Industry

How focus on high-yield visitors is stunting Kenya's domestic tourism

Tourists from Germany and Holland at Amani Tiwi Beach Resort at the  South Coast . FILE PHOTO | NMG
Tourists from Germany and Holland at Amani Tiwi Beach Resort at the South Coast . FILE PHOTO | NMG 

Except for brief pauses in election years, Kenya’s investment in tourism facilities has been on the rise since 2003, even when overall visitor numbers have not kept the pace.

Government statistics show that despite overall tourist arrivals falling in the past five years (excluding 2016, when the trend shifted), total bed capacity has kept growing.

Both arrivals and revenue figures fell consistently between 2011 and 2015, as terror attacks and the consequent advisories against travel to Kenya took a toll on the sector.

In 2011, total arrivals peaked at 1,785,382, falling by 33.8 per cent to 1,180,546 in 2015.

Revenues fell 13.58 per cent from Sh97.9 billion to Sh84.6 billion in the same period, data from the Kenya National Bureau of Statistics (KNBS) indicate.

Notwithstanding the decline, the growth on facilities, and thus available bed space, has continued apace, growing by 16 per cent – from 17,419,600 to 20,187,200 bed capacity within the same period.

The growth continued in 2016 to 21,258,500 bed spaces (also called hotel bed-nights capacity) and is expected to continue rising in the short-term as more local and global brands set up and expand in the country.

Keziah Odemba, a director at the Tourism Ministry, recently indicated that this portends good tidings for the industry.

Government investment in the sector has also been growing. World Travel & Tourism Council’s 2017 report on Kenya points to a consistent nominal increase in collective spending by the government every year in the last six years, from Sh31.9 billion in 2010 to Sh61.7 billion in 2016.

The data shows that the travel and tourism industry attracted an overall capital expenditure of Sh85.1 billion in 2016, up from Sh54.8 billion in 2011.

Yet, despite investments and growth in infrastructure, the result has not been positive in some key aspects.

Yawning gap

For one, the growth in tourism infrastructure has resulted in a yawning gap between the total beds available and the total number of occupants.

In 2015, for instance the bed occupancy rate was 29.1 per cent, compared with 40.3 per cent in 2011.

The 2015 figure is the lowest since 2008 when the county was riven by the post-election violence and nearly all tourism indicators fell sharply.

With a decline in occupancy rate, there has been a corresponding decrease in employment opportunities. In 2011 for example, the sector contributed 1,085,400 direct and indirect jobs, which in 2016 had declined to 1,072,400, according to World Travel & Tourism Council’s (WTTC) data.

Yet amid the seemingly downward spiral in recent years, domestic tourism numbers have been on a steady rise over the last two decades, barely affected by the turmoil of elections or terror attacks.

In 2014, for the first time, KNBS data showed that there were more Kenyans accommodated in hotel rooms than the total number of foreign tourists, strongly pointing to the increasing significance of domestic tourism.

Notably, domestic travel spending generated 60.8 per cent of direct travel and tourism contribution to the Gross Domestic Product in 2016 compared with 39.2 per cent for international tourism receipts, according to the WTTC.

The numbers showing domestic tourism growth are very significant given the low hotel occupancy rates, which have fallen in the last two decades — from a peak of 51.6 per cent 1997 to a low of 26 per cent in 2008. In the last few years, the rate has only improved marginally- at 29.1 per cent in 2015 and 30.3 per cent in 2016.

Over that time, the total number of hotel beds available in Kenya has more than doubled — from 9,516,600 beds in 1997 to 21,258,500 beds in 2016. In the period, the median bed occupancy rate has been below 40 per cent.

High yield

Notably, a rapid investment in hotel infrastructure, coupled with consistently low occupancy rates would be expected to result in depressed overall returns in the tourism sector.

However, the yields from the sector have mostly been positive in the long-term, except in 2008, due to the effects of post-election violence, and between 2011 and 2015, mainly due to the effects of terrorism and the negative travel advisories that followed.

The KNBS shows that revenue fell from a high of Sh97.9 billion in 2011 to Sh84.6 billion in 2015, but picked up to an all-time high of Sh99.7 billion in 2016.

The revenue drop between 2011 and 2015 was slower in relation to the corresponding decline in tourism numbers.

During the period, revenue dropped by 14 per cent compared to a 34 per cent decline in tourist arrivals. But even with the drop, the numbers point to a growth in revenue per tourist.

In the last 10 years, the average revenue from each visitor has grown from Sh35,113 in 2007 to Sh74,412 in 2016, according to an analysis from the Kenya Tourism Board. This means that even as the overall earnings decreased, the yield per tourist was growing.

The increase in revenue per tourist could also be linked to increased government initiatives to spur tourism recovery that are mainly focused on high-end tourism.

For instance in January last year, President Uhuru Kenyatta unveiled a Sh1.2 billion charter incentive scheme, waiving landing fees at Malindi and Mombasa airports for all chartered aircraft.

President Kenyatta also scrapped visa fees for children under 16, reduced value-added tax charges on national park fees and announced an expansion of airports to handle more visitors, among a raft of other measures “to attract world travellers back to Kenya.”

At the time the president announced the measures, he was presiding over the opening of “Kenya’s first luxury yachting marina”, the English Point Marina in Mombasa.

Less focus on domestic tourists

Little focus, however, has been given to domestic tourism, even though the KNBS data shows its increasing contribution to the overall sector growth.

During an event to mark International Tourism Day on Wednesday, Sept 27, online travel marketer Jumia said Kenyans were discouraged by exorbitant fees charged by hotels.

Last year, Tourism Cabinet Secretary Najib Balala last year lamented over the high cost of tourism in Kenya.

He said: “There is no need for a hotel to charge $200 (Sh20,400) per night whereas it only has an occupancy of 20 per cent. Just the other day, a hotel in South Coast charged me $250 (Sh25,500) per night even though I am a local tourist, yet the guests were very few.”

Indeed, this analysis shows disconnect between demand and supply, where hotel bed capacity keeps on increasing while the total tourist numbers have been shrinking.