March 20, 2020 / 5:24 PM / 9 days ago

South Africa's Tsogo Sun to close 36 hotels as demand collapses

JOHANNESBURG, March 20 (Reuters) - South African hotel operator Tsogo Sun will close up to 36 hotels over the next few weeks after travel bans imposed by various countries to contain the coronavirus caused a “total collapse of demand”, it said on Friday.

Tsogo said in a statement it was looking to reduce costs and capital expenditure further and this will be done by closing a number of hotels in the key areas where the firm has multiple properties and will consolidate the available demand into the remaining operating hotels in those areas.

The owner of the Southern Sun and Beverly Hills hotels said the hotel closures will affect 7,700 rooms, or 40% of the group’s hotel portfolio, over the next few weeks. All booking channels will remain active for the close monitoring of demand patterns.

“During this period, all capital expenditure has been postponed and only essential maintenance will endure,” Tsogo Sun said.

“In addition, head office support functions will operate on a limited staff-only basis to ensure good communication with guests, partners and suppliers in order to facilitate this process and most importantly, ensure the smooth reactivation of these hotels once the situation normalises.”

Many events and conferences that were scheduled to take place during the next three months had been postponed to the second half of 2020, it said.

The firm, which also owns casinos, said it had been approached by both the public and private healthcare sectors to turn its closed hotels into quarantine facilities and “we are endeavouring to assist in this regard”.

“Although near impossible to predict, the group is working on the assumption that hotels will begin to be reactivated by no later than July 2020 and that the corporate and government travel sectors will recover relatively quickly,” Tsogo said.

The group still expects to meet the covenant obligations to its various debt providers for the 12-month period ended March 31, despite the impact of its March peak month.

However, assuming exceptionally low occupancies and the closure of a number of hotels for a period of three to six months, “it would be unlikely that the group will meet the covenant requirements for the rolling 12-month period ending September 30”, it said.

“Accordingly, we are engaging with the group’s various lenders to request waivers of these covenants and ensure that the facilities to which the group has access are maintained.” (Reporting by Nqobile Dludla; editing by Nick Macfie)

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