THE GREAT E500M GAMBLE
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.”