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Tsogo continues investment drive in slow-growth environment

Tsogo Sun CEO Marcel von Aulock

Photo by Duane Daws

Photo by Duane Daws

12th November 2015

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

  

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Hotel, gaming and entertainment group Tsogo Sun has spent in excess of R12-billion over the past six years in acquisitions, expansions, new builds and general capital expenditure (capex) across its portfolio, despite being in a “slow growth” phase.

Unveiling the R200-million refurbishment of the Sandton Sun hotel, in the heart of Sandton, on Thursday, group CEO Marcel von Aulock said major investments would continue in spite of growth falling below that of South Africa’s gross domestic product.

Occupancy and rates were under pressure, as corporate demand slowed and government austerity hit volumes amid persistent pressure on the consumer on the back of a weak macroeconomic environment.

The group’s earnings a share for the six months to September 30, were expected to be between 26% and 30% higher than the 67.1c posted in the comparative period in the prior year, while headline earnings a share were expected to increase 25% to 29% on the 67.5c recorded in the corresponding period last year.

“Our story is a story of slow growth as opposed to a decline,” Von Aulock said, stating that economic growth would be the single biggest opportunity for the company.

Hotels only accounted for 25% of Tsogo’s operations, but it claimed 30% of the total formal hotel market share in South Africa.

While the group was now just “bumbling” along until the economy recovered, renovations and new constructions would continue based on the group’s firm strategy of building the business through investment.

Over the past six years, some R10-billion-plus was spent in South Africa, R200-million in Europe and in excess of R1-billion in the rest of Africa to acquire new assets, expand and revamp existing assets, embark on new builds and general capex.

The past three years alone saw between 15 and 20 hotels renovated, including the R318-million expansion of Southern Sun Maputo.

Tsogo also continued the major refurbishments of the Sun 1 portfolio, which would be completed next year, along with the recently acquired Garden Court Polokwane and the Sabi River Sun, besides others.

Edited by Creamer Media Reporter

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