Kenya - Nairobi

Tourism Tattler - - BUSINESS & FINANCE - For de­tailed anal­y­sis visit­ket/africa/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.

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