hotel occupancy rates had recovered but average room rates had not, and the chances of correcting this in the short term were gloomy, Tsogo Sun chief executive Marcel Von Aulock said yesterday.
As a result, the gambling and hotel group remained cautious in its outlook.
“The best situation is when both your occupancy and room rates are recovering but that is not the case,” Von Aulock said.
“The market is not booming yet and chances are we are going to be in that sort of environment for a while.”
Releasing its financial results for the year to March, Tsogo Sun said that in its South African hotels, average room rates remained constrained at R814, which was a 5 percent increase from a year earlier.
“It’s not where we’d like it to be but if you get a reasonable single-digit increase, you are happy with that,” he said.
Its rival, Sun International, reported a 6 percent increase in its average daily rate to R1 256 but its hotel occupancy rate dropped 2 percentage points to 61.3 percent while Tsogo Sun increased its occupancy rate to 64.1 percent from 60.9 percent in March last year.
Tsogo Sun posted a 24 percent increase in adjusted earnings to R1.6 billion.
The hotel market in general might not be recovering well, but Von Aulock said Tsogo Sun’s environment was slightly different because it catered for high-end consumers and corporate travellers.
Overall revenue for the company’s South African hotel division increased 19 percent to R1.9bn and earnings before interest, tax, depreciation, and amortisation (Ebitda) improved 20 percent to R615 million. This was after its hotels achieved 11 percent growth in revenue per available room.
Tsogo Sun had had better increases, but between 2009 and 2010 revenue per available room dropped by between 20 percent and 30 percent. As a result, Von Aulock said, it was content with the increase recorded in the year to March.
Its gambling operations recorded an 8 percent increase in revenue to R7.6bn and achieved 9 percent growth in Ebitda to R3.1bn.
The new-generation casinos of Suncoast in Durban, Silverstar and Montecasino in Johannesburg, and Emnotweni in Mpumalanga did particularly well. Von Aulock said strong urban casinos and big exposure to Durban had helped the performance of the gambling operations. “The Durban market is particularly strong,” he said.
Conditions were difficult at the Goldfields casino in Welkom in the Free State, while other gambling division operations, consisting of the Sandton Convention Centre, the StayEasy Century City hotel and head office costs, reflected a net loss of R185m, an increase of R35m from the year before.
Von Aulock said work was under way to expand most of its casino operations, across all regions. The company hoped to add two new casino operations to its portfolio.
Tsogo Sun was bidding for a new licence in Mpumalanga and was eyeing the potential to bid for the relocation of one of the smaller Western Cape casinos to the Cape Town metropole.
There were also a number of potential acquisitions, which were at different stages.
Tsogo Sun posted adjusted headline earnings a share of R1.503, 24 percent higher than a year earlier.
The group’s Ebitda of R3.9bn was 11 percent higher, pushing up the overall Ebitda margin to 39.2 percent from 38.8 percent.
It declared a final dividend of 51c a share, up 28 percent.
Its shares reached a low of R24.26 yesterday, and ended 1.48 percent weaker on the day at R24.60.
Source: Business Report – Londiwe Buthelez