Tourism budget slashed by Sh1.4 b as Rotich predicts decline

The Treasury has cut the tourism budget by Sh1.4 billion due to an increase in the number of visitors.

In the mini-budget tabled in Parliament last week, Treasury Cabinet Secretary Henry Rotich cut the amount the country was the spend on marketing Kenya as a tourist destination.

The ministry had been allocated Sh7.1 billion in the current financial year. This will see Cabinet Secretary Najib Balala’s ministry reduce the much-touted direct chartered planes for international visitors from 105 to 15.

With the reduced budget, Treasury has also cut forecasts for international tourist numbers from 2.8 million arrivals to 1.5 million by the end of the fiscal year.

“The decrease is on account of budget cuts mostly on capital projects under tourism development and promotion programme,” CS Rotich said in the Supplementary budget that was tabled in Parliament last week.

Revive the sector

This comes as the Kenya National Bureau of Statistics’ (KNBS) latest data showed that tourist arrivals through the two major international airports rose by 27.6 per cent in September. Tourist arrivals through Jomo Kenyatta International Airport (JKIA) and Moi International Airport are up 17.8 per cent to 665,058.

“We believe the rise this year is tied to lifted travel advisories from key source markets as well as government incentives and initiatives put in place last year to revive the sector,” Standard Investment Bank told investors.

Tourism earnings and arrivals having been on a downward trend since 2012, but the sector has been kept above the water by domestic tourists and conference/travel segments.

International arrivals fell 10 per cent from 1.8 million to 1.1 million with bed occupancy falling from 40 per cent to 29 per cent from 2011 to 2015, according to investment firm Cytonn. However, PricewaterhouseCoopers Limited says devolution, local tourists and businessmen exploring opportunities in rapidly expanding towns helped to increase the average return on hotel space in the last four years.

PWC says that extended stay in hotels fell 2.8 per cent but the average rate charged per room rose by 9.1 per cent, allowing hoteliers to gain over six per cent in room revenue.

SIB says they expect better occupancies from hotels, especially going into the last quarter of the year, peak season especially in the leisure segment. “According to TPS Serena, by June, leisure bookings had been better than the past two years. However, management still noted low occupancies in the coastal region due to difficulties in marketing the region with lack of direct flights to Mombasa from source markets,” SIB said.

CS Balala had put up a strong case for the need for tourism promotion and marketing especially at the country level, saying that the sector could earn the country an estimated Sh100 billion in 2016. He had presented huge incentives to charter planes that ferry tourists to different destinations locally.

With the chartered planes gone and allocation reserved for tourism promotion and marketing being cut by Sh444.6 million, the Tourism CS will hope that the market maintains the upward trajectory even with reduced incentives.

CS Rotich also cut allocation for tourism infrastructure development by Sh500 million and scaled down expectations for completion of the Ronald Ngala Utalii Training College to 50 per cent.