Tourists dry spell and pain of high cost of doing business

Pandemic sees international arrivals falling by 90 per cent

When President Uhuru Kenyatta announced in July that Kenya would open its skies for international flights from August 1, it was a glimmer of hope for the tourism industry.

The Tourism Ministry, led by Cabinet Secretary Najib Balala, quickly came up with travel health and safety protocols to be followed by industry players, based on best practices outlined by the WHO and UNWTO.

Passenger travel into and out of Kenya resumed after more than four months of closure to manage the spread of the coronavirus.

Hotels across the country instituted measures to reopen.

Domestic flights had resumed on July 15, after the cessation of movement into and out of the Nairobi Metropolitan Area, Mombasa and Mandera counties that had been in place since April 6 was lifted on July 6.

Cross-county movement gave hope to the travel and tourism industry, which is among the most hit during the pandemic, where more than 3.1 million jobs have been affected, including hotel employees, pubs and restaurants, tour operators and airlines.

A month after reopening the skies, the country recorded a paltry 14,049 international arrivals, data by the Tourism Research Institute (TRI) shows.

Of these, most (6,368) came to visit friends and relatives, 3,685 9 (holiday), 2,325 (business), 1,129 (transit) while the rest were in the country for other reasons, among them medical, religion, sports and education.

This is a 93.4 per cent slump compared to the 213, 591 international tourists who came into the country the same month last year.

HOTEL BOOKINGS SLUMP 

Hotel bookings are still low, with hundreds of international tourists either cancelling their holidays or pushing their visits ahead to 2021 and beyond.

“A number of our clients have rescheduled their bookings to later dates,” said Joan Ndung'u, residence manager at Leopard Beach Resort-Diani. “We have received a number of guests from the domestic market but occupancy is still low.”

The Coast region, a popular beach destination for tourists from Europe, mainly Germany, France and other counties, has had no major bookings so far. Same goes for the Central Kenya circuit preferred by Americans.

Hoteliers are concerned the dry spell could continue for much longer into 2021, especially in case of a second wave of Covid-19 in Europe.

Asked on any international tourist making reservations, Baobab Beach Resort general manager Sylvester Mbandi said, “None. Only foreigners who work or stay in Kenya.”

On his expectation for international arrivals, he said, “For now it is not clear, maybe November or December, if there is no second wave in Europe. If not, next year.”

The Kenya Association of Hotel Keepers and Caterers notes that while some hotels have managed to secure at least 30 per cent bookings at best, some are operating at as low as five per cent. This means there is no business.

Mombasa, which has traditionally received scheduled charter flights directly from Europe, mainly by international tour operators TUI and FTI Group, continues to suffer a big deal.

The earliest such flights are expected is November.

“The international market is yet to respond as expected,” KAHC national vice chairman Wasike Wasike said. “However, there is some light at the end of the tunnel.”

In Nairobi, the Meetings, Incentives, Conferences and Exhibitions business is yet to return to normal as social distancing and work-from-home policies remain in place at most corporations and government agencies.

The country's capital and a regional business hub is a big beneficiary of MICE, hosting more than 95 per cent of the major conferences that come into the country.

The city is a ghost town at night as the 9pm-to-4am curfew remains in place.

Things are not looking rosy for Kenya this year on international arrivals, with the US presidential elections likely to influence travel patterns from the country's top source market.

While Kenya traditionally receives more than 20,000 arrivals from the US every month, it received only 2,768 in August. Total arrivals from the US last year were 245,437, numbers that only remain a dream this year.

Europe, on the other hand, is not likely to contribute much as the EU continues to advocate internal travels and spending to help its economies recover.

With Kenya heavily depending on the UK, Germany, France and Italy markets, it is likely to miss out on the European market, which last year contributed 584,434 international tourists to the country.

LOSSES PILE UP

The low numbers and losses in the tourism and travel sector, however, do not come as a surprise, with the disruption in the global travel by the pandemic.

CS Balala has since projected international arrivals will fall by 90 per cent.

Based on last year's 2, 048,833 total arrivals, the country is likely to miss out on about 1.8 million (1,843,949) international arrivals this year.

Earnings from the sector are expected to fall by 80 per cent, the CS said.

This translates to Sh130.9 billion based on 2019 total industry revenues, when the sector generated Sh163.6 billion.

