{"id":20598,"date":"2015-09-21T01:30:54","date_gmt":"2015-09-21T01:30:54","guid":{"rendered":"https:\/\/new.igihe.com\/ailing-hotels-run-to-psf-as-banks-strike-with\/"},"modified":"2015-09-21T01:30:18","modified_gmt":"2015-09-21T01:30:18","slug":"ailing-hotels-run-to-psf-as-banks-strike-with","status":"publish","type":"post","link":"https:\/\/new.igihe.com\/english\/ailing-hotels-run-to-psf-as-banks-strike-with\/","title":{"rendered":"Ailing hotels run to PSF as banks strike with auctioneer’s hammer"},"content":{"rendered":"

Members of the Rwanda Hotel Group (RHG), have urged financial institutions to give a grace period of at least a year to members who seek loans before they can start paying back.<\/p>\n

RGH is an association that brings together owners of medium-sized hotels in the country.<\/p>\n

But this seems to be a lost battle for members who have defaulted on bank loans as banks have placed auction notices in the media to sell off these hotels.<\/p>\n

Several RHG members are now desperately trying to save their investments from being sold off cheaply to the highest bidder while banks are also doing their best to recover several billions of francs in non-performing loans (NPLs) held by these hotels.<\/p>\n

Between hotels and banks is Private Sector Federation (PSF) which finds itself with an unattractive role of a mediator between disgruntled hoteliers and the banks.<\/p>\n

\u201cHotels and banks are both our members and all we are trying to do is get them on the table to agree on an amicable way out because our interest as PSF is to ensure businesses succeed, not fail,\u201d said Stephen Ruzibiza, PSF\u2019s chief executive officer.<\/p>\n

According to PSF, there are at least twenty distressed hotels trying to appeal against being auctioned off, not over one hundred as recently reported in the media.<\/p>\n

Sylvester Mupenda, president of the RHG who talked to press in earlier interviews about the issue involving his hotel as well, declined to comment on the matter when contacted. When pressed further for a comment he said.<\/p>\n

\u201cWe have not seen any effect, I don\u2019t want to talk anymore.\u201d<\/p>\n

As the proprietor of Eldorado, one of the hotels listed for auction, Mupenda\u2019s attitude is perhaps understandable; by talking to the press about his plight earlier, the distressed investor hoped to attract some attention to somehow halt, the auctioning of his hotel.<\/p>\n

Apparently, the hotel was auctioned over two weeks ago.<\/p>\n

Located on 27 KG Street, on 8th Avenue, just behind Rwanda Development Board, Eldorado employs 17 workers who had the same prayer as of last week, to be retained in their jobs by the new owner whom they were yet to meet.<\/p>\n

The owner and hotel manager were both not on the premises at the time of visiting but according to a senior staffer, the investment is allegedly valued at over Rwf350 million (land and building).<\/p>\n

However, it was auctioned off at just over Rwf200m to recover a loan of over Rwf260 million, apparently obtained from GroFin almost a decade ago to finance the investor to modify the place into a hotel from the apartment that it was previously.<\/p>\n

But on Sunday, a source familiar with the transaction told The New Times that the takeover by the new owners had been halted after high level intervention although no details were immediately available to explain the development.<\/p>\n

{{A troubled palace}}<\/p>\n

Further deep in the city outskirts is Alpha-Palace, Kigali\u2019s troubled palace, as it\u2019s now quietly regarded; unlike the black couch with cracked leather covers at Eldorado, the reception area at Alpha which is listed as a three-star hotel, was much more respectable and cozy.<\/p>\n

Lurched in one of the shiny cream leather seats was a young male Chinese guest speaking on the phone, rather loudly; the receptionist, Diana, with a calming smile, has been with the hotel for only a couple of months; she led me to the manager\u2019s office.<\/p>\n

\u201cWe are still in charge. The auction process was halted by court because there\u2019s a disagreement on figures,\u201d said the manager, a middle-aged man who has been with the hotel since 2012.<\/p>\n

His room was a guest-suite turned into an office located on the first floor overlooking the swimming pool at the back of the hotel.<\/p>\n

