Wednesday, August 27, 2014

Lagos City Hotels Charge Highest Room Rates in Africa

Wednesday, 27 August 2014 21:42
Written by Ajibola Amzat
Nigerian Guardian

DESPITE the high number of hotels in Lagos, the metropolis remains the city with the highest charges on hotel accommodation in Africa.

  According to the Lagos State Hotel Licensing Authority, the agency responsible for regulating the hospitality industry, about 2,500 hotels and other hospitality establishments are located in the state.

   Following the preliminary investigation published earlier in the newspaper on August 2, The Guardian examines the room rates of four international hotels located in Lagos State in comparison with their rates in other African cities.

  Finding shows that all the five-star hotels included in this survey, with branches in other African cities such as Johannesburg, South Africa, Nairobi, Kenya; Lusaka, Zambia, Maputo, Mozambique, Dar es Salam, Tanzania and Balaclava, Mauritius charge much higher room rates in Lagos than they do in other African cities.

  The price difference sometimes is as high as 148 per cent. For example, the standard room rate in Southern Sun Ikoyi, Lagos costs N62,000 per night, whereas the same room costs an equivalent of N25,000 in Southern Sun, Johannesburg, South Africa.

  A diplomatic suite with king-size bed, which costs an equivalent of N149, 000 per night in Sheraton Hotel Pretoria, South Africa goes for N248,000 in Lagos Sheraton Lagos Hotel and Towers – a difference of 65 per cent (see table for other rates).

  Though these prices change from time to time subject to demand, the prices quoted in this report were the rates between August 9 and 10, 2014.

  In an e-mail correspondence with The Guardian,  the Director of Sales and Marketing, Intercontinental Hotel at Kofo Abayomi, Victoria Island Lagos, Mr. Kumar Krishna, attributed the difference to the forces of demand and supply.

  “There are very few branded star hotels in Lagos, and visitors tend to ensure that they choose one of the brands that they or their company is associated with. A premium is charged since the demand is far higher than the supply on most of the periods.”

   The Director of Nigeria Tourism Development Corporation (NTDC), Mrs. Sally Mbanefo, whose organisation last year lost the regulatory power over hotels operation in Lagos and other states of the federation through a Supreme Court ruling, also stressed market forces as the major significant factor determining prices of hotel accommodation.

  According to her, price equilibrium is bound to go higher when the demand for hotel accommodation is higher than the supply.

    Plausible as this explanation may sound, it appears a weak justification for such huge difference in the hotel room rates in Lagos compared to other African cities.

  Also Krishna’s argument that visitors prefer to pay extra for a top brand hotel “so that they are able to experience a standard service delivery as well as ensure that there are no surprises,” seems an excuse that rather points at the exploitative tendencies of hotels in Lagos.

  “Some brands offer a standard level of service, and a frequent traveller pays a premium just to ensure that he exactly knows what he is getting,”  Krishna explained.

 However, the more powerful argument by hotel operators in Lagos and other Nigerian cities is that, high operational cost is the primary cause of the exorbitant prices of hotel rooms.

   At the second Nigeria Tourism Investors Forum and Exhibition (NTIFE) held in Abuja recently by Federation of Tourism Association of Nigeria (FTAN), stakeholders at the summit submitted that the cost incurred in running hotels in Nigeria is “outrageously high.”

    In his paper, FTAN President, Mr. Tomi Akingbogun highlighted lack of key infrastructure in the country among other factors hindering the   growth of hotel business in Nigeria.

  Because of inadequate supply of basic amenities such as electricity and water, most hotel operators now procure their own transformers and generator sets, dig their own boreholes and install water treatment plants, said Akingbogun who himself owns a hotel in Abuja.

  He said hotel owners also invest huge capital in security that government has failed to guarantee in the country. All these costs are incidental on the high markup in hotel charges.

  This is a view expressed also by other hotel operators who spoke to The Guardian, including government officials whose responsibility it is to provide an enabling environment for business.

 The Lagos State Commissioner for Tourism and Intergovernmental Relations, Mr. Disun Holloway, said the sole cost of running generators to produce power, which many other countries take for granted, impacts heavily on overheads of operating hotels in Lagos.

  While Nigeria can only supply 4,000 megawatts of electricity in 2014, South Africa electricity capacity is about 45,700mw, according to South Africa’s Department of Energy (DOE).  Krishna said his organisation, Intercontinental Hotel for instance, generates 50 per cent of its power supply through diesel-power generating set.

 There is also the problem of multiple taxes, charges, which eat deep into the revenue of investors in tourism industry, and drive away potential investors. These include bills such as business premises registration fees, signboard fees, tenement rate, liquor licence, Nigeria Social Insurance Trust Fund (NSITF), value added tax, guest parking bill and water and electricity bills.

   NIPOST is planning to introduce stamp duties of N50 per N1000 (5 per cent), according to FTAN boss.

   Other costs, which make the room rates higher in Lagos than in other African cities, are employee costs and benefits, which Krishna said were the highest in Africa. This, however, contradicts a recent study by the World Bank which says the labour cost in Nigeria is actually lower than most of the country’s competitors such as Brazil and South Africa.

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