From dukawallas to billionaire hoteliers

(L) The Villa Rossa Kempinski owned by Adil Popat and (R) an artist's impression of the Radisson Blu Hotel which is set to open this year and is owned by Michael Kairu. PHOTOS | COURTESY 

By EVELYN SITUMA

In Summary

• The new boys have realised that there is money to be made in business travel and are pouring millions into that sector.
• Partnering with well-known and respected international hotel brands is doing magic for them.

Apart from an avid interest in cars, Adil Popat’s has always loved the hospitality industry where he has worked on and off for about three decades.

He worked at a Hilton hotel before joining a hotel chain in Portugal and later in South Africa where he started his own business with an Ocean Basket franchise.

So when the idea of owning a hotel came about eight years ago, the chief executive of Simba Corporation Ltd was certain that the time was right.

In 2009, he embarked on the journey to bring one of the world’s oldest luxury hotel brands in Kenya – the Villa Rosa Kempinski. While Popat could have worked with a brand like Hilton which he had worked for while abroad, he chose a brand that was not that well-known locally.

“We were approached by most of the major brands around the world but felt that Kempinski was the best fit for our property type,” says Nazir Khamisa, chief hospitality officer at Simba Corporation Ltd.

European

Popat was eager to have a stand-alone master architectural design that would be in a class of its own and Kempinski’s profile and his intended location for the hotel fit in best.

“This is exactly what we wanted for our property – to be the leading property in the region. Our architecture is very European. Our look and feel is very classical and we thought this was a good fit for what we wanted,” adds Ms Khamisa.

Popat is happy to have achieved his dream. His company is now working on its growth plan of establishing hotels in Naivasha and Kisumu. Ms Khamisa says the firm’s focus is not on leisure but business travel.

“The slump you see is in the tourist-oriented properties. We do not intend to build in this category. We also feel that with the growing middle class in this country, there is an opportunity to cater to the local travelling public whether it is for business or leisure. This allows you to grow the programme in the 2nd and 3rd tier cities across the region.”

Business travel

The new boys in the hospitality industry namely Adil Popat, Michael Kairu of Radisson Blu Nairobi, Noorali Manji and Sachedina Sabdrudin - Hilton Garden Inn, Nairobi, Amjad Rahim, owner Best WesternPlus, Mombasa, the Sanghrajka family with Dusit International management and AMS properties are all taking a different route from what was originally their businesses.

READ: Radisson Blu gets German manager as opening nears

ALSO READ: Hilton to open Garden Inn branch on Mombasa Road

They have realised that there is money to be made in business travel and are pouring millions into that sector. Partnering with well-known and respected international hotel brands is doing magic for them.

Kairu, a Nairobi businessman who is better known as the owner of a printing firm, is currently supervising the finishing touches at the first Radisson Blu Hotel in the city. His company, Elgon Road Development Ltd, is developing the building that will host the hotel.

The investment is supported by four Nordic private equity funds -Swedfund, Finnfund, Danish investment fund, IFU and Norfund.

Kairu holds 58.7 per cent stake in Elgon Road Developments Ltd – the special purpose vehicle behind the luxury hotel with Swedfund owning 21.3 per cent and 10 per cent each for Finnfund and IFU. Kairu has pumped Sh7 billion into the lavish hotel to net business travellers with fine taste.

The Carlson Rezidor Hotel Group, whose key brands are Radisson Blu and Park INN is keen to open more hotels in Africa especially Kenya through franchise and lease management. The group is currently working with the renowned prime commercial building developer AMS property for Park Inn, a middleclass brand by the group.

On Mombasa Road, Global hotel chain Hilton Worldwide is set to open its budget brand Hilton Garden Inn through a franchise with Modern Reliance Ltd next year.

Middle class

Internationals hotel chains like the 175-room Hilton Garden Inn in Nairobi are priced at a lower rate than the typical five-star mother hotels. The idea behind these chains is to offer something lavish to middle class Kenyans and business travellers.
According to those in the hospitality industry, this is a market that has been underserved, yet it offers the greatest potential for international hotel chains.

“Best Western was the most suited to the Mombasa market. It is a fuss-free brand with very good rates and a stable reputation worldwide. We wanted to spoil people by giving them international standards of hospitality at a relatively low rate,” Amjad Rahim, chief executive Elegant Properties and owner of Best Western Plus Creekside Hotel in Mombasa said.

