Nairobi Hotel Market Outlook April 2016 Demand Nairobi has well balanced hotel demand of international and domestic corporates, government, NGO, diplomatic and international leisure. We forecast this to grow at 7%-9% per annum from 2016-2020 with a high downside risk in the event of further terrorist related events. Arrivals to Nairobi decreased by 9.5% during 2015, impacting on hotel demand. Supply Current quality hotel supply in Nairobi is provided by 54 sizeable hotels with a total of 6,936 rooms. Branded supply makes up 43% of this with more global brands entering the market. A high level of new supply of 4,354 keys is due to enter the market between 2016-2020 creating oversupply. Performance In 2015 Nairobi hotels achieved an occupancy of 53.8% (-1.1%) and an average daily rate of USD 143 (-0.5%*). Occupancy led the RevPAR decline, falling -1.6% with the decrease in tourist arrivals in the first half of 2015. This occupancy remains one of the lowest in the region. Investment Nairobi has seen high quality new supply enter the market during the past five years including the Kempinski Villa Rosa, Crowne Plaza, Radisson Blu and Best Western Premier. Funding for hotels is primarily through local promoters with wide interests across numerous economic sectors. Equity is generally sourced from a number of private investors partnering in different deals, whilst debt is predominantly raised from local banks with the support of the promoter’s broader balance sheet. International capital has been slow to enter the market as the local players have been quicker to take the opportunities. We expect global investors to come into the market when acquisitions arise, although a long term view will be required. Outlook The security challenges and negative travel advisories have hit Nairobi hard during the past years and the lifting of these pressures will provide additional demand growth. Nairobi is firmly positioned as the preferred regional headquarter location in East Africa, which will continue to drive demand, coupled with a growing regional economy. Short term hotel investment returns will be affected by oversupply and we may see some distressed assets entering the market. With the saturation of the 4- and 5-star markets in Nairobi developers are looking to the budget and serviced apartment segments in Nairobi and into the provinces for new hotel opportunities. Liquidity may improve in the next three years yet remains low. Key recent openings Radisson Blu Golden Tulip Key future openings Tune Hotel Hilton Garden Inn JKIA Park In Pullman Ramada 54% Occupancy* 523 New rooms in 2015 143 USD ADR* 77 USD RevPAR* *STR Global, 2016 The capital of the world’s safari haven, home to the regional headquarters of numerous multi- nationals and major NGO’s, Nairobi continues to be an important gateway city to the high growth East Africa region. Aside from business and conference tourism, Nairobi benefits from being the major entry point for leisure travelers to the region. With a reduction in terrorism events, continued stability and high anticipated regional economic growth, Nairobi is seeing a significant number of new hotels being developed. Kenya