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African Sun to complete US$4,2m lodge refurbishment despite inflation

Despite facing a challenging operating environment, African Sun Group anticipates completing the US$4,2 million refurbishment of 100 rooms at Hwange Safari Lodge during the second quarter of 2023.

In its trading update for the first quarter ended 31 March 2023, the group noted that the season was characterised by macro-economic challenges ranging from inflationary pressures to foreign exchange rate volatility.

“The Zimbabwe dollar (“ZWL) liquidity crunch persisted during the quarter under review, which combined with other factors led to the economy being substantially United States of America dollar US$) driven.

“The Reserve Bank of Zimbabwe in its first monetary policy statement of 2023 advised that approximately 75% of transactions in the local economy are now being conducted in US$.

“As a result, the Group witnessed its revenue and expenditure notably sewing toward USS, with monthly averages of 60% and 40% of the Group’s revenue being earned in US$ and ZWL respectively.

“Based on the fact that the Group now primarily generates its revenues and incurs its costs substantially in US$, the Group changed its financial reporting functional currency from ZWL to US$ effective 1 January 2021,” read a statement dated 19 May 2023, by Venon Musimbe, the company’s secretary and governance executive.

The group further said that foreign currency liquidation exemption which the tourism sector enjoyed since February 2022 expired during the quarter.

It added that “the disparity between the parallel market exchange rate and the official exchange rate continues to exert pressure on operating margins as there is a notable mismatch between the exchange rate used by suppliers and the exchange rate used to liquidate foreign currency into ZWL and required for pricing of goods and services in ZWL.

“On a positive note, subsequent to the end of the quarter under review, the RBZ announced that all domestic foreign currency proceeds shall be exempt from liquidation for all sectors while export proceeds will continue to be subject to a 25% liquidation.”

The company said revenue at US$7.9 million for the first quarter ended 31 March 2023 was down 2 percentage points compared to the same period last year.

The group established that the decline was largely due to depressed business volumes with occupancy at 39% being 3 percentage points lower than the comparable period.

“Both of our hotel operating segments experienced declines in occupancy levels with City Hostels posting a combined 514 (2022, 56, whilst Resort Hotels achieved 23% (2022: 26).

“Despite the waning impact of Cavid 19 and the concomitant announcement by the World Health Organisation that it was no longer a public health emergency of international concern, foreign business remains depressed at 20% whilst domestic guests anchors business performance with a contribution of 80%,” read the statement.

The company said, following the removal of the Covid-19 restrictions, it anticipated improvements in occupancies at many of its hotels driven largely by election business and remaining “pent up” demand arising from overdue events and conferences.

“In addition, we expect to see continued improvements to business and corporate transient demand as businesses continue to make progress toward normal travel patterns including a perceptible acceleration in international travel, particularly for our Victoria Falls hotels

“In line with our vision to be the leading provider in hospitality and leisure operations in Africa by providing outstanding hospitality experiences, we remain focused on our strategy to upscale the state of our properties through our ongoing various refurbishment programmes.

“The Group anticipates completing the US$4.2 million Hwange Safari Lodge 100 rooms refurbishment during the second quarter of the current year.

“Going forward, the Group will continue to monitor and respond to the unique challenges and opportunities presented by the current operating environment.”