Southern Sun bumped up its overall occupancy for September to 68.2% as demand from the local and international corporate and leisure travel sector increased, propped up by softening inflation and falling interest rates, as well as South Africa’s simplification of requirements for visitors from China and India.
The JSE-listed hotels, gaming and leisure group views the improving hotel occupancy as encouraging and a reflection of “increasing demand by both international and domestic corporate group and transient as well as leisure” travellers.
“The softening of inflation as well as further interest rate cuts along with the suspension of load shedding are tailwinds that signal stronger economic growth in South Africa in the medium term,” said the company.
This came as Southern Sun yesterday reported a jump in income and earnings for the half-year period to the end of September. After its portfolio occupancy level rose by 2.6 percentage points to 58.9% for the interim period to end September, adjusted headline earnings for the company for the period rose 31% to R334 million.
The company raked in income of R2.9 billion compared to R2.7bn a year earlier, with earnings before interest, tax, depreciation and amortisation and restructuring (EBITDAR) going up 10% to R822m.
The Department of Home Affairs has simplified requirements for port of entry visas and visa regulations for China and India, indicating the government’s “commitment to promoting tourism” in South Africa. This is expected to benefit Southern Sun’s portfolio in all regions.
It said the financial performance for the period under review “reflect the impact of the decisions taken by the group, amid and during its recovery” from the COVID-19 pandemic.
Market watcher, Dave Hazelwood, said on X that “due to hotels’ operational gearing, just a small increase in revenue can lead to major jump” in profits.
The 6% income growth for Southern Sun had resulted in a 35% growth in HEPS, although “when times are tough, the reverse” is also true.
Southern Sun said its restructuring post the pandemic had helped the company to deliver the 10% growth in EBITDAR. Debt levels in the company stood at R995m.
“The reduction in debt levels and related finance cost savings, together with the share buyback implemented during the 2024 financial year has resulted in a 39% growth in adjusted headline earnings per share,” said Southern Sun.
In terms of regional performance, revenue from the company’s Western Cape had grown by 14% to R861m against R757m in prior year same period while EBITDAR increased by 25% to R277m. the Western Cape region contributed 34% to overall group EBITDAR for the half year period under review.
“Cape Town has benefited from foreign inbound travel and large-scale conferences and events across all segments, which boosts demand for accommodation and drives both volume and rate growth in the region,” said the company.
However, revenue and EBITDAR contributions from KwaZulu-Natal amounted to R490m and R120m, a decline of 8% and 27% respectively.
The group’s hotels are located on the Durban beachfront and are geared towards groups and transient business from corporates and government, with demand from these segments slowing down in the lead-up to, and immediately post the May 29 elections.
BUSINESS REPORT