The struggle to fill hotel beds continues, and has forced more SA hospitality players to put up the “for sale” boards.

In the past two months alone, Pam Golding Properties’ hospitality arm has been mandated to sell a substantial 23 midmarket (three- and four-star) hotels across SA and Zimbabwe, collectively worth around R1bn. Of these, 16 are located in SA.

Auctioneers Auction Alliance has 12 distressed hotels currently up for grabs — 22 have already gone under its hammer this year.

Hospitality Property Fund is also looking to offload four or five of its underperforming hotels – it’s the first time since the fund listed in 2006 that it will be a seller and not a buyer.

That follows Hyprop Investments’ recent sale of the five-star Grace in Rosebank for R85m to Southern Sun — 20% below its 2010 valuation of R107m.

Others that have closed their doors this year include Le Vendome and the historic Alphen in Cape Town. Southern Sun Grayston in Sandton will close temporarily at the end of the year.

Pam Golding Hospitality CEO Joop Demes says while some local players are complaining of declining profitability, international brands are keen to enter SA at a deep discount at what they believe is the bottom of the market.

Pam Golding Hospitality’s portfolio of 23 hotels is selling at around 50% less than current replacement value. Says Demes: “Buyers can pick up rooms at around R500000/key, half of what it would cost to build a new hotel.’’

Demes is already talking to, among others, Accor, Hilton and Spanish-listed NH who are looking to grow their footprint in Southern Africa. They are particularly interested in breaking into the midpriced market where local brands including Protea and City Lodge have traditionally dominated.

“These well-established global players see an enormous gap to develop the midmarket domestic and African traveller markets, which they believe is being largely ignored by local hotel players.’’

JSE-listed Hospitality is looking to offload underperforming hotels in secondary areas. Says CEO Gerald Nelson: “We are not embarking on a sudden disposal spree. But we want to focus on larger, well located properties in the big cities and will use the proceeds from the sales of noncore properties to strengthen our balance sheet and reduce debt.’’

Both Demes and Nelson are seeing encouraging signs that the market is finally turning, with forward bookings showing marginal year-on-year growth.

SA hotel occupancies and revenues have over the past two years been squeezed by lower demand amid strong growth in new hotels in the run-up to the soccer World Cup.

Latest industry figures show SA occupancies dropped to an average 52% for the six months to September 2011. That’s down from more than 70% in the mid2000s.

Source: Financial Mail