As a hotel owner and operator in Nigeria the question I am
asked the most frequently by friends and colleagues is undoubtedly the question
of price. In particular why are hotel rates so high in Nigeria? The question
has been asked so often that I have memorized two responses; a long one and a
short one. The answer I give is dependent on who’s asking. Here I will give you
a hybrid of the two because If I were to give you the long answer I would greatly exceed the 300 word
count limit I have set for myself.
asked the most frequently by friends and colleagues is undoubtedly the question
of price. In particular why are hotel rates so high in Nigeria? The question
has been asked so often that I have memorized two responses; a long one and a
short one. The answer I give is dependent on who’s asking. Here I will give you
a hybrid of the two because If I were to give you the long answer I would greatly exceed the 300 word
count limit I have set for myself.
In January Hogg
Robinson Group an international corporate services company released its annual list of
Average Room Rates (ARR) worldwide. Lagos, Nigeria was ranked as the second
most expensive hotel city in the world to get a hotel!
Robinson Group an international corporate services company released its annual list of
Average Room Rates (ARR) worldwide. Lagos, Nigeria was ranked as the second
most expensive hotel city in the world to get a hotel!
|
City
|
2012 ARR (GBP)
|
2012 ARR $
|
|
Moscow
|
261.38
|
389.46
|
|
Lagos
|
227.82
|
339.45
|
|
New York
|
220.58
|
328.66
|
|
Hong Kong
|
211.35
|
314.91
|
|
Zurich
|
207.47
|
309.13
|
So why do hotels in Lagos cost more than hotels in Hong Kong? Lack of Infrastructure,
lack of adequate supply, cost of money and corruption.
lack of adequate supply, cost of money and corruption.
There are other reasons why hotels in Lagos continue to be so expensive,
but those are the big 4.
but those are the big 4.
Lets look at these on a point by
point basis.
point basis.
Lack
of Infrastructure: Inhabitants of Lagos know first hand how deplorable the quality of infrastructure
in many parts of the city can be. Traditional services that are meant to
provided by the municipality such as electricity, water, roads often need to be
augmented or built from the ground up by the developer. These extra add-ons
greatly affect your per key costs. These
are things hotels in cities like Zurich don’t have to worry about. When was the
last time you heard of a citywide power outage in Moscow?
of Infrastructure: Inhabitants of Lagos know first hand how deplorable the quality of infrastructure
in many parts of the city can be. Traditional services that are meant to
provided by the municipality such as electricity, water, roads often need to be
augmented or built from the ground up by the developer. These extra add-ons
greatly affect your per key costs. These
are things hotels in cities like Zurich don’t have to worry about. When was the
last time you heard of a citywide power outage in Moscow?
Lack
of Adequate Supply: There are more hotels in Washington DC than there are in Nigeria! DC has
less than a 1 million inhabitants while Nigeria has more than 160 million. A
lack of competition means hotels here can afford to charge as much as they
want.
of Adequate Supply: There are more hotels in Washington DC than there are in Nigeria! DC has
less than a 1 million inhabitants while Nigeria has more than 160 million. A
lack of competition means hotels here can afford to charge as much as they
want.
Cost
of Money: Hotels are notoriously long term investments, and in an environment where
long term funding is essentially nonexistent the high cost of borrowing in
Nigeria often means investors are trying to make as much money in the shortest amount
of time to pay down the debt on the project. The result is stupendously high
room rates.
of Money: Hotels are notoriously long term investments, and in an environment where
long term funding is essentially nonexistent the high cost of borrowing in
Nigeria often means investors are trying to make as much money in the shortest amount
of time to pay down the debt on the project. The result is stupendously high
room rates.
Corruption:
In Nigeria bribes aren’t called
bribes, but rather the euphemism of ‘PR’ is used. ( If you ever go through a Nigerian
company’s books and notice that they spend an obscene amount of money on public
relations.. well don’t say I didn’t warn you). Nothing gets done in Nigeria without
a little PR. To be fair oftentimes the PR isn’t explicitly a bribe, but rather a
way to motivate service providers to do what is expected of them. An example is
the solid waste management unit in Abuja. We are billed annually by the
municipality so we can have our trash evacuated several times a week. Often
times the drivers we won’t come and do what we’ve paid for without getting an
incentive. This malaise on the part of
civil servants and public sector employees means little gets achieved without
money changing hands.
In Nigeria bribes aren’t called
bribes, but rather the euphemism of ‘PR’ is used. ( If you ever go through a Nigerian
company’s books and notice that they spend an obscene amount of money on public
relations.. well don’t say I didn’t warn you). Nothing gets done in Nigeria without
a little PR. To be fair oftentimes the PR isn’t explicitly a bribe, but rather a
way to motivate service providers to do what is expected of them. An example is
the solid waste management unit in Abuja. We are billed annually by the
municipality so we can have our trash evacuated several times a week. Often
times the drivers we won’t come and do what we’ve paid for without getting an
incentive. This malaise on the part of
civil servants and public sector employees means little gets achieved without
money changing hands.
