Home to 60 national parks and reserves, a broad offering of cultural and historic attractions, and over 500 km of sunny coastline, Kenya has seen its tourism sector rise to become the second-largest foreign exchange earner in the country, although a spate of terrorist attacks since 2011, the 2014 Ebola outbreak in West Africa and ongoing security concerns have weighed heavily on the sector, with 2015 marking the fourth consecutive year of declining visitor arrivals and earnings.

However, 2016 saw a return to form for the industry, as the sector recorded 17% growth in earnings, on the back of increased international visitor numbers from a diverse array of countries, including the US, China and India. Najib Balala, cabinet secretary for tourism, told local press that the number of international visitors arriving by air and sea jumped from 752,073 in 2015 to 877,602 in 2016, representing a 16.7% increase.

Recognising the critical role tourism plays in employment and earnings, the government has moved to support the sector with the launch of its tourism recovery programme, a 10-point strategy emphasising marketing, infrastructure development and private sector investment. Combined with rising numbers of regional and domestic travellers, and intensifying efforts to develop the meetings, incentives, conferences and exhibitions (MICE) segment, the sector is expected to gradually recover in 2017, with ongoing marketing initiatives helping to boost it to full recovery by 2018.

Sector Structure

Kenya’s tourism sector is overseen by the Ministry of Tourism (MoT), which was split from the Ministry for East African Affairs, Commerce and Tourism in 2015, when the ministry’s Department of Tourism was granted full ministerial status. Today the ministry oversees a host of parastatal companies, including the Kenya Tourism Board (KTB), Kenya Tourist Development Corporation, Kenyatta International Convention Centre, Bomas of Kenya, Tourism Fund, Tourism Regulatory Authority (TRA), Kenya Utali College and the Brand Kenya Board. The ministry is led by Najib Balala, who served in the role from 2008 to 2012 and resumed his post in November 2015 after a Cabinet reshuffle. The ministry is responsible for tourism policy, management and product development under mandates rolled out with the promulgation of the Tourism Act of 2011, which established the Tourism Fund, as well as the sector’s regulatory authority, the TRA, stipulating the latter produce a national tourism strategy every five years.

Return To Form

According to the World Travel & Tourism Council (WTTC) “Economic Impact 2017 Kenya” report, the tourism and travel sector’s direct contribution to GDP was $2.5bn, or 3.7%, in 2016, and is forecast to grow to 6% in 2017. Tourism and travel was also responsible for directly employing 399,000 Kenyans, or 3.4% of the total workforce that year.

However, tourism’s total contribution to employment in 2016 was more than 1m jobs, which includes those “employed through the supply chain and induced investment impact”, according to the WTTC. In 2016 the country played host to 1.3m visitors, when taking into account those who entered by land, sea and air, a 10.4% increase over 2015, according to the KTB.

Marketing & Lobbying

The KTB has played an increasingly active role in tourism development in recent years, and is responsible for overseeing development of a KSh200m ($1.9m) national tourism recovery marketing strategy, which was announced in May 2014. Since then, the board has launched a host of new marketing campaigns aimed at highlighting the safety and security of the country’s tourist hotspots, as well as promoting tourism at the domestic level through initiatives including an eight-week SMS campaign and social media campaigns on Twitter. The Kenya Tourism Federation (KTF), meanwhile, acts as an umbrella body representing industry interests, with a membership base that includes the Kenya Association of Hotel Keepers and Caterers, the Kenya Association of Tour Operators, the Kenya Association of Travel Agents, the Kenya Association of Air Operators, Eco Tourism Kenya, the Kenya Coast Tourism Association, and the Pubs Entertainment and Restaurants Association of Kenya.

Subdued 2015

According to the Kenya National Bureau of Statistics (KNBS), accommodation and catering services contributed KSh49.7bn ($484.9m) in 2015, up from KSh48.8bn ($476.1m) in 2014, though below the KSh57.2bn ($558.1m) reached in 2012.

