This sector is dominated by gambling stocks - Sun International (SI), Peermont and Gold Reef. Within that grouping, SI is by far the largest. Its net profit, total assets and market capitalisation are multiples of Gold Reef, its closest competitor in the net profit ranking. Peermont wasn't included in last year's ranking as it had only recently been listed.

The "select service" hotel sector in Southern Africa, dominated by City Lodge and Southern Sun's Garden Court chains, experienced some competition for the first time last year in the form of Peermont Global's Metcourt brand.

The 80-room three-star Metcourt Laurel hotel (formerly The Senator hotel) opened later in the year at Peermont's Emperor's Palace near Johannesburg International Airport. Peermont CEO Ernie Joubert says select-service and lower-end three-star hotels offer the most sustainable future for the hospitality industry in this region.

The biggest news of the year in the sector related to SI's disposal of its 38,6% stake in City Lodge. SI has tightened its focus since it amalgamated Kersaf with Sun International SA Ltd (Sisa). The City Lodge disposal was in line with this heightened focus and had nothing to do with City Lodge's performance, which has been exemplary.

In terms of an agreement that City Lodge founder and chairman Hans Enderle had with SI, he was given 120 days in which to acquire the stake, either in his personal capacity or with a consortium. Enderle wasn't able to come up with the money, with most potential investors viewing City Lodge as fully priced.

They have had to eat their words, as newly listed Hospitality Group recently bid for the entire listed capital of City Lodge at a premium of more than 50% on top of what SI was offering the stake at last year. If the bid is successful - and it looks like it will be - City Lodge will be delisted.

SI announced its empowerment scheme late last year with Dinokana Investments. This broad BEE transaction will result in 7% of SI's issued share capital being owned by a group of historically disadvantaged individuals, including SI's staff and black management. The deal forms part of SI's empowerment undertaking to the North West Development Corporation in 2003 and takes black ownership in the group's operations to more than 25%.

It was widely expected that Tourvest would turn the corner last year after a couple of dismal years, largely caused by the dampening effects of the strong rand on foreign tourism.

But it's still struggling to realise the potential that many investors have always believed was there.

Famous Brands - formerly Steers - turned in another excellent earnings performance last year and has become the benchmark for all fast-food/quick-service restaurants in SA.

The Don Group was by far the best performer in the sector, rising by more than 100% last year, to trade close to its net asset value. Hopefully, 2006 will mark the start of a sustained turnaround for this empowered hotel chain.