Is Cape Town over its World Cup ‘hangover’ and are 5-Star Hotels heading in a positive direction?

By: Hospitality Partners Association  03-02-2012
Keywords: Financial Services, Hospitality, Hospitality Properties

The outlook for the 5-Star hotel market in South Africa is looking brighter, says Joop Demes, CEO of Pam Golding Hospitality, particularly when viewed against the backdrop of global uncertainty.

“As far as many of us can remember, Europe’s financial future has never seemed quite so fragile,” he says. “To comment with any certainty on the 2012 outlook for Europe and on the exchange rate of the Euro versus the Rand will depend on Europe’s politicians showing sound leadership by saving the Euro through fiscal and monetary reform.”

Demes says while Africa has been fairly insulated from the Euro crisis due to its lack of meaningful integration into the global financial system, the fluctuations in the Rand’s exchange rate do play a major factor in terms of foreign investment and in terms of the value-for-money proposition for foreign tourists to South Africa.

“The Rand exchange rates to the Euro, Pound and Dollar that prevailed during December 2011 and January 2012, did translate on average to a 15 percent discount compared to prices last season. There is no doubt that this has contributed to a sharp improvement in ‘high end’ leisure business in Cape Town and to a lesser extent in Johannesburg.

“Lead times for visitor bookings are indeed becoming shorter and the 2010 Soccer World Cup gave many new visitors a very favourable impression which is clearly paying off as foreign tourists are attracted by word-of-mouth recommendations from friends and family who were here June/July 2010. This is coupled with prices that are lower compared to the prices during the World Cup event,” he says.

Demes adds it is very positive to see the resilience of the big brands in Cape Town, with hotels such as the Cape Grace and the Mount Nelson showing high double digit increase in RevPAR (revenue per available room) with an increase in room rate and occupancy for the first couple of months of the season.

Quoting statistics extracted from the December 2011 STR Global South African Hotel review, he says that in the Cape Town 5-Star market - written off by many market commentators over the past six months - hoteliers experienced a very pleasing final quarter of 2011. During the period October to December 2011 the occupancy figures averaged 66.4 percent, reflecting an increase of 18.1 percent compared to the same period last year.

“Cape Town 5-Star hotels increased their 2011 annual average occupancy by 8.5 percent compared to the 2010 World Cup year. In what remains a competitive market, the encouraging news is that Cape Town’s 5-Star hotels managed on average to increase their room rate by 2.3 percent during December 2011 compared to December 2010,” says Demes.

“While the January 2012 STR review has not yet become available (at the time this comment was issued), it appears to have been another rewarding month for the big brands in the 5-Star hotel industry in Cape Town. The Cape Grace, One&Only, The Table Bay and Radisson Blu all experienced very healthy increases in RevPAR compared to last year, with the Mount Nelson notable for phenomenal 49.5 percent growth in RevPAR in January 2012 compared to January 2011.

“We anticipate that the January 2012 RevPAR growth for the Cape Town 5-Star market will be in excess of 20 percent compared to January 2011,” he adds.

The outlook for February, March and April (2012) is also positive among most of the 5-Star hoteliers; the Cape Grace is on target to record its best month ever in February 2012 and the Mount Nelson already has 17 percent more business on its books for the rest of 2012 compared to last year.

“The introduction of new direct flights, the positive image of Cape Town and South Africa, unrest in the Middle East and an improved exchange rate have no doubt played a role for improved trading at both of our hotels,” says Sandro Fabris, regional managing director in Africa for the Orient Express Group – owners of the Mount Nelson in Cape Town and the Westcliff Hotel in Johannesburg.

Demes says December 2011 hotel occupancy throughout South Africa grew by 11.5 percent compared to December 2010 and the consensus among industry leaders is that business and event travel will also fare better during 2012. “It seems that increased demand throughout the country is starting to absorb the room inventory that escalated sharply during the period 2008 to 2010.

“There are a number of international funds and private individuals seeking operators and hotels that provide a compelling offer to a target market that can demonstrate growth and stability. In conjunction with this there are a number of sellers needing to raise liquidity and this could well result into a one or two larger deals with critical mass that will pave the way for one of the bigger global brands,” he says.

He says Accor, Starwood and Hilton have all announced aggressive expansion plans in Sub-Saharan Africa while Marriott, which for many years has been looking for an opportunity in Southern Africa, has announced the senior vice president appointment of industry specialist Alex Kyriakidis, former global chief of hospitality for Deloitte.

