Current State of the Kenyan Tourism Sector

By Soko Directory Team / Published October 17, 2016 | 9:55 am

Kenya has one of the biggest and most diverse tourism industries in East Africa, with offerings in a range of niches including the meetings, incentives, conferences and events (MICE) segment and safari ecotourism. Investment in Kenya’s hospitality sector has increased over the years, driven majorly by investor appetite to tap into the demand for accommodation brought about by tourism, leisure and business travel.

There has been significant growth of MICE tourism, creating demand for conferencing facilities mostly driven by Nairobi’s stature as a regional hub. However, performance in the hospitality industry has been greatly affected in the last five years partly due to security risks posed by terrorism as well as travel advisories by Western countries. This has contributed to the decline in bed night occupancy, international arrivals and tourism earnings as shown in the table below

The sector has however shown signs of recovery boosted by lifting of travel advisories, improved security, recent foreign missions and hosting of multi-national conventions. According to the Kenya National Bureau of Statistics, a 9.6 percent increase in the number of tourist arrivals was recorded in Q2’ 2016 from Q1’ 2015, while the accommodation and food services sector grew by 15.3 percent in Q2’ 2016 compared to the 5 percent decline recorded in Q2’ 2015 highlighting the possibility of improved performance in the hospitality sector in 2016.

The hospitality sector has recorded increased investment as seen through the establishment of hotel and serviced apartment developments. Hotel bed supply has been increasing at a 3 percent CAGR over the last 5-years, while the supply of serviced apartments in Nairobi alone has grown at a CAGR of 23.6 percent over the last 4 years.

Serviced apartments have become increasingly popular in the market, with Nairobi alone having more than 60 brands of serviced apartments with more than 2,500 apartment units. Increased supply of serviced apartments has largely been boosted by a number of factors including their relative affordability compared to hotels, home away from home feel, security and the fact that they tend to have more space than hotel rooms.

In Nairobi alone, Westlands has the largest supply of serviced apartments with a 38.7 percent market share, followed closely by Kilimani at 24.0 percent. These areas are attractive to both clients and investors due to the proximity to CBD and the presence of several corporate offices hence availability of a ready market especially from the expatriate community.

Some of the hotels in the development pipeline include Park-Inn by the Carlson Rezidor Hotel Group in Westlands, Best Western’s Premier Collection, The Alba and the City Lodge at the Upcoming Two Rivers Mall, which are expected to add 253 hotel beds to the supply over the next 1 year. This is an indication of appetite for investment in hotels in Nairobi.

However, the performance of the hospitality sector in the country has been on the decline with occupancy levels, international arrivals and Total Revenue per Available Room declining by CAGRS of 7.8 percent, 10.3 percent and 5.8 percent, respectively, over the last 5-years. The decline is attributed to insecurity brought about by terrorist attacks, which in turn led to issuance of negative travel advisories, thus lowering demand for accommodation and other hotel-related services.

Other challenges affecting the sector include heightened competition from both local and emerging markets in the region such as Ethiopia, with relatively low room rates.

Read: Tourism Rebound, New Markets Boost Kenya’s Private Sector Growth in September

About Soko Directory Team

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