South Africa

AC Hotels by Marriott opens first hotel in Middle East and Africa in South Africa’s Mother City

By on Dec 5, 2018

188 room AC Hotel Cape Town Waterfront celebrates the brand’s European soul and Spanish roots with classic modern design

DUBAI, United Arab Emirates, December 5, 2018/ — AC Hotels by Marriott (ACHotels.Marriott.com), Marriott International’s (www.Marriott.com) European-inspired lifestyle brand, today announced the opening of AC Hotel Cape Town Waterfront marking the debut of the brand in Middle East and Africa. Owned and developed by the Amdec Group, the hotel demonstrates the sophisticated and timeless European design that is true to the AC Hotel brand, interpreted for its Cape Town location. Conveniently located just minutes away from the buzzing Victoria & Alfred Waterfront, the hotel is just a 25-minute drive from Cape Town International Airport within the city’s thriving central business district.

“We are delighted to open our very first AC Hotel by Marriott in Middle East and Africa in Cape Town, further strengthening our long-standing partnership with the Amdec Group” said Alex Kyriakidis President and Managing Director Middle East and Africa Marriott International. “The opening of this hotel reinforces our commitment to driving growth for our lifestyle brands in South Africa in response to a continued demand from discerning travelers seeking hotels with style and functional design, while also providing unique and authentic experiences.”

Commenting on the announcement, James Wilson, Amdec Group CEO says: “We are proud to pave the way for Marriott International’s growth plans in South Africa and help to open up new markets for the world’s leading hotel company and its many loyal guests from around the globe. The Yacht Club mixed use development, where the AC Hotels by Marriott is situated, is the second property in our portfolio of iconic precincts to welcome Marriott, with Melrose Arch in Johannesburg being the first, and Harbour Arch in Cape Town, to follow.  We are thrilled with the opening of AC Hotel Cape Town Waterfront and believe it will provide another great place for international tourists to stay when visiting the city. It is exciting to be part of creating new dimensions for hospitality and tourism in the country and, by doing so, provide more opportunities for visitors and locals alike.”

With 188 spacious and stylish yet efficiently designed rooms that boast unparalleled views of the imposing Table Mountain, Lion’s Head and Signal Hill, AC Hotel Cape Town Waterfront introduces a “new way to hotel” to the dynamic city of Cape Town. The hotel houses the signature AC Lounge, a creative hotspot by day and social hub by night that serves local craft and as well as expertly made signature beverages. Guests can savor the brand’s Spanish roots with delectable tapas from fresh and locally sourced ingredients at the AC Kitchen or have a quick bite at the AC Market, offering convenient grab and go.

Other features include the AC Library, a quiet space lined with interesting and ever-evolving reading material tucked away from the buzz as well as a fitness center with state-of-the-art equipment. Located within walking distance from the Cape Town International Convention Centre, it also features four flexible meeting rooms and a boardroom with a total of 250 sqm of event space, boasting natural light and stunning Harbour views.

“With the Spanish heritage of the AC Hotels by Marriott brand, our design-driven hotel brings new inspiration to the city,” said Michael Liffmann, General Manager of AC Hotels Cape Town Waterfront. “We provide everything essential you need – and nothing you don’t – creating a seamless, tranquil and frictionless experience for our guests, whether they’re traveling for business or leisure.”

The hotel’s green status also sets it apart from other establishments in the Mother City. Some of its green initiatives include: a desalination plant; population sensor lighting to save power; heat pumps to supply hot water, eliminating the use of heat elements, as well as biodegradable straws and packaging. “In the age in which we live, we simply cannot ignore that our precious natural resources are being depleted faster and faster, before we’re even able to identify replacements or alternative methods. At AC Hotel Cape Town Waterfront, we are committed to introducing green initiatives to help save our planet and conserve it for future generations,” added Liffmann.

