Tsogo Sun invests internally, keeps focus on Africa

(Tsogo Sun)

In South Africa, the Tsogo Sun hotel brand has a solid presence in both urban hubs and in more rural areas, and is reportedly the largest listed hotel and tourism company in South Africa. The company's portfolio covers more than 90 hotels in South Africa, Nigeria, Kenya, Tanzania, Zambia, Mozambique, the UAE and the Seychelles. Perhaps most significantly, Tsogo Sun both owns and operates almost all of its hotels, keeping the business firmly in-house, as Belinda Pedersen, the company's general manager of international sales, told Hotel Management. 

In April, Tsogo Sun reached an agreement with the owners of the site of Cape Town's former Tulip hotel for the construction of a three-star, 500-room hotel complex at a total investment of R680 million. The new hotel will consist of two products in one complex, a 200-room SunSquare hotel and a 300-room StayEasy hotel. The project is expected to be completed by September 2017. Pedersen indicated that a five-star Cape Town hotel might be in the works, but the details had not yet been confirmed. In Johannesburg's Fourways neighborhood, Tsogo Sun is also planning to open another three- or four-star hotel. 

Investing in African hotels for African travelers
Tsogo Sun's midscale brands seem to be attracting the most business, Pedersen said. "The three-star hotels are doing phenomenal," she claimed, noting that they frequently attract the domestic market. "Our four-star brand is also very superior, and I think that’s where our strongest segment has been since inception of Tsogo Sun. Three- and four-star hotels are probably our biggest focus at the moment. That’s where the most investment will go."

In terms of investment, Pedersen said, "millions and millions" of rand have "gone back" into the company's hotels for refurbishment and expansions. The Sandton Sun hotel is under going a R250 million renovation, and the the Cullinan and the Southern Sun Waterfront have emerged from refurbishment. A hotel in Kruger National Park, the Sabi River Sun, just had 12 million in refurbishment. "A lot of money has gone back into the properties, which is very encouraging," Pedersen said. (So many properties are undergoing renovations that the company has a list on its website of refurbishments in progress.) 

Financial strength and international partnerships
According to Tsogo Sun's Chairman’s and Chief Executive Officer’s review from August, the company's most recent fiscal year saw a downturn due to the overall recession affecting Southern Africa in the wake of last year's ebola scare. A deal to acquire a 40 percent stake in the GrandWest and Worcester casinos in the Cape province was cancelled in July 2015 "as it became clear that we would be unable to conclude the regulatory process before the deadline for the transaction," Chairman John Copelyn said in the review statement. "Enhancing the group’s presence in the Western Cape gaming market remains an opportunity going forward."

But Copelyn expects that the 2016 financial year should reflect better growth. The group is considering creating an entertainment and hospitality focused REIT into which it would transfer its owned hotel, retail and office property portfolio. Shareholder Hosken Consolidated Investments has a concentrated holding of 47.6 percent following the share buy-back from SABMiller's 2014 exit, which also resulted in a broadening of the shareholder base. "In addition, the introduction of the HNA group out of China as the largest buyer in the SABMiller share sale is expected to open new opportunities to the group in the future," Copelyn said in the statement.

But apart from HNA's investment—which Pederson estimates at about 5 percent of Tsogo Sun's shares—the company is not looking to partner internationally. "Tsogo Sun is very rich in equity at the moment," she said, citing income from the company's casino holdings, "so they haven’t looked at bringing in external partners at this stage." Tsogo Sun recently invested in a European company, she noted, but is not planning to own or operate any hotels in Europe. 

By focusing on Africa, she added, and both owning and operating between 80 and 90 percent of their properties, the company has remained truly African. "Everything flows into one," she said. "We’ve got one team that oversees all properties. Everything is under one umbrella."