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Design & Interiors

Five-Star hotels, a sure bet for rich investors

A report by estate management firm, Knight Frank shows Nairobi remains a favourite destination for the super-wealthy to set up hotels. PHOTO | FILE
A report by estate management firm, Knight Frank shows Nairobi remains a favourite destination for the super-wealthy to set up hotels. PHOTO | FILE 

Like many cities, Nairobi now has two growing property markets that are attractive to the wealthy: hotels and offices.

Interest from high net worth individuals (HNWIs) eyeing opportunities in Kenya is driving major investments in the hospitality industry.

A report by estate management firm, Knight Frank shows Nairobi remains a favourite destination for the super-wealthy to set up hotels.

“Investors are taking advantage of the relative under supply of international-grade hotels across most of Africa and the expected increase in demand for rooms,” said the report.

Kenya has only 19 five star-rated hotels, according to the latest classification list, hence there is room for more luxurious spaces to accommodate business travellers and tourists.

The Knight Frank Hotels Africa 2018 report places Nairobi, Dar es Salaam, Zanzibar and Seychelles in that order as destination for multi-billion shilling investments that gobbled 26 per cent of all hotel development projects in Africa.

Ben Woodhams, Knight Frank managing director said Kenya currently has 68 global brands jostling for clients with last year recording 1.5 million foreign tourists arrivals. South Africa has 430 global brands, followed by Egypt and Morocco.

“Nairobi’s position as a major regional hub will further be reinforced by the growth of this sector in the city,” he said.

Kenya has also made it fairly easy to buy or build hotels. There is a new ‘plug-and-play’ hotel establishment model where international hotel groups partner with local developers and commit to take up the facilities upon completion.

“They prefer asset-light business models in Africa whereby they operate, without owning, their branded hotels. This creates opportunities for developers and investors to either build or acquire properties operated by the major chains,” the report states.

Among properties being developed under this model is a Sh20 billion property in Nairobi Upper Hill where Hilton Hotels has committed to taking up 40 floors.

Marriott International will also take up space at the Sh40 billion Avic Towers in Nairobi’s Westlands. Some companies had opted to take over existing facilities and refurbish them, reducing turnaround time in setting up operations in Kenya.

However, investors face looming competition from Airbnb which has 100,000 listings in Africa and accommodated 1.2 million guests last year.

‘‘With the hotel supply in many African cities being limited and slanted towards the luxury end of the market, Airbnb accommodation provides a cheaper alternative, particularly for younger travellers,’’ the report said.

Some high-end properties in Nairobi and Coast have already listed on Airbnb to lure business travellers looking for a home away from home.

For instance, Capital M, a luxurious property with penthouses in Nairobi’s Westlands set for completion this year, plans to enter into the untapped Airbnb business travel market.

Aram Laloui, the director at Zana Group, the marketers of the property had said its location, rooftop pool and garden, indoor squash court and lounge make it attractive to business travellers.

In Africa, Mauritius and Seychelles are increasingly popular targets for investors. They have the most luxury resort hotels, and have been relatively immune to the security concerns that have impacted resort locations elsewhere in Africa.

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