Just over six months since it unbundled from Tsogo Sun and listed on the JSE, Tsogo Sun Hotels is making an innovative play. As the economy stagnates and budgets come under pressure, the hospitality group is about to enter the affordable segment of the hotel market, opening the first hotel in its new Hi brand in the coming weeks.
The hospitality group is putting the final touches to the 123-room hotel at Joburg shopping and casino complex Montecasino.
It is the first of a planned but as yet undefined rollout of the Hi brand that will serve the under R1,000-a-room hotel market (Hi Montecasino starts at R799 a night).
The aim, according to Hi’s director of operations, Tim de Raedt, is to reach leisure and business travellers "who want convenience and creature comforts, and a base from which they can explore the city, go about their business, and enjoy what the neighbourhood has to offer".
It’s a market Tsogo believes is underserved, and growing.
"We believe we can deliver a good product at less than R1,000. This fills the gap between budget offerings and the upper end of the market," De Raedt says.
Comfort and affordability, in other words, without the bells and whistles of a traditional three-star hotel. Hi’s hotel has yet to be graded, but De Raedt says that’s the level at which it’s pitching the brand.
The rooms offer traditional comforts such as large walk-in showers, blackout curtains, coffee stations and 48-inch TVs, alongside more modern conveniences such as USB ports, a self-service check-in, a lobby deli and stream-your-own-content TV.
HTI Consulting CEO Wayne Troughton believes the product is likely to work well in SA, given limited penetration of lifestyle and budget brands, and the growth opportunities they offer. There is increasing pressure on travel budgets, he says, and cleverly designed products are offering value by eliminating services, facilities and products that are no longer required or needed by the modern traveller.
"Lifestyle hotels have been developed at a global level to cater to the millennial market," he explains. "By 2020, millennials — those born between 1981 and 1996 — will comprise half of the global workforce."
And, he says, the 2015 Global Business Travel Association’s business traveller sentiment index shows millennials are twice as likely as baby boomers to want to travel for work.
But while a number of international groups have already rolled out millennial-centric brands, most have been concentrated in the mid-to upscale segments of the market.
In SA, penetration of the millennial market — estimated at 14-million people — has been slower.
"The Fire & Ice brand developed by Protea, and subsequently rebranded by Marriott, was one of the first hotels to cater to the millennial market in SA," says Troughton.
But at less than R1,000 a night, "Hi hotels will be able to offer a millennial-focused lifestyle brand at a more budget-orientated price point".
He says this is in line with the more price-sensitive lifestyle brands that are coming online internationally, such as Hilton’s Motto and Accor’s Jo & Joe.
In the local market, Hi’s competitors include Holiday Inn Express, Town Lodge, Stay Easy and Signature Lux — all around or under the R1,000 mark, says Troughton.
Hi hotels will be able to offer a millennial-focused lifestyle brand at a more budget-orientated price point
— Wayne Troughton
Tshwane University of Technology tourism lecturer Unathi Henama applauds Tsogo for reflecting on the implications of "the new world of work and play", and adapting in the face of tough economic conditions and competition from accommodation app Airbnb.
But while Airbnb may provide some competition, Troughton says not all its products are positioned at a budget level, and many do not offer the levels of convenience that a lifestyle hotel can provide — particularly for business travellers.
"Furthermore, while a number of properties are offered on Airbnb, not all are available throughout the year, and they are rented out by their owners on an ad hoc basis."
As for expansion plans, Tsogo aims to roll the brand out over the next few years, and "is actively pursuing" a number of development sites in Joburg to this end.
These are in close proximity to shopping centres, says De Raedt. "For the concept to work, we need sites that have a variety of restaurants within walking distance and are centrally located near to an entertainment or corporate node."
As far as Henama is concerned, it’s an unfortunate decision, as it overlooks "areas that need accommodation and may lack the ‘prerequisite’ market conditions to establish a Hi hotel — for example, Soweto".
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