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The High Cost Of Lagos Hotels. by GuyFawkes: 3:16pm On Sep 19, 2014
THAT Lagos city hotels charge the highest room rates in Africa is certainly not surprising given the parlous state of the nation’s infrastructure and the ambience for any kind of business. No wonder Nigeria ranks far below many African countries in global competitiveness. This high cost of hotel rooms in Lagos and indeed other cities in the country is a disincentive to investment and tourism development which should be addressed as part of a wholesome effort to create an enabling  economic environment.

   According to the Lagos State Hotel Licensing Authority, there are about 2,500 hotels and other hospitality establishments in the state. And a recent investigation of the room rates of four international hotels in Lagos in comparison with their rates in other African cities revealed that the rates are much higher in Lagos than in the other African countries. The hotels are Southern Sun, Intercontinental, Radisson Blu and Sheraton. These hotels have operations in Johannesburg, South Africa; Nairobi, Kenya; Lusaka, Zambia; Maputo, Mozambique; Dar-es-Salam, Tanzania and Balaclava, Mauritius.

   While a standard room in Southern Sun is N25,000 in Johannesburg; N36,000 in Lusaka; N38,000 in Nairobi and N45,000 in Maputo, the same room goes for N62,000 in Lagos. Again, while the same hotel charges N24,000 for Executive Room in Nairobi and N61,000 in Johannesburg, the same room costs N70,000 in Lagos.

   For Intercontinental, a Superior/Executive room costs N24,000 in Nairobi and N54,000 in Johannesburg, but the same hotel charges N62,000 in Lagos. Radisson Blu’s Standard Guest Room costs N19,000 in Johannesburg but N49,000 in Lagos. The Business Class Room in Radisson Blu is charged N24,000 in Johannesburg but N69,000 in Lagos.

   As for Sheraton, while Classic Room goes for N16,000 in Pretoria, it costs N47,000 in Lagos. In the same hotel, a Club Room goes for N39,000 in Pretoria but N57,000 in Lagos. The cost of a Diplomatic Suite is N149,000 in Pretoria but N248,000 in Lagos. From the foregoing, the price difference is as high as 148 per cent. This huge difference has been attributed by hoteliers to the forces of demand and supply who claim there are very few of such branded hotels in Lagos and visitors especially foreigners, tend to choose one of those brands that they or their company is associated with. So a premium is charged since the demand is higher than the supply. 

   While this may seem plausible, it is absolutely not enough justification for such huge difference in hotel room rates in Lagos compared to other African cities. And to say that customers are ready to pay such a ridiculous high premium in order to experience a perceived high standard service smacks of a certain exploitative tendency on the part of those hotels. Perhaps, a more acceptable reason for the exorbitant rates is Nigeria’s peculiar environment which makes operational costs for any business very high. At the recent Second Nigeria Tourism and Investors Forum and Exhibition held in Abuja by the Federation of Tourism Association of Nigeria (FTAN), stakeholders understandably submitted that the cost incurred in running hotels in Nigeria is “outrageously high”.

   Because of shortage of basic amenities such as electricity and water, most hotel operators now install their own transformers and generating sets as well as dig independent boreholes and install water treatment plants. Besides, hotel owners invest huge sums on security that government has failed to guarantee in the country. The result of these  costs is an increase in hotel charges in Nigeria. And the tragedy is that this poor business environment in the hotel sub-sector is the same in all other sectors of the economy. Industrial production and services have been ruined as a result of such unfriendly environment. 

  No doubt, infrastructure, particularly power and transportation, must be addressed before any meaningful progress can be made in Nigeria. Power supply has hardly ever risen above 4000 megawatts in the last decade while South Africa is producing over 45,000 megawatts of power. It is not surprising, therefore, that of the four hotels surveyed, room rates are lowest in South Africa.  

   For Nigeria to be competitive, basic infrastructure must be put in place for the cost of services to reduce.  All the pretensions to being the destination of choice for investors are nothing more than that. Until an enabling environment is enthroned with adequate infrastructure and sound policy framework, Nigeria will remain below par, her potentials will remain unrealised, while consumers will helplessly continue to bear exploitative tendencies in the economy.
Re: The High Cost Of Lagos Hotels. by destante(f): 5:05pm On Sep 19, 2014
This huge disparity partly explains why the south African economy is behind Nigeria's. The costs of doing everything here is in multiple of that of South Africa and there is an effect of spread across many sectors. Putting the right infrastructure in place will allow for easing of costs that can be used to foster other aspects of the economy.

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