Home | Investing | Part of Rosebank skyline, The Grace Hotel closes its doors

Part of Rosebank skyline, The Grace Hotel closes its doors


Hyprop Investments Limited has announced the termination of its lease agreement with the Grace Hotel (Pty) Limited and the closure of the establishment by the end of August 2011. Pieter Prinsloo, CEO of listed property giant Hyprop, which owns the building, said the hotel has been hard-hit by a decline in foreign and local visitors, as well as a contraction in the corporate travel industry.

The well-known Grace Hotel in Rosebank has been obliged to close its doors provisionally after being badly impacted by the downturn in the South African hotel market.

He said because of financial losses Hyprop has no option but to cancel its lease with African Sun Hotels and close the hotel on August 31.

The Harare-based African Sun earlier issued a statement saying it had not renewed its operating agreement with The Grace in Rosebank and another five star hotel, The Lakes Hotel and Conference Centre in Benoni east of Johannesburg. African Sun says it is exiting from the five star hotel industry in Johannesburg as it is no longer sustainable.

“The parties have reached a mutual decision to close the hotel on August 31 2011 due to the continued pressures of the global recession which have negatively affected the South African travel and tourism industry.

The hotel has suffered from both a reduction in overseas visitors and domestic travel, particularly a shrinkage in corporate business which has migrated away from five star accommodation,” Hyprop said in a statement.

It further states that the five star hotel industry in Johannesburg is likely to remain under pressure for the short to medium term.

This has been exacerbated by low room rates and rising operating costs, coupled with an oversupply of hotel rooms and the subsequent “rate war” which had added to the inability of the hotel to weather the downturn in the hospitality sector. Hyprop, which owns the building, says it will assess its options and may consider alternative uses.

African Sun says its decision to exit the market was in line with business objectives and strategy as outlined in its half year operating statement released in June 2011.

The company’s CEO, Shingi Munyeza, says: “Going forward, focus for the group will be to operate hotels with a positive cash impact to the bottom line in the short to medium term. In that light our target will be to acquire management contracts in the South African market, particularly in business hotels.”