Hyde Park hotel struggles

Johannesburg - Occupancy rates at Hyprop's new Southern Sun Hyde Park Hotel reflect how difficult it is to bring a new hotel to the market in current conditions.

This four-star hotel above the Hyde Park shopping centre, which opened its doors a month ago, has a current occupancy of 22% to 25%. Hyprop chief executive Mike Rodel is however fully confident that next year's 55% occupancy target will be achieved.

He points out that the hotel opened its doors at the worst possible time in the economic cycle, at a time when the hotel and leisure industry is still in a downturn with low occupancies and fewer business travellers.

The hotel's initially anticipated return of about 11% is now significantly depressed at 6%, and he says it is critically important to improve occupancies.

For a 8% return the average occupancy needs to be 65%, with a room tariff of R1 300, explains John van Rooyen, director of operations for four-star hotels for Southern Sun, which manages the hotel.

He says that the hotel with its 132 rooms largely targets the corporate market, and negotiations are already in progress with various airlines regarding possible agreements.

Analysts reckon the hotel can be described as defensive capital spend which will be favourable for Hyprop in the long term - especially since the hotel is giving Hyde Park a new, exciting boost in an exceptionally competitive market, reckons Evan Jankelowitz, who co-manages Stanlib's property funds.

The hotel, built at a cost of R190m, is but one component of the R810m recently spent on three Hyprop assets. The other two are The Glen shopping centre to the south of Johannesburg, which has been comprehensively extended and upgraded, and retail expansion at Canal Walk in Cape Town.

- Sake24.com

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