We remain resolute about executing the projects we have identified’

Valentine Ozigbo is the managing director/CEO of Transcorp Hotels plc. In this interview with BusinessDay’s Bala Augie, he speaks on the company’s expansion of its existing facilities, its proposed new hotels in Lagos and Port Harcourt, and the challenges in the tourism and hospitality sector. Excerpt:

What is your impression of Transcorp Hotels holding its first AGM?

Let me start by saying that this is a historic occasion for us, and one that has followed a number of historic occasions. Being public is like gaining membership to a unique club; we were only just welcomed to the Nigerian Stock Exchange and now our first AGM is following that other historic milestone.

I also have to say that Transcorp Hotels is an institution that caters to its stakeholders, specifically our guests, shareholders, regulators and partners and vendors. AGMs are for companies to open their books to owners and as this is our first time, we’ll have a chance to clarify, present the company to its shareholders and let them see for themselves how well we’ve done for them. This is an event that will underscore our commitment to excellence.

Following your public listing four months ago, was it a right step; and how have you faired?

Our hotel has always been viewed as a national icon, given its location in the heart of the Federal Capitol Territory and given that we serve as the melting pot for guests from different strata in the country. And because of the deeply positive impression that we have been able to give the Nigerian public through our facilities and our service, when Nigerians travel abroad, they seek out Hilton Hotels. In fact, Nigeria is one of the countries that produces the highest number of Hilton Honors members outside of the United States, which is really remarkable.

Beyond that, companies go public and enter the capital market to raise funds with an eye to the future. From this perspective, it clearly made good business sense for us to list, as we were able to successfully raise sufficient funds for upcoming development projects. What’s more, we have created an opportunity to even add debt to the equity we have already raised, because the more equity you have in a business, the greater the capacity to attract debt. So, given the funds raised, our position as a publicly quoted company, and our new ability to attract even more, we clearly made the right move.

What gave you the confidence to come to the market when no company was willing to dare?

This is an excellent question. We entered the market when the sentiments about the country were very low; companies had begun to act on their fears about the upcoming election and this, and some other factors, had all pushed the market to a bearish position. And as you know, not long after we went public, the naira began its tumble.

So, our success in the face of these circumstances was not assured. But our past successes have been the source of our confidence. We are the largest hotel by rooms in the country and are one of the most profitably run hotels in Africa. We have won countless awards, local and international, for the quality of service, our facilities and leadership. If you ask the average Nigerian which hotel is the best in this country, the answer is usually “Transcorp Hilton Abuja”. In terms of financial performance, we have done extremely well with regards to how much returns we post and how much dividends we have paid in the past. We have good history behind us.

If you look further into our financials, you will discover that this is one company that has achieved these successes with zero debt and that improves our attractiveness to the market. Given all of this, we decided that even in the face of a tough, bearish market, we would still find investors with a strong appetite for our brand and it was proven so.

During your IPO you intended raising N8bn but got N5bn; has that affected your plans?

No it has not. We remain resolute about executing the projects we have identified because of the clear need in the new markets we are set to enter. The money we raised is sufficient to kick start project execution. We will simply introduce debt funding to our portfolio to make up the shortfall.

Looking at the plans for Lagos and Port Harcourt, what timelines do you intend to get these hotels delivered and running?

For the Transcorp Hilton Ikoyi, Lagos, we have now finalised the project design. The Lagos State government has accepted our design and we await final approvals, but otherwise, we are ready to commence work and we have targeted to conclude this by end of 2017.

Similarly, for the Transcorp Hilton Port Harcourt, design has progressed and we’ve submitted to the Rivers State Government Planning Authority. By and large, we intend to execute within the timelines that we have indicated

With inflation rising in the last few months and the devaluation of the naira, are your projections in terms of financial capacity affected? Are you looking at other means of raising funds?

Certainly, the impact of inflation, falling oil prices, the devaluation of the naira, all had a palpable effect on the bottomlines of businesses across the country. And the external pressures listed definitely increased our project costs, particularly for items that are imported.

But, our three primary sources of funding are internally generated funds, additional equity and debt funding, and we will stick to these three for now. Despite our size, we are a nimble organisation and we have adapted to the new fiscal reality; we have adopted processes to manage the impact going forward: A number of our contracts being denominated in naira and we are sequencing payments to contractors to avoid exposure to the vagaries of exchange rate fluctuation. Even more importantly for us is the fact that when we execute on all our plans, we will diversify more, create new products and revenue and expand our level of profitability — which will ultimately help us attract more foreign visitors and guests. Many of our guests pay in foreign currencies, which helps us to cushion us from exchange rate fluctuations, so the more we can expand, the more forex we can attract.

