Capitalization On Kenya’s Hospitality Market Rebound. Here Is How The Sector Has Fared Since 2021

Linah Amondi . 7 months ago

actis

Kasada

Kenya Hospitality Market

MGM Muthu

Swissbel

Capitalization On Kenya’s Hospitality Market Rebound. Here Is How The Sector Has Fared Since 2021

Share this post

Subscribe to our newsletter

As the worst hit sector, Kenya’s hospitality market witnessed a decline in its overall performance through its sub markets during the pandemic. While it is not yet completely out of the woods, it made a remarkable rebound to become among the top real estate submarkets in the country. Moreover, some of its best activities and…


Introduction 

As the worst hit sector, Kenya’s hospitality market witnessed a decline in its overall performance through its sub markets such as tourism, hotels and restaurants, and serviced apartments during the pandemic. While it is not yet completely out of the woods, it made a remarkable rebound to become among the top real estate submarkets in the country. Moreover, some of its best activities and performances were witnessed post the pandemic era. Here is how the sector has fared since 2021:

 

Hospitality GDP Prices Increased By A 37.6% CAGR between 2020 and 2022

Hospitality GDP prices increased by a 37.6% CAGR between 2020 and 2022. Notably, the sector recorded the second largest expansion in Q2:2023 after financial services sector:

Source: KNBS

 

Overall, growth in the sector has been underpinned by factors such as: aggressive marketing of the tourism market through platforms such as Magical Kenya and KTB, a growing middle income population, hotel and restaurant expansions, host to key events such as the World Rally Championship (WRC) which is to occur annually until 2026, hospitality awards such as the Leading Africa Business Travel Destination, as well as easing of travel restrictions, resulting in a 70.5% growth of  international arrivals to 1,483,752 in 2022. Consequently, hotels in operation after having scaled down activities, and bed occupancy rates have also since improved to 100% and 65%, respectively, as highlighted CBK’s Hotel Survey July 2022 Report:

 

Key Trends That Have Shaped The Market In The Period Under Review:

 

  • Sale/Acquisitions: Approximately 75% 0f Real Estate Acquisitions Made Between 2021 and 2023 Are Hospitality Market Based

As a result of the rebound, hotel acquisitions have soared since 2021. Precisely, over Kshs 6.8 bn (USD 44.4 mn) has been expended in the sector between 2021 and 2023 unlike the dormant pre pandemic period. While the retail submarket ranked top based on investment value, the hospitality market topped the list based on the number of project acquisitions and second in terms of value. Key projects include the three City Lodge hotels acquired by Actis in 2021, and Crowne Plaza Hotel by Kasada in 2022 among others: 

Source: Estate Intel

 

Featured Project:

Crowne Plaza Hotel

Location: Kenya Road, Upperhill-Nairobi

Construction Date: 2010

Grade: Upmarket

Number Of Rooms/Keys: 206

Previous Owner: Golden Jubilee Limited

Acquirer: Kasada Capital Management

Acquisition Amount: Kshs 4.6 bn ($30 mn)

Acquisition Year: 2022

Current Brand: Mercure Hotel

Source: Estate Intel

 

Additionally, there are existing pipeline transactions in the market. These include the Safari Club Hotel to be acquired by Swiss-Belhotel International in Q1:2024, and the iconic Intercontinental and Hilton hotels in Nairobi’s city center. Precisely, the Privatisation Authority of Kenya appointed Standard Investment Bank and an undisclosed consortium, to oversee the sale of the last two aforementioned hotels in November 2023.

 

  • Hotel Management Deals: Approximately 14 Management Deals Have Been Made So Far Since 2021

During the pandemic, various hotels and restaurants ceased or scaled down their operations due to financial constraints. To accelerate growth, various management deals have since been conducted to realize this objective. Notably, approximately 14 hotel management deals have been made between 2021 and 2023, through hotels such as Imperial Kisumu by Sarova, Azure Mara Haven by PrideInn, and Safari Club by Swiss-Belhotel International:

Source: Estate Intel

 

Featured Project

Safari Club Hotel Nairobi

Location: University Way, Nairobi CBD

Construction Date: 1984

Grade: Upmarket

Number Of Rooms/Keys: 146

Owner: Mukawa (Hotels) Holdings Limited

New Manager: Swiss-Belhotel International

Deal Year: 2023

Source: Estate Intel

 

  • International Entries, Developments and Expansions: There Are Approximately 2,885-Room Hotels Under Construction Currently

The period under review has also been characterized by the most expansion activities, with some being the first international entries in the country. This was witnessed through entities such as JW Marriot, Pan Pacific Group, MGM Muthu Hotels, and Swiss-Belhotel International in 2023. Notably, there are approximately 26 hotels in the pipeline comprising 3,929 rooms in Kenya, with 2,885 being under construction according to W-Hospitality Group. This was a 24.5% YoY increase, indicating a healthy pipeline. Additionally, serviced apartments in general have also grown by a 4.6% CAGR to 6,627 rooms in 2023 from 5,700 rooms in 2020:

Source: W-Hospitality Group and  Estate Intel

 

Featured Project

Radisson Blu Airport Hotel Nairobi

Location: Near JKIA, Nairobi

Project Status: Conceptual

Opening Date: Mid 2027

Grade: Upmarket

Number Of Rooms/Keys: 200

Source: Estate Intel

 

While There Is A healthy Pipeline, Actualization Rate Stands At A 45% Average In Africa

While there is a healthy pipeline, project completions and openings as per scheduled timelines is also key to improve the actualization rate which currently stands at 45% in Africa. This is mainly influenced by bureaucracy in transaction approvals and timelines, and capital requirements, among other factors. Nonetheless, there are other factors that have negatively impacted the overall hospitality sector such as the supply chain disruptions. As a result, the prices of goods and services have increased.

Overall, we anticipate that the sector will maintain the resilience geared towards its further performance improvement. Moreover, Kenya as a popular regional and tourist hub in Africa is expected to further drive both local and international investments into the country.

 

We love your feedback! Let us know what you think about Kenya’s hospitality market performance post-pandemic era by emailing [email protected].

Subscribe to ei Pro to access affordable Real Estate data such as; sales rates, yields, supply drivers, and information on key real estate market participants who are active in the market.