Pelumi Akinwande is a result-driven finance professional with over a decade of experience in taxation, accounting, and business consulting. He has worked with top institutions including PwC and leading commercial banks, and has overseen finance operations across sectors such as hospitality, logistics, energy, and real estate. He currently serves as Finance Director at T9 Hotel Ltd and Chief Operating Officer at Pax Homes, where he drives operational excellence and financial strategy. A certified Financial Modeler and Valuation Analyst (FMVA), Pelumi holds multiple certifications from the Corporate Finance Institute (Canada), an MBA in Finance, and is a Fellow of the Institute of Credit Administration of Nigeria. He is also a student member of the Chartered Institute of Taxation of Nigeria. In this interview with KENNETH ATHEKAME, he discussed the current state of the Nigerian economy, its impact on the hospitality sector, and the state of domestic tourism, highlighting how these factors influence occupancy rates. Excerpts:
How would you describe the current state of the Nigerian economy and its impact on the hospitality/short-let sector?
The Nigerian economy is currently experiencing a downturn, marked by high inflation, currency depreciation, and reduced consumer spending power. These challenges have significantly affected the hospitality and short-let sector, leading to low patronage over the past five months. Discretionary spending has declined and many potential clients are prioritizing essentials over leisure or short-term accommodation.
What are the primary economic challenges you believe are facing Nigeria today, and how do they affect your business?
The biggest hurdles are double-digit inflation, currency volatility, high energy costs and infrastructure gaps. For us, inflation drives up everything from housekeeping supplies to linen replacement. Currency swings push the price of imported furniture and electronics. And unreliable power forces us into extended generator use, inflating our utility and maintenance budgets.
How do you stay informed about economic trends and policies in Nigeria?
I stay informed about economic trends and policies in Nigeria by actively following multiple reputable news outlets that focus on economic and financial developments. Additionally, as a finance professional, I make it a priority to stay on top of trends and policies that impact my sector, ensuring I am well-informed and able to respond strategically to market changes.
What role do you think the short-let industry plays in contributing to the Nigerian economy?
The short-let industry plays a significant role in contributing to the Nigerian economy. It supports tourism, creates jobs, and stimulates local spending. In fact, during peak periods like December 2024, the industry generated revenue running into billions of dollars, highlighting its growing importance as a key driver of economic activity and urban hospitality.
How does inflation affect your pricing strategies and operational costs?
Inflation directly impacts both our pricing strategies and operational costs. While we experience rising expenses, we strive to keep our prices competitive to attract and retain customers. We closely monitor inflation trends and adjust our rates periodically to reflect increased costs, while still maintaining affordability and value for our clients.
How do fluctuations in the Naira’s exchange rate impact your business, particularly regarding pricing and international guests?
Fluctuations in the Naira’s exchange rate have been quite challenging for our business. They affect our pricing structure, especially when dealing with international guests who often compare rates in foreign currencies. While we try to maintain stability in our pricing, exchange rate volatility can reduce profitability and affect booking decisions. It also increases the cost of imported goods and services used in our operations, adding further pressure on margins.
How do you manage pricing in a volatile currency environment?
We manage pricing by adopting a flexible and responsive strategy. We regularly review our rates to reflect current economic realities while ensuring they remain attractive to our target market. For international guests, we sometimes quote prices in more stable currencies like the US Dollar to reduce the impact of Naira fluctuations. Additionally, we monitor market trends closely and streamline operational costs to maintain profitability without compromising service quality.
Do you accept payments in foreign currencies, and if so, how do you handle the exchange rate risks? How has the recent unification of the Naira affected your business?
We accept payments in foreign currency. We require 20 percent upfront in foreign currency to lock in the rate. The June 2023 FX unification narrowed the gap between parallel and official rates, reducing last-minute rejection of payments. Volatility remains, but the policy has improved transparency and planning.
How do government policies, such as taxation or regulations, affect the short-let apartment industry in Nigeria?
