Are you considering purchasing or building a commercial lodge near Hoedspruit?
As an experienced property professional and real estate agent in Hoedspruit, I have valuable insights for you to consider.
What is considered commercial?
A commercial lodge is any property where you derive income from guests staying there. These guests could be holidaymakers, safari goers, researchers, or participants in student programs. The key aspect is that guests pay to stay at the property, providing a financial benefit to the owner.
Who controls commercial operations?
Special consent is required for a property owner to operate a commercial lodge. This consent typically comes from two authorities: the local Municipality, which in this case is the Maruleng Municipality, and the specific reserve or estate where the property is located. The municipality uses the following definitions for lodges, and to operate commercially, the property must have consent to be any one of the following:
“BED-AND-BREAKFAST ACCOMODATION” – A commercial accommodation
establishment of up to and including four (4) guest rooms. The main function is
to provide temporary accommodation under personal supervision of the owner and
his/her family from his/her dwelling house. Meals (usually breakfast) are provided
to paying guests only. Only one (1) kitchen per establishment is allowed. A bathroom
for each guest room may be provided, but a bathroom may also be shared with the
host family.
“GUEST HOUSE” – A commercial accommodation establishment of five
(5) up to and including sixteen (16) guest rooms. No permanent
residents (except for the manager) are allowed. The main function is to
provide temporary accommodation under personal supervision. If meals
are provided, it should be served to paying guest only. Only one (1)
kitchen per establishment is allowed. Each guest room must have it’s
own en-suite bathroom. All other facilities such as a bar and swimming
pool are for paying guests only.
”RESORT” – Means a place frequented by people for relaxation or
recreation - for a specified purpose or quality (i.e. health, holiday,
mountain resort). Specialised resorts (i.e. youth camps, church,
cultural). Picnic resorts, holiday towns and hotels/motels, rest camps,
camping. [Nature, water, historically (i.e. mining towns, trading posts,
trek routes, old bridges) orientated].
“TOURISM” – Means the business of providing services to tourists; the
practice of travelling for pleasure; organised touring; accommodation
and entertainment of tourists as an industry.
Municipal Consent for Commercial Properties
The municipality is generally supportive of properties being commercial, but it will consult with neighbours and game reserves/conservancies first. Often, it is the reserve and estate, along with their internal policies, that dictate which properties can be commercial and how many commercial beds they may have. The municipality cannot override the conditions of the title deed, and in most estates, the title deeds require membership in the Homeowners Association and adherence to their rules.
From this perspective, it is not easy to purchase any property and convert it to a commercial property. However, free-standing properties not part of a reserve, such as a farm, can fairly easily apply for commercial rights at the municipality.
How many beds can a lodge have?
The number of commercial beds allowed is generally determined by the Game Reserve’s rules, the size of the property, and the municipality. Generally, larger properties are permitted more commercial beds. For example, in the Klaserie Game Reserve, a landowner needs 50 hectares per commercial bed, as per the Klaserie Constitution. Thus, an 800-hectare property would allow only 16 commercial beds. However, on some 21-hectare properties in Balule, the reserve rules allow for an 8-bed, 10-bed, or 12-bed lodge.
When the municipality grants lodge or resort rights, they also set a limit on the number of commercial beds, which can be quite high, such as 26 or 30 beds even on a small 21-hectare property.
Within the Hoedspruit area, 21-hectare properties are considered small and are likely to be allowed between 9 and 12 commercial beds. The municipality also has a capped number of commercial beds that must align with their municipal bylaws.
How does one get traversing?
To have traversing rights, one generally needs to own land. The more land you own, the more traversing you will have. If you own land, there is a possibility to have reciprocal traversing with neighbours. Some reserves have agreed to allow traversing to all landowners, as their constitution permits. In other reserves, it is left to each owner to allow or not allow reciprocal traversing. Property owners are free to negotiate reciprocal traversing with neighbours. The more land one has, the more interested neighbours would be in swapping traversing rights.
Share blocks
Share blocks are a type of property ownership where a registered share block company owns a larger farm portion. Shareholders own a share in the company and have exclusive rights to use a specific site to build a house, granting them access to the entire reserve or farm. However, no commercial rights or lodge will belong to any individual owner.
Frequently asked questions:
I would like a small piece of ground that is cheap to build a game lodge on and have traversing across large areas with game. Where can I do this?
Unfortunately, small pieces of vacant land for commercial purposes are extremely rare and often very expensive. Additionally, they may not come with traversing rights on other owners' land unless it is part of a development or reserve set up by the developer and approved in the original development plan.
Around Hoedspruit, there are a few 1-3 hectare sites in recognized developments that allow for commercial lodges. Another possibility is a 21-hectare farm within a reserve, though this may not necessarily have traversing rights. The best approach is to consult a knowledgeable agent about available opportunities, as these properties are not easily found on property portals due to specific requirements and fields.
With the growth of Hoedspruit and the demand for commercial properties, almost every vacant commercial site has been developed.
Is Hoedspruit a good destination and why?
Yes, Hoedspruit is an excellent destination. It is located in a UNESCO World Heritage Site, offering a natural environment for many of Africa’s iconic animals. You can purchase a property with “plains game” consisting of at least 10 large mammal species, including Zebra, Wildebeest, Impala, Giraffe, Waterbuck, Warthog, Nyala, Kudu, Duiker, Steenbuck, Monkey, and Baboon. Additionally, you may be able to get some or all of the “Big 5” animals: Leopard, Lion, Elephant, Rhino, and Buffalo. Other special species such as Wild dog, Cheetah, Hyena, Sable, Hippo, and Crocodile can also be found.
