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| NAÏVE TO
ATTRIBUTE HOTEL CAPACITY INCREASES TO SOCCER WORLD CUP |
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| One of the most critical
issues facing the South African Hotel Industry
today is the current accelerated growth
in capacity, admittedly based extensively
on the unprecedented economic growth over
the decade leading up to the Global contagion
ignited in September 2008, which resulted
in the pent-up demand for hotel accommodation
all but dissipating in the wake of the immediate
past economic meltdown. |
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Conflicting
Viewpoints
While the prevailing capacity growth
in hotel rooms is widely reported
on, there is a considerable level
of conflicting viewpoints being expressed
and the largest challenge in this
regard is invariably the unsubstantiated
and unspecified basis of these reports.
A ‘Dog’s
Breakfast’
Publications, reports and commentary
on the South African Hotel Industry
Inventory Capacity are fraught with
inaccuracies and misrepresentations,
presenting somewhat of a ‘dog’s
breakfast’ perspective on one
of South Africa’s hallmark industries
that compares with by far the best
the World has to offer.
Quantified
Perspective
As specialised consultants to the
broader South African Tourism and
Hospitality Industry, PAM GOLDING
Tourism & Hospitality Consulting
(PGTHC) maintains an empirical database
of Hotels operating in the country,
and feel it is necessary to put an
empirically quantified perspective
to the prevailing quagmire of unsubstantiated,
unspecified and often inaccurate hotel
inventory capacity being published
and presented currently.
Hotel Specifications
It is important to firstly specify
our empirical data computation, which
is based on currently operating hotels
that are larger than 30 rooms and
excludes Guest Houses, Lodges, Hostels,
Bed & Breakfast establishments
and other ‘short-term’
accommodation establishments not specifically
defined as hotels. |
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Furthermore, towards fully comprehending the current
capacity in the Hotel Industry, we have also incorporated
hotel projects currently under construction and that
will be coming on line in the short-term.
Table 1
The table below extracted from our empirical database
reflects that inclusive of all hotel projects under
construction currently, South Africa has approximately
66,000 rooms in the formal hotel sector.
Data analysed over a period of nine years reflects that
growth in capacity was fairly static over the period
2002 to 2007 but accelerating over the period 2008 to
2010 with a substantial spurt in 2010.
| Table
1: National Capacity |
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Measuring the current inventory
to 2007 levels reflects that there has been:
| • |
an overall increase of 17.4%
with |
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a substantial increase in
the 5 Star segment (28.5%) and |
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19.7% and 12.6% respectively in the 4
and 3 Star segments. |
| • |
Albeit that the 1 and 2 Star
segments come off an extremely low base,
very limited growth is evidenced in these
segments. |
Misconceptions of 2010
The common misconception in the market is that
capacity increases have been motivated by the
FIFA 2010 event but it is naïve to even begin
accepting that and industry that enjoys the typical
life-cycle of 20 years would be as irresponsible
as creating capacity for a 31 day event. |
Achilles Heel
The Achilles heel of the South African Hotel Industry
is the demand reactive nature of the industry resulting
in the prevailing growth spurt in capacity over the
past three years. The Hotel Industry enjoys a generally
direct relationship to the economic stability and growth
being experienced both within the Country and Globally.
The Upswing Period
South Africa's economy has been in an upward phase of
the business cycle since September 1999 - the longest
period of economic expansion in the country's recorded
history. During this upswing (working on data for the
period up to the fourth quarter of 2007), the country's
annual economic growth rate had averaged over 4%. In
the decade prior to 1994, economic growth averaged less
than 1% a year.
Until
the Global economic crisis, South Africa's
real gross domestic product (GDP) rose by:
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3.7% in 2002, |
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3.1% in 2003, |
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4.9% in 2004, |
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5% in 2005, |
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5.4% in, the highest since 1981,
and |
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5.1% in 2007. |
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Economic Growth in 2008
Economic growth in 2008 declined to 3.1% as South
Africa entered a recession. From the first quarter
of 1993 to the second quarter of 2008 the country
enjoyed an unprecedented 62 quarters of uninterrupted
economic growth.
But as the crisis made itself felt, GDP contracted
in the third and fourth quarters of 2008, officially
plunging the economy into recession. This contraction
continued into the first and second quarters of
2009, with GDP growth at -6.4% and -3% respectively. |
Compounded GDP Growth
This translates into a compounded GDP growth of
29.7% over the period 2002 to 2008 with growth
in capacity over the period computing to 21.8%,
as measured in 2010.
While there is a prudent time-lag between Hotel
inventory capacity reaction and the prevailing
economic bullishness, it must be understood that
from inception to planning and construction of
a hotel project is typically between 30 to 36
months.
