Occupancy forecast for Kenya shows lower demand for at least two more years

PWC REPORT PROJECTS 2 YEARS OF LOWER OCCUPANCIES FOR KENYA

(Posted 24th June 2014)

A new report just released by financial consultancy and audit firm PriceWaterhouseCoopers titled ‘Hospitality Outlook 2014 – 2018’ paints a challenging picture for Kenya’s hospitality industry, as data contained in the report suggest at least two years of lower occupancies in the capital Nairobi, at the coast and across the country.

The situation in Nairobi will be made more difficult for existing hotels as a number of new projects will be maturing in coming months and also next year, with among others Dusit from Thailand opening a new 5 star hotel by July this year, intensifying competition in the sector which may well result in attempts to secure occupancies over lower tariffs which however is not sustainable over a longer period of time before resulting in lower standards.

The report cites Kenya’s record tourism year 2011 with an average country wide occupancy rate of just over 66 percent, a figure which fell over the next two years and is expected to only come up with a 55 percent average occupancy this year. Additional data suggest that occupancies for 2015 and 2016 will fall further to just 53 percent before a slight rise in 2017 back to the 55 percent margin, considered borderline for financial viability. The PWC report also projects an overall rise of available hotel beds from presently just under 18.000 to about 19.500 in 2018 mainly due to already ongoing projects, while apparently the licensing of new projects has considerably slowed down over the past few months.

The Kenyan government regularly cites security issues as a reason for the decline, but it has also done little to engage in big league marketing of the country and make preferential financing available to upgrade and modernize resorts at the coast and elsewhere in the country, a reason preferred by sections of the local and international tourism sectors. Tax decisions too have put a damper on growth, as Kenya against the trend levied a 16 percent VAT on tourism products, affecting demand for holidays in the country.

Already the previous government of President Kibaki let tourism promotion slide at a time when the decline was clearly written on the wall and when pre-election jitters kept tourists away in the early part of 2013, but with KTB short of funds at the time did the expected major marketing blitz not take place, resulting in further reductions in arrivals.

While the PWC report makes mention of new markets like China and India have China’s arrival numbers also reduced it is an open secret that there are not nearly enough air connections available between the two countries to more effectively tap into that market and guest expectations by Chinese visitors too need to be met requiring a change of attitude and more varied offerings by resorts, hotels and lodges.

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