Despite the end of year’s bullish run that at one time saw all
five-, four- and three-star hotels in Kigali get fully booked for a good
stretch, it is not all rosy for the hotel industry, with suggestions
coming in for a tailored credit line to help salvage the industry.
“As
an industry, it has been a year of mixed fortunes, insecurity and Ebola
outbreak in the neighbouring countries have affected us, but access to
finance is still a big problem for the industry,” said Nsengiyunva
Barakabuye, the President of Rwanda Hoteliers Association, who also owns
Nyungwe Top View Hotel in Nyungwe.
He said the
repayment period and interest rate instituted by many banks in Rwanda is
putting a lot of pressure on hotel operators, and that the banks don’t
give them enough gestation period to pay back the loan.
“We need a special credit line to support the industry, we are trying to do some advocacy to this effect” Mr Barakabuye said.
Auction
KCB
Rwanda is currently on the verge of auctioning off one of the country’s
premier hotels, Ubumwe Grand Hotel, as the bank seeks to recover $18
million (Rwf 15.8 billion) outstanding loan.
The bank issued a notice of intention to foreclose on the facility after Ubumwe’s developers failed to service the loan.
Although the date of auction has been extended from the earlier 10 December to 24 December, the hotel is still in the red zone.
The owners may have to pull off something short of extraordinary to salvage the property.
In
2015, the association of small and medium hotels reported that up to
100 hotels were up for auction by commercial banks, an issue that sent
shock waves through the market.
Although interventions
from various institutions paid off at a certain extent, where some loans
were renegotiated, some hotels were auctioned off, while others were
restructured into other services and uses.
Former Alpha
Palace hotel, which was one of the embattled properties, was
transformed into university premises, while former Landster hotel was
turned into office space.
When Rwanda Today
sought the opinion of Konde Bugingo, a banking sector expert, he said
the issue is much bigger than the hotel industry itself, that from a
macroeconomic standpoint people do not have disposable income to keep
the hotel industry afloat, yet it cannot only rely on tourists for
sustainability.
“It is not an isolated case. The
economy is not strong enough to sustain the sector and the capacity of
the people to spend is very low.”
“Everyone is in a
fix, the economy is not doing well, the middle class is shrinking
instead of growing, and bank shareholders want their money, therefore
banks set interest rates that are based on these factors,” Mr Bugingo
said.
Government’s strategy
Despite
these hiccups, the hospitality industry has continued to grow, riding
on the government’s strategy of transforming Rwanda into an attractive
meetings, incentives and conferences destination, a strategy that seems
to be paying off.
However, the returns are also not
evenly distributed across the industry, as the strategy seems to favour
the high-end hotels more.
The hotel industry saw entry
of new players like Onomo hotel and Ramada, which is expected to open
before the year closes, while three-star leaders like City Blue hotels
is soon opening another property in Rusizi.
The advent
of Onomo hotel drove the number of quality hotel rooms in Kigali to 524,
which includes Onomo’s 109 rooms, Marriott Kigali’s 254 rooms and Park
Inn by Radisson’s 161. Ramada Kigali is expected to add 154 more rooms.
In general the Kigali market has remained challenging for hotel operators who are reporting low occupancy rates.
The
2018 East Africa Hotel Review by JLL, an American real estate firm,
says the occupancy rate in Kigali’s quality hotels has averaged 49 per
cent, yet the industry’s average needs to hit 70 per cent to remain
profitable.
The report shows that investors in
Nairobi’s hotels struggle most to attract customers with an average of
47 per cent occupancy rate, Dar es Salaam at 52 per cent and Kampala at
56 per cent.
It is this low occupancy rate that has
seen some developers lose their property to lenders through auctions
after failing to service the loans, while others have closed operations.
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