Nigeria’s hospitality industry is unarguably one of the hardest-hit sectors by COVID-19 pandemic that ravaged the global economy last year. The biggest hoteliers in Africa’s largest economy lost N19.77 billion in 2020.
The industry players faced their worst challenge in history as their businesses were almost brought to its knees following an average 59.105 percent plunge in revenue.
As a result, some of the service providers who were losing millions daily considered massive job cuts, and cost reduction measures in a bid to survive as the cost outran revenue.
“All the hotels listed on the Nigeria Stock Exchange (NSE) recorded losses in 2020,” Proshare’s ‘Hospitality Post-COVID-19; Making the Future Count’ report said, adding “the hospitality sector in Nigeria was not left out of the global COVID-19 crisis.”
The lockdown and social distancing measures pursued by the Federal and various state governments were some of the factors that affected businesses involved in the hospitality ecosystem.
“Occupancy was 64 percent in 2019. In 2020, we closed the year at occupancy of 33 percent. This was mainly due to the global impact of the COVID-19 pandemic,” Dupe Olusola, MD/CEO, Transcorp Hotels plc, said.
Before the COVID-19 pandemic, three of Nigeria’s listed hoteliers reported a combined profit of N1.85 billion in 2019. Only the Tourist Company of Nigeria reported a loss of about N1.2 trillion.
Analysis of the Proshare report shows that Nigeria’s biggest hoteliers last year recorded declines in their occupancy rates, profits, and patronage in most of their business segments.
Tourist companies recorded were also hard hit as they reported low tourist arrivals both domestically and internationally. Among the listed companies on the NSE, Transcorp Hotels recorded the highest percentage decline in its profits by -1,122.80 percent followed by Ikeja Hotel plc with a profit decline of 905.8%, Capital Hotels Plc reported -160.2 percent.
Tourist Company of Nigeria recorded an increase in its loss position by +439.67 percent.
In monetary terms, the losses incurred by the various hotels amounted to; N6.72 billion for Ikeja Hotel, N6.53 billion for Tourist Company of Nigeria, and N6.28 billion and N241.86 million for Transcorp Hotels, and Capital Hotels, respectively.
The hospitality and lodging industry is one of the major drivers of economic growth and social development in developed and developing countries. Their contribution to Gross Domestic Product (GDP), job creation, community development, and provision of social services to customers is not in doubt.
Before the outbreak of the COVID-19 pandemic, Nigeria’s hospitality and lodging industry was said to have contributed significantly to the economic, social and cultural development of Africa’s most populous nation.
Nigeria’s hospitality industry was projected to leverage a hotel-room capacity of about 8,000, the second-largest in Africa after Egypt, and a growing Airbnb sub-sector to post an estimated annual growth above 4 percent in 2020, according to Q3 2020, GDP data by NBS.
Accommodation and Food Services contracted by –22.61 percent, compared to a growth rate of 2.28 percent recorded in the previous year.
Transcorp Hotels said it started the year 2020 optimistic with detailed plans and budget to surpass the N20 billion revenue performance achieved in 2019 “with our Q1 2020 occupancy averaging at 53 percent. However, with the global coronavirus pandemic, the hospitality sector world over, including Transcorp Hotels plc was negatively impacted.”
The outlook for Nigeria’s hospitality industry is not clear to analysts as they have cited mixed projection for the sector.
According to Proshare’s report, some analysts believe that the fortunes of these companies would improve in 2021 on the back of a full re-opening of the economy, widespread COVID-19 vaccination, and an increase in travel.
On the flip side, it said other analysts believe that the growth in the hospitality sector would be slow in 2021, hampered by the slow growth of the economy (estimated in some quarters to be between 2.1% and 2.5% in 2021), a decline in consumers disposable income, slow start to COVID-19 inoculation, a decline in consumer confidence and the enforcement of social distancing rules.
The hospitality market will need to rethink its operation and build anew. In the future, stakeholders in the hospitality sector will need to adapt to fit the new status-quo, which is the “new normal” and forgo any hope of going back to what they were used to, according to the ‘Hospitality Post COVID-19; Making the Future Count’ report.
According to Chudi Ubosi, a Lagos-based real estate practitioner, the hospitality industry has a rough road to recovery not only in Nigeria but worldwide.
“Revenue will remain challenged, especially in our Nigerian environment where hotel occupancy is driven by seminars, workshops, and social events. These have been non-existent since COVID-19 and are gradually returning,” Ubosi said.
The 2021 real estate outlook report by Ubosi Eleh + Co projects that a lot of hotels will not survive the impact of the pandemic as it expects that many will enter the market for sale.
“Even so, buyers will be few and far between. Unless an investor is convinced of his model, this is the wrong time to enter the hospitality industry,” the report said.