Investor behind CityBlue Hotels sees gap for African mid-market hospitality brand

Exactly 20 years after the Rwandan genocide, the East African country has made remarkable progress in rebuilding its economy and attracting investors. The World Bank ranks Rwanda as one of the easiest places to do business in sub-Saharan Africa, an enticing factor for foreign investors.

Dubai-based investor Jameel Verjee launched his mid-market hotel brand CityBlue Hotels in Kigali a year ago and notes that “Rwanda is a very straightforward place to do business”. CityBlue operates three hotels in Kigali, targeted at business travellers, and has just opened one in Kampala, Uganda.

“It has given us a nice bridge to expand to Uganda because there is a close relationship between Rwanda and Uganda,” Verjee says.

Verjee is the founder and CEO of Diar Capital, an investment company focused on the creation of growth businesses. He hopes to replicate the success of CityBlue in Rwanda across Africa.

The UK-born corporate lawyer turned entrepreneur tells How we made it in Africa that using Rwanda as a launch pad into the region has been a “fantastic experience”.

“I am very pleased that we started in Kigali. Rwanda is a landlocked country so shipping products into the country was not easy. Fitting out hotels from inception, training up human resources and executing on our business model in a country… where hospitality is not an established industry, was difficult.”

A gap in the market

“We have had a lot of challenges but overall it has been a fantastic experience because there is a gap in the market, people are very receptive to our work and we have taken what one would call an early mover position. People have been looking at Rwanda for a long time and now [international brands including] Kempinski, Marriott and Radisson are all going in, but we are already there. We are established and we are in prime locations.”

Verjee started the brand to tap into Africa’s growing inter-regional trade and movement.

“We saw a space in the mid-market sector in the region where we could create a brand which could then become pan-African. Until recently, there have been no indigenously-branded mid-market hotels in the business space in East Africa.”

CityBlue intends to expand rapidly with plans to have at least 20 hotels in operation by 2017.

“Having opened four hotels in just over a year across two countries, we would like to be considered as the fastest growing hotel group in Africa. We have already signed two further properties in Uganda to open in 2015. I see our growth in Burundi, Uganda, Rwanda and Kenya initially. We will then actively look at Tanzania, Mozambique and Zambia. Down the line, we would be keen to have the CityBlue flag in Ethiopia, the Democratic Republic of Congo and Ghana. And Nigeria is Africa’s largest economy, so it is obviously on the radar.”

Managing growth

Verjee notes that Diar Capital, which has made investments in various sectors in sub-Saharan Africa and the Middle East, is expecting a very “strong return on investment” in the region. In the meantime though, the company faces challenges as it expands its CityBlue brand.

“We are growing very quickly and managing almost 150 people across two countries is obviously a challenge. The good thing is we have put in place measures and systems at our hospitality management company in Dubai so that our scalability should be managed well. Naturally one has to be prepared for the pitfalls of growing as fast as we are of trying to make sure there is consistency of the brand and customer satisfaction.”

As the “new kid on the block”, CityBlue has also faced difficulties establishing relationships with airlines, banks and potential customers.

“We are operating in an environment where the offline sales culture is more important still than the online sales culture. Today in Rwanda and Uganda, business does come from the internet in a significant way but it is still critical to have strong working relations with government bodies, regional corporations, tour agencies and, of course, NGOs. These relationships have to be built over a period of time and that is the hard part. We have just launched our new website and we intend to be at the cutting edge to reach out to our consumers online through every available form of technology application.”

Verjee advises other investors not to “forget to do obvious stuff” like market research, seeking counsel from professional advisors and spending time on the ground.

“I travel to Rwanda, Kenya and Uganda countless times and have essentially lived in each country to establish our businesses. I know them well. It is important to appreciate that the culture of each nation within the African continent is exceptionally unique. Even when you try to create a common brand that transcends jurisdictions, you have to understand that each culture has to be respected and understood. People from the outside mustn’t think that Africa is one country. It is definitely not and there are nuances everywhere.”