Africa Sun to cut ties with two hotels

operating agreements with both The Grace Hotel and The Lakes Hotel.

The market received the news with mixed reactions. If this was a good idea by the hotel group, Dr Munyeza put it well that there is no need of keeping leases of underperforming hotels.
Even locally, the group said they would also not continue to hold leases of underperforming hotels after their landlord Dawn Properties announced that they would offer leases to other hotel operators.
Dr Munyeza said this decision should, however, not erode the value of the company.

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However, analysts said the decision by African Sun to pull out of South Africa was noble, as part of the vision of the group to now operate hotels with a positive cash impact to the bottom line in the short to medium term.

Dr Munyeza said their target would be to acquire management contracts in the South African market, particularly in the business hotels.
This sounds like a better strategy given the poor performance by the South African market in the last financial year.
He also said that as they continue to pursue their expansion, emphasis on mega cities as highlighted in their business strategy with focus on RevPar growth and rooms growth would remain pivotal.

Dr Munyeza said their exit of South Africa would see the group swinging back to profitability in the current financial year.
What African Sun has done is not new in the market as most companies listed on the Zimbabwe Stock Exchange have or are shedding off loss-making and non-performing entities.
Listed companies acquired non-core business during the hyperinflationary period to hedge for value and they are now proving to be costly for companies after the economic stability ushered by the

introduction of multiple currencies in 2009.
This has resulted in almost all companies restructuring their operations sticking to core business.

Dr Munyeza said the major reason for pulling out of South Africa was due to the reduction in overseas visitors and domestic travellers coupled with the continued pressure of the global recession and rapid escalating running costs in South Africa made the business unsustainable.

Johannesburg saw an additional 4 100 rooms in the Sandton and Rosebank area which were added to the market in preparation for the Fifa 2010 World Cup.
Post-World Cup figures have shown a drop in overseas visitors and domestic travellers and in particular a shrinkage in corporate business that has migrated away from five star accommodation.

A steadily declining rate has resulted in revenue per average room declining by 30 percent in the six months ended March 2011.

Hotel business in South Africa has remained depressed and with the strengthening of the rand against major currencies as well as projections for it to remain stable over the two years removes the positioning of the country as a value for money destination.
Dr Munyeza, however, said the group central reservations and marketing will remain in Johannesburg as it is key in sub-Saharan Africa and remains a vital business link for the group.

Going forward, the hotel group will be adding 231 rooms to its portfolio by December 2011. These will be through the addition of another Holiday Inn with 153 rooms in Gaborone and a management contract under the Best Western brand in Benin City, Nigeria, comprising 80 rooms.
New signings for the group include a three-star, 201 roomed business hotel, Amber Express in Accra, Ghana, scheduled for completion within the next 24 months.
African Sun also said that they would continue to pursue opportunities in East and West Africa.