‘We had to make tactical changes to ensure the economic downturn does not affect our standard’
This year, Nigeria experienced its worst economic performance in 25 years, recording 1.5% GDP growth. This was largely due to low oil prices, low oil output due to militant attacks on oil infrastructure, and tight monetary liquidity. The effects of this recession have been felt in many sectors, including in the hotel and travel sectors. In this interview with CHUKS NWANNE, the General Manager of Southern Sun Ikoyi Hotel Mark Loxley, who expressed optimism about Nigeria’s economy, spoke on some measure already taken by the hotel to sustain customer satisfaction, as well as ensure its standards are not affected.
In the face of the economic recession in Nigeria, how is Southern Sun fairing?
We all know that within the last 18 months, the economic climate has become pretty harsh. The way I sometimes explain it to others and myself is that if you go back in time, probably the last real downturn in Nigeria was in 1991 and a lot of the population, approximately 60 percent are currently below the age of 35. So, a lot of people do not remember the last time there was a severe downturn. What happened in 1991 was assisted to some extent by the advent of Gulf War, and oil price picked up later. But irrespective of that, business continued.
The occupancy and business levels obviously have been affected in the last one-year. But what is important, like every other business, is that you have to make tactical changes in order not to allow the downturn to affect any standard or reputation identity of the hotel. So, what I am trying to put across is that we definitely have to manage our costs and expenses; we adjusted like everyone else.
To what extent has recession affected hotel business in Nigeria?
In terms of business levels, occupancy is fluctuating between 45-55 per cent and there about. Ideally, most hotels will like to be within 60 or 70 per cent and, 65-75. I will suggest that most hotels within our market are floating within 40 and 50; some between 55-45, going down from 55 percent.
So, it is all about keeping your relationship with your client and corporates strong, and keeping the morale of the staff in place. Thankfully, in the last 18 months, we have not allowed retrenchment of any staff; rather we managed to provide staff welfare. It is important that staff have a feeling of certainty and security because once there is peace of mind, they can focus on job at hand. We’ve done our best to enhance customer experience, protect our client base, and obviously making sure that staffing level remains motivated. We had to make tactical changes to ensure that the economic downturn does not affect our standard.
Apart of the obvious harsh economic climate, are there other challenges peculiar to the Nigerian environment?
The basic challenges, which the hospitality business in Nigeria is facing, apply to any business here. We have domestic inflation above 18 per cent, yanked down to 16. 1 but still high. Domestic loans and bank loans have been very high in terms of interest rates. The unavailability of the foreign exchange, the pegging of the naira, the devaluation of the naira, two parallel markets CBN and black market have made it difficult for a lot of businesses including hotels to obtain forex for their business.
It is important to renegotiate service contracts and make the suppliers are honest in terms of pricing, and ensure value for money is there instead of being extrapolated and the cost is transferred to guests. The procurement with the domestic inflation has not been easy for local food items such as vegetables, spices, poultry, fruits among others, which have gone up and we to raise prices in the hotel to accommodate all those increases.
You were involved in a couple of sponsorships last year, how much of that are you willing to do this year?
Last year, we did not indulge in all the sporting sponsorship activities because of the cost implication and the economic climate. In the last three months, we have seen slight improvement in terms of business levels, especially hotel occupancy probably because of certain government initiatives, and private sector. We are engaging with local stakeholders, corporate clients, renegotiating rates where necessary and also trying to look for new businesses as new business keeps coming to Nigeria because the country is big.In terms of sales and marketing, you have to change your tactics all the time, maintain and keep what belongs to your market share and also looking for new business.Currently, we still stand our nine years operation as the biggest hotel in Ikoyi with our 195 rooms.
How are you coping with challenges from other competitors?
There are always new competitors directly or indirectly. I think because of the economic situation at hand, a lot of the projects that were started have come to a stop. We do not expect anything major in terms of competition to come on line in the next two to three years. Some of the projects include Marriott in Victoria Island, Hilton on Glover Road Ikoyi here among others that are stopped now due to economic meltdown and people are constrained by the banks liquidity to service loans.
There is a Marriot in Ikeja, which is a different area. Our main competition is within Ikoyi, Victoria Island and may be Lekki Phase 1; we are not disregarding a number of small private hotels around us, they are vast number. Directly or indirectly, all competitors irrespective of size need to be respected and you need to tactically protect your market share in order to survive.
Hotel is a 24-hour business and we need to have responsible people to run it. So, we value of staff. Over the years we have been up scaling, ensure skills transfer, promotion from within and constant training, which is the corner stone of any management practice to keep a level of stimulation and to make sure that you provide the right environment and opportunity for people to progress.
Has the hotel met the expectations of the clients in terms of facilities?
We have done a lot in meeting our clients’ expectation in the last 18 months, precisely October and November. Where we are now is a new meeting room about 60 square meters. We developed it to bring in more business to the hotel. We have increased our banqueting and conference facility by adding an extra meeting room here. So, we have this 60 square meters meeting room, we have boardroom next door, which can accommodate 12-14 people, we have our main function hall, which is the Oduduwa Hall.
In the next 18 months, we plan to start the refurbishment project of our rooms as well. We are nine years old, typically between seven and nine years, 8-10 years depending on the model of the hotel, refurbishment project needs to be approached. We have started doing our back of house planting machinery and as the business progresses in 18 months we will start looking more at the room side of the hotel.
Are you considering expansion like other brands here?
I think expansion plans and aspirations will always be there for any brand or hotel group. The focus with this particularly property is first to upgrade the facilities, when the time is appropriate. As the economy improves, we look at viable opportunities and that will be done through our head office project development team. We have existing hotels in Maputo- Mozambique, Tanzania, Nairobi- Kenya, Zambia, Abu Dhabi in the Middle East, two hotels in Seychelles, which are offshore division as we call it and if you go to Tsogo Sun website, you will discover more about us.
As the economy gets better, we will look at viable opportunities for expansion in Nigeria and we elsewhere in West Africa. We should also not consider the economic climate, because when we opened this hotel, the world was also not in a good place. We opened this hotel during a difficult economic climate, but we survived it and grew the business.
Do you see hope in the pipeline for the Nigerian economy any time soon?
In the last 18 months, business is better as well as sentiment. Occupancy is picking up and it will continue with summer while the last quarter of the year is promising. We have to be optimistic because 2018 is a pre-election year. There will be a lot more stimulation in the second half of this year. There has been some good initiative by CBN and the government on developing the non oil and gas sector, diversifying the economy and unpegging the Naira. So, I think the fiscal and monetary policies are being followed and we must be optimistic that things will get better. As the economy gets better more infrastructure and businesses will come on line.
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