Opportunity for Investment in Kenya’s Hospitality Sector

   

Famous for its great wildebeest migration, national parks, and pristine beaches, Kenya is a beautiful country. It is East and Central Africa’s economic powerhouse, and is popularly known across the globe as a famous travel and leisure destination. It is evident in the recent times that the country’s hospitality industry has made great strides – especially the latest positive developments in the industry. According to the World Bank, Kenya’s economy is set to be among the top five economies in Sub-Saharan Africa. This is because growth rates are expected to average 6-7% in the next three years.

Kenya’s focus is slowly shifting to target the corporate travel market in order to match international guest expectations. According to statistics from Jumia Travel, a major hospitality brand, Kenya’s hospitality industry contributes an average of 10% to the country’s GDP, which is higher than the continent’s average of 8.1%. It’s worth mentioning that the travel and hospitality sector in Kenya is the country’s second foreign exchange earner after agriculture.

For the second time, Kenya was recognized worldwide as the World’s Leading Safari Destination at the World Travel Awards in 2015. This recognition, alongside other exciting industry developments, has been attributed to the increase in conference tourism. In 2016, Nairobi overtook Johannesburg to be crowned the leading Meetings and Conference City in Africa.

In 2015, conference tourism rose from 12% to 15.6%. Because of the steep competition, hotels have put in a lot of effort to ensure the needs of both business and leisure travellers are well catered to. In addition, many local and international restaurants continue to be opened in Nairobi and other major cities throughout Kenya. The country has also hosted major hospitality conferences, which have played a major role in boosting Kenya’s hospitality standards.

In 2015, the Kenya’s hospitality industry employed 9.3% of the country’s total working population; this trend went up by 1.1% in 2016, with about 1.5 million people employed in the industry. If current trends are anything to go by, it is expected that the sector’s contribution to the country’s employment market will have gone up by 2.9% in 2026. Kenya has continued to attract global investors who are setting up international standard hotels. As a result of these popular and established hospitality brands being set up in Kenya, there has been an increase in the sector’s confidence.

Nairobi is the region’s leading business and investment hub, and for this reason, there are a number of international hotel chains that have set up across the city. Some of the top global hospitality brands operating in Nairobi include Villa Rosa Kempinski, Radisson Blu, Royal Tulip, Best Western, Swiss International, Golden Tulip, and Hilton Garden Inn among many others. With these new developments, Nairobi and Kenya are now prominent features on the global hospitality map. The hotel chains that opened in 2016 alone have further increased the bed capacity by over 2,000.

Presently, many luxurious hotels are still under development. It is expected that from 2017 to 2019, more hotels will have opened their facilities to the public. A key development that is ongoing is the 45-floor Hilton Garden Inn in Nairobi’s prestigious Upper Hill area. It is designed to be part of Pinnacle Tower, a 70-floor mixed-use development that is set to be Africa’s tallest tower.

At 900 feet, the tower will have Africa’s highest viewing deck. “We are targeting the middle and high-end luxury hospitality market. Nairobi is becoming a regional hub, and the expatriates coming to work here require these residences for short stay”. The building will also have a helipad that will be at over 800 feet; again, making it the highest on the continent. “We thought it was wise to put the helipad here so that people can fly directly to the hotel and beat Nairobi’s hectic traffic”, said Abdinasir Ali Hassan, the Chairman of Hass Group – the firm tasked with building the hotel tower.

What Makes Kenya a Perfect Hospitality Investment Destination?

Improved Security

Even though Kenya has been largely a peaceful country with few major security challenges, the local hospitality industry has previously experienced a downturn. However, they later managed to bounce back after improving security. Between 2013 and 2015, Kenya suffered a number of terrorist attacks that negatively impacted the tourism and hospitality industry. Some examples include: the September 2013 terror attack at the Westgate Mall in Nairobi, frequent grenade attacks in Nairobi and Mombasa, and the 2015 Garissa University terror attack. These attacks handicapped the hospitality sector, and they were the outcome of an increased wave of insecurity. At the Kenyan Coast, more than 40 hotels closed shop temporarily, and more than 30,000 workers were laid off.

