After some challenging years, Kenya’s tourism industry is recovering, with the country becoming an increasingly attractive destination as stability and confidence have returned, travel connections have improved and relevant government programmes have come into effect. The authorities are adopting increasingly innovative policies to encourage growth, which appear to be yielding results, with tourism arrivals and sector earnings both on the rise in recent years.
Historical Context
Tourism has been a key element in the economy for more than a century. The country first saw large numbers of visitors in the late 19th century and became an especially popular destination in the 1920s. The colonial government, noting the value of the natural landscapes, passed a series of laws to manage these assets and properly administer them, such as the Game Preservation Proclamation of 1920 and the Game Ordinance of 1921. Colonial authorities also expanded the reserves and national parks. Furthermore, the founding of the East African Tourist Travel Association in 1948 – an early effort to promote tourism – was well timed, as long-distance commercial air travel was becoming more practical, bringing Kenya well within reach of most European travellers. By 1964 the country was receiving 65,450 annual tourists, more than three times the amount seen in 1948, and the most by far in East Africa.
After the country won independence in 1963, efforts continued. The new nation was in need of foreign exchange earnings, and tourism was seen as an effective avenue to balance the national accounts. Kenya spent heavily on sector promotion, opening tourism offices in New York, London and Frankfurt, and forming the Kenya Tourist Development Corporation in 1965. After a period of rapid expansion, it began to stagnate in the 1990s as competition increased and internal problems made visitors more wary of the country.
The early 2000s and 2010s also saw various challenges. Monthly tourism numbers peaked at 143,556 in July 2011. The troubles of 2013 and subsequent terror attacks made security a major concern, leading to significant reductions in arrivals. For a country with such strong natural attractions, Kenya has relatively few visitor arrivals in both regional and global terms. Morocco and South Africa, for instance, both have more than 10m annual visitors; Egypt and Tunisia receive more than 5m; and Zimbabwe and Algeria over 2m.
Improving Performance
However, improvements have been noted more recently, with the sector performing robustly in 2017 despite it being an election year. In the past, elections have been problematic for tourism, with figures falling from 1.69m to 1.14m at the time of the 2007-08 contest. Contrary to this trend, 2017 saw totals increase by 8.1%, from 1.34m to 1.45m.
According to figures from the Kenya National Bureau of Statistics, this uptick in arrivals was accompanied by a 20.3% increase in the direct value of the sector, reaching KSh119.9bn ($1.2bn). However, in its “Power and Performance 2018” report, the World Travel & Tourism Council noted that with indirect markets taken into account, tourism contributed $7.43bn, or 9.7% of GDP, in 2017. This placed Kenya 71st out of 185 countries. According to the “Travel & Tourism Economic Impact 2018” report by the UN’s World Tourism Organisation, total sector contribution to GDP is set to record 5.5% real growth in 2018, and average 5.1% expansion per annum over the 2018-28 period, placing it third in sub-Saharan Africa behind Tanzania (7.1%) and Namibia (5.4%).
Beneath the headline figures, other encouraging trends have arisen. According to the Ministry of Tourism and Wildlife, in 2017 US arrivals grew by 17% to 114,507, while those from the UK were up 11.1% to 107,078. Meanwhile, there were 4m bed-nights reported, up from 3.5m in the previous year, suggesting a strengthening market. Growth is expected to continue, with arrivals anticipated to increase by 16% in 2018.
Source Markets
Along with the uptick in numbers, changes in the make-up of the market have been observed, with traffic becoming more diverse. In 2016, for instance, the US overtook the UK, and it has been a strong and rising source of visitors. This placed the UK second, and Uganda came in third.
African nations are accounting for a larger share of visitors to Kenya, with 95,845 collective arrivals from Uganda, Tanzania and Rwanda in 2017, up significantly from 80,841 and 58,032 in 2016 and 2015, respectively. The share of visitors coming from Uganda increased from 3.9% in 2015 to 6.4% in 2017. This is driven by not only the economic prosperity and expanding middle class, but also supportive policy in the region. Africa is becoming a place of relatively open borders, which is facilitating tourism. Ugandans and Rwandans can travel freely to Kenya using only their ID cards, and all citizens of the EAC can travel to the country without visas. A multi-entry single tourist visa programme has been in effect since February 2014, allowing travellers visiting Kenya, Uganda or Rwanda to move among all three countries under a single permit, though Tanzania and Burundi are not included in this.
