Nairobi (Kenya) – March 18, 2020 (travelindex.com) – The travel restrictions announced on Sunday in Kenya will lock out residents of countries that account for 88 percent of foreign travellers to Kenya, hurting Kenya Airways and the wider tourism industry.
The government said that for the next 30 days, only Kenyan citizens and foreigners with valid resident permits will be allowed entry and they will either self-quarantine or go into government-run quarantine facility in the wake of the spread of the Coronavirus.
President Uhuru Kenyatta Sunday said his government was suspending travel from any country with reported COVID-19 cases, adding that the ban will take effect within 48 hours and remain in place for at least 30 days.
This has the potential to affect incoming travel from tens of countries countries that shipped in 2.84 million visitors to Kenya last year or 87.6 percent of the 3.1 visitors that entered the country via Jomo Kenyatta International Airport.
This will prompt Kenya Airways to ground flights and cut costs as hoteliers mull over cutting jobs on reduced bed occupancy in the face of the pandemic that has restricted global travel.
Some 160,000 people worldwide have been infected and almost 6,400 have died in an outbreak that has affected more than 140 countries.
In Kenya, confirmed cases of Coronavirus, a disease with an estimated mortality rate of two percent, rose to three with 14 persons under State quarantine and three others categorised as suspects. The travel restrictions will cut off revenue for the national carrier and the tourism sector, which rake in more than Sh270 billion combined.
The contraction is expected to filter through to other industries, risking significant job losses in the economy that was already weak.
“Obviously, this is devastating not just for Kenya but the global tourism industry,” a chief executive of one of the leading hotel chains told the Business Daily.
“There were cancellations before and now there are no new bookings,” he said in reference to the new travel restrictions.
His firm is holding meetings to decide what actions to take, including reducing staff count, he said.
This signals closure of hotels in a sector that is one of Kenya’s top foreign exchange earners and supports, among others, handicraft makers, taxi drivers, fishermen and farmers.
Nine cruise ships have since cancelled plans to dock at the Port of Mombasa, with Kenya Airways also set to ground most of its planes in the coming days.
“We are currently in meetings trying to determine the effect of the new government directives and the necessary changes we need to make,” the carrier’s chief executive, Allan Kilavuka, said.
“This will become clearer in a day or two. But we will make decisions that will conserve cash and mitigate the effect of these changes on the business. We are also currently reviewing our network and will announce the changes that we will be making shortly.”
Large revenue losses
The World Bank Monday committed $60 million (Sh6.1 billion) to Kenya to help the country battle the coronavirus outbreak that has spread to at least 30 countries on the continent. The funding will improve surveillance, laboratory services, isolation units, equipment, supplies and communication to help mitigate the virus in Kenya, the World Bank said on Twitter.
Kenya Airways and the tourism sector are bracing themselves for large revenue losses as the travel restrictions come into force.
Tourism revenues rose 3.9 percent last year to Sh163 billion as the number of visitors increased one percent to two million. The sector employs some 80,000 people directly, accounting for four percent of total formal jobs in the private sector.
The travel ban is set to worsen the country’s bed-night occupancy rate that has hovered around 32 percent in the past five years.
Entry of new players in the hospitality industry and expansion by existing firms have increased the bed-night capacity to more than 27,000.
Virtually all the major tourist source markets have been hit by the coronavirus, including Europe, Asia, Africa and North America. For KQ, as the national carrier is known by its international code, the travel restrictions will worsen its already precarious financial position.
The National Securities Exchange-listed firm made a net loss of Sh8.5 billion in the half year ended June, more than double the net loss of Sh4 billion the year before, as costs rose faster than revenue.
The loss saw the company’s negative equity widen to Sh16.1 billion from Sh2.4 billion, underlining the airline’s capital crisis.
Turnover in the review period rose to Sh58.5 billion from Sh52.1 billion, representing a 12.2 percent increase.
The government last month provided a Sh5 billion loan to the company to sustain operations.
It is expected to provide more funds if the airline is to meet its short-term obligations to employees and lessors of aircraft.
The fresh challenges facing the tourism sector are set to further weaken its contribution to the economy. The industry is estimated to account for just 0.7 percent of economic output.
Kenya is among the countries that have taken increasingly stricter measures in a bid to combat the respiratory illness.
The disease is paralysing social and economic activities in countries where it has spread to.
The scare is disrupting travel, supply chains and weakening demand for goods and services worldwide, raising the spectre of a substantial reduction in global economic growth.
How fast the disease spreads and whether a vaccine can be developed fast enough are among the uncertainties rattling the public, investors and governments alike.