Increasingly popular as a holiday destination among both domestic and international tourists, the scenic Garden Route town of Knysna has evolved into a burgeoning resort that offers entrepreneurs rewarding hospitality opportunities, particularly in the buoyant guesthouse market.
Renowned for their own unique beauty and quaintness, these areas are seeing more international tourists visiting throughout the year.This is according to Ling Dobson, area principal for Pam Golding Properties in Knysna and Plettenberg Bay, who says approximately 70km from George airport, Knysna has a population of approximately 65 000, which increases to some 110 000 in season, while Plett’s residential population of about 40 000 rises to about the same number during season.
“We constantly see visitors wandering through the streets - the restaurants are busy and there is a buzz about the towns.” Whereas previously you could walk into most restaurants after high season, bookings are a must and many guesthouses are even turning clients away due to the demand, she says.
In 2012, Conde Nast Travel Magazine ranked Knysna as runner-up on its World’s Best Cities list, which further boosted this as a prime tourism destination.
Dobson says during the summer season, visitors are predominantly international, as those in the northern hemisphere travel south to escape the cold winter months. In low season from May to September, visitors are mainly South Africans, many of whom stay in self-catering establishments which are more cost effective for families.
“However, there are other overseas markets that travel in this area during our winter months, such as the Middle East, Italy, Brazil, Holland (year round tourists), India and China.”
Dobson says today there are over 400 accommodation establishments - inclusive of hotels in Knysna, Sedgefield and Plett, providing in excess of 6 000 bed nights. These comprise small three and four bedroom B&Bs, with a further market segment offering four to seven bedroom guesthouses, also in the 3 Star and 4 Star and luxury category, which includes high quality boutique facilities. Historically, business opportunities in the Knysna and Plett areas have tended to be limited by their distance from major cities. Knysna’s industrial area caters mainly for the wood industry and other light industries.
While hotels require a year-round occupation for a viable business, guesthouse infrastructure and overheads are lower, making it easier for owners of these establishments, who also live on the properties, to offer accommodation in the peak periods and ride out quieter periods during the year.
As there are no plans for any more large hotels in this area with its ever-increasing tourism market, there is definitely room for expansion of the guesthouse offering, particularly well-run establishments which provide good service.
“Many visitors also book out houses for accommodation over the holiday season, and during 2014 our holiday rentals reflected an increase in excess of 30% over the previous year, with the exchange rate also contributing to growth in this sector,” she says.
Dobson says for those looking to acquire a B&B or guesthouse, it is better to buy an existing property as starting from scratch is not easy and requires considerable marketing spend, while there are a number of viable establishments for sale in the area for various reasons.
“If you own the property outright, the income derived during the summer months should be sufficient to sustain the slower off-season months.”
It is therefore advisable to buy the property for cash so that the income is not required to pay off a bond - bearing in mind that the banks are generally not providing bonds on guesthouses; instead they take into account the value of the residential property, she says.
In terms of location, an excellent position is either on the beach on Leisure Isle (Knysna) or in Keurbooms (Plettenberg Bay), or close to the CBD.
Dobson says it is important to consider the number of rooms. In 3 Star establishments, from seven rooms and more tend to translate into lucrative returns, whereas in the luxury category this can be achieved with as few as four to five rooms.
It is imperative to maintain ongoing marketing as well as an innovative and inviting website, she says.
“Register with the Department of Tourism, work with tour operators and travel agents for recommendations and also network with other establishments to facilitate referral business.” In addition, she says to ensure you know the town and all the restaurants and facilities available.
Two 3 to 4 Star guesthouses enjoying excellent positioning are currently on the market, and they are well-priced and offer opportunities for sound return on investment of 9% to 11% and potential for expansion, says Dobson.
The first comprises two adjacent guesthouses with a thriving turnover, positioned within walking distance of Knysna CBD with its eclectic restaurants, coffee shops and shopping malls, waterfront and museums.
The joint establishments have an art deco theme, which includes a well-appointed restaurant that could be used for functions and conferences, a second guesthouse - Beauchamp, and a separate three bedroom owner or manager’s cottage with its own private garden with deck and scenic views towards The Heads. The entire property is marketed at a total selling price of R16.5 million. The property is visible from the N2 and also has spectacular views over Knysna lagoon.
The second guesthouse, Yellowwood Lodge, is steeped in history and a few minutes from the centre of Knysna. It is a charming restored heritage guesthouse with 14 guest rooms and 12 bathrooms, with a secluded swimming pool and spacious grounds of 3 450sqm, priced at R9.9 million.
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