The MoT reports that the sector accounts for 10% of GDP and 9% of total employment. Although tourism remains the second-largest foreign exchange earner in the country after agriculture, the sector has lagged behind in recent years as security concerns and the West African Ebola outbreak affected arrivals, revenues and hotel occupancy rates, among others. The KNBS reported that tourism earnings fell for the fourth year in a row in 2015 to KSh84.6bn ($825.4m), down by a combined 13.6% since 2011’s KSh97.9bn ($955.2m), before beginning to recover in 2016.

High Alert

International visitor arrivals also fell for the fourth year in a row in 2015, with the KNBS reporting a 12.6% decline, from 1.35m in 2014 to 1.18m. The biggest challenges in the years leading up to 2015 were related to health and safety issues in the country and region as a whole. Indeed, the KNBS attributed the sector’s subdued performance to perceived security threats and the impact that travel advisories issued by major Western markets had on the sector, including those from the US and the UK, in 2015, as well as the aftermath of the Ebola outbreak in West Africa in 2014, despite the fact that no cases of Ebola were reported in Kenya. Coastal regions of the country were hard hit by a spate of travel advisories, which included Mombasa’s Moi International Airport (MIA); a number of charter flights suspended service to the city as a result of these warnings.

Hotel Occupancy

Hotel occupancy also fell as a result of these travel advisories. The KNBS reported that hotel occupancy by bed nights dropped by 6.4% in 2015 to hit 5.9m, down from 6.3m in 2014, again as a result of falling numbers of European tourists. European visitors to Kenyan hotels have decreased by 51.9% since 2011’s 2.9m nights to just 1.4m nights in 2015. This brought the average annual occupancy rate to a new low of 29.1% in 2015, down from 31.6% in 2014 and 40.3% in 2011. In June 2016 Balala told media that these factors had resulted in a cumulative revenue loss of KSh12.8bn ($124.9m) annually since 2011. Although revisions to travel warnings have since removed MIA from the list of at-risk tourist locales, warnings from the US and UK governments were still in place for some coastal regions as of April 2017, and the situation remains fluid.

Europe

European visitors continue to account for the largest portion of Kenya’s tourist market, at around 35% of all visitors into the country. The KTB reported that air arrivals of Europeans stood at 303,912 in 2016, out of a total of 874,885. This was an increase on 2015, when European arrivals stood at 277,663 out of 748,770 total arrivals. Visitors from the UK continue to make up the largest European source market for tourists to Kenya, with the KTB reporting 96,315 arrivals in 2016, a moderate on 98,195 in 2015, and comprising 11% of arrivals to the country that year.

Other traditional European markets saw their numbers rise over the course of 2016; and the KTB has reported moderate increases in the number of visitors from Italy and Sweden in particular, which had seen steep declines in 2015, when visitor numbers for those two countries declined by more than 30%. European and North American visitors stood at a combined 650,300 in 2015, according to KNBS data, making these two markets a critical priority for the Kenyan government, despite the ongoing travel warnings for areas of coastal and north-eastern Kenya.

Number One

In 2016 the US overtook the UK as the single largest source of tourists to the country — an achievement made even more impressive by the fact that there are no direct flights between the two countries. According to the KTB, in 2016, 97,097 US tourists visited the country, a 16.4% increase over 2015, compared to 96,315 tourists from the UK. US tourism to Kenya is largely based around safari tourism, a segment the government has been looking to grow.

The sector has also seen a significant rise in the number of visitors arriving from India and China, with 64,116 and 47,857 coming in 2016, respectively. The two countries accounted for more than two-thirds of all Asian tourists, and are expected to grow in 2017.

African Potential

Two more bright spots for the sector have been the rising numbers of African and Kenyan tourists. Growth in these categories in 2016 helped sustain the industry during recent times.

