Virus: Why hotels must revise business models
Kenya’s hospitality industry must rethink its business models and do away with unsustainable ones to survive the coronavirus era shocks, experts say.
They say while star-rated hotels have traditionally been viewed to be more resilient and adaptive to shocks compared to small urban eateries and restaurants, they depend on conferences and events, which were halted to contain the spread of the virus.
Kenya Institute for Policy and Research Analysis (KIPPRA) says in a report that the contraction of the hotel industry was marked by a decline in the proportion of operational hotels during the Covid-19 pandemic period.
For instance, operational hotels declined to 72 per cent in March 2020 and further to 35 per cent in May 2020, reflecting pressure on the industry due to measures to control spread of the pandemic.
This saw the closure of entities such as Radisson Blu Hotel, Nairobi Upper Hill, Norfolk Fairmont and Nairobi’s Tribe Hotel to date, while some that had temporarily closed such as Ole Sereni, Dusit2 have since resumed their operations.
“Covid-19 exposed their vulnerability as a result of over-dependence on foreign clients and unsustainable pricing models,” says Peris Wachira, a researcher at KIPPRA.
“It is critical for the state and non-state agencies to explore innovative strategies to enhance resilience and incentivise the industry during the pandemic to sustain the growth trajectory.”
Growth trajectory
The industry’s growth trajectory came to a halt as it contracted by 9.3 per cent and 83.3 per cent in the first and second quarters of 2020, respectively.
The third quarter of 2020 saw an improvement of 30.4 per cent following the easing of government restrictions and resumption of most economic activities since July 2020.
Rufus Kandie, Young Professional, Productive Sector Department at Kippra says the positive outlook was, however, short-lived and prospects shuttered when the third wave hit the country in April 2021.
“This prompted new containment measures such as lockdown of five counties, extension of curfew hours, closure of bars, with hotels operating take-away services only.”
The hotel industry is projected to constitute the majority of the 1.72 million people who lost their jobs due to Covid-19 pandemic.
The industry experienced high unemployment rates as 67 per cent of the employees lost their jobs in May 2020.
On average, 97 per cent of the hotels were operating in January 2021 compared to 89 per cent in October 2020 and 71 per cent in July 2020.
Despite the notable recovery up to January 2021, the number of operational hotels is projected to have reduced further to below 97 per cent in March-April 2021 following the Covid-19 protocols for hotels in Nairobi, Kajiado, Machakos, Nakuru, and Kiambu to provide only takeaway services.
Sarova Hotels group has, for example, started re-engineering its business model to reach out to the low-end customers having opened two restaurants in Nairobi Central Business District and Westlands.
It is thus diversifying from the trademark hotels and accommodation business to restaurant model aimed at cushioning the hotel amid the pandemic.
However, tapping into the takeaway market has been a challenge for star-rated hotels given that most clients go to the facilities for meetings, conferences and workshops, which demand real-time services.
