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Zimsun sooths away pain

ZIMSUN is a hotel and leisure organisation comprising over 13 hotels and resorts dotted around the country, a timeshare operation in Mozambique as well as holding the lease and operating business of the Grace Hotel in Rosebank, South Africa.

lign=justify>The group has a dominant position in Zimbabwe’s premier resort, Victoria Falls. The group is now known as Zimsun Leisure Group with strong emphasis on leisure after repositioning of the group in 2002.

Full year results Turnover for the year was up 308% to $176,2b (F2004: $43,2b), despite occupancy levels falling from 42% to 38% as a 2% increase in international and regional arrivals failed to offset a 6% decline in domestic volumes. Of the total sales figure $78,9b was forex-denominated. The domestic/foreign arrivals mix shifted from 75/25 to 70/30. REVPARs increased by 264% to $249317. The Grace at Rosebank performed in line with expectations though occupancies at 53,5% remained largely unchanged with REVPARs increasing by 8%.

Net operating costs increased by 320% to $162,8 billion as a result of rising utility costs. The impact of the overvalued exchange rate was apparent as operating margins fell to 7,6% from 10,4% in the prior year.A $997 million loss at Hwange Safari Lodge due to illegal resettlement issues as well as declining drive-through volumes due to the fuel crisis and lack of air transfers to the area, also worsened operating profit performance.

The group recorded an equity accounted loss of $45 billion due to problems with outsourced food and beverage operations as well as an increase in net finance costs of 270% to $4,8b. All this translated to attributable earnings of $8,7 billion for the year (F2004: $3,4 billion). No dividend was declared.

The balance sheet reflected higher gearing at 9,6% compared with 2,6% the previous year, this attributed to funding of the Grace at Rosebank transaction. However, cash flows were strong with cash generated from operations at $16,3 billion (F2004: $6,9 billion).

The group enjoys a dominant position at the country¹s premier resort, Victoria Falls with about 50% of Zimsun’s revenue generated from there. Management has been aggressive in consolidating Zimsun’s position in the prime location Zimsun receives commission on every guest the group brings in for all leisure activities occurring in Vic Falls (such as water rafting). Zimsun has a franchise tie-up with international brands. City hotels are branded to Holiday Inn, Elephant Hills to Intercontinental and VictoriaFalls to Leading Hotels of the World.

The franchise tie-up lends the group a good image with international travellers. The group’s chain of hotels has a strong business profile with a significant number of occupancies coming from business travellers. Aided by a strong business profile, the group’s tariffs are higher and the proportion of occupancies at discount rates are minimal, consequently increasing average room rate.

The tourism industry is cyclical with peak period August to November.

However the peak period is in the group¹s favour as the peak is out of phase with the Northern hemisphere peak season. The business’s main drivers are overall occupancy, room rate (US dollar denominated (offering an opportunity of an exchange rate play) and foreign component of total occupancy. Marginal cost of each guest goes down progressively once past break-even point. Any slight increase in occupancy levels (especially an increase in the foreign mix) from current levels will be beneficial.

The local tourism environment remains challenged with international and regional visitor arrivals to the country down 18% y-o-y as both perception and an overvalued exchange rate make visitors seek more palatable destinations. Domestic tourism is likely to remain under pressure as disposable incomes continue to shrink in real terms.

Going forward, the group continues to explore its regional management contracts initiatives. — Staff Writer.

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