The Lonrho Group which made a comeback into the Kenyan market in 2012 is also interested in opening up budget hotels around the country. Lonrho holds the US-based chain easyHotels franchise.

The entry of classy hotels for business travellers is for sure offering international chains the opportunity to expand in regions where they were not visible before.

The two men running the show in the Sh2.3 billion hotel near the Jomo Kenyatta International Airport are keen on achieving affordable accommodation for middle class consumers. Noorali Manji and Sachedina Sabdrudin are close friends and business partners working with Hilton Worldwide. 

Wheelbarrows

Modern Reliance’s prime location near the airport is what gave Manji the idea of venturing into the hospitality sector. He chose Hilton because he wanted the business traveller traffic to his establishment and the Hilton brand guaranteed him that.

Manji built his fortune from selling high-end furniture under his company Furniture Palace and manufacturing of wheelbarrows and other farm equipment. The decision on lease management or franchise arrangement with these branded hotel chains lies with the property owner.

“There are many considerations one has to take into account when choosing a hotel brand. What are the requirements for the brand in terms of look and feel, quality of the property, amenities required and size of rooms, etc. and does that fit in with the development that you have planned. Once this is understood, you have to ask whether what you will spend on the investment is justified,” says Ms Khamisa.

“You have to look at the management agreement and see if the terms and conditions are acceptable to you and are in line with your company culture,” she said.

Franchise refers to a business model where a company gives its brand name, service marks and operating systems to a third party to use for trading under a set agreement. However, daily hotel operations are left to the franchise holder, though regular inspections are made by the parent company to ensure compliance.

Hilton charges a franchise application fee for those interested in its brands, royalty fee on percentage of total gross room revenue and monthly programme fees.

Ms Khamisa says the fee structure is very important and needs to be looked at in minute detail as there are a lot of hidden expenses that can affect the holder’s return on the investment.

International hotels brand prefer a franchise arrangement as opposed to building and owning properties they operate because it allows for rapid expansion and less capital outlay.

Hilton Worldwide has perfect this model. In 2013 for instance the chain fanatical statement put the number of its hotel franchise at 3,420. 

Achieving such success is often an uphill task for brand owners. They need to ensure that their hotels comply with their regulations and standards.

Franchise

International brands dictate the location and design of the franchise outlet in order for it to match with set standards. The development team often advises investors on building requirements and approve on intended business location and structure in case it’s a new development. 

“Different brands have very different requirements and standards. Complying with these and adapting them to our local Kenyan market can be quite a challenge at times,” said Mr Rahim.

Mr Rahim and his wife are behind Best Western Plus, a US-based franchise located in Tudor Creek next to the Nyali Bridge with a bed capacity of 100.

“We decided to bring the Best Western brand to Mombasa because we felt Mombasa was lacking a quality ‘International branded’ hotel. We are now working with the Accor group of hotels from France and will soon be opening a 344-room Pullman Hotel in the heart of Westlands in Nairobi,” he said.

Best Western Plus, like the Nairobi Best Western is a franchise of the hotel chain that has maintained the same standards in over 4,000 hotels globally. Rahim is the businessman behind Cowrie Shell Beach Apartments in Bamburi. He is also building Golden Sand Resort in Diani.

Billionaires

Most hotel chains assign new franchise outlets a lifeline of 20 years and 10 to 15 years for converted properties.
While franchises are easy to operate, developers with no prior knowledge in hospitality favour management agreements. Hospitality has a lot of appeal, however if you do not know this business, leave it to the professionals to run it. It is very complicated and unforgiving if not run properly,” Ms Khamisa reckons.

The Sanghrajka family, who are the proprietors of the Tile & Carpet Centre business, has their passion in carpets and household interior furnishings which they have run successfully for years and not hotels, therefore they roped in the Thai hospitality brand to manage and operate their hotel on 14 Riverside in Nairobi.

The Thai-based global brand DusitD2 under the holding company Dusit International opened its doors last year in the prime Westlands district.

As the new big boys who have joined the hospitality industry from other businesses shine in their new ventures of giving business travellers decent rooms at fair rates, there is no doubt that this club of investors is growing each year and attracting more millionaires.