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 Cape Town or Sydney Hotels – Which Provide
the Best Value for Money?
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 6 August 2003 - The development of Cape Town as a destination of choice for European and USA tourists since the dramatic events of September 2001 is well documented and understood. However, Cape Town’s ability to remain in that position despite the onset of SARS and the war in Iraq is evidence of the extent to which it has been “discovered”.

The first six months of 2003 has seen a rapid strengthening of the South African Rand occurring at the same time that Cape Town City hotels have achieved a 20% improvement in revenue per available room (revPAR), as reported by the HotelBenchmark Survey by Deloitte & Touche. The question for much of the industry and the indirect beneficiaries of it, is, “Does Cape Town still represent value for money to the European and USA tourist when compared to their other options?”

When asked this question, Rob O’Hanlon (a partner in Deloitte & Touche’s South African travel, tourism and leisure practice) suggested that an effective gauge would be to compare Cape Town to a similar target destination for those travellers – Sydney, Australia.

Sydney certainly seems to be a useful comparison with its Cape Town type characteristics of being a long-haul destination set on the ocean with a huge variety of leisure activities and a gateway to a continent that has plenty to offer the adventurous tourist. Sydney’s successful hosting of the 2000 Olympic Games and the upcoming Rugby World Cup suggest that it is a proven competitor for the same tourist dollars that Cape Town is wooing.

O’Hanlon explained, “Through the HotelBenchmark Survey, we are able to monitor key performance indicators such as occupancy levels, average room rates and, most importantly, the revPAR in numerous key markets around the world. The survey illustrates that the similarities between Cape Town and Sydney extend beyond the physical attractions to the results that the hotel industry is achieving. For example, during the first six months of 2003 Cape Town achieved average occupancy levels of 70% and Sydney achieved 72%.”

Performance of Cape Town and Sydney
Year-to-June 2003

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Occupancy
Average Room Rate (Rand)
RevPAR (Rand)
Cape Town 70 577 405
Sydney 72 742 527
Source: HotelBenchmark Survey by Deloitte & Touche

O’Hanlon went on to explain that it is impressive that Cape Town has maintained its 2002 occupancy levels while achieving a 20% increase in revPAR, whilst Sydney’s revPAR grew by only 6% over the same period. “We are certainly a market that is on the up, but the best part is, when compared to Sydney through the eyes of a European or USA tourist our average room rates for the first six months of 2003 were still 29% below theirs!”
 

On 1 August 2003, Arabella South Africa opened the ArabellaSheraton Grand Hotel, a 483-room property connected to the recently opened Cape Town Convention Centre. As a result, few people are watching the market dynamics closer that Stefan Braun the CEO of Arabella operations in South Africa. Braun commented, “The continuing evidence of Cape Town being a high quality, value for money destination was one of the key factors when we decided to expand our South African hotel base. It is excellent 
ArabellaSheraton Grand Hotel
Convention Square, Lower Long Street
Cape Town, South Africa
news to hear that we are able to provide this to our clients even when compared to destinations such as Sydney – and we don’t require our clients to suffer the jet-lag of a nine hour time change!”

For both Sydney and Cape Town, June is the quietest month with occupancies of 65% and 47% respectively in June 2003. Both O’Hanlon and Paddy Brearley, Managing Director of Legacy Hotels Group, agree that addressing Cape Town’s quiet months is an ongoing challenge to new and established hotel operators – a challenge that must be solved for the industry to achieve its potential. Brearley noted that, “Our two Cape Town hotels, the Portswood and the Commodore, consistently deliver value to our clients and our group. We believe that the newly opened Convention Centre will play a key role in lifting their May to August occupancies - hopefully to those achieved by Sydney and beyond”.

Cape Town is a choice destination in its own right. Its geographic position and competitive pricing suggest that, compared to Sydney, it arguably holds the upper hand – ensuring that it remains in that position however will be a challenge for both the wider tourism industry and the government alike.

Deloitte & Touche LLP is the UK's fastest growing major professional services firm. It is based in 23 UK locations, with over 10,000 staff nationwide and fee income of £1228 million in 2002/2003. The firm is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class assurance and advisory, tax and consulting services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.

Deloitte & Touche is authorised and regulated by the Financial Services Authority.

The information contained in this article is correct at the time of going to press.

Contact:
Rob O’Hanlon
Deloitte & Touche (S.A.)
+27 21 670 1519
Also See: Rezidor SAS Renovates Former Holiday Inn in Cape Town, South Africa and Reflags The Park Inn Greenmarket Square / Mar 2003
South Africa Hotel Occupancies Improve in Second Half of 2000 / Mar 2001


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