Investment challenges in the hotel industry in Kigali, Rwanda: Hotel managers' perspectives

Figures & data

Table 1: Advantages and disadvantages of hotel investments to host countries

Form of investment	Benefits to host country	Costs to host country
Total ownership	No financial risk to host economy	Large outflow of income (‘leakage’)
100% of equity by a foreign subsidiary; may be for an unlimited time or a specified period		Difficult to reflect government policy for tourism
Joint venture	Access to capital	Requirement for the level of base capital
Partial ownership by foreign capital; an unlimited time or a specified period	Access to international marketing	Possibly unfavourable contracts due to limited bargaining power
	Reduced income leakages	Risk more widely spread
Franchising
The right to do business in a prescribed manner under an existing brand name sold to a local firm	Transfer of managerial and marketing skills	Management risk is with host country's firms
	Assured standard of quality
	brand image
Management contracts	Possible transfer of knowledge, skills, and technology (e.g. GDS – global delivery system) through a cooperation agreement	No control over finance, management or planning of firm
Business is controlled and managed by a foreign firm, but without ownership
Hotel consortia	Joint national and international marketing efforts	Small hotels may not be considered attractive to consortium
Independent hotels pool resources to compete with integrated and franchise chains		Initial lack of brand recognition
Full national ownership	Reduced international leakage	Lack of international reputation
Domestic investment without foreign links	Independence in corporate strategies	Higher marketing costs
Source: UN (1998:10).

Table 2: National Tourism Policy objectives

Objective	Policy
Economic objectives	Increase foreign exchange earnings and generate government revenues; generate employment opportunities; promote rural economic development; stimulate infrastructure; enhance regional and international tourism linkages
Social objectives	Promote favourable image to the outside world; increase awareness of responsible tourism; provide and maintain a legal framework according to international norms
Environmental objectives	Promote tourism that is ecologically friendly; develop facilities in national parks in accordance with park management plans; provide and maintain a legal framework according to international norms
Cultural objectives	Develop cultural attractions; develop cultural values; emphasise development of tourism based on Rwanda's cultural diversity
Source: Compiled by the authors on the basis of information from the National Tourism Policy (MINICOM, 2006).

Table 3: Operational and non-operational hotels in Rwanda

Source of investment	Name of project	Investment type	Year established	Jobs	Nature of investment	Estimated investment (US$^a)
Operational hotels
Belgium	Hotel des Mille Collines SA	Rehabilitation	2001	150	FDI	2 964 912.28
India	Indian Khazan Limited	New investment	2004	48	FDI	289 421.05
Rwanda	Hotel le Belvedere	Expansion	2004	49	Local	673 463.43
Rwanda	Hotel Credo	New investment	1999	40	Local	482 456.14
Rwanda	Hotel Gorillas	New investment	2000	50	Local	438 596.49
Rwanda	Novotel	Rehabilitation	2000	169	Local/FDI	406 504.59
Rwanda	Muhazi Beach Resorts	New investment	2001	65	Local	315 789.47
Rwanda	Alma Mater Lodge	New investment	2001	26	Local	152 213.68
Rwanda	Hotel Alpha Palace	New investment	2001	78	Local	329 824.56
Rwanda	Golden Head/Intercontinental	Restructuring	2001	250	Local	17 879 473.68
Rwanda	Hotel Castel	New investment	2001	23	Local	403 508.77
Rwanda	Hotel Paradise Ten to Ten	New investment	2001	50	Local	526 315.78
Rwanda	Okapi Hotel	New investment	2001	8	Local	177 094.49
Rwanda	Guest House ‘Chez Rose’	New investment	2002	10	Local	87 719.29
Rwanda	Hotel Chez Lando	Restructuring	2002	100	Local	1 026 652.77
Rwanda	Trust House Building	New investment	2002	20	Local	1 749 879.22
Rwanda	Akagera Game Lodge Sarl	New investment	2003	78	Local	1 515 789.47
Rwanda	Imorex Chez Robert	New investment	2003	18	Local	243 396.49
Rwanda	Le Petit Prince Hotel	New investment	2003	38	Local	600 175.43
Rwanda	Lighthouse Resort	New investment	2003	20	Local	477 192.98
Rwanda	Mountain Gorilla Nest Hotel	New investment	2003	28	Local	410 526.31
Rwanda	New Blue Sky Hotel	Expansion	2004	31	Local	144 720.05
Rwanda	Sky Hotel	Expansion	2004	50	Local	74 024.56
Rwanda	La Palisse Club	Expansion	2004	29	Local	963 731.57
Rwanda	Le Printemps Hotel	New investment	2004	35	Local	380 627.97
Rwanda	Amigo restaurant	Expansion	2005	46	Local	175 438.59
Total				1509		32 889 449.11
Non-operational hotels
Rwanda	Oasis Hotel	New investment	2000	Unknown	Local	3 076 578.94
Rwanda	Dreamland Towers ‘DT’	New investment	2000	60	Local	1 540 296.77
Rwanda	Royal Prince Hotel	New investment	2000	30	Local	736 842.10
Rwanda	Te Deum Apartments	New investment	2001	8	Local	526 315.78
Rwanda	Hotel Olympia	New investment	2002	Unknown	Local	1 052 631.57
South Africa	Mickor Hotel Holding	New investment	2002	130	FDI	9 122 807.01
Total				130		16 055 472.17
^aUS$1 = 570 RWF. Source: Compiled by the authors on the basis of the Investment Report 1999–2005 (RIEPA, 2005).

