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Sustainable tourism infrastructure

Sustainable tourism infrastructure

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Sustainable tourism infrastructure

Compare IOA
Country
Kenya
Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Services
Sub Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Hospitality and Recreation
Indicative Return
Describes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
15% - 20% (in IRR)
Investment Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Medium Term (5–10 years)
Market Size
Describes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
> USD 1 billion
Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.
USD 500,000 - USD 1 million
Direct Impact
Describes the primary SDG(s) the IOA addresses.
Decent Work and Economic Growth (SDG 8) Responsible Consumption and Production (SDG 12)
Indirect Impact
Describes the secondary SDG(s) the IOA addresses.
No Poverty (SDG 1) Gender Equality (SDG 5) Sustainable Cities and Communities (SDG 11)

Business Model Description

Upscale sustainable tourism infrastructure in main tourism areas through private investments to build, operate and manage key tourism infrastructure and provide services to consumers or directly to tourism operators.

Expected Impact

Increase income of local communities, generate employment opportunities, and reduce the environmental damage caused by conventional tourism.

How is this information gathered?

Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.

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Disclaimer

UNDP, the Private Finance for the SDGs, and their affiliates (collectively “UNDP”) do not seek or solicit investment for programmes, projects, or opportunities described on this site (collectively “Programmes”) or any other Programmes, and nothing on this page should constitute a solicitation for investment. The actors listed on this site are not partners of UNDP, and their inclusion should not be construed as an endorsement or recommendation by UNDP for any relationship or investment.

The descriptions on this page are provided for informational purposes only. Only companies and enterprises that appear under the case study tab have been validated and vetted through UNDP programmes such as the Growth Stage Impact Ventures (GSIV), Business Call to Action (BCtA), or through other UN agencies. Even then, under no circumstances should their appearance on this website be construed as an endorsement for any relationship or investment. UNDP assumes no liability for investment losses directly or indirectly resulting from recommendations made, implied, or inferred by its research. Likewise, UNDP assumes no claim to investment gains directly or indirectly resulting from trading profits, investment management, or advisory fees obtained by following investment recommendations made, implied, or inferred by its research.

Investment involves risk, and all investments should be made with the supervision of a professional investment manager or advisor. The materials on the website are not an offer to sell or a solicitation of an offer to buy any investment, security, or commodity, nor shall any security be offered or sold to any person, in any jurisdiction in which such offer would be unlawful under the securities laws of such jurisdiction.

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Country & Regions

Explore the country and target locations of the investment opportunity.
Country
Kenya
Region
  • Kenya: North Eastern
  • Kenya: Rift Valley
  • Kenya: Coast
  • Kenya: Nairobi (Province)
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Sector Classification

Situate the investment opportunity within sustainability focused sector, subsector and industry classifications.
Sector

Services

Development need
The service sector is the biggest sector in the Kenyan economy. The sector accounts for 43% of gross domestic product (GDP) and was valued at USD 34 billion in 2019. Moreover, it employed 39% of population in 2020, and its value grew by 6.6% in 2019.(1) The service sector is also among the sectors most impacted by COVID-19.

Policy priority
Several policy frameworks address the priority to further develop this sector, such as the Domestic Tourism Recovery Strategies for Kenya, the Revised National Tourism Policy of 2020, the National Tourism Blueprint of 2030 and the Ministry of Tourism and Wildlife Revised Strategic Plan of 2018-2022. Two key priorities are to adapt the sector to the challenges posed by COVID-19 and to promote sustainable tourism activities.

Gender inequalities and marginalization issues
Employment in the tourism sector is gender imbalanced - it is male dominated, especially in management positions. The lack of training, education and technical skills are identified as the most important obstacles for women’s employment in the tourism industry.(22)

Investment opportunities introduction
There are several incentives and support mechanisms to attract investments in the industry. The incentives are designed to develop resort cities, attract investments in conference and entertainment facilities, construct hotel chains and develop high value products.(2)

Key bottlenecks introduction
The lack of digital literacy and penetration for service sector companies present a bottleneck, especially due the effects of COVID-19.

Sub Sector

Hospitality and Recreation

Development need
Tourism/hospitality employs 10% of the population and contributes 9% to Kenyan gross domestic product (GDP).(3) The tourism sector was severely impacted by COVID-19. The respondents to a survey by the Ministry of Tourism declared that over 80% of the companies in the sector had to reduce employment and 65% had over 90% of their bookings cancelled.(4)

Policy priority
The government aims to increase the number of tourists from 1.3 million to 2.5 million between 2016-2022. (5) Some key policy priorities are to adapt this sector to the challenge posed by COVID-19, and promote and adopt more sustainable tourism activities.

Gender inequalities and marginalization issues
According to sectoral documents, to tackle gender inequality in leisure services, sustainable tourism should focus on providing similar benefits, wages and equal opportunities in the job market for women and men.(6)

Investment opportunities introduction
Several incentives and support mechanisms aim to attract investments in the industry. The incentives are designed to develop resort cities, attract investments in conference and entertainment facilities, construct hotel chains and develop high value products.(7)

Key bottlenecks introduction
Hospitality/tourism subsector bottlenecks include fear of terrorism, inadequate infrastructure and bed capacity, and low digital penetration affecting marketing and promotions.

