HOSPITALITY group African Sun Limited (ASL) will complete the refurbishment of 100 rooms at its Hwange Safari Lodge for US$4,2 million by the second quarter this year, as the Zimbabwe dollar’s depreciation threatens occupancy levels.

In a trading update for the quarter ended March 31, 2023, the hotelier announced that the foreign currency liquidation exemption on the tourism sector had expired during the first quarter, leaving the firm reeling under the Zimbabwe dollar’s depreciation effects.

During the period, the Zimbabwe dollar depreciated 35,29% to $929,86 against the greenback, from the start of the period on the official forex market and 50% on the parallel comparative to $1 500 over the same timeframe.

The Zimbabwe dollar has since fallen a further 55% on the official forex market against the United States dollar to the current $1 442,73 and to $3 200 on the parallel foreign currency market.

“The foreign currency liquidation exemption which the tourism sector enjoyed since February 2022 expired during the quarter,” ASL said.

“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 [Zimbabwe dollar] and required for pricing of goods and services in ZWL.

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“On a positive note, subsequent to the end of the quarter under review, the RBZ [Reserve Bank of Zimbabwe] 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.”

ASL said in line with its vision to be the leader in hospitality and leisure operations in Africa by providing outstanding hospitality experience, the firm remained focused on upscaling its properties through 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,” ASL said.

ASL finished renovating 47 rooms and the kitchen at its upmarket hotel, The Victoria Falls Hotel, in the third quarter of 2022. Approximately US$5 million was committed by ASL and its partner, Meikles Limited, to modernise this building.

Other refurbishments are taking place at the Great Zimbabwe Hotel’s conference centre and unfinished guest rooms that should be completed by mid-year.

ASL’s refurbishment plans come as the firm seeks to combat the depreciation of the Zimbabwe dollar that has led to a three-percentage point decrease in occupancy levels across the group to 39% from the 2022 comparative.

“Both of our hotel operating segments experienced declines in occupancy levels with city hotels posting a combined 51%, while resort hotels achieved 23%,” ASL said.

The continued depreciation of the Zimbabwe dollar comes as ASL’s foreign business remains depressed at 20% with the domestic business contributing 80% of its earnings.

Challenges in its occupancy levels led to overall revenue being down 2% to US$7,9 million during the first quarter from US$8,02 million earned in the comparative 2022 period.