The Nigerian Hotel Industry December 2013

The Nigerian Hotel Industry
December 2013

1
THE NIGERIAN HOTEL INDUSTRY
Historical Background
The origins of the modern Nigerian hotel industry date back to 1942 with the opening of
the Lagos Airport Hotel, then a small pub with rooms operation but today one of the
largest hotels in the city. The 1950s saw the opening of hotels such as the Bristol Hotel
(1956) and the Federal Palace (where Nigerias Declaration of Independence was signed)
amongst others. More hotels opened across the nation in the 1960s and 1970s, including
the Hotel Presidential in Port Harcourt in 1963, the Eko Holiday Inn (1976), the adjacent
Eko Hotel in 1977, the Festac 77 Hotel in 1977 and the three Gateway Hotels in
Abeokuta, Ijebu-Ode and Ota in 1979. Most were developed by the government, in the
absence of capacity in the private sector of this new nation.
The oil boom of the 1980s brought high demand for hotel rooms, and three significant
hotels opened in this period, the Sheraton Ikeja in1985, the Hilton Abuja in 1987 and the
Sheraton Abuja in 1988. No other branded hotels opened for over a decade, when the
Accor group opened its first hotel in Lagos, the 44-room Sofitel Moorhouse, in 1999.
After the oil-related boom, demand dropped considerably in the mid-1990s, as Nigerias
military government was isolated from the international community. The countrys
return to democratic rule in 1999 saw a resurgence in demand, as improved economic and
political stability resulted in an improved business environment, and encouraged foreign
and local investment in infrastructure, oil & gas and telecommunications, amongst other
sectors. Beginning in 2001 there was an influx of regional and international chains,
commencing with Protea, who now have 12 hotels open and under development in
Nigeria.
The Nigerian hotel industry was not significantly affected by the 2008/2009 global
economic crisis. Regional and internationally branded hotels continued to open,
primarily in Lagos but also in Abuja and Port Harcourt, three of the largest cities the
commercial, political and oil capitals, respectively. However, regardless of the growth in
the travel and tourism industry, and the great potential it has for contributing to Nigerias
economy, specifically job creation, the nation is yet fully to embrace the industry as a
major economic player and a source of national income. Presently, the travel & tourism
accounts for just 3 per cent of GDP, while the hotel & restaurant sub-sector contributes a
mere 0.55 per cent.
The Economy and Geo-Political Structure of Nigeria
The Federal Republic of Nigeria is a coastal state situated in West Africa on the shores of
the Gulf of Guinea. It is Africas most populous nation, with an estimated population of
170 million, according to recent estimates, up from 140 million at the time of the 2006
National Census. Nigeria comprises 36 States, plus the Federal Capital Territory, where
Abuja is located.
December 2013

2
Each State has a capital city, an elected Governor, and a system of local ministries,
headed by Commissioners. Within the States there are 774 Local Government Areas
which, along with the State governments, are the primary regulators of the hotel industry.
As well as the State capitals, some States have other major cities that are economically or
historically significant.
Federal Republic of Nigeria
States, Capitals & Other Major Cities
State Capital City (Other Major Cities)
Abia Umuahia (Aba)
Adamawa Yola
Akwa Ibom Uyo (Eket)
Anambra Awka (Onitsha)
Bauchi Bauchi
Bayelsa Yenagoa
Benue Makurdi
Borno Maiduguri
Cross River Calabar
Delta Asaba (Warri)
Ebonyi Abakaliki
Edo Benin City
Ekiti Ado-Ekiti
Enugu Enugu
Federal Capital Territory Abuja
Gombe Gombe
Imo Owerri
J igawa Dutse
Kaduna Kaduna (Zaria)
Kano Kano
Katsina Katsina
Kebbi Birnin Kebbi
Kogi Lokoja
Kwara Ilorin
Lagos Ikeja (Victoria Island)
Nasarawa Lafia
Niger Minna (Suleja)
Ogun Abeokuta (Ijebu-Ode)
Ondo Akure (Ondo)
Osun Oshogbo (Ife)
Oyo Ibadan (Ogbomosho)
Plateau J os
Rivers Port Harcourt
Sokoto Sokoto
Taraba J alingo
Yobe Damaturu
Zamfara Gusau
December 2013

