Financial Gazette (Harare)
Munyaradzi Mugowo
2 July 2009
Harare — AFRICAN Sun Limited, Zimbabwe's largest hotelier, reported that occupancy rates for its city hotels in Zimbabwe surged to 1999 levels in the last two months as international visits to the country on investment-related business and humanitarian aid missions increased in the new political dispensation.
The visits, which started picking up in February after the inauguration of the inclusive government, rose in the second quarter and drove occupancy rates from under 40 percent in the last five years to nearly 70 percent by the end of the first half of 2009.
Although tourist arrivals at resorts across the country also recovered during the period, occupancy rates for its hotels were below break-even levels of 25-27 percent by March.
The rates averaged 11 percent for the Victoria Falls Hotel; nine percent for the Kingdom Hotel and six percent for the Elephant Hills Resort and Conference Centre, all in Victoria Falls, while the Caribbea Bay Resort in Kariba recorded an occupancy rate of nine percent by the end of the same month.
Forward bookings for the third quarter, however, show some significant recovery for all the resorts except for Elephant Hills, which has just moved one percentage point up.
"We are now following a city and resort expansion model," Nigel Mangwiro, the group finance director said. "This is because city properties are less affected by exogenous factors compared to resorts although resorts give us the cream."
The hotels group, which rebranded from Zimsun to African Sun with a resort-heavy expansion model in 2002, has inverted the product mix in favour of city properties recently and now targets a reduction in the ratio of resorts from 44 percent in 2002 to 40 percent and an increase in city hotels from 32 percent to 45 percent.
Going forward, the proportion of lodges to total group properties will also be reduced from 25 percent to just 10 percent.
Financial results
Pre-tax profit for the half-year ended March 31 2009 increased to US$0,54 million or US$0,8 per share, which could not be compared with that of the year before as a result of technical challenges related to a change-over in the reporting currency. Hotels were granted the right to charge in United States dollars on October 12 last year.
Revenue surged to US$13,6 million, driven by Holiday Inn Accra Airport in Ghana, which contributed 27 percent to group turnover as foreign arrivals increased due to new investment opportunities created by a recent discovery of oil in the country.
By regional comparison, Nigeria and Zimbabwe operations weighed down the group average as the average room and occupancy rates for the two countries were below regional benchmarks.
Average room rates for Zimbabwe hotels ranged from US$50-65 against a group average of US$96.
During the half-year financial period, the average occupancy rate for the group was 29 percent against a benchmark of 70 percent surpassed only by Ghana, the hotelier's most dynamic market to date.
Nigeria anchored the list at 20 percent largely because it came on stream in December, mid-way through the financial period, followed by Zimbabwe at 27 percent and South Africa at 40 percent.
In the outlook period, occupancy rates in South Africa and Zimbabwe are expected to hit levels above 40 percent largely due to a projected upsurge in World Cup and business-related international arrivals.
During the review period, international arrivals to South Africa had slumped to one percent from nine percent in the comparable period the previous year due to the global recession, which triggered significant cuts in discretionary spending on tourism and holiday activities.
According to Mangwiro, for every percentage increase in room occupancy after the break-even level, about US$1 million is gained.
Projects in pipeline
Shingi Munyeza, the group chief executive officer, said African Sun will capitalise on the huge demand-supply gap for hotel stock in Africa and expand across sub-Saharan Africa through both management contract investments and leases.
Management fees are estimated to account for a greater proportion of revenue in West Africa in the outlook period.
The company plans to add 577 rooms to the 2 500 rooms currently under the group's management out of some 7 011 pipeline projects within the next 12 months and achieve a room target of 8 500 by 2012.
The hotels lined up for commissioning during the next 12 moths include Holiday Inn Kano in Nigeria with 200 rooms; Holiday Inn Arusha in Tanzania, with 199 rooms; Holiday Inn Gaborone, Botswana, with 164 rooms and Royal Chundu Lodge Zambia with 14 rooms.
The global financial crisis has, however, delayed some of the projects after three investors cancelled lending arrangements in January of US$60 million needed to complete the projects, forcing the hotelier to negotiate new financing deals.
"We are experiencing delays in a few hotels, particularly in Nigeria, which have had to delay opening dates because of lack of funding."
So far Africa Sun has concluded negotiations for US$15 million with COMESA's PTA Bank to refashion its properties in Zimbabwe.
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