Johannesburg - An increase in business travel from overseas combined with the weak rand is continuing to push up demand for five-star hotel accommodation in South Africa, returning the sector to profitability, according to industry executives.
Joop Demes, the chief executive of Pam Golding Hospitality, said revenue per available five-star room (revpar) – a combination of occupancy rates and room prices – recorded a national average increase of 15.6 percent last year.
“This trend has continued into 2013 with revenue per room by the end of August reflecting an impressive 16.8 percent increase compared with the same period last year.”
Agreeing with this, Danny Bryer, the director of sales, marketing and revenue for the Protea Hospitality group, said that the increase was a return to normality after a period in which the world economic decline, coupled with a (temporary) oversupply of rooms in South Africa following the World Cup in 2010, forced many five-star hotels to compete to fill rooms in a price-sensitive market in which their sector was showing negative growth.
Bryer said this negative-growth phase was not comparable to the situation in other parts of the world and was clearly unsustainable. “In 2012 and again in 2013 we have a normalised situation of supply and demand at the luxury end of the market that has allowed revpar to start regaining the ground lost during the worst of the economic downturn, placing us more in line with the international market.
“This has been driven entirely by the increased demand for luxury accommodation from the domestic market, the traditional overseas source markets and the fast-growing African transcontinental trade.”
Demes said demand in Johannesburg lifted significantly last year. This growth has continued but has been outstripped by the strength of demand in Cape Town this year.
He suggested that in 2012 the growth of revenue in the Sandton five-star market was ahead of that in Cape Town because Johannesburg was primarily a business market. Cape Town, being mainly a leisure destination, lagged behind.
“However, for the first eight months of 2013, this changed substantially with the Mother City reflecting a further growth of 21.4 percent while Sandton reflected 11.7 percent growth.
“It’s fair to say that business confidence has driven destination preference, especially with South Africa being a long-haul market.
“With Sandton being predominantly a business destination – and increasingly a business tourism [conference] destination – it stands to reason that business sector-driven growth resulted in a higher level of recovery in Sandton in 2012.
“The lag in Cape Town in 2012, being primarily a leisure destination, translated into a substantially more aggressive recovery in Cape Town in 2013,” he said.
Demes pointed out that arrivals from overseas, excluding Africa, grew by 15 percent last year and the available statistics reflected further growth of 6.1 percent for the period to June this year.
In addition to the positive impact of overseas arrivals on the five-star market, “arrivals from Africa have increased consistently over the past five years and more, while the business and higher-end leisure segments of this market have a marked preference for luxury hotel accommodation”.
Kamil Abdul-Karrim, the managing director of Pam Golding Tourism and Hospitality Consulting, said the difficult trading period for five-star hotels was due to a rise in the number of rooms planned and developed over an extended period in response to high demand between 2005 and 2008, just before “the unfortunate economic decline following the September 2008 meltdown”.
He said the growth in demand last year was the first indication of trading levels reverting to “the bullish 2007-2008 period” and the average room rate remained fairly stagnant as the excess inventory in the market was mopped up.
However, with growth in demand continuing this year, there was an indication that the local hotel industry was again in a stable environment.
Despite this, prices were no longer standard now that many people were making their own bookings and travel arrangements through the internet. - Business Report