Southern Sun is counting on the crucial festive season to further boost its occupancies as leisure travel in particular gains momentum.
But the hotel group said on Thursday that the rolling power blackouts posed a potential threat to its operating expenses — a concern echoed by many businesses as power utility Eskom battles to keep the lights on because of its ageing and poorly maintained coal-fired power stations.
Southern Sun, formerly Tsogo Sun Hotels, spent R13m on diesel to keep the lights on in the six months to end-September, up from just R1m in the prior comparable period.
The record power cuts come as consumers’ discretionary spending is being eroded by rising inflation and interest rates.
“We will continue to manage cash flow and liquidity closely as the country faces rising food and fuel prices and increasing interest rates, which not only affects the group, but also our guests,” CEO Marcel von Aulock said in a results statement.
“With travel budgets reduced to save costs and individuals preserving disposable income in a rising interest rate environment, the increasing cost of transport due to rising fuel prices is a travel deterrent, particularly for international and corporate travel, which are the two segments missing from the group’s recovery to pre-Covid-19 levels.”
Southern Sun and the broader hospitality industry are on still on the mend after two years of the pandemic during which tourism numbers dwindled, costing the players millions in lost revenue.
However, occupancies have gradually been picking up in line with increased Covid-19 coverage and heard immunity, though they are yet to reach pre-pandemic levels.
The group’s occupancies doubled to 46% from low base of 21% in the same period a year ago, which heavily affected by Delta variant as well the civil unrest in parts of KwaZulu-Natal and Gauteng. Its adjusted headline profit from continuing operations was R17m from a loss of 161m.
However, Southern Sun said occupancy levels across its owned hotel portfolio reached 59% in October for the first since the start of the pandemic.
Sale bookings for Cape Town in October exceeded 2019 levels, which the company attributed to the cost of flights — guests are booking early to secure cheaper flight prices.
Sale bookings for KwaZulu-Natal, however, were below 2019 levels and indicated that there was still a trend towards shorter lead-time bookings, particularly where holiday destinations are closer and travel costs are affordable, the company said. Both Cape Town and Durban in KwaZulu-Natal are traditionally prime holiday destinations during the festive period.
Southern Sun runs more than 100 hotels in Africa and the Middle East. Offerings range from hotels catering to lower-income clients to the upper end, including the Mount Grace Hotel & Spa in Magaliesberg and 54 on Bath in Rosebank, Johannesburg.
When Covid-19 hit, Tsogo closed many of its hotels — except those offering rooms for people in quarantine — operating a skeleton staff and deferring pay increases and bonuses.
The share price was up 3% to R4.70 on the JSE in early afternoon trade.
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