AC Hotel Cape Town Waterfront is a significant addition to Marriott International’s fast-growing portfolio in South Africa. Protea Hotels by Marriott, Marriott Hotels, Autograph Collection, Westin and Sheraton are some of the other brands that are currently present in the country today.

Distributed by APO Group on behalf of Marriott International, Inc.

 

LODGING MARKET OVERVIEW – LANSERIA INTERNATIONAL AIRPORT AREA, GAUTENG PROVINCE, SOUTH AFRICA

By on Jan 16, 2018

Introduction

The OR Tambo International Airport (ORTIA) is still by far the largest airport in South Africa, and regional airports such as Lanseria Airport (HLA) benefit greatly with feeder markets from international arrivals. Flights into HLA are convenient for most passengers due to its size which facilitates fast turnarounds, ample parking and access to major highways.

HLA is situated on the border between the North West and Gauteng Provinces. It is one of the most important regional airports in South Africa and it primarily serves the domestic passenger market and covers Cape Town, Durban and George. It is also favoured by the charter airline industry and covers many remote locations that are not served by the likes of the ORTIA. Many private companies and individuals also park their aircraft in the hangars located on the airport grounds.

HLA is owned by a consortium of investors, and the Lanseria Airport Development Company (LADC) was incorporated with a focus to expand the airport and to develop the extensive precinct. Support from Provincial, Local and Metropolitan authorities has also been forthcoming as the airport is seen as a major anchor for the development of a planned aerotropolis. Infrastructure projects such as airport expansions and their amenities create jobs both during construction and operational phases and are seen as an integral part of the planned mobility expansion project of the City of Johannesburg. Support has also been expressed from businesses with large planned projects.

Regional Economy of Gauteng Province  

Despite the relatively dry climate, Johannesburg, the capital city of the Gauteng Province, is still a strong competitor for local and foreign tourists into South Africa due to a relatively stable temperature profile throughout the year.  

The Gauteng regional economy places some significant reliance on HLA to facilitate its mobility. According to Gauteng Tourism, “Johannesburg is geographically fairly centrally located in South Africa, and as the biggest urban conurbation it’s also the largest transport hub – for local, cross-border and international travel”.

The City of Johannesburg Local Municipality is officially considered to have a population of 4,4 million. Johannesburg is the largest single metropolitan contributor to the national economic product. The city’s contribution is almost 16% to the national economy and 40% to the Gauteng province. Its economy is dominated by the financial and business services sector, the retail and wholesale sector, the community and social services sector and the manufacturing sector. These sectors are found in both the formal and informal economies, with the township areas accounting for the bulk of the informal economy.

The below chart illustrates regional GDP growth for the years 1997 to 2019. The trendline for the Gauteng economy is depicted in red.  

The outcome of the recent ANC Elective Conference has had a positive impact on the South African Rand. That, in combination with rising business confidence and a growing world economy, is seen as positive news for the local economy. This outlook however has to be read in line with the recent credit downgrades.   

Passenger Movement

In a past report IATA advised that global air passenger numbers are still set to double over the next 20 years, with an upside scenario growth average 5.8% through 2034 and produces 2.1 billion extra people.

Aviation in Africa has recently been given a major shake-up with the signing of the massively-delayed Yamoussoukro Decision at the end of 2017. This important milestone is meant to put into action the open skies policy for African airlines. The creation of a more competitive environment at Africa’s airports is widely seen as a major boost for the travel and tourism industry on the continent. It is perceived that HLA will benefit greatly from increased traffic.

According to the HLA CEO, Rampa Rammopo, the airport’s aim is to double its passenger numbers to more than 4 million within the next six years. HLA is South Africa’s fourth largest airport by passenger numbers among 21 significant local airports. Being in this position is a major feat considering that the airport is privately owned and relies primarily on the domestic market for its business. In 2006, HLA is said to have seen 100,000 passengers pass through its gates. This number has now risen to 1,9 million passengers and is growing in double digit percentages on an annual basis.

