South African hospitality group City Lodge is set to open a new 172-room hotel in Nairobi next month. Located in the popular diplomatic quarter in the north of the city, and next door to the Two Rivers mall, one of the largest mixed-use developments in the country, the hotel aims to capture both holidaymakers and business tourists.
The Two Rivers hotel is the hospitality group’s third facility in Kenya following its takeover of two other hotels – Fairview Hotel and Town Lodge – in recent years. Outside of South Africa and Kenya, the group also owns properties in Botswana and Namibia.
The hotel is opening at a time when experts are forecasting bright prospects for Kenya’s hospitality segment, which for the past two years has suffered as a result of terrorist incidents in 2013 and 2015. However, on the back of improved security measures, a rebound in visitor arrivals is translating into stronger growth: room revenues are projected to increase by 3.5% this year, with compound annual growth of 7.5% forecast until 2021, according to a recent report by PwC.
While the expansion of hotel capacity will slow the headline rise in occupancy rates over the next few years, the report said additional air services to Kenya, economic stability and rising demand in the domestic travel segment would spur an increase in guest nights.
This is good news for the substantial pipeline of new projects expected to open their doors in Kenya over the next four years. In addition to the Two Rivers hotel, around 13 major hotels are expected, adding 2400 rooms to the existing supply, according to PwC.
Arrivals continue on strong upwards trajectory
2017 has thus far validated the bullish optimism of hotel investors. Visitor numbers to Kenya increased by 12.6% between January and July this year, according to the Kenya National Bureau of Statistics.
A total of 543,154 arrivals were recorded at Jomo Kenyatta International Airport and Mombassa’s International Airport (MIA) in the January to July period, compared to 482,470 last year.
In July alone – a peak tourism month for Kenya – arrivals totalled 105,241, up 14.9% y-o-y.
The strong performance means Kenya is on track to surpass the 1.3m arrivals posted last year, which in turn represented a 10% rise on the 2015 total, when security concerns saw tourist numbers fall to 1.18m. At its peak in 2011 arrival numbers stood at 1.82m.
Incentives help drive growth
The expansion has been supported by a number of measures rolled out by the government to help attract new visitors, including a reduction in landing fees at MIA and Malindi Airport in Kilifi County, and support for charter operators through the Charter Incentives Programme.
Under this $7m scheme, all charter aircrafts with passengers terminating MIA and Malindi have been given exemption from landing fees for 30 months, until June 30 next year.
There will also be a passenger subsidy of $30 per seat filled by international passengers who terminate their journey or disembark in Kenya during the same period.
The strategy – a response to the imposition of travel advisories by a number of foreign governments as a result of security concerns – has led to a rise in regular and charter carriers servicing the Kenyan market.
Carriers from Italy, Germany and Poland have either returned to Kenya’s skies over the past few months or expanded their services to meet rising demand, while Dutch charter operator TUI Netherlands will resume flights into Mombasa in the fourth quarter, three years after it suspended the service.
The acknowledgement of the improved security situation has also brought other benefits to the tourism industry, with the US Department of Transportation in early September granting rights to national flag carrier Kenya Airways to directly serve routes in the US.
The airline has said it plans to begin offering direct flights to US destinations next year, improving access to the North American market and cutting travel times by eliminating transfers from other hubs.
Tourism growth offsetting economic slowdown
The increased momentum in the tourism industry should help mitigate a marginal slowing of the broader economy.
On September 15 the Treasury lowered its growth forecast for 2017, cutting its projection for GDP expansion from the earlier estimate of 5.9% to 5.5%. Reductions in state spending, combined with drought conditions in the first half of the year, were contributing factors to the lowering of expectations.
The tourism sector has also so far weathered uncertainty surrounding the election cycle, and the re-running of the presidential poll set for October, which has been a factor in the revised growth forecast. According to local stakeholders, any uncertainty surrounding the elections has not flowed into international arrival numbers or hotel bookings.
Sam Ikwaye, executive officer at the coast branch of the Kenya Association of Hotelkeepers and Caterers, told international media last month domestic and regional tourism were the only segments affected by the ongoing political scenarios in the country.