Time flies with great content! Renew in to keep enjoying all our premium content.
Prime
Hospitality 5-year-low performance stifles GDP growth
A hotel lobby. KNBS data shows accommodation and food service activities slowed to a 4.1 percent growth compared to a 38.1 percent in the first quarter of 2024.
Kenya’s hospitality sector recorded its weakest performance in five years, holding economic growth at a flat 4.9 percent in the first quarter ending March 2025.
Kenya National Bureau of Statistics (KNBS) data released Thursday showed the 4.9 percent growth in gross domestic product (GDP) equalled the growth rate posted in a similar quarter last year as accommodation and food service activities decelerated by the biggest margin.
The data showed accommodation and food service activities —where businesses that provide lodging, meals and drinks fall— slowed to a 4.1 percent growth compared to a 38.1 percent expansion in the corresponding quarter of 2024.
The deceleration has been linked to reduced spending by both local and foreign tourists, with the government reducing funding for meetings in hotels and resorts. Tourist arrivals at Jomo Kenyatta International Airport and Mombasa International Airport grew by a marginal 0.5 percent to 446,917 in the quarter under review.
This was a major slowdown compared to the first three months of 2024 when they grew 20 percent to 444,644 compared to the same period in 2023.
The deceleration in the hospitality sector was among nine sectoral activities — including transport and storage, ICT, financial and insurance, real estate, health, public administration and professional, administration and support services — where the pace of growth slowed in the review period.
However, the 4.9 percent GDP expansion was supported by a recovery of mining and quarrying from negative 16.1 percent to 10 percent, growth of the mainstay agriculture from 5.6 percent to six percent, manufacturing from 1.9 percent to 2.1 percent and construction from 0.4 percent to three percent.
“This performance [in agriculture, forestry and fishing activities] was driven by favourable weather conditions experienced in most parts of the country involved in crop and animal production,” said KNBS.
The growth pace of electricity and water supply accelerated to 3.6 percent from 2.8 percent while wholesale activities and education hit 5.4 percent and 2.9 percent from 3.6 percent and 2.4 percent respectively to support the country’s GDP growth.
The slowdown in expansion in the accommodation and food service activities at 4.1 percent marked the fourth consecutive quarter of deceleration in the sector —down from 35 percent in the second quarter of last year, to 22.9 percent in the third quarter and 10 percent in the fourth quarter of the same year.
At 4.1 percent growth, the sector has posted its weakest performance in five years. The last time it fared worse was in the first quarter of 2021, when it posted a negative growth of 28.3 percent when Kenya was reeling from the effects of hotel closures and lockdowns imposed to contain the spread of the Covid-19 virus.
KNBS has attributed the latest slump in hospitality to slowed growth in visitor arrivals to the country. No reason was given for the slowed growth in visitors into the country.
“The number of visitor arrivals via the two major airports, the Jomo Kenyatta International Airport and Mombasa International Airport increased by 0.5 percent in the first quarter of 2025 compared to a 10.4 percent growth in the first quarter of 2024,” said the data office.
Kenya’s hospitality sector has also been hit by government austerity measures, including cuts in hospitality and travel budgets. Reduced government events, domestic travel and anti-government protest-related disruptions have led to cancelled bookings and revenue loss, prompting hotels to pivot to private clients and domestic tourism for survival.
The slowed growth in multiple sectors was despite most macroeconomic indicators recording improved performances during the quarter under review. For instance, inflation eased to an average of 3.45 percent from 6.29 percent in the corresponding quarter in 2024, mainly due to lower prices of food and non-alcoholic beverages.
The review period also saw the Kenyan shilling appreciate against all the major currencies. Against the euro, Pound Sterling and the US dollar, the shilling gained by 16.3 percent, 14.2 percent and 13.6 percent, respectively.
The Central Bank Rate (CBR), which sets the tone for the pricing of loans by commercial loans, was also on a decline, moving from 11.25 percent in January to 10.75 percent. In similar months in 2024, CBR was at 12.5 percent and 13 percent respectively.
