An Eye on West Africa

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Ever complained about Lagos hotel prices? A lot of people do! A standard room is going to cost you upwards of US$500 per night at the city’s leading hotels. Let’s be honest, none of these hotels can be said to be luxurious and problems encountered by guests are frequent, ranging from power outages to water shortages and communication problems.

So why the ‘high’ prices?

I’m currently working on a client’s proposed new hotel project in Lagos. It’s a basic ‘box’ – a simple design, 120 rooms, restaurant, bar, a few meeting rooms, a gym, and that’s about it – a classic, upper midmarket product.

But here’s the thing – this hotel is going to cost double what it would cost to build in South Africa. That’s because of import duties, transport costs, contractor margins, inefficiencies, the weather, unnecessary stoppages on site due to bureaucratic interference etc. Another factor is that a hotel in Lagos needs to be entirely self-sufficient with power (three generators, with extremely expensive control panels), water (two boreholes, with water treatment plants), and waste (dedicated sewage plant).

And generators are horrible things – they sit there drinking diesel, eating batteries, and funding the lavish lifestyle of the various engineers who ‘mend’ and ‘service’ them. They blow your light bulbs, destroy your DVD players, and generally wreak havoc. Oh yes, and they are an essential part of running a hotel in Lagos. An hotelier friend recently complained that his energy costs were 18% of revenue. Ouch! A London hotelier screams when his go above 4%.

So you see the problem? Very high building costs and an environment that contributes to high operating costs as well. Those are two of the things that drive high hotel prices. The third is supply and demand. What choice do you have? You want and need to do business in the most dynamic economy in Africa, and one of the top four in the world.

Next time you hand over US$500 for a ‘standard’ room, it may not be any more palatable, but perhaps you can spare a thought for the poor old hotelier, filling up his generator’s diesel tank and calling the engineer for yet another replacement part.

Trevor Ward – MD: W Hospitality Group

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