Thanks, FL411!! A bit above my Nairobi hotelbudget ($240/night single) but perhaps they will have specials
looks impressive & I understand that the profit goes to the Red Cross but where did the the obviously large capital investment come from? It would appear a difficult business case to make in a country with such large humanitarian issues
The Kenya Red Cross Society in its self sustainability plan, decided to engage in hospitality services. One of their projects was the Red Court Hotel which has now been in operation for approximately 5 Years.
Nairobi city being a central hub in Africa, there has been a need to increase more beds/ accommodation facilities to take care of the demand. Therefore, Kenya Red Cross took another challenge to develop its hospitality wing. KRCS involved consultants on coming up with a new hotel as it has the grounds just next to the Red Court hotel. A proposal was done to certain banks and one bank accepted to fund the project, thus the birth of 'The Boma, Nairobi"
Having done feasibility studies for Hotels, I observe that the Boma Hotel is highly leveraged with a Debt: Equity Ratio of 75:25 with Debt standing at KShs. 2 Billion and Equity at KShs. 700 Million. Assuming an interest rate of 16% and a 7 year Term Loan with a 2 year moratorium, this would mean that the Boma Hotel will need to make at least Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) of KShs. 320 Million in the first year of operation to pay for the interest cost and from the third year of operation, the Boma Hotel will need to make EBITDA of KShs. 650 Million so as to service both the principal loan amount and interest cost.
This does not sound sustainable and an observation is that in this part of the World, a Debt: Equity Ratio of 50:50 would be feasible so as to ensure sustainable operations.
Unless the Boma Hotel has sources of funds through its donor agencies, charitable goodwill or other, this project in my opinion will run into financial difficulty. If so, I believe this will remain a questionable/unethical use of donor funds.
Ali and Simba - it that is the case, surely then it would make better sense to support this hotel by promoting it rather than knocking it before it's even got it's feet off the ground!
There is a good arrangement with our bank on the payment schedule which is so far working out.
As mentioned above, it will be good to support us so that we can get on our foot steadily and achieve our aim of sustaining the humanitarian services of the KRCS.
Then get the market rates to get business Ali.
From the reports on here, it looks as though they're doing something right. We'll certainly be using it later this year.
It's already at #1!!