Utalii hotel has been closed indefinitely due to economic challenges.
The hotel, long used for tourism and hospitality training, will remain closed until the Kenya Utalii College board and management, in consultation with the Ministry of Tourism, come up with a sustainable and profitable management and operational plan.
A letter by Tourism and Principal secretary Safina Kwekwe Tsungu dated April 20, says the government took the decision because the hotel had become a liability as it does not generate revenue.
Kwekwe said the decision followed a meeting between top ministry leadership and the Utalii College governance body on April 17, this year with the college’s Principal Hashim Mohamed showing reservations on the economic viability of the hotel .
“Following the submissions made by your office, it was noted that it is not viable for the institution to operate the Kenya Utalii hotel as it does not generate revenue and yet depletes the institution’s resource in covering overhead costs,” Kwekwe said in her letter to Mohamed.
Kwekwe directed the Utalii college management transfer all the guest currently staying at the hotel to other hotels or venues.
Also to suffer a similar fate are the two Utalii College satellite campuses in Kisumu and Mombasa which Kwekwe says are not sustainable due to low student enrolment.
“The satellite Campuses in Kisumu and Mombasa are expensive to run yet we do not have enough students to sustain their operations,” she states. Following the closure of the campuses, students will complete all their pending programmes via online learning.
The closure of the hotel and the two satellite campuses comes after years of closure recommendations by the Auditor General due to their economic unsustainability.
In 2017 for example, the then Auditor General Edward Ouko raised the alarm, saying Utalii College was broke after posting a Sh410.5 million loss.
“The college is technically insolvent and its continued existence as a going concern is dependent on financial support from the government and its creditors,” Ouko said in a report tabled in Parliament.
Current liability Ouko then said the college had reported a deficit of Sh410.6 million down from Sh452.6 million that it recorded in 2016.
According to Ouko, the current liabilities balance of Sh3.4 billion at the time had exceeded current assets figure of Sh537.1 million thus resulting in negative working capital of Sh2.8 billion as at June 30, 2017.
Ouko cited the management for failing to comply with the loan agreement signed between the college and the government of Kenya for a loan of Sh140 million.
The loan was advanced to the college in February 1996 to refurbish the Kenya Utalii Hotel. Payments for the loan amounted to Sh13 million as at June 30, 2017 and the accumulated interest amounts to Sh2.9 billion.
“Further, and although the previous year’s financial statements indicated that the college had entered into negotiations with the government to have the loan together with accumulated interest written off, no meaningful progress in this regard had been recorded,” said Ouko in a qualified audit opinion dated August 17, 2018.
Ouko had then cautioned that the operations at the college could come to a stop unless the government issues funds to support the institution.
“The college is therefore, technically insolvent and its continued existence as a going concern is dependent on financial support from the Government and its creditors,” Ouko’s report read in part.
According to the 2015/16 Financial Year report tabled in the National Assembly, the institution recorded an accumulated fund deficit of Sh658.73 million in the past two years, while its current liabilities stand at Sh3.1 billion.
The college is, however, yet to issue formal communication on the matter.