Tsogo Sun cau­tious about re­cov­ery of ho­tel sec­tor in year ahead

The Citizen (KZN) - - Business - Suren Naidoo

De­spite govern­ment’s U-turn on unabridged birth cer­tifi­cates for for­eign mi­nors trav­el­ling to SA, the re­lax­ation of visa rules and Cape Town’s drought end­ing, the boss of JSE-listed hos­pi­tal­ity gi­ant Tsogo Sun Ho­tels re­mains cau­tious about a ro­bust re­cov­ery in the ho­tel ac­com­mo­da­tion sec­tor next year.

Mar­cel von Au­lock, CEO of Tsogo Sun’s re­cently un­bun­dled ho­tels divi­sion and chair­per­son of Hos­pi­tal­ity Prop­erty Fund (HPF), said while there were pos­i­tive signs, the big­gest fac­tor that would drive a sus­tain­able re­cov­ery in the sec­tor was stronger eco­nomic growth in the coun­try.

He was speak­ing fol­low­ing a pre­sen­ta­tion to in­vestors on Tsogo Sun Ho­tels Limited and HPF’s lat­est re­sults for the hal­fyear to Septem­ber 30, which came out last week. “The SA ho­tels in­dus­try has been pretty sta­ble; how­ever, it is not grow­ing at the rate we would like it to grow,” said Von Au­lock.

“We are see­ing pres­sure par­tic­u­larly at the bot­tom end of the mar­ket, but there are some green shoots. Fi­nally ad­dress­ing the unabridged birth cer­tifi­cate and visa is­sues was a big move by govern­ment. It was ridicu­lous what they did in the first place, but that they’ve fi­nally ad­dressed it prop­erly is en­cour­ag­ing,” he added.

Von Au­lock noted that Tsogo was see­ing “rel­a­tively good” for­ward book­ings for the hol­i­day sea­son and he be­lieved cor­po­rate travel would be good for the first quar­ter of next year.

“We are cau­tiously op­ti­mistic for the short-term into next year as it still is a tough op­er­at­ing en­vi­ron­ment. How­ever, there is enor­mous longer-term up­side po­ten­tial for tourism and busi­ness tourism growth in the coun­try,” he said.

Tsogo Sun Ho­tels re­ported head­line earn­ings per share of 5.2 cents for the half-year, which marks the group’s first set of fi­nan­cial re­sults fol­low­ing its un­bundling from the big­ger Tsogo Sun Gam­ing group in June.

The ho­tel group recorded R2.1 bil­lion in in­come for the six months to Septem­ber 2019, while op­er­at­ing profit came to R320 mil­lion. It noted that profit at­trib­ut­able to equity hold­ers of the com­pany came in at R54 mil­lion. In line with its pre-list­ing state­ment in June, Tsogo Sun Ho­tels did not de­clare in­terim cash div­i­dends for the pe­riod. The group planned to ap­ply cash re­sources gen­er­ated dur­ing its ini­tial 15 months post the list­ing to­wards set­tling its off­shore divi­sion’s dol­lar-de­nom­i­nated in­ter­est-bear­ing debt.

Von Au­lock said this debt was $85 mil­lion (R1.2 bil­lion) and was re­lated to the group’s off­shore ho­tel ac­qui­si­tions in the UK, Nige­ria and Mozam­bique. “When Tsogo Sun Ho­tels was part of the big­ger Tsogo Sun Gam­ing group, this debt was man­age­able. How­ever, with Tsogo Sun Ho­tels be­ing a sep­a­rately listed group now, we are not com­fort­able with the level of debt.”

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