Tourists sail on a dhow around Lamu island in the Indian Ocean off the northern coast of Kenya.

Nairobi - Tourist hotels in Kenya are losing market to serviced apartments as consumers look for bargains and their preferences and tastes change.

A new report on the hospitality industry showed that the hotels, especially in Nairobi, are recording relatively low occupancy rates due to the serviced apartments.

“Serviced apartments in Nairobi have performed remarkably well, with average occupancies of 90 percent and revenue per available room at $127 (about R1 600) .

The occupancy is 30 percent higher than that of hotels,” said a hospitality report by Nairobi-based investment management firm, Cytonn.

The serviced apartments, according to the report, are 34 percent cheaper on average than a hotel room in Nairobi.

Generally, however, according to the report, it is a bad time for hotels across the East African nation.

Despite increased supply of quality hotels, occupancy of the facilities remains low due to the shrinking of tourism activities.

The report established that the average hotel occupancy for all regions across Kenya is at a low of 33 percent for three, four and five star rated facilities.

According to the report, the low occupancy is due to insecurity brought about by terrorist attacks, which in turn has led to issuance of negative travel advisories, and heightened competition from both local and emerging markets in the region such as Ethiopia, which has relatively low room rates.