Nigeria’s hospitality industry sees rebound as Ikeja Hotel’s 9-month loss slows by 86%
Nigeria’s hotel industry is finally on the path to the long-awaited recovery after reporting its worst year on record in 2020.
One of Nigeria’s notable hoteliers, Ikeja Hotel has reported an 86.07 percent slowdown in its loss for the period ended September 30 2021, thanks to the full re-opening of the Nigerian economy.
The company which prides itself as the leading provider of catering and management services to Nigeria’s oil & gas industry leveraged the increase in revenue from room occupancy and food and beverage services to narrow its loss to N195.25 million in the nine-month of 2021 from a loss of N1.4 billion recorded in the comparable period of 2020.
Ikeja Hotel grew its revenue by 83.06 percent to N6.59 billion in the review period from N3.6 billion reported in the same period of last year.
The company’s performance was driven by the N1.62 billion earned from room occupancy, its core business. The revenue represents an increase of 328.57 percent when compared to the N378 million reported in the same period 2020.
It also grew its proceeds from food and beverage services by 426.6 percent to N920 million in 2021 from N188 million in the same period of last year.
Breakdown of the financials showed that Ikeja Hotel reported a 127.97 percent increase in its gross profit, the measure of a company’s efficiency rate, toN1.63 billion in the review period from N715 million in the corresponding period of 2020.
Industry analysts said they are optimistic that the performance by Ikeja Hotel is a reflection of how other big industry players will perform in the review period.
Nigeria’s hospitality industry is unarguably one of the hardest-hit sectors by the COVID-19 pandemic that ravaged the global economy last year. The biggest hoteliers in Africa’s largest economy lost N19.77 billion in 2020.
The industry players faced their worst challenge in history as their businesses were almost brought to their knees following an average 59.105 percent plunge in revenue.
As a result, some of the service providers who were losing millions daily considered massive job cuts, and cost reduction measures in a bid to survive as the cost outran revenue.
“All the hotels listed on the Nigeria Stock Exchange (NSE) recorded losses in 2020,” Proshare’s ‘Hospitality Post-COVID-19; Making the Future Count’ report said, adding “the hospitality sector in Nigeria was not left out of the global COVID-19 crisis.”
The lockdown and social distancing measures by the Federal and various state governments were some of the factors that affected businesses involved in the hospitality ecosystem.
Before the COVID-19 pandemic, three of Nigeria’s listed hoteliers reported a combined profit of N1.85 billion in 2019. Only the Tourist Company of Nigeria reported a loss of about N1.2 trillion.
Analysis of the Proshare report shows that Nigeria’s biggest hoteliers last year recorded declines in their occupancy rates, profits, and patronage in most of their business segments.
Tourist companies were also hard hit as they reported low tourist arrivals both domestically and internationally. Among the listed companies on the NSE, Transcorp Hotels recorded the highest percentage decline in its profits by -1,122.80 percent followed by Ikeja Hotel plc with a profit decline of 905.8 percent, Capital Hotels Plc reported -160.2 percent.
The Tourist Company of Nigeria recorded an increase in its loss position by +439.67 percent.
In monetary terms, the report revealed the losses incurred by the various hotels; N6.72 billion for Ikeja Hotel, N6.53 billion for the Tourist Company of Nigeria, and N6.28 billion and N241.86 million for Transcorp Hotels, and Capital Hotels, respectively.
The hospitality and lodging industry is one of the major drivers of economic growth and social development in developed and developing countries. Their contribution to Gross Domestic Product (GDP), job creation, community development, and provision of social services to customers is not in doubt.
Before the outbreak of the COVID-19 pandemic, Nigeria’s hospitality and lodging industry was said to have contributed significantly to the economic, social and cultural development of Africa’s most populous nation.
Nigeria’s hospitality industry was projected to leverage a hotel-room capacity of about 8,000, the second-largest in Africa after Egypt, and a growing Airbnb sub-sector to post an estimated annual growth above 4 percent in 2020, according to Q3 2020, GDP data by NBS.
Accommodation and Food Services contracted by –22.61 percent, compared to a growth rate of 2.28 percent recorded in the previous year.
According to Proshare’s report, some analysts believe that the fortunes of these companies would improve in 2021 on the back of a full re-opening of the economy, widespread COVID-19 vaccination, and an increase in travel.
On the flip side, it said other analysts believe that the growth in the hospitality sector would be slow in 2021, hampered by the slow growth of the economy, a decline in consumers’ disposable income, slow start to COVID-19 inoculation, a decline in consumer confidence and the enforcement of social distancing rules.
The hospitality market will need to rethink its operation and build anew. In the future, stakeholders in the hospitality sector will need to adapt to fit the new status-quo, which is the “new normal” and forgo any hope of going back to what they were used to, according to the ‘Hospitality Post COVID-19; Making the Future Count’ report.