Between March and June, the country lost 50 per cent of total annual tourism earnings, which is about Sh81.8 billion.

“We expected to earn almost Sh189 billion in 2020-21. Unfortunately from February till June, we lost Sh80 billion and July and August, we are still calculating, but definitely we have no international tourism,” Balala said at a recent event.

This means Kenya will miss out a great deal on tourism, which supports up to 8.8 per cent of the GDP.

COST OF DOING BUSINESS

Numerous taxes and levies on businesses in the travel and tourism industry are proving to be a major headache for investors, including multinationals, as the cost of operation remains high.

Both the national government and counties are seeking a pie of the sectors' earnings, a move that does not resonate well with industry players.

Tourism establishments are paying the statutory 14 per cent Value Added Tax and an extra two per cent tourism levy to the Tourism Fund.

They also pay for business permits, National Environment Management Authority permit, liquor licence at county level, health and advertising, among other permits.

“Despite many levies being long-standing in nature, there has been a general increase in the number and scope of tourism-related taxes, fees and charges over the last couple of years. The higher taxes make Kenya as a destination too expensive,” Victor Shitakha, Kenya Coast Tourism Association chairman, says.

Industry players have since warned that the levies introduced by counties, coupled with already existing statutory taxes, are pushing up the cost of tourism products.

“The government needs to reduce too much burden on hospitality and tourism sector,” said Hasnain Noorani, Kenya Coast Working Group Chair and managing director for PrideInn hotels.

Noorani said Kenya risks losing business if prices offered are way above products offered by neighbouring and regional competitors, such as Tanzania, Rwanda, South Africa and other countries.

The tax burden is adding pressure on tourism establishments, which are feeling the impact of Covid-19 on their businesses, with reduced disposable income on households threatening to dampen even the domestic market, which the government is counting on to help revive the sector.

While President Uhuru Kenyatta has been encouraging Kenyans to travel, sample the country's tourism sector, with the ministry cutting entry fees to game parks for local citizens and foreign visitors by 50 per cent for a year, not many can afford the luxury.

George Ouma, a Nairobi resident who traditionally made trips to the Coast with his family during school holidays and the December festivities, can barely afford a night at the luxury beach facilities.

“I have taken a 40 per cent pay cut from my employer during this Covid period. Right now the priority is housing and basic needs. Holidays can wait,” Ouma said.

He is one of the hundreds of Nairobi residents who currently cannot afford luxury spending and are rather focusing on rent and other basics.

Hotels are between a rock and a hard place on product pricing and making gains, with cheap attractive packages being one of the only ways to attract numbers.

“The cost of doing business is still high, yet people are seeking cheaper packages, blaming reduced disposable income. You are stuck between cutting prices and making sure you at least make a profit. It is a headache,” Leopard Beach Resort's Joan Ndungu said.

With this, hotels, parks and other tourism businesses are not likely to earn much from the domestic market as the government expects.

Revenues are also expected to remain low as outlets will not be operating at full capacity to meet social distancing requirements, according to the Kenya Tourism Federation.

“Hopefully we are looking at getting something but it will not be full-blown because everybody is broke and everybody is cautious,” KTF chairman Mohammed Hersi said.

He projects the sector will recover from the October winter of 2021.

“For the next year, it is big trouble,” Hersi said.

In the domestic space, restaurants, night clubs and tourism facilities are reeling from the effects of Covid-19 as most either remain closed or are operating on a low scale.

This means millions of jobs are at stake as the year enters its last stretch.

Samuel Nguyo, who operates a cocktail bar and restaurant in Nairobi, wishes for the easing of restrictions by the government for his business to resume.

When measures to contain Covid-19 were put in place, including the night curfew and closure of bars, he sent all his staff home on unpaid leave.

Nguyo ventured into roadside fresh produce sales, a business that did not last a month before the county government ejected traders.

He is now in the online taxi business.

One of his dilemmas, when he reopens his 'Mojitos Cocktail Bar', is whether he will be able to  win back his suppliers.

"Things are bad but we hope for the best," he says.

Meanwhile, for the tourism industry, winter in Europe, which has traditionally sent residents to other parts of the world, including Kenya, for warmer climates, is  a wait-and-see situation, as fears of Covid-19 infections remain.

With recovery only foreseeable in 2021-22, online campaigns remain a key tool for Kenya, led by the Kenya Tourism Board, in marketing the country globally.