Hotel industry in Kenya and Tanzania is expected to grow over the coming years, a recent PwC report has said.
According to the study dubbed PwC’s 2018–2022, Hospitality outlook projects that hotel room revenue will grow 9.6%, compounded annually, in response to a rising number of domestic and foreign business and leisure visitors.
“The hotel market in Kenya got off to a good start. However, instability following a Supreme Court ruling in September that overturned the result of the August Presidential election led to a drop in tourist arrivals in October. Although tourist arrivals rebounded strongly in December, hotel guest nights were down during the latter part of the year.” The report says.
In Tanzania, the imposition of an 18% VAT on park fees in 2016, the introduction of a fixed-rate concession fee in July 2017 (chargeable per person per night for hotels in national parks), multiple taxes/fees, a tight Government expenditure policy and rising visa costs for business visitors led to a drop in guest nights and a reduction in room revenue.
“We project that guests will stay longer and occupancy rates will improve – guest nights are projected to increase from an average of 3.6 million in 2018 to 4.6 million in 2022, and occupancy rates should increase from 49.3% in 2018 to 58.1% in 2022.” Said Bernice Kimacia, a PwC Assurance Partner and provides services to hotel sector organisations in Kenya and the East Africa region.
The increase in the development of new hotels and the refurbishment of existing ones, she says, is an indication of confidence in Kenya’s economic growth. Several new properties under development in Nairobi and some upcountry towns indicate a targeted effort to attract increasing numbers of business travellers who may require specific services like conferencing facilities.
“I would expect that 2018 will be a year of much more business travel, particularly at the county level outside of Nairobi and Mombasa. Economic growth, ongoing investment in transport infrastructure and oil production is likely to spur more economic activity across the country. “Ms Kimacia says.
Kenya, Tanzania and Mauritius, the report states, should be the next fastest growing, with compound annual increases of 9.6%, 9.1% and 7.2%, respectively. Kenya will benefit from a rebound in tourism, new hotels, its growing prominence as an experience destination, infrastructure upgrades, and the expectation of political stability.
“More flights to Tanzania will boost its foreign tourist potential, new hotels are entering the market, and a strong economy will support domestic tourism. We project a 4.8% compound annual increase in guest nights and 4.2% growth compounded annually in average daily rate (ADR).” The report adds.
Increasing business traveller demand is driven by Nairobi’s position as an East Africa commercial hub and the multiplier effect of devolved government including county economic development. New investment in tourist-sector hospitality is still limited. The tourism sector continues to face challenges related to insecurity but we have seen steady growth in the number of arrivals for both business and tourism thanks in part to a targeted government publicity campaign. Local, resident tourism is rising in response to devolution and at the same time, domestic air travel is becoming more affordable.
