Property developers shun global hotel brands over running costs

Radisson Blu in Kigali. Local developers are shunning patnerships with global hotel brands due to high running costs. PHOTO |CYRIL NDEGEYA  

By MOSES K GAHIGI

In Summary

• The Movenpick from Switzerland, the Ascot Group, Protea and City Lodge are some of the brands that have been unsuccessful in their quest for local partnerships, said Charles Haba, the managing director of Century Real Estate.
• The country is positioning itself as a conference and tourism hub, with a number of high-end amenities that require professional management.

A number of international hotel brands are finding it difficult to set up shop in Rwanda after failing to secure management contracts with local developers.

The Movenpick from Switzerland, the Ascot Group, Protea and City Lodge are some of the brands that have been unsuccessful in their quest for local partnerships, said Charles Haba, the managing director of Century Real Estate.

“We have contracts with these hotels and they are all looking to enter the local market. However, property developers do not find the management contracts attractive enough,” he said.

Property owners feel that the brand owners are asking for too much without incurring any investment or running costs.

“All they come with is a brand name and a distribution network,” said one developer.

Kempinski pulled out of the Rwandan market last year, after it disagreed with the owners of Hôtel Des Mille Collines. Kempinski had signed a management contract with Mickor Investment Holdings in 2014 but it was terminated just two years later.

Sacha Haguma, the director of sales and marketing at Mille Collines, said the two partners separated when they realised there was nothing they were gaining from each other.

“People don’t realise that these companies don’t incur any investment costs on their side. All they come with is a brand name, experience and a distribution network. All the costs are incurred by the property owners,” he said in an earlier interview with Rwanda Today.

Industry analysts say unless the hotel brands reduce on the demands they set for local property owners, it will be difficult to develop lasting business partnerships.

The management costs paid to global hotel brands have been found to be too high and other demands such as upgrading properties to meet international standards has financially strained local developers.

This has seen many opting to operate their properties as local brands.
The country is positioning itself as a conference and tourism hub, with a number of high-end amenities that require professional management.

Having international hotel brands helps achieve faster recognition and lifts the country’s tourism profile. However, in the absence of more equitable partnerships, the country may have to develop home-grown brands.
Frank Murangwa, the manager of the Meetings, Incentives, Conferences, and Events (MICE) division at the Rwanda Development Board (RDB) agrees.

He argues that as much as the country needs international hotel brands because of their advantage in branding the country as a an attractive tourism destination, local property developers need to benefit from the deals.

Rwanda Today understands that there are efforts by RDB to intervene in the matter, but Mr Murangwa would not provide details.

Radisson Blu in Kigali. Local developers are shunning patnerships with global hotel brands due to high running costs. PHOTO |CYRIL NDEGEYA

With the Marriott, Radisson Blu, Golden Tulip, Park Inn, City blue and a few others currently operating, the gap for luxury hotels is reducing.

Operating costs are high for big hotel brands and they require high volumes.

However, in a recent visit to Kigali, Marriott’s president and global CEO Arne Sorenson said the hotel chain’s presence in the country was about having many options for their customers.
They want their customers to have access to their products wherever they choose to travel in the world and with almost 6,000 hotels, they can afford to give them that choice.

During the African Hotel Investment Forum, which Kigali hosted earlier this year, participants were told that over 85 global hotel chains are looking for opportunities in Africa in a bid to target the growing middle class.

Kigali is slated to host the conference again this October and the issue of revenue sharing with property developers is expected to generate heated debate.