Growing Our Base
The South African hotel industry has survived the post-2010 World Cup slump and is coming out the other end, says Graham Wood, managing director of Southern Sun Hotels. That’s not all he had to say, when I joined him for a coffee at the Palazzo Montecasino, a hop, skip and a jump from the Southern Sun offices in the north of Johannesburg.
Despite the torrid times of August 2010, followed by a dreadful first ten months of 2011, where occupancies were at depressing levels seldom seen before, Wood is now bullish about how things stand at the moment, in terms of the South African hotel industry.
“We’re starting to see some growth. The government infrastructure programmes will hopefully gather momentum and it’s got to lead to some transition in corporate activity. When that happens, we’ll start to see some return in demand, because, at the end of the day, corporate travel, meetings, groups etc, that is the bread and butter of our industry.”
“But, I’m not talking about the big corporates – they are still getting around. It’s the small, mid-level or medium-sized businesses that we are missing out on. Those guys need to start travelling again, and that’s where the industry needs to see the growth,” he says.
I’m curious, though, as to whether or not this is an exclusively South African phenomenon?
“The rest of Africa has been more resilient, particularly East and West Africa,” says Wood. “That’s because there’s less stock, so there’s been less competitive activity. They haven’t seen a 20% growth in supply like we had prior to the 2010 World Cup. But, the landscape is changing – there’s more competition going into Nigeria, Kenya, and to a lesser extent in Tanzania and Zambia.”
So, what is the Southern Sun strategy, with regards to the rest of Africa?
“We’re in Tanzania, Zambia, Kenya, Nigeria and Mozambique,” says Wood. “So, our attitude is, ‘let’s build off what we’ve got and grow our base’. Our vision is to be able to work in our existing markets, but increase our portfolio spread in those existing markets, as opposed to going to look for new markets.”
That explains Southern Sun’s acquisition of Accor’s stake in South African budget hotel group, Formula 1.
“We believe that F1 brand has legs for us to grow it,” says Wood. “So, how do we take those 23 hotels and that footprint and identify opportunities to grow that footprint in the South African market? There’s definitely enough opportunity domestically to grow it.”
What Southern Sun is also doing is dipping its toes in the water with the opening of its StayEasy hotel in Lusaka – the group’s first mid-market hotel in Africa.”
“That will give us very valuable insight into whether that model can work,” says Wood. We’ve just got to be careful that we don’t cannibalise our existing business.”
The other big move by Southern Sun has been their acquisition of the Grace Hotel in Rosebank, Johannesburg. Wood’s eyes light up when he details the plans they have for what will be a 5-star boutique hotel, with a well-known South African chef heading up their culinary offering.
Further to that, what else could we expect from Southern Sun?
“There’s still opportunity domestically,” says Wood. “If we’re going to be a serious player, we’ve got to make sure that we are represented across a broad spectrum. So, those two acquisitions ensure that we’ve got good distribution and variety. It gives us an opportunity to offer a varied product offering to all our customers, from top to bottom.”
Dylan Rogers