Johannesburg -
The hotel industry had experienced a difficult trading
environment in the year from July to August 2008 to date, Pam Golding
Tourism and Hospitality Consulting said on Friday.
Hotel occupancies and conferencing revenue were down in a
global recessionary environment which had put pressure on local
corporate and government spending, managing director Kamil
Abdul-Karrim said in a statement.
"While the current occupancy level of 60.4% is the lowest
level experienced for well over the past eight years, rates have
held and in fact increased by five percent over the period January
to August 2009," he said.
As a result, the industry decline of 9.6% had been
cushioned.
Abdul-Karrim said the Fifa 2010 World Cup would provide "some
level of reprieve" during its 40 days.
However, he expected that hotel performance would be diluted
with the introduction of substantial new hotel room inventory for
the event and other projects, planned prior to the recession, which
would be implemented in the next six to 18 months.
Added pressure, from an inventory perspective, would come from
numerous residential apartment developments.
These had been introduced on the short-term rental market to
operate in the same space as conventional hotels after becoming
distressed as a result of the credit crunch.
Unlikely marriage
"These are either self-operated or operated by opportunistic
hotel management companies that often raise a curiously high
management fee structure to the distressed developer and make
overtly optimistic revenue promises that are invariably never met."
He said this "unlikely marriage" of developer and manager
diluted the reputation of the South African hotel industry, which
operated to some of the highest standards in the world.
"The challenge is that these apartments, which are often
perceived to be better living environments than traditional hotels
as a result of their contemporary lifestyle offering, are rented
out on a daily basis at considerably lower rates, driven by the
fact that they do not have the necessary hotel infrastructure
behind the property or operation."
He said the jury was out as to the sustainability of this
business model.
"Of course the developer has the option, when the residential
apartment market turns, of reselling these units as individual
apartments.
"However this is not what the hotel industry is all about, which
is commitment, passion and service."
He said hotel development in South Africa had always been
demand-driven as opposed to capacity-creating.
"In a demand-driven environment such as ours, we typically
encounter development spikes as experienced in the past and
present, which create oversupply situations.
"And as there is a substantial lag before demand absorbs the
supply, the result is that developers seem to catch up on the
market dynamics only when demand is reaching saturation levels."
He said that with the typical life-cycle of hotel development
being 20 years or more, the gains over the longer term were there
for the developer who fully appreciated the market dynamics.
Abdul-Karrim said that despite the impending oversupply of hotel
room inventory, the longer term outlook for the hotel industry
remained healthy and afforded ongoing benefits and viable returns
for the hotelier who was in the market for the typical lifecycle of
the product.
- Sapa