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Hotel Investment Opportunities in Nigeria

Apparently faced with threats of epidemic like Ebola and security challenges from groups like Boko Haram, Nigeria’s hospitality industry is going through hard times getting public patronage.

Having been hit by the Ebola scourge in 2014 and the dreaded Boko Haram-related security issues in early 2014 Nigerians’ patronage of some hotel facilities has dropped.

Problems related to these crisis which had a negative impact on hotel occupancies throughout the entire continent result in low patronage to hotels in Nigeria.

Other reasons are oil price crash, the devaluation of the naira, election uncertainties, lack of activity after the much-lauded (and unexpected) result and, more recently, the China impact, importing less of what Africa produces and exporting less to Africa because of the slowdown.

However, while demand for hotels has been negatively affected by all these external factors, there appears to be light at the end of the tunnel, as travellers adjust their perception of risk, and accept that change is a fact of life.

According to Munachi Okoye, CEO, MCO Real Estate Limited, there is  good news for investors in existing hotels, explaining that future additions to supply are at the lowest level for many years.  “In Abuja, the only hotel under construction with an international brand is the Fraser Suites in the CBD.  In Lagos, only one internationally branded hotel, Mantis’ 62-room The George, opened in 2015”.

Even though work has resumed on Le Meridian in Ikoyi which had been stalled for many years and also on the Marriott on Victoria Island where work had stopped, there is very little likelihood that anyone  is going to open in 2016 or 2017.

Okoye said, though Nigeria’s growth rate has fallen considerably this year, it is still in positive territory, stressing that “while we may be bumping along the bottom presently, we still see an upturn in the industry in the near future buoyed by an increase in global growth and a return to stability in the local markets.

“Before the present economic downturn, Sub-Saharan Africa, particularly Nigeria was seen  by foreign investors as a green field with many international hoteliers looking to tap into the immense investment opportunities the country offered. Over 40,000 new hotel rooms in 207 hotels were expected to be delivered into the continent’s hospitality market in the next 24-36 months, giving credence to the assertion that “post the economic crash in 2008/2009, the rest of the world has really woken up to Africa”.

Analysts said Africa was a growth phenomenon of the 21st century and according to Michael Chu’di Ejekam, Director, Real Estate in Actis, whereas the rest of the world was growing at 3.3 percent and Africa at 5.5 percent, Nigeria’s GDP was growing at approximately 7 percent per annum.

Because of these opportunities, from Lagos and Kigali to Nairobi and Johannesburg, the world’s best known hoteliers were targeting Africa’s growing urban centres to benefit from a rising number of business travelers and a huge under-supply in available rooms.

According to an analyst in a private equity investment firm in Lagos, Nigeria, hotels are getting a lot more competitive, adding, “we see the arrival of international brands managed hotels; outside Lagos, you don’t have many internationally managed hotels. Room rates are quite high but we see a lot more supplies coming into the market.”

Source: The Sun

February 11, 2016

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