The Age-old lease agreements between the City of Durban and an iconic hotel group are coming to an end. This is putting pressure on the city’s coveted golden mile.
The lease agreements for the Southern Sun’s Elangeni and Maharani hotels expire at the end of 2025.
The hotel group and the municipality are at loggerheads over market value for rental. The City has put out a tender notice for interested bidders.
The uncertainty over the future of the Southern Sun’s Elangeni and Maharani hotels on the Durban beachfront stems from a 1961 land lease agreement.
The City claims Southern Sun has been paying a monthly rental fee of just R1250. With the agreement ending at the end of 2025, the city has started a bidding process. This ends in March next year.
Should the current hotel operator not be the successful bidder, it would mean they would have to vacate the premises, leaving it free for another hotel group to lease the premises.
Head of Real Estate for the eThekwini municipality, Thapelo Mmusinyane says, “By implication, those laws at that time did not require what the law now requires, that they must be at market value, so by implication, the leases would be below market value, and what they are paying us is below market value in terms of the current legislation. The rental we have put on the property based on the market value of the property is R3.4 million a month.”
The hotels are located on prime property, on the strip called the Gold Mile, and close to the CBD. Its presence is a major boost for other businesses operating in the vicinity. It is also located along the popular north beach stretch that attracts thousands of domestic tourists annually, particularly in December. Combined, they have a bed capacity of 730 beds.
Mmusinyane has denied allegations that the City has earmarked the premises for student accommodation.
“Specifically on the hotel, we are specifically looking for a hotel group that has international experience in operating hotels that would have four stars in their property portfolio. The second part specifically on the hotel, we would not accept any proposal that does not propose a hotel that is going to be a four- or five-star hotel. If you do not meet those requirements, we will automatically disqualify you.”
The Federated Hospitality Association of Southern Africa (FEDHASA) says it would be detrimental to the tourism industry if the two hotels were to close.
FEDHASA’s chairperson in KwaZulu-Natal, Brett Tungay says, “The loss of these two properties out of the ecosystem will have a huge impact on Moses Mabhida, Kingspark, and Durban July. The list is endless in terms of the knock-on effect, unfortunately. We at FEDHASA had an internal debate about this, and the fact is that there are probably only three or fewer operators in South Africa that have the capacity to run a 700-bed establishment.”
In a statement, Southern Sun says it hopes to retain both premises, having invested extensively to upgrade the establishments. The hotel group is owned by Hosken Consolidated Investments.