3
Of the 36 States, Lagos is the smallest in terms of geographical area, but has the highest
share of the nations economy, and is effectively a city state, Ikeja, Victoria Island,
Lagos Island and Ikoyi having merged into one metropolitan area.
The nations economy, in terms of government revenue and foreign exchange earnings, is
dominated by the oil and gas sector, which is centred on the oil-producing States in the
south of the country. Exports from the energy sector account for more than 95 per cent of
export earnings and some 80 per cent of the Federal Governments revenue.
The oil and gas sector represents approximately 30 per cent of the countrys GDP. It has
been projected that within the next two years, Nigeria will become Africas largest
economy after the anticipated rebasing of its Gross Domestic Product (GDP)
measurement, better to reflect the structure of the economy. According to the IMFs
World Economic Outlook, the Nigerian economy is expected to grow by 7.2 per cent in
2013, benefiting from favourable government policies and ongoing reforms in the power
sector. Due to operational problems, the oil and gas sector is growing slower than
average, with the greater part of economic growth generated by the non-oil sectors,
particularly banking, telecommunications and the retail trade. With foreign direct
investment (FDI) of US$11.23 billion in 2012, the country is the top FDI destination in
sub-Saharan Africa.
Nigerias ambition of being one of the top 20 economies is encapsulated in the Vision
20:2020 programme. The key objectives are to stimulate Nigerias economic growth and
launch the country onto a path of sustained and rapid socio-economic development, and
to place Nigeria in the bracket of the top 20 largest economies of the world by 2020, with
GDP of not less than US$900 billion (currently cUS$262 billion) and per capita income
of US$4,000 (currently cUS$1,700).
Whilst there has been rapid growth in the Nigerian hotel industry in the last decade, it is
still in its infancy. Virtually all of the growth, specifically in branded hotel products, has
been in Lagos, and the second wave is likely to be more focused on other cities. Best
Western and Protea already have hotels outside of the Big Three cities, and Park Inn by
Radisson, Four Points by Sheraton and Hilton Garden Inn are due to open in Abeokuta,
Owerri, Benin City, Ibadan and Uyo over the next few years.
The countrys return to democracy in 1999 brought stability and new FDI, as well as
local capital investment, thereby generating greater demand for hotel services. In the
2000s, demand increased faster than supply, and the main players in the industry enjoyed
very high occupancies (with a peak of over 80 per cent in 2008) and average daily rates
(ADR), with STR Global ranking Lagos second only to Paris in terms of ADR.
December 2013

4
Alongside the development of new branded hotels, such as the Southern Sun and
Radisson Blu in Lagos, and the Hawthorn Suites in Abuja, a plethora of substandard
hotels and guest houses also entered the market, a symptom of an immature but growing
market, with an evident lack of professional know-how in both the development and
operation of these properties. With a few exceptions, the unbranded hotels offer lower
product quality and service standards than the branded hotels, which have noticeably
raised the bar.
Rack rates at the countrys hotels are high, with the lowest published rates in the leading
hotels quoted at US$555 (Sheraton) in Lagos, US$419 (Transcorp Hilton) in Abuja and
US$381 (Le Meridien) in Port Harcourt.
Demand for hotel accommodation in Nigeria is generated mostly by the corporate sector,
with conference and meetings demand a close second. Whist there is some (mainly
seasonal) domestic leisure tourism, there is very little international tourism, the exception
being the Nigerian Diaspora returning to the country during school holidays and other
periods.
The main market sectors for hotel accommodation are:
Corporate travel: whilst in Lagos, Abuja and Port Harcourt there is a significant
amount of demand generated by international travellers (and all three cities have
European and other international flights), the majority countrywide is domestic
business travellers. In Abuja, the main reason to travel is to do business with
government.
Meetings & Conferences: The meetings and conference market in Nigeria is
predominantly domestic, with some international delegates attending events in
Abuja and Lagos. Demand is generated by the professional associations (of
which there are many, organized and generating demand on a national and
regional level), government, companies (especially those in the financial, oil &
gas and education sectors), NGOs and the social sector, with events ranging from
music concerts, fashion shows, award ceremonies and weddings.
Domestic leisure tourism: during holidays and the festive season, demand is
generated by Nigerians in the Diaspora, as well as those resident in Nigeria
travelling to their home town. There is an increasing trend for this market to use
hotel accommodation, rather than staying with friends and relatives. There are
only a very few destination resorts in Nigeria, with an estimated total of fewer
than 1,000 rooms between them.
Cultural festivals: Nigeria has several well-known festivals such as the Eyo
festival in Lagos, the Osun-Oshogbo festival in Oshogbo, the Igue festival in
Benin, the Argungu Fishing festival in Kebbi State, the Katsina Durbar, Riv-fest
in Rivers State and the Calabar Festival, amongst others. A small number of
international visitors attend these events.
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5
Religious tourism: The Nigerian Tourism Development Corporation (NTDC) has
highlighted the growing number of people who travel to and within Nigeria to
attend the annual conventions of the mega-churches. A survey carried out by the
NTDC revealed that the large evangelical churches such as Redeemed Christian
Church of God and Mountain of Fire Ministries attract more than 15 million
people to their prayer grounds during their December congresses.
The Lagos Hotel Market
Introduction
Lagos is Nigerias most commercially important city, with much of the nation's personal
wealth and economic activities located there, as well as the nations main companies and
two of the largest seaports in Africa. Lagos also hosts the country's largest banks and
financial institutions, including the Nigerian Stock Exchange. Murtala Mohammed
International Airport (MMIA), Nigerias largest international and domestic airport, is also
located in Lagos.
Lagos is typically the first point of entry for visitors to Nigeria and therefore the
substantial market created has attracted significant investment in the hotel sector.
Passenger numbers at MMIA have increased significantly in the last decade:
Murtala Mohammed International Airport - Lagos
Domestic & International Passenger Movements
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
2
*
2
0
1
3
*
* January - June

