21 January 2014

Uganda's Hospitality Industry Recovering

More than six years after a couple of investors got their fingers burnt when they failed to recover the money they had channeled towards building hotels in preparation for the 2007 Commonwealth Heads of Government Meeting in Kampala - which turned out to be poorly attended - the hotel industry appears to be recuperating. While there were hotels that went under receivership as a result of defaulting on bank loans, a number of Ugandan hotels are now witnessing more dealerships coming their way.

Protea hotel Entebbe plans to double its size even after it opened just two years ago. The hotel, which in a statement said it is experiencing increased demand, is expected to add 100 new rooms, with construction expected to begin in May and last about a year. There are also plans for Protea to put up a hotel in Hoima, where a couple of oil exploration, and soon production, activities are taking place.

While the Hilton hotel in Nakasero might have missed a couple of deadlines for its completion date, the project is in its final stages. At Shimoni, the former site for Saudi Arabia's Kingdom Holdings, work on a hotel and shopping complex is ongoing. More hotels such as GeoLodges, Cielo Country Inn in Ishaka town, and the Marassa group hotels have opened up in the countryside.

Industry players say the renewed interest in the hospital sector is driven by the growth in Uganda's economy.

"Continued economic growth will see an organic increase in business travel in and to the country, and as long as 'brand Uganda' continues to market itself on the international stage, the tourist numbers should grow as well," Danny Bryer, the director of sales, marketing and revenue for the Protea Hospitality group, said in a statement.

Stuart Cook, the head of Protea hotels in Uganda, said: "Protea hotel Entebbe has been running at high occupancies since it first opened; so, building this new wing is a necessity."

One of the biggest drivers remains the oil industry. As Uganda prepares to embark on the production stage of its oil industry, which has an estimated expenditure bill of roughly $10bn, other service providers have positioned themselves to tap into these opportunities.

According to the Protea Hospitality group's 2013 Africa Pipeline Study, Uganda could increase its room occupancy by 54% depending on planned construction projects. Regional integration is another reason Uganda's hospitality industry is likely to thrive. Recently, the East African states signed to the EAC single tourist Visa. This means that Uganda, Kenya and Rwanda have agreed on a visa fee of $100 and on a revenue sharing model that will see each partner state retain $30 and $10 retained for administrative expenses.

However, Balagadde, the executive director of Uganda Hotel Owners Association, feels that much more should be done in terms of infrastructure and skills development by member countries.

"Successful implementation of the EAC single tourist visa requires that Uganda puts in place appropriate strategies and actions to ensure that her key challenges such as poor infrastructure and lack of skills are addressed so as to benefit from the single tourist visa."

Benedict Naturinda, the owner of Cielo Country Inn in Ishaka town, believes it is all about taking the service where it is needed.

"We are looking at the gaps in the service provision. The quality of the service matters," he said.

The quality of service is becoming a top industry concern. The country has already planned to assess the quality of service at hotels in order to classify them. Hotel owners will have to earn their statuses and not simply identify themselves as a five-star with no official approval.

"The hotel rating is long overdue because of funding constraints. It is expected to start in January. However, sensitization of the hotel owners should be accomplished to ensure willingness to invest in the proposed changes," said Samuel Balagadde.

According to Vision 2040, the potential for Uganda's hospitality industry is undoubted. It notes that by 2011, tourism contributed 14.6 per cent of total employment (630,830 jobs) and the sector contributed 23 per cent of the total registered businesses (hotels restaurants, recreational and personal services) in the country.

The tourism sector's total contribution to the economy is estimated at $1.7bn, representing nine per cent of GDP, according to the ministry of Finance. The sector only trailed remittances from abroad for generation of foreign exchange in 2010, contributing $662m in 2010 compared to $773m from remittances.

News that close to $12m has been invested in the upgrading of the Hotel and Tourism Training Institute (HTTI) at Jinja is a boost to the industry. The imitative will give young people the necessary skills needed for the hospitality industry.

Balagadde says there is room for more investments in the hotel business, and believes that such classy small hotels can give the big hotels a run for their money.

"There is a market for all hotels irrespective of size and facilities," he said.

The Uganda Bureau of Statistics, in its Statistical Abstract 2013, shows that most of the services in the hospitality sector witnessed an increase in prices between 2011 and 2012 as demand went up.

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