Investigation of the Effects of Exchange Rate Fluctuations on International Hotel Operations in Nigeria

This study investigates the effects of exchange rate fluctuations on international hotel operations in Nigeria, with particular reference to hotels in Lagos, Abuja, and Port Harcourt that carry foreign currency-denominated obligations. Exchange rate volatility has intensified in Nigeria in recent years, creating significant financial management challenges for hotels with import-dependent supply chains and international brand fee obligations. A mixed-method research design is employed with structured interviews conducted with financial controllers and general managers of 15 internationally affiliated hotels and analysis of hotel financial statements and Central Bank of Nigeria exchange rate data from 2020 to 2024. Impact dimensions assessed include procurement cost escalation, foreign brand royalty and management fee pressures, revenue denominated in naira versus US dollar obligations, and guest pricing strategy adjustments. Findings reveal that hotels with significant foreign currency liabilities experience average cost increases of 28 to 44 percent during periods of sharp naira depreciation, with the highest impact felt in food import costs and technology licensing fees. Guest pricing adjustments lag behind cost increases, resulting in compressed margins. The study recommends adoption of hedging instruments for key foreign currency expenditures, increased local sourcing to reduce import dependency, and renegotiation of management contracts with more favourable naira-denominated payment structures. Currency risk disclosure in hotel financial reporting is also advised. Keywords: exchange rate, international hotels, financial management, Nigeria, currency risk