Lodging Market Segmentation

The Lanseria Aerotropolis lodging market consists primarily of a corporate segment, then followed by both group and individual leisure and MICE. Weddings are an important leisure activity in the greater area due to its serene and rural setting. The airport segment is rather small in line with the size of the HLA, however this is seen as a temporary situation because of all the planned expansion and the increased number of airlines that will come with this.

HLA’s rising popularity evolved as a result of corporate clients who were in need of a quick check-in and check-out process at the airport as they moved away from the larger and more elaborate ORTIA. This level of convenience is also extended at the various hotels, guesthouses, bed and breakfast and other lodging facilities that are to be found in the surrounding suburbs.

Individual and group Leisure segments are attracted to the abundant availability of tourism assets in the vicinity of HLA. The Cradle of Humankind and the Lion Park are world-famous destinations. Many wedding venues are to be found in the surrounding areas of the airport. A bit further out but still within easy reach is the Sun City Entertainment Complex. All these assets attract both domestic and international visitors all year round and the HLA helps to facilitate much of this business.

The MICE segment is amply provided for in this region due to the secluded profile of the properties found here together with ample recreational facilities, expansive grounds for team-building and central access.

Lodging Key Demand Areas

Lanseria Aerotropolis is surrounded by the Gauteng Province suburbs of Sandton, Randburg, Roodepoort, Krugersdorp, Magaliesburg and Centurion. The key demand areas comprise major residential, retail, commercial and industrial districts.

 Kya Sands, Lazer Park, Strijdom Park and Honeydew Industrial Townships are located in Randburg. These mature industrial townships have developed rapidly as an extension of Johannesburg as decentralised nodes. As Aerotropolis grew larger and became more relevant as a regional airport, new industrial parks have now been established. Lanseria Industrial Park and Cosmo City Business Park arose on the back of an expanding HLA. Since its establishment in 2006, Cosmo City Business Park has doubled its rate of vacant land take, now almost sold out. Stand development also tends to occur quite rapidly after a stand is sold out. These developments house distribution and warehousing companies and command high rentals.

Fourways and surroundings – This high value residential, retail and entertainment node is anchored by Montecasino and Entertainment Centre and Fourways Mall. Montecasino is always growing with new additions every year and brand new nodes every five years or so. These new nodes typically include entire office parks, retail and hotels.  

Fourways Mall is currently undergoing a major revamp with more than 20,000 square metres of additional shopping space. A sizable bulk of these shops are major international retail brands.

Dainfern and surroundings – Dainfern is essentially a residential golf park which grew to become a luxury node. Some of South Africa’s most expensive residences are known to change hands. It is popular with multinational expatriate executives who come to settle here.

Broadacres and surroundings – Broadacres is a pre-dominantly small-holding area which is fast developing into a high density residential environment. It is anchored by a community shopping centre and has access to Fourways and Sandton.  

Sun City – This world-famous entertainment and gambling hideaway is a short one and a half hour’s drive from Lanseria Airport.

Hartbeespoort – Hartbeespoort houses the largest dam in Gauteng Province. The town also supports much leisure activities over weekends and public holidays. Visitors come from far and wide to enjoy the various activities such as the newly-revamped cable car and water sports in the dam.

The Cradle of Humankind is a popular is perennially popular with both locals and foreigners because of its unique product offering and the operator’s focused marketing effort.

Lodging Source Markets

Lanseria Aerotropolis is essentially a business destination with a high domestic and continental guest component. Domestic source markets for hotels in the city include corporate travellers from Cape Town and Durban on scheduled Kulula, FlySafair and Mango flights, as well many chartered flights to far flung tourist destinations such as Kruger National Park and mining towns. Travellers arrive from all countries on the African continent. The previous Minister of Tourism, Derek Hanekom, has in the past announced that travellers in transit through Aerotropolis will no longer require transit visas, further cementing the airport’s reputation as a rapid transfer airport.

