Less risk, more reward | Everything Property

Less risk, more reward

COVID-19 will forever change the travel industry, but opportunity exists for products that offer value – read further to find out more.

With a national lockdown in place to try to slow the spread of the Covid-19 virus, March 2020 will go down in South African tourism history books as the month in which 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.

“Concern in the industry right now is at what stage international travel will resume and under what restrictions,” says Wayne Troughton, managing director of HTI Consulting, a development consultant for the hospitality sector across Africa and the Middle East. He posits a possible timeline of anything between one and two years for the industry to reach pre-Covid-19 levels.

He predicts that post-pandemic price-conscious travellers will want bigger bang for their buck than ever before. “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,” says Troughton. Aparthotels are full sectional-title apartment blocks that operate as serviced luxury hotels, combining the daily 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, such as Totalstay, 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.

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 we have a professionally managed, new supply of brand-focused, quality and value-driven entrants, 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. “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.”

Simon Bridges, developer and MD for property developer Elemental, adds, “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.”


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