Last week’s mid-term-budget speech underscored South Africa's dire economic straits, emphasising an immediate imperative: turbocharge our economy. And one way of doing this is to focus more on the hotel industry and building new properties.
We must acknowledge that the hotel sector is an indispensable force in driving employment, tourism, and cultural exchange. Yet, there’s a stark reality we cannot ignore – we’re vastly underestimating its potential.
Pre-COVID-19, Cape Town was a hotel development powerhouse, representing 25% of the nation’s development pipeline, with six hotels and 1 063 rooms. Durban, Pretoria, Johannesburg, and Umhlanga were hot on its heels, contributing to a rich, vibrant hospitality sector. But let's face it, the pace has slackened, hampered by domestic pessimism and global instability.
Now is the time for a bold shift in perspective. We must champion an environment conducive to widespread hotel construction, spanning the length and breadth of South Africa.
The above view is one seen by stakeholders not only in South Africa, but globally as well. I attended the World Travel and Tourism Council’s global summit in Kigali, Rwanda, last week. The take-out from my discussions with key industry leaders and hoteliers affirms the view that South Africa has great potential in this space, with global brands keen to grow their footprint in Africa using South Africa as a driver.
The facts speak for themselves. Our hospitality sector, valued at USD1.3 billion in 2023, is on the brink of a boom, with projections soaring to USD1.61 billion by 2028 (Statista.com). But let’s not sugar coat the situation. PwC warns of our lagging growth in the broader African market, pinpointing a modest 3.3% annual increase in room revenue.
Why? It’s two-fold: the rise of online booking platforms and an urgent need for a proactive, innovative approach to hotel development. We must tailor our offerings to meet the nuanced needs of both domestic and international travellers.
Hotels are vital components in our industrial landscape
Hotels are not just places to stay; they are engines of business, vital components in our industrial landscape, and catalysts for profound economic progression. They invite us to showcase our hospitality, enticing tourists to linger, spend generously, and leave with a burning desire to return.
But the road to hotel development is fraught with obstacles. Equity partners are scarce, and the financial world is wary, seldom venturing beyond 60% debt financing. The solution? A blend of innovation, tenacity, and a commitment to unravelling the complexities of hotel investment. Our mission is to forge stronger ties with financial entities, government institutions, and private investors, creating a unified, supportive financial framework.
The zoning issue is also pivotal. By strategically aligning hotels with shopping hubs and commercial centres we enhance accessibility and curate a seamless visitor experience. This synergy between hospitality, retail, and leisure not only breathes life into our urban centres but also fuels local economies and bolsters small enterprises.
The Tourism Equity Fund is a step in the right direction, a nod to our commitment to inclusive growth. But let’s be clear: it’s a mere fragment of a much larger, intricate puzzle. We need comprehensive policy overhaul, substantial infrastructure investment, and heartfelt community engagement to cultivate a fertile ground for hotel development.
The message is unequivocal: South Africa’s hotel industry is a lynchpin in our economic and cultural tapestry. Together, let’s forge a future that celebrates our rich diversity, uplifts our communities, and cements South Africa’s stature as a world-class travel destination.