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Big hotel brands feel weight of tourists drought

BUSINESS
By Awal Mohammed | Dec 27th 2020 | 5 min read
By Awal Mohammed | December 27th 2020
BUSINESS
Radisson Blu Hotel, Nairobi [Courtesy]

The coronavirus pandemic has wreaked havoc across the globe and shattered economies, pushing many businesses to close.

In Nairobi, the virus has silenced the hospitality streets. High-end hotels that were a beehive are now a skeleton of their former selves.

Doors remain locked, curtains drawn and conference rooms ghostly silent.

In the affluent area of Nairobi’s Upper hill, the loneliness of the streets hits you before the empty hotels meet your eyes. The closed doors tell you how severe the pandemic has been to the industry.

With few or no international visitors, some establishments have been forced to close shop while those open are hanging on by a thread.

Radisson Blu Upper Hill, one of the top hotel brands in the city, announced its closure two weeks ago, citing tough economic times.

The hotel had been paying employees since mid-March when Covid-19 hit Kenya and was hoping to reopen this month, but failed to do so.

Information on the hotel’s website now puts the tentative date of reopening as end of March next year.

Mitigate impact

The 271-room hotel was mainly running on conferences and private parties in the busy area that was attracting business people who wanted venues outside the city centre.

The Upper Hill facility is the largest Radisson Blu hotel in Nairobi, with the other two at Westlands and Arboretum having a joint bed capacity of 262.

“To mitigate some of the economic impact of the pandemic, coupled with the uncertainty of Radisson Blu Hotel Nairobi Upper Hill’s reopening date, we have had to make the difficult decision to reduce the size of our workforce at the hotel,” read part of the hotel’s statement to the media.

The closure came after a survey by Central Bank of Kenya (CBK) showed that bed occupancy remained low, averaging 23 per cent in November and October compared to 24 per cent in September.

The survey conducted mid-November to assess the extent of recovery in the hotels found that employment in the sector was averaging 53 per cent compared to the pre-Covid-19 levels.

The surveyed hotels told the CBK that a resurgence in Covid-19 infections in November relative to October was hurting their recovery.

“Local guests continue to support activity in the sector during the Covid-19 period, accounting for more than 80 per cent of the total clientele for accommodation and restaurant services,” said the survey.

The General Manager of El Boran Resort in Isiolo, Peter Mutuku, said international hotel brands have been hardest hit by the virus because they majorly depend on foreign visitors.

“Local hotels have managed to remain afloat because we have tailored our service to meet the local market, the international hotels majorly depend on international markets and there are not there,” he said.

In May, Fairmont Hotel temporarily closed Fairmont the Norfolk and Fairmont Mara Safari Club, and sent packing all its employees due to slow business occasioned by the pandemic.

In June, Westlands-based Villa Rosa Kempinski let go of some staff as effects of Covid-19 persisted.

In August, the iconic Inter Continental Nairobi announced plans to permanently close the 51-year old hotel.

Amid this, Tourism Cabinet Secretary Najib Balala said the tourism industry had lost two million jobs and Sh80 billion revenue due to Covid-19.

According to the Economic Survey, 2020 the tourism sector recorded double digit growth rates of 10.3 per cent in 2019 and 16.6 per cent in 2018 largely supported by 14 per cent growth in conference tourism during the period.

But it is this lack of conference tourism that has pushed the hotels to their death beds.

A report by Kenya National Bureau of Statistics for September, the Monthly Leading Economic Indicators, showed that the number of tourists arriving in Kenya from abroad declined to 20,164 in September 2020 up from 133,209 persons in 2019.

Further, the sector for the first time saw the regional market overtake the foreign tourist sources this year.

The findings showed that, on average, local guests took up 82 per cent of accommodation and 85 per cent of restaurant services during the pandemic period, compared with 68 per cent and 73 per cent before Covid-19.

But regional market tourists are not big players in conference tourism adding salt to the already injured hotels.

According to the Tourism Research Institute of Kenya, Tanzania overtook the US as Kenya’s top tourism source market with 4,309 visitors, followed by Uganda at 3,812 and the US at 3,458.

Last year the script was different, though. The US topped visitor arrivals at 245,437, followed by Uganda and Tanzania at 223,010 and 193,740 respectively.

During this year’s Madaraka Day celebrations, President Uhuru Kenyatta announced a Sh2 billion stimulus package to cushion the tourism industry from the impact of the Covid-19 pandemic.

Stimulus loans

The stimulus was in form of loans to businesses at an interest rate of five per cent and 10-year repayment period.

The credit will only benefit businesses that are registered with the Tourism Regulatory Authority and ready to use local workers and materials to promote the government policy of Buy Kenya Build Kenya.

But for the hard-hit hotels in Nairobi, the stimulus will not do much if the number of conferences remain a trickle.

The hospitality industry formally employed over 82,900 people and engaged over nine million people together with trade services in 2019.

However, activity in the sector contracted by 9.3 per cent in the first quarter of 2020, mainly reflecting the impact of Covid-19 pandemic on global travel, according to the CBK survey.

Respondents expressed views that the Covid-19 restrictions were too stringent for the sector, the compliance costs to health protocols remained high, revenues were too low to meet expenses and there was need to consider some measures to support a faster recovery of the sector.

Sixty-five per cent of the hotels surveyed had closed their operations by April with 57 per cent in Nairobi and its environs, and 73 per cent in the rest of the country.

An average of 89 per cent of hotels indicated they were operating in September, attributing the reopening mainly to the easing of restrictions and increased compliance with the required health protocols.

Respondents also had a positive outlook for the sector. According to the CBK survey, 58 per cent of hotels expect to resume pre-Covid levels of operations by end of 2021.

Nairobi hotels mainly cited the expected increase in conference activities following the resumption of international flights and easing of Covid-19 restrictions. ?

However, an average of 42 per cent of hotels were uncertain on when they expect to attain normal operations, saying it depended on how the pandemic evolves.

Covid 19 Time Series

 

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