HOSPITALITY: Prominent Hotels In Cape Town Increase Occupancies
Recent Western Cape Business News
Recently, the Mother City’s 5-Star hotel market has been the subject of negative speculation among some market commentators, which as Joop Demes, CEO of Pam Golding Hospitality points out, is unfortunate, as the wrong perceptions can be created. “What is true is that despite the fact that over the past three years the 5-Star room inventory in Cape Town has increased by in excess of 50 percent, a number of prominent 5-Star hotels have increased occupancies during 2010 as well as for the six month period ended 31 March 2011,” he says.
“Anywhere in the world, hotel markets seeing such a significant increase in room inventory will experience a dilution in overall occupancies and Cape Town has been no exception. This has been exacerbated by the global and local economic slowdown, however, overall the Cape Town 5-Star hotel market has performed remarkably well and is in a far better shape compared to that in many international cities and destinations.
“Many hotels in global destinations would have been pleased to maintain overall occupancies during the past six months compared to the previous year, and with the available 5-Star room inventory increasing by over 50 percent in the last few years, one would have expected occupancies to have halved for quite a few hotels, and yet the contrary has occurred. In fact, the increase in room inventory coupled with the major exposure afforded us through the World Cup 2010 has led to a significant increase in bed nights sold in the 5-Star market in Cape Town during the last couple of months in 2010. This trend is continuing, and despite the strong rand this market is being further boosted by the redirection of some international traffic as a result of the unrest in North Africa and certain pockets of the Middle East.”
Demes says to illustrate this, and despite all the new rooms available in the market and growing competition, the Cape Grace Hotel at the V&A Waterfront grew its occupancy for the six months ended 31 March 2011 by 15 percent compared to the same period last year, resulting in approximately an additional 6 500 guests over the same six months last year. The One&Only, also at the V&A Waterfront, for the period ended 31 March 2011 achieved average occupancies in excess of 75 percent, reflecting an increase of 24 percent compared to the same period last year and seeing well over 6 000 additional guests compared to the same six months in the prior year.
The V&A Waterfront situated Radisson Blu Hotel also reports significant growth with an increase of almost 17 percent in occupancy - representing well in excess of 8 000 guests - for the six month period ended 31 March 2011 compared to the same period the previous year. And Demes says the Cape Royale Hotel, a new hotel well-positioned opposite the new stadium, and which is the only 5-Star all-suite hotel in Cape Town, has achieved an average occupancy well above 70 percent for the six months ended March 31, 2011. “This ‘new kid on the block’ has really got it perfectly right in terms of location and product and has proven that a hotel in Cape Town does not have to be located in the V&A Waterfront to run high occupancies,” he says.
“The additional bed nights or guests who visited Cape Town in these hotels add up to a substantial amount, and if you include the additional guests who have been staying at brand new hotels such as the Taj, 15 on Orange, the Pepper Club and Crystal Towers, you can appreciate the overall and significant increase in bed nights sold in Cape Town’s 5-Star hotel market. There are, of course some 5-Star hotels in Cape Town which have seen a decline, however as a percentage this has really been minor compared to the 50 percent increase in room inventory.
“There is absolutely no doubt that the growth of quality supply and competition in Cape Town - a destination that competes with the world’s best - has resulted in a substantial growth in bed nights sold in the 5-Star hotel market. Regrettably, however, there are some stakeholders in the hotel industry, including financial institutions, which have not taken into account the above facts and when commenting, quote an overall, diluted occupancy as opposed to an overall increase in the number of bed nights sold,” says Demes.
He adds that when reports refer to a hotel in distress, this does not necessarily mean that they are about to close down. “Distress in the hotel industry is generally caused by one or a combination of the following factors: the hotel is the wrong product for the location; it is over-capitalised; it is has taken on too much debt; or it is not well branded and/or has no proven operator. Financial institutions with concerns are encouraged to first of all engage with industry experts to understand the dynamics of the specific hotel and the market in which it competes and then diagnose the real issues that might cause the distress. The good news is that in most cases there are remedies that can be applied,” he says.
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