Southern Sun occupancy levels exceed 60% for first time since 2019

JSE-listed Southern Sun lifted the overall occupancy of its hotels above 60% for the first time since 2019 in the year to end-March 2025 and anticipates that with more government stability, it should be able to maintain occupancies at the mid-to-high 60% in the medium term.

The group achieved an overall occupancy for its hotels of 60.8% in the year compared to 63% in 2019.

Read: ‘Pandemic restructuring’ delivers for Southern Sun Hotels

Marcel von Aulock, group CEO of Southern Sun – South Africa’s biggest hotel owner and operator – said on Wednesday it has been so long since the group’s hotels achieved an occupancy of 60% that they did not believe they could achieve it anymore.

“But if you just get a little bit of government stability, if the Reserve Bank can just release the throttle a little bit on the economy and stop strangling the consumer to such an extent with high interest rates, if you could basically have people not stuff up too much, your demand in travel will go up,” he said.

“There is such good work being done by [the Department of] Home Affairs on increasing the visa availability, streamlining systems.

“All the potential is there and then you have a GNU [government of national unity] blowup and everyone gets nervous and the rand falls out of bed and all that sort of stuff.”

Read: DHA visa backlog 80% cleared

Von Aulock said he doesn’t know if this government stability will come in next year or in two or three years’ time, but indicated that increasing its hotel occupancies to this level “is the really big opportunity” for the group.

Strategy

He said Southern Sun will stick to its strategy and be internally focused.

“You cannot rebuild what we have got if I gave you R30 billion in 10 years. We see that in acquisitions that are out there.

“It is a fantastic portfolio and the refurbishments are paying off and the end product is great

“We remain internally focused and we spend a lot of time on our refurbishments, less time on new builds and acquisitions – but we don’t ignore those,” he said.

Southern Sun has about 90 hotels with just under 17 000 rooms and 300 conference and banqueting facilities.

Von Aulock said Southern Sun had a great year, with very good performance by its Cape Town hotels, a “very nice” recovery in Johannesburg and Gauteng – which achieved the highest growth but off a lower base to normalise – but weakness in Durban and Mozambique.

“We are quite chuffed because the numbers are quite good,” he said.

Read:

Von Aulock said the successful refurbishments of Southern Sun Cullinan and Sandton Towers, which reopened in July 2024 and December 2024, respectively, along with upgrades to the restaurant and rooms at Southern Sun Rosebank and Southern Sun Sandton, have been well received by the market.

He said these improvements contributed to increased occupancy and rate growth in Cape Town and Gauteng during the latter half of the financial year.

In Mozambique, political unrest and rioting in Maputo since November 2024 have significantly affected demand at the Southern Sun and Stay Easy hotels, he added.

Von Aulock said Southern Sun has a large amount of room stock in Cape Town, which is trading very well, and a large amount of high-end, large conferencing room stock, which is where the demand is.

“Overall, if we didn’t have the big room stock in Cape Town and we didn’t have the big convention and meeting hotels … you still have an underlying economy that is battling along.

“We are finding ourselves in the right place, which are deals we did 10 years ago that got us there.

“Our performance in the pure transient economy product is very much in line with what City Lodge is doing.

“It’s the nature of our portfolio that has worked well,” he said.

Von Aulock said KwaZulu-Natal was disappointing, noting however that “it is not a beachfront infrastructure, dirty water problem but a group and events problem”. He believes the politics have also been a problem because it has been unstable.

Von Aulock added that not a lot has been happening in regard to the renewal of its leases for the Durban beachfront or OR Tambo International Airport.

He said Southern Sun remains the preferred bidder and only bidder “and, I think, only hope for the Durban beachfront”.

“We are negotiating the lease with the city. That is going to take a while. There is a ‘toenadering’ [coming closer] but it’s a slow and steady ‘toenadering’ between very different views on how the commercial world works but I think we are getting there, so that will carry on.”

Read:

Von Aulock said Airports Company of South Africa (Acsa) will have to go out on tender for the OR Tambo hotel but there is a lot of change happening within Acsa and there is a lot that it has to put out on tender.

He said Acsa understands that it does not have the capacity to put out all these tenders in a hurry and is in negotiations with Southern Sun as a temporary measure.

“They do have to go to tender in the end, just like the city of Durban, because these are all governed by Treasury procurement laws, so we wait for those and we carry on in the meantime.”

The numbers

Southern Sun on Wednesday reported a 20% improvement in attributable profit for the year to R1.024 billion from R856 million in the previous year.

Earnings before interest, taxes, depreciation, amortisation and rent (Ebitdar) grew by 14% to R2.2 billion.

Income rose by 9% to R6.6 billion while overheads increased 7% to R4.4 billion.

Von Aulock said Southern Sun has net debt of R266 million, which ‘is as good as nothing”.

“So we doubled our dividend to 25 cents a share, which is about one third of earnings, which I think is a nice policy to stick to going forward,” he said.

The group had cash and cash equivalents of R396 million at year-end.

Von Aulock said the group also has R1.8 billion in unutilised facilities.

“We have kept that as surplus facilities if we want to do anything big or cover short term cash flows up and down.

“It’s a fantastic position today compared to where we were five years ago when we had R3.5 billion of debt and no hotels open,” he said.

Shares in Southern Sun rose 1.36% on Wednesday to close at R8.92 a share.

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