90 per cent hotel businesses collapsed in Kenya

Kenya Association of Tour Operators (KATO) yesterday revealed the shocking statistics that, for the first time, paint the dim prospects of the hospitality industry in the face of rising terror threats.

“A total of 21,000 jobs have already been lost at the Coast and a solution to this has not been found yet,” KATO chairman Adam Jillo, revealed during a meeting between Kenya Private Sector Alliance (Kepsa) and business editors on Wednesday.

East African Affairs, Commerce and Tourism Cabinet Secretary Phyllis Kandie, confirmed that the number of workers losing jobs as hotels close down continues to increase every day.

“The number being reported are worrying. The negative travel advisories issued last year by key source markets is to blame,”said Mrs Kandie.

Hotel occupancy in the Coast, Kenya’s premier tourist destination, has dropped by 85 per cent. At least 20 hotels have closed. Hotels are now operating at between 15 per cent and 30 per cent occupancy, with the worst hit at the Coast.

More than 90 per cent of its hotel business has been lost to neighbouring Zanzibar, KATO says. It is projected that the dry spell could run beyond June, signalling a depressed year for the industry.

This dwindling number of holidaymakers is expected to have a negative impact on the economy. Players warn of total collapse of the industry, which employs more than 150,000 people.

“The situation is catastrophic and even after trying hard to improve the image, no meaningful results are being realised. The consequences are huge, workers have lost their jobs and investors have closed down hospitality facilities,” said Mr Mike Macharia chief executive officer, Kenya Association of Hotelkeepers and Caterers (KAHC), the umbrella organisation that brings together hotels, lodges, restaurants, membership clubs and airline caterers.

Macharia says some charter airlines have cancelled flights to Kenya and the effects have even spread to other sectors such as agriculture, transport and construction.

Kenya Tourism Board (KTB) MD Ndegwa Mureithi, said the situation is challenging.

“Yes the situation is dire. … as a board, we have lined up a number of activities to assist restore the industry,” he adds.

Tourism industry is one of the major foreign exchange earner and hence, if left to flop, will greatly affect the economy. Tourist numbers slid in 2013 to 1.5 million after an all-time peak of 1.8 million in 2011. In the first quarter of 2014, arrivals fell four per cent compared to 2013. Last year’s figures could be worse.

Mr Jillo, who is a member of the Consultative Tourism Recovery Strategy Committee formed by the Government last year, suggests that the Government should engage an international public relations and marketing firm to take care of creating a positive image of the country abroad.

Mr Mahmud Janmohamed, Managing Director of Serena Hotels, said the industry has been badly hit and requires all the actors to work together to restore vibrancy.

“Hotel owners are worried as they don’t know whether they will recoup as the harsh realities on the ground continues to bite. We are lost as we don’t know whether there will be light at the end of the tunnel,” says Mr Janmohamed.

However, he exudes confidence that the tourism industry has a chance to reverse the dipping trend.

According to the Economic Survey 2014, the industry posted Sh94 billion earnings in 2013 compared to Sh96 billion returned in 2012. The downward trend of the industry started after the Westgate attack on September 2013, where 67 people lost their lives properties worth millions of shilling was destroyed.

Kandie constituted the tourism recovery task force headed by Lucy Karume. The task force, whose main objective is getting the sector back on its feet, is expected to hand over its report to the President next week.

“We formed a task force last year to analyse the situation further and give recommendations as part of going forward. Further, President Uhuru Kenyatta announced a fiscal stimulus package to aid the recovery of the tourism sector,” Kandie added.

To address the problem, the CS added that the Government has invested heavily in security management including installation of CCTV cameras in major urban like Nairobi and Mombasa. The State has also increased vehicles to police officers around the country to beef up security.

On the way forward, Janmohamed advised that more efforts need to be applied to ensure the key international markets are restored.

Travel advisories have contributed to the problem, despite mounted efforts by the Government to have them reversed. While talks have been on going, tourism stakeholders say certain countries have not entirely lifted the advisories. The advisories have created an avenue to the foreign visitors to prefer other regions and mostly the neighbouring counties, for example, Zanzibar, the semi-autonomous part of Tanzania. Jillo observed that air transport is the most affected segment of the transport sector.

“By having no clients the planes are flying empty, if there are no clients that will be forced to shut down the destination that then without connections will not be able to promote itself and will be overtaken by other destinations like Zanzibar that has today taken away up to 90 per cent of what was the Kenya Coast tourism market until three years ago,” said Mr Jillo.

Due to the low hotel bookings, Jillo noted that agriculture producers are counting losses as demand for their commodities by the hotels has decreased. Tour operators as well he said are grappling with lack of business and huge loans to pay to banks.

Government is also not collecting enough taxes from hotels and tour operators, import duty for imported products used in hotels and spare parts of vehicles, income tax, and the problem has further led to low foreign exchange.