Effects of General Elections on Room Revenues in the Hotels in Nairobi Kenya

Abstract

Hotel room revenues are the best indicators of how the hospitality industry is doing in financial aspects. General electioneering periods in Kenya are usually a turning point in the industry. This study intended to assess the effects of Kenyan general elections in Nairobi County. Daily secondary data was collected from 8 hotels one month prior and one month after a two month electioneering period. Daily revenue of the rooms was taken. SPSS v20 was used to analyze the data. The study adopted an event study where from one month before and a month after the electioneering period was done. The electioneering period was taken to be one month before and one month after the election date. The AAR and the CAAR were derived from the resulting AR that was obtained from daily actual and expected returns. AAR and CAAR were plotted on a graph. Paired t-tests for both AAR and CAAR were done. From the analysis done, the CAAR graph went up immediately after the election period before falling 30 days after the election date. This indicates there were negative average abnormal returns after the election period of 30 days after election date. The general elections affects the room revenues of hotels as the room returns changed with the election date. The t-test showed that room revenues during the period before the election period was different from the period after the general election period. In this case the hotels performed poorly because room revenues fell drastically after the general elections. The study concluded that general elections do affect room revenues of hotels in Nairobi negatively. The study recommends that hotels adopt a communication strategy that informs all their clients and assures them of their security during elections. It also recommends that the government and its agencies come up with policies that ensure that there is peace thus ensuring a stable environment for hospitality business. It also recommends that hotel operators plan their finances as they anticipate low business volumes during electioneering periods.