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The unravelling of Kenya’s mid-tier hotels
Most of the hotels placed under receivership or put up for sale by banks are three- or four-star establishments facing intense competition from Airbnb-style platforms.
Since January 2025, banks have seized at least four hotels due to unpaid debt, putting some into receivership and listing others for sale.
This is happening as a pandemic-weary industry, now facing intense competition from Airbnb-style platforms, collides with lenders determined to shrink their stock of bad loans.
Most of those affected are three- or four-star hotels that have recently come under pressure from the cheap short-term rentals, popularised by Airbnb, a peer-to-peer home-sharing marketplace where hosts rent private residences for short stays.
It emerged this week that Equity Bank placed Kilimani-based Eastland Hotel under receivership, extending a trend that has picked up steam in recent months as lenders pursue defaulters in the hospitality industry more aggressively.
The hotel, whose directors are Chinese nationals, was placed under receivership over an undisclosed loan. Its assets and business will be managed by two receivers, Kamal Anantro Bhatt and Jai Kamal Bhatt of Anant Bhatt LLP.
Opened in 2011, the four-star hotel has around 140 rooms and suites, along with five conference rooms and VIP lounges.
It has generally been a busy period for the two corporate undertakers, with their services being tapped by other lenders, particularly the National Bank of Kenya (NBK), which struggled with a heap of bad loans.
Last month, they announced that NBK — recently acquired by Nigeria’s Access Bank — had appointed them as joint receivers for the Nairobi Upperhill Hotel after the owner, Geoffrey Wahome Muotia, failed to repay a Sh447 million loan advanced more than a decade ago.
Geared towards business travellers, the mid-scale boutique hotel has about 46 rooms, a bar and café, according to listings.
A day after taking over the Upperhill hotel, NBK, still using the two receiver managers, placed the Kisii-based Nyakoe Hotel under receivership. The cottage-style hotel is located along the Kisii-Kisumu Highway and is listed as having 76 rooms.
The two receivers, still acting on behalf of NBK, also took over the Milele Beach Hotel in Mombasa due to an outstanding debt of Sh811 million by Presbyterian Foundation, the property arm of the Presbyterian Church of East Africa.
Located roughly 20 minutes north of Mombasa, the hotel markets itself as a family-oriented, non-alcoholic and non-smoking property with 72 rooms, self-catering two-bedroom apartments, pools, and basic conference facilities.
Uneven recovery
It has been a bumpy ride for the hospitality industry since 2020, when the government placed restrictions on social gatherings to contain the spread of Covid-19, with most of the hotels and entertainment spots being shut.
Although some of the players have recovered as visitor arrivals have returned to pre-pandemic levels, the recovery has not been uniform across the sector.
Mainstream hotels have struggled, with cheap short-term rentals ruthlessly eating into their market share, leaving them cash-strapped and exposed to their lenders.
Data from the Central Bank of Kenya (CBK) shows that between December 2024 and March 2025, hospitality recorded the sharpest rise in bad loans — up 20.9 percent, from Sh16.7 billion to Sh20.2 billion — underscoring the sector’s unforgiving operating climate.
Seeing the increase in their stock of bad debt — technically known as non-performing loans (NPLs), or loans that have not been serviced for at least 90 days — banks have launched an aggressive loan recovery strategy, which has included auctioning some of the defaulters’ properties or putting them under receivership.
To some extent, this crackdown has been paying off for the banks. According to the CBK, despite the increase in NPLs, banks’ insurance buffer against loan defaults has declined, even as their profitability has increased.
“This indicates that the banking sector focused more on loan recoveries and tightened lending standards to mitigate credit risk,” CBK stated in its joint report with other regulators on the country’s financial stability.
The CBK noted that loan recoveries increased from Sh4.7 billion to Sh5.2 billion, while write-offs decreased from Sh33.3 billion to Sh7 billion in 2024.
“As a result, profits before tax increased by 18.71 percent in 2024 to Sh260.3 billion, from Sh219.3 billion in December 2023,” added the CBK.
The financial strain on the hospitality sector predates this year. In June 2022, KCB placed the owner of Mombasa’s luxury English Point Marina, Pearl Beach Hotel, under administration over a Sh5.2 billion loan used to develop 107 apartments, eight penthouses, and a 26-room hotel. The ensuing default spiralled into a bruising fight between the Kanjji family and KCB, culminating in the bank seizing the family’s Pinewood Beach Resort and Spa in Diani—sparking outcry from industry players.
Several luxury hotels also folded in the pandemic’s aftermath, including the InterContinental Hotel Nairobi, Hilton Nairobi, and Silver Spring in Kilimani, with many weighed down by legacy liabilities.
In Kisumu, the Sovereign Hotel — owned by Patricia Anne McTough and James Michael McTough, and located in Milimani — faced an auction notice by Colinet Auctioneers on February 20, 2023, on behalf of NBK for an undisclosed debt. The hotel petitioned the court, claiming that the parties had agreed to restructure repayments to Sh2,000,000 (about $20,000) per month after a moratorium.
Citing the ravaging effect of the pandemic on its cash flows, the hotel sought more flexible terms. However, the court found no concluded variation, only proposals in an email dated February 17, 2021 that required approval, so no binding agreement at Sh2 million existed. Therefore, the bank’s original monthly instalment of $115,000 under the 2018 facility remained active, and the review was dismissed with the interim orders discharged.
A CBK survey of 84 hotels, conducted ahead of last year’s festive season, found that cheaper short-term rentals were eating into hotels’ short-stay market.
Hotel executives reported lower bed occupancy — especially in exclusive mid-tier properties — as conference delegates used hotel facilities during the day, but opted for Airbnb-style accommodation at night to cut costs.
Industry data reinforce this trend. AirDNA, an Airbnb performance tracker, estimates that short-term rentals recorded an average occupancy of 38 percent last year — an eight percent year-on-year rise — putting the rate six percentage points shy of the 44 percent peak in 2023. Operators say this trend has put pressure on hotel occupancy and revenue throughout the year, intensifying competition at the lower and mid-market tiers.
The boom has also attracted high-profile investors. According to company registration data leaked by a Moldovan firm, First Lady Rachel Ruto and her daughter Charlene are listed as shareholders of Urban Caves, a company said to deal in high-end apartments and luxury short-stay accommodation.
Hotels have blamed the government’s austerity measures for the low demand they have witnessed in recent months, as public institutions have cut back on training and travel. This has also affected forward bookings, they argue.
But, a squeeze on disposable income amid a flurry of new levies and a tough economic environment characterised by high inflationary pressures has led customers to opt for cheaper alternatives, such as Airbnb.
