This is according to Joop Demes, MD of Golding Hotel Investment Consultants, speaking this week at the International and National Tourism and Hospitality Colloquium, at the University of Johannesburg.
Demes told the conference that prices for new construction projects were increasing rapidly. This comes as hotels experience a boom , reporting occupancy rates of 72.3 percent in the first four months of the year, up from 70.2 percent last year. This has led to an increased rate of return of 14.4 percent. Gauteng hotels are seeing the highest return on their investment at 20 percent. Gauteng will host 21 of the 64 World Cup games, putting it under pressure to provide beds for the 358000 tourists expected to visit SA. Demes said that at the moment it was cheaper to buy a four or five star hotel than it was to build a hotel from scratch. A four-star hotel is 25 percent cheaper to buy, and a five-star 16 percent cheaper. A three-star hotel is still a good deal, however, working out 29 percent cheaper to build than to buy. Demes said it was a challenge to build new hotels. One method of unlocking profit in advance to get investment for hotel construction was the mixed-use hotel, which was gaining popularity worldwide, he said.
