City Lodge Group sells hotels in Kenya and Tanzania for US$9.6m

TANZANIA –  South Africa’s City Lodge Hotel Group is selling its stakes in three hotels in Kenya, as well as its City Lodge Hotel Dar es Salaam in Tanzania, to subsidiaries of the UK-based investment firm Actis.

The Kenyan hotels, 127-room Fairview Hotel in Nairobi, the 171-room City Lodge Hotel at Two Rivers in Runda also in Nairobi and the 84-room Town Lodge Upper Hill in Nairobi, will be sold for almost R141 million (US$9.5 million) while the Tanzanian hotel will fetch R1 million (US$67,366). 

The 148-room City Lodge Hotel Dar es Salaam was opened in 2018, and City Lodge owns the hotel and land on a leasehold basis in Dar es Salaam.

Including impairments, the Kenyan and Tanzanian hotels contributed more than R371 million (US$25 million) in losses for the six months to end-December 2020, as the Covid-19 pandemic continued to wreak havoc on the global tourism industry.

City Lodge saw revenue from its 62 hotels fall by 73% in the six months to end-December 2020, compared to the same period in the previous year.

The company suffered a loss of R550 million (US$37 million) in the six months, from a profit of R46 million (US$3.1 million) in the previous year.  

The group said the proceeds from the sale of its Kenyan and Tanzanian hotels will be used to help settle its debt. 

The group had R530 million (US$35.7 million) in interest-bearing borrowings at the end of the year.

In December 2020, Nairobi’s Fairview Hotel, Town Lodge and City Lodge Two Rivers were put up for sale as the South African hospitality group which owns the three units plans to exit East Africa after barely six years of operation.

City Lodge Hotel Group said it had received an offer from a buyer who is interested in the three hotels in addition to City Lodge Hotel in Dar es Salaam which it also owns.

“Shareholders are advised that following receipt of an unsolicited non-binding offer for the proposed acquisition of City Lodge’s East African operations, comprising of its hotels situated in Kenya and Tanzania, the company has entered into negotiations which, if successfully concluded, may have a material effect on the price of the Company’s securities,” said the firm.

“The proceeds from the sale of its Kenyan and Tanzanian hotels will be used to help settle its debt” 

City Lodge

The update was shared at the Johannesburg Stock Exchange where the hotel is listed.

The firm said that occupancy levels have been below expectations at Two Rivers while bookings in the Tanzanian unit have been sluggish, leaving only Fairview with a robust performance.

The firm has not however made a direct reference to sluggish business as the reason for selling the hotels which will now leave its operations in South Africa, Botswana, Namibia and Mozambique.

“The 2020 financial year was our most challenging operating year in the group’s 35-year history, mainly due to the lockdown protocols implemented by the South African government, and similar restrictions in the rest of Africa countries in which the group operates,” said Chairman Bulelani Ngcuka.

City Lodge entered Kenya in 2012 by acquiring Fairview Hotel that is situated opposite the Israeli Embassy in Nairobi.

The group then opened another hotel in Two Rivers mall in early 2018, mainly targeting clients from non-governmental organizations, embassies and other business travellers.

City Lodge then followed up with entry into Tanzania in December 2018 by opening City Lodge Hotel Dar es Salaam, a 148-room hotel targeting business travelers and tourists.

The planned exit comes at a time the group has been marketing Fairview more actively to South Africans and positioning it as a first-choice conferencing, events and wedding venue.

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