Travel, tourism, restaurants and entertainment have been the hardest hit by the Covid-19 restrictions imposed by nearly every country in the world. In SA, the revised regulations enforced since Monday are no different, with the hospitality industry, and — uniquely to SA — the alcohol industry being impacted. Whether this will be a two-week crunch or a six-week crisis remains to be seen, but I suspect the latter.
Tsogo Sun Hotels has closed about 10 additional hotels, mainly in Cape Town and Johannesburg, and the systems we have put in place over the past 15 months of this Covid-19 nightmare are activated to ensure we minimise our cash burn, including reduced rostering of staff, transferring perishable stock from closing hotels to those that remain open, and switching off every piece of nonessential equipment. If demand at an open hotel drops below key levels, we will close that unit as well.
We are fortunate to be hosting all the teams, management and support crew for the Castle Lager Lions Series 2021 in various of our hotels with many operating as bio-bubbles. However, Tsogo and a multitude of others in our industry are missing out on what was to have been a major boost to tourism had the legendary Lions fans been able to travel with the tour. This is made all the more bitter by the knowledge that in the UK the Euro 2020 football and the Wimbledon tennis championship are being played in front of fans this month.
The impact of this can be described in two ways, beginning with the cold, impersonal accounting that we present to the market. After instituting significant cost reductions and restructuring nearly every aspect of the business, we burnt through some R550m in cash and funded this with the sale of our share of the Maia Luxury Resort in the Seychelles and working capital management, resulting in the net debt position being roughly the same as it was at the start of the crisis.
This is important because, in a year when we reported 12% occupancy on the largest hotel portfolio in SA, we avoided building up additional debt that could ultimately lead to a trap we would not get out of. Our liquidity remains strong and the banks have been uniformly supportive, as a result of both the drastic measures we have taken internally to reduce the cash burn and the fact that we own superb hotels, the value of which covers the debt multiple times.
The second description is the level of pain caused to the people who make this company and this industry. Virtually everybody in our organisation has not received their full salary or wages for over 15 months, barring a few exceptions where occupancies enabled all shifts to be rostered in certain hotels for a limited period. About 1,500 jobs have been permanently cut.
This has caused anxiety and hardship that cannot be quantified; living standards reduce, dreams are deferred. Combined with the fear and sorrow caused by the pandemic itself as it infects and affects families, the additional burden of financial insecurity is too ghastly.
It goes further than just us, with a multitude of suppliers all losing the bulk of their revenue as well, from the florists that do the exquisite displays in our lobbies, to butchers and fishmongers, conference organisers, travel agents, and the people who do our refurbishments. The value chain extends deeply and it's all suffering.
The industry overall will survive, though many operations will fail and remain closed until the market recovers. We believe travel for leisure and business will rebound strongly once the pandemic is over. Every indication is that SA will be a high-demand destination for international visitors, which bodes well for Cape Town in particular, but also many other parts of the country.
We don’t see the emergence of Zoom as a threat to business travel because, as somebody said to me, they may replace a meeting that could have happened in your office with a couple of people but not a meeting that would have needed a venue and had lots of participants.
Once this is over people will want to rebuild their lives and their businesses, and that requires travel.
Until then, the real issue is how much pain will be inflicted on the people of this industry, which (scarily) depends almost completely on the government.
Restrictions are for the most part now required. However, it is certainly a breach of the social contract that the government bans hospitality and alcohol to relieve the pressure on the health-care system when it can’t get Charlotte Maxeke Johannesburg Academic Hospital open, didn’t hire enough staff for field hospitals, and has completely botched the vaccine rollout.
Banning eating out, alcohol and leisure travel may seem like a small sacrifice until you ask the hoteliers, chefs, waiters, and financially eviscerated restaurant owners how small the sacrifice is. For the pain to ease, we must open as soon as possible and rely on the protocols.
Most importantly the vaccination programme must be completed quickly, broadly, and without any further bureaucratic delay. The government must lobby to get SA off the “red list” so that vaccinated foreign visitors can travel here without facing quarantine restrictions on their return.
As a large company, we can manage the financial implications for now, but many smaller operators can’t. It’s about lives and livelihoods and the government needs to get its act together.
• Von Aulock is CEO of Tsogo Sun Hotels
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