Invest in a Hotel? What a Capital idea!

Ever thought of investing in a swanky hotel apartment? Sectional title ownership of hotel rooms or suites is on the upswing, due to rising demand for flexible corporate accommodation.

‘The decline in the rand exchange rate over the past few years has boosted South Africa’s popularity as an international venue for conferences, events and business meetings,’ says the Rawson Property Group’s managing director Tony Clarke.

‘In addition, there is a global trend among mobile executives and professionals who work on contract or relatively short-term assignments to opt for hotel suites rather than self-catering apartments wherever they are working. It’s more convenient to have everything handy, from meals and catering when they need it to business services and meeting rooms on site,’ he says.

Several well-known properties have successfully been opened up to private ownership in this way, including the Pepper Club and the Cape Royale developments in Cape Town, the Krystal Beach Hotel in Gordon’s Bay, the Riverside Hotel in Durban, Zimbali’s Fairmont Resort, the Protea Hotel Parktonian in Johannesburg, and the Protea Hotel King George in George.

The typical deal is that you purchase a unit and lease it back to the hotel into its rental pool. There’s no agency fee, and you are guaranteed a rental income, whether the unit is occupied or not. The only condition is that you are usually required to buy the hotel’s furniture package so that it can be  furnished to its specs, but this is usually at a good price, due to the development’s bulk buying and connections in the trade.

The latest kid on the block is The Capital Hotel Group, which has four of its apartment hotels available to investors – The Capital On The Park in Sandton, The Capital On Bath in Rosebank, The Capital Pearls uMlanga Durban and The Capital Mirage in Cape Town.

‘At The Capital, the rental contracts with us are for three years, with the option to renew for up to nine years, and we give you a guaranteed income for the same period, regardless of whether the apartment is used or not. We also take care of all the maintenance and upkeep of your apartment, so it’s fuss free,’ says The Capital Hotel Group MD Marc Wachsberger.

You aren’t tied to this option, however. You can also live in your apartment, enjoying the hotel lifestyle, or rent it out on your own. Located in central business districts, these three properties already have a robust rental market.

For investors who don’t have time for maintenance upkeep, like business travellers from another city or across the border, this is the ideal lock-up-and-go investment opportunity. Occupation is on transfer, so no rental is lost, and The Capital guarantees a 6% annual escalation.

All the investment apartments in all four properties come with a fully kitted-out kitchen, including a washing machine, fridge and microwave (Bosch or similar). The beds are either king size or twins, and the open-plan kitchen-dining-living areas are tiled, while bedrooms are carpeted. The bathrooms  feature Duravit sanitaryware.
The services at all four properties are excellent. You have daily cleaning, underground parking, uncapped high-speed Wi-Fi, DStv, block-out curtains, international plug points, work desks, and complimentary laundry service.

Capital On The Park

on Katherine Street, Sandton CBD, features 300 apartments as well as penthouse suites, all with the latest mod cons. It feels like a resort hotel, complete with an infinity pool, sun deck, spa with sauna and steam room, outdoor Champagne bar, social bar and restaurant, deli, virtual indoor golf, a gym with personal trainers and specialised fitness classes, and direct access to Sandton’s Mushroom Park for daily runs in the city. It is within walking distance of Sandton City shopping centre, Nelson Mandela Square, Sandton Convention Centre, Morningside Clinic, Johannesburg Stock Exchange and Sandton Gautrain Station.
Prices start at R3.5 million for a two-bedroom unit, plus a R251,000 furniture package, fetching a rental of R24,500 per month. A three-bedroom unit starts at R6.3 million, plus a R490,000 furniture package, and fetches a rental of R40,000 per month.

The Capital On Bath

is situated on the iconic Bath Avenue in Rosebank. It has a dedicated reception, laundry and housekeeping, high-speed Wi-Fi, gym, outdoor pool, café and bar. Units start at R1.04 million for an executive suite, plus a furniture package of R73,000, and can achieve a rental of R6,800 per month. A two-bedroom unit starts at R3.25 million, plus a furniture package of R190,000, and fetches a rental of R20,400 per month.

The Capital Mirage

is next to the V&A Waterfront in the booming De Waterkant area. It offers more than 60 contemporary studio and two-bedroom apartments, and offers a dedicated concierge, sky bar and rooftop pool, a spa, tapas bar, gym, gin and snooker lounge and steakhouse restaurant. The nearest shopping centre is the Cape Quarter. Studio apartments start at R2.7 million, plus a R150,000 furniture package, fetching a rental of R18,500 per month. The two bedroom units start at R6.6 million, plus a R320,000 furniture package, and fetch a rental of R37,000 per month.

The hotel apartment concept

Apartment hotels combine a hotel with self-catering residential apartments. They are one of the fastest-growing sectors in hotel accommodation in the world, comprising about 9% of hotel accommodation worldwide, but only about 2% in South Africa, with The Capital Hotel Group commanding about 75% of the local industry.

The Capital Hotel Group MD Marc Wachsberger says his is currently the fastest-growing hotel chain in South Africa, in ‘direct response to ever-increasing demand for the apartment-hotel style accommodation.’

The Capital hotels boast an average occupancy rate of 80%, which is well above the 55% average occupancy rate for local hotels, he says.