
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, According to 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.
source: Guardian.