Digitalising Real Estate Lockdown Real Estate Guide | Page 16
HOSPITALITY
The flipside of
COVID-19
A huge opportunity for value-driven tourism
products
SIDIMA MFEKU
amenities of traditional hotel accommodation with the
space, flexibility and self-catering convenience of furnished
apartments.
Figures in late 2019 highlighted that five-star-hotel
occupancy, where most aparthotel operators, are positioned,
had increased by 4% over the previous year. While the average
daily rate (ADR, the average realised room rental per day) had
grown by 2,6%. The four-star sector’s occupancy, despite new
hotel entrants, had also increased, by 1,6% and with a 2,2%
increase in ADR.
Rael Phillips, co-founder and CEO of one of three major
South African aparthotel-focused operators, Totalstay, says the
company enjoyed exponential growth over the 5 years leading
up to the COVID-19 lockdown.
“Large property developers, like Berman Brothers, Elemental
and S12J fund managers 12Cape, have either mandated us to
turn existing developments into aparthotels or brought us on
at the onset to consult on a purpose-built property that will
operate as an aparthotel,” says Phillips.
Aparthotels in the Totalstay collection include Latitude
Aparthotel in Sea Point (32 apartments), Strand Beach in Sea
Point (21 apartments), The Verge Aparthotel in Sea Point (22
apartments) and Urban Artisan Aparthotel in Woodstock (20
apartments).
These properties include a mix of one, two, and three-
bedroom apartments, which suit the needs of different sized
groups. The company also manages smaller selections of units
in existing blocks, which it deems ‘luxury suites,’ as well as a
bespoke collection of luxury holiday villas, ranging up to seven
bedrooms in size. Its properties are located in and around Cape
Town CBD and the Atlantic Seaboard, with plans to expand the
collection further up country in the near future.
P
ost-pandemic price-conscious travellers will want
bigger bang for their buck than ever before With a
national lockdown in place to try to slow the spread of
the COVID-19 virus, the first quarter of 2020 in South African
tourism will go down in history books as in March the local
industry came to a grinding halt. And with ratings agency
Moody’s having downgraded the country’s sovereign credit
rating to junk status, the already floundering economy
compounded restrictions even further, on both corporate
travel budgets and domestic travel consumption. the world at different levels and in different timeframes, the
question is will markets and countries wait until the threat of
the virus has been eliminated entirely? We hope that travel will
start before this time in a controlled manner, with a ramp up
to being fully operational to all markets and countries,” says
Troughton.
According to the managing director of HTI Consulting,
Wayne Troughton, the concern in the hospitality industry right
now the stage at which the international travel activity will
resume and the restrictions in which the travel activities will be.
He posits a possible timeline of anything between one and two
years for the industry to reach pre-COVID-19 levels. “It’s becoming clear to us that value-driven products,
especially in the accommodation sector, like aparthotels or
traditional hotels offering far more amenities over and above
their core offering for the price of a room, will be better
positioned to meet these travellers’ needs,” He says
“Because the virus has impacted almost all countries in
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COVID-19 - 2020
Troughton says travellers battered by the pandemic,
recession or slow economic growth will want either a cheaper
price or more value-add.
Aparthotels are full sectional-title apartment blocks
that operate as serviced luxury hotels, combining the daily
Operated under a management agreement with the block
owner or developer, this aparthotel offers a full turnkey service
including marketing, reservations, revenue management,
on-site staffing, housekeeping and laundry services. Most
aparthole properties offer 24-hour concierge, full kitchens, free
WIFI and hotel-grade amenities. In some instances, depending
on the property’s facilities, it also offers on-site food and
beverage and room service. Fitness centres and/or swimming
pools are available at some of the properties.
Average occupancy for summer at Latitude and Strand
Beach in Sea Point averaged over 80%, and there are more
than 50% of guests coming from South Africa, a mix of
international trade from Australia, the United States and the
United Kingdom. For the year to the end of February, the bulk
of guests still came from the local market, sitting at 55% for
South Africa, followed by the UK and other Western European
countries. “Figures clearly suggest that the aparthotel offering
is supremely popular with South Africans, domestic travelers
who don’t have the financial wherewithal to afford more
expensive options or who just demand more value for their
spend,” says Phillips.
However, Troughton believes that South Africans are largely
unaware of the attractiveness of the aparthotel option, partly
because this kind of accommodation offering has previously
been managed on an ad-hoc basis. “But now professional
management has been implemented, new supply of brand-
focused, quality and value-driven entrants, are really beginning
to make a difference, and with that, awareness will increase,” he
says.
Troughton believes that the way in which COVID-19
has constrained travel spend will present new, exciting
opportunities. “For hotel investors, it presents an opportunity
for possible conversions into other real-estate assets like
aparthotels. The benefit of aparthotels is that they represent a
quick, more risk-averse exit strategy than conventional hotels,
as they can easily be sold off on a sectional-title basis as micro
apartments or co-living apartments,” He adds.
Phillips cites as an example of the investment opportunities
offered by aparthotel or luxury-suites schemes, Elements
Luxury Suites, 12 luxurious sea-facing two-bedroom
apartments in Upper Sea Point. Totalstay began operating
it in 2018, and property investors took an interest almost
immediately, buying into the development and then leasing
their apartments as part of the pool.
“Once we had the figures to suggest demand for this type of
accommodation, property investors saw the yield and returns,
and it was then a no-brainer for them,” Phillips says.
Simon Bridges, developer and MD for Elemental says “As a
developer one is exposed to the risk of holding unsold stock, so
furnishing unsold units and bringing in an aparthotel operator
helped us mitigate this risk by generating rental income.
We achieved 45% of our sectional-title sales target after the
development began operating as an aparthotel – it was and is
one of our strongest marketing tools.”
Bridges cites an additional appeal, and one that all South
Africans can look forward to when the COVID-19 lockdown is
lifted. “Operating the building as an aparthotel brought life into
it, with guests, happenings and foot traffic moving through on
a daily basis. This just added to the marketability and appeal of
the building, which became the wow factor when interested
buyers were actually there, seeing things for themselves.”
About HTI Consulting
Hospitality and Tourism International Consulting was
formed in 2003. The objectives of the business are to service
the strategic and operational needs of public and private
sector hospitality and tourism organisations, focusing on
developments in Africa and the Middle East. HTI Consulting
specialises in the gathering, analysing and interpretation of
sensitive market and financial data and the production of
market and financial feasibility and viability studies, business
plans, marketing strategies and project concepts for hotel,
residential, real estate, leisure, conference and integrated
resort developments.`
SOURCE HTI Consulting
COVID-19 - 2020
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