SERENA’ PROFITS SLUMP BY 39 PERCENT
(Posted 02nd May 2015)
Serena Hotels, as TPS Eastern Africa Ltd. – a company quoted on the Nairobi Stock Exchange – is regularly referred to, has now released the results of the last financial year and the profit warning sounded a few months ago turned out to translate into a 39 percent drop in profits from the previous financial year. In real figures this amounts to a significant reduction from KShs 451 million to only KShs 274 million while revenues for the year reduced by 7 percent to 6.3 billion Kenya Shillings. The management of the company cited insecurity and the impact of the Ebola propaganda on sub Saharan Africa as major reasons for the downturn in its financial fortunes.
‘I don’t think that this government completely understands what is going on in the industry’ said an industry stakeholder during a meeting two weeks ago in Nairobi, while another met during a fact finding stopover in Kenya’s capital added ‘We see nothing which suggests that there is fundamental change on the way. Companies across the board have downsized staff, retired vehicles, stopped paying bonuses for the past two years and reduced salaries and perks. The crisis from the coast has reached Nairobi too. I can see you got the summary of the report from the Tourism Recovery Task Force. It has been with the Cabinet Secretary for weeks now since just before ITB but we are yet to have an official reaction to it. This government, like the previous one, has ignored one warning from the industry after another. They live in cuckoo land surrounded by illusions of economic growth. Tourism was the backbone of the economy until two years ago and now it is in free fall. Adding VAT on tourism services was one of the first measures this government took but it took them until last week to announce a new chairman for KWS. You should think the President’s family business interests in the tourism industry would have made a difference but wapi (Kiswahili world for where or how). Their money comes from dairy and other enterprises and owning hotels for them is just a hobby it seems. Our cabinet secretary lacks any muscle in cabinet to bring her fist down on the table and stand up for the sector. Does she even know her sunshine speeches now only cause us to shake our heads? And KTB one has to pity, to try sound confident when they have nowhere near enough money and are faced with bad news and more bad news. Kenya tourism is in a coma and all left are spin doctors tending to the patient’.
On May Day did the Kenyan hotel and allied workers union also sound another warning about the state of the hotel industry at the coast, where, while the long weekend appears to have attracted large numbers of Kenyans to the Indian Ocean shores and resorts, the outlook is bleak. ‘True enough are some hotels fully booked but then many others have closed down so the demand is now met by fewer resorts. And shouting hooray is a bit misplaced because most of the weekend visitors will be gone by Sunday or Monday and then what. Thousands of more hotel workers expect to be laid off in coming weeks and the entire value chain is suffering with it, suppliers, taxi drivers, curio shops etc etc’ added another source from Mombasa to the topic.
While scheduled flights into some of the region’s countries have increased are charters into Mombasa at a record low and still does the Kenya Civil Aviation Authority show no inclination to meet the demands of foreign airlines like Qatar Airways which want to fly into Mombasa. ‘As long as KCAA put up, how did you put it recently, an aviation Berlin Wall, more scheduled flights into Mombasa will not happen. Even Turkish takes more passengers to Kilimanjaro than disembark in Mombasa. Airlines are not in the business to provide charity for our tourism industry, they are in it for profit. If Mombasa cannot offer profits they do not fly there. If combining Mombasa with another destination makes flights viable they do it. Fifth freedom rights help but KCAA will have nothing of that of course’ contributed another source to the discussion.
Another source pointed at Zimbabwe where the tourism industry is on a strong recovery inspite of the many other issues which plague that country: ‘If Zimbabwe can manage that sort of recovery we should be able to do the same. There I think the government has figured out that tourism brings in hard currency but our government still has not got the message. Nairobi is doing better than the coast but even here, after Garissa, we lost bookings and some future big meetings are now in doubt over security concerns. It is the alpha and omega of tourism success, if there is no security there can be no tourism recovery. Someone the other day, and I am not sure if in joke or being serious, said that the last two democratically elected presidents all failed Kenya on security and we should bring Moi back (Former President Daniel arap Moi who left office after being ineligible for re-election in 2002), at least under his regime security was never an issue like it has become today’.
Indeed were many voices speaking on many topics, directly and indirectly related to tourism, when the opportunity arose to meet face to face while in Kenya recently.
All that of course will be of little consolation to the shareholders of TPS Eastern Africa Limited, where profits have dropped as mentioned at the start of this article. It can only be guessed how other leading companies, not quoted on the stock exchange and therefore not bound by publicity requirements, are doing financially but from the reaction of a broad section of stakeholders it appears obvious that few still make profits and most are fighting for mere survival.
‘If Serena, our Kenyan flagship company, is not doing well, you can expect none of the others does. At least they still made some profit but the way things are going this year, who knows what their financial statements read like in a year. There is just no comprehensive response from government. I love your stories about the Seychelles where it seems that the appointment a few years ago of a tourism tsar as minister has paid off very well. Here in Kenya we have too many chiefs, many of which I think belong into politics but few if any who actually stand up and speak up for our sector the way the grassroots expect of them. Very very disappointing how our industry leadership handles this crisis’ added yet another and in fact quite senior source.
Regional tourism stakeholders equally decried the lack of visible action by the Kenyan government, clear in their understanding that a continued tourism downturn in Kenya will also affect arrivals into Tanzania and Uganda with notably only Rwanda turning the trend on the head with continued growth. Watch this space for breaking and regular news updates from not just Kenya but the entire region.
