Ayo Alonge, [email protected]
Edward Akinlade is a serial entrepreneur who heads a conglomerate which typically ventures into real estates and hospitality businesses.
With his tens of hotel outfits around the country, he reveals that the hospitality business in Nigeria contributes just one percent to the country’s GDP, an insinuation that the business has a lot of potential for budding investors and entrepreneurs, despite the numerous challenges that mitigate against its growth.
While commenting on his success story in business, Akinlade laments the preponderance of hotels by startups, as he also spoke on taxation, borrowings as well as government regulation of the industry.
My background in entrepreneurship can only be traced to the days I was with mother at Tejuoso market where we were buying and selling second-hand furniture. That was from the late 70s to 1981. My first call was in real estate. That was what I was into in the UK before I came back to Nigeria. It was later that we delved into hospitality; hotels. If you know real estate very well, you will have to segment it and focus on one.
In the real estate business, there are three levels – the luxury, the middle income and the affordability level. The luxury market now is on its knees. Don’t even go there. If you must go there now, just go into buying and selling of land. In the middle income, you need to come up with an easy payment plan. For the affordability level, whatever you put up, you can sell off in one day.
Today, we own three hotels. Best Western Hotel and Suru Express Hotel. Western Hotel was designed for Lagos, Abuja and Port Harcourt while Suru Express was designed to be seen in every state of the federation. The Lamido Sanusi’s intervention of 2009 cut that off. We were supposed to go to the Nigerian Stock Exchange to raise funds for that but that intervention made the stock market to be on its knees.
I have been an entrepreneur in the UK before coming back to Nigeria in 2006. The Nigerian challenge is just too much. Do I want to keep paying multiple taxes to Lagos State government? I can list over 20 different taxes that we are paying to both the state government and Federal Government. They include land use tax, consumption tax and so on. In advanced nations, all you pay is just one and they share it. Another is finding a staff that has honesty and integrity. Corruption has eaten into everyone in the country. The next is that if we need to borrow from Nigerian banks, they start demanding 25-30 per cent interest rate.
I am a believer. It is those who don’t believe in God that their business will collapse. We know that Nigeria is going to be better someday and we have that hope. A lot of businesses have closed down and some have even died, but we are still in business.
In order to expand, every business still depends on loans but there is a limit to what your money can do. What if you have to build 10 hotels? You may have to go into equity and that is about giving out 30 per cent too. Truth is that there is nobody in Nigeria that wants to be successful in business that won’t get involved in one form of borrowing or the other. In the UK, interest rate is less than one per cent. Another is electricity. We have at least two generating sets in each of our hotels. We keep on spending millions on diesel that could have been used to expand our business.
There is no doubt, it is very profitable. If you are building a block of four flats, for example, you expect that to cost you N60 to N70 million. I am talking about highbrow areas like Ebute Metta, Surulere and the rest. You can’t go to a Nigerian bank and borrow that because by the time they cut out their interest, the profitability will be almost zero. We do billion naira transactions at a time and we get out our money before moving to the next one.
Opportunities in hospitality business
At the moment, I would say it is not bright. For example, in Ikeja GRA alone, it so sad that we have about 35 hotels and you ask – who are staying in these rooms? Nobody! Yet, more hotels are still under construction in same environment. If you talk about a street in Nigeria where we have more hotels, it is Joel Ogunnaike. Talking about the preponderance of hotels in Nigeria, I am not in anyway suggesting that many hotel outfits would close down soon because I am part of it. What I am saying is that if you are in this line of business, you will be thinking of where all the customers are coming from.
Contribution to GDP
I may not be able to say the exact figure but I think it is meant to contribute so much to the country’s GDP but it is unfortunate that that record is not there. In advanced nations, tourism contributes about 45 per cent of the country’s GDP. So, if I have to say it, I will say that we are contributing about one per cent to GDP.
For me, I am not clamouring for regulation. I am saying they should encourage investors by giving the enabling environment. If the enabling environment is there, things would work fine. If we build massive houses, we can eradicate poverty. Why has government not done that? It doesn’t cost government a kobo. We can build hundreds of thousands of houses every year and here is how.
Call people like us and say here is free land, go and build 10, 000 units and when you are done, bring some flats to the government. Whatever is left, I will sell it for my own money. Imagine how many companies are into real estate in Nigeria. In effect, we can build four million new homes every year. All what the government needs to do is to provide free land that can then be paid back with a number of buildings. What is the cost of that to the government? It’s zero. The Federal Government shouldn’t be constructing affordable housing. People like us can do it. So, I can say that government’s will is lacking.