Q&A: Sun International – Taking stock
Q: What’s your view on the current state of the South African hotel industry?
A: Leisure travel has decreased because discretionary spend has been reduced. There is quite a nice hold in international travel, but the hotels benefitting from this market are in typically tourist destinations. The slide in the Rand’s value has actually made South Africa more affordable for foreign travellers, but it must still be noted that even Cape Town is heavily down year-on-year, and so are all other hotel nodes. A good barometer is typically Sandton, where hotels right now are down. Aside from the economy, there is also a lot of new competition, not just from new hotels per say, but new styles of accommodation. There is a huge oversupply of accommodation at the moment from apartments masquerading as hotels, particularly in the Sandton node. And then there is Airbnb which came out of left field.
Q: What’s your view on the opportunities in the different hotel market segments – ‘luxury’ versus ‘mid-market’, for example?
A: The weaker the Rand becomes the more bang foreign tourists get for their buck. If you’re travelling with pounds, dollars or euros, you can now step up a notch and buy more luxury, because your currency goes a lot further. We’re finding that bookings in premier deluxe hotels, like our Table Bay Hotel in the V&A Waterfront, are roughly 85% foreign tourists taking advantage of our weak Rand. In terms of domestic travel, people are looking for best price and best value for money. They frankly can’t afford to stay in five-star hotels. Many local businesses now have policies that prohibit staff from staying in top star hotels because everyone is trying to survive the pending recession. To save money, they’ve got systems, processes and software forcing employees to stay in two and three-star accommodation, four-star at a push. There’s a lot of great accommodation in the three-star and four-star space, so it ’s not like it ’s a burden to stay in these hotels.
Q: What has been the market response to your ‘three-tier’ hotel offering at The Maslow at Time Square?
A: The Maslow Time Square is a five-star experience from the check-in and check-out, and breakfast – all of those are a premium deluxe experience. We built a five-star hotel with rooms of different sizes, to address different needs. There is the entry level room, which is typically for a guest who plans to spend an evening at the casino, and just needs to put his head on a pillow for a few hours before leaving the next morning. He doesn’t need a lounge and multiple TVs, and he’s not entertaining guests. Guests spending more time in the hotel will opt for a bigger room with more facilities, again, depending on what they are using it for. Proper five-star suites are obviously the biggest, and these are situated on the upper levels of the hotel. So we don’t see The Maslow Time Square as being a three-tier hotel, but rather a five-star hotel experience with three different price points.
Q: Is The Maslow Time Square going to be your last hotel opening for some time, or do you have your eye on any other hotel openings in the short-term?
A: As a group, we regard ourselves as innovative, strategic and relevant. We are a premium brand in the hospitality industry, and while The Maslow Time Square is our latest hotel, it ’s far from our last foray into the hospitality space. We actively look for relevant opportunities. We look for value add, whether that ’s through managing, or through bolting onto one of our precincts or resorts, or by adding more hotels to our existing portfolio of hotels. Sun City and GrandWest may even be ready for another hotel. We may even look at other ways of using our brand to appropriately get into alternative hospitality spaces.
Q: Does Sun International still regard itself as more of a gaming company, as opposed to a hotel operator?
A: Worldwide, gaming and hospitality go hand-in-hand. I don’t know of any decent-sized casino that caters for food and beverage, entertainment and lifestyle that doesn’t have a hotel, regardless of the casino offering. A hotel is an essential part of any integrated resort. Sun International never regards itself as either a gaming or hospitality company. We are invested in both industries. There is a strong bias on the gaming side, which is where the majority of our revenue is generated, but gaming cannot exist in isolation from hospitality. It would be more correct to describe Sun International as a gaming, lifestyle, hospitality and entertainment company.