Effect of terrorism and travel warning on Kenyan tourism demand

Security concerns especially from terrorism events and travel warnings against the country presents a challenge to the tourism industry in Kenya. This study applies the Arellano-Bond difference GMM model to analyze the effects of terrorism and travel warning on demand for tourism in Kenya. Quarterly arrivals data from the Kenya National Bureau of Statistics from 22 source countries covering the period 2010q1 to 2015q4 are used. The study focuses on travel warnings by the UK and US. The results obtained show that terrorism events, represented by fatalities, significantly reduce tourism demand. The adverse effect lasts at least through to the following quarter. Travel warnings also show a negative effect on tourist arrivals in the country. However, the evolution of its effect over time seems to depend on which country issued the warning. For a UK warning, the bulk of the impact comes in the following quarter, while for a US travel warning the negative effect is mainly in the same quarter. The sector appears to recover more quickly from a US travel warning relative to a UK warning.