23 March 2019

Kenya: AirBnB - Kenyans Turn Homes Into Hotels, Reap Sh500 Million

Photo: Grid Engine/Flickr
(file photo).

Over the past year, Ms Naserian Sitelu has had business travellers from Nairobi, a group of Nigerians, tourists from China and across Europe lodge in her house.

Ms Sitelu, who has a two-bedroom apartment, joined Airbnb in December 2017 to supplement her income.

It did not take much time for visitors to start renting her room regularly, thanks to the Airbnb website, which opened her home in upmarket Nyali in Mombasa to travellers from around the world.

"Many guests hope to save money. They are very cautious about their budgets," Ms Sitelu said.

She has priced her room at $25 (Sh2,500) a night per person. She also allows two people to sleep in one room at the same price.

DIVERSITY

Ms Sitelu pointed out to a disrupted hotel industry where Airbnb continues to operate.

"Since I joined, there have been so many success stories. All those guests would have booked hotel rooms but they chose to use Airbnb," she said.

According to Ms Sitelu, home-sharing platforms are likely to gain more ground over time as travellers become increasingly aware of their benefits

"There is the money aspect," she said, adding that Airbnb also allows travellers to live as locals do, gives hosts opportunities to connect with diverse people, and for the owners, there is the flexibility to use the property occasionally, while also using it to earn money.

Since its launch in 2008, the accommodation listing platform has amassed millions of rooms worldwide, hosting tens of millions of clients, which saw it post a revenue of Sh100 billion in the fourth quarter of last year.

Locally, it is now shaking the very foundations of the tourism sector, pushing up property market prices as its key model of self-catering takes enterprising Kenyans by storm.

TOURISM

For starters, Airbnb has afforded Kenyans the opportunity to create new economic opportunities for themselves by monetising a spare room or a local experience, in places where such opportunities were often limited.

Traditionally, established hotels and operators have always enjoyed the lion's share of the country's tourism spoils, but with the new disruption wave Airbnb is quietly changing that.

Last year alone, it took away more than Sh500 million from the traditional tourism earners and placed it in individuals' pockets, and with the trend quickly catching on, this is bound to rise, with expectations that it will double in the next four years.

"Airbnb allows you to do local tourism. It puts dollars in the pockets of lower and middle-class Africans. This local tourism is particularly appealing to younger, more adventurous travellers seeking to avoid the conformity of traditional tourism packages," Airbnb Southern Africa manager Velma Corcoran said.

POPULARITY

According to Airbnb, 97 per cent of accommodation charges remain with the listing owner while 42 per cent of what guests spend circulates in the local neighbourhood.

So far, more than 3.5 million guests have arrived in Africa through its listings, with roughly half of these arrivals occurring in just the past two years.

There are over 130,000 Airbnb listings across Africa, with South Africa constituting the bulk of the business, followed by Morocco, Kenya and Egypt.

"The rest of the continent is catching up with really encouraging growth numbers," Ms Corocan said.

In the year to September 2017, hosts in Kenya earned Sh390 million, and in a similar period last year, the Kenyan numbers had ballooned to Sh510 million.

BETTER RETURNS

This can also be seen as a loss for hotel owners, given that these funds go directly into private individuals who still offer accommodation services.

Airbnb is not just a platform for booking rooms in other users' homes. Boutique and apartment hotels are also seeking to fill their rooms using the platform.

Daniel Kyalo, the Cowrie Shell Beach Apartments general manager, said they use the platform in the same way as booking services like Booking.com.

However, the commission charged by Airbnb as compared to other booking agents is much more attractive.

"Airbnb charges hosts a three per cent fee. Other online agents charge 18 per cent to 20 per cent commission. The difference is so big, making the same property have different pricing. I will obviously get more clients via Airbnb," Mr Kyalo, who has listed hotel apartments on Airbnb, said.

REVENUE

Mr Kyalo said most low-budget travellers favour Airbnb as they may not afford to stay in hotel rooms.

"I listed some in 2016. The numbers have doubled since 2016. People are getting to know the benefits of Airbnb," Mr Kyalo said.

Two months ago, Kaskazi Beach Hotel joined Airbnb. The sea-front hotel has 191 rooms.

