Lagos-based Alitheia Capital, in its latest Real Estate Insight report, notes that Nigeria’s short stay serviced accommodation industry holds good potential for further investment.
“Serviced apartments are an alternative to the traditional hotel room and the long term rental markets, providing a great degree of flexibility,” says the report. “They are operated like and compete directly with hotels, especially those that offer the same options on services as hotels, in addition to a variety of self service options.”
Alitheia suggests that the major incentive to choose serviced apartments over hotels is cost. “According to Go Native, cost savings on service[d] apartments occupancy can range from 10% to 25%, subject to length of stay,” states the report.
The demand for short let serviced accommodation in Nigeria has increased in recent times. “[The] majority of the demand has come from oil companies, telecommunication firms and the diplomatic community, usually following the directive of parent companies in adopting flexible and cost efficient business travel,” explains Alitheia.
The report notes that Lagos, Nigeria’s commercial capital, has a significant shortage for all types of accommodation.
According to Alitheia, Lagos currently has just over 7,000 three-, four- and five-star hotel rooms. Occupancy rates are around 80% to 85%, while 65% of guests are business travellers. Average daily rates for these hotels are between US$300 to $350 – one third more expensive than similar rooms in South Africa.
An over-supply of luxury residential apartments in Lagos over the past five to seven years has resulted in higher vacancy rates and a fall in property and rental values in those specific residential neighbourhoods. “This situation has certainly contributed to the increased number of short stay apartments as property investors and developers look for alternative uses for their vacant residential developments and quickly make the decisions to convert these to short let serviced apartments.”
Interviews with local property magazine editors revealed that advertisements for serviced apartments now account for between 5% and 10% of listed properties for lease, compared to 1% in 2009.
The short stay industry is also growing due to less available funding for commercial property developments.
The report says that short stay apartments offer a clear investment opportunity. “The demand for above-standard hotel rooms and short stay accommodation in and around Lagos is estimated to be around 6,000 rooms . . . growing at [an average of] 15% per annum.”
“As the city of Lagos continues to evolve into one of the so-called ‘mega cities’ in the world . . . The demand for goods and services will rise, and a responsive government will focus on the provision of key infrastructure and services. This will lead to the growth of local and international businesses, and perhaps the tourism industry, providing ample opportunities for tailored flexible accommodation and related services,” concludes the report.