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This is the 13th edition of our annual Hotel Chain Development Pipelines in Africa report and analysis. That number is unlucky for some, but as usual we are not dealing with luck, instead some very hard work, by the hotel brands and by the investors that they engage with, in very hard times. This report is something of a curate’s egg, parts of the news it contains are excellent, but sorry to say that, in addition, there are some bad points to convey

We have come a long way since it started, but the effects of the COVID-19 pandemic continue to unfold. Globally, the hotel industry has taken a major beating. We’ve had numbers thrown at us in every article about the pandemic and its impact on hotel operations. Numbers explaining the extent of our woes and the range of possibilities for a future rebound.

But what do these numbers really mean? We’re here to explain!

Using STR data[1] for the Lagos and Abuja hotel markets, we will be looking at three hotel performance metrics that have frequently been used– room occupancy, average daily rate (ADR) and revenue per available room (RevPAR). We will look at these indices and explain the story behind the numbers. Perhaps then we’d all be in a better position to contribute to the conversations and anticipate what the future is for us.

In this first article of our four-part series on hotel performance metrics, we will be looking at room occupancy.

What is room occupancy?

Simply put, it is the ratio of the number of rooms sold in any period (each day, each month, each year) to the number of rooms available to sell.

Let’s take a 100-room hotel as an example. If we had 70 rooms occupied on Wednesday, then the room occupancy for Wednesday was 70%. But be careful…what if 3 of these 70 rooms were occupied by staff members (like the General Manager, the Chef and the Resident Manager)? Is it right to claim 70% room occupancy? No, it isn’t, and here’s why. There were 70 occupied rooms, but only 67 of those occupied rooms were revenue-generating. To reflect actual performance, it is best to focus on those rooms. So, in this case, room occupancy was actually 69%. That is 67 sold rooms to 97 available rooms. There’s a lot more to room occupancy than this, take for example out of order rooms (OOO), complimentary rooms, and the lot. But that’s for another day.

Let’s take a look at live data for the room occupancies in the Lagos and Abuja hotel markets. We compare the first seven months of 2019 and 2020.

The first infographic shows that back in January 2019, the room occupancy in Lagos was 52.9%. This means that, for this sample of about 12 Lagos hotels with a total of 2,170 rooms, an average of 1,148 rooms were sold each night of the 31 days in the month. In Abuja in January 2019, with a sample of 1,321 rooms, a room occupancy of 49.8% for the month means that on average 658 rooms were sold each night.
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Let’s pick up on other observations. In the seven months of January to July 2019, Lagos room occupancies averaged 56.7%, while in Abuja the average was 53.1%. Average room occupancies in Lagos were therefore 4% higher than in Abuja. Nigeria had general elections in February 2019, and this explains the dip in room occupancies shown for both cities - Lagos (45.5%) and Abuja (49%). Overall, the peaks and the troughs from January to July 2019 (but for the February exception) follow the usual pattern of room occupancy in these two cities.
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Looking at the second infographic, which is for 2020, the January room occupancy in Lagos was 59.2% (an average of 1,136 rooms sold each night out of 2,152 available rooms). Abuja recorded a room occupancy of 45.5% (605 rooms sold out of 1,330 available rooms). Summing it up, Lagos occupancies in January were higher in 2020 than in 2019, showing growth in that market, while Abuja occupancies were lower. In February, as expected because the 2019 figures were depressed due to the elections, the room occupancies in both cities were higher in 2020 - Lagos (68.6%) and Abuja (62.1%).

Now here’s where it becomes interesting. The COVID-19 pandemic caused the government to introduce a general lockdown and the effects begin to be felt in March 2020. Lagos occupancies hit an all-time low that month at 39.9%, because people were unable to travel, and the occupancy figures become progressively lower from April to June, with a slight increase in July, when the lockdown eased and domestic flights recommenced. From March to July, which were the main months of lockdown, Lagos room occupancies averaged just 27.9%. In Abuja, the negative impact of the pandemic was even more dramatic. By March, room occupancies had fallen to 31.7% and then dropped below 10% during the lockdown months. As in Lagos, there was a slight increase to 17% in July as lockdown restrictions were gradually eased.
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The massive impact of the lockdown on room occupancies can now be assessed. The Lagos and Abuja hotel markets experienced a double-digit drop in room occupancies between March and July 2020, compared to the same period in 2019. In April 2019, Lagos room occupancy was 63.7%, but in April 2020 this had dropped by over 30%. Abuja experienced a 51% drop in room occupancies over the same period.

Why did Abuja hotels underperform Lagos hotels so markedly during the lockdown months? The entire country experienced the same COVID-19 pandemic restrictions. Both international airports, Lagos and Abuja, were running skeletal operations. Why were the two cities affected differently? Well, one thing is for certain, Lagos appears to have benefited more than Abuja in terms of the conversion of hotels into residences for companies that continued to operate during the lockdown. Second, several hotels were operating as quarantine centres for evacuees and returnees. Third, hotels provided accommodation for essential service workers.

This is the room occupancy story in Lagos and Abuja. But what would be equally interesting to see is the impact of COVID-19 on ADRs, i.e. how much the rooms were being sold for – filling a hotel is one thing, selling the rooms at a price that will make the owner a profit and return on investment is another.

More of that in the next article.

[1] STR is a consolidator and analyst of hotel operating data worldwide - www.strglobal.com


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The industry etimate half of the planned Hotel development in Africa will not open in 2020

Looking at the impact which the Pandemic has had in the short term on future supply and understanding where there are still likely to be new hotels coming online in the short to medium term.


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An interview with Obinna Emelike of Businessday Newspaper, Trevor Ward, Managing Director, W Hospitality Group, x-rays the industry’s current position, the impact, trends, recovery among other related issues.


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Gensler.com’s article on using the moment to improve city life, by Nate Cherry.


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These are the slides presented by STR at their webinar on 25th March 2020 on the
performance of hotels in the MEA region.


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Safeguarding our lives and livelihood: The imperative of our time by McKinsey &
Company


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The federal government of Nigeria as part of the measures in place to limit the spread of
COVID-19 gave an order effective 30 March 2020 at 23:00h that all organizations and
businesses should shutdown operation, with a few exemptions such as organisations
offering essential services.


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McKinsey’s COVID-19 scenarios for economic recovery, including in Nigeria, South
Africa and Kenya.

Affiliated to

1 Resort Court
Plot 15,Block XV,Chief  Abiodun Yesufu Way Lekki,Lagos, Nigeria
+234 803 321 0646
info@w-hospitalitygroup.com
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