Low levels of foreign visitors, high overhead costs and a recent recession have not prevented hotel investors from expanding their footprint in Nigeria, with a number of proposed projects in the pipeline..

In late June, BON Hotels International West Africa, an arm of South Africa’s BON Hotels, and in joint venture with South Africa’s Africa Alliance Group, signed off on a twelfth development in Nigeria. The 35-room BON Hotel Apo is scheduled open in Abuja early next year, the latest of five new facilities currently being built by the company in the country. BON Hotel Ekiti, BON Hotel Owerri, Hotel Lekki and BON Hotel Elvis Wuse2 will join the company’s portfolio by the end of 2018.

The expansion is aggressive, given that BON only entered the market in October 2016. The firm already has seven facilities in Nigeria, and has announced plans to grow that to as many as 37on the back of favourable demographics.

Nor is BON the only firm looking to increase their presence in the country. In March, Carlson Rezidor Hotel Group announced plans to expand its current presence in Nigeria from two to fifteen hotels by 2020, making the West African country the firm’s second largest market on the continent in terms of presence (after South Africa). Hilton Worldwide is also expected to finish work on its new 130-room Legend Hotel Lagos Airport, and has announced plans for another 350-room development in the same area by 2023.

Indeed, in its 2017 Hospitality Outlook, PwC reported that fifteen international hotel brands had plans to build more than 50 hotels in Nigeria in early 2016.

The new entrants are coming amid what has been a difficult few years for Nigeria, who has been hit hard by the fall in global oil prices. An economic contraction of 1.5% in 2016, together with capital controls which led to the temporary suspension of flight services by a number of major carriers, has hit the country’s nascent tourism sector. Even before the recession, hotel guest night figures, which reached 1.5 million in 2015, lagged those of other major African markets, such as Kenya or South Africa, who in that same year attracted 3.5 million and 13.3 million respectively.

However, foreign tourists comprise only a small percentage of the country’s hotel activity, which means that an improving outlook for the domestic economy may help sustain demand for rooms. Nigerians represented 97% of hotel revenues for 2016, according to PwC. Occupancy rates for the same year sit at 43.6% and are not expected to exceed this number by 2021.

Whether the demand from local travelers is sufficient to keep up with the planned influx of new room supply is not yet clear. W Hospitality Groups reports that roughly 10,222 rooms, from 61 hotel brands, are currently in the pipeline in Nigeria.

However, forecasts for growth – assuming that the country’s broader economy sustains its ongoing recovery – are bullish. Between 2006 and 2015 the sector’s value grew at CAGR 4.2% but according to PwC, the forecast through until 2021 pegs this at 14.7%, which would mean a doubling in room revenues to $517 million.