Lodging Properties and Indicative Room Rates

The Lanseria Aerotropolis lodging market comprises of only a few locally branded hotels, no global brands and numerous independent hotels and bed and breakfast establishments. Active brands include Tsogo Sun, aha and City Lodge Group. Surrounding hotels are situated at varying distances from the airport and all of them have great access to its facilities. The properties described in this paragraph are popular with business tourists due to their convenient location, attractive surroundings, affordable room rates and aesthetics.

Hertford Country Hotel, Shumba Valley Lodge and Kloofzicht Lodge are some of the more famous independently-owned assets and they cater for pilots, businesspeople, corporates, weddings and small conferences. Maropeng and Forum Homini Boutique Hotels cater for exclusive visitors to the Cradle of Humankind. Hotels at Montecasino, Indaba Hotel and City Lodge Fourways compete for the formal hotel client in the Greater Sandton and Randburg suburb. Rates at these properties are very competitive and much flexibility exists in pricing, a situation which can be attributed to their being privately owned and the largely independent operator profile.

Hotel prices change very rapidly on a daily, sometimes hourly basis. Through Google Maps, one can see the location of most of the properties that regularly advertise their price on the internet. In the study area, customers can rarely find a formal hotel room that is advertised at less than R1,200 per night. The bulk of the properties that are being advertised below that price are either guesthouses or bed and breakfast places. Formal hotels charge rack rates that are upwards of R1,500 the closer they are to the surrounding suburbs. At Montecasino in Fourways, the five-star Palazzo Hotel rack rate was advertised at R3,665 at the time this article was written. The Southern Sun was priced at R2,999 from R2,978 a few minutes earlier. On the other hand the City Lodge across the road was priced at R1,597. On the opposite end of the HLA, the aha Lesedi is advertising rack rates of just under R1,200.

Hotel Market Performance in South Africa

The average room occupancy rate of South African hotels is reported to be persistent in a range between 45% and 60% across all market positions. The branded properties tend to operate in the upper limit of this range. For most operators the key to profitability lies in how they manage their expenses while maintaining standards and still remain attractive to their guests.   

The rate of supply of hotel rooms in South Africa is in some ways regulated by the lending environment and the risk averse attitude of banks towards the funding of hotel investments. In line with that property developers have tended to staying away from hotel projects.     

The performance of the accommodation industry as measured by Statistics South Africa reveals a rising trend in revenue figures. Over the past 10 years room revenue has maintained a consistent upward trend despite tough economic conditions: “Measured in nominal terms (current prices), total income for the tourist accommodation industry increased by 1,2% in October 2017 compared with October 2016. Income from accommodation increased by 2,9% year-on-year in October 2017, the result of a 3,7% decrease in the number of stay unit nights sold and a 6,9% increase in the average income per stay unit night sold”.  

ACCOMMODATION REVENUE TREND 2012-2017

The accompanying graph from Statistics South Africa illustrates the accommodation industry’s room revenue trend during the period 2012 to 2017. Based on a perceived improving economic outlook, this rising trend is expected to remain over the next couple of years.

Room occupancy rate has remained bound in the 45% to 55% range over the same period. Whilst occupancies have been restrained, annual average room rates have maintained reasonable growth  

 

The Outlook For HLA

The outlook for the South African hotel industry is a positive one, following on increased confidence levels in business circles and the accompanying GDP growth outlook. This, in conjunction with demand for private  development in the area, government pledges  for large infrastructure projects such as new rail and water sanitation, is the setting that Lanseria aerotropolis needs to sustain a bustling hotel industry.

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For more information on the above and to learn more about our services please get in touch with us:

Makhudu Hospitality Consultants (Pty) Ltd.
Block D, Sweet Thorn on Beyers Office Park
2595 Bosbok Road,
Randpark Ridge, 2156
Gauteng Province,
SOUTH AFRICA

TEL: +2782 301 4572
CEL: +2787 238 2457
eMAIL: tshepo@makhudu.co.za
WEB: www.makhudu.co.za

COMPANY PROFILE MAKHUDU HOSPITALITY CONSULTANTS

We are a Hotel and Related Hospitality Property Consulting and Brokerage Services Company. We Pride Ourselves And Our Place through our dedication, our passion and our skill, all of which we bring to bear in serving our customer.  

