Specific risks we face

Risk responses

• Our operations are concentrated in South Africa and are affected by the cyclical nature of the hospitality industry
• The perceived inability of government to improve the current depressed macroeconomic situation, the Moody’s downgrade and the constrained growth in the government sector may lead to increased costs of funding, which leads to reduced income and lower profitability
• Exchange rate volatility impacts occupancy in foreign tourism, particularly business travel, leisure and the conferencing market
• The COVID-19 national lockdown has had a devastating impact on the local macro-economic environment. The closure of borders and persistent travel restrictions to curb infection rates have had a sever negative impact on our revenues and profitability

Specific risks we face

Risk responses

• Travellers’ fears of exposure to contagious diseases, such as COVID-19, could reduce the number of people willing to fly or travel in future, particularly if new significant disease outbreaks occur or threaten to occur. Inter-provincial and international travel are vital to our business and the current travel restrictions have meant that occupancy levels remain extremely low
• With a number of our hotels located in urban city centres, where there is a perceived increased risk of infection, many customers may choose not to travel to these hotspots, further negatively impacting trading

Specific risks we face

Risk responses

• The group may fail to identify acquisition opportunities or may pursue transactions that prove to be unsuccessful or strain or divert its resources
• From time to time, the group considers the acquisition of complementary businesses or assets where the opportunity is presented to do so at attractive prices. In the current environment, where cash resources and prudently managing debt are of paramount importance, it is more likely that the group will forgo attractive business opportunities unless alternative funding structures, such as the use of equity, for example, are thoroughly explored

Specific risks we face

Risk responses

• As a multinational business, Tsogo Sun Hotels is subject to a wide range of legislation, which is monitored on an ongoing basis. Any breach of compliance with legislation could result in fines or sanctions that affect our profitability and may have adverse reputational consequences. Refer here for details relating to the group’s regulatory compliance

Specific risks we face

Risk responses

• For our hotel businesses, ensuring the ability to adapt to stay relevant to consumers may require additional research and development and marketing, which would drive up costs, as well as capex and refurbishment expenses incurred to act on research findings. As such, the group may be required to assume development risk to enhance or protect the value of its portfolio base

Specific risks we face

Risk responses

• The group’s hotel properties are subject to leases or management contracts without guaranteed renewal or successful renegotiation
• In the absence of renewal options exercisable by the group, there can be no guarantee that all or any of the group’s leases and management contracts will be renewed upon their expiry. There can also be no guarantee that the terms of any leases or management contracts that are renewed will be as favourable to the group as the terms currently in place

Specific risks we face

Risk responses

• Service delivery, limited infrastructure investment and funding challenges at South Africa’s municipalities have compounded their capacity to supply water and electricity to ratepayers
• Inconsistent water supply and unreliable electricity provision affect the operational capability of hotels to provide consistent services to guests
• Municipalities and utility providers also increase rates, property taxes, water and electricity to fund their own shortfalls, placing an additional cost burden on the returns to shareholders

Specific risks we face

Risk responses

• An uncertain economic environment impacts our business
• A challenging economic climate impacts the risk of customer defaults

Specific risks we face

Risk responses

• The group’s business is labour intensive and, therefore, its success largely depends on its ability to attract, train, motivate and retain a sufficient number of qualified and skilled employees to run its operations
• If the group cannot attract and retain a sufficient number of qualified employees, its ability to effectively compete with its peers and its operations, profitability, cash flows and financial condition could be materially affected

Specific risks we face

Risk responses

• Our operations, including in particular online booking and hotel management systems, partially depend on our IT systems
• The performance and reliability of these systems and the group’s technology are critical to its reputation and ability to attract, retain and service customers
• Any disruption in the group’s ability to provide the use of its reservation system to customers, including as a result of software or hardware issues related to the reservation system, could result in customer dissatisfaction and harm our reputation and business