Leisure property: gains and strains

Image credit: Harper’s Bazaar

THE recovery of the leisure and tourism sector – laid low for many months by Covid-19 – will be key to a robust Western Cape economy in 2022.

While official statistics probably don’t present an encouraging story, there are signs from several listed companies that the broader leisure sector that is on the mend. But for every gain there is a strain…

Trematon, an investment company, recently reported an increase in its valuation of its holding in Club Mykonos Langebaan (CML) – the sprawling leisure property on the West Coast. The group reported that CML was profitable and cash generative in the year to end August 2021.

Trematon also said it would consider developing under-utilised land components at CML.

Trematon CEO Arnie Shapiro noted that during the past financial year the group had commissioned several incremental projects that would improve the operating efficiencies and guest facilities at the resort “in anticipation of a return to higher occupancies with the lifting of most Covid-related restrictions on the hospitality industry”.

Tsogo Sun Hotels, one of the biggest hotel operators in Africa, disclosed that it had eked a profit from its Western Cape operations. The group – which owns the Cape Sun, Arabella,  The Cullinan and Southern Sun Newlands and the Beacon Isle in Plettenberg Bay – reported revenue of R202 million and earnings of R4 million from its Western Cape operations for the half year to end August.

Occupancies were helped by accommodation provided to students stranded by the fires in Cape Town during April 2021 and the Cape Town leg of the Castle Lager Lions Series rugby tour.

The Lions Tour was a real challenge for Tsogo. The group revealed that it earned revenue of R64 million from the tour – but staff needed to stay in-house in a bio-bubble for weeks, work long hours and cater to complicated tour requirements.

But a key development in Tsogo’s Western Cape portfolio was that Marriott International plc vacated the Protea Hotel Victoria Junction in mid-October 2021. The group has since closed the hotel and plans to re-open it as a Garden Court in 2022.

Western Cape focused property group Spear reported that its flagship leisure property, 15 on Orange re-opened in mid-August under the Capital Hotels & Apartments brand. The new arrangement sees a triple net fixed-income lease in place, and Spear reckoned the entrepreneurial approach adopted by the new operator was already bearing fruit as positive rooms, conferencing and F&B activity was evident across the property.

Spear’s DoubleTree by Hilton in Cape Town had also shown marginal operational improvements with the group reporting certain international travel markets, domestic leisure and business markets had returned along with growing small meetings and conference events.

Still Spear has opted to sell the Upper East Side Hotel (UES) business, which is the owner and operator of the DoubleTree by Hilton Hotel for almost R46 million. Spear said the sale was in line with management’s road map to reduce Spear’s loan-to-value (LTV) and was part of the strategy to exit its hospitality assets in the short to medium term.

Interestingly Spear disclosed that the value of the net assets attributable UES was around R49 million, but the  unaudited loss after tax attributable to the business for the six months ended August was a hefty R61.6 million.

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