The larger region is also trending towards liberalisation, with Seychelles, Namibia, Ghana, Rwanda, Mauritius, Nigeria and Benin all having no-visa policies for other African countries, while the African Union introduced the idea of a continental passport in 2016.
Points of Origin
Although the authorities have made moves to facilitate tourism within Africa, the majority of visitors are intercontinental. In 2017, 35% of people entering the country come from Europe, 29% from Africa, 15% from Asia and 15% from the Americas. In addition to intracontinental tourism, Kenya is putting a larger emphasis on encouraging domestic tourism, a segment that grew by 15.9% in 2017.
Related industries have similarly been growing rapidly, serving as major drivers of the economy. The accommodation and restaurant segment has recorded the strongest rates of expansion for a number of years, at 13.3% in 2016, 14.7% in 2017, 13.5% in the first quarter of 2018 and 15.7% in the second quarter of that year.
The authorities continue to work to support further expansion. When President Uhuru Kenyatta first came into office in 2013, he announced that his administration would work to attract 3m tourists a year, and he has called for easier travel throughout the EAC in support of this. Also in the works is a longer-term master plan that aims to increase the number of annual visitors to 5m.
Master Plan
In June 2018 the government released a plan to achieve the country’s long-term vision to develop its tourism industry. The National Tourism Blueprint (NTB) 2030 aims to transform the sector, dealing with all components of the value chain to create a comprehensive set of offerings that both increase visitor numbers and assure sustainability.
The country aims to hit 5m yearly tourist arrivals by 2030, KSh200bn ($2bn) of public revenue and 3m jobs in the sector. It is also seeking to expand domestic tourism, with 26.4m visitors per year by 2030. The NTB focuses on four key areas: product strategy, tourism marketing, investment promotion and infrastructure. A number of sub-strategies have been identified, which broadly aim to improve, diversify, refresh and innovate the sector.
The initiative will be carried out in various stages. First, the authorities aim to jump-start existing products and upgrade the traditional markets, making over the existing framework. Second, new markets and offerings will be explored to build on the successful foundations in place. According to the NTB, the first stage will occur over the 2018-23 period, before the authorities begin to diversify in 2021. The government plans to invest in ongoing maintenance of the sector throughout the 13 years of the programme.
A total of 14 strategic initiatives have been identified, with specific plans to construct a six-lane highway to parallel the Madaraka Express and 13 new hotels. The blueprint also calls for institutional development through the establishment of a National Tourism Council, which will help with the formulation and implementation of tourism initiatives. A number of other new boards and bodies are also envisioned, including regional tourism councils and a tourism transformation fund, as well as subsidiary directorates.
The plan also calls for some large-scale, complex infrastructure works. Under the NTB, Kenya will create seven so-called branded corridors on 2500 km of roads, which are set to provide visitors with access to beach and mountain experiences alike. Secondary airports have also been targeted as part of the strategy. In terms of marketing, it is hoped that the country shifts from the traditional model and starts to embrace more online strategies. A so-called Brand Kenya will be created, and the sales system will be upgraded to make the country a preferred partner for the industry while engaging overseas representatives. Incentive programmes are set to include a refurbishment fund, the promotion of an international branded hotel, the Shanzu Creek Development City and resort cities. Cruise terminals and innovation centres are also in the NTB, as are airline incentive programmes, urban tourism and the commercialisation of beadwork.
Connectivity
Kenya’s land, sea and air connectivity continue to improve. Tourists are able travel quickly and affordably into and within the country with increasing ease. This is likely to stimulate tourism by improving travel patterns and removing bottlenecks that once made more creative itineraries impractical.
Much of the new activity is local, regional and low-cost in nature, helping shift the sector’s reputation from catering primarily to wealthy US citizens and Europeans to accommodating a wider range of individuals. A patchwork of micro-markets and short-haul networks is also developing. For example, Jambojet – Kenya Airway’s low-cost carrier (LCC) subsidiary founded in 2014 – introduced a new twice-daily service between Nairobi and Entebbe in February 2018. It is utilising a Bombardier Q400 and pricing seats at KSh11,330 ($111). With a fleet of four aircraft flying to seven destinations, the airline has noted increased demand on domestic routes.
