On May 29th 2023, during his inaugural speech, President Bola Ahmed Tinubu announced the full subsidy removal of premium motor spirit (PMS or fuel).
Now, nearly three months after this historic decision, the lingering effects of the fuel subsidy removal continue to loom over the hospitality, travel, and tourism sectors. This situation has spurred us to delve deeper into the implications of this shift.
Three findings from the report on ”The Business of Tourism” look at the implications that all stakeholders within the hospitality, travel, and tourism industries should carefully contemplate.
- Hike in transportation costs impacts visitor numbers:
The initial and most noticeable impact of the fuel subsidy removal was the surge in transport costs. Bus fares have skyrocketed by over 100 per cent in certain areas, while ride-hailing services like Uber and Bolt increased their prices by 25-30 per cent.
This escalation in transportation costs may discourage potential visitors, prompting them to explore alternative modes of travel. Carpooling and group travel could emerge as more appealing options to counterbalance the rising costs.
- Increased operational costs for hospitality, airlines, and destinations:
The elimination of fuel subsidies has had a direct impact on the operational costs of hospitality and tourism businesses, and with plans to increase electricity tariffs by over 40 per cent, operating expenses are set to rise further.
To remain profitable, businesses are likely to pass on these increased costs to customers. However, this may lead to reduced demand, necessitating strategic planning to remain competitive.
- Changing customer profile and traveller behaviour:
The fuel subsidy removal and transport fare hikes are likely to prompt changes in traveller behaviour. Tourists may opt for shorter within-city trips or opt for more budget-friendly destinations, with day visits expected to gain popularity as visitors seek to avoid overnight expenses.
This shift toward more accessible and affordable options may be temporary. Long-haul trips, especially during holidays, and adventurous visits to far-flung tourist hotspots are expected to continue.
Extended journeys, particularly during holidays, and adventurous explorations of distant tourist attractions are anticipated to persist.
What’s inside the comprehensive report?
Our concise “Business of Tourism” report delves into the implications and prospects brought about by the removal of fuel subsidies for Nigeria’s hospitality and tourism sectors.
It includes:
- Strategies for the industry to navigate the bumpy economic wave;
- Sustainability considerations for tourists, enterprises, and policymakers;
- The path forward.
To access the full report, click here