However, things took a turn for the better in 2016 when the industry started showing positive signs of recovery. Both the government and private sector embarked on a vigorous recovery strategy to ensure Kenya once again regained its position on the global map, and these efforts have paid off. Kenya’s security landscape has improved a great deal, allowing the country to focus on growing its various economic sectors. Improved security once again jump started the hospitality sector; as more tourists started coming in, the numbers increased significantly.

Since then, continued improved security has created a conducive environment for both local and foreign businesses to establish themselves in the country. At a past hospitality event, World Travel & Tourism Council (WTTC), David Scowsill applauded Kenya’s hospitality industry for remaining resilient, and successfully overcoming the threat of terrorism, crises, and disasters. “Our industry is resilient. In each occasion, travel and tourism has returned to growth with remarkable speed”.

Preferred Conferencing Destination

Aside from Kenya being centrally positioned on the continent, it is considered an excellent conferencing location. Many stakeholders including corporate, NGOs, and intergovernmental organizations have held various high-profile international conferences and forums in Kenya. In July 2015, Nairobi was put on the global map when it hosted the Global Entrepreneurship Summit Forum, opened by the then U.S. President, Barack Obama.

Other high-powered conferences that have been held in Kenya include the World Trade Organization Ministerial Conference in Nairobi during December 2015.  Major global conferences which Nairobi has hosted include United Nations Conference for Trade and Development (UNCTAD), the Tokyo International Conference on African Development (TICADVI), Africa, Caribbean, and the Pacific Parliamentary Assemblies meeting, as well as the African Green Revolution Forum (AGRF).

Corporate conferencing is the new kid on the block, and there are plans of advanced stages to build more world class convention centers across Kenya. The KICC (Kenyatta International Conference Centre), which has been there for the last 5 decades, has helped brand Kenya as a world class tourism destination. Presently, there is immense potential in the conference tourism sector that needs to be tapped into. Besides Nairobi, there are other major cities in Kenya such as Mombasa, Nakuru, Kisumu, and Eldoret, which offer great investment opportunities for hospitality service providers interested in conference tourism.

Nairobi is the only city in the world with a major National Park within its vicinity: The Nairobi National Park. This means that guests who are attending conferences in the city can easily get to the National Park, as well as sample other tourist attractions located close to the city. One of the other major attractions close to Nairobi is the world-renowned Maasai Mara Game Reserve, which is a 3 hour drive from Nairobi. It is famous for the annual wildebeest migration, and was once named one of the Seven Wonders of the World. Other top conference destinations on the Kenyan coast, such as Mombasa, are also located close to the country’s top beach attractions and national parks.

Devolved Governments

Kenya has undergone massive transformation in its governance system, which has had a direct positive impact on the hospitality industry. The new constitution that was promulgated in 2010 created devolved governments run by county governors with an aim to bring the service closer to the people. With counties now fully operating, sectors like the hospitality industry have greatly benefited.

Numerous opportunities for sectors are not only found in Nairobi, but have gradually started to expand to other counties across the country as well. Alongside Nairobi, investors are also setting up their establishments in other areas of Kenya. This is because there is a great investment climate in the counties that are now contributing more actively to the national GDP.

As a result, we’ve witnessed increased hospitality investment at the county level. With each county running its own affairs, there are a number of sustained marketing efforts aimed at showcasing the hospitality industry’s potential at the grassroots level. A number of counties in Kenya have recently organized tourism and hospitality exhibitions aimed at promoting local attractions. In these events, potential local and foreign hospitality investors are invited to sample what opportunities various regions offer, as well as how to acquire the best investments.

In line with the new constitution, the central government has continued to ensure that county governments are allocated sufficient funds to enable improved economic well being. On the other hand, county governments are tasked with the responsibility of coming up with innovative ways of advertising local attractions, with the aim of boosting foreign investments.

