Hospitality Goes Against Trends

HOSPITALITY Property, which specialises in the hotel sector, is really going against the trend by upgrading two of its Cape Town hotels in a rather limp period for the leisure and travel sector.

Last month Hospitality said the refurbishment of the Protea Hotel Victoria Junction would cost R42 million while upgrading of the Inn on the Square (on Greenmarket Square) would cost another R34 million.

The refurbishment will be undertaken mainly during the winter months when Cape Town’s hotel occupancies are traditionally at the lowest levels.

CBN hopes that the onset of the early summer months brings up occupancy levels, especially with Cape Town’s hotel market looking somewhat overtraded after the opening of a number of upmarket hotels at the time of the Soccer World Cup.

Hospitality can, however, take some comfort from the recent refurbishment of the Protea Marine (Port Elizabeth), which was completed during December 2010 at a cost of R28 million. At least Hospitality could report that the new offering has been well received by the market and should assist in the flagship PE property increasing its market share.

But one does wonder about the almost R80 million spent on two relatively niche Cape hotels when Hospitality directors paint rather a gloomy picture of the current trading environment.

They predict a difficult trading environment due to the increased room supply and limited growth in corporate, conference and leisure travel spend.

But in the longer term Hospitality appears to be pinning its growth hopes to the Cape – specifically the Arabella portfolio, which was acquired last year for R740 million.

Hospitality CEO Gerald Nelson says the acquisition of the Arabella Portfolio (wich comprises the Arabella Golf Estate near Hermanus and the Westin Hotel on the Foreshore) is expected to enhance the company’s earnings in the next financial year.

He says the Westin, in particular, has a robust business model, which should provide a strong earnings underpinning.

Perhaps more exciting is Nelson’s admission that the Arabella development near Hermanus will provide Hospitality with an opportunity to realise profits from the sale of existing undeveloped stands.

There are 460 hectares of undeveloped land adjoining the Arabella golf estate.

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