Western Cape weighs on Hospitality

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Western Cape weighs on Hospitality

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Published Date: 2018-11-22 | Source: Stephen Gunnion | Author: Stephen Gunnion

Western Cape weighs on Hospitality

The property fund says hotels have also become more competitive in their pricing due to the weak state of the economy.

Hospitality Property Fund says its hotels in the Western Cape had a tough first half due to lower domestic corporate and government business as well as poor sentiment stemming from the recent water crisis.

The fund's hotel properties are mostly in the Western Cape and Gauteng, with the two provinces generating almost two-thirds of rental income. Hotel occupancy for its Western Cape Hotels fell by 14.3% to 51.8% in the six months to end-September, with average room rates down by 3.1% to R1,333. That's resulted in a 16.9% drop in revenue per available room to R690 for the period. The STR Global South African Hotel Review says puts overall occupancy for the region at 54.2%, down 8.2% from a year ago.

Fortunately for Hospitality, Gauteng fared better, with hotel occupancy rising by 4.6% to 62.4%. For the rest of the country, occupancy declined by 0.7% to 68.1%.

The fund says hotels have also become more competitive in their pricing due to the weak state of the economy. The average room rate in its portfolio of hotels fell by 0.9% over the period and revenue per available room is down 3.5% from a year ago, with the market showing a 1.2% decline.

It's reported a 10% rise in contractual rental income for the six months to R345 million, mainly due to the inclusion of its 29 hotel properties for the full period. Net finance costs declined by 4% to R79.6 million after it negotiated lower interest rates. Distributable earnings increased by 16% to R237 million. It's declared a 41.22c per share distribution.

Last week, Tsogo Sun cancelled a transaction to sell a portfolio of seven mixed-used casino properties to Hospitality in exchange for a bigger stake in the fund, which would then be distributed to Tsogo shareholders. It was reported that Tsogo failed to garner enough shareholder support for the deal.

Hospitality's shares ended traded 4.8% higher at R9.75 yesterday. Tsogo gained 6.1% to R20.34.





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