Auctioneer's block: It's important that some businesses fail

The Rwanda Hotel Group, an association of mid-range hotels, is sounding the alarm and telling all and sundry that disaster is about to strike some of their members.

The Rwanda Hotel Group, an association of mid-range hotels, is sounding the alarm and telling all and sundry that disaster is about to strike some of their members. 

According to the Sylvester Mupenda, the association’s president and owner of El Dorado hotel, over 100 hotels are to be auctioned in the near future because owners have failed to pay back the bank loans they took to finance the construction of their properties.

Talking to a regional newspaper, Mupenda attempts to blame the government for his failing business saying, and I quote, “Right from 2007, the government started calling upon the public to invest in hotels, saying visitors were coming. By 2013, we had added 6,500 rooms, from the 300 available in 2007...but we are now trapped. Many of us took bank loans. After we built the hotels, we are not finding who to host. Our hotels are now being auctioned by banks at very low prices”.

I wish I could shed a tear for Mupenda and Co. but I cannot; frankly, I don’t give a damn. And neither should the government. Not because I’m a heartless person, but because they are to blame for the situation they are in.

Let us start by examining the failings of Mupenda’s El Dorado hotel.

I live quite close to it and I can tell you that it is located in possibly the worst possible place. Its entrance is so close to a busy road that you risk serious injury and even death as you get in and out of the miniscule parking lot.

That is, of course, if you actually enter the parking lot. Why do I say this? Because its signpost is barely visible.

Throw in its hilarious prices (between $80-120 a night), its laughable website, its amateurish Facebook page (that was last updated on January 25), its lack of events and the reason for the hotel’s losses becomes clear.

With its management, it was doomed to fail from the get go.

Another hotel that is going under the hammer is Alpha Palace. I’m old enough to remember when ‘The Palace’ was one of Kigali’s nicer hotels.

The advertisements that it ran on TVR, showcasing its swimming pool, nightclub and other facilities gave it the air of a hotel that anyone would be happy to sleep in.

Today, it seems like the building that time left alone; especially with the majestic Grand Legacy hotel standing imposingly right across it.

Listening to the Rwanda Hotel Group you’d think that all the mid-range hotels were failing. That would be the furthest thing from the truth.

Many boutique hotels are doing just fine. Hotels such as Iris Guesthouse, Chez Lando and the various City Blue establishments not only enjoy good occupancy but they also have great restaurants, professional management and good customer care.

Perhaps Mupenda and his colleagues should have done the same. Instead of complaining about high interest rates of between 18-25% and the lack of government-organised conferences, perhaps they should have done something about their occupancy rates that ranged from 1%-5%.

In business, like in sports, there are winners and there are losers. In this case, the hotels that are going to be auctioned ‘lost’ the game.

Some scored own goals (like El Dorado) while others were simply beaten by better opponents (like Alpha Palace). But these losers can’t then blame the pitch (the local financial market) and the referee (the government) for their loss.

They should take the beating, lick their wounds, learn from the experience and come back stronger next time.

I don’t believe that the State should get involved with such issues. Its job is to create a regulatory and legal framework that allows businesses to thrive. It’s supposed to ensure security and provide infrastructure. 

And it has done all that. Rwanda Hotel Group has written to the President asking for his support. I hope that he pushed it way, way down his ‘To-do’ list. I’m sure he has better things to do, such as running this country. 

After all, if the hotels hadn’t failed, would they have paid a super tax on their profits? Certainly not. So, why should the State get involved when they flopped? We cannot build an entrepreneurial class without risk.

These guys gambled on the hotel business and they lucked out.

It’s not the end of the world. These auctions should become a lesson for both owners and the banks; the hotel business is tricky. If you don’t know what you are doing, you’ll get burnt.

The writer is a journalist.

 

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