Nigeria’s lodging industry gained tremendous growth along with the overall economy and business booming in Africa. The once disordered and money-losing accommodation business is getting on the right track. And more international renowned hotel groups are entering into Africa, with standardized operation strategy, to promote the thriving of hotel industry in Nigeria.
International hotel groups’ development initiative breaks the pattern of Nigeria’s local hotels. Hotel chains bring changes and opportunities, which offer new options for consumers’ accommodation decision and a new way of thinking for hotel investors. Until now, hotel investment is no longer unpredictable, rather it ushers in a more effective and profitable future.
From Wildly Growth to Hotel Chain’s Surge
In 2017, Nigeria’s overall hotel market has outperformed industry expectations. The occupation rate has increased from 1,500,000 to 1,600,000, an increase of 45.2%, higher than the expected 42.4% (see the charter). Since this year, the market data has suggested a growth momentum and what makes the year of 2017 different is that the hotel chain has made a significant contribution to the figures.
Economic prosperity brings energy and vitality to every industry and trade in Africa. The biggest change for the hotel market is that international hotel groups are expanding their programs for the African market. In the year 2019, ten hotel brands get into the African market and proposed strategic planning. As can be seen in chart 3, in the number of planning rooms, two cities of Lagos and Abuja in Nigeria rank top 10, and this indicates the importance laid by hotel brands in the Nigerian market.
For the entire hotel industry in Nigeria, it is still in the stage of supply falling behind demand. The change we can observe is that the local hotel market is no longer dominated by individual hotels, rather chain hotels brought by international hotel groups mushrooms.
These chain hotels export standard products and services, bringing consumers with better living experience and gain more profit through scientific management in contrast with the individually operated hotels. Besides, chain hotels respond promptly in dealing with customer feedback, which helps to rectify the wrong operations and achieve sustainable growth.
There will be a transition from individual hotel’s wild growth to hotel chain’s upsurge and the phenomena of supply behind demand shall be totally changed after a period of time. Chart 4 shows the anticipated opening year of hotels signed in 2019 (first quarter) and a growing number of hotels joining the chain brand will be included in future.
Hotel Franchise and Business Model
Enormous investors will cooperate with international hotel brands with hotel chain’s rocket-fueled growth and the business model well recognized is hotel franchise.
Exporting brand, technology and operation is the major business concept of joining brand chain’s franchise scheme. The hotel property as well as the power over personnel, finance and operation is still possessed by investors. The asset-light operation strategy endows investors with decision-making right and avoids the risk of unified management.
Meanwhile, investors can enjoy the size effect and personalized programs of joining chain brand’s franchise business. Put Sunmei International as an example which ranks the 16th place worldwide, Sunmei owns a dozen of hotel brands and over 4,000 franchise hotel globally, and it offers franchise service of three brands in Africa, including economy brand of Ivy Hotel, upscale brand of Rizti Hotel and light-standard brand of Oak Hotel, providing differentiated services for investors with various needs.
For investors, the costs and expenses cover construction, labour, material supplies and one-time (consecutive) franchise-related fees. The profits come from room revenue, membership charges as well as other services fees. The comprehensive services of hotel groups help franchise hotels being more profitable.
Hotel franchise helps avoid operational risks, attracts more customers and enables greater management ability. At the same time, the funds of chain hotels can be better utilized and trackable. The personnel and material supplies shall be more managed in a more standardized method and every asset for hotel operation can be better used.
The rapid expansion of hotel chains owned by international groups in Nigeria will transform the landscape of and inject energy to the hotel market.
Sunmei International opens the franchise business to Nigeria’s investor and guarantees the one-stop hotel chain services. Sunmei International will work together with investors in the coming days to satisfy more consumers’ accommodation demands and exert positive influence to the lodging industry.