THERE was significant over- capacity in hotels and those looking into investing in the hospitality industry should wait 18 months to two years until the sector had balanced out, Grindrod Bank chief investment officer Ian Anderson said on Friday.

THABANG MOKOPANELE

SA’s accommodation industry, particularly hotels, remained under pressure in the first quarter of the year as softer occupancy levels dragged down revenue.

Mr Anderson said a recent report predicted that 20% of South African hotels would fail within the next 18 months.

“The One&Only Hotel in Cape Town will at no point during the World Cup be more than 40% occupied,” Mr Anderson said.

“And in fact will only have a 20% occupancy rate during most of the tournament,” he said.

The latest Tourist Accommodation Survey, released by Statistics SA last month, showed that total income for the accommodation industry declined 0,3% to R1,77bn in March this year compared with March last year.

Average rates increased 4,3% year on year to R662,30 per room per night.

However, occupancies fell 5% to 1,65-million room-nights sold, despite a 2,4% year-on-year increase in the number of available rooms to 112300.

Mr Anderson said it was not just the high-end hotels that would be affected.

“While the property market has remained balanced, hotels were the one area that had not.”

Quarter on quarter, the hotel sector was hardest hit, declining 4,6% to R2,01bn in the first three months of the year.

Hotel occupancies in March declined to 54,2% from 57,2% at the same time last year, while rates were flat at R799 a room night sold.

Total income fell from R1,309bn in March last year to R1,289bn in March this year.

Sun International’s hotel operation also remained under pressure for the nine months to March, with room revenue falling 8% due to lower occupancies.

Sun City’s revenue fell 4% and average room occupancies fell six percentage points to 68%.

The Table Bay achieved occupancy of 62%, down from 76% in the previous comparable period, and revenue was down 14%.

Sun International’s Zambian properties also continued to struggle, with occupancies falling further to 45% from 49%.

Overall occupancies were six percentage points lower than they were a year earlier.

Advisory firm Grant Thornton expected domestic tourism to experience a softer winter this year, with the influx of foreign fans during the World Cup displacing local visitors.

The firm expects between 300000 and 480000 foreign fans — 151000 of them from Africa — to arrive in SA for the tournament, spending R8,5bn.

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Source: Business Day