HomeBusinessASL projects big spinoffs after SA move

ASL projects big spinoffs after SA move

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ZIMBABWE Stock Exchange-listed tourism giant, African Sun Limited (ASL) says a decision by South Africa to resume international travel will have positive spinoffs on its business.

BY KUDZAI KUWAZA

South Africa is the region’s travel hub, where airlines landing from across the world feed travellers into regional carriers proceeding to the rest of the Southern African Development Community, including Zimbabwe.

A drop in arrivals in South Africa is normally felt at destinations like Victoria Falls, which have direct air links with Johannesburg.

The country’s largest hotel chain said on Friday that international arrivals would be complemented by a projected higher domestic demand stemming from government’s decision to allow intercity travel.

The industry has spent most of this year closed after government reacted to the threat of the COVID-19 pandemic by shutting down the economy from end of March, before relaxing restrictions in September.

“While COVID-19 challenges persist in key markets, it is encouraging to note that South Africa, which is our tourism hub opened international travel effective October 1 2020,” said ASL company secretary Vernom Musimbe in a commentary to the group’s financial results for the third quarter ended September 30, 2020.

“On the domestic front, the quarter under review saw the government allowing intercity travel in September 2020, with the resumption of international flights starting on October 1, 2020. Looking ahead, we expect international business to remain subdued over the coming months due to the resurgence in COVID-19 cases in our key source markets. This second wave of infections requires continued diligence and dexterity to manage costs and preserve cash.

However, we remain cautiously optimistic that we will continue to see a modest uplift in domestic and regional demand in the short term,” he added.

The group, which operates some of the country’s biggest hotels including Holiday Inn, Elephant Hills Resort, Hwange Safari Lodge and Crowne Plaza Monomotapa said occupancies dropped compared to the same period in 2019, but they had been improving.

“Occupancy improved from 5% in Q2 (second quarter) to 14% in Q3, largely driven by the relaxation of lockdown restrictions, together with a number of promotional initiatives by the group to improve demand,” Musimbe said.

“The third quarter results reflect an encouraging improvement from the second quarter amid the intractable impacts of COVID-19. The group more than doubled the number of room nights sold from 8 144 in Q2 to 20 329 in Q3, with domestic demand being driven by government and non-governmental organisations,” Musimbe added.

Year-on-year, inflation adjusted revenue for the period decreased by 62% to $965,3 million.

“The decrease is attributed to the COVID-19 pandemic and the related reduction in global travel and tourism, which required the complete suspension of all hotel operations at some point during the nine months ended 30 September 2020. Going forward, cost containment initiatives adopted in Q2 and Q3 are expected to drive our cash preservation mode in Q4 and beyond,” he added.

The harsh impact of the deadly COVID-19 pandemic on the economy was felt the hardest in the tourism industry, where an estimated 25% of jobs were lost. Government, which is looking to domestic tourism to drive the revival of the sector, has set aside $500 million for the resuscitation of the industry.

This is part of an $18 billion stimulus package put in place by the government to resuscitate businesses that have been hit hard by the impact of COVID-19-induced lockdowns.
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