South Africa: Tsogo Sun to close 36 hotels as customer demand collapses

The Tsogo Sun hotel group intends temporarily closing up to 36 of its properties around the country as demand plummets due to the coronavirus outbreak. The company said in a statement to the JSE late on Friday 20 March that there has been “a total collapse of demand” for booking from April through to June.

The lack of demand included many events and conferences being postponed to the second half of 2020.

Closures will take place in an orderly manner over the next few weeks and will take around 7 700 rooms, or 40% of total room capacity, out of circulation. Should demand improve, the shuttered properties can be reactivated again at short notice.

Initial closures in locations with multiple hotels

Tsogo Sun has not named the properties involved, but said the initial intention was to close hotels in locations where it has multiple properties. Hotels in areas that had only a single property would be assessed on an ongoing basis.

The group’s brands include Southern Sun, Holiday Inn, Garden Court, Sun One, Arabella and Beverley Hills.

Reduce costs, curtail capital expenditure and conserve cash

“Given the environment of the past few weeks, we had already implemented actions in order to reduce costs and capital expenditure, and these have now been expanded to eliminate virtually all variable costs, substantially reduce the fixed cost overheads [and] conserve cash in order to preserve the sustainability of our business and the people whose livelihoods depend on us,” Tsogo Sun said in a statement.

It added: “There are a number of consultations and planning logistics to be finalised. However we intend to still retain significant operating capacity in our key nodes for the foreseeable future, given current levels of hotels.”

The company noted that during this period only essential maintenance would be carried out.

Hotels could follow overseas example and become quarantine facilities

In its statement, Tsogo Sun said it had been approached by both the public and private healthcare sectors to turn its closed hotels into quarantine facilities and was “endeavouring to assist in this regard”.

Using underutilised hotels as quarantine facilities or to house at-risk people is already being done in the US state of California.

A similar strategy is being planned in the UK, where authorities need to find around 45 000 safe spaces for homeless people. Empty hotels are a ready-made solution because they have separate cleaning facilities and rooms, and can be leased by the government using funding allocated to tackle the coronavirus pandemic.