Nigerian hospitality barely afloat at 61
At the peak of colonial rule in 1928, Ikoyi Hotel Lagos opened for the first time as a British colonial government’s guest house, and so also Hill Station Hotel in Jos that served colonial masters who were mining tin ore then.
With time, some of the guest houses transformed into hotels, while others were redeveloped for other uses.
At Independence in 1960, the likes of Federal Palace Hotel emerged with more offerings. The hotel was the historic venue for the signing of the Independence Treaty between Britain and Nigeria. Later in the 80s, more international brands led by Starwood Group started berthing in the country and ushering in brands such as Sheraton, and Le Meridien.
But 2014 was an unprecedented year, in terms of growth for the industry. That year, the Nigerian hospitality industry recorded a wonderful milestone as a new hotel was opened almost every month in Lagos, Abuja and Port Harcourt. Then, the industry was valued approximately N562 billion investments (about $3billion), and was still growing, while stakeholders in the industry were glad with the projection that total room supply in the industry then would grow from about 7, 229 in 2010 to about 11,335 in 2013 and to over 14,000 rooms by 2020.
Sadly, the celebration in the industry was short-lived as late 2014 ushered in a sharp decline in performance that affected projections in the industry till date.
Today, we have over 15 international hotel brands across the country, offering less than 14,000 rooms, over 25 hotels in the pipeline among many franchise and management agreements, while the indigenous and unbranded hotels have grown astronomically, with about five hotels opening every month across the country, though standard is often in question.
Yet, the rooms are not enough, service culture/offerings need to improve, skills honed and more investments as the industry hardly boasts of official five-star hotels.
The outbreak of Coronavirus in 2020 impacted and is still impacting the industry negatively. With economic downturn occasioned by the coronavirus pandemic, the industry is seriously gasping for breath as recovering is very gradual, while occupancy has remained low for a long time, revenue targets are never met, Foreign Direct Investments (FDI) hardly trickle due to no guarantee on return on investments, many projects are now suspended and lots of hotels now downsize to remain afloat.
Despite hope of recovery this year, the impact of the pandemic has reversed all growth projections for 2020 and even 2021.
The projections were based on the fact that new hotels were opening almost every day, especially in Lagos and also, the Nigerian hospitality industry was leading the West African region in the number of hotels in the pipeline across 15 international brands. Then, the figures were very impressive and attracted a lot of foreign direct investments (FDI), while local partners were busy signing MoU with foreign investors here on new hotel projects.
Despite the easing of restrictions on the hospitality industry, efforts at inducing recovery and the opening of the economy, the Nigerian hospitality industry is still struggling for recovery from the 2020 downturn. Though stay unit nights (average number of nights guests spend in a hotel), which dropped to 10 percent last year because of the pandemic, has improved to 30 percent in the third quarter of this year, and average occupancy now up from between 15-30 percent, this time last year, to about 50-65 percent in September this year, the industry is still gasping for breath at international travel has not picked up to the level it was before the pandemic.
Sadly, the industry also risks delay of over 15 hotels under construction due to funding issues and poor economic outlook of the country that now discourage willing investors, especially foreign direct investment (FDI).
As W Hospitality Group, a vital strategic advisor to the Africa Hotel Investment Forum (AHIF), predicted at the peak of the pandemic last year, the recovery of the hospitality sector is going to be very slow and it is really very slow as some experts think it could be from 2023.
Obviously, the slow recovery will impact negatively on the realization of projects in the pipeline as delays and cancellations have been the order of the day now for investors who are cash trapped or cannot pay high bank interest rates.
“The delay is a big setback on the delivery of 3,000 additional rooms to the current 12,000 rooms on offer in the Nigerian market, and has hindered the industry from realizing the projected $507 million revenue in 2020”, W Hospitality Group explained.
The delay in the completion of the proposed hotels is worsening by the high interest rates between 20-30 percent charged by the banks.
The economic reality is also hitting the likes of Marriott, which many industry experts thought would have expanded across the country going by the momentum it gathered after the acquisition of Protea Group. Sadly, some brands are also leaving the country due to the dwindling revenue. Le Meridien left Ibom Hotel and Resort, InterContinental left Lagos, and Marriott International also declined in taking over some hotels, despite their world class facilities.
At present, Sun International is still looking for buyers of their shares at Federal Palace Hotel, Best Western Hotel has left its Port Harcourt hotel, African Sun and Intercontinental are gone, and some hotel brands are not willing to play here until the economy rebounds.
On the other hand, some hotel experts think that the economic downturn presents an opportunity for investors to buy over properties or develop more properties with their hard currency.
As occupancy rates keep dwindling and revenue targets become very hard to meet, making most investors think the Nigerian hotel market has lost its confidence and stability, the experts are calling on the government to boost the economy, which will in turn impact the hospitality sector.
Despite the bad outlook, Tom Adigun, a hotelier, noted that there is hope for the industry as the Nigerian economy would definitely rebound.
“Our government should leave politics and face the economy as businesses are still weighed down by the impact of the pandemic, foreign exchange volatility and insecurity. We need the right policies, supporting environment and less taxation to make the economy rebound and the hospitality industry will celebrate a better 62 years of independence anniversary in 2023.” Adigun assured.
Well, there is still good news. At least, Marriott International opened the most contemporary hotel in Nigeria at Ikeja GRA, despite the downturn. Thanks to SIFAX Group and Taiwo Afolabi, the founder and CEO of the conglomerate, for delivering on the over N40 billion hotel project.