Does Sandton really need another hotel? Family who have five already thinks so, is investing R140m
Marc Wachsberger's company EAH has five hotels in the Sandton area, and is planning on opening a sixth on Empire Road next year. That seems like a lot of eggs to put into a single city basket, but according to Wachsberger, there is enough demand in Sandton to keep his rooms filled thanks to the large numbers of skilled foreigners that South African companies are bringing in to help them upgrade their businesses and do necessary maintenance. – FD
ALEC HOGG: EAH has unveiled plans to construct the first hotel in Sandton in four years. The company says 177 Empire Place will be fully operational in the beginning of next year. Company Managing Director Marc Wachsberger is with us in the studio. Marc, it's quite an achievement to build a hotel and we were hearing a little earlier from Piet Viljoen who said it looks like the hotel market is now starting to pick up a little. How big is this development of yours?
MARC WACHSBERGER: It's a 126-room hotel – it's an apartment hotel, so it's made up of three-bedroomed apartments, 42 of them are divisible into three separate rooms so that we can then trade 126 separate rooms.
ALEC HOGG: Who are the backers?
MARC WACHSBERGER: The backers are essentially my entity – which has a private equity component – and then my family. It's family and it's funded by banks.
ALEC HOGG: Who is the private equity component?
MARC WACHSBERGER: Buffet Investment Consortium.
ALEC HOGG: Buffet Investment Consortium – not Warren – another Buffet?
MARC WACHSBERGER: No, it's not Warren.
ALEC HOGG: If nobody else has been building hotels in Sandton for four years, what makes you confident this is the right move?
MARC WACHSBERGER: This is our sixth property. We've opened one hotel per year for the past six years, and trading has never been better. It has peaked now this year…October/November…really through the roof, back to pre-2008 levels. We actually made the call already, probably a year and half ago, to construct this hotel. We could see it coming. We could see the market was turning. We've also designed it to have a residential component. As I've said, it's an apartment hotel, which means if ever we've gotten it wrong, we could always sell it off to the residential market as sectional title. It's not looking like that's the case, but that market's looking very strong as well.
ALEC HOGG: The Don tried something similar and blew it badly.
MARC WACHSBERGER: Yes, I think the Don assets in my mind just were not refurbished, were not looked after, and eventually there's no price at which you can sell a room that has sheets that are torn – there's just no price. You need to have a good, clean, and simple product, keep the costs down, and pass on the benefits to our clients.
ALEC HOGG: So it's all about management in a hotel of this type.
MARC WACHSBERGER: I believe so.
ALEC HOGG: You said six: where are the other five?
MARC WACHSBERGER: We have 20 West, which is our current flagship – it's on West Road South. All of our properties are in Sandton: Villa Via, Esprit Estate, Hydra Park, Moloko Executive Apartments, and Hotel – all in Sandton, and staying true to our form, this is in Sandton as well.
ALEC HOGG: Where are the customers coming from?
MARC WACHSBERGER: Our customers are mostly corporate companies, local corporates that are bringing in international travellers to come and work, to upgrade the banks, upgrade the IT systems, and working for the telephonic operators. We've had a skill shortage – we have a bit of 'brain drain' in this country, many of those skills aren't there, we have to import those skills, and we have to then accommodate and house them. Sandton is the hub of that.
ALEC HOGG: That's interesting. It would therefore be banks, cell phone companies, which you mentioned as well bringing in skills from abroad to help up skill the organisations, and then they stay with you.
MARC WACHSBERGER: Correct. Our clients are eager. Those banks, cell phone operators, or any of the telephonic operators, the consulting firms that are working for those clients, or it's actually CNBC Africa – that's one of our clients as well.
ALEC HOGG: So these are long-term people, who are tenants. These are not guys just coming in for the night.
MARC WACHSBERGER: We do nightly business. Most of our business is nightly business, but then of course, we accommodate weekly and monthly. Some people stay as long as six months with us as well.