Kenya's tourist industry counts the cost of unrest

The sun-loungers by the swimming pool at Nairobi's luxury Serena hotel are empty. The wildlife wardens at the gates of Nairobi National Park have not seen a 4x4 in hours. In Mombasa the beach boys sit together in the shade, searching in vain for a tourist to pester with cheap trinkets and bracelets.

This should be Kenya's peak tourist season. A time of year when hundreds of thousands of holidaymakers flee the cold European and American winter for a dose of east African summer sun. But following two weeks of unprecedented violence and political unrest, and with no end to the instability in sight, few tourists are coming to Kenya. The planes are arriving empty and leaving full, taking the last of those who remained when the fighting began at the end of December.

The consequences are potentially devastating. One million tourists come to Kenya every year, making the industry Kenya's largest foreign exchange earner. It brings in between £500m and £750m a year – more than the next two largest, horticulture and tea export, put together.

More crucially, the tourist industry directly employs 500,000 people and another 500,000 indirectly, according to the Kenya Association of Tour Operators (Kato). Fish farmers in Kisumu and pork farmers in Eldoret, towns with no real tourist industry, sell their wares to Nairobi hotels. "The chain reaction is massive," said Duncan Muriuki, chairman of Kato.

Those Nairobi hotels are now operating at less than 10 per cent occupancy – at a time of year when they should be more than 90 per cent full. Safari lodges in the Masai Mara and Samburu have similarly low numbers.

At the Indian Ocean coast, tour operators have been forced to cancel thousands of holidays in Mombasa, Watamu and Malindi – there are currently 85 per cent fewer tourists at the coast than normal.

Travel advisories from the British Foreign Office and some of its European counterparts have warned against all but essential travel to Kenya. Insurance companies are refusing to offer protection for tourists willing to defy the advice. The tourism industry will have no respite next week. The opposition Orange Democratic Movement party yesterday announced the resumption of public protests. Rallies have been planned in 28 towns and cities across Kenya next week. The opposition also called on European countries and the United States to impose sanctions.

Attempts to hold a rally in Nairobi's Uhuru Park last week failed, but the city was brought to a halt. City centre businesses have already decided to close next week, fearing the demonstrations could bring violence.

Kenya's economy has already taken a serious short-term blow. A combination of Christmas, the election and post-election violence meant the country was in effect closed down for two weeks, costing £15m a day. The Finance minister, Amos Kimunya, estimated the overall cost at £500m.

Long-term, economic analysts fear a recession may be imminent. Kenya's economic growth had been one of President Mwai Kibaki's few success stories. The economy grew from 0.5 per cent in 2002 to almost 7 per cent in 2007. Professor Terry Ryan, a local analyst, said economic growth could slip as low as 2 per cent.

Whether the economy can bounce back relies heavily on tourism. Robert Shaw, a commentator and economic analyst, said it was unlikely to happen unless the political situation was resolved. That currently looks unlikely.

Kenya's tourism industry has suffered in the past and has always bounced back. Visitor numbers dipped following an al-Qa'ida attack on the US embassy in Nairobi in 1998. But this, tour operators say, is different.