The Karisimbi Hotel, which had been put up for sale in order to recover debt, has failed to attract buyers.
The hotel, based in Kigali’s high-end Kiyovu suburb, was placed under liquidation in November last year as creditors sought to recover some Rwf2 billion ($2.23 million) owed to them.
The amount consists of Rwf1.5 billion ($1.67 million) owed to the Development Bank of Rwanda and Rwf50 million ($ 55,892) owed to the Banque Populaire, used to put up the facility. The rest consists of tax and pension arrears owed to the Rwanda Revenue Authority and the Rwanda Social Security Board.
The hotel is owned by Karisimbi Splendid Ltd.
Until last week, the assets of the cash-strapped hotel, which were first put up for sale late last year, had not attracted buyers, with four rounds of auction having been unsuccessful.
The liquidator Olivier Milimo Mukwende, said that the facility will be put up for sale again until a buyer is found.
“We have not lost hope. We shall continue with the sale and hopefully offers will be made,” said Mr Mukwende. “I hold regular meetings with the judge and the creditors to share updates. They are of the view that we need to keep trying,” he said.
Market sources cited the debt outstanding being higher than the value of the 24-bed hotel as the reason potential buyers had little hope they could quickly turn a profit from the facility.
Industry players also blame the lack of interest on the timing of the sale.
“The period between November and May is a low season for the hotel industry. This is likely to be a concern for potential clients,” said Nsengiyumva Barakabuye, a hotelier and also the president of the Rwanda Hotel and Restaurant Association.
The challenges facing the Karisimbi Hotel are not unique. Some 100 other mid-sized hotel assets across the country have been caught up in a spate of auctions over the past four years, largely due to a failure to repay bank loans taken to revamp the facilities.
As is the case with Karisimbi, creditors have had to sell the facilities at a loss after failing to find buyers at the stipulated market value, while in other instances hotels were turned into hostels, hospitals and schools.
“Only in a few cases banks negotiated with the owners and injected in more money then reviewed the repayment period after putting in place new management to turn around the business,” said Mr Barakabuye, though he did not discuss individual cases and businesses.
Mr Barakabuye said that access to credit remains a challenge for hoteliers who are forced to borrow from banks which charge hefty interest rates and show no tolerance in case of default on payments.
Affected hotels obtained loans at 18 to 21 per cent interest rate, payable in four to seven years, in monthly installments of between Rwf20 million ($22,500) and Rwf50 million ($56,400).
“This is a lot of money without adding the running costs which are also high. Besides, consider that construction alone takes three years and at times banks don’t release the funds on time. You find hotels already grappling with repayment delays even before they start operations,” said Mr Barakabuye.
“The problem is that banks don’t want to behave like shareholders in these projects, and they rush to penalise you and auction once you fail to repay at any stage. They analyse whether the situation can be salvaged by changing the management or bringing in some expertise.”
Rwanda Today established that the market situation had barely changed for hotels that have bank loans and whose owners had not managed to diversify their sources of revenues through a combination of services like accommodation, restaurant and conferences and recreational amenities.