Is there a future for international hotel brands in SA?

Expansion by big international hotel brands is not necessarily a good idea for the future of the hotel industry in South Africa, according to industry players speaking at the HICA conference in Durban last week.

Arthur Gillis, Group MD, Protea Hotels, says the days of international hotels coming into South Africa and building without equity are over. He says very few internationally branded hotel groups are coming into SA with their own equity. “These companies pursue an asset-light model. They will put their brand on a hotel, but they don’t bring any money. We are saying: that’s very exciting but not what the country needs.”

Gillis says the country now needs equity investment, real cash. Increasingly this investment is coming from local investors as they have a firmer understanding of the country and its risk profile. “Every time we have bad press on politics or safety and security it raises the barrier to entry. Local investors are much more comfortable with the SA situation.”
International brands can add value by putting flags in key cities and getting the countries into the international spotlight, says Helder Pereira, CEO, Redefine International Hotels. He adds, however, that SA is a very sophisticated market with good distribution and competent management and some very strong hotel brands. That is the reason why the big brands don’t make a great impact in South Africa, says Pereira.

Gabriel Matar, MD, Jones Lang LaSalle, says the expansion of international brands is very restricted in the mature markets. “For a mature destination, such as South Africa, an international brand can bring niche products. These brands then need to cater for their own demand that comes from their market. Non-mature markets need international brands to gain international recognition.”

Graham Wood, MD, Tsogo Sun Hotels, adds that the advantage of international brands is that they provide access to global distribution, which allows hotel owners access to the international corporate market. “International brands have massive loyalty programmes and massive distribution systems, so you pick up your share of the incoming corporate international market. And that’s what the international brands will do.”

Gillis further warns that any hotel brand should proceed with caution when it comes to expansion, even though the hotel industry in South Africa is showing promising signs of recovery. He says the hype about the recovery of the hospitality industry is right but hoteliers need to be careful not to make the same mistakes that were made in the past. “The demand side is growing and if the supply side does not go crazy now, then we will be in good shape. The challenge is that people are now starting to see some green shoots and they start building hotels everywhere. If this happens, we’ll go back to 2008/2009 pre-World Cup situation, where hotels shot up right, left and centre. That was just stupid. It was ridiculous.”

Average global travel budget set to increase-survey finds!

Budgets are no longer among the top three reasons why travellers choose their holiday destination. The pull of attractions, scenery and rich culture is instead a stronger reason for travel. This is according to Visa's latest Global Travel Intentions Study 2013, which surveyed 12,631 travellers from 25 countries.

According to the study, the average global travel budget of US$2,390 per trip is set to increase to US$2,501. It noted that future travel budget increases were especially high among Asian markets, with a predicted increase of 46%.

"Global economic woes have been well documented over the past few years but our Visa Global Travel Intentions Study 2013 hints at a change in both the financial landscape and consumer mind-set, suggesting either economic recovery or a growing appetite for larger travel budgets. Both provide excellent news for everyone involved in the global travel and tourism industry,” said Ross Jackson, Head of Cross-Border in Asia Pacific, Central Europe, Middle East and Africa at Visa. 

"Understanding these changes is key to facilitating collaboration, encouraging informed engagement, and promoting growth across the travel industry,” he continued. 

The report stated that increasing ease and availability of travel options was fuelling the tourism boom. This is particularly prominent in the airline industry, where 85%of travellers prefer to fly to their destinations. Of this figure, most (71%) chose to fly economy class while, perhaps surprisingly, only 16% chose budget airlines.

The results of the study also show that today’s traveller is seasoned, with 79% travelling in the past two years, and taking between one and two trips per year. Some 80% plan their holidays in advance, taking an average of 10 weeks to organise the trip. Spending time with family and friends was cited as the most popular (38%) reason for a holiday. These trips were more likely to be organised independently (42%) and last an average of 10 nights.