Transcorp Hotels, owners of one of Nigeria’s largest hotel Transcorp Hilton reports it loses about N1 billion every month due to the Covid-19 pandemic.
This was disclosed by the Managing Director/CEO of Transcorp Hotel Plc, Dupe Olusola, during an interactive session on Thursday. According to her, the management of the hotel met and decided to ensure that it kept costs down by restructuring its business strategy, diversifying into asset-light business models, and reducing the workforce, among others.
Olusola further disclosed that the company had suspended further commitment to buy fixed assets and operating equipment, as well as reduced its energy consumption and maintenance costs. She also confirmed Transcorp will be cutting back on all capital investments this year and in the foreseeable future until the outlook for the economy improves.
The hospitality sector has been one of the hardest-hit since the Covid-19 broke in late February. Data from the National Bureau of Statistics also reveal the sector contracted by as much as 40% in the second quarter of 2020, officially falling into recession.
Nairametrics participated in the stakeholder’s session and noted a few critical remarks from the interview.
Below is the excerpt of the interview session:
How much has COVID-19 eaten into the fabric of Transcorp Hotels?
We had a drastic decline of over N9 billion. In March alone, we witnessed a N456 million loss. We have to remember that in March, there was a partial lockdown when everyone was trying to figure out what was happening. We were at N1.03 billion loss in April alone and this has continued to be the story every month. In June, we dropped by about N840 million.
How will this development (loss) affect your staff strength?
We struggled to ensure that we would not ask people to go initially, that was our priority. We paid staff that did not work during lockdown 50% of their salaries and the ones that worked then were paid full salary. To keep the business running, we definitely have to let go of at least 40% now.
We engaged the staff Unions, both the Junior and Senior staff, before the implementation of that. We will ensure that employees are properly taken care of. The occupancies we have now are below 30% and with that, it’s impossible to have everyone around.
What is important to us is that we must ensure we are able to keep the hotel running as a national asset, because it has been in existence for over 30 years.
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We have ensured that we keep as many jobs as we can within this time frame, so this is an opportunity for us to engage the media and carry you along before such exercise. We have engaged actively with our employees and other key stakeholders. At the occupancy level that we are seeing, it is impossible for us to sustain the employees that we have to keep our doors open.
Precisely, how many will you lay off?
It is definitely a great burden to even consider a lay-off but we don’t have a choice but to keep the business afloat. We have over 1,000 staff and it appears we will not need more than 400 staff to ensure we keep the hotel running. What is happening is beyond everybody and it is just a situation we have found ourselves in.
What is your outlook for 2020, any hope of returning to the pre-COVID era?
We expect to get to the pre-COVID era by 2024 globally, because it requires the gathering of the people in preparing for events, etc. The new normal is real. We expect things to go back to what they used to be in Nigeria by 2024 also. We are not expected to do more than 30% of our occupancy this year and that is significantly low, and by this time next year, we don’t expect to see anything more than that. So, this is our trying time.
Strategy to sustain Balance Sheet before the end of 2020
We are a hotel business, the food, room and the events we hold are our sustainers. We are definitely going to end at a loss in 2020. As I said, COVID will still be around in 2024. We will try as a business to be innovative, to look at different ways. We are reporting losses of almost N1 billion on a monthly basis and this is significant to us. We hope they can come up with some vaccination to help reduce the impact of the pandemic so that businesses can begin to pick up.
Any palliatives from the government to hotels?
Governments across the world have given palliatives to hotels, but here there is no such package for big hotels in Nigeria. We have engaged at all levels of government on payroll support, tax rebate, support for employees, actively and widely as possible. Yet, these have not yielded any support, unfortunately. This is really why we have gotten to the point of disengaging our own staff. We have not seen any support from the government to actually help us.
How do you aim to restructure your loans and are there plans to raise funds?
This year is really just about losses. We have met with our stakeholders and lenders to work out how we can restructure our loans, considering some palliatives CBN brought on board like interest rate of 5%. We met the Bank of Industry (BOI) to get interest rates on our loan reduction. Some of these got a couple of positive responses. We are also considering raising funds through the right issues. We are raising N10 billion in order to pay off some of our existing obligations.
How will virtual tools affect your business model and future plans?
We are working round the clock to bring in solutions in line with the new normal to our guests and customers. How do we provide what they are looking for? How do we provide physical and virtual conferencing? We have also come up with Drive-in Movie Cinema, among others. We are going to ensure we run asset-light strategies to bring in new initiatives that can continue to help us remain standing in the business.
