Hotels rest easier with more heads on pillows

Cape Town occupancy rates stoke global chains’ room boom

IONIC BRAND: Radisson Blu Le Vendome in Cape Town, a city that had annual hotel occupancy rates of 73% last year SOUTH Africa needs more hotel rooms, especially in Cape Town, says Andrew McLachlan, senior vice-president for Carlson Rezidor’s business development in Africa and the Indian Ocean.

The performance metric used in the hotel industry is revenue per available room, or revpar; it multiplies a hotel’s average room rate by its occupancy rate.

Revpar grew 20% last year in Cape Town, the highest growth worldwide. In fact, “it pretty much grew everywhere in the country apart from the Northern Cape”, said McLachlan.

Figures released by Cape Town Tourism show annual hotel occupancy rates in Cape Town at 73% last year, a 5% increase from the previous year.

Carlson Rezidor, one of the world’s bigger hotel groups, has 14 hotels (with 3 000 rooms) in South Africa and is negotiating a further six hotel deals.

“We see South Africa as a key country, and we expect to have at least 20 hotels by the end of this decade. There’s a very clear undersupply of hotel rooms in South Africa,” said McLachlan.

The group will open three hotels in South Africa this year. Last month it opened Park Inn by Radisson in Polokwane and this week it opens a Radisson Blu on the Foreshore in Cape Town.

In September it will welcome guests to the first Radisson Red in the country — the third Red in the world — to be located next to the Zeitz Museum of Contemporary Art Africa at the V&A Waterfront.

It is also scheduled to open a Radisson Blu in Umhlanga Rocks, north of Durban, in 2019.

Radisson Red is a new lifestyle hotel brand aimed at millennials. “It’s a bit like going into the Apple store in New York or London, where it is casual and hipster and techy and edgy.”

The industry had a deluge of new hotel rooms in 2009-10 in anticipation of the Soccer World Cup, “but 2010 wasn’t great for hotels because of the aftermath of the economic crash and the World Cup oversupply. By 2012 it started to correct itself.”

McLachlan said the increase in travellers to Cape Town was despite tighter visa requirements and the misguided view that all countries in Africa were impacted by the Ebola virus.

Tourism has benefited from a weaker rand — both in terms of foreigners visiting the country and South Africans choosing to travel domestically rather than go abroad.

When W Hospitality Group, which tracks the hotel construction pipeline, started monitoring hotels in Africa, in 2011, there were 35 hotel brands active. Now there are more than 85.

“Everybody is now looking at Africa and most companies when they first come to Africa come to South Africa first because of the infrastructure, the ease of doing business, the legal system — and there’s a pool of talent here,” said McLachlan.

Besides major cities, the group is now also focusing on secondary cities where the government does a lot of business, such as Polokwane in Limpopo, Pietermaritzburg in KwaZulu- MILLENNIAL AESTHETIC: Radisson Red is designed to be ‘casual and hipster and techy and edgy’ Natal, Nelspruit in Mpumalanga, Mthatha in the Eastern Cape and Bloemfontein in the Free State. The plan is to expand into eight provinces — all except the Northern Cape, whose economic performance does not “justify demand for a hotel today”.

McLachlan said the government was “encouraged to take conferencing outside traditional areas, so you won’t have the same occupancy and rates, but you should still do 65% to 68% occupancy, which is more than adequate for a hotel to perform very well”.

Most big international hotel groups already operate in the country, and now the Dubaibased Jumeirah luxury hotel group is also considering Cape Town.

Cape Town has been successful at repositioning itself as a winter destination for Middle Eastern travellers, who visit the city instead of going to Europe or the US, where they’re treated differently from a security point of view.

June, July and August used to be terrible, but “now we don’t see a dip in occupancy because we’ve picked up the Middle Eastern market with people who are trying to leave the Middle East during the hot Middle Eastern summer”, McLachlan said.

“They love the fact that it’s cool, overcast and drizzly in Cape Town.”

Tsogo Sun is opening two hotels in Cape Town, a StayEasy and a SunSquare in the city centre, which will add 504 rooms to the city.

CEO Marcel von Aulock said Cape Town was in a “bit of a bubble due to the volume of international visitors”.

He said there was “a shortage of hotel space in Cape Town at the moment, but that can dry up overnight”.

There will be about 1 000 new rooms coming online in the city by September, of which half are from Tsogo, bringing Tsogo’s number of rooms in Cape Town to more than 3 000, including those owned in the Hospitality Property Fund, said Von Aulock.

But there are not as many business and government travellers in the rest of the country as there used to be. BEYOND THE BLU HORIZON: The Radisson Blu Port Elizabeth

“Sandton in Johannesburg and elsewhere is pretty short on business travel, which is what keeps the hotel industry going.”

Outside of Cape Town, Tsogo’s occupancy stands at 60% to 65%, while in Cape Town it’s closer to 70% and higher in the peak periods. Winters were still tough, although for a shorter period than before, said Von Aulock.

“At the moment you’re making good money out of hotels in Cape Town, but I’m not sure of the longevity of it.”

Marriott International is opening three new hotels in Cape Town, bringing more than 500 rooms onstream. The AC Hotel Cape Town Waterfront will have 189 rooms, while at Harbour Arch there will be the 200-room Cape Town Marriott Hotel Foreshore and the 150-room Residence Inn by Marriott Cape Town Foreshore.

The Amdec Group has two developments in the Melrose Arch precinct scheduled to open next year.

Marriott is also increasing the number of rooms in existing properties in Franschhoek in the Western Cape, Umhlanga, and Hatfield in Pretoria. A new hotel is being built in Centurion.

The revamped Ritz hotel in Sea Point in Cape Town, owned by the Shimmy Luxury Collection, will reopen this month.

Danny Bryer, director of sales, marketing and revenue management at Protea Hotels by Marriott, said there was an undersupply of hotel rooms in Cape Town and Johannesburg but this was not as marked elsewhere in the country.

Cape Town has been listed as a top city to visit, bringing in more international visitors.

The weaker rand had helped, and the city was positioned as one of the premier convention and conference destinations due to the quality of infrastructure and the diversity of the culture and natural attractions on offer, he said.

There are also more direct international flights to the city.

A PwC report says foreign overnight visitors to South Africa are expected to rise from 8.9 million in 2015 to a projected 11.8 million in 2020. For the forecast period as a whole, PwC projects a 2.1% compound annual increase in domestic travellers to six million in 2020 from 5.4 million in 2015.

Tourism contributed 9% to GDP in 2015.

There’s a very clear undersupply of hotel rooms in South Africa Middle Eastern travellers love the fact that it’s cool and drizzly in Cape Town