Projects worth N12trn abandoned across Nigeria
... as North sees hospitality investment decline
Rising security challenges in Nigeria, which have impacted all businesses, are taking a deadlier toll on the hospitality sector, especially in the northern part the country, with dwindling investment in the sector due to perceived unsafe business environment.
This correlates with recent findings by construction industry professionals that reveal that an estimated 56,000 construction projects valued at N12 trillion have been abandoned across Nigeria’s six geopolitical zones for various reasons.
These projects belong to private and public sector organizations, meaning that savings, bank credits and tax-payers money have been buried, leading to loss of jobs and income that affect so many people.
Besides security concerns, most of the projects, according to Abba Tor, president, Nigerian Institute of Quantity Surveyors (NIQS), were abandoned due to poor research on the monetary estimates required for them. Hospitality sector, as a segment of the real estate market, is a major victim.
Despite the boom in the hospitality sector, in the last two decades, no foreign branded hotel is located in Northern Nigeria except Abuja, which investors, who shun the other states in the region, perceive to be safe.
At present, the region’s hospitality industry, according to hospitality experts, is losing over N10 billion annually to lack of quality investments in the sector, occasioned by the growing insecurity in the country, especially in the region.
That also is the reason for the near-zero investment in other real estate assets, especially residential and commercial properties. The region has seen significant destruction of homes by insurgents, more so in the crisis-ridden states like Borno and Kaduna.
A report by the World Bank states that since commencement of the Boko Haram Scourge in 2009, about 956,453 (nearly 30%) out of 3,232,308 private houses; 5,335 classrooms and school buildings in 512 primary, 38 secondary and two tertiary institutions; 1,205 municipal, local government or ministry buildings; 76 police stations have been affected in Borno State.
Though all these have, by default, created investment opportunities, investors are not investing, except some desperate ones who go about acquiring destroyed properties, or properties that are located in a crises area at cheaper prices for speculative purposes, according to Jambil Suyudi, an estate surveyor and valuer. “Besides loss of homes, jobs that would have been created have also been lost,” Suyudi said.
Bitrus Yakubu, a former commissioner in Plateau State and hotel investor, decries that Kano, the commercial and largest city in the region, including Kaduna and Jos, the once thriving tourism hubs in the region, all have capacity to attract over 10 branded hotels each, but have lost such opportunities to the growing insecurity in the region scaring away investors with huge capacity.
“If you have a Sheraton brand in Kano, it will attract more of its kind. If you have 10 of such in a city, the taxes to the government is huge, employment and empowerment opportunities, especially for supplies will be huge. A foreign branded hotel in Abuja makes over N10 million a day, and if you multiply that for over 30 of such hotels across the other parts of the northern region where they are lacking, the region will be richer with over N10 billion annually”, Yakubu said.
Explaining the dynamics of the hospitality industry, Kunle Alatishe, a Dubai-based Accor Hotel Group sales executive, noted that huge investments attract bigger brands and the bigger the brand behind a hotel, the more the capacity and pricier the offerings are, hence guests are willing to pay $300 per night in a foreign branded boutique hotel in Abuja than N50,000 in the best hotel in Kano.
The former staff of Transcorp Hilton Abuja explained that foreign branded hotels come with quality offerings, service excellence and huge capacity that lure world-class travellers, foreigners, event planners and multinationals, which have capacity to pay for the hotel’s appreciable pricing.
He regrets that lack of such investments has denied the region revenue from the hospitality value chain from taxes, supplies and deliveries, receipts from tours, purchase of local craft, and employment of locals, among other benefits.
“Two years ago, Accor Hotel Group was interested in expanding to Kaduna and Kano, considering the improvement on the airport, rail and other infrastructure, but the kidnapping, especially in Kaduna, made the key investor to pull out. His financial advisers warned him that it would be hard to sustain good return on his investment considering the escalating security challenge and that was how that project and many others died because of the insecurity,” Alatishe said.
Currently, there are 12 foreign branded hotels in the North, with four in the pipeline and all are in Abuja, yet their least rooms are more expensive than the highest rooms in Fifth Chukka Resort Kaduna and Bristol Palace Hotel Kano, considered as the priciest hotels in the northern apart from Abuja.
Making a case for more investments in foreign brands, Emmanuel Ele, MD/CEO, Six Regions Hotels Limited, managers of Dominion Court Apartments & Rooms, Lagos, noted that with their huge capacity, pricey rates, and global networking, foreign brands pay better, train and often offer committed staff opportunity to join their global workforce amid many benefits.
However, the indigenous hotels are not doing better in the region as insecurity has stifled their business in the last decade, while many who managed to stay afloat in the face of the security challenge are closing shop now because of the impact of COVID-19 pandemic, as well as the worsening security situation.
According to a report by Guest Frontline, a hospitality research outfit, indigenous hotels are growing five times more than foreign ones in Abuja, 10 times more in Lagos, seven times more in Port Harcourt and Owerri, while one third of such investments have closed in the northern region from 2009 till date due to poor patronage.
At present, only a few hotels are recording slightly above 20 percent occupancy rate in Maiduguri, 30 in Bauchi and 35 in Jos, while some have closed down due to dwindling profit that no longer sustain the business.
“Before the crisis in 2009, an average room in Jos was around N10,000, it went down to N5000 at the wake of the crisis. It also improved with relative peace but always goes down at any crisis like we are experiencing now with the August 2021 killings”, Shallom Buka, a hotel manager in Vom, Jos, said.
Same applies to key towns in the region, from Jos, Kaduna, Maiduguri, Bauchi, Yola, Katsina to others, hotel rate crashes the moment crisis sets in as guests evacuate their rooms or leave town for safety.
As well, both local and foreign investors are now shifting to regions with relative peace and with assurance of good return on their investments.
Hospitality experts think that the trend of poor patronage, closing of hotels and shunning of investments in the region will continue as long as the security challenges are not addressed across the region.