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Budgetary support not enough to prop up tourism sector

Tumultuous doesn’t  even begin   to   describe   the state of  Kenya’s  tourism  sector in the years following its 2011 peak. although tourism sector stake- holders have tried to put on a brave face—as well they should—they have not been able to elude the reality that things are tough.

Over the past half-decade, the tourism sector has recorded a sus- tained decline in the number of tourism arrivals primarily due to heightened  insecurity,                   especial- ly at the wake the infamous 2013 Westgate attack by the al-shabab. Consequently, tourism has lost its position as Kenya’s  top forex   earner.

International arrivals have over the five-year period shrunk from more  than  1.8  million  to  just about 1.18 million, and with it a 20 per cent slump in sector earnings to sh86 billion. In 2015, the number of  visitors  from  the  uK, the largest tourist source market for Kenya dropped by 15.9 per cent to 98,523. arrivals from the us, the second largest tourist source market for the country, dropped by 10.5 per cent to 84,759, demonstrating  just  how  big a blow Kenya’s tourism sector has suffered in the recent past.
Likewise, jobs have also been lost by the thousands over this period, especially in coastal hotels, according to tourism Cabinet secretary, Najib Balala. “We have 30,000 people who are now unemployed at the Coast,” tourism Cabinet secretary, Najib Balala, said in a press conference a day before the reading of the 2016/17 budget. the budget was read in parliament on June 8 2016 by treasury Cabinet secretary, Henry Rotich. the tourism sector has been actively trying to steer a recovery during the past five turbulent years, including revising price points downwards and remodeling product offerings to fit changing customer preferences. For instance, entry fees into parks for foreigners have been cut by a third to sh6000 ($60) since February this year alongside
a waiver for visa fees for children under 16.

However, for a further reduction in prices to be feasible, government support by way of tax reductions is needed. to this end, the entire sector has rallied behind the tourism Ministry to lobby the government for tax cuts in key areas. among the measures that the tourism Ministry proposed for consideration in the 2016/17 budget was elimination of Value added tax (Vat) on park entrance fees by the start of the next financial year (July 1, 2016.) the tourism Ministry also pushed for elimination of Vat for tour operators and lower taxes for staff at hotels.
Treasury responds
the treasury has positively responded to the proposals by the tourism Ministry. the budget not only allocated sh4.5 billion to tourism, but also introduced cuts in taxes to prop up the sector. this course of action was positively received by the industry. speaking in Mombasa, Kenya association of Hotel keepers and
Caterers (KaHC) Coast branch executive officer, Mr. sam Ikwaye, said that they are happy and excited by the measures. “We have seen the government act. Cabinet secretary for tourism, Najib Balala has done his part and now tourism agencies involved in marketing need to play their part proactively to ensure that tourism rebounds to acceptable levels,” Ikwaye observed. Cs Henry Rotich announced that the 16 per cent Vat on park entry fees was now scrapped, effectively bringing costs down after they soared by close to a fifth three years ago upon the introduction of Vat. another submission by industry players that was acted upon by the treasury was the exemption of Vat for tour operating services. these measures could reduce costs for safaris by up to a collective 30 per cent, potentially attracting more price-sensitive visitors to game parks and national reserves. another key measure introduced in the budget was the scrapping of tax on tips and service charge on hospitality staff, which will result in higher pay for them, leading to higher staff retention and more dedicated service to customers. “the scrapping of tax on tips and service charge to hospitality staff is a laudable move as it put a huge dent on hospitality workers whose pay remained low owing to bad business,” remarked KaHC’s Ikwaye. there are, however, some analysts who believe that the tax reductions, though commendable, are meant to draw attention away from something bigger—a huge cutback in overall tourism spending by the government. the sh4.5 billion allocated to tourism this year is substantially less than the amount pledged for the same in the past financial year. In fiscal 2015/16, the tourism spend was almost double this year’s.

at around sh8.5  billion. this  is a huge cut, and certainly one that merits deeper analysis.

this sh4 billion cutback pri- marily arises from the government’s decision to cut back promotion and marketing activity. By this logic, the country already did enough promo- tion and marketing  last  year  and is now ready to reap the rewards. there are, however, some holes in this argument.

First, the country stills needs more promotion and marketing, especially now as it heads to an electioneering period where negative rhetoric by some politicians may reverse all the efforts made to alter global perceptions about Kenya’s political  stability  and security.

secondly, the country needs to sustain the efforts it made in the  past year. any reasonably instructed marketer knows that promotion and marketing needs to  be  sustained and consistent in order to bring the desired result. No rational  buyer ever bought a product after seeing an advert just once. Rather, they bought it after seeing the advert repeatedly.

In the same way, Kenya needs a consistent tourism promotion and marketing strategy and not one-off measures. the sh4 billion cutback in the tourism marketing and   pro

motion budget seems to support the notion that Kenya has opted for the latter route—one-off measures. there is no need to explain how this strategy will backfire. the cutback in tourism promotion spending is therefore something that needs to be revisited, and spending possibly increased in the supplementary bud- get further down the financial year.


