Hotel Occupancy Drops Below 35% as Recession Bites

Nigeria’s hospitality sector has been hit hard by the economic slowdown, with occupancy rates in hotels falling below 35 per cent this year due to the contraction of economic activities in the country.

Findings by THISDAY showed that hardest hit were the four and five-star hotels in Lagos and Abuja, where bookings have dropped significantly as individuals and companies now prefer to book rooms at cheaper boutique hotels due to the economic crunch.

THISDAY gathered that while the occupancy rate of Southern Sun Hotels, Ikoyi has dropped to about 45 per cent, the occupancy rate at the Intercontinental Hotel, Victoria Island, a five-star hotel and the second largest property in Lagos, is as low as 25 per cent.

Also, the occupancy rate at Wheatbaker Hotel in Ikoyi is currently estimated at 30 per cent, Eko Hotel and Suites, Victoria Island, which boasts a combination of four and five-star sections in its sprawling property, is down to 40 per cent, while the Federal Palace Hotel, also in Victoria Island, has dropped to 35 per cent.
In Abuja, the Transcorp Hilton, the largest property in the federal capital city, which over a year ago boasted an occupancy rate of 70-80 per cent, has seen a slight drop to 65 per cent.

A company source said the reason the Transcorp Hilton has continued to attract guests is because it had anticipated that the change in government last year and dwindling oil prices would impact on the number of guests booked in the hotel by the federal government, so it changed its marketing strategy by targeting guests from the private sector.
The source, however, admitted that weekend occupancy rate at the Transcorp Hilton has dropped significantly, but is offset by improved room bookings on week days.

He said the remodelling project currently being undertaken by the Hilton in Abuja has also helped the hotel to remain relevant in the city.

Nigeria’s third quarter real gross domestic product (GDP) growth data released on Monday by the National Bureau of Statistics (NBS) showed that the country sank deeper into recession, contracting by 2.26 per cent from -2.06 per cent in the second quarter of this year, and -0.36 per cent in the first quarter.

The contraction in GDP was largely driven by the militancy in the Niger Delta, which resulted in a drop in oil output during the third quarter to 1.63 million barrels per day (mbpd) and the decline in the oil sector’s contribution to GDP, notwithstanding the rebound recorded in the agriculture sector.

The latest GDP growth data further confirmed the level of weakness in the economy, which has been hobbled by rising unemployment and job losses, declining capacity utilisation, and acute foreign exchange shortage.
Owing to the sharp drop in hotel occupancy rates, a lot of the hotels have been forced to shed staff as they struggle to remain afloat.

“The point is that a lot of the big hotels have continued to lay off their workers. Like the Southern Sun and Intercontinental Hotel, they had to lay off some workers because of the recession. Today, more people prefer to go to cheaper boutique hotels, not exceeding N50,000 a night.

“They now go to hotels which are rated two to three stars such as the Protea chain in Lagos and Abuja. With less money, people would be booking them more,” an operator who pleaded to remain anonymous said.
Speaking on the development, the Chief Executive of Financial Derivatives Company Limited, Mr. Bismarck Rewane, explained that the average drop in the occupancy rate across the large hotel chains could even be far below 35 per cent.

“If you discount the flight crew rate, it’s even lower. That is because flight crews are always offered cheaper rates. For instance, when a British Airways is booking hotels, if a room is $200, they would pay maybe $100 or even $65 because they are paying for the whole year.

“So, the cabin crew rate is always cheaper. If you discount the cabin crew rate, if occupancy rate is about 40 per cent, they are down actually by 28 per cent.

“The economic recession has finished them (hotel operators) completely. With three consecutive quarters of increasing negative growth, that means some things are not working right,” Rewane added.