More rooms at SA’s inns

Of ev­ery sin­gle bed night sold in SA, 91% goes to some­one liv­ing in Africa

Finweek English Edition - - Property - The new Radis­son in Sand­ton. JOAN MULLER joanm@fin­week.co.za

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.

Strong oc­cu­pancy

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.

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