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Upper Hill is the best performing market with average revenue per room of $140 (Sh14,192) and they have a high occupancy in the market at 97percent/FILE


Serviced apartments performing better than hotels in Nairobi

Upper Hill is the best performing market with average revenue per room of $140 (Sh14,192) and they have a high occupancy in the market at 97percent/FILE

Upper Hill is the best performing market with average revenue per room of $140 (Sh14,192) and they have a high occupancy in the market at 97percent/FILE

NAIROBI, Kenya, Oct 17 – Serviced apartments are performing better than hotels in Nairobi, a new report has revealed.

The hospitality sector report 2016 by Cytonn Investments indicates that serviced apartments have average occupancies of 90 percent and revenue per available room at $127 (Sh12,874)

The occupancy is 29.6 percent higher than that of hotels, and is 33.5 percent cheaper on average than a hotel room.

Upper Hill is the best performing market with average revenue per room of $140 (Sh14,192) and they have a high occupancy in the market at 97percent.

The Nairobi Central Business District has the lowest total revenue per available room of $85 (Sh8,616).

“The serviced apartments in Nairobi CBD are relatively old hence unable to a fetch a premium in the market,” the report states.

According to the report themed ‘Sailing through the storm’ despite increased supply of hotel accommodation, average hotel occupancy for all regions in Kenya remains low at an average of 33 percent for 3, 4 and 5 Star rated hotels, with revenue per available room at an average of $98 (Sh9, 934).

The low occupancy is attributed to insecurity brought about by terrorist attacks, which in turn has led to issuance of negative travel advisories, and heightened competition from both local and emerging markets in the region such as Ethiopia, with relatively low room rates.

“We take a look at the key fundamentals driving the sector among them the business travellers and tourism and review how this translates to occupancy levels and revenues per room and hence the returns available for the investors. We are now increasingly witnessing a shift in consumer preference away from mainstream hotels, towards serviced apartments, especially in the Nairobi region. With more affordable rooms for long-stay business travellers, increased security and larger room sizes, serviced apartments have outperformed hotels in both revenue per room and occupancy,” said Cytonn Investment Chief Investment Officer Elizabeth Nkukuu.

From the findings of the report, Kenya has a supply of approximately 58,000 beds, majority of which are found in the coast region, which has a 39.8 percent market share, with approximately 22,000 beds.

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Nairobi has the second highest supply at 13,104 beds or 23.7 percent of the market share.

This translates to an annual bed capacity of 21 million, against an occupied bed capacity of 5.8 million, resulting in an occupancy rate of 27.6 percent.

“This is an indication of oversupply in the market, and Investors not focusing on capturing local demand with affordable rates,” the report observes.

With the insecurity in the coast region, occupancies are low at 29 percent and revenues per available room at $57 (Sh5, 778).

This is in contrast to Nairobi, with higher revenues at $149 (Sh15,104) per available room, and occupancy at 51 percent driven by the Meetings, incentives, conferences and exhibitions (MICE) segment of hospitality, which has continued to improve, indicated by a 3.3 percent and 20.9 percent growth in the number of local and international delegates to Kenya, respectively, between 2011 and 2015.

According to the report, Maasai Mara is the best performing region in the country when it comes to hotel room revenue due to higher room rates as a result of the Maasai Mara game reserve attraction.

The report highlight three best markets for investing in the hospitality sector that include, serviced apartments in Nairobi, three and five star-rated hotels in Maasai Mara and business hotels in Nairobi.

They should however be differentiated by product offering, location or customer service to attract high occupancy rates.

The hospitality sector in Kenya remains attractive supported by Kenya’s position as a regional hub for East and Central Africa and the attractive tourist destinations

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“Our outlook for the sector is still positive, and we expect increased focus on development of serviced apartments in Upper Hill, Westlands, Kiambu Road and Lavington due to the high occupancy levels already in the market. The hotel industry will continue to face a few challenges before occupancy levels improve to profitable levels again, however development is rife with more than 2,500 beds being added over the next one year,” said Johnson Denge, the Research and Site Acquisition Manager at Cytonn Investments.

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