Source: FAAN
The growth in both domestic and international air passenger traffic at MMIA is evidence
of the economic growth that the city is experiencing.
December 2013

6
Lagos is, increasingly, a major West African hub, which brings increased demand for
hotel accommodation and other services as traffic volumes grow. The decrease in
passenger numbers in 2013 (J anuary to J une) is primarily due to a reduction in the
number of domestic carriers, and frequent schedule interruptions it was therefore a
supply-led reduction, and not a reduction in demand.
Current Supply
The number of hotel rooms in Lagos has more than tripled in the last ten years:
Hotel Room Supply, Lagos
-
2,000
4,000
6,000
8,000
10,000
12,000
Total Rooms 2,994 3,630 3,867 4,330 4,968 5,500 5,791 7,302 8,005 8,263 9,567
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: W Hospitality Group research
The total of almost 9,600 rooms represents the mainstream hotel industry in the city,
which we define as those with a published tariff of US$100 and above. There are many
small, independent hotels and guest houses (many operating with very poor standards)
that are not included. The total also does not include those lodging establishments which
are occupied solely by one company (mostly those in the oil & gas and the
telecommunications sectors).
2010 and 2011saw the opening of several new hotels, notably internationally-branded
hotels such as the Radisson Blu, Four Points by Sheraton and Best Western. There was
no major branded or unbranded hotel added to the supply in 2012 - the increase of 450
rooms from the previous year is in small-scale properties that have opened, mainly in
Lekki and Ikeja.
J uly 2013 saw the partial opening (with c210 rooms available) of the 358-room
InterContinental hotel in Victoria Island, the largest hotel to open in Lagos since the
Sheraton in 1985, and the 165-room Ibis in central Ikeja.
December 2013

7
There are approximately 20 major hotels in Lagos, being those with an international or
regional (African) brand as well as large unbranded hotels such as the Eko Hotel and
Suites.
Lagos Hotel Market
Branded and Major Unbranded Hotels 2013
Hotels District Rooms Positioning
Protea Oakwood Lekki 65 Midscale
Best Western VI Victoria Island 89 Midscale
Eko Hotel & Suites Victoria Island 654 Mid to Upscale
Federal Palace (Sun Intl.) Victoria Island 150 Deluxe
InterContinental Victoria Island 358 Deluxe
Radisson Blu Victoria Island 170 Upscale
Protea VI Victoria Island 58 Midscale
Four Points by Sheraton Victoria Island Annex 234 Upscale
Protea Kuramo Victoria Island Annex 60 Midscale
Oriental Victoria Island Annex 64 Upscale
Legacy Wheatbaker Ikoyi 65 Deluxe
Moorhouse M Gallery Ikoyi 90 Upscale
Southern Sun Ikoyi 195 Upscale
Protea Westwood Ikoyi 56 Midscale
Amber (African Sun) Ikeja GRA 39 Midscale
Best Western Plus Ikeja Ikeja GRA 112 Midscale
Best Western Starfire Ikeja GRA 38 Midscale
Ibis Lagos Airport Ikeja MMIA 200 Economy
Ibis Ikeja Ikeja 165 Economy
Protea Ikeja Ikeja GRA 92 Upper Midscale
Protea Leadway Ikeja 49 Midscale
Sheraton Ikeja 332 Upscale
Swiss International Westown Ikeja 85 Midscale
Golden Tulip Festac 476 Upscale
Total 3,896
Demand
The business sector is the largest hotel accommodation demand generator in Lagos,
accounting for approximately 75 per cent of total demand. Demand from this sector
originates mostly from the oil and gas industry, financial services (banking),
telecommunications and the government, although the FMCG sector has increased in
recent years, alongside the expansion of the retail sector. The second largest demand
generator is the conference sector, generated by the corporate sector, government,
professional organizations and associations, NGOs and for social activities.
There is a high propensity to hold conferences, meetings, retreats, training seminars and
annual general meetings.
December 2013

