HOSPITALITY SERIES: ACQUISITION OF HOTEL ASSETS

By Ariana Issaias,Alex Mathini,Joyce Mbui,Joyce Karanja Tuesday, December 07, 2021
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Bowmans in collaboration with EY are pleased to present the inaugural edition of the Hospitality Series for East and Southern Africa. In this edition, we focus on Kenya, specifically the M&A activity in the hospitality sector as well as the process and considerations that go into acquiring a hotel.

M&A Activity

Measures taken to contain the Covid-19 pandemic in March 2020 impacted the hospitality sector significantly. According to the Kenya Market Update H1 2020 by Knight Frank, the tourism sector suffered a staggering KES 80bn revenue loss due to multiple containment measures, including social distancing and curfews.

The suspension of international flights by the Kenyan Government between 25th March to 31st July 2020 led to a decline in international visitor arrivals by 71.5% from 2,035,400 in 2019 to 579,600 in 2020 (Chart 1). Hotel bed occupancy rates were also impacted negatively by the pandemic, resulting in a decline from 33.8% in 2019 to 17.8% in 2020 (Chart 2).  HVS Hotel Valuation Index for Middle East and Africa in September 2021 reports that RevPAR in Nairobi is estimated to recover by only 17% in 2021 following a 64% annual decline in 2020. Similarly, profitability margins are expected to recover slowly in the short term.

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