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Despite the global economic downturn, it seems that the hospitality industry is booming in South Africa and Mauritius

Private Equity Investment holding company, the Trinity Financial Group (TFG), which is listed on the stock exchange, has via its subsidiary Dale Capital Partners (DCP) identified the hotels and leisure sector in South Africa and Mauritius as a core component of its current investment strategy.

The group has been investing in this sector for over 12 years and in the past year, management has taken a bold step of significantly increasing the level of investment in excess of R200 million.

DCP has positioned itself as a specialist group in terms of facilitating cross-border investments between South Africa and Mauritius.

Although the global slowdown has impacted all economies and sectors, the hotel sector in both Mauritius and South Africa through to December 2008 continued to record significant growth in room rates as a result of high occupancy rates and the increasing application of dynamic pricing.

In South Africa, where the slowdown has shown material impact across all sectors, it is of interest to note that the hospitality sector continued to reflect an increase in number of staff for the first quarter of 2009.

Average room rates grew on average by 17.5% during the report period 2007/2008 for South Africa, and are likely to continue to grow in excess of inflation for the foreseeable future.

Several high-demand events should add further yielding opportunities, not the least of which is the 2010 Fifa Soccer World Cup, which is estimated to contribute in excess of R51.1 billion to South Africa’s gross domestic product.

A Smith Travel Research indicated the impact to the South African hotel industry from the global financial crisis to be as follows:

• Cape Town occupancies were down by a minimal 2.9% to 68%, while average room rates surged to R896.

• Johannesburg performed even better, recording a 0.8% fall in occupancy, while the average room rate rocketed by 21.7% to R826.

• Despite the global turmoil, the average growth in room rates in South Africa should remain positive.

• There was an increase in international arrivals.

Prospects and outlooks for South Africa

Despite the current global financial crisis, we are of the opinion that the hotel and leisure sector in South Africa will continue to record significant growth because South Africa has established itself as a MICE (Meeting, Incentive, Conference & Event) destination.

There is a recent undeniable trend for international sporting events to be taking place in South Africa. The country clearly has the necessary infrastructure to host such events, which represents excellent value for money.

Some of the international sports events (which have recently taken place or which will soon take place in South Africa) worth mentioning are:

• 2009 Indian Premier Cricket League (April/May, 30 000 visitors)

• 2009 Lions Tour (June, expecting 50 000 fans)

• 2009 Confederations Cup (June, ticket sales of approximately 200 000)

• 2010 World Cup

The tourism industry in SA appears to be in a rapid growth phase, fuelled by the perception of being a relatively cheap but quality destination.

DCP has identified the fast growing Queensgate Hotels and Leisure Limited, listed on the JSE AltX, as an exciting group with which to be associated.

DCP has recently acquired the Shelley Point Hotel, Spa and Country Club situated up the Cape West Coast, one-and-a-half hours from Cape Town. The resort boasts an attractive nine-hole golf course with plans to enlarge to 18 holes.

According to DCP, it represents an excellent and inexpensive destination for locals. During July 2009 the new owners will launch a programme to sell 40 of the 4-star hotel rooms on a sectional title basis and will offer guaranteed returns. Queensgate Hotels and Leisure Limited has been appointed to manage the facility.

The doubling of tour operators in the past five years, expansion in hotel rooms and rapid expansion in non-hotel accommodation as well as product proliferation generally are indicative of the current growth phase of the tourism industry.

The hospitality sector in Mauritius continues to do well

Mauritius has shifted from being a sugar and textile driven economy to one that is globally competitive in a number of areas, such as financial services and tourism and hospitality.

RamaKrishna Sithanen, vice prime minister and minister of Finance & Economic Empowerment of the Republic of Mauritius; and Mr Raju Jaddoo, the managing director of the Mauritian Board of Investment, were recently in South Africa to address delegates on Mauritius as a business destination, at an investment seminar in Cape Town hosted by Dale Capital Partners Group, Queensgate Hotels & Leisure, AfrAsia Bank Limited and the accounting firm, Nolands.

Minister Sithanen explained that Mauritius had opened its economy in terms of residency with various options available, including a combined occupational permit for residence and work, residency for high net worth individuals and business people investing in the country and further, permanent residency for individuals who buy property within what is called Integrated Resort Schemes (IRS), where properties are worth in excess of $500 000, or potential residency for individuals buying under the cheaper Real Estate Scheme (RES).

Dr AK Mootoosamy, director of the Mauritius Tourism Authority, says the intention is to double the island’s 6 200 hotel rooms by 2012.

One way of doing this is to allow foreigners to own property in Mauritius. The theory is that foreigners with a residential investment in Mauritius are more likely to do business on the island. When they are not occupying their houses on the island, these can boost the number of hotel beds.

The government also allows non-citizen investors to buy property for business purposes. This is defined as manufacturing, warehousing, offices, shops, hotels and medical practices.

It is also worth mentioning that Minister Sithanen addressed investors at the above-mentioned event on taxation in Mauritius. He explained that: “Where taxation is concerned, clarity is key”.

He stated that he had voluntarily given up his discretionary powers to change taxation rules and that the taxation system of Mauritius was rule-based and systems-driven to provide certainty.

Further, Minister Sithanen stated that as far as the labour market was concerned, unemployment had declined in Mauritius with the introduction of both flexibility and security.

He stated that the Mauritian government had shifted from protecting jobs to protecting people and that in a globally competitive environment, it made more sense to provide training so that people could move between sectors.

On the back of the legislative decisions made by the Mauritian government relating to labour, immigration, tax and property, we can safely say that the hospitality sector in Mauritius, among other sectors, continues to provide attractive opportunities for investors.

DCP has taken the initiative to take advantage of these and is currently developing a 4-star hotel and spa with villas near Pereybere in the north of the island. The development is costing approximately R100m and offers guaranteed returns for interested investors.

Jessica T. Naga is a qualified barrister in England & Wales and Mauritius. She is the Commercial Director of the Dale Capital Partners Group.

International Arrivals in “South Africa”

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