Lilian Lagat is a woman who set up her real estate and property management business in 2007. In six years she became successful and reliable business person. Now she wants to make a right decision to invest her money into hotel business in Eldoret town, Kenya. Earlier Eldoret was a capital of Kenya and now is the largest town in western Kenya. It is on the 15th place among large cities in the whole country. The population is pretty high and there is Moi University in Eldoret with 32000 students. Meanwhile, the railway connection point between Kenya and Uganda located in Eldoret with one of the largest airport.
Lilian has already built good brand name and does not want to lost it due to competitors agressive behavour and real estate situation in Eldoret. Now she has to options to invest her money; first, is o buy a building in the centre of the town, but there is no space for parking there and no chance to set up any shops on the first floor. Also, to buy a building there, she will need to get a bank loan under 10% annual interest rate. According to her expectations and calculations, she will be able to pay the loan in five years. The second option is to buy a land in outskirt of town and build a hotel by herself with 30 cars capacity parking and swimming pool. Also, Lilian is still thinking about the class of the hotel, will it be the middle-class or upper-class hotel. The problem of the second option is that the demand of outskirts is lower than in downtown area and it will take more time to start earn money by building a new hotel than to buy it and just renovate.
The solution for the case was made according to brainstorm, SWOT analysis and calculations. The final decision was made for the first option, to buy a building in the centre of town and renovate it, because it is good long term investment, it will bring huge revenue in short period of time and prove the company's name.
The case «LILGAA PROPERTY MANAGEMENT: PROPERTY INVESTIING IN ELDORET, KENYA» is about a self entrepreneour Lilian Lagat and her successful business in the real estate area. She has established Lilgaa Property Management Ltd. (Lilgaa) in 2007 and in six years has alredy became a good business women. According to Kenya situation in 2007, Lilian was on the right place and on the right time when she started her company. The violence broke out after president's re-elections and decreased the country's economy, which also has influenced on the real estate market via reducing prices on property and land. Also, M-Pesa took a start in 2007 that influenced on growth in private businesses including buildings, manufactorin, constructions, service sector and etc.
Now, in May 2013, she seeks a difficult situation with choosing the right option to invest her large amount of capital available on hand. Lilian has already reached her good reputation on the market as a reliable property manager and built up strong relationships with people wjo are helping her in the business.
Define the Problem/Opportunity
The problem in the case is to decide how to make investment on the right way. Lilian has two options and to make a right decision she needs to overview each option carefully. The first option is to buy a building in Eldoret town centre and renovate it into a middle class hotel. The problem is that her capital won't allow her to buy the building immideatelly, so Lilian has to go to the bank and get a loan of 50 million under the interest rate of 10% annually. Also, the building territory doesn't provide any parking space and it is impossible to place shops and stores on the first floor without building ruining. The opportunity to place the hotel in the downtown of Eldoret is that 61% of country economy go from tourism sector and there are always a lot of people in the centre of town.
The second option is to buy a land in the outskirt of town and build middle -class or upper-class hotel with swimmimg pool. Advantages