Travel and tourism are expectedly one of the hardest-hit industries during the pandemic as travel restrictions and other reactive measures have been enforced globally to curtail the spread of the COVID-19 virus. Statistica says global internal tourism revenues fell drastically to $3.1 trillion in 2020 alone. The Nigerian tourism sector noted revenues as high as $2bn in 2018 (CEIC) and tourists’ influx of about 5.2m in 2016 (WorldData.info). In 2020 however, IATA estimated that the country may see 5.7 million fewer travelers due to the pandemic, putting 149,400 jobs at risk and shortchanging $1.1 billion contribution to Nigeria’s economy. What does this mean for hospitality and housing?

Reduced hotel occupancy rates

The W. Hospitality Group in Nigeria says that the country’s hotel occupancy rates are largely driven by foreign tourism with business tourism accounting for 70% of hotel demand in Lagos state. Following the ban on domestic/international flights, the state’s hotel occupancy rates dropped from 70% in February to nearly 15% levels during April before a post-lockdown recovery. Prominent hotels like The Wheatbaker, Sheraton, The George, Eko hotels & Suites had to either temporarily shut down or operate minimally due to reduced demand, employees’ health, and business sustainability concerns, all of which have negatively impacted the businesses’ potentials to generate revenue.

Reduced foreign investment and development activity

Travel and tourism are key to attracting investment and developing the economy; the tourism sector alone contributed 5.1% to the country’s GDP in 2019. However, with fewer travelers visiting the country for business and leisure, new and existing projects will note less activity from its typical occupiers. Similarly, revenue losses from the industry plunged the country even further down into recession rendering the industry unattractive for investments. The dwindling patronage has indeed created existential issues for businesses as revealed by the Q2 and Q3 financials of some major listed hotels on the Nigerian Stock Exchange where revenue losses as high as 90% were recorded. Investors typically exit the now ‘risky’ assets to seek safer havens and hedge their exposures.

Reduced purchasing power to rent or acquire residential properties

With 149,400 jobs at risk, some businesses within the Nigerian travel industry have had to lay off their workers. The combined effect of job and income losses within and beyond the travel industry hampers the purchasing power for luxury properties including housing. While new projects will take much longer to be realized due to the lower demand and funding issues (shortages of debt and equity), the increases in costs due to the currency devaluation, as well as owners’ lack of willingness to continue existing projects will create shortages on the supply side of the industry.

In summary, the effect of travel and tourism on hospitality and housing are discernable. Reducing the dependency on foreign demand while exploiting local tourist participation are considerable alternatives for the industry in these times.