Industry

Leisure Facilities

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Pipeline Opportunity

Discover the investment opportunity and its corresponding business model.
Investment Opportunity Area

Sustainable tourism infrastructure

Business Model

Upscale sustainable tourism infrastructure in main tourism areas through private investments to build, operate and manage key tourism infrastructure and provide services to consumers or directly to tourism operators.

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Business Case

Learn about the investment opportunity’s business metrics and market risks.

Market Size and Environment

Market Size (USD)
Describes the value in USD of a potential addressable market of the IOA.

> USD 1 billion

Critical IOA Unit
Describes a complementary market sizing measure exemplifying the opportunities with the IOA.

Annual tourist flows (2 million), % of people employed (10%), contribution to gross domestic product (9%)

In 2019, revenue from tourism was estimated to be USD 1.6 billion, with sales of 4.955 million beds.(11)

The number of tourists coming to Kenya has been steadily rising. According to the Kenya Economic Survey, tourist numbers surpassed 2 million in 2018.(III) The number of international visitors increased by an average of 4% year-on-year between 2008 and 2018.(11)

Tourism accounts for over 10% of total employment in Kenya. It contributes 9% to gross domestic product (GDP) and 18% to foreign exchange earnings. It is also an important source of government revenue (11% in the form of taxes, duties, fees etc.).(12)

Indicative Return

IRR
Describes an expected annual rate of growth of the IOA investment.

15% - 20%

Hotels have an estimated return rate between 14% - 18%. This rate is a benchmark calculated as a cost of equity with a country risk premium, reflecting an average return required by investors active in the subsector.(13)

According to a sector representative active in Africa, the 'green' premium for sustainable projects can add an additional 4% - 5% to investments in traditional tourism infrastructure.(14)

Investment Timeframe

Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.

Medium Term (5–10 years)

According to sectoral articles, it takes an estimated 5 to 7 years for investors to generate a positive return on investment from investing in a sustainable hotel.(15),(16)

However, the investment timeframe depends on the specific characteristics of the business model and can vary significantly depending the type of investment, its model and financing sources.

Ticket Size

Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.

USD 500,000 - USD 1 million

Market Risks & Scale Obstacles

Market - Highly Regulated

Insufficient regulations enforcing sustainable operations (17)

Capital - Requires Subsidy

Insufficient incentives to operate sustainably (17)

Market - Limited demand and understanding

Lack of demand for sustainable tourism in the past (18), lack of a common understanding of what sustainable tourism and 'ecotourism' means (low awareness) (19)
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Impact Case

Read about impact metrics and social and environmental risks of the investment opportunity.

Sustainable Development Need

Tourism is one of Kenya’s key industries. It has been characterized as a cornerstone of the economy, because its growth stimulates further development in other sectors such as transport, food production, retail and entertainment.

Kenya's tourism industry accounts for over 10% of total employment, 9% of gross domestic product (GDP) and 18% of foreign exchange earnings. It is also accounts for 11% of government revenue (in the form of taxes, duties, license fees, park entry fees etc.).(20)

Kenya needs a holistic approach towards sustainable operations of hotels and tourism services. The tourism sector recognizes the need for programs and initiatives to mitigate its negative environmental impacts.(21)

Gender & Marginalisation

Employment in the tourism sector is gender imbalanced - it is male dominated, especially in management positions. The lack of training, education and technical skills are identified as the most important obstacles for women’s employment in the tourism industry.(22)

Supporting investments in leisure facilities with training and vocational education focused on women would increase female employment in the tourism sector.

Expected Development Outcome

Increased environmental protection and sustainable infrastructure in the country

Increased number of tourists

Gender & Marginalisation

Increased number of jobs, especially for women and youth

Primary SDGs addressed

Decent Work and Economic Growth (SDG 8)
8 - Decent Work and Economic Growth

8.9.1 Tourism direct GDP as a proportion of total GDP and in growth rate

Current Value

N/A

Target Value

N/A

Responsible Consumption and Production (SDG 12)
12 - Responsible Consumption and Production

12.b.1 Implementation of standard accounting tools to monitor the economic and environmental aspects of tourism sustainability

Current Value

N/A

Target Value

N/A

Secondary SDGs addressed

No Poverty (SDG 1)
1 - No Poverty
Gender Equality (SDG 5)
5 - Gender Equality
Sustainable Cities and Communities (SDG 11)
11 - Sustainable Cities and Communities

Directly impacted stakeholders

People

Tourists, local communities, tourism service providers, people working directly or indirectly in the tourism industry and associated services (particularly women and youth)

Planet

Environment due to less harmful tourism practices

Corporates

Infrastructure service providers

Indirectly impacted stakeholders

Corporates

Industries related with tourism (e.g. transport, restaurants, agriculture, entertainment and other services)

Outcome Risks

Unplanned and uncontrolled tourism development may ultimately lead to environmental degradation, land use change and interference with natural processes.(23)

Risk of socio-economic imbalance among local populations (23)

Seasonality and over-dependence on tourism (24)

Opportunity costs (transfer of funds and engagement in tourism instead of other economic sectors) (24)

Impact Risks

Drop-off risk: the probability that positive impact does not endure, or negative impact is no longer mitigated, relating to the 'sustainability'aspect of tourism activities

Gender inequality and/or marginalization risk: Unexpected impact risk - the risk that increased tourism activities around traditional communities will disrupt their lifestyle

Impact Classification

C—Contribute to Solutions

What

Investments in sustainable tourism infrastructure are likely to reduce the economic and environmental impact of conventional tourism and increase the income of local communities.

