Delta Airlines have recently announced the start of their direct passenger and cargo flights to the US in June 2009, and during the same week, the Norfolk Hotel, one of Nairobi’s historical properties, presented the results of its extensive refurbishments. More flights and better hotels, or global slowdown and political crisis – what are the perspectives for Kenya’s tourism? By Andrea Bohnstedt
Alongside tea, tourism is one of Kenya’s main foreign exchange earners, and a sector that had been severely affected by the post-election violence: Selling Kenya’s stunning beaches and inland game parks has its difficulties when done against a backdrop of prime-time news coverage of burning slums. The violence in early 2008 meant that Kenya’s tourism got off to bad start last year, and just as circumstances normalised again, the global economic crisis crushed hopes that bookings would return to their pre-election levels in early 2009. As a consequence, the industry went from double-digit growth over several years, worrying over capacity constraints, to a steep decline in tourist arrivals and hotel bookings.
Sluggish Leisure Tourism
Long-distance leisure travel will be one of the first casualties in an economic crisis, and the typical leisure tourist destinations, i.e. the coast and the safari properties, were feeling the impact most immediately: According to Richard Markham, the Managing Director of Express Travel Group, the number of charters into Mombasa has fallen markedly compared to two years ago, the last year of rising arrivals. And those who are still travelling carefully consider their options: Markham notes that his company receives more requests for quotations, but ultimately achieves fewer conversions, and business has become a lot more short term and last minute: Agents and clients shop around more before committing to a deal. This creates additional work for travel and tour agents without generating the respective revenues, and makes corporate planning more difficult. Hotels, Markham says, have gradually woken up to the necessity of becoming more flexible if they want to sustain their business. Whereas many had refused to budge on rates in November 2008, they are more willing to consider it now that it is becoming increasingly apparent that the next high season is not looking promising.
Mohit Advani, who runs an upmarket tour and travel agency that sells East Africa tours out of Kampala, expects the full impact of the crisis to hit Uganda’s tourism later this year. Tourism in Uganda is by far not as much of a mass product as in Kenya, and the nature of Uganda’s main attractions will help to push the full impact back for a while: Since permits for the gorillas at Bwindi Impenetrable Forest and the chimpanzees at Kibale Forest, Budongo Forest and Queen Elizabeth National Park sell out for at least a year in advance, many tourists are still committed to their trip.
Advani also notes that both the Kenya Wildlife Service (KWS) and the Uganda Wildlife Authority (UWA) have raised their park entrance fees for the national parks by significant amounts – a move that he considers of questionable use. In addition, UWA has removed the staggered fee structure for national parks in which the rate would fall with the length of the stay, encouraging visitors to spend more on accommodation and activities, and has introduced flat rate.
Both Kenyan and Tanzanian hotels have been faster to adjust to the new realities than their Ugandan counterparts, finds Advani: “The price of safari lodge accommodation in Uganda increased from last year, some properties by very large amounts, and effectively contradicting what is happening in the neighbouring countries.” Even though it has taken Kenyan properties some time to consider price reductions and other offers, they now offer reductions of up to 40% compared to a year ago, and some resort hotels in Zanzibar and Mombasa offer free additional nights. Especially in 2008, Kenyan hotels and tour companies began to place more focus on marketing themselves domestically: Local travellers would not be deterred by the lingering after-effect of bloodshed on prime-time news.
Beyond Hotels
The tourism industry is a key player in Kenya’s economy, so the recent reversal in its expansion has a far-reaching impact. It is one of Kenya’s key foreign exchange earners, along with tea, horticultural and floricultural exports, and contributes a sizeable part of Kenya’s GDP. Its contribution to the national economy is quantified in the national economic survey that is published annually, mostly in the hotels and restaurants data, but also partly in transport data under e.g. air passenger traffic. This survey estimated the 2007 tourism earnings represented a 16.4% increase over those from the preceding year. In that year, growth was supported by efforts to expand and diversify the products, and the recent economic growth had given a boost to the conference industry. In 2007, the number of local conference rose by 12%, and the number of international conferences even by 19.2%. The introduction of long-haul carriers also helped. The Kenya National Bureau of Statistics has not yet compiled the 2009 Economic Survey for the 2008 data, but the Kenya Tourist Board estimates that revenues in the first quarter of 2008 had fallen by 54% year on year, and by 32% year on year for the first half of the year.
