Western Cape weighs on Hospitality. The property fund says hotels have also become more competitive in their

pricing due to the weak state of the economy.

Hospitality Property Fund says its hotels in the Western Cape had a tough

first half due to lower domestic corporate and government business as well as

poor sentiment stemming from the recent water crisis.

The fund's hotel properties are mostly in the Western Cape and Gauteng, with

the two provinces generating almost two-thirds of rental income. Hotel

occupancy for its Western Cape Hotels fell by 14.3% to 51.8% in the six months

to end-September, with average room rates down by 3.1% to 1,333 rand. That's

resulted in a 16.9% drop in revenue per available room to 690 rand for the period.

The STR Global South African Hotel Review says puts overall occupancy for the

region at 54.2%, down 8.2% from a year ago.

Fortunately for Hospitality, Gauteng fared better, with hotel occupancy rising

by 4.6% to 62.4%. For the rest of the country, occupancy declined by 0.7% to

68.1%.

The fund says hotels have also become more competitive in their pricing due to

the weak state of the economy. The average room rate in its portfolio of

hotels fell by 0.9% over the period and revenue per available room is down

3.5% from a year ago, with the market showing a 1.2% decline.

It's reported a 10% rise in contractual rental income for the six months to

345 rand million, mainly due to the inclusion of its 29 hotel properties for the

full period. Net finance costs declined by 4% to 79.6 rand million after it

negotiated lower interest rates. Distributable earnings increased by 16% to

237 rand million. It's declared a 41.22c per share distribution.

Hotel trading is expected to remain under pressure until the outlook for the

South African economy improves," Hospitality said.

Last week, Tsogo Sun cancelled a transaction to sell a portfolio of seven

mixed-used casino properties to Hospitality in exchange for a bigger stake in

the fund, which would then be distributed to Tsogo shareholders. It was

reported that Tsogo failed to garner enough shareholder support for the deal.

Hospitality's shares ended traded 4.8% higher at 9.75 rand yesterday. Tsogo gained

6.1% to 20.34 rand.