Kenyan hotel group sets its sights on domestic tourists

Kenya’s multi-million dollar tourism industry is heavily reliant on international visitors. Travel advisors and media reports on incidents of insecurity and election violence often affect tourist numbers. Recent efforts have focused on improving domestic tourism following on from Kenya’s growing middle class.

Leon Ndubai, Sandalwood Hotels and Resorts chairman

Leon Ndubai, Sandalwood Hotels and Resorts chairman

Kenyan hospitality group Sandalwood Hotels and Resorts is focusing on this growing market.

“The Kenyan middle class is pushing this market. They love holidays. They have time to play golf, go for spa weekends and spend time with family. The CEOs use conferencing time outside the city as a small getaway and extend their trip for a day or two to enjoy themselves,” says Leon Ndubai, the hotel group’s chairman.

Sandalwood Hotels and Resorts runs a portfolio of hotels including the Golden Beach Resort, a 20-room luxury hotel on the Kenyan coast, and Sandalwood Hotel Kitengela, 30km outside Nairobi.

The hotel group is currently constructing a 55-room facility in Elementaita, about 120km outside Nairobi. The Sandalwood Elementaita Lodge will cost KSh 500m (US$5.8m) to construct.

“We are looking at selling a room [in Elementaita] for $500,” said Ndubai. “We are also renovating Forest Lodge in Meru (about 226km outside Nairobi) which was my dad’s property and has been closed for five years now. We are looking at attracting health conscious tourists who want to go for spa treatments outside the city. That should be up and running by next year.

“We are targeting middle and upper classes because in that market profits are bigger. It is easier to handle the middle-up market because our hotels are not very big. Our biggest capacity is 80 rooms.”

Ndubai plunged into active management of his family’s business at the age of 21 after the death of his parents. The family had investments in hotels, a micro-finance firm and a gemstone export business. At the time, Ndubai was in Germany studying gemology.

“I came and found business was suffering. In the absence of both our parents, the vision was lost. The drive in many ways was also lost. The team was filling a very big vacuum. It was up to me and Richard (Ndubai ‘s brother) to step in. We started with reorganising the hotel business.”

Ndubai is also currently the CE of Nairobi-based microfinance institution Indo-Africa Finance. The firm provides middle and lower income Kenyans with simple and affordable access to asset financing. In the last decade, Ndubai and his team have focused on expanding the different business lines.

Lending to the youth

Passionate about the youth, Ndubia is keen to use the institution to help young people venture into business.

“Banks are more willing to lend if you have security to back it up and that is where the challenges lies for many youth. Coming out of university, the youth don’t have their first car, their first piece of land; how do they get access to their first loan? We are trying to change that.”

Indo-Africa Finance is at the final stages of becoming a deposit taking microfinance (DTM) institution. Currently it has 39,000 customers and a KSh.750m ($8.6m) loan book.

“We want to expand regionally. There are a lot of unbanked Africans and we want to get them banked and give them access to cheap credit. Getting credit without having assets is very difficult and that is what we are trying to address. In five years we see ourselves being the biggest DTM in Kenya.”

While he has been successful in expanding his family’s business, Ndubai said he made mistakes and learnt a lot along the way.

“We lost quite a bit [of money] before we started making it. We were learning on the job. Understanding a business is not as easy as it looks on the outside,” he says. “For all the money we lost, it was school fees because we were leaning the ropes. So I have paid a lot of school fees.”

Earning respect

While in his 20s, Ndubai said he “inherited control and respect” because of who he was – the boss –and not really for what he had achieved.

“Today that has changed. When I sit in the board meeting I have proved myself. There is less opposition and questions. I think it was with respect and [to better the] company that many questions were asked in the early days,” he said. “There were times I wished I was older because it’s like age gains respect, which is very wrong. This is a new phase. Young people in Kenya today; if we are not learning, we are earning.”

Ndubai said his biggest contribution to the family businesses has been putting in the hours to run the business and “not pulling out the funds”.

“Ploughing back the profits instead of pulling them out and using them for other things has been one of the hardest things,” he said. “We sacrificed maybe by not buying property and sports cars and putting the money back for the long-term. I get my satisfaction in creating a bigger company.”

Some of the challenges he faces include running the hotels on international standards while keeping the cost down and accessing affordable credit for onward lending to Indo-Africa Finance clients.

The hard work was worth it

“The easier we get cheaper credit, the lower the rates will be for our clients. We are even considering borrowing in dollars because of interest rates. Going into 2014 our loan book is growing and our loan requests are getting larger. We need more funds to be able to on-lend and at a good rate.”

Ndubai said although he has had “lots of difficult times” in business, he has chosen to stay the course because of the milestones he has achieved.

“You have more difficult times than the good ones. It has been very difficult growing the business. It hasn’t been a walk in the park, but when I look back, I can see it was worth it.”

Ndubai advised other entrepreneurs to stay focused on what they intend to achieve.

“You must believe in yourself and in your vision and not let other people’s ideas or comments waver or distract you from your goal.”