Nigerian hospitality still gasps for breath at 60

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 world-class 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.

In 2014, 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.

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Sadly, the celebration in the industry was short-lived as late 2014 ushered in sharp decline in performance that affected projections in the industry till date.

Today, we have over 15 international hotel brands across the country, over 8,000 hotels offering less than 14,000 rooms, over 25 hotels in the pipeline among many franchise and management agreements. Yet, the rooms are not enough, service culture/offerings need to improve, skills honed and more investments as the industry hardly boasts of official fivestar hotels.

With the present economic downturn occasioned by the coronavirus pandemic, the industry is seriously gasping for breath as 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.

As well, 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 wooed 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 the pandiemi-induced lockdown and the opening of the economy, the Nigerian hospitality industry is still struggling for recovery. Currently, stay unit nights (average number of nights guests spend in a hotel) has dropped to 10 percent while the average occupancy rate in the sector hovers between 15-30 percent with negative impact on revenue, which was zero during the lockdown, and less than 3 percent over the last three months.

As well, 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).

In view of the development, W Hospitality Group, a vital strategic advisor to the Africa Hotel Investment Forum (AHIF), fears that recovery of the hospitality sector is going to be very slow. Obviously, the slow recovery will impact negatively on the realization of projects in the pipeline as delays and cancellations are imminent in post-covid-19 era.

“The delay is expected to be a big setback on the delivery of 3,000 additional rooms to the current 12,000 rooms on offer in the Nigerian market, and may also hinder the industry from realizing the projected $507 million revenue in 2020”, W Hospitality Group explained.

The delay is the completion of the proposed hotels is worsening by the high interest rates between 2030 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 looking for buyers of their shares at Federal Palace Hotel, Best Western Hotel has left its Port Harcourt hotel, African Sun is gone, and some hotel brands are not willing to play here until the economy rebounds.

The pandemic 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, hotel 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. If the economy is given the needed attention and stimulus with commitment from government and private sectors, the economy will rebound and the hospitality industry will celebrate a better 61 years independence anniversary next year”. Adigun assured.