8
Lagos Hotel Demand
Market Mix 2012
75%
15%
10%
Business
Conference
Other

Data obtained from STR Global (who commenced data collection in 2009) shows the
performance of a sample of chain-managed hotels in Lagos:
Lagos Hotel Market
Hotel Performance Data - 2010 - 2013
Occupancy Average Daily Rate (US$) Revenue per Available Room (US$)
2010 2011 2012 2013 2010 2011 2012 2013 2010 2011 2012 2013
59.3% 64.7% 64.6% 300 289 298 178 187 193
Jan-Oct 63.6% 66.6% Jan-Oct 296 295 Jan-Oct 188 196
Source: STR Global
Despite major increases in supply (c33 per cent in three years), occupancies increased
significantly in 2011, and have been stable since. ADRs have, however, come under
pressure.
Future Supply
There are an estimated 3,400 branded hotel rooms currently planned or under
construction in Lagos, with opening dates between 2014 and 2017, and at least another
1,200 with no brand. Of the total (c4,600), approximately 43 per cent are still in the
planning stage, and the remainder are actively under construction (31 per cent) or have
had work undertaken but are currently stalled (26 per cent).
To date, the majority of new supply in Lagos has been at the top end of the market, in the
upscale and deluxe categories. The mid-market, budget and economy sectors, however,
represent the greatest opportunity for new entrants.
December 2013

9
Agreements have been signed for 21 new additions, as listed in the table below - only
those shown in bold are actively under construction.
Lagos Hotel Market
Future Branded Supply Signed Agreements
Group Name Brand District Rooms
Scheduled
Opening Year
Protea Protea Select Ikeja 126 2014
Mantis Mantis Ikoyi 64 2014
Mantis Mantis Ikeja GRA 65 2015
Wyndham Ramada Lekki Ikota 164 2015
Marriott Marriott Victoria Island 150 2017
African Pride African Pride Ikeja 200 2014
IHG Holiday Inn Ikeja MMIA 300 2014
IHG Crown Plaza Ikeja MMIA 275 2014
Louvre Golden Tulip Ikoyi 42 2014
Louvre Tulip Inn Ikeja 100 2014
Legacy Hotels & Resorts Wheatbaker (extension) Ikoyi 41 2015
Carlson Rezidor Park Inn by Radisson Apapa 150 2015
Sun International Sun International Victoria Island 200 2015
Best Western Best Western Premier Ikeja GRA 65 2016
Hilton Hilton Ikeja MMIA 250 2017
Hilton Hilton Ikoyi 350 2017
IHG Holiday Inn Victoria Island 300 2017
Starwood Four Points by Sheraton Ikeja GRA 191 2017
Hilton Hilton Garden Inn Ikeja 120 2017
Hilton Hilton Ikoyi 350 2017
Starwood Luxury Collection Ikoyi 441 2017
Fairmont Fairmont Victoria Island 230 2017
In addition to the branded future supply, there are a number of unbranded projects
underway, such as the extension to the Oriental Hotel (104 rooms), and the new hotel on
the site of the Eko Hotel, the 171-room Eko Signature (the fourth separate operation on
the same site). Both were expected to open in 2013, but at the time of writing, neither is
operational.
The Abuja Hotel Market
Introduction
Abuja is Nigerias capital city and is the administrative and political heart of the country.
Commercial activity in the city is very limited compared to Lagos. As the centre of
Federal government activity, with some 285 government bodies based there, the majority
of the workforce - about 70 per cent - are civil servants.
December 2013

10
Private sector employment is mostly in construction and in the service industries, which
constitute about 25 per cent of the total.
Nnamdi Azikiwe International Airport is Nigerias second major airport. Although
Abujas international flight operations are limited compared to Lagos, there has been
substantial growth in the past few years.
Nnamdi Azikiwe International Airport - Abuja
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
2
*
2
0
1
3
*
*January - June