Government policies especially around taxation, licensing and zoning significantly affect the short-let industry in Nigeria by increasing regulatory compliance requirements and operational costs. We face VAT, stamp duties on rentals and withholding tax on corporate bookings.
How does the state of infrastructure (electricity, internet, roads) in Nigeria impact your ability to provide quality services to your various guests?
Electricity outages demand 24/7 diesel generators, doubling our utility bill. Road conditions affect staff commute times, forcing staggered shifts to maintain 24-hour front-desk coverage. We partner with two ISPs for automatic fail-over to guarantee high-speed Wi-Fi.
How has the fuel subsidy removal affected your operational costs and service delivery?
Fuel for our gensets shot up 40 percent overnight, raising per-day power costs by 65 percent. We tightened pool pump schedules, switched to energy-efficient LED lighting and imposed a modest energy levy ensuring service levels remain intact.
What are your thoughts on the impact of the rising cost of petrol on the short-let business, particularly for guests requiring transportation?
The rising cost of petrol has significantly impacted the short-let business not only by increasing transportation expenses for guests, but also by driving up operational costs due to the heavy reliance on generators for power supply. This dual pressure affects affordability for guests and profitability for operators.
How do you perceive the current state of domestic tourism in Nigeria, and how does it affect your occupancy rates?
Domestic tourism is booming. Leisure bookings grew 35 percent year-on-year as Nigerians rediscover Lagos, Abeokuta and Calabar. Weekends are our busiest windows, with average occupancy hitting 62 percent across the portfolio. The trend helps us compensate for weaker mid-week corporate demand.
What strategies do you employ to attract both local and international guests in the face of economic challenges?
We package localised experienced partnerships and reduce rate. Sometimes we offer discounts. Internationally, we team up with inbound agencies abroad. Locally, we run geo-targeted social media campaigns offering “long-stay” discounts for families and remote workers.
How do you think economic instability affects the willingness of Nigerians to travel and utilise short-let accommodations? How do you tailor your services to appeal to different segments of the market during economic downturns?
Instability pushes some to pause discretionary trips while boosting staycations. We have introduced a “work-from-home escape” rate for remote workers needing better broadband. For budget-conscious families, we launched a half-board plan with bundled meals at 15 percent below à la carte. Segmenting offers helps fill rooms in tougher times.
What strategies have you implemented to mitigate the effects of economic downturns on your short-let business?
To mitigate the effects of economic downturns, I have adopted several strategies, including adjusting our pricing to remain competitive, offering discounts for longer stays, optimising operational costs and improving guest experience to encourage repeat bookings and referrals. I have also diversified our marketing channels to reach a broader audience and maintain steady occupancy.
How do you manage your expenses and maintain profitability during periods of high inflation and economic uncertainty?
During periods of high inflation and economic uncertainty, I manage expenses by prioritizing essential spending, negotiating better deals with suppliers and reducing energy and maintenance costs where possible. I also implement cost-effective marketing strategies and adjust our pricing to balance affordability for guests with sustainable margins, ensuring we maintain profitability without compromising service quality.
What opportunities do you see arising from the current economic situation, and how are you positioning your business to capitalize on them?
Despite the challenges, the current economic situation presents opportunities such as increased demand for affordable, home-like accommodation as people seek cost-effective alternatives to hotels. We are positioning our business to capitalize on this by offering flexible pricing, improving customer experience and targeting digital nomads, remote workers and local travelers looking for staycations or temporary housing solutions.
How do you manage the risk of bad debt or payment defaults during times of economic hardship?
To manage the risk of bad debt or payment defaults during economic hardship, we enforce strict payment policies such as requiring full or partial payment before check-in. For corporate clients, we maintain clear terms and follow up promptly on outstanding invoices to minimize exposure.
How do you handle the increasing costs of maintenance and repairs within the current economic climate?
To handle the increasing costs of maintenance and repairs, I prioritize preventive maintenance to reduce the likelihood of major breakdowns, work with reliable service providers to negotiate favorable rates and source quality materials that offer long-term value. I also schedule routine inspections to catch issues early and manage costs more efficiently.
