Two weeks to St. Valentine’s Day, I called a hotelier friend of mine for possible advert in the newspaper, but his response baffled me to the bones. “Hello my friend. I have not paid my franchise fees, our suppliers are on my neck, my general manager is leaving and the one coming from Paris is insisting on almost double the salary of the outgoing one. All these payments are in dollars, and where is the dollar? Business is slow, and guests don’t care, all they want is low rates and discounts”, he lamented.
“You are talking of advert. We have canceled training programmes for five staff members in Switzerland, the hotel owner is considering sacking people because he is under pressure to service and pay back the loan he got from his Dubai partners who are not willing to convert it to equity share. The worse is that he is paying in dollars that is almost double the value of the loan”, Monday Achim, a rooms division manager of an international brand said.
The hotelier may sound frustrated, but that is the reality many of them are experiencing now in the face of the economic downturn. Even, at the peak of the last administration when Naira was stable for some time and exchanged for N150 per dollar, some hoteliers complained about the high exchange rate and had to increase their charges, especially room rates in order to breakeven in business.
Today, at over N300 per dollar, one wonders what goes on in the minds of most hotel owners; in a country most foreigners believe that rooms are overpriced.
As dollar rises and naira falls freely, almost daily, the ugly situation impacts on the bottom-line of most hotels, as many are now using more money to import fewer items. The development is worsened by the fact that the manufacturing sector is as good as dead with hotels importing almost everything from toothpicks, toiletries, linen, furniture, to even some food condiments because of the doubt of the quality of the ones manufactured here, if at all there are. Of course, expatriates are still on most hotels’ import list, and that engagement is usually sealed in dollars.
Again, it is not their fault because prior to coming here, some of the hotel chains they represent, insist that their expatriate staff salaries, especially general managers, chief finance officers, executive chefs, and sometimes, the food and beverage managers, are paid in dollars. If this is part of the conditions for allowing an indigenous investor to franchise their brands, the indigenous investor will definitely be under pressure to pay these super expatriates in dollars even with the current situation. It also means, these ‘lucky guys’ earn more with the appreciating dollar while their folks who are assumed not to have “expatriate skills” earn devalued naira, and still expected to perform optimally.
As the situation persists even with dollar aiming at N400 and still expected to peak N500 if nothing is done by the economic team of the present administration, service, which is key in the hospitality industry is deteriorating fast as hoteliers are mindful of revenue and not expenditure such as maintenance.
Also, some hotels may downsize to ensure survival, while the few staff left may not give their best input as the workload leave them exhausted every day.
This is a crack that will grow bigger tomorrow and impact negatively on service culture, professionalism and hospitality infrastructure.
However, the situation is favouring foreign guests a lot. With the strong dollar, they have more purchasing power here, and afford to spend more here with less impact on their pockets.
Now, an average standard room in most international brands sells from $250 a night (about 75,000), but only a few months ago, that $250 was about N40,000. While the locals here see it as expensive due to fall in their purchasing power occasioned by weak naira, foreign hotel guests take advantage of its relatively fair pricing over some other business destinations in South Africa, Kenya and even Ghana.
Besides foreign guests buying more with less, Ikechi Uko, a travel and hotel expert, noted that the weak naira offers good deal for foreign investors as the hotel business is cheaper to enter now than before. For him, a weak economy is time for discerning investors to buy and invest more in that country as things will soon begin to look up and investments appreciates.
But to avert job losses, the likely exodus of good hands to countries already poaching them with better pay, and collapse of the industry, hospitality stakeholders are calling on the present government to do whatever it can to rescue the economy and thereby encourage indigenous businesses to thrive while contributing to the economy diversification move.
OBINNA EMELIKE
