In this inspiring interview, CPA Christopher Karuru, the Group Financial Controller at Serena Hotels,shares insightful views on the hospitality industry’s financial inclinations and stresses the importance ofstrategic planning and adaptation to evolving market dynamics.
He offers valuable advice on maintaining financial stability and growth and encourages innovative solutionsto manage downturns. His optimistic outlook on the industry’s recovery shows how a company canprogress with suitable approaches and attitudes.
In addition, he encourages accountants to keep honing their skills and embrace technology rather thanfight it, noting that continuous learning makes one more productive and knowledgeable and puts oneahead of the pack.
CPA Karuru advises fellow managers to seek the views of their colleagues, regardless of their positions, and they will be glad they did.
The Group Financial Controller explains that they stay ahead of their game by ensuring compliancewith the ever-changing laws in all the countries they operate in. They manage this through regular stafftraining and keeping up with new standards, among other things.
Below is the Q&A with CPA Christopher Karuru, Group Financial Controller, Serena Hotels.
Q. TPS Eastern Africa PLC (TPSEAP) owns several subsidiaries and trades as the Serena Hotels brandfor Africa. There is also the Serena Hotel Group in Pakistan. Is there any similarity in financial management between the Africa Group and the Pakistan Group?
A. Yes, Serena Hotels operates 22 hotels, resorts, lodges, and camps in Kenya, Tanzania, Zanzibar, Uganda, Rwanda, the Democratic Republic of Congo and Mozambique. As an international hotel brand, we focus on standardizing financial management practices in all countries.
Q. TPS Eastern Africa PLC has subsidiary companies in Kenya, Uganda, Tanzania and Zanzibar and associated companies in Rwanda and Tanzania. TPSEAP also manages hotels in Uganda, Mozambiqueand the Democratic Republic of Congo. How many hotels does TPS own, how many hotels does itmanage in each of these destinations, and how big is your finance team?
A. TPS Eastern Africa PLC owns and manages the following properties;
- Seven properties in Kenya: Nairobi Serena Hotel, Serena Beach Resort and Spa, Mombasa, Amboseli SerenaSafari Lodge, Mara Serena Safari Lodge, Kilaguni Serena Safari Lodge, Sweetwaters Serena Camp, andLake Elmenteita Serena Camp.
- Eight properties in Tanzania: Arusha Serena Hotel, Lake Manyara Serena Safari Lodge, Ngorongoro SerenaSafari Lodge, Serengeti Serena Safari Lodge, Serena Mivumo River Lodge, Mbuzi Mawe Serena Camp,Kirawira Serena Camp and Dar es Salaam Serena Hotel.
- Zanzibar Serena Hotel, in Zanzibar.
- Kampala Serena Hotel and Lake Victoria Serena Golf Resort and Spa in Uganda.
- Kigali Serena Hotel and Lake Kivu Serena Hotel in Rwanda.
- Polana Serena Hotel in Mozambique.
- Goma Serena Hotel in the Democratic Republic of Congo.
That’s 22 properties across Africa covered by a finance team of 280 employees.
Q. Managing the finances of a large number of hotels and maintaining world standards must be a dauntingtask. How does TPSEAP manage to do this?
A. Serena Hotels is a revered brand best known for its 5-star standards. The team maintains these standardsthrough constant training, proper planning, clear communication channels, and leveraging on technology to provideaccurate and timely reports to make informed decisions.
Q. What are the international best practices and trends in managing hospitality finances, and how are youleveraging technology?
- Hospitality finance, like any other industry, entails optimizing revenues while managing costs and cash flows. The main revenue streams are rooms, food, and beverages. We, therefore, apply dynamic pricing strategiesthat adjust room rates based on demand, competition, and other market factors. This entails data analysis toforecast demand and optimize pricing.
- Close monitoring of budgets while implementing cost-saving measures without compromising on servicequality will go a long way toward ensuring costs are managed efficiently. For example, TPSEAP ispassionate about energy conservation, because heat, light, power, and water form a large
cost line item coupled with efficient waste management measures in the food and beverage departments.
- Focus on working capital management to ensure optimized cash flows availability across the group.
- As TPSEAP, we have embarked on a journey of further technological integration. We are currently in theprocess of upgrading our accounting system to a more robust Enterprise Resource Planning (ERP) system that responds to our dynamic operating structure. Our strategy also includes upgrading the CustomerRelationship Management System (CRM) and migrating to cloud computing, just to mention a few. So yes, there are interesting times ahead of us.
