• African Sun shows improvement in Q3 performance after significant loss in 1H 2023
  • Q3 earnings boosted by higher average daily room rate and increased demand from MICE sector
  • Revenue grew on quarterly and year-to-date basis, with domestic business segment driving performance

Harare- After experiencing a significant loss of US$1.8 million in the first half of 2023, African Sun, the leading hotel group listed on the Victoria Falls Stock Exchange, has shown improvement in its performance during the third quarter, which covers the period from July 2023 to September 2023. However, it remains shrouded whether the Group will repair the 1HY2023’s loss in full year 2023 given the post Kingdom crisis. The latest Q3 positive performance in earnings was due to a higher average daily room (ADR) rate, driven by increased demand from the Meetings, Incentives Conferences and Events (MICE) sector, particularly due to the recent August 2023 election-related activities.

ASUN is a distinguished hospitality enterprise in Zimbabwe with its inception dating back to 1968 when it emerged as Rhodesia National Hotels (RNH). Then, it was entrusted with the responsibility of overseeing and administering hotels on behalf of the government. RNH's primary emphasis during its nascent stage was in the meticulous management of hotels situated in pivotal tourist hotspots, notably Victoria Falls and Great Zimbabwe.

Subsequently, in 1983 following the nation's attainment of independence, RNH underwent a transformative process wherein it underwent privatization and assumed the appellation of African Sun Limited. This transition into new ownership marked a pivotal juncture for the company, prompting an expansive diversification of its portfolio encompassing a broad spectrum of hospitality services. These services encompassed the establishment and stewardship of hotels, resorts, and casinos, thereby its noteworthy presence in the hospitality industry.

Currently, ASUN operates with remarkable efficacy through four distinct divisions, namely Hotels Under Management, Hotels Under Franchise, Owner-managed Hotels, and the Victoria Falls Hotel Partnership. Within its repertoire, there are esteemed hotels such as The Victoria Falls Hotel, Holiday Inn, Great Zimbabwe Hotel, which pays homage to the rich historical heritage of the region, and The Caribbea Bay Resort, an idyllic retreat nestled along the shores of a picturesque lake. ASUN’s eminence encompasses other notable establishments that which includes Hwange Safari Lodge, a haven situated at the periphery of the esteemed Hwange National Park, providing an immersive wildlife experience, Monomotapa Hotel, strategically positioned in the heart of Harare, Zimbabwe's capital city, and Troutbeck Resort.

Meanwhile, during the period in question, the average ADR rate experienced a notable enhancement of 9% from US$107 to US$117. When considering the year-to-date performance, the ADR rate demonstrated a growth of 21%. This contributed to a corresponding 21% increase in total revenue per available room (RevPAR) for the quarter, reaching US$122. It is worth noting that the occupancy rate remained unchanged at 53% when compared to the third quarter of 2023.

However, when evaluating the year-to-date basis, the occupancy rate achieved a level of 48%, aligning closely with the occupancy levels observed in the entirety of the year 2019. This development signifies a positive trend for the business, indicating a gradual recovery from the adverse impact of the COVID-19 pandemic.

With the enhanced average daily room rate and revenue per available room (RevPAR), the company experienced a growth in revenue both on a quarterly and year-to-date basis. During the quarter under review, the Group generated a revenue of US$14.6 million, marking a 12% increase from the previous year's comparable quarter, which recorded a revenue of US$13 million. On a year-to-date basis, the company's revenue exhibited an advancement of 13%, reaching a total of US$36.9 million.

During the quarter under review, the domestic business segment played a significant role in generating revenue, accounting for 65% of the total revenue. This represents a decrease compared to the third quarter of 2022, where domestic business contributed to 77% of the revenue. Conversely, the international business segment contributed 35% of the revenue for the quarter, reflecting an increase from the 23% observed in the third quarter of 2022.

Within the domestic business segment, 55% of the revenue was generated in US dollars (USD), while the remaining 45% was generated in Zimbabwean dollars (ZWL). When considering the overall revenue composition, a substantial portion of 71% was earned in USD, indicative of a growing reliance on USD as the preferred currency within the underlying economy.

On a year-to-date basis, the Group's revenue breakdown reveals that 65% of the revenue was earned in USD, emphasizing the continued prevalence of USD transactions within the business. The robust performance of the domestic business segment, coupled with a gradual recovery in international arrivals, played instrumental roles in driving the improved performance of the Group during the period under review.

In light of that year-to-date occupancy has returned to levels seen before the pandemic, this indicates an increase in the number of arrivals, leading to a surge in demand for rooms. The United Nations World Tourism Organization predicts that international tourist arrivals will reach up to 95% of pre-pandemic levels this year, necessitating improved and expanded accommodations.

Prior to the pandemic, ASUN had the capacity to accommodate a sudden influx of tourists and visitors through the 294-room Kingdom Hotel. However, due to a dispute with the owner, ASUN relinquished ownership of the hotel in February of this year. Consequently, as demand continues to rise, the hotelier will be unable to meet the shortfall of 294 rooms.

On January 5, the Kingdom hotel, which had been operating in the resort town of Victoria Falls for 23 years, ceased its operations. The closure was a result of a lease dispute between ASUN the occupant of the hotel since 1997, and the property owners, First Capital Bank (FCB).  

Amidst the lease renewal negotiations that took place last year, FCB, the proprietors of the property, put forth a proposition for a shorter two-year lease agreement pertaining to the 294-room establishment. Conversely, ASUN advocated for a 10-year extension, citing the necessity to recuperate its investment in the hotel. ASUN contended that a longer lease duration would allow ample time to regain the substantial financial resources it had allocated to the property. However, owing to the impasse regarding the lease terms and the accompanying stipulations, ASUN and FCB were unable to reach a mutually agreeable settlement. This ultimately resulted in the cessation of operations at the Kingdom Hotel, as no agreement could be reached between the two parties.

ASUN is presently involved in active deliberations with local financial institutions in order to secure standby financing facilities. These funds would be allocated towards ongoing and forthcoming hotel refurbishment initiatives. The primary objective is to finalize the refurbishment of the remaining 46 rooms at Hwange Safari Lodge. ASUN recognises the consequences of relinquishing ownership of the Kingdom Hotel. The closure of the Kingdom Hotel has resulted in a notable absence within the company's hotel portfolio, and ASUN acknowledges the imperative to address this void. There is a pressing need to expand the available room inventory in order to address the void that has arisen.

During the third quarter, ASUN has successfully concluded the initial phase of refurbishment at Hwange Safari Lodge, amounting to a total cost of US$4.2 million. The company's attention has now shifted towards the second phase of refurbishment at Hwange Safari Lodge, which aims to revitalize the public areas before embarking on the highly anticipated refurbishment of Elephant Hills Resort and Conference Centre.

In addition to these refurbishment efforts, ASUN has expressed a keen interest in exploring property markets as a means of diversifying its revenue streams. This strategic move will play a pivotal role in mitigating a portion of the revenue loss resulting from the closure of Kingdom Hotel.

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