The Economic Value of tourism in Kenya

Abstract

This dissertation presents an estimate of the economic value to Kenya residents of expenditures by non-residents of East Africa visiting Kenya (tourists). Economic Value of an activity is defined ai the contribution of th at act i vi ty to the v aLu e of .le al th of th e pe r-s ons concerned. Economic Value is distinct from political, social and cultural consequences of an activity, which other consequences may be equally or b.ore important to residents. Value of wealth is defined as the present value of cons umption. Four "values of tourism" are c a Lc uLa t e d for Kenya: (1) the increase in value of residents t Health if visitor numbers and expenditures had continued at the same levels as they had reached by 1967) compared \>lith a hypothetical situation in which the country received no t l' a v e 11 e 1'5 in the p as tor f ut u r-e ; (2) the re due t i on in the --. value of residents' wealth if visitors had ceased arriving at the end of 1967 t compared with continuing at the 1967 rate; (3) the increment in the value of wealth from allowing tourist numbers to expand on reasonable forecasts from 1967 to 1978, compared w i t h restraining visitors at their 1.967 level; and (4) the sum of (1) and (3). Estimates of revenues and costs of tourism in 1966/7 and 1967 w e r-e made from analyses of questionnaires administered to visitors depart ins Kenya, and to business firms and government dep artmen ts de alin g VI i th t ouris t s • E xte nsive use was also made of results of interviews with representatives of firms and government and of analyses of accounting records of particular firms. In the absence of an input-output table for Kenya, government survey of distribution (retain and wholesale trade) and of industrial production were used to analyze 1965/7 tourist expenditures into foreign exchange, labour remuneration, rent, depreciation, and profit. Various alternative assumptions are made about gr owth and composition of future visitor f Lows , their exp~nditures, the effects of possible future political instability, and the costs of catering for tourists,' demands up to 1978. After v a r Lous adjustments to take account of distortions introduced between consumption values and market prices by taxes, quantitative controls t and price fixing (particuJ,arly rr i n i rnurn Hage laws and xxii trade union agreements), the s t r-e arn of net change in value of consumption due to tourisn is discounted at rates of 10%, 20%, and 30% respectively. (Streams of consumpt.i..on values are assumed to remain constant from 1978 to 1988. The sensitivity of the estimates to using 1988 as the time-horizon is checked.) The main conclusion is that the economic value of t ou r-Ls m to Kenya (on definition (4) above) is positive even at a dis count rate of 30%. Under the m os t plausib Le set of ass umpt ions, th e e con o mi c value of t ouris rn CODes to 3% of the value of all wealth of Kenya residents. The final chapter r-e vLew s studies of the economic impact of tourism to other countries, and contains a criticism of the use of "tourism mu l t LpLde r-s !' , The value of tourism to Kenya is co~pared with that to other tourist destination countries. It is suggested that tourism will have the greatest value (expressed as a percentage of tourist receipts, say) in countries V1ith very unequal distributions of income among residents, together with progressive tax structures. While these characteristics may be contradictory in the long run, in the medium term they can co-exist.