Kenya’s Hospitality Sector to bounce back to its previous growth path in 2019 – PwC

Kenya’s hospitality sector capacity is projected to grow faster than demand but grow more slowly over the 2019-21 period according to the latest Price Waterhouse Coopers (PwC) report.

The ‘Hospitality outlook: 2018-2022 8th Annual edition themed Positioning for future growth, Kenya’s tourism industry is set to bounce back to its previous growth path by the end of 2019.

“We project room rate growth to average 2.6%, compounded annually through 2022. We expect the average occupancy rate to rise to 58.1% in 2022, up from 47.3% in 2017 but still well below the 62.3% rate in 2012,” states PwC.

The report indicates that besides the sector’s growth being temporarily  interrupted in late 2017 when the Supreme Court overturned the August 2017 Presidential election, creating a new period of uncertainty: Hotel guest nights, which were on track to grow at a rate of 6%, fell 19% during the latter part of the year, leading to an 8.3% decrease for 2017 as a whole. The ADR also declined, falling 5.7%, which further depressed the hotel market, leading to a 13.5% decline in hotel room revenue in 2017.

“We expect tourist arrivals to Kenya to increase 8.8% 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% compound annual rate, rising to 2.06 million in 2022 from 1.47 million in 2017.”

Factors that are contributing to the sector’s growth include:

  • Introduction of direct flights to the United States by Kenya Airways will boost U.S. travel to Kenya.
  • Stable local economy, attracting international hotels to Kenya. Sheraton, Ramada, Hilton, Best Western, Radisson, Marriott, and Mövenpick are among the international brands scheduled to open hotels in Kenya during the next five years. “Some 1 800 rooms will be added over this period.”
  • Kenya promoting itself as a beach destination, which should be aided by the ‘Beach & Bush’ tourism campaign with Mauritius to promote both countries as tourist destinations.
  • Kenya’s new policy allowing visiting Africans to obtain visas upon arrival, making it easier and more convenient to travel to the country.

Similarly, Knight Frank’s Hotels Africa 2018 report states that Kenya sits fifth in the list of top 10 African countries with the highest number of chain and branded hotels— excluding lodges, safari camps, chalets and cruise-hotels—according to data compiled by Knight Frank Research for up to December 2017.

The report shows Kenya had 68 chain and branded hotels, as South Africa led with 430, followed by Egypt (300), Morocco (153) and Tunisia (103). Mauritius, Nigeria, Tanzania, Zimbabwe, and Algeria are the other countries in the top 10 list.

Cytonn Investments says the sector continues to be attractive driven by increased demand from both local and international guests.

“The opportunity in the sector is in (i) serviced apartments, which recorded high average occupancy rates of 72.1% compared to 50.6% for hotels in Nairobi in 2017, and (ii) 4-star hotels which recorded a high occupancy of 56.5% and Revenue Per Available Room (RevPAR) of Kshs 6,872 in 2017, compared to the market average of 50.6% and Kshs 5,937, respectively.”

Jumia’s Hospitality Report Kenya 2018, on the other hand, states that technology is defining the Kenyan domestic tourism scene with 71 percent of domestic travelers making reservations on its website prefer booking from their mobile phones.

Rosemary Mugambi, Regional Sales and Marketing Director, Serena Hotels EA, however, is of the view that,

“Creating a more personalized guest experience is an integral part of delivering positive sustainable results. This can be achieved if there’s a right balance between technology delivered service, and the personal touch cannot and must not be taken away.”

Further, three-star hotels remain the most preferred attracting 35% of total bookings while two-star and four-star hotels take home 30% and 26% respectively.

Nairobi is the most popular destination with 35%, followed by Mombasa at 30% and Diani at 15%.