The recent competitive entrance of global hotel operator chains in Africa over the last number of years has necessitated a rapid rise in new hotels. Because of that a related increase in the level of sophistication of hotel investors has created a need for a specialist consultancy service to meet to service the industry. Makhudu Hospitality Consultants (Pty) Ltd was established in 2017 to meet this need.

Over many years Tshepo Makhudu has amassed experience and knowledge of the hotel investment industry in South Africa and across the continent. He has held positions at leading consulting, real estate owning, banking institutions. Recently Tshepo has worked for a global hospitality development, management and investment consultancies in the world, where he was tasked with valuations, market and feasibility studies and consulting engagements in Africa.

Learnt skills include commerce and property development and management at leading universities in South Africa and executive leadership training in the USA. Tshepo is a founding Board Member of the South African Institute of Black Property Practitioners and in in 2015 he was bestowed the IsiThwalandwe Award for his contribution towards the transformation of the property industry in South Africa.

 

South Africa 'must re-double trade and tourism efforts'

By on Jun 30, 2017

IATA study highlights aviation’s impact on jobs and economy

 

IATA Regional Vice President for the Middle East & Africa Muhammad Ali Albakri says efforts must be “re-doubled” to promote South Africa as a destination open to trade and tourism.

Albakri’s comments come following an IATA study that highlighted the immense value of the air transport industry in South Africa.

Aviation supports some 490,000 jobs in the country, including tourism-related employment.

Affordable, safe and reliable air transport is crucial to economic growth

The sector also contributes $US12 billion to South Africa’s GDP—the equivalent of 3.5% of total GDP.

“The study confirms the vital role of air transport in facilitating over US$110 billion in exports, some US$140 billion in foreign direct investment and around US$9.2 billion in inbound leisure and business tourism for South Africa,” Alkbari said.

“Now with the country in recession it’s time to re-double efforts to promote South Africa as a destination for business, trade and tourism.”

Executives surveyed by the World Economic Forum rated South Africa’s status regarding three key areas for the air transport industry.

Thirty-seven African countries in all were rated, out of these South Africa ranked:

• 1st for infrastructure

• 19th for visa openness

• 17th for cost competitiveness

Alkbari has urged the South African government to recognize the benefits of aviation, and remove barriers affecting air connectivity and trade.

We urge the South African government to remove any impediments

“Affordable, safe and reliable air transport is crucial to economic growth,” he added.

“It promotes skills development and is a catalyst for jobs. We urge the South African government to remove any impediments, including unnecessary red-tape and policies that hinder air connectivity and the trade, investment, tourism and job opportunities it facilitates and stimulates.”

South Africa ‘must re-double trade and tourism efforts’

By on Jun 30, 2017

IATA study highlights aviation’s impact on jobs and economy

 

IATA Regional Vice President for the Middle East & Africa Muhammad Ali Albakri says efforts must be “re-doubled” to promote South Africa as a destination open to trade and tourism.

Albakri’s comments come following an IATA study that highlighted the immense value of the air transport industry in South Africa.

Aviation supports some 490,000 jobs in the country, including tourism-related employment.

Affordable, safe and reliable air transport is crucial to economic growth

The sector also contributes $US12 billion to South Africa’s GDP—the equivalent of 3.5% of total GDP.

“The study confirms the vital role of air transport in facilitating over US$110 billion in exports, some US$140 billion in foreign direct investment and around US$9.2 billion in inbound leisure and business tourism for South Africa,” Alkbari said.

“Now with the country in recession it’s time to re-double efforts to promote South Africa as a destination for business, trade and tourism.”

Executives surveyed by the World Economic Forum rated South Africa’s status regarding three key areas for the air transport industry.

