Kenya loses Ksh40bn as hotels hit by tourism drop

Thursday August 21 2014

Nairobi. Terrorism has exacted a heavy toll on tourism in Kenya with losses of up to Ksh40 billion this year, stakeholders in the sector said on Tuesday. There has been a drastic drop in arrivals, with hotels reporting as low as 20 per cent occupancy.

The Kenya Association of Hotel Keepers and Kenya Union of Domestic, Hotels, Education Institutions, Hospitals and Allied Workers (KUDHEIHA) said in a joint briefing that the sector had taken a beating from travel advisories.

The group did not give the revenue and arrival figures for this year but last year Kenya earned Ksh96 billion from Ksh1.52 million international tourists. Many in the sector had hoped revenue would go past the Ksh100 billion mark this year. The country has suffered a series of attacks that led to a number of Western nations, including the United Kingdom and the US, the main source of tourists, advising their citizens to avoid Kenya. (NMG)

Cancellations have seen hotel occupancy go down to about 20 per cent, leaving the industry to operate below a third of its capacity.

“We are going through a hard time. The figure of Sh40 billion is a conservative estimation, the damage is definitely bigger than that if you include all affected income generating ventures,” said Kenya Association of Hotelkeepers and Caterers national chairman Jaideep Vohra, who is also the managing director of Sarova Hotels.

KUDHEIHA secretary general Albert Njeru said the situation had seen up to 20 hotels at the coast close down — five in the South Coast and 15 in the North Coast.


“These are hotels that employ not less than 100 Kenyans each. It is a serious crisis and we could sink deeper if mitigation efforts are not taken immediately,” Mr Njeru said. The two organisations said the government was not helping matters by delaying taking measures to revive the sector.

For instance, the government announced at the beginning of the year that it had allocated Sh200 million for the Kenya Tourism Board to run marketing campaigns to boost the sector’s recovery but the money has yet to be released.

The stakeholders are now demanding that an independent ministry be created to handle issues affecting the sector given its importance to the economy as the second biggest foreign income earner.

“The current minister is not giving the sector its due attention because she handles three dockets at the same time,” Mr Vohra said.

To revive the sector, the stakeholders have called on the government to adopt “open sky policy” in the aviation sector for increased flights in the country as a tour destination.

According to KAHC chief executive Mike Macharia, the closed air policy is further chocking the industry, making tourists opt for other destinations with similar products in the neighbouring countries.

“In order to start reversing the negative trends Kenya needs to address the lack of adequate airline seat capacity which is one key challenge affecting the growth of tourism,” Mr Vohra said.

Other factors crippling the sector include high VAT on the service industry and the revenue aspect, making the country compete unfairly with other East African countries.

With the introduction of the single tourist visa in February, Kenya, Uganda and Tanzania have been marketing the three countries as a single destination. However, stakeholders say the likelihood of Kenya benefiting from this marketing is lower than other countries.

Mr Macharia said Kenya’s decision to impose VAT on park entry fees was bad for the industry. As a result of the taxation, he said, Kenya now charges Sh7,830 ($90) compared to Tanzania which is charging Sh4,350 ($50).

The stakeholders are now urging the government to suspend the VAT for 18 months to allow the sector to grow.

Kenya has also been hit by flight cancellations and the pulling out of charters. Last week, a Dutch charter cancelled its flights to Mombasa and will not resume until next year in April. The charter is however flying tourists to Tanzania. (NMG)