André Volbrecht, head of Auction Alliance’s Hospitality and Leisure Division comments, “From the creation of new leisure ownership options to the popularity of secure residential lifestyle estates across South Africa, this ever-evolving industry is constantly being fine-tuned in the face of burgeoning trends and lifestyle concepts.’’

The 2010 FIFA World Cup coupled with the recent announcement that Cape Town is the world’s top travel destination, has catapulted South Africa onto the global radar and positioned it as a key player within the hospitality and leisure industry. In spite of this exposure, numerous individually owned metropolitan and boutique hotels are currently experiencing significant levels of distress.

Volbrecht believes this is because smaller, individually owned hotels do not possess the economies of scale required in terms of management and market penetration to compete with industry dominant hotel giants like Sun International, Southern Sun, Protea Hotels and Peermont Global Resorts. Comments Volbrecht, “The banks’ reluctance to fund the acquisition and development of hotel properties, has created a substantial barrier for the smaller investor in this sector of the market.’’

The emergence of a number of leisure ownership options including fractional ownership, private residence and destination clubs over the last ten years is according to Volbrecht largely due to investors growing disillusioned with the rising holding costs, reduction in use and lack of flexibility associated with owning private holiday homes. Volbrecht also believes that the waning of interest in time-share in the top-end of the market is due to the perception of there being little or no opportunity for capital appreciation.

In terms of Fractional Ownership schemes, many developers and investors alike have been unable to create a sustainable formula to fund and develop these projects for a number of reasons. He believes that one of the two distinctive reasons for this is the cumbersome funding mechanisms imposed by project promoters. The other, is that banks have been unwilling to provide developers and investors with optimal funding.

Since its inception by Anglo American properties in the 1980’s, the residential lifestyle estate trend has proliferated at a considerable rate. Comments Volbrecht, “Over the last 5 years, the values of properties situated in secure residential estates have remained steady and in some cases, significantly increased depending on location. The inundation of golf and lifestyle estates onto the property market has created a huge over-supply of properties in this sector.’’

Speculation, the global financial crisis and stricter lending criteria imposed by banks has further aggravated the situation and stifled the momentum of countless projects now sitting at various stages of completion. Adds Volbrecht, “The distress experienced by the leisure property sector has resulted in an augmentation of opportunistic buying by investors seeking to not only unlock value from investments, but obtain properties at prices significantly below market value.’’

He says that distressed properties in prominent locations, within close proximity to major metropolitan areas, offer investors considerable value. These properties are specifically appealing to investors once a sizeable amount of capital has been invested to cover the rezoning, approvals process and infrastructure costs.
 
“As the economy gains momentum, developers and bankers alike are expected to adopt a far more cautious approach to new developments. However, with South Africa positioned as one of the world’s most desirable tourist destinations and with a host of foreign and local investment anticipated to further boost the economy, the sector is primed to strengthen in future months in terms of capital flow and development,” concludes Volbrecht.

For more information contact André Volbrecht on 083 286 7831or email This email address is being protected from spambots. You need JavaScript enabled to view it.  or visit www.auction.co.za