Transcorp restructures business strategy as pandemic impacts sector
• Reduces workforce by 40 per cent
Notwithstanding a bleak outlook, the hospitality business holds for Nigeria following the Coronavirus (COVID-19) pandemic, one of the country’s five-star hotels, Transcorp, said it was working on cost optimisation and survival strategies to ensure it remained in operation.
The hotel said the pandemic had already weakened its financial position for 2020, adding that, as part of restructuring of its operations, it was diversifying its portfolio and reducing its workforce as measure for cost-management initiatives.
At a virtual press conference recently, Managing Director of Transcorp Hotels Plc, Dupe Olusola, said the slow pick up of international travel, restriction on large gatherings, the switch to virtual meetings and fear of the virus, have drastically reduced demand and occupancy levels to lowest of less than five per cent.
She noted that, even as there has been slight increase in economic activities, they are still struggling to operate pre-pandemic period.
She said in the second quarter of June 2020, Transcorp Hotels’ rooms revenue fell to N3.03 billion compared to the N5.88 billion in the same period in 2019, while losses have been on a month-to-month basis at over N1 billion.
Olusola maintained that it was a tall order for the management to continue to operate as a hotel with a payroll cost of over N2 billion and operational cost at N4.1 billion monthly.
She disclosed that the hotel had engaged actively with the labour unions in the sector, with stakeholders and employees to see reasons on their decision, as it planned to reduce the workforce by 40 per cent.
She said negotiations are ongoing to ensure that colleagues, who would be impacted, are adequately compensated.
She added that a health insurance package to reduce their health burden costs, especially during the pandemic, among other payment settlements would also be activated.
“The board met and decided it could no longer continue to run the hotel business with such significant losses. We concluded it was important we carried all our stakeholders along. We ensured we were able keep the hotel of over 30 years of existence in operation.
“We have over 1,000 workers, and we do not want to send all of them home. We continued to pay our staff 100 per cent in March and April. In May, we made the decision to pay 100 per cent to those working, and 50 per cent to those not working.”
She said the hotel has not benefited in palliatives from the government, but has engaged with the government in dialogue on what could be done for them in terms of tax exemption, supporting the staff and palliatives for the sector.
Olusola also revealed that the company would consider raising N10 billion in form of rights issue in order to strengthen its balance sheet.
“One of the key things we did was to engage with our lenders to see how we can get loan reductions on our interest loans, and we got positive responses from some of them. We are considering raising N10 billion in form of rights issue in order to strengthen our balance sheet. We are a strong organisation and we are optimistic, and we are working on a day-to-day basis to bring innovative solutions to our customers.”
According to her, the industry felt the impact when the Federal Government shut the economy in April, as it asked all businesses in Abuja, Lagos, and Ogun states to lock up.
“It is expected that recovery levels globally will be by 2024, and it is not surprising because government policies, which involve the health practice of wearing masks as well as practising social distancing will come up. People are slowly coming to terms that the pandemic happened, and so are re-thinking different business models.”