Kenya’s hospitality sector is attracting global capital despite pandemic woes

Kenya’s hospitality sector was among the worst hit sectors due to the pandemic, resulting in an array of distressed assets. 

Interestingly, the increase in distressed assets has resulted in a renewed focus on the market from global capital. Below we highlight some of the prominent transactions that have taken place in the market over the past three years.

 

Actis’ acquisition of City Lodge Hotels

Actis concluded payment for City Lodge Hotels estimated at in July 2022 following on their announcement to acquire the hotels in 2021. The deal includes a portfolio of three Kenyan hotels; Fairview Hotel with 127 keys; City Lodge Hotel at Two Rivers at 171 keys and Town Lodge Upper Hill at 84 keys as well as Tanzania’s City Lodge Hotel consisting of 148 keys in Dar es Salaam.

Overall, the sale was prompted by the need to reduce debt levels and eliminate operating losses with Actis noting that occupancy levels have been below expectations at Two Rivers while bookings in the Tanzanian unit have been sluggish, leaving only Fairview with a robust performance.

 

Kasada Hospitality’s acquisition of Crowne Plaza Hotel

Kasada Hospitality Fund acquired the Crowne Plaza Hotel in Nairobi for an estimated price of US$ 39 million in an announcement in July 2022. The hotel which had been in the market since 2020, was opened in Nairobi’s Upper Hill area in 2010 and tapped the Crowne Plaza brands under the InterContinental Hotels Group. This deal signifies Kasada’s debut into the Kenyan hospitality market and adds on to its growing portfolio across Africa in countries such as  Rwanda, South Africa, Senegal, Cameroon and Namibia.

 

The Fairmont Norfolk and Fairmont Mara Safari Club sale 

Hailed as one of the largest East African deals at the time, the acquisition done at the onset of the pandemic saw Chaudhary group acquire the major stake in the two five-star hotels in Nairobi  estimated at US$25.6 million. The deal included a portfolio of  170 guest rooms and suites, 51 luxury tents and approximately 10 food and beverage outlets.

Following on from this acquisition, the hotels recently resumed operations in March 2022, after a 21-month shutdown over the pandemic

 

Overall, while the hospitality sector is yet to bounce back to pre-pandemic levels, it continues to recover buoyed by an increase in international arrivals (Kenya tourism arrivals increased by 85% in Q1:2022) as well as domestic tourism (domestic bed nights grew by 101.3% between 2020 and 2021). 

This was evidenced by the increase in occupancy rates recorded at 57% at the end of Q1 2022, a tremendous growth compared to the 18% recorded a year earlier but still below pre-pandemic levels recorded at 66%. Although we expect a slowdown in August due to the general election, we anticipate the market will continue to recover throughout the year. As such our market outlook for the sector is neutral.

 

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