Fly Tristar Services, another LCC, began operating along the coast of Kenya in summer 2018, and it is set to continue offering discounted fares of KSh4333 ($42) through to early 2019. The airline offers a route between Wilson and Mombasa three days per week. It also services Ukunda, Lamu and Malinidi on a charter basis. Founded in 2004, Safarilink is an older market player and utilises 11 smaller aircraft, Dash-8s and Cessnas to transport passengers to about 13 domestic destinations, such as Kilimanjaro, from its base at the Wilson International Airport in Nairobi.
While Kenya is well served by smaller fleets and LCCs, and a number of these are expanding their offerings, it is nonetheless an evolving business. AirKenya, for instance, announced that it will be discontinuing its coastal routes connecting Diani, Lamu and Malindi from 2019 to develop other services, such as a planned route between Mara and Entebbe starting June 2019.
Larger Carrier
Kenya Airways is in the midst of a recovery and restructuring programme that could help boost the tourism sector by offering improved direct connections and services. Founded in 1977, the airline has had a mixed history, expanding too rapidly at first and suffering from market volatility in recent years. The company reported the largest corporate loss in Kenyan history in FY 2015/16. While it continued to record losses, performance has since improved, with 3.1% revenue growth recorded in the first half of 2018.
In 2017 the carrier underwent a restructuring to put the airline on sound footing. In a massive debt-to-equity swap the government increased its stake from 29.8% to 48.9%, and the banks agreed to convert about $400m to stock. The Air France-KLM holding was reduced from 26.7% to 7.8%, while the International Finance Corporation and retail investors were all significantly diluted. Overall, the government and 11 local banks ended up taking over approximately 90% of the company.
With the restructuring has come changes to routes, which could provide the broader sector with a welcome boost. Kenya Airways – the sixth-largest carrier in Africa with 4.45m passengers in FY 2016/17 – will add an additional weekly flight to Mauritius beginning in November 2018. It also began code-sharing with Delta Airlines for routes from Nairobi to Europe, as well as for some routes beyond Nairobi, and it increased the frequency of flights to Amsterdam. Spokespeople for the airline said it was considering adding 20 new services – including a European and Asian route – over 2018-23 period as a part of its recovery efforts. The airline will also take back five aircraft it had sublet.
These initiatives have seen passenger numbers rising, while load factors are returning to healthy levels. Passengers numbers have increased by 71% over a decade, and in FY 2016/17 the load factor hit 72.3%, up from a low of 63.6% in FY 2014/2015 and approaching its recent peak of 73.6% in FY 2007/08. Transatlantic services are anticipated to further bolster this performance, supported by agreements signed by President Kenyatta and US President Donald Trump in 2018. After receiving a number of key approvals since 2017, the airline is beginning to offer direct services between New York and Nairobi on October 28, 2018. Tickets for the daily service went on sale early in the year, with prices as low as KSh87,000 ($852).
Kenya Airways believes that the flights will play a significant role in its future success, forecasting the service will help increase earnings by 10% in 2019. For tourists from the US the direct connection will make a significant difference, reducing travel time from 25 hours to 15, thus more conveniently linking Kenya with its biggest single source for tourists. This is also set to improve trade of certain perishable items. In addition to its large domestic carriers, Kenya is working to attract international LCCs, such as Ryanair and easyJet, to expand inexpensive and direct connections from the UK to its beaches and safari areas.
Ground Transport
The Standard-Gauge Railway project, which ended its first phase in January 2018 and is receiving KSh74.7bn ($732m) for the second phase, is helping the development of safari tourism, with tour operators telling industry press that this will reduce road traffic, and that they would use rail instead of air travel on trips to Tsavo National Park. The local market is a source of increased demand. With the opening of the twice-daily Madaraka Express train connecting Nairobi and Mombasa, the rise of LCCs, the improvement of various roads and the upgrading of airstrips, vacations are now more within reach for citizens of all income levels. In addition to land and air travel, cruise tourism is an area of focus. The Kenya Ports Authority noted an increase in arrivals during the 2017-18 cruise season, with six ships docking at Mombasa between October 2017 and March 2018. A cruise terminal is being built at Mombasa with the help of TradeMark East Africa to allow for the simultaneous docking of two ships. However, its anticipated completion date has been delayed from August 2018 to July 2019.
