Times Of Swaziland: THE GREAT E500M GAMBLE

THE GREAT E500M GAMBLE
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BY MFANUKHONA NKAMBULE on 16/02/2014 08:04:00


EZULWINI – Government’s proposed E500 million five-star, six-storey hotel is
considered a high risk investment.
Hospitality industry experts say a hotel with 500 rooms, in any environment, is
a high risk to the funder or owner.
The new hotel will be built a stone’s throw from where the prestigious
Ezulwini Sun Hotel stopped operating in 2012.
Ezulwini Sun remains closed until management sees a significant increase in
demand for hotel rooms in Ezulwini and across the country in general.
It was operating at occupancy rate of 52 percent per annum at the time it was
closed. The hotel, situated opposite Lugogo Sun and adjacent to MTN
headquarters, had 60 hotel rooms and employed 60 people. Lugogo Sun has 202
rooms while Royal Swazi Spa Hotel has 149 rooms.
The other competitor in the same vicinity is Royal Villas, which has 14 villas
and 56 rooms.
Happy Valley Resort and Casino has 65 rooms while Sibane Hotel, located at the
foot of Malagwane Hill, about three kilometres from where the new hotel will
stand, offers 30 en-suite rooms.
All these hotels, it has been established, struggle to attain full bookings even
though they have an average number of rooms.
On the other hand, government insists on setting up its six-storey hotel to be
linked to an International Convention Centre. It is projected that
government’s hotel will have 500 rooms to be built in phases.
Construction is expected to begin in the next two months and will take two and a
half years.
The Times SUNDAY requested Lance Rossouw, the Area Manager of Sun International,
to give his view of government’s new investment.
He was also asked to explain why Ezulwini Sun closed down.
The highly respected hotel manager gave this advice to government; “Properly
researched and branded hotel properties that are built today carry low to medium
risk. A five-star, 500-bedroom hotel in any environment is very high risk,
unless supply and demand research is crying out for such an investment.”
Rossouw said Ezulwini Sun did not close down but had been mothballed until such
time it was clear whether supply and demand required that it be necessary to
operate the hotel again.
Mothballing is described as the preservation of a production facility without
using it to produce.
It is also defined as reserving something for use in future, depending on demand
and supply.
At the time the production or hotel is mothballed, demand and supply were low;
thus squeezing profits.
“It must be understood that the Ezulwini Sun did not close down, but has been
mothballed until such time as it is clear whether supply and demand requires
that it be necessary to operate the Hotel again,” said Rossouw.
“The mothballing was essentially initiated by the completion of the 15 year
Vacation Club Timeshare contract, which then caused us to take a long, hard look
at the worth, in terms of competitive analysis.
“It was clear to us that the Ezulwini Sun operating purely as a hotel would
have presented the 202 bedroom Lugogo Sun with its major competitor.
He said management found that Ezulwini Sun and Lugogo Sun were competing with
each other; with both operating at the lower 50 percent level, hence one was
diluting the other.
“In order for us to reopen the Ezulwini Sun for business, we would need to see
a significant increase in demand for hotel rooms in the Valley and the Kingdom
in general. We would only consider other uses if the proposal is financially
viable over a protracted period of time and it is of a high standard.”