REGENERATION STRATEGY FOR THE
GA-RANKUWA HOTEL SCHOOL
Contents
1.
2.
3.
4.
5.
6.
Introduction
Policy and Strategy context
Situation Analysis, Physical Facilities and Key Issues
Training in the tourism sector
Skills Gaps
Best practices – hotel schools and related physical
facilities
7. Regeneration Strategy
8. Marketing Plan
9. Financial Model
10. Implementation Roadmap
11. DED Vision
12. Conclusions
Introduction
Background
• The Ga-Rankuwa Hotel School (GRHS), located in Ga-Rankuwa
township of the Gauteng Province, is currently a campus of the
hotel division of the North West Parks and Tourism Board
(NWPTB) and is in the process of being transferred to
Department of Economic Development of the Gauteng
Provincial Government (GDED)
• The DED resolved as follows:
• Conduct a due diligence that will inform the acquisition
transaction of the Ga-Rankuwa Hotel School (GRHS) for
valuation purposes
• Develop a Regeneration Strategy and Marketing Plan
with the aim of repositioning the school to be a “Leading
world class training and leisure facility in Africa” –
this project
Introduction (cont’d)
Scope of the Project
• The scope of the project inter alia included a review of the
following:
– Policy and Strategy context;
– A Situation Analysis with respect to:
•
•
•
•
GRHS;
Training in the tourism and hospitality sector;
Industry skills gaps; and
Best practices in the tourism industry – benchmarking both local and
international.
Introduction (cont’d)
Scope of the Project
• The scope further required a development of the following:
• Business model for the new hotel school;
• Alignment of the school to government strategies for the
tourism industry; and
• Implementation Roadmap.
FOCUS: This presentation is structured as per the scope of work of
the project, and it further details the Regeneration Strategy and
Marketing Plan
Tourism Policy
The White Policy (1996) is considered the overarching tourism
policy. With regards tourism education, it emphasised the
following:
• Deficiency in tourism education;
• The need to access an affordable tourism education for the
previously neglected groups;
• The need for a tourism awareness programme;
• The school curriculum to include a tourism subject; and
• Basic skills such as communication and customer service to
compliment tourism technical skills.
Tourism Sector Strategies
Cognisance is taken of various strategies in place. For the purpose
of this presentation, we focus only the National Tourism Sector
Strategy (NTSS) and the Gauteng Tourism Sector Strategy
(GTSS). These strategies set the targets illustrated below:
National Tourism
Gauteng Tourism
Sector Strategy
Sector Strategy
Foreign visitor arrivals
15 million
8.25 million
Domestic tourists
18 million
10.26 million
Total est tourist
33 million
18.51 milliom
Direct jobs
461,700
*258,972
* Extrapolated based on NTSS direct jobs to be created
The GTSS states that the number of jobs is still to be determined,
and we thus extrapolated to estimate that about 32,000 learners
must be trained and given decent jobs, based on the tourism
growth rate with regard to the envisaged number of tourists to
South Africa
Situation Analysis
• Management and organisation
– The rector manages the school and hotel operations with a
23 staff compliment, eligible for corporate benefits
• GRHS operations
– The school has capacity to enrol 100 students, and currently
enrols about 40%, using 2 academic staff members;
– The hotel school is accredited with CATHSSETA and offers
one year certificate and two year diploma courses in
professional cookery;
– The hotel, currently not graded, has ten (10) rooms and
utilises about 7 staff members;
– The GRHS shared services, namely, HR, IT and financial
management are based in Mafikeng; and
• The physical facilities require urgent refurbishment.
GRHS Physical Facilities - Buildings
GRHS Physical Facilities - Kitchens
GRHS Physical Facilities - Library
Situation Analysis – strategic decisions
• Transfer. The finalisation of the transactional arrangements,
which are recommended to deal with:
– the nature of the transaction-which should be an asset
transfer/acquisition;
– a management agreement concluded with the NWPTB to
manage the school on behalf of DED during the transitional
phase
• Improvements. The timing of the refurbishment of the physical
facilities
• Expansion. Raising of investment capital and related funding
options
• Institutional capacity. Formalisation of relationships with
industry players
Training in the tourism sector
The South African education system comprises these bands:
• Basic Education – tourism courses offered at school
• Further Education and Training (FET)
• Higher Education – University of Technology and University
• Sector Education and Training Authority (SETA)
The GRHS is accredited by CATHSSETA, one of the SETAs.
