Monetary Policy Committee Hotels Survey May 2021

REPORT OF THE SURVEY OF HOTELS - MAY 2021 .1

2 | REPORT OF THE SURVEY OF HOTELS - MAY 2021 .1

TABLE OF CONTENTS

1. BACKGROUND...... 1

2. SAMPLE AND METHODOLOGY...... 1

3. KEY HIGHLIGHTS OF THE HOTELS SURVEY FINDINGS...... 1

4. HOTELS IN OPERATION...... 2

5. LEVELS OF OPERATIONS...... 2

6. EMPLOYMENT IN HOTELS...... 4

7. EXPECTATIONS ON RETURN TO NORMAL LEVELS OF OPERATIONS...... 5

8. CHANGES IN HOTEL CLIENTELE...... 5

9. HOTEL FORWARD BOOKINGS...... 6

10. OTHER COMMENTS ...... 7

11. CONCLUSION...... 7

REPORT OF THE SURVEY OF HOTELS - MAY 2021 1. BACKGROUND 2. SAMPLE AND METHODOLOGY

The of (CBK) conducted a Survey The Survey covered hotels, ranging from the top of Hotels between May 11 and 13, 2021, to assess rated 5-star hotels to the small scale outlets, selected the extent of recovery of the sector, particularly randomly from hotels operating in and following the resurgence in COVID-19 cases in the surrounding towns (Machakos, Kiambu, and Kajiado) country and the consequent imposition of zoned and the rest of the country, particularly in Mombasa, lockdowns in Nairobi, Kiambu, Nakuru, Kajiado and Kisumu, Eldoret, Naivasha, Nakuru, Nyeri, Kisii and Machakos counties. In addition, sale of alcohol was Meru towns. banned while the restaurant services were restricted to take-away services only, in the five counties. The Survey was administered to the chief executives, These restrictions were lifted on May 1, following a managing directors, owners, and /or senior reduction in infection rates in the country. employees of the hotel enterprises. The respondents were people with good knowledge of the activities It is against this backdrop that CBK undertook this in their respective hotels and the sector as a whole. follow-up survey to assess the extent of impact of A total of 67 hotels across the country (27 in Nairobi the pandemic and the pace of recovery of the sector. metropolitan area; 18 in Naivasha, and 22 in the rest The survey assessed the levels of operations in the of the country) participated in the survey. sector in terms of accommodation, restaurant and conference services, levels of employment, and The Survey was administered through direct forward bookings for the period April to May 2021. interviews by CBK staff using a structured questionnaire. The responses were aggregated and Prior to COVID-19 pandemic, the accommodation analyzed using frequencies, percentages and simple and food services sector was a key contributor to averages, where appropriate. This report provides the strong performance in services in the economy. a summary of the findings of the Survey of hotels The sector formally employed over 82,900 people conducted in May 2021. and, together with trade services in 2019, engaged over 9 million people. The sector was the worst hit 3. KEY HIGHLIGHTS OF THE HOTELS by the pandemic, contracting by 57.9 percent in the third quarter in 2020, albeit an improvement SURVEY FINDINGS from the contraction of 83.3 percent in the second quarter of 2020. The sector recorded a growth The Key takeaways from the 2021 CBK Hotels Survey of 10.3 percent in 2019. The contraction in the for May included: second and third quarters of 2020 were attributed • The proportion of sampled hotels in operations to measures instituted by Government to contain stands at 94 percent compared to 81 percent in the spread of COVID-19. These measures included: April, and 98 percent in March. This reflects the suspension of passenger flights, closure of hotels impact of the COVID-19 containment measures and bar services, and imposition of night curfew. imposed in March 2021, following a surge As the rate of infections declined, the economy was in infections, and consequent lifting of the gradually re-opened with strict health protocols, containment measures on May 1. and consequently hotels and entertainment areas • Employment in the sector declined to 49 percent started re-opening. of pre-COVID levels (February 2020) in April, but recovered to 57 percent in May. Despite this The May 2021 Survey was a supplement to the decline, employment remains above the May regular Committee (MPC) Market 2020 levels. Perceptions Survey and the CEOs Survey. The Survey • Average bed occupancy, utilization of restaurants of Hotels sought information on the status and levels and conference services also improved slightly in of hotel operations particularly the utilization of May after the decline in April 2021. accommodation and restaurant services, changes • Local guests continued to support activity in the in employment in the sector, changes in the sector during the COVID-19 period, accounting composition of clientele during the pandemic period, for 84 percent and 85 percent of the total clientele expectations on when the sector would return to for accommodation and restaurant services, normal operations, and general sentiments by the respectively, in May 2021. sector. The Survey findings provided important input and information to the MPC in its May 2021 meeting.