The least priced room at Alpha Palace which has over 46 rooms is US$70 a night; the hotel is three-star classified but that\u2019s also the source of its current problems.<\/p>\n

Alpha Palace which is valued at over Rwf2 billion is currently battling a consolidated credit facility of Rwf500 million from Bank of Kigali which was borrowed, according to the manager, to mainly upgrade its facilities ahead of RDB\u2019s countrywide hotel classification exercise.<\/p>\n

The hotel managed to get the stars but they haven\u2019t translated into commercial success. \u201cThis endless story of us being auctioned has badly affected our performance, most of our clients have left us thinking someone else took over the facility,\u201d he said.<\/p>\n

Alex Baingana, the hotel\u2019s proprietor has literally knocked on all doors in an attempt to save his lifetime investment from auction; he believes the bank is being unfair noting that selling off the property should be the very last resort after exploring all possible avenues.<\/p>\n

But a source within Bank of Kigali intimated to The New Times that the hotel misused the credit and diverted it into other activities outside the planned spending.<\/p>\n

However, the hotel blames its woes on what the manager describes as a dwindling clientele mainly because of tight competition from dozens of hotels that dominate its neighbourhood.<\/p>\n

\u201cCome and see what I am talking about,\u201d he said as he guided me towards the balcony, pointing to the houses a few meters away from the hotel.<\/p>\n

According to the manager, owners of most residential houses next to his hotel have turned them into motels which are stealthily diverting demand from Alpha Palace hotel hence contributing to its current financial woes.<\/p>\n

The argument of stiff competition and reduced clientele is what most members of RHG will cite for their woes which they also blame on government for unfulfilled promises of a booming tourism sector that would generate incomes for these hotels.<\/p>\n

{{Happy neigbours}}<\/p>\n

But not everyone is complaining. For instance at Grand Legacy (GL), a newly established hotel directly opposite Alpha Palace, Christian Ndagijimana, the facility\u2019s marketing manager says they have already become market leaders after just over a year in business.<\/p>\n

Established just over a year ago, the 5-star classified hotel has 43 high-end rooms ranging between US$240 and US$420 for a night.<\/p>\n

Ndagijimana says that within a short period of time, GL has become Kigali\u2019s leading facility, based on statistics compiled by TripAdvisor, an American travel website providing reviews of travel-related content.<\/p>\n

As to why smaller hotels like the one across the road are failing, the salesman says it\u2019s because of a general lack of proper management, dysfunctional marketing strategies and lack of passion in what people do.<\/p>\n

\u201cSo the way out for them is to really get proper management in place and get people who are passionate about the hotel business, you definitely don\u2019t want someone who is just looking for a pay cheque at the end of the month,\u201d he said.<\/p>\n

But Ndagijimana also admits that getting top managers can be quite expensive for most hotels which want to run on low budgets.<\/p>\n

\"\"<\/figure>\n

{{So what\u2019s the way out for struggling small hotels?}}<\/p>\n

Although PSF\u2019s advocacy can help to temporarily protect the hotels from the auctioneer\u2019s hammer, perhaps a more realistic solution is with Celestin Rwabukumba, the CEO of the Rwanda Stock Exchange.<\/p>\n

Rwabukumba says most companies, small or large, are struggling with a problem of being undercapitalised something he says can be addressed through raising money on the market; it worked well for Bank of Kigali, Bralirwa and most recently, Crystal telecom.<\/p>\n

\u201cIt\u2019s possible that up to 90 per cent of our businesses are undercapitalised. Many businesses start off wrongly with up to 80 per cent of their operating capital obtained from commercial banks and only a small section being their personal savings, that\u2019s dangerous,\u201d he said.<\/p>\n

Jean Claunde Karayenzi, the Access Bank Rwanda managing director echoes similar views pointing out that businesses like hotels need longer term capital to allow them to borrow with longer repayment periods.<\/p>\n

Recently, African Development Bank Group extended a $6 million line of credit to Access Bank to support Rwandan small and medium entrepreneurs; the credit line is long-term and will see borrowers enjoying friendly interest rates.<\/p>\n

Rwabukumba says equity is not what one owns as some people wrongly perceive it, but rather the cash at hand because in practice, land can\u2019t pay bills unless it\u2019s liquidated into hard cash.<\/p>\n

