Start an Affordable Short & Long Term Accommodation Business

Cheaper accommodation is one of the businesses mentioned in business ideas for 2022 thread.

If you look at South Africa’s short term accommodation industry it is the same old story seen across sectors: cheap poor quality vs. expensive holiday rentals, no in-between. You either going to get a cheap “sleep and go” filled with prostitutes or an expensive R1000+ a night room. There has to be middle ground.

Market Need
Many people need short term accommodation whether travelling for business or pleasure. People going on holiday usually accept that it will cost a bit of money and save and budget accordingly. But what about people just looking for a place to rest their heads?

The business market
When people think business travel they think executives, nope most executives use hotels and don’t utilize self-catering. Many contractors operating out of province their company will hire them self-catering accommodation, these are usually 2-4 sleeper units.

What we have seen with both companies and individual entrepreneurs is that even that is getting too expensive. We have seen some companies even utilise municipal resorts for their workers to sleep at (and holiday goers complaining about all the work contractors roaming around spoiling the holiday vibe as in the case of Dennebos Pine Forest).

With that said I believe the next opportunity in accommodation in cities like Cape Town is backpackers for locals. We are already seeing companies that used to use hotels start using self-catering accommodation so they can stuff four people in one room. This will soon happen with strangers sharing close quarters.

In my neighbourhood there are many self-catering units to rent, it is not a holiday town but it is quiet and central just off the N1, minutes from Century City and with both Cape Town and Tygervalley 10 to 15 minutes away. All these places have seen a sharp decline. Why because business can no longer afford it, groups such as sports, choirs have also cancelled as COVID ravaged social events. Their biggest clients are now SAPS (South African Police Service) who instead of simply buying a house for their personnel to live in spend hundreds of thousands a month housing their people. In other worlds only people pissing away taxpayers money are still using these self-catering units that cost R1500 a night. These self-catering companies instead of adapting to reality with cheaper offerings are conducting asset disposals as banks call in their loans.

So what options are there?
Like many cities in the world we will start to see backpacker style accommodation. Regardless of COVID people need to go on with their lives and will be forced to use shared accommodation. It does not necessarily have to mean dormitories maybe smaller less fancy accommodation. My friend used to operate this kind of accommodation in rooms behind his pub.  He used to charge R450 a night which is cheap by Cape Town standards, he also used to rent it out by the hour for R150 but you can imagine how that went and the place got a reputation for being a brothel. So maybe don’t do hourly rentals especially if you have a pub attached as community pressure might prove problematic for your liquor licence (mass objections from the community used to come in when there was a need for public participation both for zoning expansion and for Grandslots/Vslots style gambling on the premises).

Then there are the Western Concepts or rather Eastern Concepts such as Capsule hotels aka pod hotels which are hotels that features many small bed-sized rooms known as capsules. Although I have no idea if this format will work in SA as it looks like a mortuary. I may look at it more in future.

Cheaper accommodation portal
If you look at the local rental marketplaces SafariNow, Lekkerslaap etc. You get an idea that even basic spaces cost a lot of money. I certainly think there is opportunity for rentals in the R300-R500 a night bracket (and even cheaper for longer terms), I am not talking about Airbnb I am talking about cheapies where people will accept the shortcomings of the place. Airbnb model is too intensive that is why their commission their booking fees for hosts, guests is too high, rather charge a flat rate for listings or sell ads for accommodation and related services. These cheap places can adapt accordingly to avoid large laundry bills they can let people bring their own bedding or rent out sleeping bags as an optional extra.

What budget accommodation in Poland looks like

Longer Term (month-to-month and upwards)

There is also a need for longer term accommodation, such as month to month, for extended work such as contracts but without the budget of paying R1000 a day just to sleep.

The accommodation situation in places like Cape Town is dire, the price of property has increased dramatically due to an influx of people fleeing other provinces like rats off a seeking ship, creating crazy demand that have stunned both optimistic and pessimistic property analysts.

Most people cannot afford to buy or rent a house and go for apartments, but even that is getting too expensive for most. This has pushed people in two directions: house share or less affluent areas. Now as someone who grew up on the Cape Flats I can assure you that you are better off going with the former and living like Julius Malemas foreign friends (living many people in a house).

We have not seen a major change yet from the City of Cape Town’s bylaw that allows three dwellings on a single plot probably due to high building costs. It remains to be seen how that will play out. We are not yet seeing the building of wendy houses in backyards to live in outside of the Cape Flats. I think property owners are not that desperate yet.

What we are seeing is that house share – what was once the domain of students and illegal foreigners are gaining traction with normal working people. It is not ideal for an adult to rent a room in a house with many others. But what can they do but accept the reality of the situation?

From a landlord perspective of these places, personality clashes are common, if I can give you one piece of advice when dealing with strangers – I don’t care what the law or constitution says – don’t mix different races in a single dwelling. The majority of South Africans didn’t drink the rainbow nation cool-aid and don’t play well with each other in such cramped spaces. Just obviously don’t tell the people directly or Unemployed Twitter might come for you.