The KTB reported that the number of air arrivals from the African continent hit 251,626 in 2016, up from 194,870 in 2015. Of this total number, visitors from Uganda and South Africa comprised a cumulative 86,940 visitors, or about 35%. Rising arrivals from the African continent have helped the industry offset some of its losses from traditional markets in Europe.

Domestic tourism has also been gathering momentum in recent years, after the KTB launched a $300,000 SMS marketing campaign in January 2016 aimed at drawing more Kenyans to tourist hotspots. Although the still limited purchasing power of Kenya’s burgeoning middle class has constrained its contribution to the sector, ongoing campaigns urging hotel and tour operators to reduce rates for domestic tourists during the low season are already paying dividends. The government had targeted a 3% increase in domestic tourists’ share of total occupied hotel nights in the country by 2017, but the KNBS reported that the country had already exceeded this target in 2015, with Kenyan visitors comprising 53.5% of total occupied hotel nights over the course of the year, up from 47% in 2014 (see analysis).

Mice Tourism

In 2012 Kenya was ranked the second most-popular MICE destination in Africa after South Africa by the International Congress and Conference Association, and has continued to see its role in the tourism sector expand. The MICE travel segment had previously been identified by the government as holding significant potential for future expansion, and the segment’s performance in 2015 reflects the results of the government’s efforts to grow this number.

In 2015 the country hosted 117,630 foreign arrivals attending MICE events, representing a 13% increase on the 2014 total (see analysis). The Kenyatta International Conference Centre (KICC) has been tasked with developing the country’s MICE tourism segment, with its Nairobi facility standing as the largest convention centre in East Africa, and the Tsavo ballroom offering capacity for over 4000 delegates.

In November 2015 KICC announced that it had signed a memorandum of understanding with Kenya Airways, the country’s flag carrier, to partner in promoting MICE events in Kenya internationally. The KICC and the airline have combined efforts to promote Kenya in key MICE markets, in addition to bidding in partnership on regional and international conferences. The KICC reported that the MICE segment contributes KSh24.6bn ($240m) annually to the economy, in addition to employing an estimated 24,000 people.

Kenya has hosted a number of high-profile conferences, including the Global Entrepreneurship Summit and the 10th World Trade Organisation Ministerial Conference. At the country’s inaugural MICE in East Africa and Central Africa conference, hosted in Nairobi in November 2015, KICC reported that the business tourism segment is expected to generate over KSh32bn ($312.2m) in annual direct and indirect economic benefits to the country in the coming years. Domestic tourism was again a strong point, with the KNBS reporting that the number of local conferences hosted in Kenya rose by 4% to hit 3199 in 2015, up from 3077 in 2014.

Parks & Recreation

Kenya’s national parks and wildlife reserves are set to make a comeback in 2017, while the growing popularity of museums and historical attractions saw cultural tourism remain a bright spot in 2015. Kenya is perhaps best known as a safari destination, holding a portfolio of 60 national parks and game reserves, which includes Amboseli National Park, a national park bordering Tanzania and the famous Mount Kilimanjaro, and one of the most popular in the country. Although these attractions have traditionally been one of the strongest segments of the tourism industry, the number of visitors to national parks and game reserves fell by 9.7% in 2015 to 1.95m, even as the KNBS reported that the number of visitors to museums, snake parks and other historical sites rose by 15.4% to 797,500 in 2015, against 690,900 in 2014. According to the KNBS, falling visitor numbers to national parks and reserves are partially attributable to competition from neighbouring countries, which do not charge a value-added tax (VAT) on park entry fees.

