Global hotel brands in Rwanda report returns on investment

Over the course of the last year, a number of international hotel brands made inroads into the Rwandan market validating the country’s ambition of becoming a conference hub.
The Marriott Hotel in downtown Kigali is one of those that have reported returns. (Net)
The Marriott Hotel in downtown Kigali is one of those that have reported returns. (Net)

Over the course of the last year, a number of international hotel brands made inroads into the Rwandan market validating the country’s ambition of becoming a conference hub.

The brands include The Marriott, Radisson Blu, Park Inn, Wilderness Safaris and Golden Tulip.

Prior to the entrance of the brands, there had been some doubts on the profitability of the high end hospitality sector given that Rwanda is considered a ‘small market.’

However, the brands say that, contrary to such perception, Kigali has turned out to be profitable largely due to efforts to market the country as a destination as well as the Meeting, Incentives and Conferences and Exhibition (MICE) initiative.

Alex Kyriakidis, the president for Middle East and Africa for Marriott International, told The New Times that for the one year they have been operating in the country, they have had returns on their investments.

“The experience for Marriott in Rwanda from day one has been amazing. It has been one of the most fruitful relationship in Africa for us. We are doing well one year into the business and (are already enjoying fair share of the market). As a result of which, we are committed to the market and looking for greater opportunities,” he explained.

Last year, the tourism sector raked in about $404 million, with the MICE initiative bringing in about $47 million.

According to Belise Kariza, the chief tourism officer at Rwanda Development Board, a total of 32 major conferences were held last year with the number expected to grow further this year.

“Last year, Rwanda hosted 32 major conferences, hosting about 32,500 delegates. MICE initiative generated about $47 million, while this year, conferences have so far raked in about $35 million,” Kariza said.

Radisson Blu Hotel, owned by Rezidor Hotel Group, have also had a good year so far and has been able to surpass some of its competitors in terms of market share.

Andrew McLachlan, the senior vice president in charge of business development in Africa and Indian Ocean at the Group, said their indexes show a lot of progress so far.

“We measure something called revenue generation index, which means that if you get 100 per cent, you get significant market share. We get about 180, meaning that we get 80 per cent more market share than competitors. We are happy with performance,” he said.

McLachlan projects that the performance will go higher especially for major conferences given that they have received some bookings for conferences to be held in three years.

“Some of the booking happens within a four-year window. We can see an increase in bookings for major conferences. We are the third busiest conference centre in Africa at the moment. We can see others worried about our competitiveness. We are in the ramp up phase,” McLachlan said.

Among some of the major challenges that dogged the local market when the major players were setting up shop in the country was the shortage of a pool of qualified personnel to run the sector.

This had seen trends of high labour mobility within the sector as well as some establishments incurring high costs in training staff.

In the case of Radisson Blu, when they opened, about 97 per cent of their workforce did not have any experience working in the hotel business.

McLachlan said this has been addressed through in-house training and a year into the market they are happy with the skills levels. 

“When we opened we had 97 per cent of staff who had never worked in a hotel before. We are happy with how they have progressed,” he said.

Partnership with local firm

For Marriot Hotel, the hurdle was jumped by partnering with a local institution, Akilah Women Institute, that train young women professionals in the sector.

Kyriakidis said this was done by bringing in experienced staff from some of their hotels from across the world to transfer skills to locals.

“When we invested we had an understanding that we would like to have a majority of local staff. When you start in a new country and have to train a team, you need many expatriate supervisors to oversee skills transfer. Today, if you look at the mature markets we are in, 99.9 per cent of jobs are given to locals,” he said.

Previously, the hospitality sector had been found to have high revenue leakages resulting from heavy importation of supplies and inputs from outside the country.

A significant section of inputs used in the sector were imported which could see more value retained in the country.

A report by UN Economic Commission for Africa (UNECA) has previously shown that there were low levels of local produce used in the local tourism industry, consequently leading to financial leakages.

However, that is fast changing as brands like Marriott have begun working with small- and medium enterprises with a positive bias toward female entrepreneurs.

“We deliberately skew towards doing more business with small to medium enterprises, particularly those that are run by women. Most of them can easily meet standards and we help them over time. Our clients are happy with their input,” Kyriakidis said.

McLachlan said they have been working to build local supply chains as opposed to imports, noting that local suppliers are making significant improvements.

Patrick Fitzgibbon, the senior vice-president for development in charge of Europe, Middle East and Africa at Hilton Group, said the ongoing investment in infrastructure as well as the expansion of tourism attractions have added to international hotels’ confidence in the local market.

RwandAir deputy chief executive in charge of corporate affairs, Yvonne Makolo, said the continued expansion of the national carrier to the current 23 destination and 12 aircraft is further expected to boost the performance of the hospitality sector.

 

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