Are South Africa’s hospitality investors playing it safe?  

Founder and CEO of BON Hotels, Guy Stehlik, believes that hotel investors lack of investment in emerging hubs and new corporate corridors is costing the industry. Here’s why.

India’s hotel industry is booming. Not just in Mumbai or Delhi, but in places that most investors wouldn’t have considered a few years ago. According to a report by The Economic Times India, smaller tier-2 and tier-3 cities are experiencing a huge surge in hotel development. Real estate consultancy JLL found that more than 13 000 hotel rooms were signed in these emerging markets last year – almost double the previous year’s numbers. What’s driving this shift? Economic growth, improved infrastructure, rising domestic travel, and business expansion outside major cities.  

That exact same trend is playing out in South Africa, but investors here are too slow to act. Instead of capitalising on emerging hubs, many are continuing to play it safe, funnelling money into the usual locations – Cape Town and Johannesburg – while ignoring what’s really happening on the ground. The question is not “Is there demand in secondary cities?” but rather “Why are we still ignoring it?”  

The Durbanville lesson: what investors keep getting wrong

I learned this lesson the hard way when I was buying my first hotel. Like most newcomers, I was looking in all the wrong places – the V&A Waterfront, Green Point, Sea Point; the locations that everyone talks about. But here’s the reality: those hotels trade on their reputation. They are insanely expensive to buy into, and competition is brutal.

Then came Durbanville. Somewhere I barely knew, other than from a few childhood rugby matches. On the surface, it didn’t seem like an obvious choice for a hotel. It wasn’t a tourist hub, it didn’t have a trendy reputation, and it wasn’t on any investor’s radar. But when I actually did my homework, I discovered something remarkable. Four of South Africa’s biggest financial institutions had their head offices right there. Corporate demand was through the roof. And yet, there wasn’t a single properly-serviced business hotel in the area.  

Before I finalised the deal, I spoke directly with these companies and tested the market. I realised that if I locked in some corporate agreements from just those four firms, I could secure 50 – 60% occupancy on weekdays from the start. That gave me the confidence to go all in. I bought the hotel, renovated it, and from the day we opened, it was a flyer. And it’s still flying today.  

That approach – looking where others aren’t looking – has become a fundamental part of how we do business at BON Hotels. It’s why we’ve expanded into Nigeria, where we now operate 40 hotels, many of which are the only well-serviced hotels in town. And it’s exactly the approach South African hospitality investors need to start embracing.  

Where the smart money should be going

Look around South Africa right now and it’s obvious where the next wave of hotel growth should be happening. Cape Town’s northern suburbs are booming – Bellville, Tyger Valley and Parow are evolving into major business districts. But the hotel infrastructure isn’t meeting demand. The West Coast is another big gap. Langebaan and Saldanha Bay are seeing significant residential and industrial growth. There’s more movement, more business, but not enough hotel capacity to support it.  

Then there’s the Garden Route, particularly George and Mossel Bay. These towns are flooded with people relocating from Gauteng, yet the accommodation options still haven’t caught up with demand. Even beyond the Western Cape, places like Nelspruit and secondary hubs in Gauteng are emerging as strong economic locations with very little proper hospitality investment.  

This is exactly what’s happening in India right now. Global hotel brands have already started moving into smaller Indian cities before the market becomes overheated. They know that by the time everyone sees the opportunity, it will be too late to affordably invest. South African investors need to get ahead of the curve, because once these emerging hotel markets become obvious, the cost of entry will be far higher.  

The three biggest mistakes holding investors back 

There’s nothing wrong with being cautious when investing in hospitality. But too many investors are hesitating for the wrong reasons. These are the three biggest mistakes I see:  

Believing that hotels in secondary cities can afford to specialise. They can’t. In a major metro, a hotel can cater just to business or just to leisure. But in smaller towns and cities, a hotel has to appeal to a broader market – corporates midweek, a smattering of leisure business, weddings and events on weekends, conferences year round. If you’re not catering to multiple types of guests in these cities and towns, your hotel won’t survive.  

An obsession with star ratings. Developers still get caught up in whether a hotel should be three-, four-, or five-star. It’s outdated thinking. No one books hotels based on star ratings anymore, they go straight to TripAdvisor customer reviews. In the coming years contracts will be based more on price tiers than rigid star ratings.  

Underestimating infrastructure risks. Yes, secondary cities often have challenges with water supply, power stability, and municipal services. But that doesn’t mean they’re a bad investment. It means you have to plan correctly from day one. In Nigeria and Angola, hotel developers don’t hope that infrastructure will be available after they’ve built – they secure water, electricity, and essential services before a single brick is laid. South African hotel developers need to start thinking, and planning, the same way.  

For too long, we’ve poured money into the same cities, expecting different results. But business hubs don’t stay static. They shift, they expand, and they create new demand. Cape Town isn’t just about the City Bowl and the Waterfront anymore. Johannesburg isn’t just about Sandton and Rosebank. Corporate corridors are constantly shifting. India figured this out, and their secondary-city hotel expansion has taken off. We need to ask ourselves: how much longer are we willing to wait before we stop playing it safe and start playing it smart?

WORDS: Guy Stehlik
PHOTOGRAPHS: Courtesy Bon Hotels, Unsplash

Born into the world of hospitality, Guy Stehlik’s journey started as a bellboy at seven, shaping a lifelong passion for the industry. With a rich background spanning top hotel groups, business development, and leadership roles, he founded BON Hotels, built on the principles of good people, good thinking and good feeling. A dedicated family man and talent scout, he continues to redefine hotel management with BON Hotels’ owner-, staff-, and guest-centric approach. Headquartered in South Africa, BON Hotels owns, manages, markets, and operates a rapidly expanding portfolio of hotels, lodges, and resorts across Southern, West and East Africa.