Hope for the hotel industry amid uncertainity

29 Mar

Hope for the hotel industry amid uncertainity

Kenya is still, but no longer JUST, a top Safari destination. Even amidst political and economic uncertainty, the country is emerging as a promising Business Tourism and MICE (meetings, incentive, conference and exhibition) market for both the local and international consumer.

In the past year, stakeholders in the Kenyan tourism and hospitality industry have swayed between two opposing and extreme outlooks. On the one hand, the major threats to their trade have included the recent political instability, and in a macro sense, a general slowdown in the global economy. On the other hand, projections on the Kenyan economy and the hospitality industry’s performance spell confidence.

Effects of the economy on the hotel industry

IMF’s World economic outlook reports a global recovery of 3.7 percent for the year 2018 (this is compared to 3.6 percent in 2017 and 3.2 percent in 2016). The IMF adds that 2018’s positive outlook is largely influenced by emerging markets and developing economies – of which Kenya is one – where growth in per capita incomes has stalled for the past two years but set to improve in 2018.

It has been a period of mixed fortunes for the Kenyan economy – with a reported slowdown from 5.8 percent in 2016 to 5 percent for the better part of 2017. The slug was mainly due to drought, a prolonged campaign and election period, and a reduction in credit growth partly caused by the cap on commercial banks’ lending rates.

But like in the global arena, forecasts indicate a rebound in 2018. The Kenyan government foresees a 6 percent growth, moving towards 7 percent in the medium term, while international watchers such as the African Development Bank Group projects a growth of 5.6 percent in 2018 and 6.2 in 2019.

A promising local industry

In periods when international tourism has suffered, domestic tourism, buoyed by a middle class with growing earning power, has been a major mitigating factor. In the 2017 festive season, hotels recorded an 80 percent booking in the coastal region – with 60 percent of the booking coming from domestic tourists. Even though cottages and apartments record the highest number of both local and foreign tourists, luxury hotels are still popular. For example, in the same period, Sarova Whitesands Beach Hotel reported that 85 percent of its visitors were domestic.

The Chinese built Nairobi-Mombasa Standard Gauge Railway had a lot to do with the ease of domestic travel to the Kenyan coast. Similarly, a devolved government and commerce across counties has increased local business travel – with a reported increase in commercial travel between major towns across Kenya.

International investment

Politics and all, ‘resilient’ is one word that has been used to describe Kenya’s economy.  In fact, Kenya has moved up 12 places to a ranking of 80 in the World Bank’s 2018 Doing Business Report, with multinationals scrambling for space to put up their African headquarters. Chinese companies for example, have especially outdone themselves; throwing their weight behind investments in food production, aviation, construction, motor and hotel industries.

The country has remained a regional hub for information and communications technology, financial and transportation services, making it (as opposed to its regional neighbors) a promising destination for international business. A rising middle class, urbanization, devolution, the construction industry, access to the port of Mombasa, a skilled workforce and global air travel connections are just some of the reasons Kenya remains the gateway to East Africa. All this has created an opportunity for services for the international business traveller, with local and international investors stepping up to cater to that.

Top luxury destination

The business traveller aside, Kenya is still a notable destination for the leisure traveller, remaining one of the top-10 destinations in Rough Guides – a travel guide book series popular among western travellers. Early last year, the country was (for the fourth time) named the world’s top safari destination at the World Travel Awards in Vietnam.

In the second half of 2017, in the same period the country was facing heightened political tensions, it nevertheless managed to clinch prestigious titles at the World Luxury Hotels Awards 2017. The recognitions were for Africa’s leading national park (Maasai Mara), Africa’s leading Tourism Board (Kenya Tourism Board won it for the 6th year running), Africa’s best luxury adventure destination and luxury tented safari camp (Sarova Mara Game Park), best luxury hotel in the continent (Sarova Stanley) and the best Luxury spa resort (Sarova Whitesands).

Even with election jitters, the number of international tourists in the first nine months of 2017 rose by 10 percent to 720376 compared to the similar period the previous year. The 2017 awards are a ringing endorsement of the hospitality industry, a marketing tool that might see international tourist arrivals increase in 2018.

The future looks grand

If investors in the hospitality industry weren’t confident of Kenya’s growth trend, they wouldn’t have their eyes set on the region as they currently do.  The question of where to stay in Nairobi is bound to grow exponentially in it’s array of options. A total of 16 global hotel brands are set to open in Kenya in the next five years – adding 2900 rooms, expanding hotel capacity by 14 percent, with a 2.7 percent annual compound increase. The Marriot, Raddison, Best Western, Sheraton, Ramada, Hilton Garden Inn, Movenpick and Four Points by Sheraton are just some of the luxury hotels in Nairobi that have newly opened, are under construction and/or are planning expansion in Nairobi.

Other than an overall resilient economy contributing to international investor confidence, interest in the hospitality industry is partly due to a lifting of travel advisories and government incentives (such as the removal of visa fees for children, removal of VAT on and overall reduction of park fees and a waiver of landing fees on chartered flights.).

All in all, as long as the Kenyan ‘climate’ remains somewhat manageable, it looks like both the local and international consumer is willing to place money in one of the country’s most notable revenue earners. The hotel and hospitality industry is thus poised to be a close and interesting watch.