Southern Sun Hotels Thrive with Boost from Netball World Cup and BRICS Summit

Hotel operator Southern Sun has reported a significant increase in group occupancies, attributing the rise to a series of major events in the Western Cape, notably the recent Netball World Cup. According to the company’s update during its Annual General Meeting, group occupancies for the five months up to end-August increased by approximately 11 percentage points, reaching just over 55%. Moreover, Southern Sun foresees potential improvements of over a third in revenue for the first half of the year and nearly three-quarters in operating profits.

Southern Sun, valued at around R7.1 billion on the JSE, manages an array of hotel brands and properties, encompassing 54 on Bath, the Sandton Convention Centre, Sandton Towers, and Beverly Hills Hotel. Despite grappling with the adverse effects of COVID-19 restrictions in the previous year, trading volumes in South Africa have shown consistent recovery. The group attributed this resurgence to a return to normalized demand from both local and international travelers, as well as a strong uptick in international conferencing and events. Currently, group occupancies stand only about 2 percentage points below pre-COVID-19 levels. Moreover, the average room rate, reflecting average charges, has surged by 26% compared to pre-COVID-19 levels. This impressive improvement is attributed to a combination of higher achieved yielding and a strategic shift in the mix of hotels, including the consolidation of previously third-party leased properties.

Notably, the Western Cape region has experienced a substantial boost in business, primarily due to hosting major events at the Cape Town International Convention Centre, such as the Netball World Cup. Likewise, in Gauteng, the Southern Sun group played host to the 15th BRICS summit in August 2023 at the Sandton Convention Centre, leading to a significant surge in demand for accommodations at the adjacent hotels. The group further highlighted that most regions witnessed a positive spike in transient demand, with a significant portion of the group’s hotels trading above pre-COVID-19 levels. However, some hotels in the Sandton and Rosebank areas, as well as the budget-friendly offering Sun1, are still in the process of recovery, displaying encouraging signs of progress as the year unfolds.

In financial terms, Southern Sun anticipates a decrease in headline earnings per share within the range of 23% to 36% for the first half of the year. Additionally, the company received a boost in September 2022, with R399 million from Tsogo Sun Gaming, stemming from the implementation of its separation agreement. This sum is tied to the management of various hotels for Tsogo, along with licensing.

While Southern Sun is encouraged by the positive results and foresees a robust summer tourism season, the company remains cautious in light of persistent challenges, including load shedding, fiscal constraints on the government, and the overall fragile state of the South African economy. As is often the case, the majority of profits are typically earned in the second half of the year.

Despite the status quo in the stock market, Southern Sun’s shares have witnessed a commendable increase of over a third over the past year.