However, these figures only tell half of the story. Equally important to consider are the backward and forward linkages in the economy: Around every hotel or lodge, there is a microcosm of drivers, guides, laundry services, food deliveries and other suppliers. Richard Markham tried to estimate these knock-on effects: Even if you assume, he says, that every tourist consumes just one soft drink or bottle of water per day, then falling arrivals already have a very tangible impact on major local companies like Coca Cola, Keringet, and others. The turnover of Farmers Choice, he says, is probably one of the best market indicators for the development of the tourism and hospitality sector. And if Farmers Choice sell less, the local pig farmer sells fewer pigs, and buys less animal feed. Quickly, the impact spreads through the economy, affecting both large corporates and tiny family and household enterprises. It is the same story for fuel companies as much as for beach curio vendors.
Perspectives
The silver lining in the travel and hospitality industry is relatively robust business travel, bolstered by several years of accelerating growth rates and rising regional investment. Even though currently the slowest growing economy in the region, Nairobi is still a business and transport hub for the region, and business travel through Kenya’s capital still continues to do relatively well, as the Hilton’s Martin Voskamp confirms. Events like the UN Governing Council meeting in Nairobi in February 2009 also helped to fill upmarket hotel beds. In addition, local companies have used meeting and conference rooms in hotels, although it is not sure how much longer this will last, as local firms struggle with a second year of GDP growth estimated to fall behind Kenya’s population growth of nearly 3%. And despite the recent solid performance, international business travel may slow down as companies consider the expensive of long-haul business trips, and rely increasingly on ICT rather than meet in person.
Industry members agree that government support is urgently needed: Kenya needs to, argues Markham, ‘advertise like crazy. Otherwise, it will become very difficult to attract those that still have any money left.’ The government had promised KES1bn in financial assistance for the tourism sector, but so far, only KES250m have been given to KTB for advertising and marketing. It does not help that Kenya’s institutional capacity to support the tourism sector has its own challenges: Although now acknowledged as supportive and committed, new Tourism Minister Najib Balala got off to a difficult start. More importantly, the Kenyan Tourism Board (KTB), like so many parastatals, had been shaken up by revelations of corruption, and officials appointed under the previous administration have been suspended. Whether that merely signals a change in the (corrupt) guards to accommodate the new members of government or an actual reduction of corruption is anyone’s guess.
The fallout from the political crisis of early 2008 can be overcome – hotels and tour operators have been through this in previous times, and have improved the mechanisms to deal with this. Many overseas visitors have short memories and limited interest in the political obscurities of exotic locations, and images of burning slums will soon fade. However, Kenya’s current politics indicate that the country remains distinctly vulnerable to renewed outbreaks of tension. Both the social and economic impact run much deeper than the official estimates of the number of employees and retrenchments suggest: In Kenya, practically every employee has a large number of dependents, so any retrenchments reach into families and communities. If hawkers and small traders in the typical tourist destinations can no longer earn their living in their usual trade, the threat of a restive population and politically motivated violence in an already tense environment rises further.
So the future of Kenya’s tourism industry is closely tied to the country’s political risk outlook: Despite several years of accelerating GDP growth rates, President Mwai Kibaki’s Party of National Unity (PNU) performed weakly in the December 2007 elections, and neither were the years of economic expansion sufficient for Kibaki to achieve a clear election victory. If 7% GDP growth could not assuage widespread frustrations so easily transformed into violence by politicians devoid of a substantiated agenda, the current outlook is distinctly worse. A good year old, the grand coalition government has achieved little apart from fights between its constituent parts and a seemingly endless string of corruption scandals on both sides. Most politicians seem to prepare for the decisive battle (and this is not figurative) at the next elections, and the underlying reasons that drove the post-election violence are practically untouched. Alongside lower economic growth, social tensions continue to simmer under the surface. Student and other occasional protests may still appear like isolated incidents from the outside, but the potential for violence is certainly not abating. The CNN ‘Backstory’ coverage of the Mungiki-related killings in Central Province do not just add to Kenya’s flawed image, but are also an indication of significant and unresolved problems that cannot merely be papered over with a PR campaign. The tourism sector, ever vulnerable to crisis news, is one of the prime victims, and these developments threaten to create a vicious circle.
Earlier expectations that the industry would recover by June 2009 are no longer realistic. The most optimistic projection is now from 2010 at the earliest, nudging it ever closer to the inevitable business slowdown ahead of the 2012 elections. If the grand coalition government survives that long, that is.
|
Subscribe to this comment's feed
Show/Hide comment form
USD 
GBP
EUR 
AUD
CAD
JPY