Lagos: The hospitality growth frontier

For a combination of factors notably the presence of oil and gas companies and a large and growing market with strong buying power, Lagos, Nigeria’s commercial capital and economic nerve centre, remains an attractive business city in Africa and a new frontier for hospitality sector growth in Africa.

This is not surprising as Lagos is home to the head offices of many international oil corporations and multinational companies whose expatriate staffs frequently fly into the city for one official engagement or another and these business travelers usually find their way into the many hotels that dot the city’s landscape.

In 2012, a number of new hotels opened in Lagos including Four Points by Sheraton Lagos; Ibis Lagos Airport, and Radisson Blu Anchorage Hotel while a new one being promoted by African Capital Alliance in the Ikeja axis of the city will soon open for business.

Many more are in the pipeline and these are being promoted by international brands including Carlson Rezidor Hotel Group, Hilton Worldwide, InterContinental Hotel Group, Starwood Hotels & Resorts Worldwide, Hyatt Hotels Corporation and Protea.

These developments suggests to us that in comparism with Johannesburg in South Africa, Lagos is a preferred destination and a recent survey on most expensive cities for tourists lends credence to this. The  Hotel Survey conducted by Hogg Robinson Group (HRG) which places Moscow as the most expensive city for business travellers with an average room rate (ARR) of £263.07 (N63,499.83), also ranks Lagos as the second most expensive city with ARR of 117 pounds (N28,248.46). Demand for hotel rooms in Lagos increased by 7.3 percent in 2012 and, according to David Grossniklaus, a global economic analyst, some 5,000 new hotel rooms are expected to open in Nigeria by 2017.

Lagos attractiveness to hospitality business operators is not unconnected to Nigeria’s visible economic growth in recent years. Given the country’s GDP growth at approximately 7 percent per annum, the economy has experienced rising demand in residential and commercial property, high traffic at the airports and increased activities and volume of trade at the sea ports.

We see opportunity of immense proportion knocking on the city’s doors which will usher in a period of economic growth. Thus there is need to deploy policies and institutions towards positioning the city to tap from this unfolding growth opportunities.

However, we need to draw attention to frequent investors’ complaint of harsh business environment which experts say adds about 15 percent additional burden to the cost of doing business in Nigeria generally.We believe that the only way to for Lagos to remain in its position is to commit to creating the enabling environment for investment and also addressing thorny issues of land charges, multiple and needles taxation/fees which could be a disincentive to investments.

As an emerging economy with a growing population and rising urbanization, we see demand always outstripping supply of basic infrastructure including hotel rooms which creates more opportunities for investment in these areas. It is noteworthy that while hotel demand in Lagos increased at the rate of 7.3 percent in 2012, supply growth during the same period was just at 6 percent, invariably creating opportunities for investment in the hospitality sector.

Thus, we advise that everything possible should be done to continue to make Lagos an investors delight.

By: BusinessDay

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