Who

Communities of the tourism destination (new sources of employment and income, reduced environmental degradation)

Risk

Seasonality and over-dependence on tourism and a risk of local inflation and socio-economic imbalances. There is also a threat of negative environmental impact, which should be mitigated.

Impact Thesis

Increase income of local communities, generate employment opportunities, and reduce the environmental damage caused by conventional tourism.

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Enabling Environment

Explore policy, regulatory and financial factors relevant for the investment opportunity.

Policy Environment

Domestic Tourism Recovery Strategies for Kenya: This policy outlines strategic actions to sustainably grow and develop domestic tourism. It identifies the need to tap into the potential market in a sustainable and competitive manner.(25)

Product Improvement and Diversification Policy Brief: The policy brief identifies sustainability as an important feature of a tourism product, recognizes the importance of community involvement for sustainability and calls for conservation and sustainability oriented campaigns.(26)

Digitizing Travel and Tourism Industry Policy Brief: This policy brief indicates geographical information systems (GIS) as a potential tool, which can be helpful for sustainable tourism development.(27)

Revised National Tourism Policy 2020 on Enhancing Resilience and Sustainable Tourism: This policy recognizes the tourism industry's impact on the sustainable development of national natural and heritage resources, which suffered from poorly planned developments.(28)

National Tourism Blueprint 2030: This policy aims to restructure the development and management of Kenya’s tourism sector.(29)

Financial Environment

Fiscal incentives: The capital deduction for hotel building expenditures is 70%. Duty exemptions are available for constructing/upgrading accommodation facilities. Capital repatriation and the remittance of dividends and interest are guaranteed for foreign investors if they pay the applicable taxes. The tax regime in this sector is relatively low, with a value added tax of 16%.

Other incentives: Employee vacations that last for a week and are paid by the employer can be treated as a tax-deductible expense. (32)

Regulatory Environment

Tourism Act 2011: This Act outlines the development, management and regulation of sustainable tourism and related activities, and defines sustainable tourism as 'a development that meets the needs of present visitors and hosts while protecting and enhancing opportunity for the future'.(30)

Tourism Regulatory Authority Regulations 2014: These regulations regulate the standardization and classification of tourism enterprises, licensing of tourism activities and services, and employment and vetting of expatriates. (31)

Major regulatory bodies for the tourism sector are the Ministry of Tourism and Wildlife, the Tourism Regulatory Authority and the Kenya Wildlife Services.

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Marketplace Participants

Discover examples of public and private stakeholders active in this investment opportunity that were identified through secondary research and consultations.

Private Sector

Exodus Travels, Intrepid Travel, Bigmac Africa Safaris, Trafalgar, Gracepatt Ecotours Kenya, Exciting Africa Holidays, Elida Tours and Safaris Ltd, Bigzone Africa Safaris, Jeep Safaris and Tours, All Time Safaris Ltd, Holiday Destination Safaris, East Africa Safari Bookers

Government

Ministry of Tourism and Wildlife, Kenya Tourism Regulatory Authority

Multilaterals

World Bank (WB), European Investment Bank (EIB), African Development Bank (AfDB), KfW Development Bank.

Non-Profit

Kenya Tourism Board, Kenya Wildlife Research and Training Institute, Kenya Utalii College, Tourism Research Institute, Tourism Finance Corporation, German Corporation for international Cooperation (GIZ), Zeitz Foundation, Kenya Association of Women in Tourism

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Target Locations

See what country regions are most suitable for the investment opportunity. All references to Kosovo shall be understood to be in the context of the Security Council Resolution 1244 (1999)
country static map
rural

Kenya: North Eastern

Northern Kenya has many tourist destinations, such as Maralal, Turkana, Loiyangalani and Sibiloi.(33)
semi-urban

Kenya: Rift Valley

The locations around wilderness areas, such as Masai Mara Reserve, Nairobi National Park, Samburu National Reserve or Lake Nuru National Park, have a high tourism potential.(33)
rural

Kenya: Coast

The coastal regions in Kenya are relevant for the industry as well, such as Diani Beach, Malindi and Watamu and Lamu.(33)
semi-urban

Kenya: Nairobi (Province)

The locations around wilderness areas, such as Masai Mara Reserve, Nairobi National Park, Samburu National Reserve or Lake Nuru National Park, have a high tourism potential.(33)
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References

See what sources were used to establish the investment opportunity’s data and find resources that could be consulted to explore more.
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