GTC Aerial View
- 179 views
Kenya's tourism industry is experiencing a notable surge as evidenced by the Kenya National Bureau of Statistics (KNBS) reporting a remarkable increase in international tourist arrivals.
The numbers escalated from 1.54 million in 2022 to 2.09 million in 2023, reflecting a 35.4 per cent rise. This influx has resulted in a 23.2 per cent growth in bed nights, soaring to 8.6 million in 2023, thereby underscoring the urgent demand for expanded hotel accommodations to cater to the growing number of visitors. The World Travel and Tourism Council illustrates the tourism sector's crucial role in the Kenyan economy, revealing that it contributed Sh 1.05 trillion to the national GDP last year, which constitutes seven per cent of the total GDP.
With ambitions to attract over three million visitors by the end of 2024 and to potentially reach a target of five million within three years, the industry is poised for continued growth. In response to this demand, numerous hotel developments are underway. W Hospitality, a firm focused on Africa's hospitality sectors, forecasts that 31 new hotels will be constructed in Kenya in 2024, adding 4,268 rooms to the market. Leading global hotel chains, including Accor, Hilton, IHG, Marriott International, and Radisson Hotel Group, are actively collaborating with local developers to set up world-class facilities nationwide.
Prominent projects include the recent completion of the 315-bed JW Marriott hotel in Nairobi’s GTC tower and the introduction of the 211-room Glee Hotel along the Northern Bypass. A rebranded 162-room Pullman hotel in Upper Hill and the M Gallery in Gigiri’s diplomatic zone have also entered the market. Notably, JW Marriott has launched an exclusive lodge in the Maasai Mara, marking its inaugural foray into Africa's safari segment.
The African hotel development pipeline appears robust, with W Hospitality reporting 524 hotels and 92,193 rooms in the works, a 9.1 percent uptick from the past year. The majority of these developments (81 percent) are structured as management contracts, with franchises and joint ventures playing essential roles in the sector's expansion. Kenya Association of Hotel Owners and Caterers CEO Mike Macharia cautions that despite the optimistic growth outlook, stakeholders must remain vigilant.
The projected rise in visitor numbers could soon surpass the current hotel capacity, necessitating further investments in the hospitality sector. Government policies play a pivotal role in shaping these developments. Real estate developers keenly monitor policy directives that indicate potential business growth in sectors, including hospitality. The potential for construction remains substantial with projections estimating over five million arrivals in the coming years.
For comparison, Berlin receives approximately 12 million visitors annually, illustrating the room for substantial growth within Kenya's tourism sector.
Key areas for hotel investment include those near major airports and corporate centres such as Jomo Kenyatta International Airport, Upper Hill, Gigiri, and Westlands. However, high interest rates and restricted access to affordable credit present ongoing challenges for developers.
Knight Frank's market update for the first half of 2024 indicates that high interest rates have led investors to prioritize high-yield, risk-free treasury bonds and bills, thereby diminishing the available capital for real estate projects. Samantha Muna, a hotel development expert and director at Trianum Hospitality, underscores that liquidity issues frequently lead to protracted legal and financial challenges for developers. She notes that insufficient funding may delay project timelines therefore resulting in arbitration processes that disrupt hotel operators' schedules.