More rooms at SA’s inns
Of every single bed night sold in SA, 91% goes to someone living in Africa
UNLIKE MOST SECTORS of the South African real estate market hotels are still coining good profits for investors, with revenues rising in double-digits last year. Figures from international hotel benchmark company Smith Travel Research (STR) show that SA’s hotels managed to raise revenue per available room (Revpar) by 10% in 2008 (year-on year). That despite a number of new hotels opening in major metros, including Cape Town and Johannesburg, last year.
It also bucks the international trend, where a marked slowdown in business and leisure travel has resulted in falling revenues. STR data on Revpar showed North America and Europe dropped by an average 1,9% and 1,6% respectively and London hotels saw revenues slump by around 4% last year.
The resilience of SA’s hospitality industry compared to many offshore markets has prompted renewed interest from global hotel investors and operators to bump up their presence here. Belgium-based Rezidor Hotel Group last week announced it would add another four hotels to its SA portfolio. The group already has six hotels (completed or under construction) in its SA stable. The five-star Radisson Blu officially opened its doors in Sandton last week, while the Radisson Blu Port Elizabeth is scheduled to open next month. The group’s second Sandton hotel and Radisson in Blaauwberg, Cape Town, are scheduled for completion next year.
Andrew McLachlan, Rezidor’s vice-president of business development for Africa and the Indian Ocean islands, says the group’s SA expansion plans are part of a larger Africa strategy that will see the group’s existing 25 hotels throughout Africa swell to 35. The group will enter Angola and Zambia for the first time this year.
McLachlan says most of the new Rezidor projects planned for SA will fall under its mid-market Park Inn brand. He says the middle-income sector is where the biggest growth potential in the SA market exists, particularly given the current economic slowdown.
McLachlan dismisses talk of the SA hotel industry potentially heading for a major oversupply over the next 12 to 18 months. He says although a number of hotel operators are aggressively trying to establish or increase their presence in SA before the 2010 Soccer World Cup kicks off, not all planned projects will go ahead. “Local banks have recently started to tighten their credit lending taps to hotel developers, which makes it more difficult to get new projects off the ground.”
Joop Demes, CEO of Pam Golding Hospitality, agrees the market isn’t near saturation, with latest Revpar and occupancy figures from STR clearly suggesting SA’s hospitality industry could support more hotel rooms.
Demes says although average room occupancies softened marginally last year to 71,5% (2007: 72,8%) that was amid increased room supply. He says some areas – notably, Gauteng’s luxury hotel market – saw average room occupancy rise to 80,7% last year, up from 78,1% in 2007. Revpar in Gauteng simultaneously increased by a hefty 22,8% last year.
and Revpar levels have seen global hotel operators “clamouring” to gain a presence in SA, says Demes. Pam Golding Hospitality has over the past 11 months been engaged in feasibility studies for 17 new hotel developments worth an estimated R4,3bn. In Cape Town alone, the group is currently engaged in nine new hotel developments.
Says Demes: “Almost every major branded hotel operator in the world has registered their requirements and credentials with us in search of an opportunity to be present or to expand in southern Africa.” He says a major reason why SA’s hospitality industry is faring so well compared to the rest of the world is that around 91% of every single bed night sold in SA goes to someone who lives in Africa. Therefore, the SA market isn’t that exposed to the slowdown in international travel. Demes says SA has two other global competitive advantages: strong liquidity and playing host to the 2010 Soccer World Cup.
It’s not only international hospitality players that are trying to increase their footprint in SA. JSE-listed hotel group City Lodge earlier this month announced a R1bn expansion plan that will add 10 new hotels to the SA market over the next two years. It’s the group’s biggest capital expenditure programme to date. City Lodge saw revenue increase 16% last year. Average occupancies were still a relatively high 81% in 2008 throughout the group’s four brands, marginally down from a record 83,5% achieved in 2007.
Room with a view.