- 1 Definition / Scope
- 2 Market Overview
- 3 Key Metrics
- 4 Market Risks
- 5 Top Market Opportunities
- 6 Market Drivers
- 7 Market Restraints
- 8 Industry Challenges
- 9 Technology Trends
- 10 Regulatory Trends
- 11 Other Key Market Trends
- 12 Market Size and Forecast
- 13 Market Outlook
- 14 Distribution Chain Analysis
- 15 Competitive Landscape
- 16 Competitive Factors
- 17 Strategic Conclusion
- 18 References
Definition / Scope
Travel & Tourism is an important economic activity in most countries around the world. The industry has significant indirect and induced impacts as well.
The indirect contribution of travel and tourism sector of Kenya is greater than that of the direct contribution to GDP. The indirect contribution can be explained by three factors which are:
- Capital Investment spending by all the players involved in the industry
- Government spending of the promotion and support of Tourism activities in the country
- Purchase of domestic goods and services directly by different industries within the Travel & tourism
The contribution made by the tourism sector is mostly to GDP and the employment sectors of the country.
The tourism sectors direct impact to the economy of the country was $2.5 billion i.e. 3.7 percent in 2016. As of 2018 quarter end, the expected figure is $8 billion which will account 9.6% of GDP and is foretasted to reach $1.33 trillion and growth by 5.1 percent by 2028 which will account 9.1 percent of GDP. Also this sector has directly provided employment opportunities to 399,000 Kenyans which accounts as 3.4 percent of total workforce in Kenya.
Kenya's tourism sector is the second largest Forex recipient after tea industry. It is a diverse sector within the entire East African region. The segments within tourism which has received most of the investments are conference, eco and leisure. The tourist arrivals at Kenya in 2017 grew by 20 percent and the revenues were recorded at $1.2 billion.
Some of the major tourism products of Kenya are:
- Eco- tourism: Most visitors coming to Kenya are willing to engage in the wildlife safari. As Kenya is diverse in terms of wildlife and has amazing landscapes, 7.5% of the total land area of the country is occupied by wildlife reserves.
- Beach Tourism- It also has 536 km of pristine white sand beaches covered with palm and coconut trees. Mainly holiday visitors enjoy the marine life and are engaged in all sorts of water sports such as snorkeling, kitesurfing, dhow sailing and kayaking.
- Conference Tourism- Some of the popular global conferences such as Global Entrepreneurship Summit and 10th World Trade Organization Ministerial Conferences were held in Kenya. Thus this has led to the birth of MICE (Meetings, Incentives, and Conferences & Exhibition) tourism in Kenya and many western countries are observing Kenya as the commercial hub to carry out such events.
- Cultural Tourism- after Nairobi, Mombasa is another city which is the attraction destination for the tourists. It has rich cultural history aging back to 8th century.
- Birding- A total of 1,070 birds' species variety is found in Kenya. This becomes a favorite pastime for many visitors.
|Base Year||2017||Researched through internet|
Tourism in Kenya is one of the sectors which have significant contribution to the economy of the country. However, one of the biggest risks associated with this sector is terrorist attacks in the country.
The attack which happened in the Westgate mall in 2013 is one of the events after which the countries which account large number of tourist visitors in Kenya allotted security advisory in the country to ensure their citizens are safe. Another attack happened in 2015 at Garissa University. This has further shrunk the visitor numbers and put pressure upon the hotel industry revenues and overall tourism earnings.
Top Market Opportunities
Various new forms of tourism has existed at recent times such as village tourism, rock art tourism, eco-tourism among others. These ideas have been let out in order to promote the natural and cultural resources of the country. Similar new segments can be identified by other companies operating in the industry to create competitiveness within the industry and overall promote Kenya as an essential tourist destination in globe.
Interest of China in the foreign direct investment across various countries has been the increasing trend. As China is eyeing the developing economies, Kenya is also one of the most striking countries for China to provide aid and donations. It will definitely broaden its scope of involvement in the tourism sector of Kenya. Thus companies which are involved within the sector can learn from the China's marketing efforts of Kenyan Tourism industry and improve their position to cater the western clients as well as become prominent in international tourism market.
Online travel is an increasing trend throughout the world. Statistics reveal that 7 out of 10 travelers around the world use internet to search information regarding travel and tourism related activities. In a poll that was conducted in UK, 70 percent respondents stated that they use internet for planning travel. As UK is the major source market for the Kenya, it is necessary for businesses involved in tourism sector to be present online and promote their businesses online where they provide additional services like online booking etc.
