5 Star Hotels On The Increase In Cape Town

By: Hospitality Partners Association  08-24-2011
Keywords: Hospitality, Hospitality Properties, Hospitality Trends

Named as the World’s Top Travel Destination by global travel site, TripAdvisor, Cape Town has once again been hailed as a prime tourist destination. Regardless, the Mother City’s 5-Star hotel market has been the subject of negative speculation lately. Joop Demes, CEO of Pam Golding Hospitality, points out how unfortunate this is, as the wrong perceptions can be created by the hospitality industry.

“What is true is that despite the fact that over the past three years the 5-Star room inventory in Cape Town has increased by in excess of 50%, a number of prominent 5-Star hotels have increased occupancies during 2010 as well as for the six-month period ended 31 March 2011,” he says. This increase stands to reason that Cape Town tourism is still thriving and the hotel management for these 5-Star establishments must be doing something right.

Hospitality Industry Sees Dilution In Occupancies

Joop Demes continues to note how Cape Town tourism continues to flourish despite general hospitality industry trends, “Anywhere in the world, hotel markets seeing such a significant increase in room inventory will experience a dilution in overall occupancies and Cape Town has been no exception. This has been exacerbated by the global and local economic slowdown, however, overall the Cape Town 5-Star hotel market has performed remarkably well and is in a far better shape compared to that in many international cities and destinations.”

Cape Town Hotel Management Sees Good Results

“Many hotels in global destinations would have been pleased to maintain overall occupancies during the past six months compared to the previous year, and with the available 5-Star room inventory increasing by over 50% in the last few years, one would have expected occupancies to have halved for quite a few hotels, and yet the contrary has occurred.” There are certain hospitality industry trend influences that could have had an impact on the Cape Town tourism.

“In fact, the increase in room inventory coupled with the major exposure afforded us through the World Cup 2010 has led to a significant increase in bed nights sold in the 5-Star market in Cape Town during the last couple of months in 2010. This trend is continuing, and despite the strong rand this market is being further boosted by the redirection of some international traffic as a result of the unrest in North Africa and certain pockets of the Middle East.”

Positive Growth In Cape Town’s 5-Star Hotels

Using the following 5-Star hotels as examples, one can note how the Cape Town tourism afforded the local hospitality industry with a profitable boost.

* Cape Grace Hotel at the V&A Waterfront grew its occupancy for the six months ending on 31 March 2011 by 15% compared to the same period last year. This translates to an additional 6 500 guests over the same six months last year.

* The One & Only, also at the V&A Waterfront, achieved average occupancies in excess of 75% for the period ending 31 March 2011, reflecting an increase of 24% compared to the same period last year. This brought in over 6 000 additional guests compared to the same six months in the year prior.

* The Radisson Blu Hotel at the V&A Waterfront also reports significant growth with an increase of almost 17% in occupancy; representing well in excess of 8 000 guests. This was also captured over the six month period ended 31 March 2011 compared to the same period the previous year.

* The Cape Royale Hotel is a new hotel that is well-positioned opposite the new stadium. It’s only 5-Star all-suite hotel in Cape Town and has achieved an average occupancy well above 70% for the six months ending on 31 March 2011. “This ‘new kid on the block’ has really got it perfectly right in terms of location and product and has proven that a hotel in Cape Town does not have to be located in the V&A Waterfront to run high occupancies,” says Joop Demes.

He went on to add, “The additional bed nights or guests who visited Cape Town in these hotels add up to a substantial amount, and if you include the additional guests who have been staying at brand new hotels such as the Taj, 15 on Orange, the Pepper Club and Crystal Towers, you can appreciate the overall and significant increase in bed nights sold in Cape Town’s 5-Star hotel market. There are, of course some 5-Star hotels in Cape Town which have seen a decline, however as a percentage this has really been minor compared to the 50% increase in room inventory.”

Substantial Growth For The Hospitality Industry

“There is absolutely no doubt that the growth of quality supply and competition in Cape Town - a destination that competes with the world’s best - has resulted in a substantial growth in bed nights sold in the 5-Star hotel market.

Regrettably, however, there are some stakeholders in the hotel industry, including financial institutions, which have not taken into account the above facts and when commenting, quote an overall, diluted occupancy as opposed to an overall increase in the number of bed nights sold,” says Demes.

He adds that when reports refer to a hotel in distress, this does not necessarily mean that they are about to close down. “Distress in the hotel industry is generally caused by one or a combination of the following factors: the hotel is the wrong product for the location; it is over-capitalised; it is has taken on too much debt; or it is not well branded and/or has no proven operator. Financial institutions with concerns are encouraged to first of all engage with industry experts to understand the dynamics of the specific hotel and the market in which it competes and then diagnose the real issues that might cause the distress. The good news is that in most cases there are remedies that can be applied.” he says.

Keywords: Hospitality, Hospitality Properties, Hospitality Trends

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