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  The Nigerian Hotel IndustryDecember 2013   1 THE NIGERIAN HOTEL INDUSTRY Historical Background The srcins of the modern Nigerian hotel industry date back to 1942 with the opening of the Lagos Airport Hotel, then a small “pub with rooms” operation but today one of the largest hotels in the city. The 1950s saw the opening of hotels such as the Bristol Hotel (1956) and the Federal Palace (where Nigeria’s Declaration of Independence was signed) amongst others. More hotels opened across the nation in the 1960s and 1970s, including the Hotel Presidential in Port Harcourt in 1963, the Eko Holiday Inn (1976), the adjacent Eko Hotel in 1977, the Festac 77 Hotel in 1977 and the three Gateway Hotels in Abeokuta, Ijebu-Ode and Ota in 1979. Most were developed by the government, in the absence of capacity in the private sector of this new nation. The oil boom of the 1980s brought high demand for hotel rooms, and three significant hotels opened in this period, the Sheraton Ikeja in1985, the Hilton Abuja in 1987 and the Sheraton Abuja in 1988. No other branded hotels opened for over a decade, when the Accor group opened its first hotel in Lagos, the 44-room Sofitel Moorhouse, in 1999. After the oil-related boom, demand dropped considerably in the mid-1990s, as Nigeria’s military government was isolated from the international community. The country’s return to democratic rule in 1999 saw a resurgence in demand, as improved economic and  political stability resulted in an improved business environment, and encouraged foreign and local investment in infrastructure, oil & gas and telecommunications, amongst other sectors. Beginning in 2001 there was an influx of regional and international chains, commencing with Protea, who now have 12 hotels open and under development in  Nigeria. The Nigerian hotel industry was not significantly affected by the 2008/2009 global economic crisis. Regional and internationally branded hotels continued to open,  primarily in Lagos but also in Abuja and Port Harcourt, three of the largest cities – the commercial, political and oil capitals, respectively. However, regardless of the growth in the travel and tourism industry, and the great potential it has for contributing to Nigeria’s economy, specifically job creation, the nation is yet fully to embrace the industry as a major economic player and a source of national income. Presently, the travel & tourism accounts for just 3 per cent of GDP, while the hotel & restaurant sub-sector contributes a mere 0.55 per cent. The Economy and Geo-Political Structure of Nigeria The Federal Republic of Nigeria is a coastal state situated in West Africa on the shores of the Gulf of Guinea. It is Africa’s most populous nation, with an estimated population of 170 million, according to recent estimates, up from 140 million at the time of the 2006  National Census. Nigeria comprises 36 States, plus the Federal Capital Territory, where Abuja is located.  The Nigerian Hotel IndustryDecember 2013   2 Each State has a capital city, an elected Governor, and a system of local ministries, headed by Commissioners. Within the States there are 774 Local Government Areas which, along with the State governments, are the primary regulators of the hotel industry. As well as the State capitals, some States have other major cities that are economically or historically significant. Federal Republic of Nigeria States, Capitals & Other Major Cities State Capital City (Other Major Cities) Abia Umuahia (Aba)Adamawa Yola Akwa Ibom Uyo (Eket) Anambra Awka (Onitsha) Bauchi Bauchi Bayelsa Yenagoa Benue Makurdi Borno Maiduguri Cross River Calabar Delta Asaba (Warri) Ebonyi Abakaliki Edo Benin City Ekiti Ado-Ekiti Enugu EnuguFederal Capital Territory Abuja Gombe Gombe Imo Owerri Jigawa Dutse Kaduna Kaduna (Zaria) Kano Kano Katsina Katsina Kebbi Birnin Kebbi Kogi Lokoja Kwara Ilorin Lagos Ikeja (Victoria Island)  Nasarawa Lafia  Niger Minna (Suleja) Ogun Abeokuta (Ijebu-Ode) Ondo Akure (Ondo) Osun Oshogbo (Ife) Oyo Ibadan (Ogbomosho) Plateau Jos Rivers Port HarcourtSokoto Sokoto Taraba Jalingo Yobe Damaturu Zamfara Gusau  The Nigerian Hotel IndustryDecember 2013   3 Of the 36 States, Lagos is the smallest in terms of geographical area, but has the highest share of the nation’s economy, and is effectively a “city state”, Ikeja, Victoria Island, Lagos Island and Ikoyi having merged into one metropolitan area. The nation’s economy, in terms of government revenue and foreign exchange earnings, is dominated by the oil and gas sector, which is centred on the oil-producing States in the south of the country. Exports from the energy sector account for more than 95 per cent of export earnings and some 80 per cent of the Federal Government’s revenue. The oil and gas sector represents approximately 30 per cent of the country’s GDP. It has  been projected that within the next two years, Nigeria will become Africa’s largest economy after the anticipated rebasing of its Gross Domestic Product (GDP) measurement, better to reflect the structure of the economy. According to the IMF’s World Economic Outlook, the Nigerian economy is expected to grow by 7.2 per cent in 2013, benefiting from favourable government policies and ongoing reforms in the power sector. Due to operational problems, the oil and gas sector is growing slower than average, with the greater part of economic growth generated by the non-oil sectors,  particularly banking, telecommunications and the retail trade. With foreign direct investment (FDI) of US$11.23 billion in 2012, the country is the top FDI destination in sub-Saharan Africa.  