Domestic and African market

It is also not enough for the tourism sector to rely entirely on the gov- ernment. It needs to start exploring the domestic and african market. although these markets currently account for a negligible percentage of Kenya’s total tourism earnings, they carry a lot  of  potential  and  can act as insulation  during  times  of lower international arrivals, as is presently the case.

the domestic market’s potential lies in the well documented phe- nomena of Kenya’s rising middle class. Nothing speaks as clearly to the magnitude of the expansion of Kenya’s middle class as the fast pace of growth in Nairobi; a growth rate that has attracted a range of businesses from consumer goods to retailers. In fact, Nairobi is one of the few cities  in africa  outside of south africa that currently has a fully evolved shopping district and a world class shopping mall (garden City).

although retailers and consum- er goods companies are the direct beneficiaries of Kenya’s growing middleclass, tourism also stands to gain, perhaps even more profoundly. Domestic air travel  in  Kenya  has shot up, demonstrating that more Kenyans are inclined to local travel and in effect local  tourism.

Jambojet, Kenya airways’ local subsidiary, has seen solid  progress in growth, increasing its daily flights to Eldoret by 50 per  cent  in  the  past  year.  It  flies  three  times  daily


to Eldoret, except sundays when it has two flights a day. Fairly similar volumes has been witnessed in other destinations. “the numbers have been growing of late compared to the previous years, with more pas- sengers seeking to travel by air,” said Jambojet CEO Willem Hondius.

granted, the domestic market isn’t sufficient to offset both the volume and value of business being lost by way of lower international visits. It is, however, certainly worth exploring. It will at the very least  help keep tour operators in business and at most offset losses for some tour operators who did not have such a huge exposure to the interna- tional market.

the african market also pres- ents a good opportunity, especially south africa and Nigeria. It is  in  fact telling that last year, Nigeria and south africa were the only two key markets that recorded higher tourist arrivals to Kenya on a year on year basis.

Kenya therefore needs to come up with marketing strategies  that  can establish closer and more bind- ing linkages between south africa and Nigeria. these linkages can be established on a commercial level, but also a cultural  one.

Kenyans, especially the young- er demographic, increasingly enjoy Nigerian and south african music. the longstanding popularity of Nigerian movies in Kenya need not be documented—it is well known. these cultural  connections  present a golden opportunity for Kenya to grow inflows from south africa and Nigeria. they should therefore be cultivated even further by encour- aging, where possible, collabora- tion between Kenyan, Nigerian and south african arts and entertain- ment industries.

these african markets could be Kenya’s new tourism cash cows, reducing the extended  overde


pendence on traditional western part- ners. growing tourism traffic from african markets also present secondary benefits by strengthening ties between african states and providing a platform for greater bilat- eral and multilateral cooperation in areas like trade and investment. the tourism sector therefore has to give more attention to african markets, even as it continues to convince other international visitors that the country is safe.



New marketing approach

In the final analysis, Kenya  may  need  to  do more than just enhance promotional efforts. It may need to do more than just push government to spend more on tourism and cut back on   taxes.

Kenya may need to recreate itself, its image and  its  essence.  Bad  politics  is  part of the key reason why tourism is not picking up, despite efforts to ramp up security being enhanced—security  actual-  ly accounts for more than a tenth of the 2016/17 budget at sh224 billion, a 12 per cent yearly increase.

Recent turbulence in the political arena is doing very little  to  burnish  Kenya’s  image globally. On the contrary, it is revers- ing the gains made in image-building fol- lowing a succession of key global events in the country over the past year such as the global Entrepreneurship  summit,  which saw u.s. President Barack Obama visit; the Pope Francis visit; the World trade Organization 10th Ministerial Conference (MC10); the fourteenth session of the united Nations Conference on trade and Development (uNCtaD XIV); and the sixth tokyo International Conference on african   Development   (tICaD VI).

to preserve the gains made as far as improving its international image goes, Kenya needs to reign in its vitriolic brand of politics, which only serves to deter international visitors who are highly con- cerned about safety. For instance, the IEBC protests in late May and early June have alarmed the sector and are already having an impact on business.

“a lot of people I meet are saying Kenya is maturing but when they see the incidents of the last weeks (IEBC protests),

they say we are going backwards,”tourism Cs Najib Balala said at a briefing. “My concern is that, the efforts and the road map is working very well, I don’t want the political noise to interrupt that program,” he observed. “Months of tourism recovery efforts will go down the drain if the IEBC protests continue,” Balala added.

It is safe to say that the tourism Cs’s view echoes the sentiments of the entire industry, including tour operators, hoteliers and other players. Dennis   gituma,   director of Jumbo trek africa safaris, a local travel agent, is already contending with cancellations of bookings by international tourists due to the demonstrations. “International tourists have had to cancel or suspend their safari (travel plans) to Kenya opting for a more peaceful (destinations such as) tanzania. the current political temperature makes them worried of their security,” he said.
ratic political  system  that is safeguarded by the Kenyan constitution accommodates diverging views and pre- supposes the citizens’ capacity for tolerance and respectful dialogue within the frame- work provided by the law.

these provisions should, however, not be used as an avenue to wrought instability and violence.

this only serves to reinforce the ste- reotype that africa cannot get its house in order, negatively affecting areas such as tourism, which for Kenya is one of the key hard currency earners.