On our future plans, we have suspended our expansion plans. For instance, we initially planned to set up hotels in Port-Harcourt, Rivers State, which has been suspended for now. Also, we suspended further commitment to buy fixed assets and operating equipment as well as reduced our energy consumption and maintenance costs.
Bottom Line: The hotel faces a tipping point and as things stand survival is what is its priority.
- To do so the hotel will have to make tough decisions some of which as job cuts, reduction in overheads, and suspension of capex related activities.
- This will be a very painful restructuring process for the hotel group but it appears this is the only way it can survive.
National Carrier to benefit from Single Africa Air Transport Market – Aviation Ministry
The Aviation Ministry has stated that the proposed national carrier will improve Nigeria’s position with the Bilateral Air Service Agreements (BASA).
The Ministry of Aviation has disclosed that the proposed national carrier will enable Nigeria take full advantage of the Single Africa Air Transport Market (SAATM), reduce air rates through competitive pricing, and improve Nigeria’s position with Bilateral Air Service Agreements (BASAs) with other nations.
This was disclosed by Mr James Odaudu, the Director of Public Affairs, Ministry of Aviation, in an interview with NAN on Tuesday in Abuja.
“Establishment of the national carrier will also make Nigeria take full advantage of the Single Africa Air Transport Market (SAATM), introduce competition leading to competitive fares, better services and generate employment,” the Director said.
He added that Nigeria had worked out the arrangements needed with stakeholders for a national carrier to begin domestic flights, stating that the national carrier project would be private-sector driven, made up of international airlines, leasing companies, aircraft manufacturers, and institutional investors, with the FG holding not more than 5%.
On the part of the FG, he added that the Infrastructure Concession Regulatory Commission (ICRC) had completed a feasibility study of the proposed airline, in line with the FG’s goals to create a business climate to sustain the airline.
“The next phase is the placement of Request For Qualification (RFQ) in local and international media as part of the procurement exercise,” he said.
What you should know
Nairametrics reported this week that the Minister of Aviation, Hadi Sirika, had held a discussion with the government of the United States of America over the establishment of a national carrier for Nigeria, stating that the FG was aiming to launch Nigeria Air by the end of the year.
Cargo handling business records boom in Q1 2021, firms make N2.63 billion
Aviation handlings firms made N2.63 billion from cargos handling against N2.53 billion recorded in same period in 2020.
Cargo handling businesses recorded a boom in the first quarter of 2021, as aviation handling companies made N2.63 billion (import and export) against N2.53 billion recorded in the same period in 2020.
This was extracted from the Q1 2021 financials of Nigerian Aviation Handling Company Plc and Skyway Aviation Handling Company Plc (major Aviation handling firms in Nigeria).
For instance, SAHCO, the Aviation handling firm, made N1.44 billion from its cargo handling services, up from the N1.32 billion recorded in Q1 2020.
Cargo handling in SAHCO Plc also includes income from cargo documentation services rendered to airlines, which include import and export cargo facilitation through Nigeria’s biggest network of customers, bonded warehouses in Lagos, Kano, Abuja, and Port-Harcourt.
In the case of NAHCO Aviance Plc, it made N1.19 billion from import and export cargo handling within the first three months of 2021. This is against the N1.22 billion recorded in the same period in 2020.
Cargo handling includes invoices raised for cargo documentation services for airlines, import, and export.
What led to the cargo revenue growth?
While commercial airlines are still struggling to come out of the woods after they recorded losses from their passenger businesses in 2020, cargo handling companies were able to avoid a similar fate.
The cargo aspect of their revenues has witnessed an increase over the years, as airlines continued lifting goods, especially essential items such as medical supplies, and personal protective equipment (PPE) during the pandemic.
What you should know about cargo revenue
NAHCO, Nigeria’s oldest cargo handling company, recorded revenue growth in import cargo handling from N3.60 billion in 2019 to N3.65 billion at the end of 2020, according to Nairametrics.
Revenue from its export cargo business rose from N348.6 million to N397.4 million in 2020.
Cargo handling includes invoices raised for cargo documentation services for airlines, import, and export.
SAHCO, on the other hand, reported that its import handling revenue rose from N4.436 billion in 2019 to N4.865 billion. It also grew its cargo handling export revenue from N318.38 million recorded in 2019 to N447.90 million in 2020.
Nairametrics | Company Earnings
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