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Serviced apartments overtake hotels in occupancy, revenue

By David Nguthuri | October 20th 2016


Demand for serviced apartments has surpassed that of hotels in Nairobi, a new survey by Cytonn Investments shows.

According to the report, serviced apartments registered a 90 per cent occupancy level, with each room going for $127 (Sh12,700) on average in the third quarter of this year. The average occupancy level for hotels during the same period was 29.6 per cent lower, with each room being for 33.5 per cent cheaper.

Serviced apartments in Upper Hill were the best performing with a room costing $140 (Sh14,000) on average and an occupancy level of 97 per cent. Nairobi CBD serviced apartments fetched the lowest price per room at $85 (Sh8,500).

The report said demand for serviced apartments was being driven by expatriates who are attracted into the country by its position as a regional hub for East and Central Africa and attractive tourist destinations like Maasai Mara Game Park.

“We are now increasingly witnessing a shift in consumer preference away from mainstream hotels towards serviced apartments, especially in Nairobi. With more affordable rooms for long-stay business travellers, increased security and larger room sizes, serviced apartments have outperformed hotels in both revenue per room and occupancy,” said Elizabeth Nkukuu, Cytonn’s chief investment officer.

According to Johnson Denge, Cytonn’s research and site acquisition manager, more serviced apartments are expected to be developed in Upper Hill, Westlands, Kiambu Road and Lavington.

Serviced apartments have become increasingly popular in Kenya, with Nairobi alone having more than 60 brands of serviced apartments with more than 2,500 units. Increased supply of serviced apartments has largely been boosted by a number of factors, including their relative affordability compared to hotels, home-away-from-home feel, security and the fact that they tend to have more space than hotel rooms.

The report points out that, the best markets for investing in the hospitality sector are serviced apartments in Nairobi, 3 & 5-star rated hotels in Maasai Mara and business hotels in Nairobi.

Serviced apartments growth has also been contributed to by continued increase in the number of investors from the growing middle-class who have higher disposable incomes and also the improving infrastructure, which has opened up satellite towns for development.

With a number of hotels also expressing interest in setting base in Kenya, the real estate sector is poised for exciting times.

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