Growing Middle Class

Kenya has recently witnessed a rapidly growing middle class and increased urbanization, which has created numerous opportunities in the hospitality industry. Unlike in the past when dining and going out was associated with the rich in society, middle income individuals have now begun to embrace the culture of visiting various hospitality facilities. In addition, the growing number of elites known to have an appetite for the finest things in life – such as accommodation, food, and drinks – have necessitated the improvement of hospitality facilities to meet the needs of the customer.

With the increasing number of investments, clients from different social classes have had their needs adequately met. The increasing middle class population has driven up competition, as every service provider wants to outshine their competitors. Whether you are looking to invest in mid-range or luxury hospitality facilities, Kenya is definitely a great destination for hospitality investors.

The flourishing economy has undoubtedly created a favorable environment for the growth of the middle class population. Proliferation of large shopping malls around Nairobi and its suburbs has also created extra space for the establishment of hospitality enterprises such as hotels and restaurants – which are popular amongst the middle class.

Increase in Domestic Travel

Hospitality trends in Kenya have changed rapidly in recent years. The country previously depended solely on international business and leisure travellers; however, things have changed. Kenyans are now travelling to various destinations across the country, both for leisure and business functions. Statistics indicate domestic travel spending in 2015 stood at 59%, compared to 41% in 2014.

Implementation of various policies and domestic marketing efforts has encouraged Kenyans to not rely on foreign visitors alone, but to visit various hospitality establishments across the country. This move has increased foreign investor confidence because the Kenyan hospitality industry is very diverse; for instance, it caters to both domestic and foreign clients, which creates an avenue for better returns on investments.

How to Successfully Invest in Kenya’s Hospitality Industry

The hospitality industry in Kenya is very competitive. As a result, investors need to strategize and find innovative ways of appealing to the market. Major investments witnessed in the industry have further improved the level of service delivery, and the key component of Kenya’s hospitality industry is customer service. Without offering exemplary customer service, achieving success in the industry can be an uphill task. Even though an establishment has excellent facilities, it is likely that  high clients will shun the facility if quality customer service is not provided.

Major Hospitality Categories in Kenya

The hospitality industry in Kenya is divided into numerous categories, each of them offering unique opportunities for investment. Below are the sector’s three main areas that one can invest in.

Food and Beverage

Food and Beverage is undoubtedly the largest sector in Kenya’s vibrant hospitality industry. Opportunities in this sector can vary from high-end restaurants, to catering establishments and fast food joints. In the recent past, the food and beverage sector has continued to flourish with the help of numerous local and international establishments joining the market. Nairobi has even seen a rapid increase in global restaurant chains setting up base in the city, especially in the central business district and large malls. The key to success is to offer excellent food and drinks, as well as offer top-notch customer service.

Accommodation

Hotels, lodges, and bed and breakfast establishments are the common types of hospitality investments in this category. Kenya’s stable economy and good security has paved way for more investors to come in and set up hotel facilities. Even though the country has numerous hotels ranging from 5-star to budget facilities, there are still plenty of opportunities to be exploited. Comfort, exceptional customer service, and efficiency must be guaranteed in order to attract more clients.

Travel and Tourism

The sector of travel and tourism is a key segment of the hospitality industry. It includes transportation such as road tours, airline transportation, trains, and cruise ships among others. There is no doubt that Kenya has a well-developed transportation network that supports efficient and safe travel. Both business and leisure guests have a choice of many different service providers. Thanks to the stakeholders in the travel industry, guests can enjoy comfortable travel on their journey to numerous tourist attractions such as national parks and beaches.

Due to its stable business environment and steady economic growth, Kenya’s hospitality industry is definitely set for greater heights. Major goals have been achieved: the improvement of infrastructure, as well as the simplification of permit acquisition for foreigners keen on investing in the hospitality sector.

According to the 2017 EY Attractiveness Program Africa Report, foreign investors prefer to invest in diverse economies such as Egypt, South Africa, Morocco, Kenya, and Nigeria. In 2016, these 5 countries attracted 58% of the entire continent’s Foreign Direct Investment projects. The hospitality industry in Kenya continues to thrive as days go by, and it’s expected that the country will soon be a prominent feature among the top destinations in Africa.

Authored By: Steve Siboe

Shared By : Fredrica Chelangat