REPORT OF THE SURVEY OF HOTELS - MAY 2021 | 1 • On average, under the prevailing conditions, 18 • Despite the recent surge in COVID-19 infections, percent of respondent hotels indicated that they respondents were optimistic about a strong expect to attain normal (pre- COVID) levels of recovery of the sector once the pandemic is operations in 2021, a drop from the 39 percent in contained, particularly with the continued rollout the March Survey. of vaccines.

4. HOTELS IN OPERATION

Respondents were requested to indicate whether of the country were in operation in May compared their enterprises were operating in each of the months to 88 percent of hotels in Nairobi. The few hotels in between December 2020 and May 2021. On average, Nairobi that are still closed cited low business as the 81 percent of the sampled hotels were in operations main reason, since they largely depend on foreign in April, down from 98 percent in March. This decline business. Nevertheless, respondents reported was associated with the imposition of lockdown on concerns and risks related to the resurgence and March 26, following a surge in COVID-19 infections in increase in COVID-19 infections. the country. The respondents to the Survey noted that the impact Following the lifting of the restrictions on May 1, hotels of restrictions announced on March 26 was largely on in operation improved to 94 percent in May (Figure the hotels in the lockdown counties while it had little 1). In particular, 100 percent of the hotels in the rest impact on hotels in the rest of the country.

Figure 1: Hotels in Operation (percent of hotels that responded)

120

100 100 100 100 100 97 97 99 99 100 91 100 100 86 88 95 96 96 94 94 95 81 80 71 86 71 82 81

72 57 70 60

100 100 43 43 96 96 97 97 98 98 94 89 40 84 81 72 71 36 47 20 27 27

35 35 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May 2020 2021

Overall Hotels in Nairobi Hotels in the rest of the country

5. LEVELS OF OPERATIONS

The level of operations of hotels was assessed in On average, bed occupancy in April 2021 averaged terms of accommodation (bed occupancy rates), 17 percent compared to 27 percent in March, but restaurant and conference services. In particular, recovered slightly to 18 percent in May following respondents were asked to indicate, on a scale lifting of the restrictions that had been announced of 0-100 percent, the level of hotel operations in on March 26 (Figure 2). In particular, bed occupancy terms of utilization of bed capacity, restaurant and in hotels in Nairobi remained stable while that of the conference services in April and May. rest of the country dipped in April with some recovery

2 | REPORT OF THE SURVEY OF HOTELS - MAY 2021 Figure 2: Bed occupancy rate (percent of total bed capacity)

70 70 67 64 60 59 60

50 50

40 41 40 38 33 33 31 30 30 29 30 28 27 26 23 24 25 21 22 24 20 20 21 19 20 18 20 17 17 20 17 17 18 16 16 15 17 17 17 14 14 16 15 13 10 10 10 10 7 5 7 65 39 7 5 6 5 9 15 20 25 28 25 28 24 27 27 17 18 0 0 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May 2020 2021

overall Nairobi Hotels Hotels in the rest of the country Lockdown zone in May. The stability of hotels in Nairobi is associated The restrictions of movement in the five counties with the fact that it was still possible to freely move also affected the restaurant services across the within the lockdown counties. country. In particular, the ban on sale of alcohol, and the restriction of restaurants to take-away services The impact of the restrictions was largely felt on the also affected the sector. In this regard, the restaurant lockdown counties except Nairobi county. This is services decline to 22 percent in April from 30 percent attributed to the fact that despite being allowed to in March, but recovered in May after the restrictions move within the counties, the rise in infections had were lifted (Figure 3). The survey noted that the led to cancellation/postponement of planned events impact of the restrictions was across the country, but such as conferences, meetings and other workshops largely in the lockdown counties. that are normally held in the counties surrounding Nairobi.

Figure 3: Utilization of restaurant services (percent of total capacity)

70 67

60 64 59

50

37 38 40 35 4133 37 33 32 30 26 31 27 28 25 27 26 27 21 25 23 20 20 20 15 23 23 25 17 21 22 21 22 19 10 17 13 17 12 10 16 16 15 5 145 8 7 6 66 40 7 6 9 15 20 26 33 31 33 28 31 30 22 24 0 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May 2020 2021

Overall Hotels in Nairobi Hotels in the rest of the country Lockdown Counties (March 26-May 1)