Source: FAAN
Current Supply
There are approximately 5,300 hotel rooms available in Abuja:
Hotel Room Supply, Abuja
-
1,000
2,000
3,000
4,000
5,000
6,000
Total Rooms 3,263 3,478 3,715 3,878 4,200 4,330 4,736 4,788 4,892 5,271
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013


December 2013

11
Unlike Lagos, there have been very few new rooms entering the Abuja market, an
increase of only 9 per cent since 2010 and, currently, there are no new hotels under
construction with an international brand affiliation.
The hotel supply of relevance in Abuja can be divided into four categories:
Two large internationally-branded hotels Hilton and Sheraton;
Five smaller internationally-branded hotels, of which three are managed by
Protea;
Large locally-managed hotels such as NICON Luxury, Bolingo and Rockview;
Small boutique hotels such as the Summerset, The Bentley, Valencia,
Immaculate Suites, Nordic Villa and Nordic Residence
The market is dominated by the first three categories.
There are 22 major hotels in Abuja, being those with an international or regional
(African) brand as well as locally managed hotels.
Abuja, Federal Capital Territory
Hotels District Rooms Positioning
Mediterranean Hotel Asokoro 25 Midscale
Protea Hotel Asokoro Asokoro 83 Midscale
Bolingo Hotel & Tower CBD 350 Midscale
Chelsea Hotel CBD 38 Midscale
Nanet Suites CBD 52 Midscale
Reiz Continental CBD 86 Midscale
Hawthorn Suites Garki 110 Midscale
Protea Apo Apartment Garki 32 Midscale
NICON Luxury Hotel Garki 253 Midscale
Best Western Plus Ajuji Hotel Gudu 104 Midscale
Ibeto Hotel Gudu 100 Midscale
Nordic Residence/Villa J abi 32 Midscale
Protea Maitama Maitama 28 Upscale
Summerset Maitama 26 Midscale
Transcorp Hilton Abuja Maitama 670 Upper Upscale
Chelsea Hotel Wuse 2 124 Midscale
Denis Hotel Wuse 2 84 Midscale
Immaculate Suites & Apartment Wuse 2 86 Midscale
Rockview Royale Wuse 2 210 Midscale
Sheraton Hotel Wuse 2 540 Upscale
Valencia Hotel Wuse 2 60 Midscale
The Bentley Utako 60 Midscale
Total 3,153
December 2013

12
Demand
The corporate sector is the largest demand generator in Abuja (approximately 80 per cent
of total demand in 2012, up from approximately 70 per cent in previous years). This
sector is almost exclusively doing business directly or indirectly with government. A
level of overnight accommodation demand is also created by the embassies and high
commissions located in Abuja. Corporate demand exhibits a traditional seasonal pattern
with reduced levels of demand at weekends and during holiday periods. There are few
leisure activities to be enjoyed in Abuja, and although some long stay guests will stay
over the weekend, the majority will leave the city on Friday (as do many politicians and
other residents).
Abuja Hotel Demand
Market Mix 2012
80%
15%
5%
Business
Conference
Other

On a macro basis, corporate demand is particularly affected by peaks and troughs in
government activity. Prior to the terrorist threats and attacks in 2011, conference and air
crew demand was growing for Abujas hotels due to the extensive facilities that exist in
hotels and other venues, the prestige of the hotels and the volume of rooms available, the
central location of Abuja in Nigeria, and the increasing number of national and
international flights serving the city. The countrys 2006 Tourism Master Plan identified
Abuja as the conference capital of Nigeria, but if this potential is to be realised, the city
needs more rooms, and needs to have an organised approach to the sector.
Tourist demand is almost non-existent due to the lack of attractions and activities in
Abuja. One of the main initiatives by the city in the tourism sector is the annual Abuja
Carnival, but it is believed that this is primarily attended by city residents, with few
guests from out of town.
The Abuja hotel market recorded a mixed performance in 2011 and 2012. The chart
overleaf shows the performance of a sample of branded hotels in Abuja:
December 2013

