Overseas buyers interested in Cape guesthouses, boutique hotels

Peter Bruil, MD of PGLAG says, "Recent STR reports reveal that for the 12 months ended 31 December 2012, RevPAR (revenue per available room, in Rands) in South Africa grew by 10.5% compared to the same period in 2011. The same report showed that RevPAR over this same time frame increased by 9.4% in the Western Cape and 14.5% on the Garden Route.

"Market activity in the guesthouse and boutique hotel market indicates growing interest in this region. The company recently sold two sizeable 4-Star guesthouses - Albourne Guesthouse in the Cape Winelands town of Somerset West and Whale Rock Lodge in Hermanus, 'whale viewing capital of the world'. The combined value of these two sales is close to R17 million. Interestingly, each property has been trading for almost 20 years, being one of the first guesthouses in their respective towns."

He says it is notable that the purchasers of these prime located establishments are overseas investors who already had a presence in South Africa. The new owners of Whale Rock Lodge, Dave and Anouk Bakker, were already the owners of WedgeView country House & Spa in Stellenbosch, which they also acquired through the company at the beginning of 2007. The Korevest Leisure Management Group, a specialist investment company that helps build sustainable small and medium sized leisure and hospitality businesses in emerging markets, has acquired Albourne Guesthouse.

"With its attractive Cape Dutch facade and set within a large, tranquil garden, Albourne Guesthouse has always proven a favourite among a very loyal clientele, which also applies to Whale Rock Lodge, which resembles an English thatched roof country house. Both properties have quite a few aspects in common - in excess of 10 rooms, of a 4-Star standard and set on very spacious grounds, and each has tremendous potential. They both cater predominantly for the overseas tourist in high season, servicing mainly markets from the UK, Germany and the Benelux countries, while in low season they attract mostly South African corporate travellers.

Refurbishment, staff retention part of package

"Running very successfully for close to two decades, the guesthouses needed refurbishment and a fresh look. This is where the discerning buyers identified an opportunity to add value to the properties by investing a limited amount of additional capital. Conservative calculations allowing for increased room occupancies and room rates show a very attractive yield on the investment over the medium to long term.

"The purchase process for each guesthouse transaction was relatively quick as there was no need for bank finance. Obtaining bank finance can be a stumbling block for investors and often places a buyer in a weaker negotiating position in comparison with cash buyers."

In both transactions, the staff complement has been retained and it is anticipated that additional staff will be recruited in the near future. Both buyers decided to invest additional capital as part of their expansion strategy, which is a major vote of confidence in South Africa's hospitality industry as a desirable investment destination.

A former national cricket captain for Holland, Dave Bakker had visited South Africa previously and fallen in love with the country. Having acquired WedgeView Country House & Spa in the Cape Winelands, they felt it was now time to expand the business. Tin Korver, who relocated to South Africa 18 years ago, founded Korevest in Cape Town.

Rand value sparks interest

"Foreign interest in guest houses and boutique hotels in South Africa is increasing when compared to a year ago. In addition to the healthy growth in revenue during 2012, confidence has been boosted by the rand exchange rate, which makes South Africa some 20% more affordable as a tourist destination than a year ago.

"We are currently in an advanced stage of negotiation with a number of overseas buyers, including clients from Korea, Thailand, Germany, Switzerland, The Netherlands and England and have a selected number of quality investment opportunities available."

Scenic Somerset West is extremely popular among 'swallows', mainly European retirees and holidaymakers who stay for approximately three to four months of the year, making the town their base from which to explore the Cape. The town attracts very high occupancies from September/October through to April. With its fisherman's village charm, the thriving holiday resort of Hermanus has a six week longer season as the whales frequent the bay from as early as July/August.