‘Green shoots’ grow in hospitality industry
THE OUTLOOK for the South African hospitality industry remains positive and considerably brighter when viewed against the backdrop of somewhat sobering global trends, says Joop Demes, chief executive of Pam Golding Hospitality, hospitality division of the Pam Golding Property group.
“ S o u t h A f r i c a ’s h o s p i t a l i t y industry is proving very resilient amid the global economic downtur n. South Africa is far less dependent on the overseas market as most of our business is generated from our own domestic market and neighbouring countries. In much the same way, in Europe the German hotel market relies far more on a domestic than a foreign market, so is trading relatively well,” says Demes.
The core business of Pam Golding Hospitality – the facilitation of transactions in the hotel, lodge, guest house and restaurant industry together with operator procurement and hotel feasibility studies – is close to achieving a record of R5 billion in the capital value of transactions facilitated in the southern African hospitality industry – the bulk over the past six years.
Pam Golding Hotels has recently been appointed to market a number of hotel investment opportunities in Joburg and Cape Town, as well as a portfolio of leading boutique hotels and lodges around South Africa. Rapidly expanding and with offices in Joburg, Somerset West in the Winelands, Durban, Port Elizabeth and Knysna, Pam Golding Lodges & Guest houses over the past five months facilitated nine transactions worth close to R50 million – six concluded on behalf of overseas investors, and the balance for South African upcountry buyers.
During 2008, Pam Golding Hospitality & Tourism Consulting was awarded 22 assignments and feasibility studies – 65 percent commissioned by international hotel operators and/or investors. Good news for South Africa’s construction industry and job creation is that these are now being converted into real projects representing an estimated capital investment of R4.3m and providing 2 423 rooms and 2 062 direct jobs, says Demes.
“Widespread across the country are some remarkable and encouraging ‘green shoots’ in the industry. A c c o r d i n g t o S m i t h T r ave l Research’s (STR) global hotel benchmark survey, in June 2009 the South African hotel industry as a whole achieved a four percent increase in Revpar (revenue per available room) compared to June 2008. To place this in perspective, this means the effective room revenue or turnover for an average hotel across the country has actually increased by four percent despite the fact that the number of rooms in South Africa is increasing because of the opening of new hotels and lodges, as well as the launch of new B&Bs and guest houses. A further positive is that this, in turn, creates new employment opportunities.”
The STR survey reveals that in the Free State, hotels have on average experienced an increase of 7.4 percent in Revpar for the first six months of 2009 compared with the same period in 2008, and in the Eastern Cape Revpar increased by 3.4 percent and four-star establish- ments in Durban achieved an increase of 3.4 percent in the same time frame.
Demes says that although some hotels are suffering in a highly competitive and challenging market, these are outweighed by those that are doing well, thereby resulting in overall growth.
For June 2009 compared with June 2008, the STR survey shows further evidence of positive “green shoots” being widespread across the country, with Revpar growth of 20.3 percent for hotels in the Cape Town central city, Foreshore and V & A Wa t e r f r o n t ; 1 4 . 2 p e r c e n t growth for five-star Durban hotels, 9.1 percent growth for hotels in Sandton CBD and 24.6 percent Revpar growth for hotels in Stellenbosch.
Demes says that contrary to negative comments recently published about hotels in Cape Town, the wellbranded hotels in South Africa and in Cape Town remain in good shape, unlike those in many other cities and countries in the world.
“You should bear in mind that Cape Town is in the middle of its low season, which in any other city i n t h e worl d r o u t i n e l y p r o mpts special rates being offered and is certainly not indicative of a ‘price war’. As an example of the resilience shown locally, the Radisson Blu has recorded a similar Revpar for the first six months of this year compared to the same period last year, despite the opening of the One&Only Hotel virtually next door, and the same is true of the Table Bay Hotel. Results such as t h o s e a c h i e v e d b y l a r g e , we l l - branded hotels are in fact far more relevant than isolated results in a market which is very competitive.”
Demes says it is unfortunately true that many hoteliers in South Africa have been “overspending” from a space point of view, which has increased the cost per key.
“We need to be far more aware of the space used for a hotel – from bedrooms to circulation areas, public areas and back of house. And commercial banks need to carefully consider the viability of finance applications for hotels which do have the correct competitive cost per key.”
He adds a reminder to devote due attention to basic economic principles such as demand, supply, cost, income and return. “Unfortunately it is too easy to say no in times when liquidity is scarce – thereby missing opportunities to improve on South Africa’s infrastructure and create much-needed employment,” he says.
STILL IN DEMAND: A scenic view of Cape Town with the Radisson Blu Hotel in the foreground.