Hospitality group Southern Sun says national budget delays following disputes between key parties in the government of national unity (GNU) pared demand from the government, in the first quarter of this year.
The company, which reported a 9% increase to R6.6bn in income for the year ended March, said while books improved following last year’s election, budget delays hurt the industry as the government held back spending.
“Within SA, travel and accommodation demand from the corporate, government and leisure sectors slowed in the lead-up to the national elections in May 2024, [and] while corporate and leisure bookings rebounded after the elections, government demand outside of G20-related events has been slower to recover due to the uncertainty around the approval of the national budget,” Southern Sun said.
The group reported higher annual earnings driven by robust trading in the Western Cape and notable growth in Gauteng.
The group, valued at R11.8bn on the JSE, said on Wednesday that a 12% increase in operating profits together with finance cost savings resulted in 30% growth in adjusted headline earnings to R1bn for the year to end-March.
Headline earnings per share (HEPS) were up 33% at 74.8c. A dividend of 25c was declared.
Total income has increased by 9% to R6.6bn and comprises rooms revenue growth of 10% to R4.4bn, supported by average room rate (ARR) growth of 5% and an increase in occupancy of 2.2 percentage points to 60.8%.
Food and beverage revenue was up 6% to R1.6bn in line with occupancy growth.
The group said the successful refurbishments of Southern Sun Cullinan and Sandton Towers, which reopened in July and December 2024, respectively, and upgrades to the restaurant and rooms at Southern Sun Rosebank and Southern Sun Sandton, contributed to increased occupancy and rate growth in Cape Town and Gauteng during the latter half of the financial year.
However, the group said KwaZulu-Natal and Mozambique hampered performance.
Reduced event activity at the Durban International Convention Centre negatively affected the group’s hotels in Durban, though trading in Umhlanga has remained stable.
In Mozambique, political unrest and rioting in Maputo since November 2024 significantly affected demand at the Southern Sun and StayEasy hotels.
Though the situation has stabilised after the inauguration of the president in January and supported by the fact that the hotels are in a secure zone surrounded by embassies and security forces, occupancy levels continue to lag.
The group’s operating costs were tightly controlled and the suspension of load-shedding resulted savings of R36m on diesel, offset by a R37m increase in electricity costs largely due to tariff increases.
The group said refurbishment plans scheduled for the 2026 financial year were progressing for several hotels, with mock-up rooms in progress. Depending on trading levels or specific regional market conditions, any of these refurbishment projects could be delayed to preserve cash.
“However, we believe that it is important to proceed, particularly in markets where we see signs of increasing demand, to capitalise on potential economic growth,” it said.
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