State move for low-cost hol­i­days

Un­lock­ing un­der-used govern­ment-owned properties and part­ner­ing with the pri­vate sec­tor is on the agenda

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - MICHAEL BROM­LEY

THE South African Depart­ment of Tourism has an­nounced its in­ten­tion to un­lock un­der-used govern­ment-owned properties and part­ner with the pri­vate sec­tor to de­velop low-cost hol­i­day re­sorts in SA sim­i­lar to the But­lins re­sorts con­cept ini­ti­ated many years ago in the UK.

The min­is­ter of tourism, in his speech to par­lia­ment on May 14, stated that 75% of all tourists in SA are South African, and do­mes­tic tourism con­trib­uted R101bn to­wards the South African econ­omy in 2011.

The govern­ment plans to con­vert un­der­used state properties into tourist fa­cil­i­ties and an au­dit of the properties avail­able for use has al­ready been com­mis­sioned by the depart­ment in as­so­ci­a­tion with the In­dus­trial De­vel­op­ment Cor­po­ra­tion.

The depart­ment’s in­ten­tion is to pro­mote lo­cal de­mand for af­ford­able hol­i­days, thereby grow­ing do­mes­tic tourism which the depart­ment be­lieves is cru­cial to the per­for­mance of the lo­cal tourism in­dus­try.

The pe­riod for sub­mis­sion of ten­der pro­pos­als for the fea­si­bil­ity study into the hol­i­day camps has al­ready closed, and the win­ning bid­der is ex­pected to de­liver the fea­si­bil­ity re­port in Septem­ber this year.

Among other re­quire­ments, the fea­si­bil­ity study is in­tended to pro­vide the depart­ment with ad­vice re­gard­ing the struc­ture of the de­vel­op­ments.

The fea­si­bil­ity study will no doubt es­tab­lish whether there is a de­mand for such ac­com­mo­da­tion and whether it is a com­mer­cially vi­able propo­si­tion.

Ac­cord­ing to the depart­ment the pur­pose of part­ner­ing with the pri­vate sec­tor is to en­sure that the govern­ment does not carry the full fi­nan­cial bur­den

The re­sorts are in­tended to pro­vide safe, af­ford­able and or­gan­ised fun, with on-site din­ing fa­cil­i­ties and recre­ational fa­cil­i­ties

and risk in the de­vel­op­ments. The depart­ment’s ul­ti­mate goal is to drive lo­cal de­mand for af­ford­able hol­i­days in SA, con­trib­ute to job cre­ation and al­le­vi­ate poverty.

The But­lins hol­i­day camp con­cept was cre­ated by Sir Wil­liam But­lin be­fore the out­break of the Sec­ond World War with the tag line that the work­ing man should be able to have “one week’s hol­i­day for one week’s pay”. Af­ter the English Hol­i­day Pay Act of 1938 was pro­mul­gated the hol­i­day camps grew in pop­u­lar­ity as blue-col­lar work­ers were given their first paid breaks. In its hey­day there were 10 such camps across Bri­tain, Ire­land and the Ba­hamas. But­lins at­tests to the idea of sup­ply­ing af­ford­able lux­ury, and many of the early build­ings were de­lib­er­ately de­signed to mir­ror the pro­file of transat­lantic pas­sen­ger lin­ers.

The re­sorts are in­tended to pro­vide safe, af­ford­able and or­gan­ised fun, with on-site din­ing fa­cil­i­ties and recre­ational fa­cil­i­ties, in­clud­ing dance halls and sport fields.

Ac­cord­ing to An­drew Rogers, deputy CEO of the Hos­pi­tal­ity Prop­erty Fund Ltd, a com­pany in­vest­ing in ho­tel and leisure properties and listed on the main board of the Jo­han­nes­burg Se­cu­ri­ties Ex­change, the South African ho­tel in­dus­try has seen a strong up­turn in busi­ness vol­umes since late 2012. While rates may still be too low to stim­u­late the next de­vel­op­ment cy­cle at this point, this new ini­tia­tive might as­sist the in­dus­try in the short term to of­fer af­ford­able ho­tel ac­com­mo­da­tion to the mid-mar­ket sec­tor.

He feels ac­cess to debt re­mains a key chal­lenge for hos­pi­tal­ity sec­tor in­vestors. It’s still cheaper to ac­quire ex­ist­ing places than to de­velop new prod­ucts, so this pro­gramme might en­able in­vestors to come on board at a rel­a­tively low en­try-level cost.

It will also de­pend on the aux­il­iary of­fer­ings that each of th­ese fa­cil­i­ties will have, as well as prox­im­ity and ac­ces­si­bil­ity to ma­jor source mar­kets, as th­ese ad­di­tional costs need to be fac­tored into the trav­ellers’ bud­gets when con­sid­er­ing the des­ti­na­tion.

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