Following global trends, multiple title ownership of hotel rooms in South Africa is rapidly catching the attention of both local and international investors, and is becoming recognised as an ideal and cost effective means of acquiring a sound investment with a generous leisure usage option during the year, says Joop Demes, MD of Golding Hotel Investment Consultants (GHIC), leading facilitators of the SA hospitality and leisure industry and a member of the Pam Golding Property group.

Comments Demes: "While this is not a new concept, the business models for both sectional title ownership and timesharing have been refined and reworked to provide the investor with the best of all options in acquiring an investment property with sound returns, no hassles, and with up to 30 days' free use every year.

"Upon purchase of a unit, the sectional title owner - who is seeking a commercial income return, coupled with personal leisure use and capital appreciation - will then let the unit for the remainder of the year. As an example, at the luxury Lake Pleasant Hotel and Spa in Knysna, for an average price of R1million the investor can acquire an exclusive, full-services five-star product. Because of the bank guaranteed returns of at least five percent per annum for the first three years, gearing of up to 50 percent is obtainable, which means that your capital investment is significantly reduced. In return you have 30 days use of luxury accommodation and all the facilities, the benefit of the infrastructure and security, and no additional costs. There are not many families today who can afford to stay in a five-star hotel for an entire month. On top of that your investment yields a commercial return as well as capital appreciation," he adds.

Demes says that GHIC's new business model for such sectional title hotel ownership projects is sustainable and workable, without the pitfalls of the mid-90's schemes, which were based on ambitious and often unachievable returns, further exacerbated by extremely high interest rates. He says the new, more realistic and affordable investment plan, coupled with South Africa's reduced interest rates, stable economy and rand and buoyant property market, makes sectional title ownership of hotel rooms an appealing investment option - both for local and international buyers.

"For the past three years, South Africa's hospitality industry has outperformed many overseas competitors, with greatly improved and sustained occupancy and room rates. With the country's increased global awareness and the far-reaching spin-offs from the forthcoming World Cup Soccer, the outlook is extremely positive. For the hotel operator, whose real business is in management, the benefit of sectional title ownership lies in reduced capital outlay. Further reducing risk for the purchaser of the room is the fact that returns are linked to gross accommodation revenues instead of to profit or loss, and that levies and costs are absorbed by the hotel operator," he says.

"A good percentage of our local and overseas clients enquiring about such schemes are however, seeking investments where the emphasis is undoubtedly on a 'lifestyle' leisure usage as opposed to commercial returns. Typically, these are affluent households with minimal but flexible leisure time. This customer generally demands a more sophisticated design and good quality amenities and service in a four to five star hotel environment. Time and usage is sold as a fraction, often flexible from four to 12 weeks, and the investment they make is underpinned by the inherent and growing value of the property. These business models are fast becoming one of the most evolving and profitable sectors in the global hospitality industry. Fractionals, as they are called, are extremely successful in the United States, Australia, the UK and other European countries, and within the next two months we will launch of a similar product in South Africa," says Demes.

GHIC is currently busy with three fractional models - all in the four and five star hospitality environment in the Western Cape. "What is really exciting is that the pricing structure will encourage participation, both from an ownership and user point of view, in the growing hospitality industry across a much broader cross section of South Africans. A four-week annual fraction will be priced from approximately R150 000 plus a small annual levy. A floating system will guarantee time during high season," says Demes.

Together with the Pam Golding Property group, GHIC is in the process of establishing a specialised division to cater for sectional title ownership and fractional ownership. This new division will specialise and consult in demand analysis, product positioning, financial modelling and marketing and sales of fractional ownership (sectional title and fractionals) within the hospitality and leisure industry in Southern Africa.

Ends

Issued by Gaye de Villiers

Tel: 021 6837788 or 083 325 1939

On behalf of Pam Golding Properties