Emerging Trends and Competition in the Kenyan Hospitality Industry

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Hotels, restaurants, coffee shops and other eateries have taken the trend in the capital of Nairobi and they continue to thrive. New investments keep coming up and being established by both the local and foreign investors in and out of the City.

In 2015 and part of 2016, the Kenyan tourism industry became handicapped by a wave of terror attacks which resulted into rising insecurity in the East Africa nation. At the coast where tourism activities are mostly concentrated, more than 40 hotels were shut down temporarily and more than 28,000 workers remained without jobs due to layoffs.

By the end of 2016, the hospitality industry in Kenya had started picking itself up and the number of new strategies was put in place as a way of bringing back the glory in the sector. Stability came back as issues if insecurity were catered for. Normality was experienced and tourists started visiting the country once more. With the steady increase in the number of visitors from within and outside the country, another opportunity was discovered, investing more in the hospitality industry.

This came about as a result of the growing middle class and the country’s elites going for finer things in life, especially foods, drinks, and accommodation. All these called for an upgrade on the hospitality sector so as to meet the needs of the customer. A number of internationally branded hotels opened not only in Mombasa but more of them were put in Nairobi. Different classes of people had their needs catered for as mid-range hotels targeting business travelers who don’t want to spend too much money also increased. There was heightened competition in the industry and players risked losing business if at all they could not up their game.

Over the past year according to the EY Attractiveness Program Africa 2017 Report, foreign investors tended to gravitate toward the larger, more diverse economies in Africa. These include South Africa in the south, Morocco, and Egypt in the north, Nigeria to the west and Kenya in the east. Collectively, these markets attracted 58 percent of the continent’s total FDI projects in 2016. Given that these markets are the dominant anchor economies in their respective regions, they provide investors with greater scale and relatively more mature markets.

Kenya, which is East Africa’s anchor economy (and SSA’s fourth largest), saw investment flag in 2016 after a bumper year in 2015. FDI projects were down 57.9 percent, while capital investment declined by 55.5 percent. However, if we take a longer-term perspective, FDI into Kenya has tended to ebb and flow year-on-year, similar to the experience of Nigeria. Additionally, Kenya had a strong 2015, mainly driven by a surge in projects from the UK. These understandably slowed in 2016, as the UK copes with uncertainty following the vote to leave the EU. Our confidence in Kenya’s investment prospects remains firm, underscored by the country’s strong ranking as the second most attractive FDI destination on the AAI 2017.

Increased businesses in the hospitality industry are as a result of Nairobi being a regional investment hub. More 10 hotel chains have already been opened in Nairobi in the course of the year and more are expected to open businesses in the country this year. They include Pullman, Park-Inn and Best Western in Westlands, Lazizi Premiere and Hilton Garden Inn near the Jomo Kenyatta International Airport. This in itself brings about competitions in the hospitality sector where the best of the best are the ones grabbing the biggest share of the market.

The more (hotels), the merrier. It gives more variety and options. The international hotel chains must have done a feasibility study before setting foot in Nairobi. The recent development coming up as a result of a competitive hospitality industry is the acquiring of Kenya’s Java House by Dubai-based private equity investor, The Abraaj Group.

According to Abraaj Group Managing Partner and Global Head of Private Equity Mustafa Abdel-Wadood, the move to take over the coffee house is so as to expand Java’s well-known culture and products across the East African Region and beyond.

“The rapidly expanding middle class and increasing urbanization trend creates compelling investment opportunities in multiple sectors, and we believe Java House is ideally positioned to benefit from these trends,” said Mustafa.

Java House Group was established in Nairobi in 1999 by Mr.Ashley who later sold a controlling stake to ECP in 2012, thereby raising fresh capital to boost the Java brand presence from 13 shops in Nairobi the current 60 stores across 10 cities in Kenya, Uganda, and Rwanda.

Java boasts of three flagship brands, Java House, (a coffee specialty service), Planet Yogurt (East Africa’s first self-service frozen yoghurt chain) and 360 Degrees Artisan Pizza, an upmarket Italian pizzeria concept.

Java House also operates commercial coffee roasteries providing quality coffee and bean sales to its own stores and to supermarkets, hotels, restaurants and wholesale buyers.

Java House currently serves about 320,000 guest checks per month and has 2,000 workers.

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Vera Shawiza

Vera Shawiza is Soko Directory’s in-house journalist. Her zealous nature ensures that sufficient and relevant content is generated for the Soko Directory website and sourcing information from clients is easy as smooth sailing.Vera can be reached at: (020) 528 0222 or Email: [email protected]