The universities offer mainly diplomas and degrees in tourism and
hospitality studies.
Skills Gap
The GRHS offers learners career opportunities to become Chefs.
The table below illustrates tremendous skills gap in the hospitality
sector:
Employee Qualification Level
NQF 5-8
NQF 2-4
NQF 1 & LESS
HOSPITALITY
18%
28%
54%
TOURISM & TRAVEL
74%
18%
7%
GAMING & LOTTERIES
53%
40%
5%
CONSERVATION & TOURIST GUIDING
22%
50%
28%
The table indicates that 82% of employees in the hospitality sector
have obtained qualifications at or lower than NQF4, which is
equivalent to Matric.
Best Practices – hotel schools
•
•
•
•
•
Highly ranked schools are private – GRHS may utilise an
outsourced management company, with the land and physical
facilities being leased to an institution/operator to run academic
programs, with clearly set out targets contained in the business
plan;
– The benefits of such a model are clear
Location – in the city centre or nearby a tourist attraction – GRHS is
on the outskirts of City of Tshwane, but may remain a campus of a
bigger school;
Physical facilities including the library – state-of-the-art;
Fees are generally expensive – a subsidy may be needed for the
new GRHS; and
Limited revenue models – GRHS may explore hosting a restaurant
at its facility instead of providing hotel operations, whereby the
conference facility becomes a dining room
World Class - Facilities
City centre building
Palace in a
resort
Well-equipped
library
Computer
room
World Class - Facilities
Typical classroom
En-suite rooms with TV
Residential
corridors
Double-room
Regeneration Strategy
• Institutional Arrangements
– Appoint, in the interim, a senior official to facilitate and
conclude the transfer transaction
– Establish a section 21 company to warehouse the current
GRHS and formulate its related business plan;
– Appoint the board to establish a Project Programme Office for
the feasibility study and construction of a new tourism centre
of excellence and supporting hotel facilities
• Vision and Mission
– Make it easy to remember , and refine it into, “ to be a centre
of excellence in tourism education”
– Similarly to the Vision, the mission can be refined to read, “to
provide tourism education and professionalise the tourism
market”
Regeneration Strategy
• Accreditation
– Upon official name change, register the school with
CATHSSETA
– Register the school with industry relevant associations, e.g.,
CASA and RASA
• Internship
– Appoint a full-time person and an assistant to fully coordinate internships and placements
• Refurbishment Programme
– Implement quick-wins
Marketing Plan
• Formulate a generic brand of the Gauteng Institute of Tourism
Education (GITE), and also the brand for the school of culinary
arts;
• Register a website, www.gite.gov.za;
• Compile a new prospectus for the GITE;
• Advertise nationally, and local media including the DED online;
• Launch the new GITE following completion of the upgrades.
Financial Model
Value Drivers for the Financial Model
Input Variable
Total target students
Amount
1,500
Boarding students ratio
0.25
Day students ratio
0.58
Correspondence students ratio
0.17
The number of students that
the expanded facility will
accommodate will have an
impact on the extent of the
investment in the
infrastructure which will
further impact on the
operating expenses of the
school. The ratio of boarding
v/s day students will also
impact on the infrastructure
with regard to number of
rooms to be developed.
Financial Model
Revenue Model
Input Variable
Base Case
Amount/Rate
Average
annual
increase
Base school fees for boarding
students
R29,700
10%
Base school fees for day
students
Correspondence fees
R16,100
9%
R8,250
8%
Base conferencing fee rate
(per delegate)
R240
8%
Restaurant average price per
meal
R30
8%
R4,943,253
10%
Base government subsidy
The fees structure is based
on the existing fee
structure. The
correspondence students
fee is an estimate. The
conference rate is based
on a similar facility in
Randburg. The restaurant
price per meal is influenced
by average food price in
the locality of the school
and the potential target
market of the school. The
government subsidy is per
the due diligence report.
