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Estate developers, experts bemoan real estate business slowdown

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Published in Real Estate
Tuesday, 10 November 2015 15:02

Estate developers are lamenting plowing huge investments into the nation’s real estate sector following recent lull in the sector, especially now that they think the hotel and tourism sector is posting better returns on investments. SYLVA EMEKA-OKEREKE reports.

As investors and other economic players step-up actions to tap the potential from different sectors of the global economy, to stave-off the growing recessions, experts in the nation’s real estate sector have been making frantic efforts to go back to tourism industry, which hitherto was one of government’s revenue earners, regretting the neglect of the all-important sector.

Describing tourism development as a viable option to property business, experts believes that the present economic reality amid oil glut, has necessitated the dire needs for diversification into other sectors of the economy, including tourism industry.

According to some investment and property development experts who spoke with National Mirror, the sector suffered a setback due to the inability of earlier investors to recoup their investments as a result of non-patronage of the tourism business. However, some analysts have noted with assurance that the situation is a sharp deviation from the past, going by the current tourism index of over 65 percent return on investments.

An estate consultant, Mr Michael Asupo, pointed out the tourism sector was not only viable, but capable of generating huge revenue to state and federal governments as could be seen in some developed and developing countries of the world.

For instance, some African countries like Kenya, Ghana, Ethiopia, Egypt, South Africa and Tanzania have been making huge revenues from the sector. Asupo, who cited Tinapa and Ogudu Cattle Ranch in Cross River state, as big tourism potential capable of generating enough revenue to the state, said the lacklustre attitude of the past and present administrations in the state has affected the good intention of the immediate past governor of the state.

According to him, tourism potential of the country is higher that its real estate potential, saying in the past, cash was not rolling in the sector, assuring that once again, the sector would bounce back, considering the global oil.

He said: “As long as the economy continues to improve, the fortune of the tourism sector will continue to improve, compare to real estate industry” The industry player projected that the sector would witness impressive growth in the next three years, noting that tourism industry engages in hosting services such as hotels, bars, cruise lines, cattle ranching as well as other related businesses.

Asupo explained that the influx of foreigners as well as local and foreign tourists into the country, was capable of boosting the nation’s economy of the country, noting that the Gross Domestic Products, GDP, of some African and western countries come from tourism industry.

He therefore urged estate developers to channel their funds in developing the tourism industry, stressing that in due time, the sector would play major roles in the revenue generation of the country as well as the GDP.

Similarly, Funso Adeyemi, a tourism analyst, said the industry remained a multi-billion dollar business, stressing that it is the most economically-active of the sector’s developments, especially in accommodation and food services.

He said that prior to the discovery of oil as a major source of revenue Nigeria was primarily an agrarian economy with little or no investments in tourism industry. The oil boom of 1980s, he said, brought high demands for tourism industry, especially hotel businesses, as Nigerian military government was isolated from international community. This was coupled with the influx of foreign nationals into the country.

However, he said, the country’s return to democracy in 1999 saw a resurgence in the sector, as improved economic and political stabilities in business environment, which encouraged foreign and local investments in oil and gas as well as telecommunications, thus playing down on tourism development.

Tourism business, especially hotel investment dates back to 1942, with the unveiling of Lagos Airport Hotel, followed by other hotels like Bristol Hotel in and Federal Palace hotel. Consequently, more hotels opened across the country in 1960s and 1970s, including Hotel Presidential in Port Harcourt, Eko Holiday Inn and Festac 77 Hotel as well as Gateway Hotels in Abeokuta. Others include Ijebu-Ode and Ota, which were developed by government in the absence of capacity in private sector.

Adeyemi said, there was an influx of regional and international chains of hotels as Nigerian hotel industry was not significantly affected by the 2008 and 2009 global economic crisis Regional and internationally branded hotels continued to open in the country, especially in Lagos state, Abuja and Port Harcourt among other areas. Tourism investments cut across other sectors and such potential cannot be underestimated, considering serious population growth in the country.

For instance, overcrowding as well as overpopulation of in some academic institutions in the country is capable of encouraging governments as well as the private investors to build and run hostels. Presently, a lot of Nigerian banks are involved developing hostels, hotels among other tourism potential in some institutions of higher learning. Some of the banks, including Spring Bank, Zenith Bank among others have stakes in some of the private and public institutions in the country.

This is not applicable to Universities alone, but also Federal and state Polytechnics, Colleges of Education, Technical Colleges as well as Teacher Training Institutions. Experts have maintained that no matter the location of the institutions, whether rural or urban areas, they can still generate a lot of traffic, especially during academic session.

The rush for such investments makes the rent higher than most urban areas with the same square meter area of rooms. According to experts, the returns on investment is high as students pay yearly, thus generating lump sums of money to build more or add to the existing ones, which can easily be rented out again.

‘’Your contract with students is usually on yearly basis, which terminates at the end of every session. You are paid before new tenants come in, unless the present occupier can afford to pay new rates, which are usually added almost every year.

The student sojourn is always short and transitory, which makes it easy for you to increase your rent, after he must have packed out’’, an estate developer stated. For potential investors, there are two options through which they can participate, one is by going into partnership arrangement with more tertiary institutions to obtain land under leasehold agreement, build and manage the hostel on agreed terms. Also, to speculate for land around tertiary institutions, obtain necessary titles and approvals from government agencies, build and then manage the hostel.

The hostel does not have to be located within the school premises, but should at least be in the town or close to the school, hence the closer it is, the higher the rate. One can start with small rooms, about 4-5 rooms on a half plot of land and grow steadily to build bigger ones in the institutions scattered all over the nation. Banks; mortgage and other financial institutions can collaborate in this regard.

A reliable investment, hotels produce constant and predictable returns. They represent an alternative to investing in traditional real estate markets, such as the residential and tertiary sectors. The hospitality industry is built on solid fundamentals and is able to weather economic storms.

Revenues and profits have risen steadily over the past decade. The sector is particularly dynamic in France, which remains the world’s premier tourist destination with a 6 percent increase in visitor numbers in 2012. As wider hospitality industry continues to face a slow recovery, savvy hotel owners and managers are looking inwards to ensure better technology to run their facilities.

While some hotel organisations have used the present economic downturn to adequately plan for the future through improved technology and staff investment, many others are shedding costs.

Progressive hospitality organisations have currently heeded the warning signs that dynamic markets and changing industry requirements are part of the new ‘normal,’ and have taken time to invest in the right training to be better placed to effectively conduct business in the market place.

In consideration of how investment in hospitality technology can support business growth, it is important to look at what operational efficiencies can bring, including improvements in staff activities and morale to generate more revenues.

As hotel industry continues to move towards a more dynamic and interconnected environment, it is vital that correct technology infrastructure is in place to meet this challenges. Importantly, hoteliers also need to realize that the hospitality industry is constantly changing and a lack of upto- date technology and older strategies will not always be applicable to new, unique situations.

For instance, with the increase in choice of distribution channels for a hotel, it is no longer appropriate to expect a Reservation or Revenue Manager to handle a multitude of manual Extranets to ensure revenue management and pricing integrity.

 

SOURCE: THE NATIONAL MIRROR

Read 1223 times Last modified on Thursday, 12 November 2015 14:01
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