The iconic face of two landmark hotels on Durban’s Golden Mile could possibly change dramatically following a report by the eThekwini Municipality’s Real Estate Unit to call for public bidders to lease the prime beachfront property that houses the Tsogo Sun’s Elangeni and Maharani Hotel.
The report was presented to the full city council meeting, with the main opposition, the Democratic Alliance (DA), flatly voting against the report – citing that any changes to this twinned, iconic accommodation mecca, could spell a bleak economic future for international and inter-provincial tourism that could lead to massive job losses. The DA fears that the giant hotel group will pull out lock, stock and barrel its new bid fails amidst competition from public bidders. While Sharmaine Sewshanker, the DA’s ward 26 PR councillor for the beachfront, has raised a red flag and voiced her concerns about the impact of the process on Durban’s tourism and hospitality industry. Samantha Croft, director of operations in KwaZulu-Natal for the hotel chain group, said: “Southern Sun is aware of the public tender process and will be submitting a proposal.’’ Mluleki Mntungwa, spokesperson for the mayor, Mxolisi Kaunda, said: “The council approved the report detailing the thorough consultation process the municipality undertook which paved way for the starting of the bidding process.” In the report, the Real Estate Unit sketched the history of the current lease in respect of the Elangeni and Maharani Hotels, dating back to 1929 and was first terminated in 1961 “The leases all expire on the 31st of December 2025 with no right of renewal. The current gross rental for the leases is R15 060 per annum
(R1 225 per month) with no escalation. Simultaneously, on terminating the initial leases in 1961, the subsequent leases were registered in favour of various parties and over the years have been ceded to various other entities with the last being Tsogo Sun.” the report read. The report pointed out that Tsogo Sun had submitted various proposals to extend its long-term leases with the municipality on expiry of the existing leases: “There were various engagements with Tsogo Sun over the years and due to various reasons reported to EMC previously it was deemed necessary to undertake a Public Participation and Competitive Bid Process.” However, the DA is not seeing it the ANC way to go public on leasing these prime properties in which both these flagship hotels dominate the skyline of the Golden Mile on the Indian Ocean Rim.
Sewshanker said the shutdown of the Hilton Hotel that provided accommodation to hundreds of thousands of delegates for conferences and various events at the Durban International Convention Centre, as a direct result of the Covid-19 impact on the hospitality industry, was a major blow to tourism and job-creation. “If we lose the Elangeni and Maharani hotels, the Tsogo Sun Group will strip everything, including taking the names of both iconic hotels. The company will take the assets, furniture and fittings. There’s a proposal in 3.1.3.4 that the subject property provide a capital investment of R250-million upwards and the incentive offered is a R122-million write-off as a three year rental holiday,’’ Sewshanker said.
‘’The future tenant has to invest R250-million. We must consider the structure that allows the property owners to make investments, but the minimum lease period must be 50 years. Rather than the basic monthly rental of R3,4-million, the right thing to do would be to link it to the number of beds sold. The hotels combined have 744 beds. If the facility could run at 80% capacity, the city would generate more than R3,4-million rental a month. We should protect the hospitality industry and the employment it is generating, negotiate with the current tenant and allow them first right of refusal. That would be the fair and the right thing to do. It is better to work with your current tenant and build on the existing infrastructure to ensure that the hotel and hospitality is improved in line with the city’s vision,’’ she added.
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