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Kenya Tourism Report Q2 2010
Business Monitor International, March 2010, Pages: 45
Kenya Tourism Report provides industry professionals and strategists, corporate analysts, tourism associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Kenya's tourism industry.
Kenya’s tourism sector remains buoyant despite declining visitor numbers as a result of the recent financial crisis in 2009. A disastrous 2008, mired in post-election violence that caused many of the world’s tourism boards to recommend not travelling to Kenya, gave rise to new initiatives that will help boost tourism numbers over 2010.
Kenya promoted domestic tourism in 2009 in an attempt to counter falling international arrivals, but there are limits to this strategy. International and Kenyan tourists prefer different destinations, with most international tourists travelling to the inland game parks, while domestic tourism is focused on the Indian Ocean beach areas around Mombasa.
While this diversification may be positive, domestic holidaymakers do not spend as much as Western tourists and do not generate foreign exchange earnings. Almost exactly 50% of travellers arrive in Kenya by air, with three-quarters flying in Nairobi and the rest in Mombasa.
Political Risk The coalition cabinet remains the major source of internal political risk in Kenya, with agreement only tentative at the time of writing. The issue of dealing with suspected perpetrators of post-election violence also remains potentially divisive. In July 2009, Prime Minister Raila Odinga said: ‘It is a matter of extensive and intensive consultations and I am sure the cabinet will reach an agreement,’ regarding the prospect of setting up a local tribunal to try the suspects. However, the establishment of a local court would likely be politically unpopular. According to a poll conducted by Steadman, 68% of Kenyans want suspects to be tried at the International Criminal Court.
Economic Risk The most recent data suggest that Kenya is weathering the global recession relatively well, with its economic activity pointing towards growth throughout 2010. In a global context, Kenya is set to have a strong performance, with our real GDP growth estimate for 2009 and forecast 2010 revised up to 2.5% and 3.9% respectively, This is expected to be followed by trend growth of 4.6% annually during 2011- 2014. Kenya has outperformed our expectations, giving us reason to revise up our 2009 and 2010 growth figures from 1.1% and 3.4% previously.
Headline inflation in Kenya fell to 17.8% year-on-year (y-o-y) in June 2009 from 19.5% y-o-y in May. A spokesperson for the Kenya National Bureau of Statistics (KNBS) attributed the decline to ‘a continued fall in the prices of cabbages, potatoes and other seasonal food items’. According to the data, prices of food and non-alcoholic drinks declined by 2.6% month-on-month (m-o-m) in June 2009. Underlying inflation, which excludes food items, also trended down, falling to 5.8% y-o-y in June from 7.0% in May. We estimate that headline inflation continued declining over the remainder of 2009, hitting 12.0% y-o-y by the end of the year.
Business Environment Kenya’s business environment is one of the best within the East African region. Higher levels of political stability, good airport facilities and flexible labour regulations and investment laws have allowed Kenya to attract a wide range of foreign business. However, there are weaknesses in the business environment, most notably a high level of corruption, which can make it difficult for local businesses and foreign firms to operate in a transparent fashion. The post-election crisis in December 2007 and early 2008 also had an extremely negative impact on the country’s international reputation.
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