South Africa hotel seeks more buyouts after Fairview deal
Fair View Hotel chef prepares meals. SA hotel chain City Lodge bought a stake in Fairview Hotel last year. FILE
What you need to know:
City Lodge said in its recently released annual report for up to June 2013 that its Kenyan joint venture had contributed Sh119 million to its bottom line.
The South African hotel chain has a 50 per cent stake in the Fairview Hotel and the Country Lodge, both in Nairobi.
The acquisition of shares in Fairview Hotel, was completed in July 2012 for a reported Sh1.6 billion.
South Africa’s hotel chain City Lodge is eyeing more Kenyan acquisitions after recording a boost in performance helped by two local hotels that it bought into about one year ago.
The Johannesburg Stock Exchange listed hotels chain said in its recently released annual report for up to June 2013 that its Kenyan joint venture had contributed Sh119 million (13.6 million rand) to its bottom line.
The City Lodge Hotel Group has a 50 per cent stake in the Fairview Hotel and the Country Lodge, both in Nairobi.
“We have entered into non-binding memorandums of understanding in respect of development opportunities in both Kenya and Ghana with ongoing negotiations to finalise agreements in both countries,” said chief executive Clifford Ross in a statement announcing the group’s performance.
The acquisition of shares in Fairview Hotel, was completed in July 2012 for a reported Sh1.6 billion.
The 13.6 million rand contribution by the Kenyan units to City Lodge’s net profit accounted for six per cent of the 222 million rand (Sh2 billion) made in the just ended financial year.
The firm said that it is looking for more opportunities in the East Africa region and southern African countries. The hotels chain had disclosed its acquisition of shares in the Kenyan hotels in its 2012 annual report.
At the time City Lodge said its investment was a joint venture that would be used to drive expansion in the region.
“In accordance with the purchase agreement, the 50 per cent acquisition has resulted in joint control being obtained by the company. The resultant goodwill created on acquisition is as a result of the synergies in operations identified between the companies and the growth prospects which the acquisition offers,” said the 2012 annual statement.
Analysts say that the recent the entry of hotel chains is mainly to target business travellers coming to the region who have to make a stop-over in Nairobi, unlike leisure travellers who have more to spend.
“If you look at these hotels they are mainly within Nairobi and the business traveller guests are always high-end,” said Brenda Kithinji, a research analyst at Standard Investment Bank.
Major hotels chains have opened or are opening outlets in Nairobi to take advantage of the city’s positioning as a regional business hub.
Sarovar Hotels & Resorts, an Indian-based hotel management firm, and businessman Kiran Patel have signed a deal to put up a four-star hotel to be located in Embakasi, Nairobi County.
The 144-room hotel to be called “The Premier” will be located in Embakasi and the location, near the Jomo Kenyatta International Airport and should be open doors in 2015.
Sarovar said that the Embakasi location is meant to attract business travellers, whose number is increasing as more investors come to Africa through Nairobi, the hub for the region and other parts of the continent.
Data from the Economic Survey 2013 shows that number of arrivals on business increased by 1.7 per cent to 236,000 in 2012 from 232,100 in 2011, unlike tourist arrivals which fell by 7.6 per cent to 1.22 million from 1.32 million over the same period.
Business travellers have been a cash cow for the hotel industry over the past decade and the trend is projected to continue driven by more opportunities emerging in the region.
Ms Kithinji adds that interest in increasing the arrivals of business travellers is also coming from the government, with the Kenya Tourism Board’s push for the Meetings Incentives Conference Exhibitions, which is meant to make Nairobi a preferred choice for conferences.
