As I write this, I am reflecting on the mounting global economic concerns in the recent days. Of note are the United States of America’s credit rating being downgraded and the debt crisis being faced by Italy. These occurrences are cyclical and typical of economies and businesses worldwide.
Closer to home, I recently communicated our decision to exit out of the South African operations. While it was a tough decision that the board and management had to make, it is a normal turn of events for any hospitality company that hotels will be opened and hotels will be closed, but I am happy to say that the decision was in the best interest for African Sun.
As we operate hotels we must look at the hotel’s full cycle and its ability to give us our targeted return over the period we are operating it. If we find that the company is funding the operations, particularly in a lease arrangement over a protracted period as in the instance of the two hotels in South Africa then a decision is made to exit out of the arrangement.
It is therefore important never to depend on one market for profitability and viability because of the nature of our business which is very fickle to political and economic trends. You will see that this is the case with all major hotel groups in the world and also here in Zimbabwe in that that they have presence in more than one geographical region.
In that aspect we continue to seek presence in mega and growth cities in sub-Saharan Africa as our strategy and business model demands and we are set to open another 231 rooms before the end of the year. We have since opened the Best Western Homeville in Benin City in Nigeria. The next opening is Holiday Inn, Gaborone which is due to open by November in Botswana. We also have a 201-room Amber Express Hotel in Accra, Ghana under construction which is scheduled to open in the next 24 months.
Best,
Shingi
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do we expect any recovery on the price surely as investors we have lost a great deal of value from African sun
ReplyDeleteDear Anonymous,
ReplyDeleteAs we go forward our focus will be on rationalizing our overheads and driving RevPAR growth in all our hotels. African Sun will also be exiting out of non-profitable lease arrangements as was evidenced by the recent exit out of South Africa.
Going forward, the group’s focus will be to add more rooms to our portfolio through management contracts which have a direct positive cash impact on the bottom line. All these initiatives will get the company back to profitability by the end of our financial year in 2012, and subsequently see the share price recovering as a result.
Thank you,