Hospitality war: Short let apartment takes on hotels for market share
Short let apartments are firing shots at hotels as the big-wigs in Nigeria’s hospitality industry are losing market share to the smaller short stay ventures.
Nigeria ranks very high on the bucket list of countries tourists want to visit in Africa, short let apartments, which is mostly driven by tourists in countries like South Africa, Mauritius and Morocco, is defying odds in Nigeria, thanks to large, local patronage.
Though it has been in existence in Nigeria since 2011, the not so popular short let apartment leveraged the COVID-19 lockdown, a period when most hotels were out of business and were forced to close their doors to occupants, to record breakthroughs.
Low cost of the home-like short let apartment, the fear of hotel crowd and high chances of virus exposure, ability to choose the apartment of choice are top reasons short-stay apartment saw a boom in 2020, and is projected to maintain the same momentum in 2021, as compiled from BusinessDay survey.
Estimated at hundreds of millions of naira, Nigeria’s short let market is having a slice of the hospitality business in terms of the volume and value of transactions it is taking from the conventional hotels.
While data from Statista put the average occupancy rate of Nigeria hotels at 47.5 percent in March 2021, a survey by BusinessDay across three Nigeria’s busiest cities shows the average occupancy rate for short let apartments increased to 76.3 percent in March from 54.6 percent reported three years ago. Analysts believe short let holds investment opportunity for strategic investors.
“Since I got into the short let business over a year ago, my client base has increased significantly,” operator of BankyJay Luxury Apartments, one of the short let agents in Lekki, said.
Through short-term rental, landlords can make upwards of 20 percent more than they would on a rent-controlled property, according to analysts.
As the name implies, short let describes furnished self-contained apartments that are rented for short periods, usually by the month as opposed to annual rentals in the unfurnished apartment rental market.
“Few weeks after the local airports were open for flight, I flew into Lagos from Abuja, to do some business there. Although some hotels were open but the fear of the crowd I might be exposed to and the high chance of contracting the virus made me look for alternative accommodation. And behold, I came across a short let apartment,” an Abuja-based businessman who simply identified himself as James, stated.
Upon returning to his base in Abuja, James said he could not stop himself from singing the praises of the short-let apartment he stayed in the two weeks he was in Lagos. The low price he paid for the suit apartment and the facilities in the apartment were the highlights for him.
Described as the most affordable option for month-long stays, estimates by analysts show that a short let in Nigeria could be 25–50 percent cheaper than a hotel room.
They are seen as an alternative to hotels. Some of the property operators permit pets, just like some people would ordinarily allow in their homes.
According to Tunde Balogun, CEO of Rent Small-Small, the supply of short let properties in Nigeria has grown to a stage that has surpassed demand. The many offerings in the short-let business must have stirred up competition and resultantly influenced the relatively lower price charged by the operators as against the conventional hotel price.
While Balogun described the current short let market performance as a bubble expected to burst in the nearest future, he said there would still be winners in the business.
“The winners will include the players that pay attention to the hospitality side of the business and those that have built a reputation for having clean apartments, regular maintenance and intentional about their services,” he said, adding that “a lot of real estate players” were jumping into the venture “because of how much of a cash cow short let is.”
For most of the short let operators, their booking channels range from word-of-mouth to a simple online Google search. Some of their customers resort to apps like Airbnb, Hotels.ng, or Trip Advisor to make their bookings. Others go directly into the website of managers of these apartments, and select their preferred cities and spaces, view the amenities, and make payments.
Once payment is confirmed, they receive an email and SMS notification of their door access code, and Google maps address to space. After being checked in, guests simply use WhatsApp or text messages to request concierge services, which are available 24/7.
Like other e-commerce businesses in Nigeria which leveraged the COVID-19 induced impact to record growth, many short let operators and agents are going online to market their products.
“No one does parties in their apartments these days. There are short let apartments that are focused mostly on providing space for people that want to rent and host their parties. Even musicians, when they travel within Nigeria, they don’t stay in hotels any more, for privacy and other reasons,” a Lagos-based professional, Osasere Imafidon, said.
According to Imafidon, a short let apartment has been a lifesaver as it has filled some of the nightlife gaps created due to the COVID-19 guidelines that prevent night clubs and other party spots to operate.
“With N50,000 per night, my friends and I were able to host several house parties and we were not arrested by the police because it wasn’t in the public domain. I don’t think we would ever host parties in our apartments again,” he said.
Before the COVId-19 induced growth, short-let apartments in Nigeria were already gaining grounds as the owners of the hub for short let and the biggest in the world, Airbnb ranked Nigeria in 2019 as one of the fastest-growing markets globally for Airbnb.
Even though South Africa, Morocco and Kenya were top on the ranking as the countries with the largest Airbnb markets in Africa, Nigeria, which came in fifth position, was named by the Californian-based company to have reported the fastest growth of 325 percent over the past year with effective Airbnb locations at Ibadan, Abuja and places in Lagos, like Lekki County Apartments, Mixta Apartments, Urban Shelter Apartments, Lekki Gardens Apartments, and many more, as high yield accommodations.
While hotel remains the primary provider of hospitality services in Nigeria, the following are the reasons why short let is becoming a strong competition to the industry big-wigs.
Accommodation and the right event venues are considered some of the most expensive items when either travelling or organising an event.
Short let apartments offer what industry players describe as “affordable quality” when it comes to accommodation. The affordable luxury nature of short let apartments is making the venture to become an alternative for hotels.
According to data from Nigeria Property Centre, the average price of flats short let in Lagos is N65,000 per day. This is compared to the average of N100,000 or more charged per day by hotels for a similar apartment that falls within the three or four-star ratings.
“Paying far less than a hotel with the comfort of home added to it is defiantly a deal-breaker,” one of the patrons of the short-let apartments in Lagos who pleaded anonymity said.
According to him, tenants would rather rent a house for a week or two with all the comfort of a home than spending money in a hotel room, where they are left with just a fridge and a kettle.
A win-win for tenants and landlords
While some landlords are directly reaping from the short let industry, others are enjoying early rent payment from their tenants who put out their spare rooms up for shot let.
People go on vacations for an extended period leaving their properties vacant. These empty flats stay unused and bring them no added benefits. Renting out the building for a few months would make an extra source of income, at no extra cost.
“I have been an Airbnb host for almost two years and the money I get from listing on the platform goes a long way in helping me pay for my house rent. The weak exchange rate in Nigeria has also helped as my rooms on Airbnb are being paid for with US dollars or its naira equivalent,” a short let operator in Chevron environ said.
According to industry analysts, more Nigerians are expected to join their peers and list properties for short let and it would consequently lead to lower prices that will be enjoyed by occupants.
Home away from home
A survey by Airbnb shows that a lot of travellers are interested in the household amenities and large space provided by short lets. They like to “feel at home even while away from home,” an Airbnb executive said.