Financial Model
Revenue Model
Year
TOTAL INCOME
1
2
3
4
5
6
8 157 500
10 072 855
13 159 043
17 436 028
22 828 709
54 200 554
2 227 500
2 951 438
4 242 691
6 098 869
8 385 945
22 692 366
75
94
117
146
183
450
Fees per student
29 700.00
31,482
36,204
41,635
45,798
50,378
Estimated Sales Turnover
2 227 500
2 951 438
4 242 691
6 098 869
8 385 945
22 692 366
Day Student fees
2 817 500
3 733 188
5 226 463
7 317 048
10 060 940
26 729 906
Boarding Student fees
Number of boarding students
Number of Day students
175
219
273
342
427
1 051
Fees per student
16 100.00
17,066
19,114
21,408
23,548
25,432
Estimated Sales Turnover
2 817 500
3 733 188
5 226 463
7 317 048
10 060 940
26 729 906
412 500
472 230
540 609
618 889
708 504
811 096
50
53
56
60
63
67
Fees per student
8 250.00
8 910.00
9 622.80
10 392.62
11 224.03
12 121.96
Estimated Sales Turnover
412 500
472 230
540 609
618 889
708 504
811 096
2 700 000
2 916 000
3 149 280
3 401 222
3 673 320
3 967 186
90 000
90 000
90 000
90 000
90 000
90 000
Average price per meal
30.00
32.40
34.99
37.79
40.81
44.08
Estimated Sales Turnover
2 700 000
2 916 000
3 149 280
3 401 222
3 673 320
3 967 186
Correspondence Student fees
Number of Day students
Restaurant Revenues
Esimtated number of meals sold
Financial Model
Direct Cost Model
Year
1
2
3
4
5
6
Total direct student costs
Average Cost per Student
5 578 088
18 593.63
6 880 112
18 823.84
9 053 916
20 263.69
11 926 518
21 770.39
15 724 071
23 347.65
40 351 638
25 728.29
Total Number of Students
300
313
391
488
610
1,501
Boarding students
Number of boarding students
Cost of kitchen training set
Student training costs
Boarding lodge charges
Student ICT costs
Direct foobd & beverages costs
75
94
117
146
183
450
2 500.00
2 650.00
2 809.00
2 977.54
3 156.19
3 345.56
11 270.00
11 946.20
12 662.97
13 422.75
14 228.12
15 081.80
9 100.00
9 646.00
10 224.76
10 838.25
11 488.54
12 177.85
129.00
136.74
144.94
153.64
162.86
172.63
4,583
4 858.35
5 149.86
5 458.85
5 786.38
6 133.56
2 068 676
2 285 526
3 028 321
4 012 526
5 316 597
13 863 558
Kitchen equipment amortisation costs
Total
Dau Students
Number of Day students
Cost of kitchen training set
Student training costs
Direct foobd & beverages costs
Student ICT costs
Kitchen equipment amortisation costs
Total
175
219
273
342
427
1 051
2 500.00
2 650.00
2 809.00
2 977.54
3 156.19
3 345.56
11 270.00
11 946.20
12 662.97
13 422.75
14 228.12
15 081.80
4 583.35
4 858.35
5 149.86
5 458.85
5 786.38
6 133.56
129.00
136.74
144.94
153.64
162.86
172.63
-
-
-
-
-
-
3 234 412
4 285 596
5 678 414
7 523 899
9 969 166
25 995 597
Correspondence students
Number of correspondence students
50
53
56
60
63
67
Distance training administration costs
5 500.00
5 830.00
6 179.80
6 550.59
6 943.62
7 360.24
Total
275 000
308 990
347 181
390 093
438 308
492 483
The key direct cost
drivers were arrived
at by applying a 70%
factor on the student
fee structure, thus
assuming a 30%
gross margin. Other
costs include a
culinary tool kit per
student, food &
beverage cost per
student and internet
connectivity
Financial Model
Revenue based expenses
Input variable
Percentage of
revenue
Water & electricity charges
2.25%
Cleaning services
1.25%
Building maintenance
Equipment maintenance
Landscape services
Marketing & sales
Security services
Usage based expenses
Input variable
Communications
Telecommunications
month
Rate
per
employee
per
R484
Internet connectivity per month
R129
Courier services (base usage -300 times)
R125
1.5%
2%
0.5%
Transport costs for administrative staff per
month
Stationery use per month per employee
R3,300
R55
2.5%
3.5%
Computer
month
consumables
per
employee
per
R75
Financial Model
Job implications
Direct Employees
Indirect Jobs
Rector
1
Deputy Rector
2
Finance Officer
1
Lecturers
9
Programme coordinator
6
Student registrar
6
General Office Adminsitration
Administration Staff
Total Staff
17
Security services
50
Professional consulting
10
Contruction (short term)
130
Supplies
10
Total Staff
200
9
52
Financial Model
Projected Income Statement
Year
1
2
3
4
5
6
R
R
R
R
R
R
Income