Most reserves or conservancies will have some combination of these animals, and Hoedspruit is not far from the Kruger National Park, which has all of them in abundance.
Hoedspruit is also a well-known tourism destination, popular with foreign tourists. Besides the wildlife, Hoedspruit offers excellent support infrastructure for the lodge and tourism industry, which can be described as a core competency. Hoedspruit has its own commercial airport, a civil airstrip, good roads, and various service providers, including game vehicle repairs, lodge and farm staff recruitment and placement agencies, maintenance and building contractors, tourist transfers, and more.
If you were to own a lodge in another country, such as Zambia, you would first need to market Zambia as a destination, followed by the area, then the reserve, and finally your lodge. Since there may not be many other lodges there, the total marketing spend would be small. However, in an area like Hoedspruit, which has many lodges, there is already a lot of money being spent on marketing the area and lodge industry. There is a strong lodge industry, and you only need to get your slice of the business and the “pie.”
Additionally, it is easier to do business here due to the pool of skilled talent, making recruiting easier. If you need game vehicles repaired, there are experts who can assist. There are companies that do guest transfers and that you can outsource day activities to. There are experts in all areas you may not have thought about, such as air conditioner experts, maintenance experts, and wireless internet providers. Guests also need to consider medical facilities and emergency services. The list goes on.
Does calling a property a lodge mean it's commercial?
No, not necessarily. The term "lodge" is used loosely by many people and could refer to private use, family use, or commercial use. When looking for a property that can be run as a business or accommodate paying guests, look for terms like commercial rights, lodge rights, and registered beds.
What is meant by commercial beds?
For example, if a lodge has 12 commercial beds, it refers to the tourism expression “bums in beds,” meaning the right to 12 beds, which typically translates to 6 double beds that can accommodate 12 guests. 16 beds means 16 guests, excluding staff.
In some reserves, when there is traversing, they limit the number of guests and vehicles that can traverse. For instance, a property may be a 20-bed lodge with two vehicles. In this case, only 20 guests may come, and only a maximum of two game drive vehicles can traverse the reserve, as 10 people can fit into a game vehicle.
Do all lodges on large portions of ground have traversing?
No, they do not. They may be called a lodge, but there is no guarantee on the size of the property, the types of animals present, or the extent of traversing possible. When referring to a lodge, I specifically mean a commercial game lodge.
What do the better, more expensive lodges have that others do not?
For the distinguished traveller, the top lodges have large portions of land. This allows them to offer more traversing and a better safari experience. With extensive land, they can swap traversing rights with neighbours, providing even more traversing opportunities. As a result, the top lodges are generally able to provide a “Big 5” experience.
Additionally, with ownership of large properties, the top lodges can offer high-quality food, accommodation, and service.
What would a top investor be looking for in a lodge?
A top investor would prioritize high-quality game viewing and large amounts of land. Additionally, they would seek a solid business foundation, which includes quality staff, good occupancy figures, and consistent financial performance.
What returns can be expected from a lodge?
Returns from a lodge can vary, but generally, they are lower than other investments. The purchase of a lodge should be viewed as a project with an entry point and exit point. In between, there will be cash flow, profits, and losses. To determine the investment value, one must consider the exit point for higher returns, as much of the profit comes from the appreciation of the lodge.
Lodges can be lifestyle investments, especially when they are small, where returns are measured in sunsets rather than Rands and cents. In smaller lodges, owners live off the lodge, covering expenses such as food, telephone, vehicles, television, and internet fees. Ultimately, they spend what they need to live a happy and meaningful lifestyle. Even overseas travel trips can be booked as “marketing and advertising” expenses for the lodge, which may be part of the trip. Ultimately, the lodge may show lower returns and may even break even. Some owners prefer fewer bookings and schedule quiet times instead of maximizing bookings, as increased income comes at the cost of working harder.
Each property should be evaluated on its own merits, and buyers must create a plan for how they intend to run the lodge.
Will banks provide finance for commercial lodges and how much?
Banks are generally not very fond of commercial lodges, mainly because the profits do not easily service large amounts of debt and lodge owners often struggle to prove their financials. Commercial lodges fall under the commercial division in banks, so a normal home loan is not possible. The application process for a commercial loan is far more onerous, requiring historical financials and a business plan. While the value may be underpinned by an asset, banks know that the ability to service debt may be problematic. The risk is higher for banks since poor business performance can lead to missed loan payments.
From this perspective, banks will look for strong historical performance, a higher level of deposit, surety, and collateral for the loan amount.
Are game lodges only for the wealthy and rich?
Wealth is a relative term, but lodges are indeed expensive, and many wealthy owners possess them. Some owners have earned their money to purchase lodges, while others may not be wealthy but have inherited them, with their wealth tied up in the property.
One thing is certain: they don’t make land anymore. Pristine landscapes with a balanced and healthy ecosystem are rare, and those who desire them the most and can afford them will own them.
The weather in Hoedspruit is warm and generally sunny. We do not have the cold winters like other parts of the country, and we are not prone to windy conditions like coastal areas.
Hoedspruit has a cosmopolitan feel, with many people relocating here in recent years. They are friendly and happy to get to know new people. There are many foreign owners from various overseas countries. The town is estimated to have about a third English-speaking, a third Afrikaans-speaking, and a third foreign-owned residents.