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The Hospitality industry in Africa is not under threat, it’s just evolving
While hotels have taken a beating in bookings as a result of the COVID-19 pandemic and global lockdown, short let homes and apartments bookings have soared.
In the wake of the gradual return to life and resumption of business activities following the COVID-19 inspired lockdown globally to contain the spread of the deadly disease, Lagos based firm, Digital Landlords has predicted a spike in the real estate, hospitality, and tourism sector. This is just as more people are expected to seek the desired trip away from home to their choice holiday destinations or even a short break away from home having spent the large part of the previous year working remotely.
While hotels have taken a beating in bookings as a result of the COVID-19 pandemic and global lockdown, short let homes and apartments bookings have soared with the number of bookings continuing to rise as we return to normalcy.
According to a report by Market Watch, the short-term rentals market has grown significantly during the last few years, and it is expected to grow at a rapid pace in the next five years with the occupancy rate projected to be at 70% in 2021.
The increase in short let homes adoption is in close relation to the growth in the tourism industry as travelers have widely adopted short-term rentals, such as the vacation homes on Airbnb and other booking channels, resulting in one of the hottest arms of the sharing economy. In fact, short-term rentals yielded 30% more profits for homeowners/investors than long-term leases, with an estimated global market valuation of $169 billion in 2018 alone.
With a growing urban and middle-class city comes a need for recreational centres, tourist accommodation and activities. According to African Futures Papers, by 2035, close to 30 million people could live in Lagos, turning Nigeria’s commercial hub into the largest megacity on the continent. At the same time, more than a third of Africa’s urban population is expected to live in West Africa. Nigeria’s Lagos city is estimated to become one of the fastest-growing cities in the next twelve years with Lagos becoming a megacity by 2030.
Commenting on how his company, Digital Landlords is leading the charge to drive short let homes utilization and investment, Keji Giwa, the Chief Executive Officer of the firm said digitization and the huge cost of hotel rentals have created a huge opportunity for short let homes to thrive. “Why on earth have I been paying high prices for hotel rooms when I could pay less for a whole apartment within the same prime location and with close proximity to the best bars, restaurants, shopping centres and beaches,” Keji Giwa said after he had his first short let experience in 2019.
He noted that; “Today, Lagos Island is experiencing a real estate boom driven by high yield rental income from short let opportunities. This can be seen as both a threat and an opportunity for the hospitality industry. The prospect of its continued expansion is clearly a timely warning to hotels offering rooms at the same rates that consumers can use to get a whole apartment and, in some cases, much lower.”
Keji Giwa who disclosed that his company’s average booking duration increased by 350% for group bookings from 4 days to 14 days and an average of 7 days for single bookings, which is a 230% increase from a previous average of 2 days per booking, stressed that the hospitality and tourism industry is evolving to meet the needs of the yearning end users.
“Hotels can choose to evolve or compete, however with digitisation, automation and artificial intelligence, digitally focussed start-ups within the short-let rental market can create a terrifying monster for large and small hotel chains just by using technology to deliver on the go instant bookings, convenience, comfort and the use of virtual booking agents to replace human agents,” he said.
With over 80% of Nigeria’s population having internet access via their mobile devices according to a 2021 digital report by We Are Social, the country is well-positioned to benefit from the global digital opportunities. This also affords more online rental platforms to provide an opportunity to capture demand for domestic and international bookings where affordability and luxury go hand in hand.
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Mastercard New Payments Index: Consumer appetite for digital payments takes off in Nigeria
78% of consumers in Nigeria say digital payments methods help them save money.
- 96% of consumers in Nigeria are considering emerging payments such as wearables, biometrics, digital wallets and currencies, and QR code, in addition to Contactless, according to the Mastercard New Payments Index
- 86% of Nigerian consumers have access to more ways to pay compared to this time last year
- 78% of consumers in Nigeria say digital payments methods help them save money
- 81% say they are more loyal to retailers who offer multiple payment options and would shop at small businesses if offered more diverse ways to pay
As the world went into pandemic lockdown in 2020, consumers shifted their spending habits to embrace contactless tap-and-go payments and online shopping. As stores closed and social distancing took hold, retailers worldwide moved their businesses online, embraced e-commerce and explored the potential of new ways to pay. More than a year later, research from Mastercard shows that the adoption of new payment technologies is rising, and consumer appetite for new, fast and flexible digital experiences continues to grow.
The Mastercard New Payments Index shows 96% of Nigerian consumers will consider using at least one emerging payment method, such as cryptocurrency, biometrics, contactless, or QR code, in the next year.