The major driver of the industry lies in the effort of the tour operators to increase their revenue by adding up a new stream which is by expansion of source markets. The major markets include US and UK but now the interest has shifted to Asia and Latin America too. The Kenya Airways has supported this initiation by boosting up its diffusion in Asian markets particularly in China. China Southern Airlines have also introduced service between Guangzhou and Nairobi. In the year 2014 alone, 120,000 passengers traveled between two countries with an expected annual 15 percent rise, the number will reach 209,880 passengers by 2018.
As the tourism sector in Kenya appears to be very attractive, there are number of hotels in pipeline to be constructed. These hotels are targeted to mid and low budget travelers. These new hotels are providing rooms at competitive prices which will push down the overall average rates in the industry. Further, other segments such as beach and safari in tourism are also likely to be boosted because of the increase in investments of lodges targeted to these segments. Thus, these factors will help to drive tourism activities and supply of tourist visitors in the country which will increase the prospect of sector in long term.
Kenya is concentrating on increasing the air connectivity within the African continent which is going to become one of the major drivers of tourism in 2018. The Tourism Ministry of Kenya projects a 16 percent growth riding visa on arrival for the African and US tourists. The new cruise ship facility which has been recently introduced which is further going to boost tourism in Kenya. Other African countries like Uganda also showed a 20.6 percent increment in visitors to Kenya and became the largest African tourist source country for Kenya in 2017. The common visa policy with features such as visa on arrival for all African nationals, minimum 30 day visa for African citizens for visiting any country in African by 2018 and single continental passport within 2020. Thus these initiatives are going to lead to intra-African travel which will definitely boost tourism not only in Kenya but overall African region.
Commencement of multiparty politics in 1992 has led to political unrest until present. The core political situation exposes the industry to significant uncertainty.
The social issues have also been another factor limiting the potential of tourism to grow in Kenya. There are problems of famine, drought and poverty across Kenya. Generally in the northern region of the country the locals are continuously encountered of having a clash with the wildlife reserve to close down as they are unprotected to the attack of wild animals residing within the reserves. Also, Kenya is ranked as the 11th country with most exposed diseases. For instance, new forms of tourism in Kenya such as 'slum-tourism' and 'agro-tourism' requires the visitors to travel and stay in remote areas of the country where they may contract diseases from the locals.
In a total of 40,000 human resources equipped within the industry, 70 percent have a formal education and training to carry out tourism related services.
There have been instances where the beaches and the wildlife of the Kenya has been degraded. These have been the main tourist destinations for visitors since a long time and due to unplanned tourism, excessive human settlement several properties have been destroyed. Further the situation remains complex as the environmental policies that could be directed at such issues have fallen trap to political interests. This has led to the decline in number of tourist destinations in Kenya.
The ministry of tourism is the government body which regulates the tourism sector in Kenya. There are policy initiatives which has been made to improve the condition of tourism in the country however some important issues have been left out within the policy such as ownership and management of tourism organization, training and education of human resources involved with the sector, lack of inter-sectorial connection and integration etc. These challenges are further probed by various stakeholders involved with the industry and lack of a clear policy formulation has led to problem creation time and again.
The upsurge of 4G and 4G LTE services and the growth in smartphone usage is driving the in e-commerce and other e-based services and innovation. Thus external companies are using these means to create tourism related services which are fast and convenient for the tourists. This is a big threat to the existing tour operators in the industry who are reluctant towards integrating such technologies in their businesses. This has led the industry to become vulnerable and lack of policy to address the ICT issue is further discouraging the players in the market.
As Kenya has been extensively using marketing tools to promote tourism in the country, one campaign called "Make it Kenya" which was presented at Milan Expo 2015 in Italy with the use of technology as a tool to promote Kenya among the worldwide audience. A website regarding the campaign has been created which also stores digital content regarding tourism in the country which can be retrieved easily and can be shared through the means of smart devices.
According to statistics, online tourism has become one of the biggest trend at present and number one channel for selling commodities online. Africa has recently been engaged in online tourism activities through the means of conferences like, East Africa Conference on e-tourism which helps the tourism sectors to understand the use of new technologies available in the region with the help of various travel experts who have already established firm grounds in the area of online tourism such as Trip Advisor, Expedia, WAYN.com and Google. The conference was a two- day event has been sponsored by Safaricom, KCB and Crowne Plaza Hotel Nairobi. These efforts are encouraging companies to move towards e-tourism frontier and use online marketing tools to promote their businesses.