Thirty-seven African countries in all were rated, out of these South Africa ranked:

• 1st for infrastructure

• 19th for visa openness

• 17th for cost competitiveness

Alkbari has urged the South African government to recognize the benefits of aviation, and remove barriers affecting air connectivity and trade.

We urge the South African government to remove any impediments

“Affordable, safe and reliable air transport is crucial to economic growth,” he added.

“It promotes skills development and is a catalyst for jobs. We urge the South African government to remove any impediments, including unnecessary red-tape and policies that hinder air connectivity and the trade, investment, tourism and job opportunities it facilitates and stimulates.”

International Sporting Events – Takeaways for Hotel Investors

By on Jan 27, 2017

Introduction

There is no doubt hosting a major sporting event boosts the profile of the country and city.  Who does not want to visit Rio after the recent FIFA World Cup and Olympics?  However, these events are only for a few weeks and even allowing for a year of visits from sponsors and managers in the lead up to the event and the boost to demand once the curtain comes down and the television cameras depart, does hosting an international sporting event justify building new hotels?

In this article, we review the possible impact of hosting the Commonwealth Games on the city of Durban and provide some advice for would be hotel investors.  We also share some of the lessons from the 2010 World Cup in South Africa, the London Olympics 2012, the 2014 World Cup and the Rio Olympics.

The Commonwealth Games and Durban

In a BBC article two years ago, the last Commonwealth Games in Glasgow in 2014 was listed as the fifth largest global sporting event.  They attracted 1,300,000 spectators to watch 4,820 athletes from 71 nations.  Television coverage was taken to 90 countries.  The next edition of the ‘friendly games’, as they are known is in Gold Coast Australia in 2018.

The Commonwealth Games 2022 have been awarded to Durban, South Africa. However, there are rumours that the city is facing the real prospect of losing the right to host the Games. This instability is not good news for investors who had been readying themselves to enter the Durban landscape with new hotel developments since the hosting announcement was made.  We assume this insecurity will soon be lifted and all parties can plan for a successful event.

Durban has hotels, swimming beaches, stadia and wonderful weather all year round. Hotel performance has not been stellar in the past couple of years however, with the city still having to work off the oversupply from the 2010 FIFA World Cup.  As things stand, the event will coincide with the countrywide Municipal and Local elections in 2022, and this may or may not interfere with the city’s ability to host a successful event.

PERCENTAGE CHANGE IN HOTEL VALUE PER ROOM

The HVS Hotel Valuation Index 2016 graph below illustrates the trend in hotel values since 2010, and it can be seen how these have suffered between 2010 and 2016. This can be attributed to the bedroom oversupply that affected all the major centres in South Africa.  Values are reported in US$. The weakness of the Rand against the Dollar also contributed to the poor performance. Over the seven-year period from 2010 to 2016 the CAGR for value is -6.1% for Durban, which compares to -2.2% for Johannesburg and 4% for Cape Town.

durbanchart

What Can We Learn from Past Events?

In 2010 FIFA was reported to have block-booked more than 450,000 bed-nights long before the start of the event in an effort to regulate room rates prior to the Games. This was also done before the devastating financial crisis of 2008 and 2009 and due to this, many prospective sports followers cancelled their planned trips into South Africa. However, since many new hotel development projects were kick-started shortly after the hosting announcement and before the financial crisis, a hotel room oversupply resulted.

London is a mature tourism market with a stable tourism flow. Wary that this stability would be disrupted, the organising committee block-booked hotel rooms prior to the Summer Olympics of 2012 and released them to the market closer to the start of the event. Average Daily Room Rate during the Games was up 86.1% compared to the same days the prior year, whilst occupancy was recorded at 88,5% for London hotels. RevPAR also increased during the same period, according to data from STR. So how did London manage to host such a successful event for the hotel industry? The answer lay in how the city kept a lid on building new hotels, and rather worked on adjusting the room rate to increase performance.

