Kenya Tourism Market Report Q1 2012

By Sandler Research | www.sandlerresearch.org | sales@sandlerresearch.org

Worsening Outlook For Tourism Sector The outlook for Kenyan tourism has deteriorated sharply since our last quarterly update. In mid-October 2011 Kenyan military forces crossed the border into Somalia to crack down on the Al-Shabaab terrorist organisation. This followed two high-profile kidnappings and murders carried out by suspected Al- Shabab members inside Kenya. In the first incident, on September 11 2011, a 58-year-old British man, David Tebbutt, was murdered when six armed men burst into his holiday cottage at the Kiwayu Safari Village, which lies only 28 miles from the Somali border. His wife Judith, 56, was kidnapped and is now believed to being held in Somalia. Two Kenyan men have since appeared in court in connection with the kidnapping, although both have pleaded not guilty to the charges against them.

Kenya Tourism Market Report Q1 2012  
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In the second incident, a 66-year old disabled French woman, Marie Dedieu, who spent 7-8 months each year living in Kenya, was taken by kidnappers from her house on the island of Manda on October 1 2011. By mid-October, it was announced that she had died in captivity somewhere in Somalia as she needed to take medication every four hours, which the kidnappers did not take with her. As with the prior incident, it is suspected that local people must have been complicit in planning the kidnapping at least. Both incidents have shocked the world and are likely to result in a spate of holiday cancellations as the security situation around the Kenyan-Somali border worsens. Western governments have been quick to update travel advice as a result of the worsening situation, with the UK Foreign and Commonwealth Office advising ‘against all but essential travel to within 60km of the Somali border and to coastal areas within 150km of the Kenya-Somalia border. This includes the Lamu area’.
Against this backdrop, we have revised downward our tourist arrivals forecasts for 2011 and 2012. We now believe that 2011 could well see a fall in tourist arrivals over the full year, to around 1.04mn. This would represent a 5% drop year on year (y-o-y) and would also mark a severe blow to the industry, which had recorded 13.5 % annual growth over H111, to reach 549,083 arrivals, according to the Ministry of Tourism. However, we think that arrivals data over the last quarter of the year will show significant declines as tourists try to cancel their holidays in the wake of rising tensions.
In future, much will depend on how the security situation develops over the coming months. Although Kenya’s tourism ministry has released a statement saying that Kenya is not at war with Somalia and that the military response on Al-Shabaab will not affect tourism activities in the country, it is clear that Western tourists in particular will likely stay away from Kenya for at least the next six months. We believe it is prudent to revise down our forecasts for 2012 as well, at least until there is greater clarity over the future of military action by Kenyan forces in Somalia.
The effect of escalating military action will have differing effects on different aspects of Kenyan tourism. Given its location, we expect inbound tourism to Lamu to be hit particularly hard. On the other hand, safari holidays – which take place much further inside Kenya – should be relatively unaffected. That said, perception is everything when it comes to tourism demand and any further deterioration in the security situation – for example another grenade attack in Nairobi similar to the twin attack of October 2011 which killed one person and injured more than 20 people – would likely put further downward pressure on arrivals and revenue numbers over the medium term.
Consequently, we have just made alterations to our 2011 and 2012 forecasts for now. We will continue to monitor the situation to see if further changes need to be made to our forecasts in Q212.
New Classification System Being Considered
In March 2011, the Ministry of Tourism announced that it would be carrying out a major hotel reclassification process across the country, in an effort to improve standards for visiting tourists. The process was last carried out in 2000 and was marred by allegations of bribery.
However, by May 2011 the All Africa website was reporting that a shortage of assessors, plus the fact that many hotels are currently closed for renovation works, had forced the Ministry of Tourism to suspend the process temporarily. According to the Kenya Hotel Keepers and Caterers Association, there are over 5,000 hotels in Kenya and only 19 assessors are available for the classification and rating.
If carried out properly, BMI believes that the development of a new national classification system will be a great help to the evolution of the Kenyan hospitality industry, allowing tourists to be better informed about the standard of accommodation available across the country.
Airline Industry Expanding
In recent years, there has been a steady increase in the number of visitors travelling to Kenya by air, with passenger numbers (arrivals, departures and transit) passing through Jomo Kenyatta International Airport in Nairobi rising by 8% y-o-y in 2010, to reach 5.49mn. Passengers passing through Moi International Airport (MIA) in Mombasa also rose, by 14.1% y-o-y to reach 1.27mn. The other seven airports operated by the Kenya Airport Authority (KAA) saw passenger numbers of 760,000, making for total passengers handled by KAA of 7.52mn in 2010. In terms of arrivals alone, a total of 1.23mn travellers arrived in Kenya over 2010, making up over half of all visitor arrivals. Rising visitor numbers have led to KAA seeking funding to carry out the modernisation of JKIA, which is ongoing.

Executive Summary

SWOT Analysis

Kenya Tourism SWOT

Kenya Political SWOT

Kenya Economic SWOT

Kenya Business Environment SWOT

Industry Forecast Scenario

Arrivals

Table: Arrivals Data, 2008-2015

Accommodation

Table: Accommodation Data, 2008-2015

Expenditure

Table: Tourist Expenditure & Economic Impact, 2008-2015

Inbound Tourism

Table: Tourist Arrivals By Region, 2008-2015 (‘000, unless stated)

Outbound Tourism

Table: Outbound Tourism Data, 2008-2015

Market Overview – Travel

Commercial Airlines

Road Transport

Global Oil Products Price Outlook

Market Overview – Hospitality

Accommodation

Accommodation Developments

Tourism Regions In Kenya

Tourism Infrastructure

Land

Tourism Bank

Industry Associations

Business Environment Outlook

Kenyan Business Environment Developments

Table: Middle East And Africa Travel And Tourism Business Environment Ratings

Global Assumptions

Europe On The Edge

Table: Global Assumptions, 2009-2015

Table: Global And Regional Real GDP Growth, 2010-2013 (% chg y-o-y)

Table: Developed Market Exchange Rates, 2010-2013

Table: Emerging Market Exchange Rates, 2010-2013

Developed States

Table: Developed States Real GDP Growth Forecasts, 2010-2013 (%chg y-o-y)

Emerging Markets

Table: Emerging Markets Real GDP Growth Forecasts, 2010-2013 (% chg y-o-y)

Table: Real GDP Growth Consensus Forecasts, 2011-2012 (%chg y-o-y)

Company Profiles

Heritage Management

Kenya Airways

TPS East Africa

BMI Methodology

How We Generate Our Industry Forecasts

Tourism Industry

Tourism Ratings – Methodology

Table: Tourism Business Environment Indicators

Table: Weighting of Components

Sources

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