Earnings for hotels to decline, says PwC

Spending on hotel rooms in Kenya will be at its lowest this year, says a PricewaterhouseCoopers (PwC) report.

The South African Hospitality Outlook 2014-2018 says that in 2014, annual room revenues in Kenya will be Sh49 billion, a slight drop from last year’s Sh51 billion.

The figure is expected to fall further for two consecutive years, then rise slightly in 2017, when the annual room revenue is projected to be Sh53 billion.

The hospitality industry is expected to pick up later in 2018, earning Sh58 billion in revenue.

“Terrorist activities are expected to have an impact on tourism in 2014; most tourists will flee from the coastal region,” states the report.

Last month, tourists in Mombasa and Kwale left their hotels, and some fled the country in a hurry, following terror threats.

It is feared the dire situation facing tourism is bound to worsen as terrorism takes its toll on the Coast.

The number of hotels in Kenya during this period are, however, expected to increase, defying the gloomy prospects.

The report projects the number of hotel rooms to increase from 17,500 in 2013 to 19,400 in 2018.

Despite the increase, the average cost of a room will go up from Sh13,544 in 2013 to Sh14,243 in 2018.

New hotels that set base in the country last year include Hemingways Nairobi, Villa Rosa Kempinski, and Eastland Hotel.

Marriott plans a new hotel in Nairobi in 2015 and Hilton has said it will open two hotels in Nairobi in the next few years.

Terrorist attacks

Radisson Blu, Park Inn, and Lonrho Hotels are other international brands seeking to expand in Nairobi.

The PwC report comes on the backdrop of several terrorist attacks in Kenya.

The latest attack was at Mpeketoni last week, raising fears in the tourism industry, which is already suffering from the adverse effects of travel advisories by Western nations.

Last month the UK, US, and Australia issued travel advisories, leading to more than 500 British tourists at the Coast being evacuated.

The Mpeketoni attack also came just days after the British Government closed its Mombasa consulate over security fears.

This sparked jitters over tourist bookings for the high season. The UK is Kenya’s leading tourist source market.

Mombasa and Coast Tourist Association executive officer Millicent Odhiambo said the attack on two small hotels in Mpeketoni has impacted negatively on the industry.

“Already, we were not expecting a vibrant high tourist season. The Mpeketoni attack has worsened the situation,” she said.

Kenya Association of Hotelkeepers and Caterers Coast branch executive officer Sam Ikwaye said Lamu’s tourism would be adversely affected.

To mitigate the effects of slowdown, the government is investing Sh2.4 billion in a bid to grow domestic tourism.

The money allocated in the 2014/15 Budget will allow workers to take holidays at the expense of their employers.

The expenses will be tax-deductible. About 300,000 Kenyans are expected to take up the offer over the next year.

“The hospitality sector has faced challenges in the past year as a result of decreased number of foreign tourists.

To mitigate against these challenges, I propose to amend the Income Tax Act to allow deduction of expenditure paid by employers on vacation trips made within Kenya,” said Treasury Cabinet secretary Henry Rotich last week.