Tsogo Sun’s Hospitality Property Fund operations grind to a pandemic halt

Hospitality Property Fund (HPF), a subsidiary of gaming and leisure group Tsogo Sun, wrote down the value of its portfolio by R2bn as the economic downturn hits operations.

Now valued at R10bn, the operations of the company, which owns 54 hotel and resort properties in SA, including Cape Town’s Westin and the Mount Grace Country House and Spa, came to a halt because of the Covid-19 pandemic.

Speaking after the company posted financial results for the year to March, CEO Mara de Lima said HPF was at the will of the government as it waited for the country to move to the necessary level of lockdown restrictions under which hotels and their attached conference centres may reopen to full occupancy.

Under the Disaster Management Act and the government’s rules these part of the economy may only reopen under level 1. SA’s economy is set to move to level 3 on Monday.

De Lima said HPF had a decent year, but it was derailed by coronavirus.

“We could open all of our hotels and then set up quarantine rooms and house essentialservice workers, but this wouldn’t be feasible. The occupancy would just be too low, given the costs of running our properties,” she said.

De Lima said that in the 11months to end-February, the group’s total revenue had climbed 5%.

But in March, revenue had swung, falling 7% for the full financial year.

Hospitality’s distributable earnings decreased 14% for the year, he said.

Hotel occupancies fell on the prior year by 2.5 percentage points, or 4% to 59%, primarily as a result of lower volumes in Gauteng.

The average room rate was up 3% on the prior year at R1,131, resulting in a 1% decline in revenue per available room on the prior year. Rental income was R768m, down 7% on the prior year’s, due mainly to poor performance from the Gauteng hotels, falling 14% below the prior year.

Hospitality did not declare full year dividend, and may review this decision once there is more certainty about the effect of the Covid-19 pandemic.

The group was not looking to sell any assets while its balance sheet was in a healthy state. De Lima said the fund would look to acquire new assets in future.

The company’s share price rose 9.62% to close at R2.85c on Friday.