13
Abuja Hotel Market
Hotel Performance Data 2010 - 2013
2010 2011 2012 2013 2010 2011 2012 2013 2010 2011 2012 2013
61.6% 60% 51% 260 280 289 161 163 153
Jan-Oct \50.7% 53.3% Jan-Oct 288 335 Jan-Oct 155 180
Source: STR Global
In 2011 and 2012, Abuja suffered from terrorist threats, actual attacks (on the World
Bank building and on the Eagle Square parade ground) and negative international travel
advisories, which severely impacted normal travel volumes to the city, and also
resulted in the cancellation of various conferences and other events which were due to be
held there. Room occupancies were down in nine months out of 12 in 2012, and for the
year as a whole was 51 per cent, compared to 59 per cent in 2011, a reduction in rooms
sold of approximately 13 per cent. Of note, however, is that the Transcorp Hilton
represents 50 per cent of the STR sample in terms of available rooms and, together with
the Sheraton, over 85 per cent of the sample, the others being two of the Protea properties
and the Hawthorn Suites. It was the Hilton, apparently singled out as an American
target, that was the most affected by the terrorism threats in 2011 and 2012, with their
occupancy dropping from approximately 75 per cent in 2011 to around 50 per cent in
2012. The main hotels were also affected by the withdrawal of international aircrew
business from Abuja, due to the security issues.
The change in the business mix of the hotels in the sample, particularly the Hilton and the
Sheraton fewer aircrew and conference groups resulted in an increase in the ADRs.
Future Supply
There are several hotels under construction in Abuja, none of which is affiliated to an
international brand. Typically, the quality of design, construction and finishing of many
of these hotels is poor. Further, construction on several has been suspended for some
time. Notwithstanding the lack of progress in new hotel development in Abuja, the city
has been visited on a number of occasions by several of the international hotel chains,
seeking opportunities for management, and some major announcements are expected in
2014 regarding new deals there. Abujas status as a national and regional capital makes it
an appealing location for many of the international operators. It is therefore inevitable,
that new branded hotels will be developed there at some time. However, these
international chains are not investors, and therefore signed management contracts are
only one part of the development process, not the conclusion.
The table overleaf lists the future branded supply in Abuja:

December 2013

14
Abuja Hotel Market
Group Name Brand District Rooms
Scheduled
Opening Year
Best Western Best Western J abi 84 2015
Carlson Rezidor Park Inn by Radisson Kaura 150 2015
Carlson Rezidor Park Inn by Radisson Maitama 125 2017
Carlson Rezidor Radisson Blu Maitama 200 2017
Marriott Courtyard CBD 250 2017
Marriott MEA CBD 100 2017
None of these hotels is currently under construction, although the Park Inn by Radisson
in Kaura is a half-completed structure, but with no work active at the time of writing.
The Port-Harcourt Hotel Market
Introduction
Port Harcourt is the capital of Rivers State, the commercial centre of the Niger Delta
region, and one of Nigerias leading industrial centres, almost entirely related to the oil
and gas industry. The city is also the location of various manufacturing plants for tyres,
aluminium products, glass bottles, paper, steel structural products, paints, plastics,
cement, concrete products and several other items, as well as truck and bicycle assembly
plants.
Port Harcourt has two airports the international airport at Omagwa, northwest of the
city, and the NAF Base in the centre of the city. The closure of the international airport
in mid-2006 (until early 2008) for runway repairs brought about the cessation of the
international flights and the diversion of some domestic services to the NAF Base (not
captured in the FAAN data in the graph overleaf). By 2012, passenger traffic at Port
Harcourt airport had increased by 36 per cent from 2005.The decrease in passenger
numbers in 2012 is primarily due to a reduction in the number of domestic carriers, and
frequent schedule interruptions. Similar to Lagos, this was a supply-led reduction, and
not a reduction in demand.

December 2013

15
Port Harcourt International Airport - Port Harcourt
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
2
*
2
0
1
3
*
* January - June

Source: FAAN
Current Supply
The Port Harcourt hotel market comprises various classes of hotels, many of which have
standards lower than one would expect in a modern hotel. There are a small number of
internationally-branded hotels that offer a much higher level of product and service than the
non-branded hotels, but the market is dominated by unbranded, owner-operated hotels.
There are 16 major hotels in Port Harcourt.
Port Harcourt Hotel Market
Hotel Rooms Positioning
Le Meridien 87 Upper-Upscale
Novotel 117 Upper Midscale
Presidential Hotel 305 Upper Midscale
Golden Tulip 102 Upscale
Best Western Premier 89 Midscale
J uanita 65 Midscale
Beverly Hills 130 Midscale
Bougainvillea 58 Midscale
Dannic Hotel 46 Midscale
Everyday Check-Inn 31 Midscale
Landmark 120 Midscale
Maas Central 30 Midscale
Rachael Hotel 62 Midscale
Sasun 125 Midscale
Vee Hotel 72 Midscale
Swiss International Mabisel 117 Midscale
TOTAL 1,556
December 2013

16
Demand
The main demand for hotel rooms in Port Harcourt is generated by the corporate sector,
and the majority of that by the oil & gas industry and by the State government. The
second largest demand is for conferences and meetings, many of which are also generated
by the hydrocarbons industries, as well as by NGOs and by government. Other
demand includes leisure and aircrew.