REPORT OF THE SURVEY OF HOTELS - MAY 2021 | 3 The respondents indicated that the utilization for the period. The impact of the restrictions was of conferencing services declined in April largely on the lockdown counties compared to compared with the levels in March, reflecting the the rest of the country, reflecting the impact of impact of the restrictions (Figure 4). Hotels also travel ban to other counties from the lockdown confirmed having received many cancellations zone. of conferences services that had been planned

Figure 4: Utilization of conference services (percent of total capacity)

65 58 60 60 60 55 56 59 50 54 45 46 40 37 35 33 30 27 25 26 25 23 21 20 23 18 22 20 20 20 17 16 19 18 17 21 20 14 15 18 19 9 12 16 12 10 8 5 8 12 13 13 3 3 11 11 5 9 5 8 5 9 6 6 55 57 38 4 4 5 10 14 20 20 18 21 19 27 26 10 13 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May 2020 2021

Overall Hotels in Nairobi Hotels in the rest of the country Lockdown counties (March 26-May 1)

6. EMPLOYMENT IN HOTELS

The Survey also assessed changes in employment The employment levels in hotels averaged 49 in the hotels sector. In particular, respondents were percent in April, down from 59 percent in March requested to indicate the number of active employees 2021 (Figure 5). This decline reflected a reduction engaged by the hotels between December 2020 and in employment following low demand in the sector May 2021. The survey findings show that employment since the emergence of COVID-19 in March 2020, and levels declined in April and May 2021 as hotels scaled aggravated by the restrictions measures imposed on down operations due to low business on account of March 26, 2021. The lifting of the restrictions on May COVID-19 restrictions. Respondents indicated that 1 supported the recovery in the month of May, and Hotels either dismissed their workers, sent them on particularly for hotels in the rest of the country. paid/unpaid leave or worked below their full pay.

Figure 5: Employment (percent of the number of employees in February 2020)

120

100 100 100

80 75 84 66 63 63 63 63 60 57 56 50 100 38 42 44 54 55 56 38 38 42 49 51 51 40 80 46 45 48 47 41 45 46 36 60 57 59 59 57 52 53 49 42 42 42 44 45 20 37

0 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May 2020 2021

Overall Hotels in the rest of the Country Hotels in Nairobi

4 | REPORT OF THE SURVEY OF HOTELS - MAY 2021 7. EXPECTATIONS ON RETURN TO NORMAL LEVELS OF OPERATIONS

The Survey also captured expectations by hotels as respondents expect that it is only after the full rollout to when they would attain normal (pre COVID-19) of the COVID-19 vaccine in Kenya that their hotels operations. On average, 18 percent of hotels would return to normal operations. In Mombasa, expected to resume normal levels of operations by about 29 percent of respondent hotels hedged their end of 2021 (Figure 6). This is a decline from the 39 recovery on the vaccine rollout. This is not unusual percent recorded in the March survey. Respondents because a significant share of their business is attributed this to the rise in infections and the recent foreign, and hence increased vaccinations both local lockdowns that affected the pace of recovery in 2021. and foreign would boost their business. However, these proportions varied across regions in May, with hotels in Nairobi and Mombasa being About 37 percent of respondent hotels indicated the most pessimistic about recovery in 2021, while that their businesses would get back to normal hotels in the rest of the country had relatively higher operations if certain pre-conditions are met. expectations of recovery before the end of the year. Particularly, extension of operating hours and lifting of curfew were cited as the main hindrance to their The level of uncertainty as to when normality would recovery. The respondents indicated that the current resume increased among hotels in Nairobi and the closure time for bars (7 pm) has affected operations rest of the country except Mombasa. Respondents of the sector. In addition, they indicated that the 10 attributed this to the discovery of new strains of the pm to 4am curfew hours had affected businesses virus, the rising cases, the recent lockdowns and that previously operated 24-hour services. the slow rollout of the vaccine. About 11 percent of

Figure 6: Expected return to normal level of operations (percent of respondents)

50 43.8 43.8 45 42.3 42.9 40 37.2 35 33.4 28.6 30 26.9 25.0 25 20 17.9 14.3 14.3 15 12.5 11.4 10 5.8 5 0.0 0 2021 Uncertain/Don’t Know Pre-conditioned on Vaccine Pre-conditioned on Other Rollout Factors

Hotels in Nairobi Mombasa Hotels Hotels in the rest of the country Overall

8. CHANGES IN HOTEL CLIENTELE

The Survey also sought to assess the type and 62 percent and 69 percent, respectively, during the average proportion of clientele (foreign and local) period before the pandemic (Figure 8). Respondents served by hotels in accommodation and restaurant attributed the dominance of local guests mainly to services before and during the COVID-19 pandemic low foreign clients due to the international travel period. restrictions imposed during the pandemic period. In addition, responding hotels indicated that they Overall, local guests took up 84 percent of have intensified their domestic marketing, and also accommodation and 85 percent of restaurant offered discounted rates on their accommodation services between April and May, 2021, compared with and restaurant services to attract local clientele.