Nigeria’s ambition of being one of the top 20 economies is encapsulated in the Vision 20:2020 programme. The key objectives are to stimulate Nigeria’s economic growth and launch the country onto a path of sustained and rapid socio-economic development, and to place Nigeria in the bracket of the top 20 largest economies of the world by 2020, with GDP of not less than US$900 billion (currently cUS$262 billion) and per capita income of US$4,000 (currently cUS$1,700). The Nigerian Hotel Industry Whilst there has been rapid growth in the Nigerian hotel industry in the last decade, it is still in its infancy. Virtually all of the growth, specifically in branded hotel products, has  been in Lagos, and the “second wave” is likely to be more focused on other cities. Best Western and Protea already have hotels outside of the “Big Three” cities, and Park Inn by Radisson, Four Points by Sheraton and Hilton Garden Inn are due to open in Abeokuta, Owerri, Benin City, Ibadan and Uyo over the next few years. The country’s return to democracy in 1999 brought stability and new FDI, as well as local capital investment, thereby generating greater demand for hotel services. In the 2000s, demand increased faster than supply, and the main players in the industry enjoyed very high occupancies (with a peak of over 80 per cent in 2008) and average daily rates (ADR), with STR Global ranking Lagos second only to Paris in terms of ADR.  The Nigerian Hotel IndustryDecember 2013   4 Alongside the development of new branded hotels, such as the Southern Sun and Radisson Blu in Lagos, and the Hawthorn Suites in Abuja, a plethora of substandard hotels and guest houses also entered the market, a symptom of an immature but growing market, with an evident lack of professional know-how in both the development and operation of these properties. With a few exceptions, the unbranded hotels offer lower  product quality and service standards than the branded hotels, which have noticeably “raised the bar”. Rack rates at the country’s hotels are high, with the lowest published rates in the leading hotels quoted at US$555 (Sheraton) in Lagos, US$419 (Transcorp Hilton) in Abuja and US$381 (Le Meridien) in Port Harcourt. Demand for hotel accommodation in Nigeria is generated mostly by the corporate sector, with conference and meetings demand a close second. Whist there is some (mainly seasonal) domestic leisure tourism, there is very little international tourism, the exception  being the Nigerian Diaspora returning to the country during school holidays and other  periods. The main market sectors for hotel accommodation are:    Corporate travel: whilst in Lagos, Abuja and Port Harcourt there is a significant amount of demand generated by international travellers (and all three cities have European and other international flights), the majority countrywide is domestic  business travellers. In Abuja, the main reason to travel is to do business with government.    Meetings & Conferences: The meetings and conference market in Nigeria is  predominantly domestic, with some international delegates attending events in Abuja and Lagos. Demand is generated by the professional associations (of which there are many, organized and generating demand on a national and regional level), government, companies (especially those in the financial, oil & gas and education sectors), NGOs and the social sector, with events ranging from music concerts, fashion shows, award ceremonies and weddings.    Domestic leisure tourism: during holidays and the festive season, demand is generated by Nigerians in the Diaspora, as well as those resident in Nigeria travelling to their home town. There is an increasing trend for this market to use hotel accommodation, rather than staying with friends and relatives. There are only a very few destination resorts in Nigeria, with an estimated total of fewer than 1,000 rooms between them.    Cultural festivals: Nigeria has several well-known festivals such as the Eyo festival in Lagos, the Osun-Oshogbo festival in Oshogbo, the Igue festival in Benin, the Argungu Fishing festival in Kebbi State, the Katsina Durbar, Riv-fest in Rivers State and the Calabar Festival, amongst others. A small number of international visitors attend these events.

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