Hotel brands make N5b annually on franchise in Nigeria

While the proliferation of hotel properties across the country, especially in Lagos and Abuja, has attracted over $500 million in investments to the country in the past five years, the development is also creating more returns on investments to owners of international brands outside Nigeria through franchise fees.

With over 15 international hotel brands, over 100 hotels and almost 8,000 rooms, external international hotel brands rake in over N5billion annually from franchise and management agreements originating from Nigeria.

The most expensive franchises in Nigeria include the Marriot, InterContinental, Hilton, Sheraton, Le Meridien and Sun International because of its casino offering.

BuisnessDay’s investigations show that the lowest franchise fee, which starts from $50, 000 annually, is charged mainly by regional hotel brands with footholds in Africa and the Middle East, such as Protea Group and African Sun, among others, with the exception of Sun International that does ownership and management.

Besides the franchise fees, the hotel brands also insist on sourcing key management staff  who are often paid exorbitant expatriate fees.

This means that at the height of the expansion of Protea Group in Nigeria, before the takeover by Marriot, it means the group made close to $1 million annually from the franchise to over 15 hotels then.

Other brands, especially Best Western, Golden Tulip, Radisson Blu, considered by Nigerian hotel owners because of their spread beyond Africa and Middle East, attract more franchise fees and stiffer conditions.

Though most outlets of the Best Western brand in Nigeria are managed by African Sun, the Zimbabwe-based hotel group, there are a few that are stand alone.

Golden Tulip seems to be rebranding every other hotel that had other brands on them before. This development, according to Imeh Etuk, a hospitality expert, means the brand may not have uniform franchise fees. Some can be less or higher than $50,000 annually because most Nigerian hotel owners prefer cheaper brands or just pay management fees, as is the case with Transcorp Hilton which operates under a management agreement.

Our investigations also reveal that the brand portfolio, the number of individual hotel brands in the chain, the spread across the world, the quality of professionals in its workforce, as well as the location, among others, influence the franchise fees. “If you approach the Hilton brand for franchise, you will be surprised at the scrutiny because the brand is not cheap. If they assess you and discover that you are serious, they will suggest some of the hotels in the 12 brands of Hilton but not the first three that include Hilton itself because you are going to cough up not less than $200,000 annually for franchise”, says Adebanjo Shonuga, a hotel franchise owner.

Unveiling the five hotels across hotel brands under Starwood Group in Nigeria, which include; Le Meridien, Sheraton, and Four Points By Sheraton, Shonuga says the agreements differ from one owner to the other. While some prefer full fledged franchises, other go for management agreements that only require them to pay management fees to the brand.

But no matter the operation model, Shonuga says Starwood brand is among top global hotel brands and hence cannot go less than $300,000 annually.

“Most hotel owners prefer franchises because the management agreement seems to be more expensive at the end of the day. My friend negotiated to pay $70,000 annually for franchise, but does not pay the extras, especially expatriate fees which is the bone of contention in management agreement”.

But from the standpoint of the brands, James Pitchwell, franchise manager West Africa, for an international brand, said that the hotel franchise is like any other business.

“While hotel owners are looking for top brand names to help sell their hotels to international visitors, they often do not want to pay, forgetting that the brand was developed, refreshed and maintained by someone before it became global. Hotel franchising is business and follows business principles, including right pricing and right to withdraw a brand from a property if the managers or owners fail to meet up with the franchise agreement”.

OBINNA EMELIKE