Big hotels in Nigeria are facing an existential crisis that could force some of them to collapse on the weight of rising operating expenses, without any revenue to absorb.
Reports from four of the major listed hotels on the Nigerian Stock Exchange, reveals a revenue decline of nearly 90%, due to a fall out of the COVID-19 induced lockdowns. The dire state of their financials has forced some of the hotels to consider massive job cuts, and cost reduction measures in a bid to survive. For most of them, it is either they take drastic actions, or face the consequences associated with piling losses and unpaid debts.
Since the breakout of COVID-19 in March 2020; the FG approved lockdown in Abuja and Lagos State, forced all the major hotels to shut down, a bitter sacrifice by the hospitality sector, as the government sought to contain the spread of the virus.
The lockdown effect on the results of these companies is reflective in the Q2 results of the main listed companies. According to the data, Ikeja Hotels (Sheraton), Tourist Company of Nigeria (Federal Palace), Capital Hotels (Abuja Sheraton), and Transcorp Hilton Hotel Plc have all lost 90% of their revenue in the three months preceding June 2020.
The hotels earned a combined revenue of N1 billion in the quarter, compared to N10.2 billion in the corresponding period of 2019. They are all wallowing in losses of over N4.7 billion for the quarter alone. Combined, they have about 3,502 employees as of 2019.
The situation in the hospitality sector is not only restricted to these four hotels. The same can be said for tens of other major hotels in Nigeria. In the latest Q2 GDP report published by the Bureau of Statistics; the Accommodation and food services business, which hotels belong to, recorded a GDP contraction of over 40%. Except for transportation and storage, which posted a 49% contraction, it is by far the worst in the country.
The Managing Director, Transcorp Hotels Plc, Mrs. Dupe Olusola, disclosed this during a Press Conference on Thursday, “The impact of COVID-19 on the business is like nothing the company has ever witnessed. The hotel and hospitality industry in Nigeria has never faced a crisis that brought travel to a standstill, including the Ebola Virus outbreak of 2014 or the recession of 2016. The slow pick up of international travels, restriction on large gatherings, the switch to virtual meetings, and fear of the virus, has drastically reduced demand for our hotels and occupancy levels to its lowest – less than 5%.”
Hotels across Africa also face a similar fate, but could likely fair better when the dust settles. Unlike in Nigeria, hotels in Kenya, Egypt, and even South Africa can rely on local tourism to drive occupancy rates. But in Nigeria, locals prefer smaller mushrooms hotels that are cheaper, and often well-furnished to meet their needs. Nigerian hotels, on the other hand, rely on commercial room sales, driven by the influx of business and leisure travels into the country.
With several airlines yet to fully operate due to reciprocal bans, it is highly unlikely that things will improve anytime soon.
How to avoid a collapse
To avoid an imminent collapse, the hotels need to do what is required in times like these. Explore new sources of revenues, and drastically reduce overheads. For starters, furloughing headcount will be top on the table, as services of employees who have no one to serve won’t be currently required.
It is a tough decision to make for these hotels, considering that the employees that will be affected, face an even worse outlook due to the economic crunch, which is likely to remain for years to come. Mrs. Olusola of Transcorp provides a first-hand insight.
“Despite the losses incurred, we have fulfilled our obligations to staff. At the inception of the pandemic, we maintained a 100% salary payment to our over 900 employees in March and April. We also activated various cost-saving initiatives, such as renegotiations of service contracts and restructuring of our loans. We suspended further commitment to buy fixed assets and operating equipment, as well as reduced our energy consumption and maintenance costs. Despite undertaking these, it has become apparent that more fundamental changes need to be made, for the business to survive. To this end, our workforce headcount will be reduced by at least 40%, and our reward system will be optimized.”
Hotels also need to cut down on other overheads. Food costs would have to be reined in, while also renegotiating inefficient pricing on purchase orders. Hotels will also have to renegotiate bank loans and explore capital raising efforts, to avoid further damage to their balance sheets. Lobbying a cash strapped government may seem futile, but hotel owners should push for intervention loans from the central bank, giving them enough buffer and financial stability to weather the storm.
With hotels reopening gradually, there is likely going to be stiff competition among the big brands, tempting them to undercut each other through pricing. Rather than cut prices, the prices should be adjusted on the naira side, to cater to the effect of the recent devaluation. This means foreign visitors will not witness a dollar increase in room rates, whilst the hotels will earn more on the naira side to deal with inflation.
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These are the plausible and painful options available to branded hotel operators, if they are to avoid a collapse. Without bailouts and government support, management of these hotels needs to take urgent action, to reduce the impairments of shareholder valuations.
How air passengers can save more as Nigerian fares rise by 100% in 30 days
Recent airfare hike has created holes in the pockets of air passengers.
It is no longer news that air tickets have increased by over 100%, as reported by Nairametrics a few weeks back.
This development has created holes in the pockets of air travel patrons, especially those who chose the medium of transportation due to several cases of kidnappings and attacks witnessed on the road.