Recovery Plan

Recognising the serious challenges facing nearly all segments of the tourism sector, the government has moved to implement a long-term recovery plan, which should see the country reach its target of 3m annual international visitors, unlikely to occur by the government’s original deadline of 2017. In May 2013 authorities at the Ministry for East African Affairs, Commerce and Tourism announced the launch of a 10-point strategy highlighting priority areas for tourism development in the country, including streamlining the boards of state tourism corporations such as the KTB, potentially through the amalgamation of all tourism parastatals into a single tourism authority as suggested by the Tourism Act. In addition, the strategy has sought to launch a market recovery programme to improve the country’s image internationally and promote domestic tourism. Priorities include infrastructure upgrades for key transportation links, including highway construction between Narok and the Maasai Mara National Reserve, a bypass on the highway connecting Nairobi to Mombasa; and upgrades at MIA in Mombasa. “Nairobi suffers from poor public transport. If the city wants to be competitive, especially in the MICE industry, it must find a way to decongest the roads and make travelling more conducive,” Daniel Kang’u, general manager of the Nairobi Serana hotel, told OBG.

The KTB was also reportedly in talks to receive a significant spending influx to launch its marketing campaign, and in May 2014 the board announced it would receive a KSh200m ($1.9m) budget to implement an ambitious marketing campaign, which came in the wake of travel advisories from critical source markets.

The UK-based marketing firm National Review won a KSh10m ($97,570) contract to formulate the plan, which included launching new marketing campaigns in important source markets like the UK, Ireland, the US, South Africa, India, Nigeria, Ghana, Canada, the EU, Russia, Asia and Brazil, targeting, for example, 1m Chinese tourist arrivals annually in the coming years.

Channelling Resources

The KTB’s enhanced marketing budget is part of a broader overall trend that has seen the government channel significant new financial resources into the sector, in addition to slashing taxes and fees levied on the industry. The KNBS reports that the government boosted its budget allocation to the State Department of Tourism from KSh5.6bn ($54.6m) in FY 2014/15 to KSh10.7bn ($104.4m) in FY 2015/16, a 91% increase. In addition, it scrapped landing fees for chartered flights to airports in Mombasa and Malindi between January 2016 and June 2018, and rolled out a $30 subsidy to airlines for every passenger who disembarks in Kenya over the same period.

In June 2016 Balala told local media that the recovery plan was already well under way, noting that the ministry had proposed a number of measures in the FY 2016/17 draft budget, including removal of VAT on park entrance fees, which would reduce entry fees by nearly a fifth. The measure came after the MoT had already decided to reduce park entrance fees by a third, to KSh6000 ($59) in February 2016. This move should prove particularly advantageous in light of Tanzania’s June 2016 decision to implement an 18% VAT on its tourism sector, including national parks, which has been widely panned by industry stakeholders there. Balala also announced that the MoT had decided to waive visa fees, which stood at KSh10,000 ($98) for multiple-entry visas and KSh5000 ($49) for single-entry visas, for anyone under 16 years old, in a bid to encourage family travel package sales.

Funding for marketing activities also rose in FY 2016/17, which began in June. The Ministry of Finance announced it had allocated KSh4.5bn ($43.9m) to tourism marketing activities, in addition to approving the draft budget’s plan to eliminate VAT on national parks and remove VAT from commissions earned by tour operators. The government also announced plans to increase air passenger service charges for external travel from $40 to $50, and increased the same charge for domestic travel from KSh500 ($5) to KSh600 ($6).

Revenue earned from these increases will be used exclusively for tourism promotion activities, according to the FY 2016/17 budget statement, with the government announcing plans to establish a Special Tourism Promotion Fund, which could be sourced from revenues generated by the airport departure taxes.

Outlook

Although a full recovery is not expected until 2018, stakeholders are becoming optimistic after concerted government efforts to boost marketing, enhance security, and reduce costs for operators and employers. These efforts are paying off; the KNBS reported in June 2016 that tourism was the most-improved sector in the economy during the first quarter 2016, recording a 12.1% growth, compared to an 11.4% contraction in the first quarter 2015. International visitors increased by more than 10% in 2016, and the WTTC predicts that by 2027 the number of international tourists could reach 2.3m, generating KSh343.5bn ($3.4bn).