Insecurity stemming from the Boko Haram insurgency in parts of northern Nigeria has led to the cancellation of about four hotel branding deals and caused investors to abandon about seven hotels under construction.
Also, a few hotels completed or nearing completion cannot be opened due to low patronage and apprehension.
Losses from the botched projects come to about N15 billion. These include the Magwan Water Hotel in Kano, which would have cost close to N5 billion; the Kaduna Plaza Hotel (about N3 billion), and the Bauchi three-star hotel estimated at N1.5 billion. The remaining four three-star hotels would have cost not less than N2 billion each.
One of the cancelled branding deals, according to Salami Oketola, a representative of a South African hotel brand, is the abandoned multi-billion naira Magwan Water Hotel in Kano which a South African hotel brand wanted to buy into to rebuild and turn it into a five-star hotel.
“The investors pulled out because the security reports were not favourable, and instead, the Kano State government decided to convert the hotel project into an all-girls boarding secondary school,” Oketola said.
The brand which has operations in Lagos and Port Harcourt, according to Oketola, is already partnering with local investors in Port Harcourt and Warri for two budget hotels to be opened in 2016.
Also, the proposed Kaduna Plaza Hotel, a four-star development that would be managed by an American hotel brand on completion, was likewise abandoned at foundation level since June 2012 because the undertaking bank refused to provide funding for fear that insecurity would obstruct returns on investment.
Similarly, all is not well with Al Mukta & Co, a Bauchi-based investment company, as a Nigerian bank is on its neck to repay a loan it received to build a three-star hotel in the state. Though the hotel has been completed, Usman Dan Ali, a hotelier in the state, who has relocated to Abuja and is privy to the deal, observed that the Protea Group which was supposed to manage the hotel declined, citing security considerations.
“Since Protea declined the offer, the owners have approached Golden Tulip, but it seems hotel brands have decided not to go beyond Abuja. So, the hotel is set, but you need a known name to give would-be guests confidence on service and security,” Ali said.
In Kaduna alone, over 10 indigenous hotels have closed down for fear of attack by the extremists. Also, a few international brands which over the years dragged their feet now have genuine reasons not to invest. According to a report by the Kaduna Chamber of Commerce, banks now cite insecurity as a reason not to give loans to businesses in the state.
Uche Asika, an investment banker, explains that increased lending to northern businesses was not likely as the possibility of paying back the loans was slim. According to him, banks see it as a great risk to lend to investors intending to establish in the north.
In Abuja, a good number of projects proposed for hotels have also been abandoned for lack of confidence in the market and fear of low returns on investment, all occasioned by insecurity. Many banks are pulling out of funding deals they signed with hotel investors in Abuja and some other northern states.
It was also gathered that attempts by Movenpick Hotel, a Swiss brand, to establish in Abuja were also botched by the hotel’s contact in Accra, Ghana, who insisted that Abuja was not safe. At the same time, many international brands are still watching the security scenario before signing deals with investors in any hotel project.
Despite its renovation plan, Capital Hotels plc, owners of Sheraton Abuja Hotel and a major player in the sector in Abuja, witnessed a decline in business occasioned by insecurity, as did other brands.
If the insecurity persists, Janie Buns, a hotel manager in Abuja, says the hospitality business may just wind up as guests are key to hotel business which thrives in peaceful atmospheres.
OBINNA EMELIKE
