Hotels adopt flexible pricing to boost occupancy rate

… seasonal sales down 30%

Nigerian hospitality industry, which has been under pressure since the second quarter of 2015 to increase rates in order to meet soaring operational cost, may resort to flexible pricing mechanism to reduce the pressure of dwindling occupancy rate.

The hoteliers, especially leading international brands, are introducing flexible rates to boost occupancy, which has been hovering between 30 and 40 percent in the last 14 months, a percentage many hotel managers say is not sustainable for revenue generation and is putting them under pressure to increase rates.

Another point of pressure, say hoteliers, is the weaker naira, which has cut deep into the revenue of most hotels, especially international brands who import close to 70 percent of raw materials, products and facilities they use.
“The average room used to go from $200 to $300 per night, and people were already complaining that Nigerian hotels are overpriced. But at N400 per $1, it has become even more difficult to maintain these prices.

‘’We have been under significant pressure maintaining the same rates for over two years now. But, if the downturn persists, we have no option than to increase rates, especially in the second quarter of 2017,” Mathieu Edward, financial controller of an Ikoyi, Lagos-based hotel, says.

Beyond the importation of items, hotel managers say they are also faced with the challenge of sourcing foreign exchange for servicing franchise, management agreements and expatriate fees, which are all putting the industry under pressure as all these are done in foreign currencies.

Speaking on the workability of the flexible rates, Victor Edosomwan, former staff of Transcorp Hilton Abuja, ex-general manager, Sunfit Hotel, notes that hotels now sell their rooms based on daily reservation, the type of guest, destination the guest is coming from, and the time of the day.

“You do not expect a Nigerian guest to pay $400 per night in Abuja or Lagos. He will look for cheaper hotel, so you look for rates he or she can afford without the hotel losing money unnecessarily. But if the guest is a foreigner on a business trip, most international brands in Nigeria who are looking for foreign exchange will offer him competitive rates, believing he has the dollars to pay,” Edosomwan says.

According to Edosomwan, flexible rates encourage guests with low purchasing power occasioned by the economic downturn to still stay in hotels without incurring huge expenses, while allowing hotels to attain daily average room rate, boost revenue to pay their bills, and also woo corporate clients to effectively cut costs on hotel bills.
Explaining the rationale behind the flexible rate, Abimbola Oyewole, rooms’ division manager in an Abuja-based four-star hotel, also notes that most measures hotels are putting in place to boost occupancy in the past have been short-lived, hence easing the rates makes the rates flexible enough for more guests to book rooms at competitive pricing.

Despite the flexible rates, occupancy and seasonal sales are still trailing behind last year’s performance. Kevin Kamau, general manager, Radisson Blu Anchorage Hotel, Victoria Island, Lagos, says that booking pace for the festive season has not been as aggressive as it was this time last year. The general manager believes that things can turn around as bookings may likely soar as festive season gets closer.

In addition to flexible rates, most international brands are offering festive promotions to boost bookings and patronage, but the response, according to Oyewole, has been poor as most Nigerian Diaspora who make up 50 percent of the seasonal booking sales are reluctant at visiting despite their high purchasing power.
“They prefer to buy properties, send hard currency to their relations and enjoy elsewhere. But this is the time we need them because of their dollars and high purchasing power,’’ he explains.

The Nigerian hospitality industry, before the recession hit the country’s economy, usually gets a boost in revenues during the seasonal festive sales. This usually drops off from late January when the peak season would be over, leaving hotels scrambling for guests to fill their rooms.

 

OBINNA EMELIKE