Southern Sun said yesterday that corporate and leisure travel demand has rebounded post the May 29 election and subsequent consummation of the government of national unity (GNU), although government activity was still lagging behind.
Formerly Tsogo Hotels, Southern Sun has previously said leisure travellers were more resilient to economic headwinds such as high inflation and elevated interest rates. However, like most South African businesses, the company was somewhat affected by the uncertainty that dogged the pre-election season.
“There was a slow-down in travel and accommodation demand from the corporate, government and leisure segments in the lead up to the national elections in May 2024,” said Southern Sun in a trading update yesterday.
Although the demand for corporate and leisure travel had returned after the elections, the government segment “has been slower” to normalise. The company, however, anticipates recovery from the category to entrench in the second half year period to March 2025.
It is also banking on recent announcements by the Department of Home Affairs regarding simplification of South Africa’s work and remote working visa processes. The company has described this move as “encouraging development” for the South African tourism industry.
In the five months to the end of August, trading volumes in Southern Sun “improved marginally” after group occupancy levels at 57.1% inched up by 1.2 percentage points compared to 55.9% achieved for the prior year contrasting period.
The group’s average room rate also increased by a marginal 1.7% over the same period.
Southern Sun has attributed this less robust performance to which it has described as “subdued” to the prior year’s substantial demand for accommodation services due to South Africa’s hosting of the 15th BRICS Summit at the Sandton Convention Centre during August 2023.
Moreover, the closure of Southern Sun’s The Cullinan for June 2024 and the Sandton Towers from 26 April 2024 to end August had reduced the company’s available room stock, negatively impacting occupancy and rate as well as revenues for the period.
The closure of the two properties was however “necessary to complete major refurbishments that will relaunch these flagship properties as premium hotels” in the respective markets.
“Despite the modest revenue growth in the first half, which is traditionally the Group’s quieter period, savings in finance costs as a consequence of the significant reduction in debt levels together with the reduced number of shares in issue following the share buyback implemented in the second half of the 2024 financial year, has meant that earnings per share, headline earnings per share and adjusted headline earnings per share for the six months ended 30 September 2024 are all expected to be at least 20% higher than the prior comparative period,” said the company.
For its full year to the end of March, Southern Sun reported an 88% jump in full-year profit after factoring in cost-savings on the back of stronger business travel and tourism revenues.
Adjusted headline earnings per share (AHEPS) for the period grew to 56.4 cents compared to 30 cents a share in the previous year. This was after group revenues firmed up by 19% to R6 billion, with Cape Town driving up income.
“Cape Town has benefited from foreign inbound travel and large-scale conferences and events across all segments, which boosts demand for accommodation and drives both volume and rate growth in the region,” said Southern Sun in May.
BUSINESS REPORT