BUSINESS MODEL
OUR CAPITALS – RESOURCES AND RELATIONSHIPS
The value of a business is the present value of the future cash flows that can be generated by the assets and other capitals utilised by the business.
The capitals that generate these cash flows include:
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Our hotel real estate together with our employees who provide guests with our signature hospitality experience |
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Our intangible capitals such as licences, brands, trademarks, technology and systems, which provide seamless delivery of that experience |
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Our financial resources to pursue growth opportunities |
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Our quality relationships with key stakeholders |
Our strategy in action section provides more insight into our performance and outlook as well as how our capitals are deployed in our strategy and business model to generate and sustain value in the long term.
Execution of a robust strategy informed by and responding to material risks and opportunities will lead to optimal utilisation of capitals and generation of cash flows and ultimately value.
WE HAVE IDENTIFIED OUR MOST IMPORTANT CAPITALS
KEY FEATURES
The group owns, leases and manages hotels in South Africa as well as several sub-Saharan African countries, the Seychelles and Abu Dhabi.
We hold a majority interest in Hospitality, which provides scale to the hotel group. We hold a minority investment in RBH and IHPL, based in the United Kingdom. We also operate the hotels that were developed as part of the various casino complexes owned by Tsogo Sun Gaming under long-term management agreements.
PORTFOLIO PHILOSOPHY
There are five key elements to our business, which can be represented as follows:
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MANAGEMENT OF HOTEL OPERATIONS |
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BRANDS |
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| OPERATIONS |
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MANAGEMENT |
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As the group’s major property-owning subsidiary, Hospitality owns a total of 54 hotels in South Africa.
54
HOTELS |
| 42 |
Leased and managed by the group |
| 12 |
Leased and managed by external operators including Marriott and Radisson |
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Outside of Hospitality, various group subsidiaries own and manage a further 29 hotels.
29
HOTELS |
| 22 |
South Africa |
| 7 |
Offshore |
With 75% of our hotel real estate owned either through freehold or
leasehold title, we prefer the ‘asset-heavy’ hotel model as it provides
strategic advantage of scale in South Africa. This model allows the group to
retain control over its assets, thereby ensuring security of tenure and
resilience through economic cycles. While this model is more capital
intensive, it allows for higher returns on effort.
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In South Africa, the group will only manage operations
for third parties if they are strategically important (due
to partner requirements or location) and where there
is no option to own or lease.
The group manages operations for offshore third parties as this is a lowrisk
option to enter new markets and operate hotels as a franchisee
where necessary due to brand differentiation requirements. However, the
group does not act as a franchisor of its brands. In addition, the offshore
division seeks to access new hotel opportunities through a variety of
management contracts or new builds (on its own or via joint ventures),
primarily within its existing operating markets.
The majority of Tsogo Sun Hotels’ occupancy depends on the business
traveller, government and group and convention markets. Relationships
with key customers and travel intermediaries, and access to the correct
distribution networks, are critical in driving both occupancies and average
room rates throughout the group.
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The internally managed hotel operations are performed via six operational
departments, five of which are regionally based and one is brand focused.
The regional operations are Cape, KwaZulu-Natal, central northern,
eastern northern and offshore (Africa, Seychelles and Middle East), while
resorts (mostly timeshare) has a brand-based office as a result of its
unique product offering.
The regional and brand management teams are supported by key centralised services which aim to ensure the hotels have access to the required expertise at the most efficient cost structure. These include:
| ACCOUNTING |
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| Central accounting services
both for the organisation
as a whole, which operates
under SAP, and activities
such as centralised payroll,
debtors, creditors and cash
book, procurement and
management information
systems. |
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| RESERVATIONS, CHANNEL
MANAGEMENT, WEB AND MARKETING |
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| Central reservations, channel
management, web and marketing
services are provided across the
group, ensuring that the hotels
have access to the necessary
booking channels, global
distribution systems and sales
channels at competitive costs. |
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| SALES AND REVENUE MANAGEMENT |
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| centralised sales team focuses on direct sales to existing key
and potential new accounts. These include account management
and product training for larger customers including sports bodies,
government, state-owned entities, conference organisers and
corporate clients. The long-standing relationships we have
developed with organisations such as the South African Rugby
Union, stem from our ability to handle complex travel requirements
countrywide, during normal season and extraordinary tournament
periods. Our revenue management team supports the sales team,
providing a more cohesive outlook towards topline generation,
particularly contracted and negotiated revenue streams which make
up a material portion of our business. Closing the deal will always
be a fine balancing act between price and volume and this has
never been more important than in the difficult environment
we are going to experience in coming years. |
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| MARKETING |
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| Marketing including core promotions like the Sunbreaks
campaign, the summer sale and promotion of the rewards
programme. Up to 35% of the group’s rooms revenue is
generated from rewards members illustrating the depth of
the reach and the value offered by our extensive portfolio in
South Africa. |
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| INFORMATION TECHNOLOGY |
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| IT services including sourcing and maintaining appropriate operating
systems such as reservations, property management, sales and catering,
the human resource management system (including payroll). These
services also include procurement and support of hardware including
physical and virtual private branch exchanges (‘PABXs’), personal
computer requirements, networking of hotel systems and Wi-Fi
infrastructure. |
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| DEVELOPMENT |
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| Development services including facilities
management, project management of
major repairs and renovation projects
and new property developments. |
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| HUMAN RESOURCE |
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| Human resource services including policies and procedures, payroll management, labour and
employment equity compliance, pension and medical aid administration, industrial relations, the
group’s B-BBEE monitoring, compliance and planning incorporating the flagship Tsogo Sun
Entrepreneurs programme as well as training and human capital development. |
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This collectively makes up the management (‘Manco’) division’s activities, through which the group operates its hotel portfolio.
