Hotel occupancy stabilises in Q1’18, multiple taxation still issue

While November-December 2017 was the best for a long time for the hospitality sector in terms of occupancy rate and revenue generation, the sector is posting an impressive first quarter result for 2018.

So far, occupancy, which was below 40 percent at the peak of the recession in 2016 and slightly above 50 percent in late 2017 is averaging 65 percent by the first quarter of this year, resulting in improved revenue in the sector, especially in the mature hotel markets of Lagos, Abuja and Port Harcourt.

The improvement in the sector, according to stakeholders, are due to sustained stability in the economy, particularly foreign exchange rate, government policy direction, return of foreign direct investment and growing number of government and corporate activities booked and hosted across many hotels in the country.

Some indigenous hoteliers recorded between 5-15 percent revenue improvement as against this time last year, while some foreign brands recorded 20 percent upwards.

Speaking on the development, Adedeji Martins, a hotelier, said the Nigerian hospitality sector has regained the confidence of guests and investors, which it lost during the recession in 2016.

For him, many hotels run above 50 percent occupancy now, some have as much as 80, while a few luxury boutique hotels are fully booked.

“About 20 months ago, hoteliers could not see anything positive, today we think the worst is over; we have bottomed out and have turned the corner”, he said.

But while some hoteliers expect the electioneering for 2019, which has started to generate business for them, Ameed Hathit, a Lagos hotel general manager, is pessimistic. “We do not know what is going to happen during the 2019 election, though the industry is more hopeful of positives today than it was for the 2015 election. The fear that there will be violence is our greatest enemy because it restrains would-be guests, corporate customers and foreigners from patronizing hotels”, Hathit said.

Despite the soaring occupancy, the Nigerian hoteliers are battling with the challenges of doing business in Nigeria, especially multiple taxation, which most of them decried for gulping as much as 10 percent of their profit.

At present, there are over 24 different taxes paid to the three tiers of government across the country amid high cost of daily operations.

Some of the taxes include company tax, consumption tax, value added tax, hotel license, personal income tax, environment impact assessment, parking permits, waste water request, land use charge, radio and TV permit, LAWMA, LASAA security among others.

With the failure to harmonize the taxes, especially those paid on same product to different tiers of government, hoteliers are forced to push the cost to guests in terms of overpriced room and services or close down if they cannot breakeven after increasing rates.

In Lagos alone, over 15 hotels have been redeveloped into real estate and private schools as the profit margins were not big enough to pay all the 24 taxes across Federal, state, local governments and agencies, and also sustain the business.

Obidike Osakwe, a hotelier and member of Hotel and Personal Services Employers’ Association of Nigeria (HOPESEA), decried the many taxes that are pressurising hotels to increase rates and furthering the perception that Nigerian hotels are overpriced.

“The economic downturn is really biting harder and we are left with no other option than to increase our rates and pass same to the guests. But there is no money anywhere, the guests are also crying and we cannot increase prices to run ourselves out of business, so we are rather sacrificing now for not increasing rates according to the economic reality”, Osakwe said.

On the way forward, Makama Yahaya, a member of Hotel Owners Forum Abuja (HOFA), noted that government can always pursue its revenue targets but with human face in order to save businesses such as hotels from closing down and keeping those under their employment who government cannot employ in it over bloated service for now.

He also asked governments at all levels to consider investments in infrastructure development and sustaining the momentum through win-win models without necessarily overburdening businesses with taxes.

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