Kenya to Experience a 9.6 Percent on Hotel Room Revenue, says PwC

Kenyan hotel room revenue is expected to experience a 9.6 percent growth in response to a rising number of domestic and foreign business and leisure visitors.

Pricewaterhouse Coopers’s (PwC) 2018–2022 Hospitality outlook projects that that in Kenya, guests will stay longer and occupancy rates will improve. Guest nights are projected to increase from an average of 3.6 million in 2018 to 4.6 million in 2022, and occupancy rates should increase from 49.3 percent in 2018 to 58.1 percent in 2022.

Over the next two years, Kenya will also benefit from a number of new hotels opening, including hotels from Hilton, Radisson Blu, Pullman, Best Western, and Mövenpick. Some 1 800 rooms will be added over this period.

Over the five year forecast period, 13 hotels will enter the market, adding a total of 2 600 rooms and thereby accounting for a 14 percent increase in hotel capacity and a 2.6 percent compound annual increase in room availability from 2017. The combination of new hotels, more flights to Kenya, stronger economic growth, lower inflation and, most importantly, greater security should contribute to growth in guest nights.

PwC further project guest nights to rise at a 6.9 percent compound annual rate during the next five years. The combination of increased supply and reduced demand led to a drop in ADR in 2017. With occupancy rates have fallen below 50 percent, there is expected an additional decline in ADR in 2018, followed by modest increases thereafter.

The audit and financial advisory firm project room rate growth to average 2.6 percent, compounded annually through 2022.

The company expects the average occupancy rate to rise to 58.1 percent in 2022, up from 47.3 percent in 2017 but still well below the 62.3 percent rate in 2012.

The tourist market in Kenya had an up-and-down year. After falling a cumulative 31 percent between 2012 and 2015 as a result of terrorist attacks and travel advisories discouraging travel to Kenya, international arrivals rose 13.7 percent in 2016, reflecting the retraction of negative travel advisories.

That momentum continued in 2017, helped by the launch of the Standard Gauge Railway (SGR), which makes traveling within Kenya much easier and less time consuming; the opening of new international hotels; and a period of peace and security, all of which made Kenya an attractive destination once more. Growth was temporarily interrupted in late 2017 when the Supreme Court overturned the August 2017 Presidential election, creating a new period of uncertainty.

Tourist arrivals rebounded in December, however, and overall growth for the year averaged 9.9 percent. Real GDP growth slowed to 4.7 percent, the smallest increase since 2012, and inflation jumped to 8.0 percent, the highest level since 2012.

Hotel guest nights, which were on track to grow at a rate of 6 percent, fell 19 percent during the latter part of the year, leading to an 8.3 percent decrease for 2017 as a whole.

The ADR also declined, falling 5.7 percent, which further depressed the hotel market, leading to a 13.5 percent decline in hotel room revenue in 2017.

Kenya should also benefit from a new policy that will allow visiting Africans to obtain visas upon arrival, making it easier and more convenient to travel to the country.

PwC expects tourist arrivals to Kenya to increase 8.8 percent in 2018, building on the pickup in December 2017. Going forward, assuming a period of relative stability, we expect tourism to Kenya to increase at a 6.9 percent compound annual rate, rising to 2.06 million in 2022 from 1.47 million in 2017.