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Tsogo Sun Hotels’ key differentiator in South Africa
is its wide distribution of quality hotel products.
In addition, the delivery of consistent exceptional
guest experience remains the focus at all of the hotels
to differentiate in an often commoditised industry.
Within each region the group operates hotels across
a number of well-recognised brands, servicing a
broad spectrum of traveller from luxury to economy.
LUXURY
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FULL SERVICE
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ECONOMY
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| LUXURY PORTFOLIO |
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Each hotel in the luxury portfolio is individually branded and operated
according to its own personality, derived from its location, design and
community environment. These luxury hotels are typically graded as
five-star hotels and are some of the most iconic properties in their
locations including Sandton Sun at Sandton City, Palazzo at Montecasino,
Beverly Hills in Umhlanga and 54 on Bath in Rosebank. We also operate
two InterContinental branded hotels in Johannesburg under licence from
the InterContinental Hotels Group plc (‘IHG’). |
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Sandton, Umhlanga,
Rosebank, Fourways,
Seychelles |
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| FULL SERVICE PORTFOLIO |
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Southern Sun Hotels and Resort hotels
Southern Sun Hotels is our core, full-service brand and is typically graded
as four-star when applicable. The majority of these hotels are
located in key urban nodes, servicing business and leisure travellers
alike. The properties have substantial food and beverage operations as
well as conference facilities. Resort properties are located in attractive
tourist destinations such as Umhlanga, Plettenberg Bay, the Drakensberg
and Mpumalanga and include a large Timeshare operation. During
the year, the Crowne Plaza in Rosebank was rebranded as Southern
Sun Rosebank leaving only Holiday Inn Sandton as the remaining
IHG brand operated by the group within the Southern Sun Hotels category
of branding. The final gem in this collection is the beautiful Paradise Sun
on the Island of Praslin in the Seychelles. |
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Umhlanga, Cape Town, Durban,
Plettenberg Bay, Drakensberg,
Mpumalanga, Rosebank, Nigeria,
Mozambique, Tanzania, Seychelles |
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Garden Court
A well-established and successful mid-market offering, spanning
20 hotels with 3 959 rooms. This brand includes large well-known hotels
such as Garden Court Marine Parade and Garden Court Sandton City,
which have both undergone a complete refurbishment in recent years,
through to smaller properties such as Garden Court Newcastle, which
was recently expanded by a further 40 rooms. Garden Court Kitwe in
Zambia opened in 2018 and represents the first Garden Court outside of
South Africa. |
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South Africa,
Zambia |
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20
HOTELS |
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3 959
ROOMS |
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SunSquare
SunSquare hotels are our alternative and trendy offering to the mid-scale
market. With properties at Montecasino, Suncoast, Cape Town City
Bowl and Cape Town Gardens, these hotels are situated in great
locations and include creative in-house concept restaurants such as
Jeera, Vigour & Verve and Zepi. |
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Montecasino, Suncoast,
Cape Town City Bowl,
Cape Town Gardens |
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Jeera, Zepi,
Vigour & Verve
FOOD AND BEVERAGE |
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| ECONOMY |
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StayEasy
Catering to the economy segment, this brand has grown to 10 properties
with 1 505 rooms. Offering great value and tasteful rooms, these hotels
were developed in key business locations such as Century City and City
Bowl in Cape Town, Eastgate, Pietermaritzburg and Pretoria. The group
also has StayEasy products outside of South Africa with hotels in Lusaka,
Zambia and Maputo, Mozambique. The Maputo hotel is the latest build
and opened its doors to guests in 2018. |
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Cape Town, Eastgate,
Pietermaritzburg,
Pretoria, Zambia,
Mozambique |
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10
PROPERTIES |
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1 505
ROOMS |
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hi Hotels
hi Hotels is the latest brand offering to be introduced by the group. These
hotels consist of a modular design, with each room fully factory built.
They are scalable in that we can deliver an attractive physical product
with unique bedroom and public space facilities at a capital cost that
makes the hotels highly feasible. The first hi Hotel opened its doors at
Montecasino in February 2020. Although it was only open for a short six
weeks before closing under the national lockdown, it achieved good
results and we believe that the brand has strong potential for the future. |
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Montecasion |
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February
2020
Opened |
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SUN1
The SUN1 brand comprises the portfolio of budget hotels acquired from
Accor, which were originally built as Formula1 hotels in South Africa. This
portfolio has undergone a substantial refurbishment in most of the
properties post-acquisition and consists of 22 hotels situated countrywide.
SUN1 offers well-appointed rooms sleeping up to three guests at a great
price. SUN1 Southgate was recently expanded and, with 138 rooms, it is
the largest SUN1 hotel. |
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Countrywide |
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22
HOTELS |
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1 741
ROOMS |
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