REPORT OF THE SURVEY OF HOTELS - MAY 2021 | 5 Figure 8: Local and Foreign Clients Served by Hotels (Percent of Total Clients)

100 90 86.5 83.8 84.2 85.2 80 68.7 70 62.0 60 50 38.0 40 31.3 30 20 13.5 16.2 15.8 14.8 10 0 Pre-COVID-19 During COVID (Feb- During COVID (April- Pre-COVID-19 During COVID (Feb- During COVID (Apr-May March 21) May, 21) March 21) 21) Accomonddation Services Restaurant Services

Local Foreign

9. HOTEL FORWARD BOOKINGS

The Survey also requested hotel respondents to Average bookings for May 2021 (unutilized services) indicate their levels of bookings, relative to the total were about 9 percent in Nairobi while the rest hotels bed capacity, for the period May to August 2021. in the rest of the country had average bookings at 12 percent (Figure 9). Some respondent hotels Generally, forward bookings in the next four months in Nakuru and Naivasha towns reported to be fully remain subdued due to concerns about the evolving booked for one week in June 2021 mainly for the nature of the pandemic. However, most of the World Rally Championship event. Mombasa hotels respondent hotels reported that they largely depend reported a higher number of bookings in August on walk-in clients or bookings on short notice as 2021, largely associated with the start of high tourism clients avoid long prior bookings. season.

Figure 9: Average Hotel Forward Bookings (Percent of Bed Capacity)

14.0

12.0 12.1 12.0 11.3

10.0 9.5 8.7 8.3 8.0 9.2 7.5 7.8 8.5 8.0 6.0 6.0 5.0 6.5 4.4 4.0 4.0

2.0

0.0 May-21 Jun-21 Jul-21 Aug-21

Mombasa Nairobi Hotels Hotels in the Rest of Kenya Overall

6 | REPORT OF THE SURVEY OF HOTELS - MAY 2021 10. OTHER COMMENTS

The Survey allowed respondents to make general About 15 percent of the respondent noted that the comments including on the impact of the resurgence resurgence in infections had resulted in cancellation in infections in Kenya and the consequent restrictions, of booking for their services (accommodation and/or on their operations. The results are summarized in conferences). Some respondent hotels indicated the (Figure 10). About 43 percent of the respondent need for the Government to urgently rollout stimulus indicated that the resurgence of COVID-19 infections package to support the hotel sector following has had a negative impact on their businesses. Other the significant impact of the pandemic on their comments from 17 percent of respondents included: businesses. heightened uncertainty, jobs lost and request to remove curfew.

Figure 10: Implications of the recent escalation of COVID-19 infections (Percent of respondents)

Reduced Business 43.3

Others 16.7

Cancellation of Bookings 15.0

Government to Support the Sector 8.3

Extend Operating Hours 6.7

High Operational Costs 5.0

Increase Vaccine Coverage 5.0

0.0 10.0 20.0 30.0 40.0 50.0

11. CONCLUSION

The CBK conducted a follow-up Survey of hotels on largely reflecting the impact of the surge in infections May 11 to 13, 2021 to assess the status of the recovery and imposition of restrictions in the five counties. of the sector from the effects of the pandemic and However, the services recovered in May after lifting of the impact of the recent restrictions imposed after a the containment measures. surge in infections. Local guests continued to support the The Survey shows a recovery of the sector in May accommodation and restaurant services in the 2021 after the decline in operations in April 2021. In sector during COVID-19 period as international particular, 94 percent of hotels sampled across the travels remain subdued. On average, under the country were operating in May 2021 compared with existing conditions, 18 percent of respondent 81 percent in April, after easing of the restrictions hotels expected to attain normal (pre- COVID) and increased compliance with the health protocols. levels of operations 2021, while the rest indicated Similarly, employment in the sector recovered in that the recovery would depend on other factors May to 57 percent of pre-COVID-19 levels, up from 49 including the evolution of the pandemic and related percent in April but lower that the 59 percent in March containment measures. 2021. However, despite the decline, employment remained above the levels recorded in May 2020, Despite the recent resurgence in COVID-19 infections reflecting continued recovery. and discovery of variants of the virus, respondents were optimistic about a strong recovery of the sector The average bed occupancy, utilization of restaurant once the pandemic is contained. and conference services declined in April 2021,

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