Kenya - Nairobi
Although the prospect of presidential elections in 2017 may have a negative effect on hotels' performance, the visit of the President of the United States, Barack Obama, and his Holiness the Pope led to an increase in interest for the country.
Nairobi's hotel market presents a mixed picture. While non-branded hotels are struggling and the market performance is down (overall REVPAR down by 6.2%), the international hotel groups continue to see Kenya as a lucrative market for expansion. 2016 - 2018 will see a massive increase in supply of branded hotels offering international standards.
Concurrently, Kenya's hotel market offers significant investment opportunities owing to its position of regional hub for leisure tourism, finance, government and commerce. Foreign investment continues to flow into Kenya, the World Travel and Tourism Council forecast a 5.2% growth in capital investment per annum until 2025. The huge increase of new supply results in a fall in RevPAR. As a result, hotels' values in Nairobi were down 4.8% in 2015. Room supply continues to be a challenge and local demand in Nairobi is now as important as international. As a result, rooms demand is weaker, and that has a negative impact on the overall hotels' profitability. Increased confidence from international travelers along with the growing supply of international brands should boost hotels' performance in the market and therefore hotel values.
With the improvement of the security situation and the lifting of travel warnings, the Nairobi hotel's market should gradually recover. By ensuring a peaceful presidential election, the country would regain the international community confidence, and that's all that is needed. The values dropped by 6.4% in 2016, accounting for a massive amount of new supply that impacted the level of occupancy. However, HVS is confident that strong economic growth combined with the introduction of international brands into the market and a steady growth in demand will allow Nairobi to experience a significant increase in room values when the excess of supply is absorbed.