"We have found 12 bodies so far after we managed to access the building," a senior police officer told AFP. "We are still combing the area with the help of anti-terrorism police and sniffer dogs in the ongoing search and rescue."
Eleven men and one woman were killed in the 3:30 am blast at the Bisharo lodge, a police source told AFP. The toll was confirmed in a government statement that said part of the building was collapsed by the blast.
Kenyan media reported that some of the dead were members of a theatre group due to perform for school children in Mandera. The Al-Qaeda-linked Shabaab militant group claimed the attack in a message broadcast by its Radio Andalus media organisation, claiming 15 were killed.
"This attack is part of a series of attacks in which the Mujahideen are hunting down infidels" in northeast Kenya, the group said. It is the second Shabaab strike in Mandera in three weeks.
The previous one on October 6 killed six people at a gated residential building that mainly housed non-Muslims, less than a kilometre from the volatile Somalia border town of Beled Hawa. A Shabaab suicide bomber also attacked an African Union military base housing Djiboutian soldiers in the central Somali city of Beledweyne.
It is not known how many were killed in that attack which comes as Somalia is in the process of selecting parliamentarians, and a new president, due by the end of November. Mandera governor Ali Roba said the raids in Mandera were designed to divide communities and destroy the economy.
"This is an attack that is aimed at making sure we don't attract investors, we do not attract a professional workforce, we do not have interaction with the rest of the country," Roba told a press conference on Tuesday morning.
Northeastern regional security boss Mohamoud Saleh said he suspected "local criminal gangs" of complicity since border security had been stepped up after the October 6 attack.
Another security source who did not want to be named told AFP local politics might also be involved, with some seeking to trigger a declaration of a state of emergency that would prevent elections taking place as scheduled next year.
"There is serious political tension in the county," the source said. The Shabaab has fought to overthrow the internationally-backed government in Mogadishu since 2007, but turned its sights on Kenya when the army was sent into Somalia in 2011 to fight the Islamic insurgents.
Since then the militants have targeted civilians in different parts of Kenya, including a dramatic assault on Nairobi's Westgate shopping mall in 2013 in which at least 67 people were killed.