Leading up to the start of the 2014 FIFA World Cup, tour operators who had years before bought blocks of rooms, were desperately offloading their spare capacity. Discount rates of more than 40% were not unheard of. As in the case South Africa in 2010, FIFA’s accommodation partner, Match Hospitality, prior to the event, released unsold rooms it had previously block-booked. The unfortunate result was that some World Cup hotel room prices dropped to half of the levels the hoteliers were achieving two years before. Overall, hotels in Brazil saw a 50.1% ADR increase in June and a 36.1% ADR increase in July; occupancy levels across all host cities decreased when compared to 2013; Brazil saw a two percent supply increase in June 2014 on a 12-month-moving-average basis, according to reported STR statistics.

On the other hand, the 2016 Olympic Games in Rio de Janeiro were successful not only on the sporting front, but on the hotel performance side as well. Media reports leading up to the Games were dominated by the devastating impact of the Zika virus, with the resultant withdrawal of some athletes from across the world, and the political turmoil involving the Brazilian president. Despite these hurdles, Rio hotels achieved good performance ratings during the games. STR has reported a 199.2% surge in average daily rate for Rio hotels during the games. The combination of this growth in rate and a 26.6% increase in occupancy to 76%, brought about a 278.6% increase in Revenue per available room. These are glowing statistics and it is generally held that Rio hotels outperformed London hotels during the previous Olympic Games of 2012. The key point to note however is that Rio was oversupplied with hotel rooms leading up to the games and this supply overhang is likely to negatively impact occupancies in the future. STR has estimated this bedroom oversupply at 23% more than a year earlier.

How Are Other Host Cities Preparing for Future Games?

The FIFA World Cup 2018 will be hosted by Russia; Tokyo will be receiving visitors to Japan for the Summer Olympics in 2020, and the FIFA World Cup 2022 will be held in Qatar. With prospects of many thousands of visitors, hoteliers are hoping to make significant profits from hosting the Games. Hotel investors are also eyeing superior returns from new properties that are entering these markets. These countries’ and cities’ organizers would do well to heed the lessons from previous international events.

Russia’s foreign political landscape, the exclusion of its top athletes from the Rio Olympics and the FIFA corruption scandals relating to how Russia won the rights to host the 2018 World Cup do not bode well for the country’s prospects to host an untainted event. On the other hand, Hotel News Now has recently reported that “the end of uncertainty in the Russian economy coupled with growth of occupancy and other performance indicators might increase the number of new hotel projects in Moscow and Saint Petersburg between 2016 and 2018”.

STR has previously reported that the Tokyo hotel industry is a high performer, with “some of the highest occupancy levels globally and with rates continuing to rise – all against the back drop of limited supply in the pipeline”. This situation could be an indication that the hotel market in Tokyo will be lucrative for hotel investors as large numbers of visitors are expected to flock to the city for the Games in 2020. The proviso however is that the delicate balance between supply and demand should be respected always.

Conclusion

Hotel investments are by nature very cyclical, therefore a delicate balance needs to be struck between the variables of supply and demand. International events can throw this balance out, and market players that can skilfully navigate these events can extract maximum benefit. To ensure that Durban hotels derive maximum benefit from hosting the Commonwealth Games in 2022, it is essential that hotel supply is kept at reasonable levels. A six-week event does not justify a $20 million investment in a new hotel, however to time the opening of a new hotel with such an event can massively help with cash flow management in the tricky first year of operation.  Durban hotels may not enjoy a 280% increase in RevPAR that Rio managed for the Olympic Games last year, but a substantial increase should be achievable.

However, perhaps the biggest bonus for all current and future hotels in the city is four years of international marketing reminding people of all the attractions Durban has to offer. The hotel industry can have a huge impact on the success of the games.  It is therefore imperative that the hotel industry is properly represented in the organising committee to ensure both the success of the games and the long-term success of the hotel industry learn from recent events.

ENDS