A platform has been created to enable small and medium enterprises like hotels to raise money from stock market and improve their capital bases.<\/p>\n

\u201cUnlike large companies that are required to have minimum capital requirements before listing on the stock market, the SME segment doesn\u2019t require such conditionalities,\u201d he said.<\/p>\n

Surprisingly, the initiative is not new as it was approved about two years ago, but no SME has been able to debut although Rwabukumba revealed that at least four enterprises are in the process to pioneer the initiative.<\/p>\n

The biggest challenge for SMEs, according to Rwabukumba is poor governance systems and accountability and that there\u2019s a need to build their capacity to enable them access the market with confidence that investors\u2019 money would be safe.<\/p>\n

The NewTimes<\/p>\n","protected":false},"excerpt":{"rendered":"

Members of the Rwanda Hotel Group (RHG), have urged financial institutions to give a grace period of at least a year to members who seek loans before they can start paying back. RGH is an association that brings together owners of medium-sized hotels in the country. But this seems to be a lost battle for […]<\/p>\n","protected":false},"author":3,"featured_media":2000069617,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[69],"byline":[160],"hashtag":[],"class_list":["post-20598","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-homehighlights","byline-theophile-niyitegeka"],"bylines":[{"id":160,"name":"Th\u00e9ophile Niyitegeka","slug":"theophile-niyitegeka","description":"","image":{"id":0,"url":"https:\/\/secure.gravatar.com\/avatar\/?s=96&d=mm&f=y&r=g","alt":"Default avatar","title":"Default avatar","caption":"","mime_type":"image\/jpeg","sizes":[]},"user_id":3}],"contributors":[{"id":160,"name":"Th\u00e9ophile Niyitegeka","slug":"theophile-niyitegeka","description":"","image":{"id":0,"url":"https:\/\/secure.gravatar.com\/avatar\/?s=96&d=mm&f=y&r=g","alt":"Default avatar","title":"Default avatar","caption":"","mime_type":"image\/jpeg","sizes":[]},"user_id":3}],"featured_image":{"id":2000069617,"url":"https:\/\/en-images.igihe.com\/IMG\/logo\/arton20598.jpg","alt":"","caption":"","mime_type":"image\/jpeg","width":0,"height":0,"sizes":{"thumbnail":{"url":"https:\/\/en-images.igihe.com\/IMG\/logo\/arton20598.jpg","width":1,"height":1},"medium":{"url":"https:\/\/en-images.igihe.com\/IMG\/logo\/arton20598.jpg","width":1,"height":1},"medium_large":{"url":"https:\/\/en-images.igihe.com\/IMG\/logo\/arton20598.jpg","width":1,"height":1},"large":{"url":"https:\/\/en-images.igihe.com\/IMG\/logo\/arton20598.jpg","width":1,"height":1},"full":{"url":"https:\/\/en-images.igihe.com\/IMG\/logo\/arton20598.jpg","width":0,"height":0}}},"_links":{"self":[{"href":"https:\/\/new.igihe.com\/english\/wp-json\/wp\/v2\/posts\/20598","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/new.igihe.com\/english\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/new.igihe.com\/english\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/new.igihe.com\/english\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/new.igihe.com\/english\/wp-json\/wp\/v2\/comments?post=20598"}],"version-history":[{"count":0,"href":"https:\/\/new.igihe.com\/english\/wp-json\/wp\/v2\/posts\/20598\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/new.igihe.com\/english\/wp-json\/wp\/v2\/media\/2000069617"}],"wp:attachment":[{"href":"https:\/\/new.igihe.com\/english\/wp-json\/wp\/v2\/media?parent=20598"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/new.igihe.com\/english\/wp-json\/wp\/v2\/categories?post=20598"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/new.igihe.com\/english\/wp-json\/wp\/v2\/tags?post=20598"},{"taxonomy":"byline","embeddable":true,"href":"https:\/\/new.igihe.com\/english\/wp-json\/wp\/v2\/byline?post=20598"},{"taxonomy":"hashtag","embeddable":true,"href":"https:\/\/new.igihe.com\/english\/wp-json\/wp\/v2\/hashtag?post=20598"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}