While some travellers doubt that it is possible to save on airfare, others, especially business travellers, argue that saving money at the point of purchasing the flight ticket is achievable. Here are some ways to spend less on air travel tickets.
Make findings on prices across many carriers
Fares for similar flights can vary dramatically from airline to airline. A quick search for a non-stop flight (both local and international) on online travel sites can help you uncover airlines offering cheaper ticket prices.
But where exactly should you search?
“There are several places to search for airfares online. You could search each airline’s website individually, but that could take some time. A more convenient way is to search a travel website like Travelstart.com, Orbitz.com, Travelocity.com, Kayak.com, Hipmunk.com or Dohop.com. You should also compare the prices on travel websites with those on the actual websites of each airline to confirm the prices.” Samuel Olafimihan, a travel agent, explains.
Sign up for alerts
Osagie Ehi, another travel agent, explained that to save more, air passengers should sign up for online alerts that will inform them of discount deals by airlines. According to him, the alerts often promote deeply discounted fares on a few seats in order to earn the airline some goodwill and free word-of-mouth advertising.
He said, “Most carriers allow you to sign up for these messages on their websites and customise them to your favoured airport. Many alerts are delivered by e-mail, but airlines are now using social media outlets like Facebook and Twitter to distribute them as well.
You can also receive alerts through a number of third-party websites, which will send you alerts about low prices on a variety of airlines. The sites will let you know when a great fare becomes available for your area.”
Book different flights
For passengers flying a long distance, Olafimihan had this to say:
“The trip to a particular stopover might be cheap for one airline, and the trip from that stopover to the final stop cheaper for another. If you can afford a layover of a day or two, then book the flights separately. Though you are likely to get to your destination a little later, you would have saved some thousands of naira.”
Go for a one-way ticket
This, according to Ehi, allows passengers to book another airline on the return trip if that airline is cheaper, or book at the time of the return trip at a cheaper rate than when setting out.
What you should know: Last week, Nairametrics reported that airfares across Nigeria had doubled. Ticket fares to cities like Port Harcourt, Ilorin, and northern states like Kebbi, Borno, Adamawa and Kano have increased by as much as 100% in the last one month.
What they are saying: Travel agents, in separate interviews, told Nairametrics that not only are airfares becoming more unpredictable in Nigeria due to exchange rate and other factors, the fares may also not come down anytime soon. This is why it is advised that you explore the options listed above while trying to book a ticket.
Covid-19 protocol: FAAN insists that arriving passengers can only be picked up at car parks
The directive is in accordance with laid down Covid-19 protocols which was issued by the Federal Government.
The Federal Airports Authority of Nigeria (FAAN) has insisted that arriving passengers are to walk to designated car parks to board their vehicles as no driver would be permitted to pick up arriving passengers at the front of the airport terminal.
The directive is in accordance with laid down Covid-19 protocols which was issued by the Federal Government to help contain the spread of the coronavirus disease across the country.
This disclosure is contained in a press statement issued by FAAN and signed by its General Manager, Corporate Affairs, Henrietta Yakubu, on Monday, April 12, 2021.
FAAN in its statement said that drivers are only permitted to park and wait at the car parks adding that they can only drop off the passengers in front of the terminals and are not permitted to wait for any reason.
What FAAN is saying
The statement from FAAN reads, “The Federal Airports Authority of Nigeria (FAAN) hereby advises passengers, drivers and other airport users, particularly those at the General Aviation Terminal, Lagos, to always comply with all laid down protocols on Covid-19 to ensure the safety of all airport users,” the statement read.
“No driver is permitted to pick up arriving passenger(s) at the frontage of the terminals. All drivers must park and wait inside the car parks, while arriving passengers walk down to the car parks to board their vehicles.
“For departing passengers, drivers are only allowed to drop off passengers in front of the terminals. They are not permitted to wait for any reason after dropping their passengers, it is only a ‘Drop Off’ zone.
“We will like to advise all our esteemed customers to strictly adhere to these rules, to ease facilitation and enhance the safety of all airport users.”
In case you missed it
It can be recalled that FAAN, on Friday, advised passengers and airport users to arrive at the airports early, particularly those at the Nnamdi Azikwe International Airport, in order to complete their check-in procedures in good time and avoid unpleasant experiences associated with missing their flights.
In July 2020, the Minister for Aviation, Hadi Sirika, announced that domestic passengers are expected to arrive an hour and a half before departure.
FAAN had also said that anyone, including Very Important Personalities (VIP), who refuses to comply with Covid-19 protocols will not be allowed access to airport facilities.
COVID-19 PROTOCOLS; FAAN TASKS AIRPORT USERS ON COMPLIANCE
The Federal Airports Authority of Nigeria (FAAN) hereby advises passengers, drivers and other airport users, particularly those at the General Aviation Terminal, Lagos, to always comply with all laid down..
— Federal Airports Authority of Nigeria (@FAAN_Official) April 12, 2021
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