of its 39.11 per cent stake in Mountain Lodge Ltd. 

Mr Balala said the three facilities will hold board meetings in November to discuss the issue.

The government, said Mr Balala is seeking consultants to advise on the sale. “We want to do a valuation on the stakes we have in the three properties. The plan is to give the existing shareholders a chance to buy in but if they do not give us the price we want, we shall go for an investor who can give us what we want,” Mr Balala told The EastAfrican.

“We are aware this process is very sensitive and it will be subject to boardroom wars, but Kenya must get a fair price from these investments, which the government feels are mature for an exit.” 

News of impending sale of the hotels had excited the market. Nairobi has this year seen several global hotel chains come calling. Some are said to be eying the government facilities that are up for sale.

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. 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.

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 putting up a Ksh1.6 billion ($17.9 million) facility that opens in September 2011 with a capacity of 50 rooms and five conference halls.

Most of the government hotels managed by the Kenya Tourist Development Corporation (KTDC) have been run down over the years and continue to struggle financially, prompting the government to restructure them through sale to investors.

KTDC is a government-sponsored development fund that finances construction of hospitality facilities on concessionary terms and holds varying stakes in the hotels on behalf of the state.