Harare — Zimbabwe's Sun Group of Hotels (ZimSun) has begun construction on a US$550 000 hotel and cabanas in the popular beach resort of Vilancoulous in Mozambique.

The hotel is the first project in ZimSun's planned regional expansion, which is designed to diversify the company's holdings and protect it from political turmoil and the collapse of the tourism sector in Zimbabwe.

"The first phase consists of a 30 bed hotel, with 32 cabanas built in the second phase. It's modelled as a time-share resort, and is the first of our regional expansion projects," ZimSun managing director John Smith.

"We're studying a number of other potential projects in neighbouring countries, and are confident of announcing additional acquisitions soon."

Smith conceded that ZimSun had suffered substantial losses as a result of political violence in Zimbabwe, but said the security situation was expected to stabilise after scheduled presidential elections in March.

"We are confident the economy will recover after the elections," he said.

Foreign tourist arrivals dropped 60% in Zimbabwe in 2001, with tourism revenue plummeting from an estimated US$6 billion in 1999 to just US$1 billion in 2001.

ZimSun is amongst Zimbabwe's top three hotel chains, managing the Kingdom Hotel in Victoria Falls, the Elephant Hills Hotel, and both the Harare and Bulawayo Holiday Inn hotels.