Saturday, September 27, 2014

How to start a Budget Hotel/Inn business in Nigeria

Nigeria being the most populated country in Africa and the busiest market on the continent attracts tens of thousands of daily visitors who troop in for business or pleasure. The estimated return on investment is between 20 and 30% net profit on total sales.

Opportunities in the Budget Hotel Business
One online report has it that not less than 20,000 people fly in daily into Lagos and Abuja both local and international for business purposes alone. The vast majority of these people are on official trips from companies they represent and so need to be accommodated for the duration of their visit. Where could they possibly be hosted?

As of 2014 there are just over 150 hotels in Abuja to host 8,000 – 10,000 guests at any given time. Many of these visitors are international guests and would prefer to lodge at only premium hotels that fall within their budget. This means only larger standard hotels with many rooms have the capacity to manage the huge influx of international visitors leaving the smaller hotels to compete for the remaining low budget guests who are roughly 30 – 50% of the entire hotel market. So let’s say your hotel is based in Abuja, out of 10,000 daily guests you have to compete for say between 3,000 and 5,000 guests with other budget hotels.

In the UK, the leading hotels are budget hotels capturing roughly 39% of the entire market. This is because they’ve been able to provide world class services at affordable rates thereby poaching some customers from the other hotel categories.

On average a 20 room budget hotel should be fully booked year round and with adequate services to go with there is plenty of room for expansion.

Types of Hotels in Nigeria to Know
If you want to venture into hotel business in Nigeria you’ll need to factor in how much capital you have, where you’d situate the hotel, the target market etc. These factors would now determine what you’d like to provide as services and amenities for guests and customers. But take note of the following types of Hotels in Nigeria

Business Travel Hotels
These are hotels designed for travelling business executives. They are usually very expensive but provide conducive work and rest environment for business executives travelling on official assignment.  Example is Victoria Court Hotel in Lagos

Boutique Hotels
These are top class hotels that attend to the needs of both business travellers and tourists. They’re expensive as well but lack the specialized services of business travel hotels. An example is Eko Hotel and Suites.

Bed and Breakfast Hotels
These are smaller but standard hotels that provide complimentary breakfast along with lodging services. Most bed and breakfast hotels target workers on official assignments typically middle level managers but their guests cut across all groups usually when other higher capacity hotels are either too expensive or fully booked. A good example is Protea hotels

Budget Hotels/Inns
These are hotels for people on average budget, typically they offer basic lodging service but not adequate amenities to support special needs such as international standard rooms, swimming pool, tennis court, standard conference rooms etc but may also offer a complimentary breakfast with room service. The good thing about this category of hotels is that they have a large target market but due to inadequate marketing many of them are just barely able to turn a profit.

Challenges
·        Criminals often like to use cheaper hotels as hideouts especially when on the run from law enforcement agencies.
·         Low budget hotels tend to attract all-comers thereby depriving guests of quality time.
·         Low budget hotels are easier to access from unwanted guests unlike standard hotels that enjoy exclusivity.

Startup Capital for a Budget Hotel in Nigeria

Item
Cost
20 room house
N40 million (depends on location)
Hotel Amenities (car parking space, bar, dedicated hall etc)
N10 million
Furniture
N10 million
Official Car
N1.5 million
Electronics and Electrical gadgets
N2 million
1 year salaries
N6 million
Marketing expenses
N1 million
Other expenses
N3 million
Cash at hand
N2 million
Total
N75.5 million

Want to start a budget hotel in Nigeria and need a good business plan for it? Give me a call: 0803 206 4106 and I'll walk you through the process.