Tsogo Sun Hotels Limited, one of South Africa’s largest hospitality groups, will take the unprecedented move to “deactivate” – essentially temporarily close – 36 hotel properties around the country in the wake of the worsening economic fallout from the global Covid-19 coronavirus outbreak.
It noted in a JSE Sens statement after the market closed on Friday that group forward bookings for April through June reflected “a total collapse of demand” as a result of the impact of Covid-19 and “accelerated travel bans” in SA and other several countries globally.
“President [Cyril] Ramaphosa declared a national state of disaster on Sunday 15 March 2020, which included numerous, very necessary interventions in order to try and contain the spread of Covid-19 in South Africa which the Group is fully supportive of,” Tsogo said in the Sens statement.
“Given the environment of the past few weeks we had already implemented actions in order to reduce costs and capital expenditure, and these have now been expanded to eliminate virtually all variable costs, substantially reduce the fixed cost overheads, conserve cash in order to preserve the sustainability of our business and the people whose livelihoods depend on us,” it added.
Tsogo Hotels noted that the further reduction in costs and capital expenditure would require “a reduction of excess capacity”, which would be “implemented through an orderly deactivation of a number of hotels in the key nodes where the Group has multiple properties”.
This move will see the group consolidating the available demand into the remaining operating hotels in those areas.
Tsogo Hotels, which was unbundled from Tsogo Sun Gaming last year, did not give details of the exact hotel properties that will be affect. The group has a major presence around the convention centres in Sandton and the Cape Town CBD, as well as along the Durban beachfront and within Tsogo Gaming’s Monte Casino precinct in at Fourways, Johannesburg.
“The first phase [of the deactivation] will affect up to 36 hotels, representing 7 700 rooms (or 40%) of the Group’s portfolio over the next few weeks. There are a number of consultations and planning logistics to be finalised, however we intend to still retain significant operating capacity in our key nodes for the foreseeable future given current levels of hotels,” it said.
“In areas with a single hotel such as outlying areas in South Africa and some of the other African countries or hotels where the saving through deactivation is minimal, such as in the budget market, the Group will assess demand on ongoing basis while ensuring the operating cost of these hotels are reduced to a minimum,” it noted.
“Should there be little to no demand or future regulatory impacts that result in a total restriction of travel, the hotels will be deactivated, again with the ability to reactivate the hotels on short notice.”