- Revenue
13 615 000
17 229 710
23 168 806
31 470 833
41 984 099
104 433 922
13 615 000
17 229 710
23 168 806
31 470 833
41 984 099
104 433 922
(5 578 088)
(6 880 112)
(9 053 916)
(11 926 518)
(15 724 071)
(40 351 638)
Gross Profit
8 036 912
10 349 598
14 114 889
19 544 316
26 260 027
64 082 284
Government subsidy
4 943 253
5 437 578
5 981 336
6 579 469
7 237 416
7 961 158
Expenses
(8 640 373)
(8 743 485)
(9 971 252)
(12 118 001)
(15 104 462)
(32 971 748)
4,339,792
7,043,691
10,124,973
14,005,784
18,392,982
39,071,695
Less
Direct costs of education provision
Net Profit Before Interest
Less Interest Paid
-
-
-
-
-
-
Add Intrest Earned
Net Profit Before Tax
4 339 792
7 043 691
10 124 973
14 005 784
18 392 982
39 071 695
Taxation
(1 215 142)
(1 972 234)
(2 834 992)
(3 921 620)
(5 150 035)
(10 940 074)
Profit after Tax
3 124 650
5 071 458
7 289 981
10 084 165
13 242 947
28 131 620
Dividends
Retained Income
3 124 650
5 071 458
7 289 981
10 084 165
13 242 947
28 131 620
Financial Model
Investment Implications
Description
Number of units
Administrative block
1
Kitchens
8
Hostel Accommodation
168
Student dining room
1
Linen rooms
4
Classrooms
16
Library
6
Computer labs
6
Maintenance offices
5
Project management fees
VAT thereon the estimated costs
TOTAL DEVELOPMENT COSTS
Sqm/unit
Indicative costs
2,782
112.37
40
462
21.43
45.53
41.86
41.86
84.97
R24,619,743.24
R7,955,796.00
R59,372,783.20
R3,606,733.20
R627,539.30
R5,653,557
R2,222,766.00
R2,222,766.00
R3,759,923.00
R20,517,231.81
R18,398,965.35
R149,820,146.46
The estimated
capital investment
is based on the
number of
students and the
resultant facility
that is required.
The conservative
development cost
is at R8,850 per
square meter.
Implementation Roadmap
Apr-12 May-12 Jun-12
ACTIVITIES/ACTION POINTS
DEPARTMENT OF ECONOMIC DEVELOPMENT ACTIVITIES
Finalise the DED's Strategic Implementation Road Map
(SIRM)
Approval of the SIRM
Develop the TOR for the PMO
Issue a Request for Proposals for the PMO
Appoint a Service Provider (PMO)
PMO ACTIVITIES
Conclude the Transaction between DED and NWTBP
Restructure the operations of GRHS
Develop a business plan for GRHS
Conduct architenctural design, costings for the
refurbsihments of the GRHS
Determine the funding requirements and design funding
structures for GRHS
Develop specifications for the management of GRHS and
call RFP
Conclude transaction with land owner for the new school
Conduct geotechnical, land survey, EIA on the land
earmarked for the school
Submit applications for development and obtain all
regulatory approvals for development of the new school
Design the school's infrastructure, lay-out of kitchens etc
Call for proposals for the Development of the new School
Project Manage the development of the school
Jul-12
Aug-12
INDICATIVE TIMELINES FOR THE PMO-NEW SCHOOL HOTEL
Sep-12 Oct-12 Nov-12
Dec-12 Jan-13
Feb-13
Mar-13
Apr-13
May-13 2013-2015
DED Vision
A reception to reflect a
School in hospitality
A conference centre
converted into a restaurant
GITE
Culinary
Learners provided with
right tools, books and
uniform
GITE
Culinary
Access to internet,
including in corridors
DED Vision
Demo kitchen for
foundation phase levels
Optimal use of space –
advanced kitchens
Enclosed kitchens,
pastry (wooden
tables) and
cookery (stainless
steel)
DED Vision
Proper computer
room
Proper library
Conclusion
• The GRHS has been severely under-funded over the past five
(5) years and certain facilities require urgent attention and
funding estimated at R150 million
• The international bench marking trip further confirmed hotel
schools best practices
• The GRHS must consider to substantially increase its student
intake to support envisaged phenomenal growth in tourism;
• The GITE must evaluate which of priority and critical skills
courses it wants to offer initially within the hospitality industry
• Optimal institutional arrangement is that the GRHS is
warehoused in a section 21 company with the aim to ring-fence
the tourism institute, and renamed the existing school the GaRankuwa School of Culinary Arts