Intercontinental Hotel to be Leased out for Mixed Use Amidst Hotel’s Economic Fallout

Owners of InterContinental Hotel and allies of former and Late President Daniel Arap Moi, are considering leasing out the building or converting it into a mixed-use property.

The move which comes after the five-star hotels closed down last year August will hinder the State’s efforts to sell its 33.8 percent stake in the hotel.

According to the Kenya Hotel Properties (KHP) there is a need for sound consultant advice on change of business model for the hotel to include a mixed-use approach, a move that will transform the hotel building into office blocks, shops and mini-hotels.

“Define the various strategic options available for the company premises and adjacent parking silo to repurpose the property to ensure maximum returns on investment,” said KHP in a notice seeking consultants

This confirms that KHP has set its eye on earning leasing fees from the 389-room Hotel whose sale of the government stake has dragged for more than a decade.

Sovereign Group is the largest individual local investor in the hotel with a 19.2 percent stake while Development Bank of Kenya has a 12.99 percent stake. Other stakeholders include Joshua Kulei, former President Moi’s former private secretary, Rodger Kacou and Ahmed Jibril with a combined stake of less than one percent in the firm.

Another stakeholder is The Intercontinental Hotels Corporation Group which is listed in both the UK and the USA with a 33.8 percent stake in the hotel group.

InterContinental Hotel announced its plans to end its lease agreements with KHP, the holding company for the five-star hotel, and shut down the facility amid the coronavirus economic fallout August 2020, making Sovereign Group the likely candidate to acquire the 33.8 percent stake ahead of sale to outsiders.

The InterContinental Hotels Corporation has been running and managing the 389-room InterContinental Hotel Nairobi under a 99-year lease since April 1967. However, with Kenya’s over Sh100 billion loss in tourism revenue last year amidst Covid pandemic and the failure of the tourism sector to grow from its 2018’s Sh 163.5 return.

Analysts forecast that global travel will take more than three years to recover, cutting investors’ appetite for expansion in the sector.

Besides the effects of Covid-19 on the hotel industry, KHP is fretful of the impact of real estate developments near the InterContinental building, including the Nairobi Expressway and the soon-to-be-opened bus park.

KHP has urged consultants to review if the building could be used by the government, signaling its open to sale or lease of the hotel building to the State.

“The analysis should review and advise on the potential strategic re-evaluations for hospitality and commercial real estate for utilization by the government and private sector,” said the KHP notice.

InterContinental Hotel was already struggling before the pandemic and was last year declared technically insolvent since it could not service its Sh717 million debt which was owed to Stanbic Bank.