The Coronavirus has affected every sector across the globe, and the hotel industry is among the hardest hit.
The outbreak of the deadly coronavirus that disrupted economic activities across the country has impacted the occupancy levels in Nigeria hotels across major cities, resulting in a 57.97 percent decline in the combined revenues of the largest players in the industry to N12.59 billion as at September 2020.
The companies are: Transcorp Hotels Plc, Tourist Corporation of Nigeria, Ikeja Hotels, and Capital Hotels.
Hospitality workers such as waitresses, hotel keepers, and casino dealers have had their salaries slashed, while others were either furloughed or fired out-rightly.
Investors are worried that operators in the industry may not have enough financial strength to meet their obligation to short and long term creditors.
For instance, the four dominant players collectively made a loss of N13.47 billion in September 2020 as against 2019’s net income of N162.79 billion.
They are highly geared and could default on loans as they are reeling from huge debts that could undermine future profit.
Total debt owned by them stood at N41.66 billion in the period under review, which represents a 0.41 percent reduction from 2019’s N41.84 billion.
Transcorp Hotels, the largest hotel and Hospitality Company in Africa’s largest economy, has a total debt of N15 billion in its balance sheet in the period under review, while finance costs increased 36.89 percent to N4.45 billion in September 2020 from N3.25 billion the previous year.
The company posted an operating loss of N1.19 billion as at September 2020, which means it doesn’t have the earnings to cover interest expense, according to MoneyCentral analysis.
The Tourist Company of Nigeria Plc has total debt of N25.73 billion as at September 2020, which is 4.03 times total equity, an indication that the company funds its operations or balance sheet with creditors’ money.
Ikeja Hotel said the protracted deteriorating financial conditions could hinder its ability to reward its owners from distributable profit.
In addition, the Company received a letter dated October 15, 2020 from the Lagos State Government, purportedly revoking its right of occupancy on its land situated at Opebi Gorge, Ikeja, Lagos.
The Company has taken legal action to contest this revocation. However, the revocation has the potential to impair the assets of the Group to the tune of N4. 63 billion if the government succeeds.
Before the outbreak of the coronavirus pandemic, operators in the hotel industry were reeling from a difficult operating environment and foreign currency peg by the central bank resulted in capital flight as investors feared they may be unable to repatriate their money.
And now the economy is contracting, Naira is depreciating, inflation is spiking, foreign reserves are falling, food prices and unemployment are soaring.
About 90 million people live on less than $1.95 a day, according to the World Bank.
Data from the National Bureau of Statistics also reveal the hotel and hospitality sector contracted by as much as 40 percent in the second quarter of 2020, officially falling into recession.
Transcorp Hotels said that it loses about N1 billion every month due to the Covid-19 pandemic.