The Kenya coast hospitality industry will be given a financial break when new dedicated loan arrangements become available with lending at preferential interest rates.
Commercial loans, presently standing just under 20 percent, are too expensive for coastal resorts to take out as fluctuating occupancies at the coast have made repayments of loans a big gamble. In fact are a number of non performing loans by coast resorts cause of concern for the banking industry which todate however has not resorted to foreclosure or auctions, heeding a government call to give the industry time to recover from the last few years of sharply reduced visitor numbers.
The Kenyan government is now in the final stage to obtain a major funding tranche from the World Bank and the French government which, while being processed through a yet to be named commercial bank, will only demand interest between 6 and 9 percent, significantly lower than what commercial bank loans attract these days.
‘This reminds me of the 1970’s and 80’s when the Kenya Tourist Development Corporation gave cheap loans to build hotels and only took the land titles as collateral. Those days you could build a hotel and repay the loans in a few short years because business was booming.
However, many resorts build back then have not seen a major overhaul and modernization until now. Few hotel groups have done that, like Serena or Sarova but a lot of individual hotel owners have failed to keep up the pace. Now they will have a chance to get money at low interest rates and upgrade their tired resorts, a key factor often mentioned about the quality of coast accommodation. This is a good development and we hope many take advantage of it and modernize their resorts and bring them into the 21st century. It is time some of the so called 5 star hotels inject investments and return to 5 star status and not let standards slide further’ contributed a regular coast source on the subject.
With tourist arrivals once again growing and more charters returning to Mombasa from July onwards, in part due to the incentive package by the Kenyan government to see withdrawn flights return, it is expected that demand for beds will once again grow for the rest of 2016.