Saturday, 3rd June 2023

Hospitality sector on ‘wait and see’ as renewed lockdown threatens survival

By Helen Oji
08 June 2021   |   3:50 am
Having barely recovered from the impact of COVID-19 lockdown, newer restrictions to contain further spread of the pandemic have begun to hit hard on the hospitality sector, as earnings of listed firms in the sector remain abysmal, just as the players continue to lay off workers.

• Four listed firms’ revenue dips by nearly 90%
• Over 1,000 workers laid off in one year
• Recovering businesses may not survive new restrictions, experts warn

Having barely recovered from the impact of COVID-19 lockdown, newer restrictions to contain further spread of the pandemic have begun to hit hard on the hospitality sector, as earnings of listed firms in the sector remain abysmal, just as the players continue to lay off workers.

The Federal Government, recently, declared a new phase of restrictions on movement across the country with the reintroduction of curfew to curb the spread of COVID-19 variants.

Already, four major listed firms under the sector have lost nearly 90 per cent of their revenue even as no fewer than 1,000 workers have been disengaged in the past one year.

Strategies that were taken to flatten the COVID-19 curve such as community lockdowns, social distancing, stay-at-home orders and travel restrictions resulted in a temporary closure of many hospitality businesses and significantly reduced the demand for their services.

Between March and August 2020, airlines were grounded due to the closing of airports, while some hotels, in some countries, were converted to isolation centres.

In a recent report by MAWA Foundation, a senior worker of Capital Global Apartment at Asokoro area of Abuja, narrated how the hotel was converted by the Federal Government to isolation centre leading to its shutdown and sack of over 120 staff.

Another senior worker of IBETO Hotel at the Apo area of Abuja, while speaking to MAWA on how COVID-19 affected their establishment, disclosed that the hotel has since disengaged a huge number of its staff, leaving only a few workers to take care of food and beverages.

“It is so bad that we had to disengage a huge number of our staff, and now to resort to hiring casual workers we pay a token daily,” he said, adding that the company has since canceled all workers union, an action meant to weaken worker’s resistance.

The Guardian gathered that among the listed companies on the Nigerian Exchange Limited, Transcorp Hotel Plc. recorded the highest percentage decline in profit by -1,122.80 per cent, while Ikeja Hotel Plc. recorded a decline in its profit by -905.8 per cent. Capital Hotel also recorded a loss of 160.2 per cent. On the other hand, Tourist Company of Nigeria Plc. recorded an increase in its loss position by +439.67 per cent.

The listed hotels incurred different levels of revenue losses and they include Ikeja Hotel Plc (N6.72 billion), Tourist Company of Nigeria Plc (N6.53 billion), Transcorp Hotel Plc (N6.28 billion) and Capital Hotel Plc (N241.86 million).

The firms also recorded a decline in their revenue in 2020 with Tourist Company of Nigeria Plc, recording the highest decline of -64.31 per cent, while the other hotels also saw the following decline in revenue.

Capital Hotel’s revenue depreciated by -62.36 per cent, Ikeja Hotel -59.5 per cent, and Transcorp Hotel Plc -50.25 per cent. Transcorp Hotel Plc recorded the highest revenue of N10.15 billion in 2020, while Ikeja Hotel recorded revenue of N5.07 billion, Capital Hotel revenue was N1.95 billion, and Tourist Company of Nigeria N1.31 billion.

To this effect, operators and investors have expressed doubts about the survival of companies in the sector. They warned that these firms could witness a total collapse should the Federal Government fail to support them with incentives in form of tax holidays and other palliatives, while the pandemic lasts.

Investors argued that government should engage industry stakeholders on various intervention measures that would help revitalise the sector and boost profitability as obtainable in other emerging economies.

Vice Chairman of Highcap Securities Limited, David Adonri, pointed out that due to the delicate structure of the sector, there has been a remarkable decline in occupancy rate, number of guests arriving and revenue of operators in the industry. He described the hospitality industry as a creator of enormous wealth, but its 2021 prospect is not bright.

According to him, Nigeria stands to lose if the wealth-creating capacity of the hospitality industry is jeopardised. He said with the reintroduction of mild restrictions, analysts’ predictions that the sector would record stronger topline earnings in 2021 financials compared to 2020 might not become a reality.

He said: “The lockdown and restrictions imposed in 2020 to curb the pandemic spread, continue to depress the hospitality sector. As a result of that setback, the income earned by breweries, hotels and entertainment centres declined substantially in 2020.”

“Many of those businesses that are just recovering from last year’s disruptions may find it difficult to survive if the newly announced restrictions to combat the third wave of the pandemic takes effect. The delicate nature of the hospitality industry as potential facilitators and super spreader centres of the pandemic makes it inevitable to curtail their activities. While taking measures to preserve public health, the damaging impact of the restrictions can be mitigated by government, using palliatives to preserve their existence.”

Managing Director, Transcorp Hotels Plc., Mrs. Dupe Olusola, had, in a press conference, lamented the impact of COVID-19 on the business. According to her, the hotel and hospitality industry in Nigeria has never faced a crisis that brought travel to a standstill, not even the Ebola Virus outbreak of 2014 or the recession of 2016.

She said the slow pick up of international travels, restriction on large gatherings, the switch to virtual meetings, and fear of the virus, has drastically reduced demand for hotels and occupancy levels to their lowest.

A senior employee of Transcorp Hotel, Abuja, while recounting the impact of COVID-19, explained that the hotel has since placed all staff on contract agreement and canceled all full and permanent staff agreement. He added that the policy to keep all workers on contract agreement happened after the hotel sacked a huge number of staff. Although the sacked workers protested, they were not recalled.

At Top Rank Hotel located at the Area 11 part of Abuja, a worker at the hotel said they had to sack over 200 workers during the lockdown, and now have less than 60 workers. He added that despite sacking a huge number, the hotel was forced to reduce salaries by 60 per cent. Before the pandemic, the hotel made N24 million monthly, but since the pandemic, it is struggling to make N10 million every month.

Hotels across Africa also face a similar fate, but could likely fair better when the dust settles. Unlike in Nigeria, hotels in Kenya, Egypt, and South Africa can rely on local tourism to drive occupancy rates.

Nigerian hotels, on the other hand, rely on commercial room sales, driven by business and leisure travels into the country. With several airlines yet to fully operate due to reciprocal bans, it is unlikely that things will improve anytime soon.

An independent investor, Amaechi Egbo, said the hoteliers needed to do what is required in times like these to avoid an imminent collapse. According to him, hotel operators must explore new sources of revenues, and drastically reduce overheads.

“For starters, furloughing headcount will be top on the table, as services of employees who have no one to serve won’t be currently required. It is a tough decision to make for these hotels, considering that the employees that will be affected face an even worse outlook due to the economic crunch, which is likely to remain for years to come.”