Over two-thirds of respondents (66%) agree they have tried a new payment method they would not have tried under normal circumstances, but the pandemic has galvanized people to try flexible new payment options to get what they want, when they want it. With this interest and consumer demand also comes a greater expectation for businesses to provide multiple ways to shop and pay. In fact, 81% of Nigerian consumers say they are more excited about shopping at retailers who offer the latest payment methods. Additionally, (78%) Nigerian consumers say that digital payment methods help them save money.
“The pandemic made us think differently, partly out of necessity,” said Craig Vosburg, Chief Product Officer at Mastercard. “To deliver the choice and flexibility that consumers need – and increasingly expect –retailers worldwide need to offer a range of payment solutions that are easy to access and always on. As we look ahead, we need to continue to enable all choices, both in-store and online, to shape the fabric of commerce and make the digital economy work for everyone.”
Contactless technology was the digital catalyst to explore new payment options because of its fast, secure, and touch-free experience. Between the first quarter of 2020 and the same period in 2021, more than 100 markets saw contactless as a share of total in-person transactions grow by at least 50 percent. A year into the COVID-19 pandemic, contactless is showing its staying power and dynamism – in the first quarter of 2021 alone, Mastercard saw 1 billion more contactless transactions worldwide as compared to the same period of 2020. All signs point to a continued growth path for contactless, with nearly 7 in 10 consumers globally anticipating using a contactless card this year.
“The world as we now know it has changed dramatically since the outbreak of the pandemic, accelerating long-term shifts in consumer transaction and payment methods. We continue to work with our merchants, fintechs and banking partners to rapidly innovate payment options that meet consumer needs while ensuring we drive financial and digital inclusion,” said Raghav Prasad, Division President, Mastercard, Sub-Saharan Africa.
Looking to the future, digital currencies and wallets, wearables, biometrics, contactless and QR codes are trending as emerging payments technologies as people’s comfort with them and understanding of them increases and the use of cash decreases. In fact, 86% of consumers in Nigeria have more ways to pay compared to this time last year. The exploding interest in new payment technologies may encourage businesses to expand their options at checkout. The Mastercard New Payment Index found:
- Cryptocurrency1 Gains Ground – Today consumers can buy, sell, and trade cryptocurrency as a commodity or investment. Consumers are also increasingly showing interest in being able to spend crypto assets for everyday purchases. As global interest in digital currencies continues to accelerate, 6 in 10 people (65%) in Nigeria say they plan to use cryptocurrency in the next year, with 76% noting they are more open to using it than they were a year ago. While consumer interest in cryptocurrency – especially floating digital currencies such as Bitcoin – is high, work is still required to ensure consumer choice, protection, and their regulatory compliance. Earlier this year, Mastercard announced that it will start supporting select cryptocurrencies directly on its network.
- Biometric Payments are More Trustworthy – Perceptions of safety and convenience have been front and center for people over the past year. 49% of Nigerian consumers say they plan to use biometric verification methods like gait or walk assessments and fingerprint authorization. In fact, over 6 out of 10 people (66%) feel safer using biometrics to verify a purchase than entering a pin.
- QR Codes are Cleaner and More Convenient – Growing markets are leveraging QR-based options as a clean and convenient way to interact with merchants. Consumer desire for clean and convenient ways to pay will remain post-pandemic. 54% of people in Nigeria expect to use more payment technologies like QR codes in the next year. Consumers also find that that QR codes are cleaner (75%) and more convenient (77%) for in-person payments and have a significant potential to reduce cost of payment acceptance and increase financial
- Digital Wallets Surge in Popularity – Nigeria is seeing a surge in the popularity of digital wallets. 73% of Nigerian consumers said they were likely to use digital wallets next year. 66% of shoppers even say that they feel safer storing their card information in one place such as a digital wallet.
To Meet People’s Demands, Businesses Forced to Jump into Emerging Payment Trends
With consumer interest around new payment technologies, the expectation for businesses to adapt for the long-term is here to stay. Over three in four Nigerian consumers (84%) say that they would shop at small businesses, if they offered more payment options, and 81% noted being more excited to shop at retailers that can offer the latest payment methods, and an equal proportion (81%) said they would be more loyal to retailers who offered multiple payment options.
This behaviour shift is reinforced by the desire for consumer choice – with 89% saying that they expect to make purchases when they want and how they want. The businesses that can provide multiple ways to shop and pay are best positioned to meet these expectations. As the demand for emerging payments and choice continues, it requires a wider range of payment solutions, insights, and products to meet the accelerating enthusiasm for the future state of pay.