You declared dividend for investors in your first year, how confident are you of sustaining this going forward?

We are a company with very strong corporate governance principles and compliance standards, therefore, whatever we commit to, we achieve or do. We promised investors we would continue to pay dividends even to our first time shareholders and we have kept to our word. Going forward, we intend to keep paying dividends, and the amounts we pay will be determined by considerations to two main factors: the need to excite our shareholders and the need to keep sufficient positive cash flow to execute our new projects for greater long term value creation.

What is the level of expansion of Transcorp Hilton Abuja?

The upgrade of the Transcorp Hilton Hotel Abuja is actually our number one priority. There is a need for us to keep our market share as much as we want to expand. We want to stay head and shoulders above the competition in the country and on the continent for that matter, and we are therefore intent on redefining the property and scaling up to the highest standard possible. As a matter of fact, every part of the hotel will be upgraded – from the rooms, corridors, meeting spaces, food & beverage outlets, and external areas to even new products that we want to add like the Spa, nightclub and business club. As we speak, designs have been completed and live, mock-up rooms have been completed.

Our intention is to start actual upgrades in the third quarter of this year and in a manner that will minimise operational risk and sustain our guests’ experience. We do not intend to shut down the entire hotel; we will rather close floors one by one.

How is your company surviving with analysts who say hotel occupancy is very low?

Last year, we generated revenue of approximately N15 billion. When analysts use that world “low,” it means it could have been better. And yes, it could have been better, but what we have achieved is still sufficient to keep us far ahead of competition and global peers.

Indeed, last year was tough because we were affected by a number of things. For example, the insurgency and insecurity in the North is one, though the Federal Government has made a lot of progress in recent times. More specifically, the incidence at Banex Plaza and the Nyanya bombing affected our business — directly because of an immediate lull in the travel and accommodation business, including the cancellation of high profile events, and indirectly when some embassies send out travel warnings to Nigeria.

In addition, the Ebola Virus had a shocking level of negative impact on the hospitality industry, even in areas where Ebola never happened. I was in South Africa during that period and when I got to a particular hotel, I found it relatively empty. When I asked why, they said it was due to the Ebola epidermic. I wondered what South Africa had to do with Ebola. You find that people in the West can just say there is Ebola in Africa as though Africa is a country..

When these things happen, they impact on our revenue, our profitability and in fact we start to spend money that was never budgeted, as we had to buy equipment and chemicals, train our staff and take some additional precautions to ensure prevention and provide safety to our guests.

When are you expecting the occupancy rate to improve?

It has already improved. This year we expect much better rate. As a matter of fact, one of the biggest fears people had about Nigeria was what would become of the election. We think that this year will present huge opportunities for us and I speak from two perspectives: On the one hand, I think that Abuja is going to be buzzing, especially when we get close to the handover and thereafter, because you will find out there will be a lot of appointments, a lot of people will come into the city.

On the other hand, we intend to embark on the upgrade. This will affect our occupancy and revenue, but this is a necessary sacrifice we must make now to secure the future. So, we will not be very bullish with our expectations, we will just make sure we do not drop below where we are and after our upgrade, there will be a new dawn for our business.

You and your parent company are listed on the Nigerian bourse; how do you relate with each other?

The relationship is what it has always been. Transnational Corporation (Transcorp) plc is the parent company, we are a subsidiary company. Transcorp plc owns majority stake of Transcorp Hotels plc while the government and the general public own the rest. It is a parent-subsidiary relationship. When we went public, a lot of people misconstrued that and thought we were no longer attached to Transcorp plc, and that is wrong.

People also wondered why we have a Plc under a Plc. It is actually commonplace. There are many companies with similar structures even on the floor of the Nigerian Stock Exchange.

Any diversification plans to remain ahead of competition?

Diversification is the name of the game, and that is what we are doing. We are diversifying in terms of products, geography and new business lines. We want to include a multipurpose banqueting centre that can accommodate over 5,000 people; we want to develop apartments and there is even a plan to develop an office complex within the Transcorp Hilton perimeter. In fact, we are having discussions around developing new areas, which we’ll advise after engaging the Nigerian Stock Exchange.