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1.1.    Background of the Study

The establishment of hotels and recreational centers in Nigeria both small scale and large scale has ultimately helped in the socio economic development of the country. For this development that has been as a result of the building and establishment of these hotels to be lasting, the challenges confronting the small scale hotels in Nigeria has to be limited as negligence of these challenges may lead to the shutting down of the already existing ones thereby discouraging entrepreneurs from investing this this profitable niche of business known as the hospitality sector of Nigeria.

The Small and medium scale enterprises have long been recognized as an instrument of economic growth and development in Nigeria. This growing recognition has led to the commitment of World Bank group on Small scale hotels sector, as core element in its strategy, to foster economic growth, employment and poverty alleviation. The World Bank group in 2004 approved roughly $2.4 billion in support of Micro, Small and Medium Enterprises (World Bank, 2001). The Small scale hotels have been given due recognitions especially in the developed nations for playing very important roles towards fostering accelerated economic growth, development and stability within several economies. Several researches have been conducted on the prospect and challenges of Small scale hotels in Nigeria and abroad as Small- and medium-sized enterprises (Small scale hotels) have long been believed to be important in supporting economics development within a country (see Akhtar& CDASED, 1999; Mazzarol, Volery, Doss, and Thein, 1999; Al-Shaikh, 1998) while others such as Chukwuemeka (2006), Agwu and Emeti, (2004), Arinaitwe (2006), Lundström (2005), Oboh (2002), Okpara (2000), Wale-Awe (2000), Ihyembe (2000), Bruch and Hiemenz (1984), Binks and Ennew (1996), Baumback (1983); and a host of others have observed various factors or challenges that impedes the performance of Small scale hotels ranging from inadequate finance, poor infrastructural facilities, inadequate managerial skill, weak and instability of government policies and other presumed factors and challenges causing premature death of Small scale hotels as Beckman (1983) classified the problems as internal and external. Many studies have looked at the respective factors that are germane to the success of Small scale hotels. Teoh and Chong (2008), Ding and Li (2010) argued about that lack of access to credit and managerial skills are the major obstacles to entrepreneurship development and that in a knowledge-based economy, the intellectual capital is gradually replacing the physical assets in modern enterprises. In the seminal work of Aschauer (1989), he finds that the provision of public infrastructure is a significant determinant of aggregate productivity of Small scale hotels. Pointing to these different findings, it appears that empirical studies on the prospects and challenges of Small scale hotels are still largely inconclusive as the direction to which of these factors serve as prospects for Small scale hotels and those which are really challenges have not been properly identified. In tandem with the objective thrust of this study, none of these studies has observed the ranking of these challenges in order of their importance or the priorities on the Small scale hotels. The authors only argued on the presumed factors that affect Small scale hotels, that is why this study intends to look at factors that have the highest priorities or ranking order of importance using principal component of factor analysis; being the gap existing in empirical works. Apart from this introductory section, the remaining aspect of this study is divided into four other sections.

1.2.    Significance of the study

Assessing the challenges of small scale hotels in Nigeria would help highlight the challenges confronting small scale hotels in Nigeria with a view to tackling such challenges so that investors can be confident enough to invest in the Nigerian economy which would at the long run help in the socio economic development of Nigeria.

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