InterCon rots away two years after grand slump
Monday March 20 2023
A lone guard, a rusting gate and an eerily vacant compound are what greets a visitor to one of the fallen hotel giants in Nairobi.
Nearly three years after it crashed out of business, Hotel InterContinental Nairobi looks like the sole surviving building of a ghost city.
The parking that housed luxury vehicles daily is now dusty, empty with broken concrete giving way to blades of grass after months of disuse.
There is scanty evidence that this property at the heart of Nairobi has hosted any activity in months. There is even less indication it will in the foreseeable future.
The hotel’s long and eventful journey began in 1947 when Intercontinental Hotel Corporation (IHC) signed a lease with the owners of the building, Kenya Hotel Properties Limited (KHP).
According to the agreement, the hotel was to occupy the building for 99 years. For 73 years, the facility called this edifice at the city centre its home.
Only a walking distance from Parliament, City Hall and Harambee Avenue that sit the country and county’s power, its ideal location, heritage and reputation preceded it.
On a normal day, its massive lobby would be humming with activity as politicians, power brokers and professionals alike met for talks, to cut deals and to party.
In the 1980s, then Vice President George Saitoti hosted foreign dignitaries at the hotel, signing deals on behalf of the government.
Indeed, some MPs had in the InterCon a second home, walking here for breakfast with associates, staying on for lunch and, sometimes, even dinner. Many of them boarded here.
Thanks to its international appeal, visiting leaders and businesspeople would stay at the 389-room facility. It was conveniently situated, secure and classy.
When US President Barack Obama visited Kenya in 2015, the hotel was chosen for the State dinner. On multiple occasions, late President Mwai Kibaki hosted State banquets here.
Externally, InterCon gave the impression of a thriving business. After all, guests were coming in droves, service remained impeccable and the staff kept their smiles on.
Internally, things were skidding fast and heavy. Its housekeepers and internationally-accredited chefs had been leaving for greener pastures.
Read: Moi allies seek end of InterCon hotel business
This was absurd for a hotel that had been the model employer for decades, attracting the best talent on the market.
Staff exits were also the first signal that InterCon was buckling under financial and management.
‘‘All the guys I knew left. They [brought] in new people,’’ reveals a former senior chef at the hotel who did not wish to be named.
‘‘We relied heavily on large functions for business. This was our speciality. When Covid-19 came and events were suspended, it was difficult to stay afloat,’’ a former manager at the hotel says.
The hotel’s woes, though, had begun long before the pandemic. Covid-19 only came to expose how the giant was dying.
In 2019, InterCon had been declared ‘‘technically insolvent’’ by the Tourism Finance Corporation, which holds the government’s stake in the property.
In a letter to the Privatisation Commission (PC) in February 2019, chief executive Jonah Orumoi lamented that the business was on its knees.
The hotel was, for instance, unable to repay a debt of more than Sh700 million owed to Stanbic Bank.
‘‘KHP is not able to service its long-term facilities as they fall due. [This has] attracted huge interest and penalties,” Orumoi wrote.
Tellingly, the hotel also did not have insurance for incidents such as fire, putting its sizeable assets in peril.
Orumoi’s appeal to the commission was to dispose of the property with urgency. Meanwhile, Stanbic threatened to have the hotel blacklisted by the Credit Reference Bureau (CRB) as other creditors wanted to unleash auctioneers on the business.
But if indebtedness had drilled a hole in the hull of this ship, its failure to move with the times had sealed its fate.
While it was struggling to survive, other emerging properties such as Radisson Blu, Villa Rosa Kempinski and Tribe Hotel were mushrooming in Nairobi’s cityscape, taking the hospitality battle to InterContinental’s doorstep.
‘‘These new properties were coming with better, modern facilities. InterCon remained the same. The place just could not compete with the emerging players,’’ another former manager at the hotel observes.
For 10 years until 2019, the facility had not made profits. In 2018 alone, it made Sh113 million in losses. At the time, its liabilities had exceeded its income by more than half a billion shillings.
By then, the global parent company, Intercontinental Hotel Corporation, had cut ties with the Nairobi franchise owing to the latter’s troubled balance sheet, setting it on a free fall.
In August 2020, the hotel sent its staff packing. The grand InterCon had finally given up the battle for survival, its imminent death hastened by the Covid-19 pandemic.
By shutting down, the hotel had sunk the livelihoods of hundreds of suppliers and service companies they did business with.
Parliament had in 2012 approved the government’s plan to exit the hospitality industry by shedding its stake in hotels, lodges and beach resorts. Many of them across the country had been operating at losses.
If successful, the move would see the State sell its 33.8 percent stake in the hotel, 40.57 percent in Hilton Hotel and 39 percent in Mountain Lodges Limited.
After the exit of the Grand Coalition government, the Jubilee administration of President Uhuru Kenyatta dragged its feet to sell the hotel despite its struggles and continued accumulation of debt.
Attempts to sell the government’s shareholding in 2015 would run into headwinds after the buyers, Sovereign Group, quoted a price lower than the market rate.
The group that is linked to the family and friends of former president Moi owns some shares in the hotel.
There is little evidence the government is determined to effect this transaction once and for all.
In 2021, KHP further complicated the government’s seemingly half-hearted desire to sell the hotel when the entity sought to lease out or convert the building into a mixed-use property.
The conversion would see the InterCon become an office block with shops, restaurants and other businesses.
Two years later, hundreds of its rooms remain unoccupied as the facility rusts away, with debt and maintenance costs soaring.
There was more confusion to come. That same year, former Treasury Cabinet Secretary Ukur Yatani wrote to the Tourism Finance Corporation, ordering the entity to cease all its operations, including payment of loans.
Mr Yatani sought to disband TFC and merge its operations with those of the Industrial Commercial Development Corporation (ICDC) and IDB Capital.
Together, the institutions would form the Kenya Development Corporation.
The proposed merger that would see the new body take over the assets and liabilities of the trio was part of parastatals reforms initiated by Kenyatta’s government in 2014.
When the trustees of the hotel’s pension scheme obtained approval from the Retirement Benefits Authority (RBA) to wind up the scheme in 2021, there was no turning back.
The hotel and everything about it were officially leaving the scene.
The scheme would appoint Kingori Kimani & Company to liquidate the Sh115 million due to its members at the time.
‘‘This is to notify any person including past scheme members who may have any claim against the scheme to submit such a claim,’’ read the liquidator’s notice to members at the time.
Lawyer Kimani Kingori reveals to the Business Daily that the majority of the hotel’s staff had received their pension by the time of the closure.
‘‘We have been tracing and processing the pension benefits due to the members and beneficiaries of deceased members as per the law since we were appointed,’’ Mr Kingori adds.
Read: InterContinental closure derails hotel sale to Moi cronies
With their favourite hideout long gone, MPs and other leaders now drive to restaurants along Wabera, Muindi Mbingu and Kaunda streets for their rendezvous, causing traffic congestion at the city centre during daytime.
InterCon was a giant among equals. Today, as other giants roam the market, the InterCon slithers away, quite tragically, into oblivion and with it a rich heritage, and stories told and untold, tucked away in the walls of hundreds of its rooms.