There’s a new generation of visitors heading for South Africa and they’re not coming just for sun, sea and safaris. They’re in search of cosmetic surgery, breast enhancement, liposuction or laser eye surgery at a third of the price of similar procedures in Europe. And because there’s a need to recuperate after such operations – you can’t fly until 10 days after having breast implants, for example – hotels are reaping the benefit.
Jonathan Raggett, managing director of Red Carnation Hotels, the company behind the recently opened 70-bedroom Twelve Apostles hotel in Cape Town, smiles at the thought of these silicon safaris (“Is madam in for a boob job or liposuction this week?”), but these visitors could prove a lifeline for a company that needs to establish itself in a new market. “Cosmetic surgery is big business here,” says Raggett. “We’ve already forged links with 40 surgeries in Cape Town and they’ve agreed to recommend the Twelve Apostles as a place to recuperate post-surgery.”
These new-image seekers could also help provide some of the volume hoteliers need to compensate for the effect of the devalued rand on their businesses. When the Twelve Apostles launched in November there were R15 to the pound. In the late 1980s, when Raggett was working as deputy general manager at the Maharani in Durban, the rate stood at five to the pound.
The devaluation of the rand has been one of the biggest challenges hoteliers in South Africa have had to face, making it, some might say, not the best market to target. When a new hotel is part of an eight-strong group whose core base is London and which is used to achieving the rates commanded by that market, it’s financial suicide, isn’t it?
Raggett thinks not. For starters, he says, the Twelve Apostles has been taken on as a long-term management contract, thus reducing the risks associated with outright ownership. South Africa was chosen because founder Bea Tollman comes from the country and so the links are well established.
But the choice of destination isn’t entirely an emotional one. In South Africa, and in the Cape in particular, the long-term forecast for tourism looks favourable. True, there were media reports of isolated violent incidents against tourists last year, but the news focus has shifted and the South African government has stated its intention to punish the perpetrators of crime and educate locals on the importance of tourism to the future of the country.
Further good news is that there’s a new convention centre with capacity for 2,000-plus delegates opening later this year in Cape Town. This should put the city firmly on the world map and prove popular with conference bookers keen to take advantage of favourable exchange rates and the fact that there’s no time difference between Cape Town and Continental Europe.
It’s early days still at the Twelve Apostles. The hotel has had a complete overhaul and a name change (it used to be called de Oudekraal). It helped, of course, that it launched in time to take advantage of Christmas and New Year: between 18 December and 10 January it had an occupancy of 96.7% with an average achieved room rate of R2,040 (£142).
The Twelve Apostles is aimed at the five-star market, with rates from R2,830 (£198) to R9,000 (£628) in the winter and R3,760 (£262) to R12,000 (£838) in the summer (the seasons are the reverse of ours). The rates are about 10% lower than those of other five-star hotels in the market – a deliberate ploy.
“We’ve pitched under our competitors slightly to get ourselves established, but we’ve no intention of starting a price war,” Raggett says. “The difficulty will come in attracting business in the winter months [our summer]. In summer you can charge the earth and people will pay; but in the winter it’s discount heaven out here.”
There are cost advantages to operating in South Africa that help to make up for lower rates. Labour, laundry and produce are all much cheaper than in the UK. As a comparison, 165 full-time staff account for 32% of costs at the 70-bedroom Twelve Apostles, while at the 63-bedroom, central London-based Milestone hotel, also part of Red Carnation, just 110 full-time staff account for 34% of costs.
Raggett can see some crossover between the London market and Cape Town. “London hotels are humming with South African staff. A lot of staff in Cape Town want to work in London. We plan to offer them jobs in London and then, after a year or so, bring them back to South Africa, where they can hopefully revert to more supervisory roles.”
But it will be a slow burn when it comes to making money: the management contract alone is set up for 25 years. “It’s a long-term strategy,” says Raggett. “We’re not expecting to make money overnight.”
In the meantime, the company is actively looking for more hotels, either as outright purchases or as management contracts. Ideally it would like about 12 properties, with New York high on the wish list. “New York would be the ideal next destination, and if I were a betting man I’d say it will be by this time next year,” says Raggett.
Red Carnation Hotels
Founder: Bea Tollman
Managing director: Jonathan Raggett
Twelve Apostles hotel (formerly de Oudekraal)
2002 R18m (£1.26m)
2003 R25m (£1.75m)
2004 R32m (£2.23m)
Owned by: Twelve Apostles Pty Ltd, a group of private investors
Projected occupancy: November to end of March 90%; rest of year 72-73%
Launching a hotel with a new identity
De Oudekraal hotel, as it used to be known, was taken over by Red Carnation Hotels in April last year. But it underwent a transformation to become the Twelve Apostles. A new general manager, Charles Lotter, who had worked for the South African Grace Group, was hired. And Brian Brennan, projects director for the group, was taken out to oversee the refurbishment, an investment of £1.8m.
Lotter was no stranger to opening hotels. He had been part of the opening team of the Cape Grace, also in Cape Town. But this was more stressful because the hotel continued to trade throughout. “Workmen had to keep noise levels down to a minimum because conferences were going on,” he says.
All staff were kept on but had to accept a huge culture change. At first they were suspicious of their new bosses. “The hotel didn’t have a particularly good reputation, and there was a siege mentality among staff who hadn’t had a pay rise for two years,” recalls Lotter. The hotel was also unpopular in the local community, because the land behind it is part of what was once a Muslim burial site. “A lot of Capetonians were still in shock that it had ever been developed as a hotel,” says Lotter.
Trainers were shipped in for two weeks to manage the culture change with courses on Aids awareness and health and safety. Salaries were also raised by about 10%.
Of the 95 original staff, only five didn’t buy in to the new regime and left. Now there are 158 staff, giving a staff-to-room ratio of more than 2:1.
Two months after the official opening Lotter’s challenge is to get on with the second phase of the hotel’s development: a spa and further landscaping, due for completion later this year and costing £1.8m.
The five-star hotel marketin Cape Town
* Table Bay, operated by Sun International as a management contract.
* Cape Grace, owned and operated by Meikles, a Zimbabwe-based hotel and consumer goods company.
* Mount Nelson, the grande dame of Cape Town, owned and operated by Orient-Express Hotels.
* ArabellaSheraton, Grand Hotel, opening in spring in Cape Town’s new convention centre.
Doing business in South Africa
Before you think of rushing off to Cape Town, be aware that it can be a difficult market to do business in, warns Red Carnation projects director Brian Brennan. “At every level, planning is unbelievable,” he says. “I wanted to put a little conservatory on the front of the hotel. My architect said I should be able to do it and estimated three months for approval. I had to go to council offices with picture boards to show what I wanted to do.
“But that was just the start. I had to go through one office for health and safety, another for ventilation and so on. And nobody had the balls to sign anything off. Once the application had been accepted, we then had to advertise so that everyone knew about it. The advertisement had to appear in three papers to give plenty of opportunity for people to send in their objections. As for the conservatory, we’ve just got the go-ahead, 14 months later.”
Six million foreign visitors visited South Africa last year, a 14% increase on the previous year. Speaking at the first annual tourism conference last year, Mohammed Valli Moosa, the minister of environmental affairs and tourism, said South Africa was one of the best-performing tourism destinations in the world. The challenges for the country would be to look at a structure that would sustain the industry, even in the face of unpredictable world events, he concluded.
The World Travel & Tourism Council has predicted that by 2011 tourism will contribute 11% of gross domestic product and account for 19% of total employment – some 260 million jobs worldwide.