Oversupply of accommodation a serious problem

"While official reports indicate that South Africa's tourism industry is growing, the facts are that the hotel, guest house and broader accommodation sector is experiencing a particularly tough time, with many establishments being forced to close their doors.

"There must be agreement on the state of the industry, responsible and consistent messaging to operators and a clearly defined growth plan. When there is fire on a boat, passengers and the crew need to work together to put it out.

"Frankly I do not want to hear the words '2010 FIFA World Cup' again. Yes, it gave our industry an artificial window of opportunity, but now the economic recession is a definite reality, one that I do not foresee will disappear within the next two years. Tourist spending patterns may also be a factor, with visitors opting for cheaper accommodation options or staying with relatives and friends."

Dungan says he met with all major banks in South Africa in June 2010, alerting them to post World Cup expectations. "It all fell on deaf ears and now over-exerted bonds and near bankruptcies are just about the order of the day."

According to the latest PwC accommodation report, South Africa will have to gain an additional 3.5 million visitors per year to address the enormous oversupply of hotel rooms created before the World Cup. Between 2008 and 2010, an additional 9700 hotel rooms were placed on the market and it is expected the number of available hotel rooms will increase by another 7.1% this year.

Dungan says ownership of hospitality establishments often does not lie in the name of the business, but in the name of individuals who are pursuing their dreams. "Owners find it increasingly difficult to raise funds to settle their debts, often being forced to sell their properties for as little as 25% of their real value.

"My honest advice to owners who find it difficult to keep their businesses afloat is not to wait until it is too late. There is no shame in closing a business to avoid liquidation. When the market picks up, you can always re-enter the industry, on a solid and positive foundation."

FEDHASA represents the interests of all sectors of the hospitality industry in Southern Africa.