Nigerian hotels count revenue losses due to pandemic-induced plunge

COVID-19 has affected many sectors of the Nigerian economy, and one of the hardest hit is the hotel industry. The industry felt the impact when the Federal Government shut the economy in April, as it asked all businesses in Abuja, Lagos, and Ogun States to lock up. Only the one offering essential services were exempted.

Unfortunately, hotels are not considered among essential services providers. For this reason, they were mostly shut down, except for the few that were used as isolation centres. Needless to say that the adverse effects of the shutdown were huge. Revenue suffered, even as many hotel workers were laid off.

Pandemic bleeds Transcorp, Ikeja, Capital Hotels’ revenues

About three of Nigeria’s biggest hotels are listed on the Nigerian Stock Exchange. Their latest earnings reports have shown the extent of the lockdown’s impacts on their financials. These hotels are:

  • Transcorp Hotels Plc, owners of Transcorp Hotels in Calabar, Port Harcourt, and Ikoyi
  • Ikeja Hotel Plc, owners of Sheraton Lagos Hotel and a significant shareholding in Tourist Company of Nigeria  Plc, (owners of Federal Palace Hotel & Casino Lagos)
  • Capital Hotel Plc, owners of Abuja Sheraton Hotel

Transcorp Hotels: In the quarter ended June 2020, Transcorp Hotels’ room revenue fell to N3.03 billion compared to the N5.88 billion in the same period in 2019. Business activities in the nation’s commercial capital, Lagos, grounded to a halt between the months of April and May after the government imposed restricted movements in a bid to combat the spread of the Coronavirus. Gradual easing commenced in June but economic activities in most sections of the economy remain subdued.

Ikeja Hotels: Although Ikeja Hotels Plc has not released its second-quarter result, the revenue loss-handwriting is already on the wall, as it declared a revenue loss in its quarter ended in March 2020. This was before COVID-19. Room revenue fell to N1.56 million compared to N1.65 million recorded within the same period. The company’s revenue also witnessed a drop, when it fell to N1.59 million in 2019 to N1.61 million as at the end of March 2019. But this did not affect the Profit after Tax of the Group, which rose to N252.54 million from N130.13 million in 2019.

The Backstory: Nairametrics had reported Capital Hotels Plc’s 2020 second-quarter results which revealed that its revenues fell by 88% compared to the same period in 2019. The company reported a loss of N235 million in the quarter.

In the second quarter, which is the period April to June 2020, the company reported a revenue of N142.3 million compared to N1.18 billion in the same period in 2019. Its latest result is one of its worst quarters on record even as the first quarter of 2020 produced revenues of N993 million. Room revenues were only N64.3 million in the quarter ending June 2020 compared to 502.7 million in the quarter ending March 2020.

Abuja Sheraton has been a shadow of itself for years seeing as its owners seek to recapitalize. However, the huge demand for hotel accommodation in the nation’s capital has helped the company deliver revenue growth. The company’s revenues have risen from N4.69 billion in 2015 to as high as N5.9 billion in 2018. Revenue fell to N5.1 billion in 2019.

When will the industry come out of the woods?

Managing Director of W Hospitality Group, Trevor Ward,  explained that the industry would be on the part of recovery once the borders and skies are reopened. He said:

Whilst countries like South Africa and Kenya can look to the domestic market for demand, as they can drive to hotels, in Nigeria we rely on air travel for our domestic and international guests, so without flights, no guests.

“Then, there is the fact that for many cities in Africa the demand is almost entirely commercial and/or government, and unheard-of reductions in GDP, and therefore corporate and state incomes, means there will be a reduction in demand from those sources. “Soon”? No, I don’t believe it will be soon, but then the resilience of Africa and the Africans is legendary, and a return to growth is not so far away.”

Irrespective of how long it will take the industry to survive the pandemic and its effects, like other industries, it is important for operators to look inwards and re-engineer the processes to cut costs, and look outwards to customers, maintain contact, inform them about the steps being taken to ensure their safety when they return.

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