Table 4: Ownership type and grades of hotels in Kigali

Name of hotel	Ownership	Grading
Intercontinental Hotel	A franchise/government (formally managed by a South African company).	5-star
Mille Collines	FDI/Government owns only 2.5% of shares	4-star
Novotel	Libyan Arab Republic 60% and the Government 40% (managed by Libyans)	4-star
Okapi	Private	3-star
Ninzi	Private	3-star
Sky Hotel	Private	3-star
Alpha Palace	Business partnership	3-star
Chez Lando	Family business	2-star
Isimbi	Family business	3-star
Castel	Private	1-star
Baubar	Private	1-star
Hotel Gorillas	Private	3-star

Table 5: Perceived positive and negative experiences of the hotel industry

Feature	Experience
	Positive
Politico-economic environment	Most respondents saw the existing political and economic environment as stable. The political situation in Rwanda is more promising than ever before.
Destination image	Perception of Rwanda as a tourist destination in recent years has been very negative, but the country has improved greatly and is more promising.
Government's role	All respondents thought the government recognises the significance of tourism in the economy. They anticipate that in the near future tourism will be the leading economic sector.
Locality	Rwanda's strategic location has facilitated movement in the Great Lakes region and helped to tap into the East and Central African markets.
Investor information	Information on investment opportunities is provided to potential tourism investors adequately through the one-stop centre – RIEPA.
Economic reforms – liberalisation	Positive steps have been taken towards liberalisation of the economy and privatisation since 1995 and this is in line with promoting investments. Some hotels have been privatised.
Market size	The market for hotel development is still limited, but has been increasing.
	Negative
Standard	Standard and availability of tourist attractions are still low – there are few tourist attractions and even the few that exist are mainly focusing on mountain gorillas.
Skilled labour	There is lack of skilled labour in Rwanda. The Rwandan business environment has been constrained by lack of human capital, among other constraints (OECD, 2006).
Infrastructure	Almost all respondents saw Rwanda as lacking basic infrastructure – water, electricity, roads and airports – was lacking. Lack of sufficient energy has continued to affect the country's competitiveness. There has been rehabilitation of important national roads, but roads are still poor, particularly in the rural areas (OECD, 2006). Telecommunication infrastructure is unaffordable for the ordinary person.
Expensive destination	Rwanda is currently served by one airport – travelling to the country is very expensive, which discourages potential tourists to Rwanda.
Investment options	Promotional efforts in terms of incentives and government policy towards FDI have mainly been in the form of import duties. Not much has been given to investors in the hotel sector.
Access to land	Views on the availability of land were mixed. Some respondents believed that land for investment is available depending on where you want to invest; others that getting a site for investment is difficult because the land belongs to the government.
Source: Interviews with hotel managers; OECD (2006).

Figure 1: Specific locational advantages

MINICOM (Ministry of Commerce, Industry, Investment, Promotion, Tourism and Cooperatives) . 2006 . National Tourism Policy , Kigali : Government of Rwanda .

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