This Tourism Week: Bringing back the institutional investors

One discussion that going to get special attention has to be ‘Bringing Back the Institutional Investor’ (Day 3 from 9:30 to 10:30, and moderated by Joop Demes, CEO of Pam Golding Hospitality).

So I asked Wiza Nyondo, the head of tourism in the commercial property finance division of FNB why his company would even consider investing in tourism in the first place. And haven’t the institutional investors been staying away since ’08, anyway?

“I haven’t heard anyone saying ‘look, we’re pulling out’ – in fact it’s the other way round,” he said.

“We’re getting more and more interest from international hotel groups who want to establish themselves in South Africa and on the rest of the continent.

“On our side we’ve continued to invest in viable businesses, and so far we’re doing pretty well.

“The decision to invest was a no-brainer when tourism was growing in 2008. In the run-up to the World Cup, when we were the FIFA National Supporter, we decided that getting into tourism would generate the returns that we needed.

“At the same time, tourism was identified by national government as a key sector in terms of job creation and poverty alleviation, and we feel that it’s also a great way of pumping back into the community.

“We did a lot of research into the industry, and looked at both the areas where we could invest commercially, and the areas where we could work on a sponsorship basis. Research, research, research is the most important thing in order for one to be involved, and that’s what we’ve done at FNB.

“The attraction at that time was in bricks and mortar in the hotel space, and in tour operating, travel agencies, and some of the non-branded restaurants.

“And up to now we’ve done pretty well in terms of return on our investment, although it often takes a long time. But you must have the patience, because this is an industry that brands the country, that creates jobs, and that alleviates poverty when done properly.”

And what must the industry do to make you want to continue investing?

“It’s an ever-changing industry, and the industry in South Africa needs to start responding to change.

“If you look at the spending habits of travellers, and the fact that they’re becoming more discerning, you need to be more creative to make sure that we’re not left behind by other destinations.

“People are becoming more ecologically friendly, they’re looking for tours and packages that cater to the needs of single people, and they’re looking for hotels that are disabled-friendly, and that cater to the tech-savvy traveller.”

But he wasn’t implying that those things aren’t happening.

“From what I’ve seen so far, the industry has responded: most of the hotels offer free Wi-Fi now, and more and more of them are looking at their pricing strategy for single travellers. The rooms configuration of hotels is changing, too: in the best case scenario, you offer the kind of contemporary look and feel that we’re seeing in the top new hotels.

“All those things make it more attractive for us.”

“But remember that we aren’t just looking at constantly creating numbers: we at FNB also look at the long-term impact of our investments on society and the consumer.

“There are barriers to entry – it’s not everyday that one can raise twenty million, forty million for a hotel – so the demand, the cost of the land, the cost per room, and the cost of construction, need to be reasonable enough to justify any investment.”

I thought about what he’d said for a while, and came back with just one question: “So the industry needs to make itself more attractive to the consumer in order to make itself more attractive to the institutional investor?”

“Of course,” said Wiza. “If the consumer is responding, we’ll see the returns.”

And that makes perfect sense, wouldn’t you say? It’s a 21st Century take on the old adage about pennies-and-pounds: look after the customer, and the investors will look after themselves. 

• I’ll be blogging about HICA 2013 at www.thistourismweek.co.za over the next six weeks, and I’ll be tweeting directly from the conference via @ThisTourismWeek
• To book for HICA 2013, please visit http://hica.co.za/2013/