From an opportunity point of view, the East African hospitality landscape remains largely untouched. And yet its vast nature-based leisure attractions and growing economies have the potential to encourage a higher-level volume and mix of leisure, corporate and MICE travelers from domestic, regional and international markets. Certainly, there are challenges when compared to other regions of the developed and emerging world. These include comparatively weaker infrastructure, lower levels of public/private investment and support in travel, tourism and hospitality, and the more recent Covid-19 pandemic, all of which have hindered the region’s competitiveness as a travel and tourism destination.
Following the easing of restrictions and a mass vaccination campaign, Kenya witnessed a marked recovery in tourist arrivals in 2021, with a 53 percent increase (870,465 arrivals). This upward trend has continued well into 2022, with government estimates exceeding the one million mark by the end of the year, albeit the risk to travel posed by the recent general elections (held in August). In terms of hotel market performance, the primary market of Nairobi remains somewhat subdued, with occupancy registering 20- 25 percent in 2021 (average daily rate of USD 80-90) and 30-35 percent in Q1 2022 (average daily rate USD 95-100).
According to STR, Kenya has an existing supply of 22,500 keys and a significant pipeline of 4,800 keys. The market was in a state of recovery even before Covid-19 hit, and there are further indications of demand growth, which is required to support higher levels of supply. Overall, Kenya is one of the most mature markets in East Africa and continues to demonstrate resilience, growth, competitiveness and attractiveness as a destination.
Prior to Covid-19, Tanzania was one of the most competitive leisure destinations in East Africa and the wider African continent, with 1.5 million tourist visitors in 2019. The local authorities also earmarked corporate and MICE travel as part of the next chapter in the vision to evolve the travel, tourism and hospitality landscape. Following the onset of the pandemic, there has been a short-term shift in this strategy, as the country has sought to recover and promote leisure travel. The local government has also been active in providing recovery support, with TZS 90 billion being granted to the Ministry of Natural Resources and Tourism for the year 2021-2022.
In terms of supply, according to STR, Tanzania has an existing supply of 9,900 keys and a pipeline of 900 keys, which indicates significant opportunities for new supply investment. Overall, Tanzania remains one of the most competitive destinations in terms of leisure travel; however, more investment, support and promotion of business-related travel is also required.
Uganda is considered a high-potential tourism destination thanks to its mix of wildlife, nature and cultural attractions. In 2019, prior to the pandemic, tourist arrivals hit an all-time high of 1,54 million, which dropped to 473,085 in 2020, subsequently rising to an estimated 521,000 arrivals in 2021. While these arrival figures are impressive compared to other East African countries, the tourism industry has been hit hard by the coronavirus. The ministry and Uganda Tourism Board continue to seek financial support that’s beyond what the government can handle, as the focus is to attract 5 million tourists a year by 2024. In terms of hotel market performance, Kampala recorded an occupancy of 20-25 percent (at an average rate of USD 120-125 in 2021), while as of Q1 2022, occupancy stood at 25-30 percent (at an average rate of USD 125-130).
According to STR, Uganda has an existing supply of 9,800 keys and a pipeline of 1,600 keys. Similarly to Tanzania, this indicates significant opportunities for new supply investment as the market recovers from Covid-19. Overall, Uganda maintains strong appeal for investment in leisure oriented assets, which is in line with the local authorities’ vision for growth.
Despite being one of the smaller nations in East Africa in terms of geography and population, Rwanda has demonstrated ambition and vision to grow into one of the most competitive tourism hot spots in the region. Although the pandemic affected tourism, the government of Rwanda has been proactive in providing support. As such, the country is on course to achieve 80 percent of the pre-pandemic levels of tourism revenue (average of USD 480 million), with MICE and leisure tourism playing a significant role.
Research conducted by STR has shown that Rwanda has an existing supply of 2,200 keys and a pipeline of 500 keys, indicating a positive outlook for new supply investment, especially considering the investor friendly environment created by the government. Overall, Rwanda is considered a stable environment for both local and international investors, with opportunities in both leisure- and corporate-based assets.
Ethiopia had notable success in tourism prior to the start of the pandemic and recent political unrest. Increased investment in new supply and the growth of Ethiopian Airlines were key drivers to this growth. During the first nine months of 2021, a total of 331,001 tourist arrivals were recorded in Ethiopia. This data reveals the vast untapped potential of Ethiopia considering its population, competitive airlift and overall tourism product when compared to other East African destinations. In terms of hotel market performance, Addis Ababa recorded an occupancy of 40-45 percent in 2021 (at an average rate of USD 85-90 in 2021). This figure rose significantly, reaching 55-60 percent by Q1 2022.
According to STR, Ethiopia has an existing supply of 4,000 keys and a pipeline of 7,100 keys, which indicates a healthy supply growth trajectory. This may spark an increase in arrivals and demand for hospitality offerings in spite of the current political situation affecting the country as a whole.
Overall, Ethiopia maintains significant appeal countrywide in the long term for new offerings that can capitalize on the current levels of investment in tourism and hospitality sector.
manager of hotels MENA at Colliers International,