Projects Prior to 2005
Projects therefore initiated in 2005 after fair
comfort that the economic bullishness was sustainable
and that the prevailing pent-up demand was reaching
saturation levels, only started coming on-line
in 2008, resulting in the current accelerated
increase in inventory.
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| Table
2: Cape Town Capacity |
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Pent-Up Demand
The additional inventory being introduced would have,
by most measures, been absorbed by the pent-up demand,
but for the economic downturn from late 2008.
Increase in 5-Star Capacity Explained
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The Greater Cape Town hotel industry
experienced 19.5% increase in overall capacity
with the strongest growth in the 5 Star segment
at 51%. |
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Growth at the 4 Star level was 18.6%
while the remaining segments were static. |
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A major contributor to the growth in especially
the 5 Star segment has been the large scale introduction
of luxury hotel apartments. |
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While a proportion of these were
always planned to be apartment hotel, a substantial
proportion of these were conversion from planned
Luxury Residential Units to Hotel Apartments resulting
directly from distressed Residential Developments
as a direct result of the prevailing Credit-crunch. |
Conflicting Reports
Interestingly, recent comments from CTRU, the marketing
arm for the city, on Southern African Tourism Update
Online (Wednesday, 19th May 2010) mentioned that capacity
in Greater Cape Town increased by 40% compared to our
measured and substantiated 19.5%.
| Table
3: Greater Johannesburg Capacity |
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| Table
4: Pretoria Capacity |
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Cape Town Truth
| • |
The article further referred
to the Greater Cape Town Hotel room capacity
being 50,000 compared to our empirically
substantiated capacity of 11,584 Hotel Rooms. |
Greater Johannesburg
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The Greater Johannesburg
hotel industry experienced 28.6% increase
in overall capacity with the strongest growth
in the 4 Star segment at 43.3%. |
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Growth at the 5 Star level
was 20.7%. |
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The 3 Star segment increased by 30.4%
while the remaining segments were static.
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Gauteng accounts for nearly 34% of South
Africa’s total GDP and is larger than
almost every other African economy, producing
approximately 10% of Africa’s total
GDP. |
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With Johannesburg being the
epicentre of the province, the Economic
bullishness experienced in the region translated
into direct increase in pent-up demand,
especially over the period 2005 to 2007,
and moving into 2008, sparking-off the substantial
increase in Hotel room capacity. |
Pretoria
Pretoria has seen very limited growth
in Hotel room capacity and has been secondary
to the main travel cities of Cape Town, Durban
and Johannesburg but 2010 will see the introduction
of substantial new inventory albeit only at the
3 Star level. |
Greater Durban
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The Greater Durban hotel industry experienced
35.6% increase in overall capacity, recording
the largest growth in the country albeit
of a fairly low base and a historically
static inventory base. |
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The strongest growth is in the 5 Star
segment at 42%. |
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Growth at the 4 Star level was 40.5%.
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The 3 Star segment increased by 24% while
the remaining segments were fairly static.
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Pent-Up Demand
While Durban remains a major industrial and manufacturing
province and also faced economically driven pent-up
demand, another major contributor has been the
established
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| Table
5: Greater Durban Capacity |
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shift from the CBD to the Umhlanga Ridge region as well
as new hotel developments in the Ballito and Umhlanga
region driven by the relocation of the Airport and the
growing business and leisure popularity of the North
Coast region.
Substantiated Overview
of the Current Supply Dynamics
The foregoing analysis and interpretation of the prevailing
Hotel room capacity growth presents a substantiated
overview of the current supply dynamics, and while the
difficulties facing the Hotel industry is consistently
blamed on over capacity in the industry, due cognisance
needs to be taken of the economic decline both Nationally
and Globally.
Responsible Industry
While both capacity increases and economic volatility
face their own individual gestation periods, what needs
to be understood is that the industry has largely not
been irresponsible as often is intimated by swashbuckling
commentators with limited understanding of the industry
and its drivers.
Long -Term Commitment
The hotel industry is a long-term commitment and aligning
the capacity growth purely to FIFA 2010 opportunism
is irresponsible and sensationalist.
Conclusion
There will, in our opinion still be some
attrition post the FIFA 2010 event and as the
Luxury Residential Market improves, developers,
who traditionally are in for the short-term gain
on developments, will retire to their normal business
of selling apartments and not operating them as
hotels, and that the hotel industry will again
revert to being a responsible and gratifying business
operated by passioned specialists committed to
serving people. |
HOSPITALITY
PROPERTIES AVAILABLE AROUND SOUTH AFRICA |
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#1
SOUTH AFRICA - WESTERN CAPE - GARDEN ROUTE
– KNYSNA:
R8.5mil |
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Paradise
Beautiful Victorian style Guesthouse
with magnificent views of Knysna Heads.
Comprising entrance hall, lounge,
dining room and study, 11 guest suites
including 2 family rooms. Manager's
3 bedroom apartment and swimming pool.
