Julius Baumann

Aviation and Tourism Editor

HOTEL group Southern Sun has seen a sharp contraction in business over the past two months.

MD Graham Wood said yesterday SA had so far been sheltered from the economic fallout resulting from the credit crisis, but the effects of a global slowdown was starting to be felt locally.

“We first started seeing a decline in international arrivals in August and that trend has continued into October and November.

“The corporate market has also tightened and has started to put room rates under pressure,” said Wood.

He expected the economy to remain under pressure for the next six to eight months before gradually recovering, helped by several major sporting events taking place in SA next year.

“We have the Confederations Cup and the Lions tour in mid 2009. The Lions tour in particular will provide a kicker with between 50000 to 60000 fans expected to visit the country,” said Wood.

In the short term, the proliferation of new hotel developments in Johannesburg and Cape Town was likely to put further pressure on the industry.

However, in the longer term Wood believed the market would be able to absorb the additional room stock.

“We have an average occupancy of 70%, which indicates that in peak periods there is a strain on our room supply. Therefore we believe that there is still demand for more rooms,” said Wood.

Southern Sun has committed R1,5bn to new projects in SA over the next five years and the group will push ahead with various developments, despite the uncertain economic climate. Wood said that Southern Sun had committed to or was building an additional 600 rooms to complement its existing 12000 rooms.

The group said it had begun construction of a R275m development on the Montecasino precinct in Fourways, to be called 1 Monte. The development, to be completed in May 2010, will include office space, a 196-room Southern Sun hotel as well as conference facilities.

This week the group opened its second hotel in the budget StayEasy stable in Rustenburg and was on track to open the 135-room StayEasy Witbank next May.

Wood said the group would continue to roll out the brand over the next three to four years, with two or three hotels being completed each year.

Several weather and construction-related problems had delayed the opening of the R200m Southern Sun Hyde Park to the middle of next year.

Another area of focus is on timeshare. “The timeshare market has been largely stagnant over the past few years. A recently commissioned Deloitte survey showed that there is huge demand in this market,” said Wood.

Southern Sun will be expanding its timeshare facilities at the Sabie Sun and Drakensberg Sun as well as developing several new properties with third-party groups.

The group will also end its long standing relationship with RCI in January, while signing up Interval International, the global timeshare exchange company, as its new partner.

Internationally, the group continues to pursue new opportunities. In the Middle East, Southern Sun has signed an agreement to develop and manage a 120-room Plantation Club hotel as well as develop 148 apartments. In Abu Dhabi the group will build a 350 room Eva Hotel.

Source: Business Day