Natural Saccharomyces cerevisiae isolates from vineyards in the Western Cape, South Africa were evaluated for ethanol production in industrial conditions associated with the production of second-generation biofuels. The strains displayed high phenotypic diversity including the ability to grow at 45 °C and in the presence of 20% (v/v) ethanol, strain YI13. Strains HR4 and YI30 were inhibitor-tolerant under aerobic and oxygen-limited conditions, respectively. Spore-to-spore hybridization generated progeny that displayed heterosis, including increased ethanol productivity and improved growth in the presence of a synthetic inhibitor cocktail. Hybrid strains HR4/YI30#6 and V3/YI30#6 were able to grow at a high salt concentration (2 mol/L NaCl) with V3/YI30#6 also able to grow at a high temperature (45 °C). Strains HR4/YI30#1 and #3 were inhibitor-tolerant, with strain HR4/YI30#3 having similar productivity (0.36 ± 0.0036 g/L per h) as the superior parental strain, YI30 (0.35 ± 0.0058 g/L per h). This study indicates that natural S. cerevisiae strains display phenotypic variation and heterosis can be achieved through spore-to-spore hybridization. Several of the phenotypes (temperature-, osmo-, and inhibitor tolerance) displayed by both the natural strains and the generated progeny were at the maximum conditions reported for S. cerevisiae strains.