Nigeria to reap $1.1bn from growing hotel room revenue by 2018

As the Nigerian hospitality industry anticipates a trebling of the number of hotel rooms in the next five years, rising from 8, 400 in 2013 to 24, 000, in 2018, the sector gears up to impact the national economy more through corresponding revenue.

The projected growth, according to a report issued recently by PricewaterhouseCoopers (PwC),  would see overall hotel room revenue expanding at a 22.6 percent compound annual rate to $US1.1 billion in 2018 from $413 million in 2013.

The report contained in PwC’s 4th edition of the ‘Hospitality Outlook’ also pointed out that the projected growth was based on Nigeria’s booming economy, buoyed in part by regional and international investment in the hospitality industry, and which also grew hotel room revenue to 59 percent between 2009 and 2013.

The forecast, according to the PwC report, was despite the fact that the hotel market in Nigeria grew by 9 percent in 2013, which was the smallest gain since 2010. However, stay unit nights ( guests staying more than one night) increased by 6.3 percent in 2013 and has grown faster than room availability over the past three years.

 

Average room rates have grown slowly in the last two years, rising by only 2.5 percent in 2013.

Speaking on the further growth expected in Africa’s hospitality sector in the next five years, Nikki Forster, PwC Leader of Hospitality and Gaming, says: “Growth in travel and tourism is expected to fuel growth in the accommodation industry across the African continent during the next five years.”

However, while the number of hotel rooms in Nigeria is expected to rise from 8, 400 in 2013 to 24, 000 in 2018, it is still far behind South Africa, which the report estimated will have about 63,000 hotel rooms by 2018  up from 60, 900 in 2013.

To ensure that Nigeria realises the projections of the PwC ‘s report by 2018, Ugo Okonta, a hospitality expert, says that the country should learn from South Africa, where tourism is considered as a key element in  the economy and is recognised in the National Development Plan as an important driver of economic and employment growth.

Okonta urged indigenous investors to look inwards and form synergies that would pull resources together to compete for market share in the booming industry.  “About 60 percent of international hospitality presence and branding in Nigeria today is owned by foreign interests. It will be sad if by 2018 they increase their share, with little or no Nigerian participation. After all, the hospitality industry is very open and competitive globally”, he observed.

Olumide Oyeyemi, a hotel owner, however has a different view. Oyeyemi says that  the South African hospitality industry should grow better than its Nigerian counterpart because of the seriousness of the government over there at truly supporting the private sector to drive the hospitality and tourism sector.

“If you want quality participation of indigenous investors in the Nigerian hospitality industry and even to realise the projected growth in 2018, government has to provide an enabling environment.

“Infrastructure is still an issue, especially power supply, multiple taxation and security, among others, which are no longer issues in South Africa. But if we must grow without all these complementary efforts from government, hotel room rates and service charges will keep increasing in order to offset operational costs and break-even”, Oyeyemi said. 

The projected growth would see over 50 international branded hotels across the country.

 Though ushering more rooms in the hotel market is expected to reduce room rates, many hospitality experts anticipate  room rates may even be higher in 2018 despite the many rooms, because of increasing operational costs.