Property Size: 3450m²
Building Area Size: 800m²
Contact
Deborah Scott
Email: deborah.scott@pamgolding.co.za
Cell: +27 (0) 72 731 8188
Ling Dobson
Email: ling.dobson@pamgolding.co.za
Cell: +27 (0) 83 252 2112
Office: +27 (0) 44 382 5574
Web Access: PGLK1007852 |
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#2
SOUTH
AFRICA - WESTERN CAPE - OVERBERG –
HERMANUS:
R4.5mil |
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4
Star Guesthouse in Hermanus
The guest house was established nearly
2.5 years ago. It is centrally located:
5 minute walk to the village, restaurants
and cliff paths for whale watching
in season. It consists of 5 guest
suites with en-suite bathrooms and
a separate lounge area with a double
bed sleeper-couch in each room to
accommodate a 3rd adult per suite
or children sharing with parents.
The suites all have separate entrances
and overlook the pool and beautifully
landscaped garden.
Heated saltwater swimming pool, with
a kids’ splash pool. Large covered
braai area, with built-in seating
and a built-in bar and cloakroom.
The manager’s suite has a private
entrance and consists of a bedroom,
full bathroom, lounge, dining room
and private garden with a water feature.
This suite is suitable for a single
or a couple to live in/manage. Secure
parking for 8 vehicles.
Working facilities include a fully
fitted kitchen, a separate scullery
and a separate laundry room, as well
as a reception area and breakfast
room.
There is a fully installed PABX system
in reception and through to the guest
suites.
The erf size is approximately 1407m²
Contact
Peter Bruil
Email: peter.bruil@pamgolding.co.za
Cell: +27 (0) 83 384 0584
Office: +27 (0) 21 852 5155
Web Access: G05206 |
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#3
SOUTH AFRICA - WESTERN CAPE - BOLAND
(WINELANDS) – STRAND:
R3.6mil |
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4
Star Guesthouse
This 4 star graded Guesthouse is comfortably
nestled in the peaceful avenues of
the popular Strand, within easy walking
distance of the Strand’s white
beaches.
The Strand’s beachfront, is
5km of white sand that is a water
sports magnet and among the safest
swimming beaches in the country. The
Strand is a mere 20 min drive to Cape
Town International Airport, 30 minutes
from the hustle and bustle of central
Cape Town, 15 minutes from historic
Stellenbosch and its famous wine route
and 45 minutes to Hermanus (for whale
watching). It is a golfer's paradise
with more than 25 golf courses within
easy striking distance not to mention
a host of other sporting activities.
Accommodation offers 7 luxury guest
suites equipped with 4 star amenities
such as tea and coffee making facilities,
bar fridge, satellite TV & M-Net,
wireless internet, safes, heating/
cooling etc. 3 Rooms are equipped
with small kitchens and can be used
as self catering units.
Barbeque facilities and lovely swimming
pool area. This Guesthouse has the
ideal venue for meetings and provides
fully functional conference facilities.
The Strand is a very popular tourist
destination and high occupancies are
possible.
Contact
Peter Bruil
Email: peter.bruil@pamgolding.co.za
Cell: +27 (0) 83 384 0584
Office: +27 (0) 21 852 5155
Web Access: PGLAG1023046 |
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#4
SOUTH AFRICA - WESTERN CAPE - OVERBERG
– HERMANUS:
R4.5mil |
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4-Star
Guesthouse in Hermanus
The guest house was established nearly
3 years ago.
It consists of 4 standard guest suites
with en-suite bathrooms and a separate
lounge area with a double bed sleeper
couch in each room to accommodate
a 3rd adult per suite or children
sharing with parents. The suites all
have separate entrances and overlook
the pool and beautifully landscaped
garden.
The 5th suite is a luxury/honeymoon
suite which has a private garden with
its own pool and BBQ (braai) area,
a loft bedroom with a queen size bed,
a spacious lounge with a kitchenette
and a double bed sleeper couch, and
the full bathroom has a shower with
a glass ceiling so you can shower
under the stars.
The manager’s suite has a private
entrance and consists of 2 bedrooms,
a full bathroom, lounge, dining room
and private garden with a water feature.
There is parking for 8 vehicles.
Working facilities include a fully
fitted kitchen, a separate scullery
and a separate laundry room, as well
as a reception area and large breakfast
room. New covered braai area has been
built.
The erf size is approximately 1380m2
There is a fully installed PABX system
in reception and through to the guest
suites.
Contact
Peter Bruil
Email: peter.bruil@pamgolding.co.za
Cell: +27 (0) 83 384 0584
Office: +27 (0) 21 852 5155
Web Access: G04207 |
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Pam Golding Property
Group Head Office:
Monterey, 12-14 Klaassens Road, Bishopscourt, Cape Town,
7708.
South Africa
www.pamgolding.co.za |
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