The South African hotel industry has some challenges, with the changes to the country’s visa regulations top of that list. Tsogo Sun CEO Marcel von Aulock addresses this issue and others in this chat with Business Traveller Africa, along with a look at other Tsogo Sun-related issues.
Q: How would you describe the state of the South African hotel industry, currently?
A: The industry is doing pretty well and continues to show recovery from the lows of 2009/2010. There is still excess supply in some areas, but overall there is a slow and steady uptick. The December season was good, or at least better than expected considering the visa issues.
Q: Are there specific challenges the industry faces?
A: Input costs continue to rise, particularly administered costs such as power, water and rates. However for the most part it’s just sticking to the basics and maintaining good cost control as volumes slowly pick up. The visa issues are still heavily affecting the Chinese and Indian markets, which were showing good growth until the new laws.
Q: How has the South African hotel industry changed over the past 20 years?
A: It’s a fundamentally different industry than 20 years ago. The South African economy is substantially bigger than it was and there are much greater levels of domestic and international travel. The emergence of the black middle class has resulted in far greater demand for hotel accommodation for business and leisure, and the number of international airlines feeding into SA has grown exponentially. A number of international brands now operate in SA and the number of hotels across all segments of the star grading have increased substantially. The last 20 years have also seen the guesthouse business develop in terms of volumes and quality.
Q: As a hotel and gaming company, is it difficult to remain focused on which area of the business is more important at any one time?
A: No – we are equally focused on both and have invested significant time and money into both parts of the business.
Q: Was your business affected by the changes to South Africa’s visa regulations?
A: Yes. The Indian and Chinese tour business took a big hit and will take a long time to recover. The family related business has been affected by the birth certificate requirements, which impacts even non-visa-requiring businesses.
Q: Tsogo Sun is currently present in five other African countries. What’s key to making a success of a hotel outside SA?
A: Our brand is strong in SA and in Africa, because of the number of South Africans working in Africa. We are also very focused on understanding local business requirements, customer needs and being a contributing company in the country in which we operate.
Q: Which of your Mozambique, Tanzania, Zambia, Kenya and Zambia properties would you say were the biggest successes of 2015?
A: The Southern Sun Maputo in Mozambique was closed for five months for a total redevelopment that saw a 70% increase in the number of rooms, new facilities and a complete refurbishment of the existing rooms. The hotel re-opened and immediately traded well, and is undoubtedly the finest hotel in Maputo.
Q: Where in Africa are you planning to open new hotels in the next five years?
A: We are keen to expand in countries we already operate in. So we will focus on Mozambique, Nigeria and Kenya. We are also looking at Ghana, because of its growing economy and its location relevant to Nigeria.
Q: What is attractive about Ghana and Mozambique – two of your development locations?
A: Growing economies and a market that knows South Africa and our brands and products.
Q: Are you seeing more opportunity in the 3- and 4-star market in Africa, as opposed to 5-star?
A: Absolutely. Economy and business hotels are our core focus. We operate seven 5-star hotels, six in SA and one in Seychelles, but the balance of our 95 hotels range from budget Sun 1 hotels to full service 4-star Southern Sun hotels.
Q: What’s the Tsogo Sun approach to conferencing?
A: It’s a core part of our business. We have a couple hundred conference venues and meeting rooms and they play an important part in our business. We also operate the Sandton Convention Centre in Johannesburg, the economic heart of SA. We handle many of the international events and large scale local conferences and have a dedicated sales force to cater to these markets.
Q: Are there any international hotel trends you’ve picked up on?
A: Not really. We are pretty leading in what we do in SA. Obviously we stay abreast of design trends in development, but we have done quite a bit of our own research and development in that field. Our revenue management and operating procedures are world class. Quite frankly most of our hotels run better than most of the international hotels I’ve visited, before you even take into account how competitively we are priced as a result of the rand, particularly in food and beverage.