The hotel's marketing manager Daniel Ogechi said they were using Airbnb to find new customers.

"It is giving us business. We normally give them three to four rooms. We wanted more bookings. We are selling single and double rooms. We have had bookings from international tourists," he said.

According to the Tourism Sector Performance Report, 2018 by the Ministry of Tourism, growth in shared economy is among the notable trends that will shape destination Kenya's performance this year.

GROWTH

In the seven months to September last year, Kenya guest arrivals via Airbnb grew by 68 per cent and this is out of the domestic market that is also using the platform.

Since its founding in 2008, Airbnb hosts across Africa have earned more than $400 million in direct income from renting out their properties via the service.

Tourism is one of the continent's fastest-growing sectors and contributed nearly $178 billion to Africa's gross domestic product in 2017, according to latest figures from the World Travel and Tourism Council.

Data from Airbnb shows that Kenya had more than 6,500 listings at the end of 2018, while AllTherooms, an accommodation search engine, puts 2,000 active listings in the Coast alone.

PRICING

Of these, 676 are active Airbnb listings in Mombasa with an average price of the rentals at $85 per night. The lowest priced Airbnb in Mombasa is $10 per night.

Diani Beach in Kwale County has 404 active Airbnb rentals with an average price of $135 per night. Malindi in Kilifi County has 409 active Airbnb rentals.

The average price of Airbnb rentals in Malindi is $126 per night. Watamu in Kilifi has attracted 413 active Airbnb rentals with an average pricing of $133 per night.

Kilifi Town has 62 active Airbnb rentals with an average pricing of $133 per night.

As a result of the entry of this new form of tourism hosting, African governments now want a slice of Airbnb's cake.

For instance, Tanzania last November asked all the Airbnb operators to register their facilities with the government before the end of the year or face court action.

COMPETITION

In Kenya the push for registration has not been as aggressive as other markets, but still tourism players are calling for a fair playing ground, as they recognise the threat from this service.

"It will have an impact on the traditional landscape and the Tourism Regulatory Authority (TRA) needs to be proactive. We already have issues with homestays.

"The proprietors of homestays are complaining that the standards are stringent," Mr Sam Ikwaye, Kenya Association of Hotelkeepers and Caterers (KAHC) Coast branch executive officer, said.

"We have the issue of standards and quality, but most important we have issues on the challenge of taxation. If there is somebody who is going to do business and not pay taxes, then it is actually a disservice and it is creating an uneven playing field," Mr Ikwaye added.

TAXES

In an interview with Saturday Nation, TRA chairman Sammy Nyule said they are in the process of registering all tourism-related enterprises and expected Airbnb to come forward and be registered.

"We are working with Airbnb to facilitate registration and remitting of taxes by July. It is being planned. They are supposed to be licensed by TRA after which we can come in," Mr Joseph Cherutoi, Tourism Fund Chief Executive Officer, said.

He said they were looking forward to signing a memorandum of understanding (MoU) with Airbnb.

"We will arrange a meeting with them and then write an MoU. After that, once Airbnb collects their commission, they will also collect the levy on our behalf. We are also going to work with the Kenya Revenue Authority," Mr Cherutoi said.

MUTUAL RELATIONS

Interestingly, most county officials in the Coast, which is a tourism hub, either have no idea about this new disruption, or are just burying their heads in the sand.

"This is still an emerging issue, and we know that this platform is gaining traction in urban areas like Nairobi, Mombasa, Malindi and Nakuru. We also understand that most of these hosts are hiding this kind of businesses, but we are working with TRA and Kwale, Kilifi, Mombasa and Taita Taveta county governments to register them," he added.

Airbnb, on its part, has expressed willingness to work with African governments to ensure they get a piece of the hospitality pie through sharing of revenues.

"We are working towards having the African government embrace home sharing as a new player in tourism, then we can work with them to put in place certain tools, like collecting and remitting tourism tax," Ms Corcoran said.

More on This

Airbnb Sees No 'Uber-Like' Problems in SA

Internet accommodation sharing service Airbnb has played down fears that regulation could impact its business in South… Read more »

See What Everyone is Watching

Copyright © 2019 The Nation. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.