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Transcorp Hotels Nigeria Plc has remained profitable amid a slump in the economy of Africa’s most populous nation that forced companies and individuals to book rooms at cheaper boutique hotels.
The hospitality giant posted a profit after tax of N388.40 million in the first quarter of 2017. Profit before tax stood at N543.16 million, as the company and its peers continue to operate in tough and unpredictable macroeconomic environment.
Nigeria’s hospitality sector has been squeezed by an economic downturn, with occupancy rates in hotels falling below 35 per cent last year due to the contraction of output in the economy.
The number of events and conferences held in four and five star Hotels dipped significantly as economic lassitude continues to scare investors from the country.
A combination of tumbling oil prices and acute dollar shortage tipped the country into its first recession in over two decades and half.
Nigeria’s economy contracted by 0.25 per cent in the first quarter of 2017, lower than the 1.50 per cent drop in the last quarter of 2016, according to a recent report by Nigeria’s National Bureau of Statistics (NBS).
Inflation for the month of April stood at 17.20 per cent, the highest in 11 months, hurting the spending power of the people. The statistics body said that jobless rate rose to a 7-year high in the first quarter of 2017, at 13.90 per cent.
The aforementioned putrid figures accentuate the woes of operators in the hospitality sector as margins continue to be suppressed.
Transcorp Hotels felt the pinch of the tough operating environment as net margins, a measure of efficiency, declined to 11.35 per cent in March 2017 compared to 26.31 per cent the previous year.
Earnings before interest and taxation (EBIT) margin fell to 14.67 per cent in the period versus 32.42 per cent the previous year as sales declined by 18.80 per cent to N2.98 billion.
Experts say operators in the hospitality industry lost revenue due the closure of the Abuja airport for six weeks as international flights were disrupted and hotel bookings waned.
Analysts at Pricewaterhouse Coopers LLP expect the rate of Night stay to pick up in 2017 and 2018 on the back of a stable economy.
“In 2018, as the economy begins to pick up, we project stay unit nights to again expand. Growth for the five year forecast period will average 4.8 percent compounded annually, highest among the five countries covered in this report,” said PWC analysts.
Industry stakeholders hint at indications of strong growth in the hospitality market given the expectation of more additions to accommodation in the next five years.
“Lagos will be adding 10 hotels with more than 1 900 rooms, six hotels with more than 1 100 rooms will open in Abuja, and three hotels are coming to Port Harcourt with more than 600 room,” said the analysts.
BALA AUGIE
