Hotel occupancy rates remain incredibly low

 ·24 Nov 2021

Tsogo Sun Hotels says that prospects for the hospitality industry are slowly improving, but lockdown, July riots, and the ongoing Covid-19 pandemic have kept the sector under pressure – and recovery depends heavily on vaccination.

The group reported its interim results for the six months ended September 2021, recording a loss of R162 million, down from a prior loss of R176 million over the same period in 2020.

Income was up significantly at R959 million (H1 2020: R335 million), and earnings before interest, tax, depreciation, and amortisation were at R145 million, from a loss of R206 million before.

Tsogo Sun operates hotel chains including Southern Sun, Garden Court and budget chain Sun1. It also owns the popular Mount Grace Hotel and Spa, the Sandton Sun.

While there is a notable upward trend in trading, occupancy rates at hotels remain incredibly low at just 21.9% (H1 2020: 5.2%).

“The KZN region and specifically Durban had been the group’s best-performing region throughout the pandemic and the impact of the violence on the confidence of travellers was pronounced,” the hotel group said.

Having achieved its highest level of system-wide room sales since the beginning of the pandemic at 117,952 rooms in April 2021, the group’s room sales dropped to 55,280 in July 2021.

“This negative impact on sentiment and further delays and disruption to the vaccination rollout has meant that the recovery in the corporate and international travel markets has been further delayed with many corporates only expected to return to their offices in January 2022.”

The group said it is acutely aware that it is still trading at only 50% of system-wide rooms sold prior to Covid-19 and at occupancies far below the group’s long-term average.

“It is clear that Covid-19 will remain with us for the foreseeable future and the only way to return to some form of normality is to ensure that the majority of the South African adult population is vaccinated.”

For the hospitality industry in particular, ease and affordability of travel are of paramount importance as is the safety and confidence of tourists once they reach South Africa’s shores and stay in local hotels.

“Unnecessary regulation and limitations on travel is an impediment to our recovery and our view is that provided an adult is fully vaccinated, they should be allowed to travel internationally.

“The group continues to encourage our employees to get vaccinated and we maintain the highest levels of Covid-19 health protocols at all of our properties as evidenced by the successful sporting events we have hosted during the pandemic.”

The group did not declare an interim dividend, choosing to preserve cash.

Until the international and corporate markets return and demand levels normalise, the group said it will continue to focus on cash preservation and liquidity to continue trading through the pandemic and to protect the livelihoods of its stakeholders.

On the assumption that the current level 1 lockdown restrictions continue for the remainder of the financial year and trading levels continue to improve in line with the trend over the past two months, there should be increasing demand for conferences, business and leisure travel with international and corporate take up during the 2022 calendar year, it said.

“Should there be signs of an upturn in demand the group has the ability to reactivate the remainder of closed hotels – which now make up only 19% of total room stock – in order to capture the available business.

“There is still a risk that a fourth wave of infections as severe as the third could occur, however, the group’s experience and learning throughout the pandemic means that management can quickly respond by deactivating hotels and reducing rostered staff to reduce cash burn to a minimum.”

Read: Hotels in South Africa have changed fundamentally – here’s what you can expect when going on holiday in December     

Show comments
Subscribe to our daily newsletter