Amid election fears, seasonal business lull may linger in Q1, Q2 2019
... as hospitality sector prepares for another rough ride
The Nigerian hospitality industry faces a spectre of rough ride in the first and second quarters of 2019, amidst growing fears over the upcoming general elections. This will be a reversal of the impressive result it achieved in the last quarter of last year, which was adjudged best for a long time in terms of occupancy rate and revenue generation with average 70 percent occupancy.
The expected decline in the industry may also result in operators setting minimum revenue targets, delay in completion of ongoing hotel projects and even downsizing until the situation improves.
The situation, which is predicted to be similar to the peak of the economic recession of 2016 when occupancy fell below 30 percent, is due to the seasonal lull in business associated with every new year when businesses are slowly picking up, and worst still, the fears over the 2019 general elections.
Comparing this time last year and other non-election years with 2019, bookings and hotel activities are usually down resulting in occupancy rates of below 40 percent. But the situation improves the moment corporate organisations resume fully from the last week in January or first week in February.
The seasonal lull in business in the better part of January of every year is normal. But the fear this year is that the lull may linger beyond the first quarter because the economy usually picks up months after the elections if there is no disruption. Besides, the budget for 2019 has not been passed and government policy directions will not be clear to investors until after May 29 when swearing-in of elected office holders will hold.
“So, until then, businesses may
not rebound,” Clems Oziri, an economist, said.
Currently, occupancy rate is in the range of 30 percent-40 percent for international hotel chains and about 20 percent in indigenous hotels. This development is worrisome for Ronald Stilting, general manager, Ibom Hotel and Golf Resort, because the fear that the elections may be violent is already scaring guests who now shelve bookings, and corporate organisation who are also holding on until the elections are over on a peaceful note.
The British-born general manager fears that this year may be difficult for the hospitality industry.
“I can recall when President Buhari came to power in 2015. I was at Lilly Gate then. It took long for a decision to be taken to assure investors on the direction of government policy and that affected the economy. That situation may repeat and hospitality business will suffer for it because the hospitality industry needs activities in the economy to thrive,” Stilting said.
Corroborating Stilting, Oziri believes this year’s elections will not be different from 2015.
“If the government is not proactive with early policy direction after the elections and the swearing-in, the economy will suffer and I don’t see that happening with any of the two major candidates for the general elections in February,” he said.
Ubong Nseobot, marketing and sales manager, Southern Sun Ikoyi Hotel, who noted that the hotels are struggling now to sustain occupancy, thinks that the election is supposed to generate even more business for the hospitality industry through meetings, political gatherings, and campaigns, which would have impacted on their business especially this lull period.
She assured that the traditional lull in business in January would soon elapse.
“But if by the first week in February hotels are still struggling, then we know that it is because of the fears of the elections resulting in many people being afraid to return to Nigeria after the holidays, and probably waiting for elections to be over before they come back,” she explained.
Ikechi Uko, CEO, Akwaaba African Travel Market, noted that hoteliers are expecting a rough ride this year because of their experience with election years in the past. “Usually, the economy acts differently during election time. People are cautious, investors do not take further risks and the whole economy is on alert. So, that is what we are about witnessing,” Uko said.
Whichever way the elections go, Uko assured that hoteliers must have planned ahead, while the Nigerian economy will keep healing by itself.
While Uko does not see an extremely bad year because of the elections, hoteliers hope for a quick rebound of the economy after the elections, but point out that the political actors have to make it happen if they have the country’s interest at heart.
But they wish that occupancy will not go below 30 percent during the long lull in order to remain in business.