The Kenyan Government has recently given order to the department of immigration which is in connection with the Ministry of East African affairs, commerce and Tourism to issue visa online to make it convenient for the foreigners travelling to the country. Similarly, the government also instructed to issue single visa for visitors from other parts of the world to countries Kenya, Uganda and Rwanda. This created a synergy in tourism industry of all three countries and promoted them together as a single tourism destination.
The Kenyan government has taken several steps to promote the tourism sector among which one is Tourism Recovery Task force that was introduced in July 2014. This was basically a policy directed at the tourism sector which included initiatives to improve safety, develop necessary infrastructure to ease the experience of visitors and develop attractive tourist destinations which will gain appeal in global market. Also an initial budget of $2.2 million was provided by the concerned government body. This sum is used to establish measures to re-train the Tourism Police unit. Also, the task-force utilized it's time to soften the travel advisories for the country so that more visitors could come into the country in near future and guarantee that Kenya is a safe place to visit.
Another mission which was led out by the task force was to promote Kenya in global market from the perspective of tourism. Various marketing campaigns such as "I choose Kenya" campaign which a marketing initiative is taken by the private sector bodies which basically preached about the safety measures the country is implementing.
Another major initiative from the government end was in May 2015 when it announced that the budget for promotion of tourism activities will be set at $77 million each year starting from 2015. At present mitigating the insecurity in various locations across the country is the number one urgency of the tourism sector and a major priority of government. An amount of $2.5 billion has been allocated for expenditure on employing necessary security measures too.
Other Key Market Trends
MICE Tourism which stands for Meetings, Incentives, Conferencing and Exhibitions has become an emerging and major segment in tourism in Kenya. As business tourism is increasing the hotels and resorts have also become competitive to provide such events.For instance, a resort namely Dani Reef Beach Resort is providing beach conferences which is exclusive in itself and utilizing the beach to provide the opportunity to conduct conference as well as give a vacation feel.
Sports tourism is also getting good momentum among the domestic as well as foreign tourists in Kenya. The Tourism board of Kenya has shifted forward to promote sports tourism with the national and international sports events. For instance, a range of marathons are held in the highlands, open gold tournament which was recently held in Muthaiga Country Club, water and beach sports and other forms of sports such as polo, horse racing, volleyball, tennis, hockey etc are conducted in various cities in the country time to time.
Family oriented safaris are one of the major products in tourism sector. These safaris are child friendly and secure. These holiday options which includes a variety of recreational activities along with safari is provided by Dani Reef Beach Resort which provides the major five attractions of the African Safaris namely- elephant, rhino, leopard, lion and buffalo.
There are some exotic locations in Kenya which is becoming the dream for westerners especially modern generation bride and groom to tie their knot. The major highlight was the Prince William's proposal to Duchess Catherine in Kenya, which attracted numerous other people to get involved in destination wedding for which Kenya is becoming the observable choice.
Market Size and Forecast
As of 2017, the annual tourism earnings has grown by 20.3 percent in at $1.2 billion from the previous $989 million in 2016. The trend at past revealed that since 2011 the earnings have been decreasing gradually at a rate of 2 percent every year. 2011 was considered as the peak year as the earnings has reached $1.1 billion. But since 2017, the revenues have reached the new peak and from hereon the revenues are expected to grow at 10% annually.
Categories of travel spending:
As of 2017,Leisure travel spending or the holiday visitors has contributed 65.8 percent of the revenue to the Tourism sector in Kenya $2.88 billion compared with 34.2% for business travel spending $1.48 billion.
Domestic travel spending generated 60.8% of direct revenue to the Tourism in 2016 compared with 39.2% for visitor exports. Both have increased at the rate of 6.1% and 6.5% in 2017 respectively.The domestic tourism contributed about $2.84 billion revenues to the tourism sector whereas, visitor exports generated $ 1.82 billion which accounted 16.5% of total exports in 2017.
Tourism sector in Kenya is expected to have attract capital investment of $844 million in 2016. This is going to rise by 4 percent over the next ten years to $1.33 billion in 2027.
Business travel spending is expected to grow by 5.5% to 2.7 billion in 2027. Leisure travel spending is expected to grow 6.1 percent to $5.5 billion in 2027.
Domestic travel spending is expected to grow 5.4 percent to $4.80 billion in 2027. Visitor exports are expected to grow by 6.5 percent to $ 3.40 billion in 2027.
By 2027, tourism sector in Kenya will create 569,000 jobs directly, an increase of 3.3 percent annually over a decade.
The visitor exports is expected to grow by 6.5 percent in 2027 and will generate about $3386 million respectively.
