Tourism slump drags economic growth to 5.5pc in third quarter

Corporate News

Insecurity resulted to a 60 per cent drop in bed occupancy at coastal beach hotels and a 28 per cent drop in Nairobi’s high class hotels. PHOTO | FILE  

By VICTOR JUMA, vjuma@ke.nationmedia.com

In Summary

• All other sectors grew, leaving contraction of the tourism industry as the only drag on an economy that is projected to expand by 5.3 per cent in the full year.
• The hospitality sector, as captured in hotel bookings and restaurants, contracted by 14.6 per cent in the third quarter.

A deepening crisis in the tourism sector pulled growth down to 5.5 per cent in the third quarter of 2014 compared to 6.2 per cent in the same period last year, official data released yesterday shows.

• All other sectors grew, leaving contraction of the tourism industry as the only drag on an economy that is projected to expand by 5.3 per cent in the full year. The hospitality sector, as captured in hotel bookings and restaurants, contracted by 14.6 per cent in the third quarter.

“The contraction is attributable to both internal and external factors, including insecurity concerns, negative travel advisories by some key tourist source countries and the perceived health risks in Kenya due to the country’s geopolitical location and connectivity with West Africa,” the Kenya National Bureau of Statistics (KNBS) said in a statement.

This resulted to a 60 per cent drop in bed occupancy at coastal beach hotels and a 28 per cent drop in Nairobi’s high class hotels, deepening the negative growth of 3.9 per cent recorded a year earlier.

Official statistics show that absolute tourist arrivals dropped 14.9 per cent to 998,069 in the seven months ended July 31 compared to 1.1 million the year before, underlining the industry’s troubles.

READ: High agency fees inflate air fares, dampen local tourism growth

Tourism, which accounts for 1.6 per cent of all economic activity, also supports related industries that are suffering from its slowdown. Parks, tour firms, retailers and airlines are among the major losers from the slump in the hospitality sector whose earnings topped Sh100 billion two years ago.

Tourism revenues fell two per cent to Sh96.02 billion last year on the back of a drop in visitor numbers by 29,000 from the 1.2 million arrivals recorded the previous year.

The steep drop was attributed to advisories issued by Western governments ahead of the March 4, 2013 election that many feared would culminate into violence similar to the 2008 mayhem in which more than 1,300 people were killed and 600,000 others displaced.

Fresh travel warnings against Kenya were issued in the wake of major terrorist attacks, including the Westgate incident in September 2013.

The outbreak of the deadly Ebola epidemic in West Africa has also hurt Kenya as a tourist destination because of its perceived exposure arising from the country’s position as a regional air transport hub. These challenges have left tourism as the Achilles heel of a robust economy that is growing in key sectors.

The KNBS data shows that construction expanded by the largest margin of 11 per cent in the third quarter, improving on the 8.6 per cent growth the year before.

“The sector’s resilience has been on account of sustained real estate development and infrastructure development by the government,” KNBS said, noting that cement consumption increased 11.1 per cent in the period to reflect the sector’s performance.

Financial services came in second with a 9.9 per cent growth, up from 8.3 per cent in the same period last year. This signals the steady rise of financial services sector in the economy. Finance has in the past five years grown relatively faster alongside other services to outpace traditional sectors like manufacturing and agriculture.

The sector’s latest performance was driven by increased trading at the securities market and lending to government that saw the stock of domestic debt rise 3.7 per cent to Sh2.1 trillion. ICT came in third with a 6.6 per cent growth that was, however, slower than the 14 per cent recorded in a similar period last year.