Hotels: reopening with restrictions intact is of no much help

The majority of hotel operators in Kenya agree that reopening the industry will not yield much if all restrictions and containment measures are still in place.

In a market perception survey conducted by Central Bank for the month of May, respondents pointed out that reopening, with curfews and lockdowns in Nairobi and Mombasa, and with airports closed would not be cost-effective.

In an attempt to assess optimism in the economic prospects of the country in the midst of Coronavirus pandemic, the survey requested hotel sector respondents to indicate monthly forward hotel bookings, if any, received so far for the period May to August this year.

Results showed that most hotels had all their bookings cancelled or suspended indefinitely with the onset of COVID-19.

Out of hotels that responded, 75 percent were in the process of reopening basically complying with the Government’s requirements for reopening, 19 percent had reopened, but with zero forward bookings and only 5 percent had forward bookings for the period.

“Respondents, however, pointed out that reopening with curfews and lockdowns in Nairobi and Mombasa, and with airports closed would not be cost-effective,” shows findings from the study.

Forward Hotel Bookings for May–August 2020 (percent of total capacity)

Respondents from the overall tourism sector reported sharp reductions in the number of international tourist arrivals in quarter one of this year and projected the trend to remain for the rest of 2020. In addition, respondents indicated that domestic tourism had come to a halt due to the restriction of movements to limit the spread of the virus further affecting the hoteliers.

Respondents, however, expected the sector to pick up at a slower pace, with the lifting of restrictions.

The hotel industry largely relies on the transport sector for the bulk of its business. The virus outbreak has however led to the cancellation of international flights, travel bans, and lockdown blocking a revenue stream to the hoteliers from international and local visitors.

As a result, major hotels have temporarily closed down their businesses with few operating opting to cut the number of employees or enforcing measures such as slashing salaries of staff.

Acknowledging the impact of the pandemic on the industry, Treasury in this year’s budget allocated an additional Sh6 billion to the tourism and wildlife sectors aimed at boosting recovery efforts.

National Treasury Cabinet Secretary Ukur Yatani said the State Department of Tourism has received Sh12.8 billion for sector development and promotion and another Sh10.8 billion for wildlife conservation and management, up from Sh8.9 billion and Sh8.8 billion allocated previously.

The 30 per cent increase in allocation is part of the Government’s effort to cushion the sector that is virtually on its knees, following the cancellation of International flights and enactment of movement restrictions in parts of the country.

“The tourism sector has been adversely hit by the coronavirus following cancellation of international flights, travel bans and lockdown measures taken by countries,” said Yatani.

“To jumpstart the sector, we are allocating funds for soft loans to hotels and related establishments and another Sh2 billion through the Tourism Finance Corporation.”

Additionally, Sh2 billion has been set aside to support the renovation of facilities and restructuring of business operations.

The Central Bank of Kenya (CBK) undertakes a Market Perceptions Survey every two months, prior to every Monetary Policy Committee (MPC) meeting to obtain perceptions of banks and non-bank private sector firms on selected economic indicators.

In the event of an adverse shock in the economy, the MPC carries out special surveys on a monthly basis to obtain perceptions and expectations from specific sectors to shed more light on the crisis.

The Survey also enables respondents to indicate their levels of optimism in the country’s economic prospects and business environment, and perspectives on the current and expected economic conditions, focusing on economic activity and employment.

It also captures suggestions by private sector firms on ways to improve the business environment. Commercial banks, micro-finance banks, and a sample of non-bank private sector firms are included in the surveys.

The May 2020 Market Perceptions Survey sought bank and non-bank private sector firms’ assessment of economic activity in the two months prior to the May Monetary Policy Committee (MPC) meeting, i.e., March and April 2020, to get their views of the impact of the COVID-19 pandemic and other economic conditions prevailing before the MPC meeting.

The results from banks and non-bank firms revealed weak activity in March and April, due to the impact and the measures adopted to contain the COVID-19 pandemic, floods, locust invasion, and slow private sector credit growth.

Bank respondents indicated that the pandemic had negatively affected individuals and businesses, citing collapsed businesses, employment lay-offs, especially in the hotel industry, muted consumer demand and confidence, weak investment demand by firms as entrepreneurs adopted a wait and see approach to investments, lower turnovers, reduced purchasing power, and muted business activity, as direct COVID-19 effects on the economy.

In addition to the direct effects, efforts to contain the pandemic including the international lockdowns, curfews, movement restrictions, cessations and the diversion of government budgetary funding to fight COVID-19 also significantly contributed to the slow-down in economic activities in March and April.