Among the two segments within the tourism industry, the business tourism has boomed as 95 percent of the hotel bookings are made by the corporate visitors. Within the country. The growth of this segment is recorded at 4.7 percent CAGR in 2017 and is expected to grow at 10 percent since 2017 because of developments in MICE products, construction of premium hotels among others.
Another segment which is domestic tourism existed since a decade ago but accounts 58.1% of the total revenue generation of the industry. As of 2017, this sector has grown by 15.9% and contributed 2.6 billion dollars to the industry which is expected to grow at a CAGR of 5.2% until 2025.
As of 2017,Tourism directly supported 429,500 jobs i.e. 3.4% of total employment. This is expected to increase at the rate of 2.8% in 2018 and rise by 2.7% to 574,000 jobs 3.2% of total employment in 2028.
Tourist Arrivals in Kenya is expected to be 778000 by the end of 2018, according to Trading Economics global macro models and analysts expectations. Tourist Arrivals in Kenya is currently at an average of 769000 in 12 months time. by 2020, the Kenya Tourist Arrivals is projected to trend around 880402 per year.
Distribution Chain Analysis
As of 2017, The United States of America is Kenya’s leading source market, with a growth rate of 17 percent to top 114,507 arrivals and accounted 11.8 percent of total arrivals.
The United Kingdom alone which is Kenya’s primary source of international tourists came in second with an 11.1 percent share of arrivals, which also grew by 11.1 percent to 107,078 arrivals.
Uganda came in third with a share of 6.4 percent, India with 6.2 percent and China with a share of 5.5 percent contribution to the total arrivals in 2017 respectively.
In terms of share of arrivals by region, Europe contributed 36 percent of arrivals, followed by Africa at 29 percent, the Americas at 15 percent, Asia at 15 percent, Middle East at 3 percent and Australian region at 2 percent respectively.
The Tourism sector of Kenya is highly clustered. It basically consist of three different institutions or industries which support the core activities of the tourism industry and these are:
- Government Agencies- the Ministry of Tourism and Wildlife which endures responsibility to regulate the sector, formulation and implementation of policies.
- Institutions for collaboration- These institutions are involved with the marketing campaigns as well as provide key services and support in capacity building activities.
- Educational Research Institutions- These are involved with training the staffs involved within the sector and providing skills and academic base for people wanting to pursue career in tourism.
The services or businesses involved directly with the tourism sector and provide core activities are follows:
- Hotel & Lodges (Accomodation)
- Tour Operators
- Travel agents
- Entertainment & natural resourses
- Meeting Facilities
Other services/products which indirectly support the major activities of the core service providers are: Local retail services, Souvenirs & handicrafts, IT, Manufacturing, Food & Beverages,Financial services, Construction services, marketing agencies etc.
The natural and cultural resources of Kenya is its biggest comparative advantage. There are total 32 national parks and reserves in Kenya and most of the activities that tourist demand and the operators provide are wildlife safari. After safari, beaches, marine life and plains are other forms of attractions present in Kenya.
These are the two most developed products provided to tourists. Kenya also has 3 UNESCO World heritage sites with 42 cultures and other small innumerable cultural tourism products. As there are very few countries in Africa which have been able to preserve the ancient culture and artifacts, Kenya is one country which has been successful in sustaining it because of which cultural tourism has become major segment in tourism at present. 
Various private sector collaboration institutions are established for supporting and promoting tourism activities in Kenya which are follows: Kenya Tourism Association is a Trade Association representing over 200 professional tour operators. The Kenya Association of Hotel Keepers and Caterers is a civil society organization to promote eco-tourism and sustainable tourism practices.
The Kenya Association of Travel Agents represents businesses that own and operate hotels, lodges, restaurants, membership clubs & airline caterers.The Kenya Association of Tour Operators represents over 84 professional travel agencies whilst the International Hotel and Tourism Institute is responsible for hospitality training and tourism education & training.
Kenya Tourism Development Corporation (KTDC). In the 1970s, Kenya began supplementing its wildlife safaris with beach tourism. Through the KTDC, we see the foundations of government involvement and support that continue to this day.
As there are few impediments standing within and outside of the tourism sector of Kenya which is hampering its growth, substantial investment in marketing and ICT adoption can further improve the condition of the industry in near future. Both domestic and business tourism are getting good momentum along with Asian region which has added up as a new source market with the presence of the traditional markets such as Europe and US. Also, with the FDI which is likely to increase in near future and number of government initiatives the tourism sector will definitely emerge from the slowdown and will establish itself as a core location in international tourism.