‘Green shoots’ grow in hos­pi­tal­ity in­dus­try

Weekend Argus (Saturday Edition) - - PROPERTY -

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.

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