Port Harcourt Hotel Demand
Market Mix 2012
55%
29%
16%
Business
Conference
Other

STR Global do not collect data from Port Harcourt. The following are estimates based on
our research.
Port Harcourt Hotel Market 2010 - 2013
Hotel Performance Data
2010 2011 2012 2013 2010 2011 2012 2013 2010 2011 2012 2013
63.8% 64.6% 64.7% 93 95 100 60 62 65
Jan - Oct 60% 65% Jan - Oct 98 105 Jan - Oct 59 69
Prior to the onset of the Niger Delta crisis in 2009, Port Harcourts hotels experienced
high demand for their rooms and suites, as the oil & gas sector flourished. There was a
marked reduction in demand as security became an issue and companies moved their
operations out of Port Harcourt. Relative peace and security has returned to the city with
renewed optimism, as the State government implements numerous infrastructure projects
to promote the city as a healthy environment for residents, investors and visitors alike.
The oil and gas companies have gradually returned to Port Harcourt, and in line with the
construction activities going on, there has been an in increase in the presence of
construction companies such as Reynolds Construction Company and Bandini, as well as
the increase of banking and financial activities in the city.
December 2013

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Future Supply
Due to various factors, most notably the security issues that affected the city and the
wider Niger-Delta area in the last decade, there has been no large addition to the supply
of quality hotels in Port Harcourt in recent years. There are a number of stalled
construction projects in the GRA district, as well as planned projects in other parts of the
city. These hotels, if all proceed, will add approximately 800 rooms to the existing
supply.
Three of the new hotels, with approximately 500 rooms, are branded:
Port-Harcourt Hotel Market
Group Name Brand City Rooms
Scheduled
Opening Year
African Sun African Sun Port Harcourt 76 2015
African Sun Amber Port Harcourt 196 2015
Carlson Rezidor Radisson Blu Port Harcourt 206 2016
The Radisson Blu hotel is to be constructed on the site of the former Olympia Hotel,
which has been demolished.
Secondary Cities in Nigeria
The hotel supply in Nigerias secondary cities comprises mostly small unbranded hotels.
There are a few secondary cities with branded supply:
Nigerian Hotel Market
Secondary Cities - Branded Supply
Hotels Location Rooms Positioning
Best Western Homeville Benin City 80 Midscale
Protea Hotel Select Emotan Benin City 95 Midscale
Protea Hotel Select Ekpan Warri 95 Midscale
Le Mridien Ibom Hotel & Golf Resort Uyo 130 Upper-Upscale
Demand for these hotels is mostly from domestic travellers.
The following table lists the agreements that the chains have signed elsewhere in Nigeria;
those marked in bold are actively under construction:

December 2013

18
Nigerian Hotel Market, Secondary Cities
Group Name Brand City Rooms
Scheduled
Opening Year
Best Western Best Western Plus Asaba 90 2014
Best Western Best Western Plus Makurdi 135 2014
Carlson Rezidor Park Inn by Radisson Abeokuta 173 2014
Louvre Golden Tulip Ibadan 80 2014
Hilton Hilton Garden Inn Uyo 240 2015
African Sun African Sun Warri 100 2014
Louvre Golden Tulip Warri 192 2014
African Sun African Sun Owerri 170 2015
Louvre Tulip Inn Owerri 79 2016
Starwood Four Points by Sheraton Ibadan 150 2017
Starwood Four Points by Sheraton Benin City 188 2017
Hilton Hilton Garden Inn Owerri 150 2017
Of these hotels, only the Park Inn by Radisson, Hilton Garden Inn, the two Best Western
Plus and Golden Tulip are actively under construction.
The interest being shown by the international chains in expanding in Nigeria is evidence
of the opportunities in the country. Some chains have Nigeria as their primary focus on
the continent. There is no doubt that the nation is in need of quality hotels, particularly to
serve the increasing domestic market, as the economy grows. Of the new hotels listed
above, all except the Four Points by Sheraton hotels in Benin City and Ibadan are at the
midscale level, where the greatest opportunities lie.
Operating Factors
Hotel operations in Nigeria, particularly those in the three major cities experience, in
general, higher profitability levels than elsewhere, with Gross Operating Profits of 50 per
cent and higher of revenue not unusual. This is partly due to high ADRs, and partly due
to low payroll costs. Basic salaries are low, but these are supplemented by the
distribution of the 10 per cent service charge which is added to guests bills.
Energy costs are high, 10 per cent or more of revenue not unusual, but the inclusion in
the development planning of energy-saving devices, and building in sustainable energy
sources such as solar panels and heat exchangers, can reduce the bills.
Taxation and other charges, from the various levels of government, can add to operating
costs some States, including Lagos, impose a 5 per cent consumption tax on all hotel
services, and local governments are often to seen to be unfair on the hotel industry due to
the number of licences that have to be obtained.
December 2013

