Mauritian firm bets on West Coast

Johannesburg - Some hotel developers who climbed on the "guaranteed return" bandwagon at the height of the property boom in 2006 and 2007 are probably out of the money now, with hotel occupancies in most parts of South Africa dipping to five year lows.

But that hasn't stopped Mauritian-based group Dale Capital to introduce a guaranteed income return product at its newly acquired four-star Shelley Point Hotel on the shores of the Cape West Coast's St Helena Bay.

Dale Capital, the hospitality investment arm of Mauritian-listed Trinity Financial Group, earlier this year bought the 44-suite Shelley Point Hotel, spa and country club from SA developer Gert Joubert for around R60m. The group has committed another R40m to double the hotel's room capacity to 88 by end-March 2010 and upgrade other amenities to turn Shelley Point into what Dale Capital chairperson Norman Noland refers to as a "Mauritius-styled but West Coast flavoured" family beach resort.

Half of the hotel's suites will be up for sale from next month at prices ranging between R1.05m and R1.4m. The self-catering units sleep four, are fully furnished and vary in size from 64 sq m to 72 sq m.

Noland is offering investors 30 days free usage per year, plus an escalating minimum net rental return for the first three years after purchase - 3% in year one, 4% in year two and 5% in year three.

Noland said income returns will be closer to 8% per year, despite the hotel industry going through a slump at present. An average annual occupancy of 60% to 65% is projected from mid-2010 onwards, although Noland said it traditionally takes a new hotel about three years to reach these levels. However, income payouts are not reliant on the actual occupancies achieved as they are bank guaranteed.

Too ambitious

Noland is aware of the fact that some guaranteed hotel products launched in recent years have left developers out of pocket because projected occupancies were too ambitious. He is, however, confident that the Cape West Coast has the potential to develop into one of SA's premier hospitality and tourism destinations.

"Shelly Point is an easy one and a half hours drive from Cape Town and offers some of the best boating and surfing waters in SA. Yet the area is still largely undiscovered, which only adds to its charm."

Norman said the fact that the Dale Group has a strategic stake in AltX-listed Queensgate Hotels and Leisure, who manages 12 hotels across Southern Africa, will go some way in placing Shelley Point on the SA hospitality map.

The Dale group is also involved in a 42-room boutique hotel development on the North Coast of Mauritius near Grand Baie, which will be sold on the same guaranteed return basis as those at Shelley Point. Noland said the idea is that Shelley Point and Mauritian investors will be able to interchange usage between the two hotels. Queensgate will also manage the Mauritian hotel.

Meanwhile, latest hotel data from the Smith Travel Research (STR) Global Hotel Benchmark showed average occupancies across SA for the first half of 2009 are down 13.5% year-on-year.

Although occupancies firmed somewhat on the back of sporting events such as the British Lions rugby tour and the Confederations Cup, revenue per available room (Revpar) dropped 4.1% in July year-on-year. The average occupancy in SA came to 59.5% in July.

- Fin24.com