- Hotel Occupancy Drops Below 35% as Recession Bites
Nigeria’s hospitality sector has been hit hard by the economic slowdown, with occupancy rates in hotels falling below 35 per cent this year due to the contraction of economic activities in the country.
Findings showed that hardest hit were the four and five-star hotels in Lagos and Abuja, where bookings have dropped significantly as individuals and companies now prefer to book rooms at cheaper boutique hotels due to the economic crunch.
While the occupancy rate of Southern Sun Hotels, Ikoyi has dropped to about 45 per cent, the occupancy rate at the Intercontinental Hotel, Victoria Island, a five-star hotel and the second largest property in Lagos, is as low as 25 per cent.
Also, the occupancy rate at Wheatbaker Hotel in Ikoyi is currently estimated at 30 per cent, Eko Hotel and Suites, Victoria Island, which boasts a combination of four and five-star sections in its sprawling property, is down to 40 per cent, while the Federal Palace Hotel, also in Victoria Island, has dropped to 35 per cent.
In Abuja, the Transcorp Hilton, the largest property in the federal capital city, which over a year ago boasted an occupancy rate of 70-80 per cent, has seen a slight drop to 65 per cent.
A company source said the reason the Transcorp Hilton has continued to attract guests is because it had anticipated that the change in government last year and dwindling oil prices would impact on the number of guests booked in the hotel by the federal government, so it changed its marketing strategy by targeting guests from the private sector.
The source, however, admitted that weekend occupancy rate at the Transcorp Hilton has dropped significantly, but is offset by improved room bookings on week days.
He said the remodelling project currently being undertaken by the Hilton in Abuja has also helped the hotel to remain relevant in the city.
Nigeria’s third quarter real gross domestic product (GDP) growth data released on Monday by the National Bureau of Statistics (NBS) showed that the country sank deeper into recession, contracting by 2.26 per cent from -2.06 per cent in the second quarter of this year, and -0.36 per cent in the first quarter.
The contraction in GDP was largely driven by the militancy in the Niger Delta, which resulted in a drop in oil output during the third quarter to 1.63 million barrels per day (mbpd) and the decline in the oil sector’s contribution to GDP, notwithstanding the rebound recorded in the agriculture sector.
The latest GDP growth data further confirmed the level of weakness in the economy, which has been hobbled by rising unemployment and job losses, declining capacity utilisation, and acute foreign exchange shortage.
Owing to the sharp drop in hotel occupancy rates, a lot of the hotels have been forced to shed staff as they struggle to remain afloat.
“The point is that a lot of the big hotels have continued to lay off their workers. Like the Southern Sun and Intercontinental Hotel, they had to lay off some workers because of the recession. Today, more people prefer to go to cheaper boutique hotels, not exceeding N50,000 a night.
“They now go to hotels which are rated two to three stars such as the Protea chain in Lagos and Abuja. With less money, people would be booking them more,” an operator who pleaded to remain anonymous said.
Speaking on the development, the Chief Executive of Financial Derivatives Company Limited, Mr. Bismarck Rewane, explained that the average drop in the occupancy rate across the large hotel chains could even be far below 35 per cent.
“If you discount the flight crew rate, it’s even lower. That is because flight crews are always offered cheaper rates. For instance, when a British Airways is booking hotels, if a room is $200, they would pay maybe $100 or even $65 because they are paying for the whole year.
“So, the cabin crew rate is always cheaper. If you discount the cabin crew rate, if occupancy rate is about 40 per cent, they are down actually by 28 per cent.
“The economic recession has finished them (hotel operators) completely. With three consecutive quarters of increasing negative growth, that means some things are not working right,” Rewane added.
Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd
The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.
The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.
The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.
The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.
Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.
The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.
Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins
Oil Prices Recover from 4 Percent Decline as Joe Biden Wins
Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.
This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.
Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.
On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.
“Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”
The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.
“There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.
“Either you’re crimping energy demand or consumption behavior.”
Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020
Revenue of OPEC Members to Drop to 18 Year Low in 2020
The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.
EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.
“If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.
The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.
It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.
It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.
“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”
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