19
With poor infrastructure, hotels need to be self-sufficient in everything, generating their
own power when the mains supply is cut (which happens frequently each day), drawing
their own water from boreholes, and treating it, and providing their own sewage
treatment plants onsite.
The supply of food and drinks is improving, but import duties make much of what is
imported very costly. This is passed on, typically, through high prices to the customer,
with a buffet meal in some of the top restaurants in Lagos and Abuja costing as much as
US$50.
Challenges
Despite the opportunities, and the progress being made, the Nigerian hotel industry faces
several challenges. Whilst the economic outlook is positive, there are serious challenges
facing the country which, if not properly addressed, will restrict growth:
Political instability: creates security concerns and discouraging travel and
investment. Electioneering is already underway for the 2015 polls, which could
mean 15 months of stagnation, with the focus on politics rather than on the
economy.
Corruption: endemic throughout the system, and the poor quality of government
spending means that economic growth does not have as large an impact on per
capita income as it should.
Multiple taxation: levies and taxes by the federal, State and local governments
make business difficult and increase operating costs.
Infrastructure: the nations basic infrastructure is inadequate. This raises costs and
makes Nigeria an expensive place to do business. The electricity supply is
epileptic, and considerably below what is required to support the existing
economy and its growth. As a result, operating costs are high (due to a reliance
on alternate power supply, i.e. imported generators and diesel). Power outages
and voltage fluctuations are common and can damage equipment. Hotels have to
be self-sufficient not only in electricity, but also in water supply and waste water
treatment. Other infrastructure, such as the road networks and the countrys
airports, are in dire need of repair and expansion.
Skilled workers: there is a very limited supply of skilled labour in the industry.
As a result, existing hotels need to expend considerable resources on training and
retraining staff.
Development costs: these are high as the construction industry is underdeveloped,
with a limited number of capable contractors. The importation of construction
materials and hotel fittings also contributes to the high cost.
Financing costs the local banking industry has limited long-term funds, and the
interest rate on a local-currency loan can be above 20 per cent.
December 2013

20
Although dollar loans are available in certain circumstances, both from local
banks and from foreign lenders, the country risk-premium means that the interest
rate is likely to be above 10 per cent.
Classification/Grading: there is no official grading system of hotels. This is an
important factor in building up quality lodging facilities. Nigerian hotels are
presently underperforming with regards to standards, partly because there is no
quality-measurement tool in force.
Statistics: the industry lacks adequate statistics on accommodation providers, their
performance and growth rates within the sector. The absence of statistics
indicates poor policy making as there are no indicators on quality, quantity and
existing products.
Conclusion
The Nigerian hotel industry has great potential as well as challenges. However,
developers and operators are overcoming these challenges, and are moving forward with
new hotel projects, not just in the main cities but also in the some of the State capitals.
With the view of entering into or increasing their presence in high-growth markets, the
international hotel chains are increasingly venturing into Africa, with a focus on Sub
Saharan Africa; Nigeria is definitely on their radar.
Amongst the international and regional hotel chains, their largest development pipeline in
Africa is in Nigeria, with a total of 49 hotels and 7,470 rooms scheduled to open by 2017.
In sub-Saharan Africa, the next largest pipeline is in Kenya, with 11 hotels and 1,469
rooms - just 20 per cent of that planned for Nigeria.

Trevor Ward, Managing Director
Lola Udabor, Consultant
W Hospitality Group
Lagos, Nigeria
December 2013

www.w-hospitalitygroup.com

The Nigerian Hotel Industry December 2013

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