Tourism investors raise a red flag due to slow recovery

PHOTO | FILE Tourists disembark from a cruise ship at the Port of Mombasa on December, 26, 2013. Kenya will use the ongoing global tourism fair in Durban, South Africa, as a platform to win back tourists to the country.

What you need to know:

  • Board statistics show that arrivals have declined sharply across the board
  • According to the managing director of Kenya Hotel Keepers and Caterers Association, Mr Mike Macharia, the sector was poised to perform poorly from the start of last year.
  • According to the KTB data, the number of tourist arrivals declined by seven per cent in the year to July 2013 to 1,169,350 million from 1,257,869 million.

Investors in the tourism and hospitality business are grappling with low returns due to slow pace of recovery in the Kenyan industry.

The latest statistics from the Kenya Tourism Board (KTB) show that tourist arrivals in the year to July 2013 declined across the board, an indicator that the woes bedevilling the business could ultimately cost the country its key foreign exchange earner and hand a body blow to growth prospects.

According to the managing director of Kenya Hotel Keepers and Caterers Association, Mr Mike Macharia, the sector was poised to perform poorly from the start of last year.

The VAT law that imposed a 16 per cent levy on industry services pushed up the cost of doing business, further downgrading Kenya’s competitiveness compared to the country’s key competitors — South Africa, Tanzania and Mauritius.

“If the cost of business keeps rising, and nothing is done about it, we will be left with no choice but to retrench workers,” Mr Macharia said.

According to Mr Fred Kaigwa, chairman of Kenya Tour Operators Association, the VAT levy was a killer blow to Kenya’s tourism business.

The tax hit came after a string of hurdles including the uncertainty surrounding the elections and insecurity that has gripped the country since 2011.

At first, the polls were expected to be held in August 2012, then December 2012 only to be held on March 4, 2013. Such uncertainty coupled with security scares negatively affected the tourism climate.

As a consequence of the VAT law, Mr Kaigwa says, it is now 30 per cent cheaper to go to South Africa compared to Kenya.

Mr Macharia also criticised some government directives, for instance, the one requiring civil servants to only fly with Kenya Airways. This requirement, he said, can only cripple recovery initiatives.

“Haphazard policy decisions by the national and county governments will do more harm to the sector,” he said.

ARRIVALS DECLINED

According to the KTB data, the number of tourist arrivals declined by seven per cent in the year to July 2013 to 1,169,350 million from 1,257,869 million.

Tourists who disembarked from the Jomo Kenyatta International Airport declined by six per cent to 987,910 from 1,053,443 recorded in the same period in 2012. Those who landed at the Mombasa International Airport contracted by 11 per cent to 181,440 from 204,426.

The data shows that no cruise tourist landed in the period under review.

Tourist arrivals from Europe dipped by 15.3 per cent from 577,797 to 489,429 in the year to July 2013, “partly due to the economic recession in Eurozone,” the report notes.

Eurozone accounted for 41.9 per cent of arrivals in the time under review.

The investors also blame the government’s laxity in releasing the Sh500 million recovery fund which they requested last year after the polls to bolster marketing drives following insecurity scares and the uncertainty surrounding the elections.

“We have also as a country, not done enough to recover and if nothing is done, 2014 could be worse,” he said.

The government has rolled out a plan to introduce a single tourist visa to the East African region, however, the investors say that the greatest concern at the moment is revamping the country’s products to make Kenya a competitive destination.

Kenya’s 2013–2018 tourism strategy places great emphasis on developing the local industry by creating an enabling environment and maintaining an open door policy on foreign investment in the business.

The industry, the report says, has previously been left to fate, even as it struggled to win customers in the face of cutthroat international competition.

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