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Friday Sep 21, 2012

Budget hotels go for a song as discounts lure clients away

Despite an "increasingly positive" outlook for South Africa's hotel industry and rising revenue per available room, there are many opportunities at present to acquire attractive budget hotels at prices about half their current replacement value, according to Joop Demes, the chief executive of Pam Golding Hospitality.

He explains that budget hotels have been hit by discounting by five-star, four-star and three-star hotels that were affected by the increasing costconsciousness of many foreign tourists last season and a cutback in business travel that has since been reversed, and also by a rise in independent travel as opposed to standard tour operator business.

"If we take the achieved average daily rate in South Africa's hotels and extrapolate this by a compounded rate of 6 percent, and then compare this to what the prevailing rates in 2012 should be, it reveals that five-star hotels are currently discounting rates by 19.4 percent, four-star hotels by 19.9 percent and three-star hotels by 12.2 percent", he said.

"Presently this is impacting negatively on budget hotels whose customers are poached by higher graded competitors. This trend towards discounting is, however, not sustainable as the newer hotels will have to raise rates to service debts."

Meanwhile, new hotels are being developed throughout sub-Saharan Africa, including this country, encouraged by the increasing prosperity of countries in the region and higher profits by some groups. The international Carlson Rezidor group announced this week that it planned to open its second mid-market Park Inn by Radisson hotel in Cape Town, with 122 rooms, early in 2014.

Andrew McLachlan, Rezidor's vice-president for business development in Africa and the Indian Ocean islands, said this would confirm Rezidor as the largest internationally based hotel operator in South Africa with 10 hotels and more than 1 800 rooms already open or being developed.

He said the new Park Inn now being built in Newlands, in the southern suburbs of Cape Town, would have multipurpose meeting and function rooms and would be close to several sports stadiums and institutions including the Newlands rugby stadium and cricket ground and the Sports Science Institute, as well as to UCT and many office parks and company headquarters.

McLachlan said the owners of the new hotel would be a joint venture between property developer Meridien, the Deaf Federation of SA (Deafsa) and the Industrial Development Corporation.

Deafsa represented about 800 000 hearing-impaired members nationally and the development would be a key broadbased empowerment initiative in terms of income generation, skills transfer and employment opportunities.

Business Report

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