- In the past two years, short-term rentals in Nairobi have been the new trend.
- Hospitality has bounced back remarkably after the challenges posed by the COVID-19 pandemic, emerging as one of the best-performing asset classes in 2023.
- Trappler highlights that hospitality is a key economic driver, employment creator, and focal property type in regions throughout East Africa.
Hospitality has bounced back remarkably after the challenges posed by the COVID-19 pandemic, emerging as one of the best-performing asset classes in 2023. This resurgence is particularly notable in Nairobi, especially with the renewed demand for short-term rentals.
The strategic position of Kenya’s capital city serves as an East African hub for various industries, including corporate, government, MICE (Meetings, Incentives, Conferences, and Exhibitions), embassies, and tourism, which makes it an attractive destination for hospitality and residence brands.
The increasing and diversifying demand for accommodation creates meaningful opportunities for market expansion and business growth.
This view reflects the insights of the thought leaders who will explore opportunities in East Africa’s fastest-growing and most resurgent sector at the 11th annual East Africa Property Investment (EAPI) Summit Hospitality & Residences Forum on 17 April 2024 in Nairobi, Kenya.
The forum will cover key hospitality trends, from greening to financing, development, resorts, safari, and more, creating a crucial platform for stakeholders in the hospitality and residence sectors.
Radisson Hotel Group Senior Director, Development – Sub-Sahara Africa, Daniel Trappler, says that looking at the hospitality market, demand drivers are creating the need for accommodation in Nairobi for both short and long stays.
“As demand continues to grow in all segments, this has balanced the influx of international and regional brands developing over the past decade, sidestepping the potential risk of oversupply. Hotel operators can continue to benefit from good business by operating hotels in the East African hub,” said Trappler.
Trappler highlights that hospitality is a key economic driver, employment creator, and focal property type in regions throughout East Africa.
Fiona Craw, JLL’s Vice President – Hotels & Hospitality Group for Sub-Saharan Africa, says investors have shown growing interest, especially in markets such as Nairobi and Zanzibar. Craw also notes that private equity funds have been key in driving the transaction market in Nairobi over the past 48 months.
“Hotels globally are emerging as a preferred asset class with global revenue per available room (RevPAR) recovering well, driven by strengthening urban performance. While the hospitality sector was the most severely affected by the pandemic, it has been one of the fastest asset classes to recover across Africa and East Africa,” said Craw.
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Even so, Craw points out that access to capital for hotel developments will remain challenging in the short term. The significantly lower pipeline of new developments across the region has created a strong performance narrative for existing hotels.
“This was evident in 2023 with the Nairobi hotel market achieving higher occupancies and average daily rates than in 2019 pre-pandemic,” says Craw, adding, “A key change driving demand is accessibility.”
Nairobi’s infrastructure has grown significantly, sparking investment in the hospitality sector and broadly across all real estate asset classes.
A game changer for the Nairobi hotel market was the opening of the Express Way in 2022, creating ease of access between Jomo Kenyatta International Airport and Westlands, the key commercial hub.
“As a result, hospitality brands have been increasing their presence over the years, with all the key operators and brands actively looking at expanding their portfolio not only in Nairobi but across secondary cities in Kenya,” reveals Craw.
This expansion opens doors for development-focused regions to construct hotels designed and operated for high efficiency, resulting in utility cost savings for owners, lower future regulatory capex requirements, and better access to green funding.
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“Moreover, embedding environmental, social and governance (ESG) principles into hotel management agreements aligns the goals of the property owners and operators since investors and stakeholders are paying more attention to these aspects in the hospitality sector.”
Demand Soars for Short-Term Rentals in Nairobi
Focusing on the short-term rental and residence sectors in Nairobi, Eleni Georgopoulou, Founder and CEO of YourHost Ltd, says demand is growing significantly, driven by factors such as economic growth, improved transport connectivity, the burgeoning middle class, and online booking platforms.
“The likes of Airbnb, Booking.com, and VRBO have revolutionised the hospitality industry. People now have access to a wide range of accommodation options, including short-term rentals, making it more convenient and accessible to both domestic and international travellers.”
While demand is being met with adequate supply, and there are concerted efforts to improve the experiences at these properties continually, Georgopoulou notes that there is still room to do more.
“It is crucial to ensure that there are enough properties to cater to a wide range of budgets and preferences to ensure customer satisfaction. Developers are actively constructing new properties and refurbishing existing ones to meet travelers’ changing preferences,” said Georgopoulou.
“They are introducing fresh, modern designs, prioritising and expanding their guest services, instilling guest confidence with robust security measures, embracing sustainability practices and green principles, and integrating smart technology to make stays seamless.”
