Kenya’s hospitality industry is registering renewed activity on the deals front amid sector recovery from the vagaries occasioned by the Covid-19 scourge almost three years ago.
Such deals involve overseeing of a hotel location including day-to-day operations such as staffing, payroll, building and maintenance, housekeeping as well as marketing.
Last month, Hong Kong-based hotelier Swiss-Belhotel International marked its debut in the Kenyan market after entering a management deal with NIBS Resort Company Management to run Kileleshwa-based Emory Hotel, which will now be rebranded to Swiss-Belinn Nairobi.
The location became the group’s first operating site in Africa with Swiss-Hotel underlining management as a strategy for expansion on the continent.
Fast forward to last week, Swiss-Belhotel took over operations of the iconic Nairobi Safari Club, doubling its presence in the country in just a month.
The Nairobi Safari Club is expected to be rebranded by Swiss-Belhotel with the facility expected to undergo a significant facelift including revamp of products and services.
This is expected to reposition Nairobi Safari Club for growth nearly four-decades since the facility was established by late businessman and politician Stanley Munga Githunguri.
“This is a significant milestone for us. With an eye on the changing market dynamics, we are strategically building our portfolio to inspire more guests to experience our brands and hotels. Nairobi Safari Club’s iconic status and Swiss-Belhotel International’s operational excellence will undoubtedly create a unique hospitality offering in the heart of Nairobi,” noted Laurent Voivenel, Vice President of Operations and Development for Europe, Middle East and Africa and India at Swiss-Belhotel International.
For the proprietors of the hotel, which is run by Stanley Munga’s kin under Mukawa Holdings Limited, the deal elevates the facility’s positioning with the new manager expected to bring with them international experience.
“We are pleased to announce the management partnership with Swiss-Belhotel International, one of the global hotel operators who share in our dream and passion for delivering a world-class city hotel,” noted Claire Njeri and Lilian Githunguri, custodians of the Nairobi Safari Club.
Swiss-Belhotel is not alone in its quest to grow and expand via management deals as local players use similar pacts to expand their foothold in the industry.
The PrideInn Group, for instance, already manages three hotels including Pride Inn Azzure in Westlands, PrideInn Mara inside the world famous Maasai Mara, and PrideInn Plaza in Athi River on the outskirts of Nairobi.
According to PrideInn Group Managing Director Hasnain Noorani, experienced hoteliers are usually poised to take advantage of opportunities presented by new investors in the industry.
“What happens generally is that hospitality is a heavy capital investment business requiring expertise and knowledge in running. A lot of investors will build very beautiful hotels but have no experience running them. They will, therefore, collaborate with hoteliers like us and work hand in hand,” he told Smart Busienss in an interview.
Hotel operator deals can take the form of either leaseholds or management contracts with experienced players tapping from their knowledge and economies of scale to run facilities under management.
Hotel chain Sarova Hotels and Resorts has similarly indulged in operator deals in recent years in search of growth including last year’s entry into Kisumu after entering a management deal to run the Kisumu Imperial Hotel.
The deal saw Sarova take over the running of the hotel, for the next seven years passing on the baton of management from the chain’s Proprietor-Mayfair Holdings Limited.
Sarova has continued to lean on management deals this year to expand its operations around the country with a new deal last month, taking over the running of Nanyuki-based Maiyan Luxury Resort.
The continued recovery of the sector from the pandemic has set the stage for more investors to angle for a piece of the hospitality sector, which could bring with it more management deals as proprietors of hotel chains seek growth outside of brick-and-mortar expansion.
According to data from the Kenya National Bureau of Statistics, the accommodation and food service sector grew at a double-digit rate of 12.1 per cent in the second quarter to June, albeit slower than 44 per cent in the corresponding quarter of 2022 with this being attributed to a conducive economic environment in most tourist destinations.
Visitor arrivals through the Jomo Kenyatta International Airport and Moi International Airport have also improved further this year with direct international flights to Mombasa boosting the numbers.
According to Mr Noorani, the continued recovery has given players confidence to continuously expand.
For PrideInn Group, hotel operator deals are at the forefront of the expansion strategy even as opening standalone facilities remains on the cards.
“We cannot become a real estate company and a hospitality business at the same time. Operator deals are part and parcel of our expansion strategy but we are not limited to just that,” Mr Noorani added.
Besides hotel operator deals, acquisitions have also surged as investors sought to capitalise on rebounded room sales.
Qatari-backed private equity fund, Kasanda on July 28, 2022, announced a Sh4.9 billion acquisition of the former Crowne Plaza in Nairobi not long after it purchased the Umubano Hotel in Kigali, Rwanda as part of a strategy to become a Pan-African hotelier through purchase of high-end assets.
“This acquisition offers us a gateway into Nairobi’s vibrant ecosystem of innovation and entrepreneurship. We look forward to launching our ambitious renovation programme for this hotel with the aim of repositioning it to attract more international travellers and become the place to be for the local community,” Olivier Granet, Kasada’s managing partner and CEO said.
The Crowne Plaza, which opened in 2010, is located in Upper Hill-- Nairobi’s financial centre and a commercial hub that hosts the headquarters of several local businesses, international institutions, and diplomatic delegations.
The hotel has 206 rooms, a ballroom that can accommodate 300 people, and over 10 meeting rooms with a total capacity of 550 people—making it one of the facilities with the largest meeting and event spaces in Nairobi.
“Thanks to our expertise and support, Nairobi’s Crowne Plaza Hotel is about to enter a new life cycle and contribute to the revitalisation of the Kenyan hospitality sector post-Covid 19 pandemic,” Mr Granet added.
In another deal, Machakos-based Maanzoni Lodges has received regulatory approval to buy the three-star 680 Hotel in Nairobi for an estimated Sh1.2 billion from Setrim Hotel chain—a deal that is expected to add to the chain of acquisitions within the industry. The 680 got its name from the number of beds it had when it opened its doors.
In July last year, the Kenyan hotel industry registered yet another acquisition deal when the South African owners of Nairobi’s Fairview Hotel, Town Lodge, and City Lodge Two Rivers announced the sale of the three hotels to private equity fund Actis for Sh1 billion.
City Lodge Hotel Group put up the three Kenyan hotels and Tanzania’s City Lodge Hotel in Dar es Salaam for sale in plans to exit East Africa after barely seven years of operation. It plans to sell the Tanzania hotel for Sh7.3 million.
