Hotel occupancy rises to 60% in H1 despite poor Q1 outing

...sector looks to better H2

The Nigerian hospitality sector recorded an impressive result at the end of first half of 2019, with average hotel occupancy rate hovering between 60-70 percent, from less than 40 in the first quarter of the year, according to industry experts who spoke to BusinessDay.

The low occupancy recorded in the first quarter was worse in the months of February and March due to election uncertainties and especially the postponements that resulted in cancellations of many hotel bookings. In the second quarter, however, the peaceful political transition engendered confidence in investors, travellers, government and corporate clients of hotels.

From about 30 percent occupancy in the major part of the first quarter (against about 50 percent in same period in 2018), average occupancy improved to over 60 percent in the second quarter of 2019, with average room rate hovering around N30,000 per night for standard room, against N18,000 in the first quarter, while revenue shot up by 20 percent.

Bashir Bello, deputy general manager, Four Points By Sheraton Lagos, said the months of February and May were bad for hotel business because of the many booking cancellations due to election postponement, but marvelled at the rate business soared in between the two months and after May.

“We had a very bad February. It was the worst February we have had in a long time, then May because of the inauguration in Abuja and the states, which made business to move towards Abuja and outside Lagos,” Bello said. “Aside from those two months, year-on-year, we have had improvement in occupancy, rates and general guests experience.”

Comparing H1 2018 and H1 2019, Bello said though the first half of 2018 was better, this year would have surpassed last year’s record if not for the huge losses in February, March and May. Going by a sustained occupancy rate of over 50 percent in an election year, he thinks that H1 2019 was impressive.

Trevor Ward, CEO, W Hospitality, publishers of the annual Hotel Chains Development Pipelines in Nigeria, noted that despite losing revenue for a whole month in February, the Nigerian hospitality sector was impressive in the first half of this year.

According to him, the post-election stability in government wooed back hospitality investors; it saw many people travelling again within the country, and hotel rooms bubbling with guests once more.

But an anonymous industry expert at Transcorp Hilton Abuja noted that occupancy had been good all through the first half of 2019 despite the elections.

Bearing in mind that 2019 is an election year, and in order to absorb the shock, the expert explained that Transcorp Hilton concentrated on growing volume.

“So, while our occupancy is increasing, our average room rate reduced a bit. It is a deliberate policy because you do not bank on average rate. Last year, our average rate was higher but volume was lower, and this year is a reverse,” the person said.

“As long as volume continues to increase, definitely, your net income will increase. Instead of waiting for one person to pay you N200,000, you can get 10 people to pay you N50,000 each and they will give you more money, though it puts more pressure on your facility,” he said.

Victor Edosomwan, CEO, Vicwan Limited and principal consultant to five indigenous hotels in Lagos and Abuja, noted that though the election period affected occupancy and revenue of hotels a bit, the business sustained 50-60 percent average occupancy in the first half, a surprise in an election year.

But the impressive performance, according to him, goes in line with the dynamics of the industry as location, brand equity and offerings impact occupancy of hotels despite the challenges.

“In Abuja, Hilton is still having 80 percent occupancy, Sheraton has 60 percent, and there are still some hotels that have 80 percent occupancy in the first half, even during elections particularly those patronised by politicians like Hilton Abuja,” he said.

Explaining further on the industry dynamics, Edosomwan said before election, occupancy was around 30 percent, some hotels struggled to sustain 50 percent except the likes of Hilton Abuja, which maintained about 80 percent because it is the most patronised hotel in Nigeria by government, and then Sheraton in Lagos that is guaranteed 70 percent occupancy all-year-round because of the airlines, which take 30 percent occupancy.

As well, he said that hotels in Ikeja did well despite the challenges of election and lull in business, especially those around Isaac John Street in GRA, and Alausa area because of closeness to the seat of Lagos State government and the international airport for easy evacuation in time of conflict during election.

With an impressive half year, most of hoteliers hope for a better second half, especially now that a new government has settled down, new ministers sworn in and business resuming in full scale across the country.

Edosomwan expressed delight over political stability but decried that hotels are no longer depending on government patronage because of the cost control by the present administration, which has made most ministries, parastatals, and agencies now to limit their workshops and seminars within their in-house conference facilities to save cost. As well, some NGOs have limited their patronage because of the cut in their funding by donor agencies and countries, especially those sourced from the United States of America and United Nations.

But the industry expert said that the concern now is how impressive the second half would be because recently government pronouncement on the economy is not positive coupled with the falling oil prices, after the encouragement earlier in the year.

“Those are issues that will always affect the travel industry, but hotels are optimistic,” he said.

For Bello, the industry is looking very optimistic to the second half, especially September, October and November.

“We are very optimistic that these three months will be good because by September, schools would have resumed, people are back from summer vacation and business is expected to pick up fully. December is generally not a boom for us as many people travel out for holidays,” he said.

But Ward said the industry needs to be patient in order to see what happens with the new regime.

“But there are lots of things to be positive about in Nigeria; there are still interests in investment in the industry, which means people are still travelling, the hotel sector is doing very well, and there are lots of demand for meetings and conferences. We are optimistic, but let’s see what the new regime is up to,” he said.