Q. Please give us an insight into the critical aspects of hospitality financial management.
A. Financial reporting and analysis; To produce accurate and timely reports, regular financial reviewsmust be conducted. During these reviews, crucial Key Performance Indicators (KPIs) must be determinedto monitor the business’s financial health and make informed decisions. For example, the KPIs for roomrevenue are occupancy and the room rates charged.
- Risk management; Risk has a broad spectrum. The Serena Hotels properties cover a wide geographical area and are exposed to various risks, therefore, it is important to ensure these arecomprehensively insured from damage, disruption of business, and liability claims. It alsorequires ensuring the group is compliant with the various tax and statutory requirements in eachjurisdiction and continuously planning for unforeseen emergencies.
- Digital transformation; We have leveraged technology to improve operational efficiency through automation of repetitive tasks and, thus, reducing the risk of human error.
Q. The recent past has been a challenging period for the hotel industry: President Uhuru Kenyattaannounced the first case of COVID-19 on March 12, 2020; in April 2020, six visitors from abroad visited Kenya. Could you take us through the financial journey that TPS has travelled from that time to thepresent, indicating whether the wars in Ukraine and Gaza have also affected your business?
A. This was a challenging period for the hospitality industry as a whole. The lockdowns and travel restrictions meant that business dwindled in all our properties. Management had to take drasticmeasures to ensure business continuity. These involved shutting down some properties for severalmonths, renegotiating terms with our suppliers and financiers, restricting capital expenditure toessential items only and payroll sacrifices. As these were unprecedented situations, we had to navigate through such harsh conditions with support from shareholders, financial partners and Governmentinitiatives to save businesses from crumbling. The Ukraine and Gaza wars have affected the supply chains ofvarious products, resulting in delays and increased prices of imported goods.
Q. Is business today back to 2019 levels? Are occupancy rates back to how they were in 2019, or are they even better? Is the outlook good for the short-term future?
A. Fortunately, yes. Business activity and regional arrivals increased to 2019 levels in 2023. TPSEAP reported itshighest profit in 2023, and we are cautiously optimistic about the business levels remaining positive.
Q. Can you tell us about any recent financial projects or plans you have implemented to augment financialperformance, particularly within the African operations?
A. We are revamping our properties to ensure our guests have the best that Serena Hotels has to offer. Thisincludes upgrading room facilities, guest experience services, food and beverage offerings, and technology.
Q How do you ensure compliance with local tax regulations and reporting requirements in the African countrieswhere Serena Hotels operate?
A. We pride ourselves on being tax compliant in all jurisdictions by working very closely with respective revenue authorities. We also partner with reputable consultancy firms that train our finance teams on any regulatory changes and perform tax health checks to ensure we keep our house in order.
Q. Could you discuss the financial performance of TPS Eastern Africa PLC in the African market over therecent past? What will be the main drivers of revenue in the future?
A. TPSEAP has had an upward trajectory in its performance since the pandemic; this is mainly driven bysignificant growth in business volumes from domestic and regional markets spanning leisure, corporate travel,events, and functions.
- Serena City Hotels remained the preferred venue for high-profile events, governmental and diplomatic functions.This trend is expected to gain further momentum in 2024 and beyond.
- We continue strengthening and building new relationships with local and international business suppliersthrough dynamic and aggressive marketing and sales strategies to grow our market share and achieve anefficient business mix with optimized yields.
Q. How do you manage currency exchange variations when operating in various African countries?What financial risk management strategies are in place? Does the volatility in the rate of exchange present difficulties in doing business?
A. TPSEAP operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily the US Dollar.
- Exchange rate volatility is minimized by adopting natural hedges, such as holding cash balances in foreigncurrencies to hedge against any foreign currency-denominated amounts payable.
- Foreign exchange risk is also mitigated by converting the foreign currency collections into localcurrency on an ongoing basis to cater for operational requirements.
- In addition, TPSEAP receives collections in foreign currency to a greater extent, and any future foreign currency commercial transactions are settled in the same currency to avoid the effect of swinging exchange rates.
- Currency exposure arising from the net assets of foreign operations is managed primarily through borrowingsdenominated in the relevant foreign currencies.