“There are also a number of luxury hotels for sale which offer exceptional value as long term strategic investments and there are good deals to be done with global operators that are seeking presence in the gateway cities of Southern Africa, for example Johannesburg and Cape Town.

“It is going to be an interesting year and acquiring properties to re-brand seems at present a better option compared to building something new. When speaking to a number of regional hotel operators most agree the timing is right to acquire existing hotel properties in Southern Africa,” adds Demes.

For further information contact Joop Demes of Pam Golding Hospitality on 082 883 2231, email [email protected]

Keywords: Financial Services, Hospitality, Hospitality Properties, Hospitality Trends

Contact Hospitality Partners Association

Email

Print this page

Share

Other news and updates from Hospitality Partners Association

Finanical Diligence Can Help Avoid Buyer's Remorse from Hospitality Partners Association thumbnail
10-07-2013

Finanical Diligence Can Help Avoid Buyer's Remorse

Financial due diligence considerations and timing in hospitality M&A can prevent buyer's remorse when buying a hospitality or leisure property.


06-12-2013

Grant Thorton SA explains consequences of company deregistration

Grant Thorton South Africa explains the deregistration process of a company or close corporation and what happens to immovable property in such an event. Requirements to re-instate a company have also been discussed.


06-11-2013

Pam Golding Hospitality Reviews Hotel Industry Trends in South Africa

Pam Golding Hospitality reviews hotel industry trends in South Africa based on the STR HotelBenchmark Survey. Read more.


12-14-2012

Should You Have A Trust

Much has been written and said about the advantages and disadvantages of having a Trust as a special vehicle through which to invest and grow assets. Opinions vary and at times the debate can get heated.


10-04-2012

What is Public Liability Insurance?

Is your business financially covered against all possible threats? Liability insurance provides cover for your business against the financial risk of being sued by a member of the public. Here’s everything you need to know to make sure you are fully covered.


Acquiring a Distressed Business May Be a Bargain but Beware Pitfalls from Hospitality Partners Association thumbnail
05-24-2012

Acquiring a Distressed Business May Be a Bargain but Beware Pitfalls

The ongoing global economic turmoil has resulted in a deluge of distressed companies available at bargain deals. While these deals provide the opportunity to generate value, they can be risky as buyers overlook important objectives in favour of the attractive low price of the target company.


How to Buy a Guesthouse in South Africa from Hospitality Partners Association thumbnail
01-11-2012

How to Buy a Guesthouse in South Africa

Establishing an or similar hospitality business is an attractive proposition. This is particularly true in emerging markets where modest investments can yield significant returns.


10-19-2011

Immigration Experts Achieve Positive Outcomes

Professional immigration consultants will not only make the process of immigration easy and pain free, but there is a much higher chance of success.


08-31-2011

Leisure Tourism Stakeholders Meet to Solve Crisis

A Leisure Tourism Stakeholder Meeting was held on 28 June 2011, when around 70 senior tourism stakeholders met informally to discuss the current crisis in the leisure tourism industry and to come up with solutions.


08-31-2011

Direct Marketing and the CPA: The Do's and Don’ts

We all know that marketing is a crucial element of most successful businesses. But how, now that the new Consumer Protection Act (CPA) places substantial limitations on what is termed 'direct marketing'?


08-31-2011

New Fringe Benefit for Employees

A number of Employers have, for several years, been contributing towards either an employee death or an employee disability policy on behalf of their employees (long-term insurance policies).


08-31-2011

FICA Increases Risk on Estate Agents

The three month compulsory registration period for Estate Agents to register with FICA has recently ended on 28 February 2011. Since that date the requirements of the Financial Intelligence Centre Act 38 of 2001 is applicable to all estate agents


08-24-2011

5 Star Hotels On The Increase In Cape Town

According to HPASA, 5-star hotels in Cape Town have increased their occupancies. Find out more about hospitality industry news and tourism in Cape Town.


08-16-2011

Bank Like A Banker

When you set out to buy new shoes, do you generally tend to browse around and compare the options at different stores before making a purchase?  Do you apply the same principles in terms of banking? Banking is part of your monthly expenses and only by comparing costs and shopping around for the best deals will you really be able to save.