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Tsogo Sun Hotels warns of up to R1.8bn revenue slide

Due to the Covid-19 economic fallout.
The Southern Sun Waterfront Hotel in Cape Town. Image Supplied

Hospitality giant Tsogo Sun Hotels noted in a JSE trading update after markets closed on Tuesday that group revenue is expected to be between 81% and 87% lower for the six months ending September 30, compared with revenue of just over R2 billion in the same period last year.

In rand terms, the slide in revenue is expected to be between R1.685 billion and R1.810 billion, largely on the back of the Covid-19 lockdowns which hit the first three months (April-June) of its half-year particularly badly.

Most of its more than 110 hotels countrywide were closed during the initial ‘hard lockdown’ and Level 3 restrictions until June, when essential domestic business travel was allowed, but not inter-provincial leisure travel.

Tsogo Sun Hotels, which was unbundled from Tsogo Sun Gaming last year and is South Africa’s largest listed hotel group, is set to release its latest set of results on Friday.

In its JSE Sens trading update it also advised shareholders that:

  • Ebitdar (earnings before interest, income tax, depreciation, amortisation, property rentals, long-term incentives and exceptional items) is expected to be between 134% and 140% lower (R749 million and R783 million lower) (H1 2019: R559 million);
  • Earnings per share (EPS) is expected to be between 24 cents and 29 cents lower (H1 2019: 9.8 cents);
  • Headline earnings per share (Heps) is expected to be between 48 cents and 53 cents lower (H1 2019: 10 cents); and
  • Adjusted Heps is expected to be between 50 cents and 55 cents lower (H1 2019: 13.3 cents).

“The company is of the opinion that the publication of adjusted Heps and Ebitdar are appropriate performance measures which will assist shareholders in understanding the group’s trading results,” it noted.

“These interim results clearly reflect the devastating impact that Covid-19 and the accompanying lockdown regulations have had on the hospitality industry in general and our group in particular,” Tsogo Sun Hotels said.

“With effect from March 27, 2020, as part of the nationwide lockdown, the group’s entire portfolio in South Africa, Africa and the Seychelles was deactivated with the exception of those hotels designated as quarantine facilities or as accommodation for essential service providers and persons awaiting repatriation,” it added.

The group said that it is encouraged by the recent move to Level 1 of the national lockdown, which has resulted in 68% of the hotels in its portfolio now being in operation. However, it pointed out that the recovery of the hospitality industry is expected to be slow.

It noted that uncertainties around the health of travellers, and the negative economic impact on government, corporates and individuals, would lead to reduced spend on hotel accommodation and conferences.

Tourism bodies say ‘red list’ must be scrapped
Historic Edward and Mount Grace hotels to reopen under Tsogo Sun

“The current regulations on international inbound travel are restrictive, with many of the group’s key source markets, including Germany, the UK, France and the US, prohibited from travelling to South Africa,” it said.

“This has resulted in the cancellation of both Africa Oil and Mining Indaba scheduled for the first quarter of 2021, events which have historically benefited the group’s Cape Town hotels. Without international travel, the Cape region is expected to experience a slow recovery,” Tsogo Sun noted.

“Many corporates have implemented travel restrictions and in order to limit social interaction, are likely to keep offices closed until January 2021,” it said.

“Together with government limiting travel and conferencing, the group will largely be reliant on the domestic leisure and sport segments over the coming months. Demand from these segments is expected to contribute to the group’s coastal and outlying properties, however many of the group’s larger Gauteng-based hotels catering to corporate and government groups and conferencing business, are expected to remain closed until the first quarter of 2021,” it added.

Meanwhile, gaming and hotel group Sun International released a voluntary business update on the JSE on Tuesday, highlighting that its casinos are recovering well despite Covid-19 social distancing capacity restrictions. However, hotel revenues are yet to recover.

“All the company’s South African operations have reopened, with Sun City having recommenced trading in September once the restrictions on inter-provincial travel were lifted and the Maslow Sandton and Table Bay hotels having resumed operating in October and November, respectively,” it said.

Read: Sun International’s closed Carousel casino property up for sale

“The effect of Covid-19 continues to impact trading. However, despite the extensive restrictions and significantly reduced capacity, South African revenue has shown a strong recovery, following the lifting of the lockdown,” the group added.

Sun International noted that income at its South African casinos in October had improved to 76% of that achieved in October 2019.

This is compared with revenues for its recent July-September quarter being around 52% of what it achieved in the same period last year.

Hotel room revenues have also improved, but at a much slower rate, as its hotels only started reopening as of August. Hotel income for October stood at 39% of that achieved in the same month last year; however, this was up from just 23% for September.

The Cascades Hotel at Sun City is set to reopen only at the end of November due to a soft refurbishment current underway according to the group’s COO for hospitality, Graham Wood.

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The article says — “In rand terms, the slide in revenue is expected to be between R1.685 million and R1.810 million”

Surely that should be billion?

Bye from Abu Dhabi.

If you’re in a hole, any income is better than no income. Reduce prices for locals, please.

End of comments.





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