Top hotels expect upswing

Occupation figures in SA’s five-star hotels are under pressure, but experts are of the opinion that the Soccer World Cup will relieve the pressure. According to the STR Global Hotel Benchmark statistics occupation figures in SA dipped by 12,8% in the six months until the end of December 2009 when compared with the corresponding period in 2008. This creates favourable buying opportunities for property funds looking to expand their portfolios.

The listed Hospitality Property Fund recently announced an agreement whereby it will acquire the Protea Hotel Edward in Durban for R110,4m from the Protea Hospitality Group. According to an independent valuation by JHI real estate the value of this four-star hotel is R114m. It was thus sold at a 3% discount.

Gerald Nelson, CE of Hospitality, says although there is currently an oversupply of rooms in five-star hotels in Cape Town, there are certainly early improvement signs in the year to date.

Nelson believes the World Cup will be beneficial to the hospitality sector, but the challenge will be in terms of what happens after the tournament is over. The country’s hotel and hospitality industry will then be largely dependent on economic growth.

He says one of the advantages of the tournament is that it will leave little room for corporate and business trips during this period. It has already led to an increase in activities in these sectors before the soccer and will also lead to a rise in activities after the World Cup is over.

Lots of hotel space has recently come on to the market in Cape Town, leading to fiercer competition in the city.

Chaim Cohen, executive chairman of the listed Quantum Property Group, is positive about the prospects. He says the World Cup will be the platform for sustainable growth in the hospitality sector after the event. “It will be a time when SA will be discovered.”

The group opened the doors of its 15 on Orange development in Cape Town in December. This luxury mixed use development includes a five-star hotel, retail space of 2,467sqm and 12 super-luxurious roof apartments of between 300 and 500sqm, which were sold for between R8m and R20m.

Cohen says this hotel is fully booked for the World Cup and there is even a waiting list. The hotel has 129 luxury suites with tariffs of between R3,100 and R8,500 per night.

He says since opening its doors, the hotel has done well, especially with business travellers to conferences held in the Mother City.

The group was successful in converting the initial investment of R16m in the development in a trophy asset of R1bn.

Get commercial property news by email

Free alerts when we publish — pick a focus or get everything, unsubscribe in one click. Subscribe »