THE CAPITAL HOTELS & APARTMENTS: Five-Star Strategies Allow The Capital to Seize Opportunities

13 years of innovation in the hotel business have seen The Capital lead the way in sought-after, apartment-style accommodation, that offers a home away from home experience in the context of a slick, luxury hotel. “We are the leading hotel and apartment group in South Africa, specifically in the bracket of apartment or extended stay hotels, and the fastest-growing both in general hotel terms and specifically conferencing,” The Capital CEO Marc Wachsberger unpacks.

“We currently have 12 hotels, including the new properties set to open this year, which in the African context perhaps does not look a large number,” he readily acknowledges, “but what really excites us is our status as the group with the fastest, strongest growth, which frames the whole story much more accurately for me.

“We began amid another crisis, in 2008, when we were renting apartments and then sub-letting them nightly – very much the same space that Airbnb subsequently adopted,” Wachsberger details, and these formative years. “This initial foray then led us into the regular hotel sector and conferencing, meetings and events.”

UNIQUE PROPOSTION

The ensuing years have allowed Wachsberger and The Capital to zero in on and hone the elements that set it apart. “Over this time, as our experience and portfolio have grown, we have come to realise that we have two major strengths and differentiators. The first is having apartments within our portfolio to afford people longer stays,” he explains.

“The brain-drain that has taken place within the whole of Africa means that we have to import lots of skills from Europe, India, and many other countries. These clients prefer apartments as they are often staying for much longer, and we have been a major player in introducing this provision whose popularity continues to boom.”

The Capital’s still fairly unique management model has also been a significant boon, Wachsberger furthers, giving it complete control over the offering and identity, as well as the ability to implement practices across the entire portfolio with ease. “The other major discerning factor for us is that we are an owner-operator. This goes against the norm, which is still to have a management company simply putting a known name to other people’s properties.

“This has really been key to our success. It has removed any sense of bureaucracy from the decision-making process, and means that we are able to pivot, change and adapt to volatile and unpredictable circumstances very quickly.”

Bureaucracy is not the only ingrained hampering characteristic that The Capital has decided to shun, Wachsberger explains. “Ego is a massive thing in the world of hotels, as it leads to people overcompensating and making things way fancier than is sustainable or profitable. We take ego out of the equation and design our hotels backwards, so that we don’t get caught in the trap of overbuilding and generating no returns.”

We created our business at a time of crisis with risk defences in place, so that if ever we found ourselves in trouble, we would have a plan. Thus we find ourselves in the heart of the Covid storm, with terrible trading for over 18 months, the only hotel group able to adapt to and expand despite the new situation,” Wachsberger adds of how The Capital is now uniquely placed to capitalise.

“While a number of players can see the opportunity in crisis, nobody else has the funding or the ability to execute on being a purchaser of distressed properties. This is our philosophy: to use the bad times to grow.”

ABILITY TO CAPITALISE

South Africa is unlike much of the rest of the world, according to Wachsberger, where an overload of prospective hotel buyers meets a dearth of sellers. “In South Africa it is entirely the opposite,” Wachsberger counters, which brings stunning opportunities. “Sellers and distress abound, and we are literally the only feasible buyer I know of.

“As such we have been able to secure hotels at incredible, once-in-a-lifetime prices simply because we have been able to raise the money to purchase these properties where no-one else can.”

There is no sense of this being a purely self-serving pursuit, Wachsberger is anxious to relate – its impacts are much more wide-reaching and vital. “We are doing this to save jobs. Looking at our recent acquisitions, all of the staff were about to be retrenched and we have come in and spared all these livelihoods.

“Of course, it suits our business to buy distressed, but ultimately it supports a whole industry’s ability to survive and continue to contribute to the entire economy. Not just jobs, but through the whole hotel supply chain, which has been equally brutally impacted as the hotel groups themselves.”

Having built the business to withstand what Wachsberger terms a ‘black swan’ scenario – this  sudden, and for many ruinous, stop – The Capital was then, characteristically, able to capitalise.

“Step two was to adapt the business to the new situation on the ground, and then step three was to take advantage of the opportunities that inevitably arise.”

OPEN DURING SHUTDOWN

With an entire industry and every competitor mandated to close, The Capital once again defied the norm to maintain an enviable continuity of business and occupancy. “We were the only hotel group able to keep its assets open and running , with all but one of our 10 remaining operational even during the harshest lockdown and with an average occupancy of 80%.

“We were the first to rush to government’s aid to quarantine and isolate passengers arriving from overseas, which then landed us the approval to keep our doors open. As many as 50% of the repatriation flights that came to South Africa then stayed with us, booked and paid for by the government of South Africa.

“We still made a loss, but we lost an awful lot less than all the others who had to close.

“As we were the only ones open, we consolidated all the essential services business from rival hotels. We even created a hospital in partnership with the largest medical aid in South Africa, Discovery Health,” Wachsberger goes on, a feat of adaptability impressive even for one so known for it as The Capital. “We turned the entirety of one of our hotels into a centre for Covid-positive patients, to relieve the pressure on the hospitals themselves.

“All of this allowed us to survive the harshest of the lockdowns, and put us into a position where we were able to then explore these purchasing opportunities of bankrupt hotels.”

CONSTRUCTION AND ACQUISITIONS

Planned expansion into Southern Africa has had to be put on hold as The Capital maximises opportunity in South Africa. “We are already in the big four cities – Johannesburg, Pretoria, Durban and Cape Town – and we are about to start our rollout into the sub-national cities.”

Construction of The Capital Mbombela’s R205m hotel is central to this, the third new product in the group’s portfolio this year with an opening anticipated for November 2021. “It might have been a brave decision to build it during Covid,” Wachsberger says, “but we actually thought it the  best time to construct, in time for re-opening and all the anticipated catchup business after the pandemic.

“There hasn’t been a new hotel in a location like this since our 2010 World Cup, so we think it will do very well,” he elaborates. “In Africa there simply isn’t the competition a constant supply of new hotels engenders, so if something is done well, it will be successful.

“You don’t have to try to find perfection in service to stand out from competitors in Africa. You need to give guests everything they need, and nothing they don’t. It has to be consistent, solid and driven in accordance with value.

“It takes an anti-hotelier, someone from outside of the sector, to make the business profitable,” Wachsberger states, whose own background in mergers and acquisitions has proven a huge asset to The Capital’s success to date, and a further two iconic hotels have been snapped up by The Capital including an R15 million investment to renovate 15 On Orange for re-opening in August. “We are midway through the development of our much larger Zimbali acquisition,” Wachsberger reveals of the second, which will retain approximately 140 employees and deliver over R40 million in upgrades to the legendary Fairmont Zimbali Resort on KwaZulu Natal’s North Coast.

Everything points to further dominance to come for The Capital, and the group has the ambition to match. “In five years we should have 40 hotels, based on our growth trajectory ramping up from opening two hotels per year to three in 2021, and the growth opportunities available,” Wachsberger finishes. “The portfolio acquisition opportunities are such that we could double our size in a single year now with the hotels that are out there.

“For this reason, we aren’t rushing too far too soon – there is too much potential still here for us to explore. We intend to spread our hotels across Southern and East Africa, and build on what we have already achieved as the leader in the sector. We have everything in place to remain the best.”