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Cape Town - Hotel occupancies are down on last year’s levels after too many new hotel rooms were apparently built in the run-up to the World Cup soccer tournament.
About 10 000 new hotel rooms have been introduced countrywide since the beginning of last year, says Clifford Ross, chief executive of City Lodge Hotels and chairperson of hospitality organisation Fedhasa’s committee for group hotels.
The biggest expansion has been seen in five-star hotel rooms. According to Pam Golding these have increased close on 30%.
Gavin Wood, head of investments at Kagiso Asset Management, said the group does not currently regard the hotel sector as a good investment opportunity because too many new rooms were added in the run-up to the World Cup soccer tournament.
Kagiso’s data indicate that from 2006 to 2010 the number of hotel beds countrywide climbed 40%.
Wood does not believe the country can sustainably expect many more tourists over the next couple of years. There will be an oversupply of hotel rooms, he reckons.
Much of the expansion is concentrated in particular areas, such as Sandton and Rosebank in Johannesburg, as well as in Midrand and Cape Town.
Ross said that, of the 10 000 total, 4 390 new rooms were opened in Johannesburg.
According to Pam Golding the number of rooms in Johannesburg has risen 29% in the past three years.
Dirk Elzinga, managing director of the Cape Town International Convention Centre and the new Fedhasa Cape chairperson, said that since the beginning of last year 10 new hotels with 1 579 rooms have opened in Cape Town.
Six of these are five-star hotels: Crystal Towers, 15 on Orange, Taj, One & Only and Coral International and Pepperclub. Together they have more than 1?000 rooms.
Pam Golding says that rooms in Cape Town have risen close to 20% in the past three years, and the five-star segment has expanded by 51%.
The Durban environment has seen a rise of almost 36% in hotel rooms, according to the property group.
This is an oversupply that will take years to work out of the system, said Wood, and it will result in competition, which will impact profits.
Kagiso expects a significant decline in occupancy rates and consequently a downward trend in profits and share prices, he said.
Many people in the hotel industry do not believe that the oversupply is related only to the World Cup soccer tournament.
The oversupply is the result of increased occupancies in these areas prior to the economic recession and cannot now be ascribed to the World Cup alone, said Ross.
The industry did very well before 2008 and because hotel developments take many years to plan and develop hotels were caught by the economic downturn which led to an oversupply in certain areas.
Kamil Abdul-Karrim, managing director of Pam Golding Tourism and Hospitality Consulting, reckons it's a misconception that the increase in rooms was motivated by the World Cup.
He thinks it was also driven by the strong economic growth after the previous decade and would not have been a problem had it not been for the 2008 economic crisis.
According to Ross, national occupancies are now about 55%. For the same period in 2009 they were 61% and in 2008 71%.
Johannesburg's occupancy rate is also currently 55%, compared with 63% and 76% in the previous years.
- Sake24.com
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