Outlook for the hospitality industry in Nigeria for the next couple of years is positive such that nationwide hotel room revenue is expected to rise by 154.5 percent to $280 million by 2023, up from $110 million the industry was able to raise in 2017, analysts say.
Comprehensive hotel room revenue will even go up much higher within this period. The analysts expect that the revenue will grow to $400 million in 2023, up from $220 million that was generated in 2017.
This implies that opportunities are there for investors in space providers and brand managers just as job opportunities are beckoning professionals with relevant skills in that sector of the economy.
Like anywhere else in the world, the hospitality market in Nigerian depends largely on tourism, the business traveller and, to a reasonable extent, improved infrastructure.
The large number of Nigerians who live abroad who returns home for holidays during festive seasons is driving Airbnb bookings in Lagos. Business, leisure and meetings, incentives, conferences and events (MICE) are the pillars and major drivers of rising demand for hotel rooms in the country.
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As at the first half of this year, high-end room prices per night averaged N70,000 in Lagos and N80,000 in Abuja. Lagos was rated among the fastest growing Airbnb markets due to tourists exploring the arts and culture scenes in the state.
This, perhaps, explains why major hotel brands, including Marriott, Hilton, Radisson and Sheraton, have outlined plans to open locations over the next three to five years in Lagos and Abuja.
“This is due to the available infrastructure and basic business/tourist activity required to accommodate an increase in rooms,” explained Ayo Ibaru, Director Real Estate at Northcourt, in a recent report on the real estate sector performance in the first half of 2019.
Ayo noted that business travel between Lagos and Abuja is one of the busiest routes in Africa and the Murtala Muhammed International Airport in Lagos is the fifth busiest on the continent with more than 7 million travellers annually.
The reconstruction of the Muhammed International Airport Road in Lagos, though already commissioned by President Muhammadu Buhari, is still 75 percent done.
But the good news is that the road, which is designed as a 10-lane highway comprising, three express lanes, five pedestrian bridges and two-service lanes in each direction, has improved significantly the traffic situation to and from the airport.
“This simply underscores the power of infrastructure in aiding business and economic growth in any country,” says Kayode Oluyemi, an estate developer and facilities manager. All over the world and particularly in Nigeria, infrastructure gap is wide and it is affecting businesses significantly.
Global infrastructure gap by 2040 is estimated to be $15 trillion with Nigeria’s share of that put at N3 trillion. Emmanuel Odemayowa, MD/CEO, Global Property Partners (GPP), a consortium of firms with diverse interests in real estate and infrastructure development, says the current infrastructure gap in Nigeria is over $1 trillion.
“Now that the effects of recession are fading and business activity returning to normal, government should start aggressive infrastructure development. The directive by the National Pension Commission that pension fund administrators invest a minimum of 60 percent of their infrastructure funds in projects within Nigeria is encouraging,” Oluyemi said.
Guest nights, number of available rooms, and room capacity are expected to rise as economic conditions improve, exchange rates stabilise, security improves and consumer inflation moderates.
When combined with current development plans, available rooms are expected to grow at a rate fast enough to keep occupancy rates around 70%. The combination of economic growth and room rate growth are expected to lead to growth in guest nights. 3 and 4- star hotels currently account for 45% of total available rooms and 50% of guest night stays.
Expectation is that, with these developments, average room price for mid-range hotels will grow to about N50,000 over the next 3 years from the current N35,000 per night for available rooms.
“The development of mid-range hotels is the future of hotel profitability in the leading cities as opposed to the prestige projects that tend to have only large returns on ego,” Ibaru predicted.
