Hotels move into Africa

AS GROWTH in the South African hotel industry slows down after the pre-World Cup spending boom, local hotel groups are looking to expand in the rest of the continent.

According to an Industrial Development Corporation (IDC) report, west and east Africa in particular can expect a glut of new hotels as a result of pent-up demand.

Compared to South Africa, which experienced a construction boom before the World Cup, there is a shortage of high-quality hotels in the booming cities of Africa’s frontier markets.

“Although occupancies in Sandton average 55%-60%, which is almost full for business hotels, these rates are still low compared to the occupancy rates in some of Africa’s rising cities such as the Ethiopian capital Addis Ababa, Tanzania and Nigeria,” said Jorge Maia, the IDC’s head of research and information.

“There would be plenty of opportunities for exporting South African catering equipment, processed foods and stationery — those are the tip of the iceberg as far as direct opportunities are concerned.”

Eddy Khosa, acting CEO of the Federated of Hospitality Association of Southern Africa, said many local and international investors have expressed confidence about opening hotels on the continent.

“Local hotel groups such as Southern Sun and Protea Hotels are already penetrating the west African markets, especially Nigeria. Look at east Africa as well — our groups are already active in Kenya, Tanzania and Mozambique.”

Khosa said domestic hotels are recovering after occupancy rates declined after the post-World Cup slump. However, he did not expect more growth as there are “ample supplies of room stock, especially in the central nodes”.

Hotel occupancy in SA stood at 56% last year, according to STR Global, down from 68% to 70% in 2008 and 58% during the 2010 football tournament.

From 2008 to 2010, Sandton saw a 40% increase in hotel rooms, Cape Town’s supply rose 21% — mostly in the four- and five-star market — and the area around Johannesburg’s OR Tambo was up 30%. Durban had a 53% increase in stock, largely in Umhlanga.

Revenue per available room, which hotels use to measure return from room rates, was R482 at the end of last year compared with R556 in 2008, a drop of 13%. The measure incorporates both room rates and occupancy levels.

A 2011 study by PwC did not expect the market to recover to pre-crisis levels within the next three years. Increases in hotel occupancy rates “during 2012-15 will not offset the drop from 2008-11 and the occupancy rate in 2015 will remain lower than in 2010 and prior years”.

However, there are signs of life:

•Tsogo Sun bought the Grace Hotel in Rosebank, Johannesburg, which closed in August. It will open the renamed 54-onBath hotel next month. Tsogo said it is in the market for more hotels.

•Sun International is spending R250million to revamp the former Southern Sun Grayston Hotel in Sandton.

•Protea Hotels has a R2-billion war chest.

•Hilton International bought the “noalcohol” Coral Hotel in Cape Town. It aims to take over management of other hotels that will be relaunched under the Hilton brand.

•Marriott, another US group, is said to be looking at opportunities to manage SA hotels.

Graham Wood, MD of Tsogo Sun Hotels, said the hotel industry was benefiting from recent growth in inbound-tourist arrivals, especially from emerging markets.

Tourism Minister Martinus van Schalkwyk said international tourist arrivals grew 3.3% last year compared with 2010.

More than eight million tourists visited South Africa last year. There were 38% more visitors from Nigeria, 24% more from China and 26% more from India than in 2010.

While North American arrivals grew 2.3%, European arrivals dropped 3.5%. The UK remained the biggest overseas market with 420500 arrivals, despite a decrease of 7%.

Mmatsatsi Marobe, CEO of the Tourism Business Council of SA, said the industry is “on a recovery path”, with growth expected from emerging markets in Africa, as well as Brazil, India and China.

To this end, the South African Tourism Services Association plans to open offices in 10 African countries including Angola and Nigeria.

The organisation’s CEO, Michael Tatalias, expects hotel occupancies in SA to hit about 60% by the end of the year, but “we’re not out of the woods yet”.

The More Group, which owns three game lodges adjoining the Kruger Park and in the North West, and two hotels in the Cape, reported occupancies of between 75% and 80%. Most of its visitors are from the US and Europe.

Neil Markovitz, MD of Newmark Hotels, which has about 350 rooms in its portfolio that includes the Ambassador and the V&A Hotel, said he is “cautiously optimistic”.

His group reported more bookings for May to August than during the same period last year.