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TSOGO SUN TO FOCUS ON ORGANIC GROWTH

Listed hotel and casino operator Tsogo Sun expects increased revenue to come from continued economic recovery and the organic growth of the business, according to CEO Marcel von Aulock.

Mr von Aulock said in an interview last week that while the hospitality industry was in a healthier state, it was ” by no means back to the boom times”.

The hospitality industry has been hurt by an oversupply of rooms and a decline in demand due to the recession, though analysts believe a gradual recovery is on the cards as demand increases.

Mr von Aulock said Tsogo Sun had seen a continued improvement in trading conditions.

In the group’s half-year results released in November, the company said there had been an uptick in occupancies.

The group reported an increase in earnings for the six months ended September, driven by solid growth in its gaming and hotel divisions’ revenue. Diluted headline earnings per share rose 40% to 69.9c over the period.

While Tsogo Sun was targeting opportunities in the rest of Africa, Mr von Aulock said there were still opportunities for growth in SA — in the form of acquisitions and new developments. But the group’s single biggest opportunity was growth from its existing portfolio.

“Everything we’ve done in the past few years has been bulking up our South African operation — we’ve acquired hotels that have been distressed, we’ve brought the Gold Reef Resorts group into the organisation.

“So our view is that if you get an economic recovery, which we think should happen, the single biggest growth opportunity we’ve got is organic — from the asset base that we’ve built up,” he said.

Hotels and gaming analyst at Avior Research, De Wet Schutte, said on Friday that Tsogo Sun was well placed to capitalise on improving economic conditions. “The nature of their business is that it’s a fixed-cost business, and as a result of that, there’s a lot of leverage to growing revenues,” he said, adding that a continued recovery would be led by the hospitality segment.

“The hotel industry in SA is on a normalisation path — there’s not a lot of rooms being added currently, and demand-supply dynamics are helping the industry to normalise,” Mr Schutte said.

On the other hand, last year was “a mixed year” for the gaming industry, and the Western Cape had shown a poor December.

The “normalisation process” seen in the hospitality industry was also evident with other hotel groups such as City Lodge, although it was not yet evident in the casino market, he said.

Source: BDLive – Nick Hedley