Promotion
The government’s Kenya Tourism Board (KTB) anticipates the 2018 Kenya Open Golf Championship to promote the country as a golf tourism destination. The competition has been held since 1967, but the prize was increased by 127% in 2018 to KSh62.5m ($612,000). It now offers the highest monetary award in the European Challenge Tour, and this is set to double to KSh126m ($1.2m) in 2019. Betty Radier, CEO of the KTB, noted that the championship demonstrates Kenya’s strong golf history and tradition, with more than 40 golf courses, long days and favourable weather.
Further events are being planned, such as the first-ever international film festival in the country, set to be held in Malindi in Kilifi County in late 2018. Additionally, the return of flamingos to Lake Nakuru National Park is helping improve tourism in the North Rift area. Hotels report increased bookings, especially from Asian countries and within Kenya itself. The KSh5bn ($49m) Chemususu Dam Project has helped the lake recover and encouraged the birds to return.
Wildlife & Conversation
In early 2018 the wildlife remit was moved from the Ministry of Environment and Natural Resources to the newly established Ministry of Tourism and Wildlife. This move recognises that conservation is central the country’s success as a tourist destination. The shift in wildlife management marks a return to the country’s historical norms, with natural features marketed along with other attractions. In support of this changing view of conservation as a measure to benefit tourism, public-private partnerships are being explored. With the cooperation of the Chinese firm Alibaba, Kenya will be using cloud computing, artificial intelligence and the internet of things to manage the 13,500-sq-km Tsavo East and West National Parks. The technologies will use data collected from sensors, drones and traps to analyse wildlife in the parks, as well as reduce poaching and other illegal activity.
County Plans
The KTB has called for county governments to contribute to a national calendar of events to help diversify away from safari and beach tourism. “Kenya cannot rely only on safaris and beach tourism,” Hashim Mohamed, principal and CEO of Kenya Utalli College in Nairobi, told OBG. “Tourist destinations are about experiences that are unique and authentic, and every country should develop niche products that are unique and marketable.” County officials have said they would like to take the lead in their marketing efforts, as they are better suited to publicising what their respective regions have to offer. Although tourism remains a largely centralised endeavour, they are campaigning to bring devolution to the sector.
Hotel Infrastructure
According to global consultancy PwC, Kenya’s hospitality sector is set to grow by 8% in 2018 and receive 2.06m visitors in 2022. The country plans to add 1800 rooms to the market by 2020 and 2600 rooms by 2022, bringing the total number to 21,700. This would represent a 14% rise from the 17,000 hotel rooms at the end of 2017. That year, hotels had an occupancy rate of 47.3%, down from 52.9% in 2016.
Some areas are still facing difficulties. As the number of visitors to the coastal regions has declined, hotels have also closed, and many establishments have been put up for sale. Meanwhile, some properties have seen an uptick as improved transport links have helped boost domestic tourism. Others choose to market themselves as meeting, incentive, convention and exhibition centres. Groups attending these events book in large numbers and well in advance, which helps boost bookings. Hotels in Watamu, Kilifi County, recorded 50% occupancy in early 2018, up from 30% in the same period a year prior. Some hotels reported occupancy rates as high as 90%, with most visitors coming from Europe.
Outlook
The trend in the tourism sector is clearly positive. After a difficult period, the numbers are climbing towards new heights. However, connectivity is an area with potential for development. “There is room for improvement on issues of connectivity and the product,” Susan M Ongalo, CEO of the Kenya Tourism Federation, an association of private sector players, told OBG. “We have been doing the same thing for so long and getting the same results, hence it is time to place more effort on diversification.”
In an effort to achieve this diversification, the country is looking to offer a more contemporary experience, combining traditional attractions with new offerings. If players rely solely on conventional measures, they will face natural limits. However, Kenya has major-destination potential if it builds on its already solid foundations.
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