Hotel industry fear rising cost of goods could taint recovery

The rising cost of essential goods is likely drag full recovery of Kenya’s hotel industry where majority are yet to report same level of operations prior to COVID-19 outbreak.

Hotel industry which relies heavily on food and fuel for their daily operations expect their operational expenses to rise significantly as prices of essentials items continue to rise.

According to a survey carried out by the Central Bank of Kenya (CBK), only 21% of respondents have recovered by attaining operation levels recorded before the pandemic which is now threatened by rising inflation even for 37% who said they expect to resume normal operations by end of the year.

Kenya has seen the cost of key commodities rise significantly in what policymakers attribute to external factors including the Russia-Ukraine war which has seen prices of wheat and oil rise globally.

Kenya recorded a rise in inflation rate to 5.56% in March from 5.08% recorded in February 2022 attributed to the increases in prices of food and fuel.

“55% of the respondents noted that business had improved while another 16%t expected business to rise going forward. In addition, 16% of the respondents felt that the cost of goods had risen significantly thereby affecting their business. This included the cost of basic inputs like gas, cooking oils and grains that were further compounded by a rise in fuel prices thereby raising cost of running their business,” stated the MPC Hotel Survey for March 2022.

For instance, the price of 2 kilogram of wheat flour rose 4.47% to retail at Kshs. 151.43 on average in May compared to Kshs. 144.95 in February while the price of a litre of cooking oil also increased from an average of Kshs. 312.09 to Kshs. 332.37, a 6.5% increase during the period.

On the other hand, the retail price of a 13kg of gas went up from Kshs. 2659.70 in February to Kshs. 2866.20 in March.

Nonetheless, the hotels industry continues to record increased activities supported by the low covid positivity rate, school holidays and return of conference meetings by government and corporate organizations.

According to the survey, the average utilization of restaurant services improved to 48% in March 2022 indicating a gradual recovery from the slowdown in January.

Bend occupancy was recorded at 60.5% nationally, 54.6% in Nairobi while Mombasa led with 67.5% occupancy rate.

“Bed occupancy in Mombasa was particularly high with some hotels reporting full occupancy. This was supported by the school holidays despite being a low tourist season,” said CBK.

Meanwhile increased activities also meant the industry had to employ additional casual workforce. This saw the overall employment levels in the sector improve from 80% in January to 83% in March 2022.

Local tourists continue to play a role in the recovery of the industry as foreign arrivals drag.

CBK says overall, domestic clients took up 76%t and 79% of accommodation and restaurant services between February and March 2022, compared to 62% and 69% respectively, during the period before the pandemic.

CBK says 65 hotels across the country participated in the survey which was conducted mid last month.