BMI View: The Kenya tourism report looks at a range of key indicators in this well established, yet struggling, tourism destination. A decline in the security situation is impacting heavily on the tourism market, particularly along the coastline , and deterring potential investors and visitors alike. Although we expect to see a return to growth towards the end of the current forecast period, it will be some time before Kenya regains previous inbound tourism highs. In the meantime, the outbound tourism market offers more attractive growth prospects based on healthy domestic economic growth.
Kenya has long been established as a popular safari holiday destination and benefits from having diverse source markets including the United Kingdom, the Netherlands, the United Arab Emirates, India and South Africa. The country's tourism market has however been in decline for several years due to a rise in terrorist activity within the country, particularly the capital Nairobi and along the coast line. While inland safari destinations have suffered less of an impact, the previously popular beach holiday destinations are now on many 'unsafe' travel lists for governments worldwide. With arrivals on a downwards trend we expect to see an 8% decrease in arrivals in 2015, to around 1.2mn.
Short term prospects for Kenya's outbound travel market are more positive. We believe that a booming consumer story, a robust outlook for investment and lower oil prices will see real GDP growth in Kenya expand at around 6.5% annually over the next few years indicating increasing private financial consumption and healthy growth in demand for outbound travel. As such we expect to departures increase by 9.6% in 2015 followed by similarly high growth throughout the remainder of the forecast period meaning that by 2019 departures will outweigh arrivals.
Kenya's hotel market presents a mixed picture at present. While hotels along the coast line are suffering (23 closed in the first quarter of 2015), hotels in the capital and in safari destinations in the many national parks are seeing more positive results (though still down on previous years). Despite the weak security situation, Kenya continues to attract foreign investment and several international hotel groups are expanding in the country, primarily in Nairobi. The hotel market in general offers significant scope for expansion due to Kenya's underlying tourism potential and the lack of competition however most investors will likely wish to see more stability in the country before committing.
The government in Kenya will need to act swiftly to protect the tourism industry, which is one of the biggest contributors to the domestic economy. It is vital that the country improves the security situation, particularly in rural areas, as tourist arrivals have fallen sharply since the most recent attacks (such as the Garissa University attack in April 2015) and cancellations are rising. There is also growing concern surrounding animal poaching in national parks which will impact upon safari holiday destinations.
Key Developments and Forecasts Include:
Kenya continues to expand international travel connections: Kenya Airways recently launched a non-stop route to Vietnam connecting Kenya's capital Nairobi with the Vietnamese capital of Hanoi. The new route reduces average travel times by almost nine hours and will be available three times a week from Jomo Kenyatta International Airport to Noi Bai International Airport.
Outbound departures are expected to increase to 994,840 in 2015, up by 9.6% while inbound travel will decline by 8% to 1.2mn.
International hotel groups are expanding in the market with Wyndham due to open a new luxury golf resort near Amboseli National Park in 2017.
The quarter BMI has given Kenya a score of 35.35 out of 100 on the Tourism Risk/Reward Index, placing the country 15th out of 18 countries in Sub-Saharan Africa, ahead of Botswana but behind Burundi.