Nigeria benefits from hotel building boom

The owner of an apartment complex in the Ikeja suburb of Lagos points out nearby cranes - signs of competition to come.

A hotel building boom has taken grip of Nigeria's commercial capital and other cities in the past five years as developers have gobbled up prime plots.

The number of $100 a night rooms in Lagos alone has tripled since 2004, according to data from W Hospitality Group, a Nigerian consultancy.

The increase reflects the rapidly growing economy, but also an industry playing catch-up: international hotel brands steered clear of Nigeria in the 1990s because of security concerns. Trevor Ward, managing director of W, says: "By 2008, you could have opened your garage, put a bed in it and rented it for the night, such was the shortage of supply."

As the economy has grown, so has the variety of its hotel guests. Managers from Nestle and Roche are now as likely to rent rooms as those from Shell and Chevron, hoteliers say. Meanwhile consumer goods companies are flocking to service the growing middle class.

The large number of business travellers for whom security is a concern means room rates in Lagos are the second highest in the world, according to a study by Hogg Robinson Group.

And, while occupancy rates in the city have fallen from their 2008 peak, at 67 per cent they continue to compare favourably with European cities excluding capitals, says Mr Ward.

As domestic airlines fly to more cities, Nigerians with sufficient funds are also filling rooms. That is encouraging development beyond Lagos, Port Harcourt, the centre of the oil industry, and Abuja, the political capital. Starwood Hotels & Resorts, for example, has a property in the eastern state of Akwa Ibom state.

"Family is an important part of the social structure in Nigeria and we see individuals making journeys home from Lagos that wouldn't have been possible five years ago," says Alexander Gassauer, area manager for Starwood. He says Nigerians account for up to 80 per cent of occupancies at some of his properties.

As in other emerging economies, luxury hotels have dominated the boom, offering a secure environment that also attracts diners and weekend visitors.

The Eko hotel, one of Lagos's largest, has numerous bars and restaurants, that contribute to revenue. The smaller Wheatbaker is among the favourite eating spots for wealthy locals.

In Abuja, it is said that if you sit in the lobby of the Transcorp Hilton for long enough you will meet everyone who matters in the city. Rooms start at about $400 a night and Transcorp's owner, Transnational Hotels, plans to spend $150m upgrading rooms and developing luxury apartments, offices and retail space.

Valentine Ozigbo, chief executive of Transnational, says: "In August, we had more than 20 presidents staying in the hotel at one time. That drives demand for luxury."

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He says the company is considering a local stock market listing next year to finance additional Hilton hotels in Lagos and Port Harcourt.

More affordable offerings are also beginning to appear. In Abuja, social media sites are helping a pair of boutique hotels challenge the Trans­corp. Charging between $150 and $200 a night, and offering a reliable internet connection, the Nordic Residence and Nordic Villa have be­come favourites with cost-conscious executives.

Anders Mogensen, the Danish owner, says 30 per cent of guests come through TripAdvisor. Mr Mogensen, a digital consultant, set up the Nordics after he tired of the hotel where he stayed while working on a Nigerian government contract.

As more businesses send staff to Nigeria for longer periods, serviced apartments and short-lets are appearing that meet the needs of longer-term guests.

Aart Court, an apartment complex in Ikeja, offers hotel amenities such as a swimming pool, gym, cleaning and security guards, but also more private space.

Leye Taiwo, who co-owns Aart Court, says: "Nearly all our guests move from hotels. They like the option of cooking, even if it is just beans on toast."

Short-let locations such as Aart Court are tapping into the growing demographic of African expats who play host to guests from countries such as Cameroon and South Africa, and who often hold regional management positions within multinationals.

Two clouds loom on the hotel developers' horizon. One is financing. Dollar loans can be tough to secure, especially for small developments, while interest rates on local currency loans are high: the Nigerian central bank's benchmark rate is 12 per cent, and borrowers say rates on property loans are often more than 20 per cent.

Foreign investment is also rare - brands such as Hilton and Starwood charge a fee for managing hotels but are unlikely to own them outright. International investors are missing out says Mr Mogensen. The profit margin on his Abuja hotels is much higher than on the consultancy business he runs in Denmark.

The other fear is of oversupply. However, while there is a long list of hotels waiting to build in Abuja and Lagos, Mr Ward says financing constraints may scupper many.

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