LISTED hospitality group, African Sun will invest $60 million over the next two years to upgrade and expand five hotels within its portfolio after sealing a management partnership agreement with Legacy Group of Hotels. African Sun and Legacy Hospitality group signed an agreement for the management, refurbishment and expansion of five Afrisun hotels namely Elephant Hills Resort and Conference Centre, Troutbeck Resort, Hwange Safari Lodge, The Kingdom at Victoria Falls Hotel and Monomotapa Hotel.
The agreement also provides for possible future expansion of Carribea Bay and Fothergill Island. Afrisun chairman Mr Hebert Nkala on Friday told the company’s stakeholders briefing that the group will invest towards upgrading and refurbishment of assets within its portfolio in the next two years to meet international standards.
“In an endeavour to find a lasting solution to the company’s persistent loss position, the board deliberated on several possible solutions and it was finally agreed that there be a change of business model wherein the company would contract hotel management companies of repute and integrity to manage a selected number of hotels.
“The board approached six international hotel groups to provide their global brands and participate in the management of our hotels. These hotel groups were also requested to look at the feasibility of partial refurbishment and or total closure of the hotels (to facilitate refurbishment of the hotels). “Of these hotel groups various factors conspired to eliminate the four from consideration with the international hotels group IHG retaining its right to continue with the franchising structure with respect to the Holiday Inn Harare and Holiday Inn Bulawayo and soon to be re-branded Holiday Inn Mutare.
“We agreed to globalise our hotels by contracting an international hotel management company of repute to manage selected hotels within the group. We expect to spend approximately $60 million in refurbishments and expansion over the next two years with major refurbishments at Elephant Hills expected to start in the coming eight weeks,” said Mr Nkala
Mr Nkala said the management agreement has been subjected to intense scrutiny by management, board of directors, shareholders and legal practitioners. The partnership with the Legacy Group of Hotels came after a long and arduous decision born out of the need to immediately address the financial haemorrhaging the company has been going through since dollarisation.
The company has not declared any dividend to the shareholders since dollarisation and has also accumulated losses in excess of $20 million due to a poor business model and unprofitable regional investment decisions. Mr Nkala said the new look Afrisun group will have three strategic business units including the Legacy Group and International Hotels Group, constituting Holiday Inn branded hotels in Harare, Bulawayo and Mutare.
He said the remaining unbranded hotels will include Victoria Falls Hotel, an affiliate of the leading hotels operating in a partnership with Meikles Hotel. Mr Nkala said under this unit will also fall three of the remaining hotels Caribbea Bay Resort, which needs some major refurbishment, Great Zimbabwe Hotel, which needs extensive product revamp and expansion and Beitbridge Express Hotel, whose viability is still being assessed.
He said these three hotels will continue to be managed by African Sun until a decision is taken about their future. Mr Nkala said Afrisun has made positive steps towards rationalising its operations on the continent. The Afrisun board has decided to divest from all regional operations and the lease agreement for Amber Hotel in Accra, Ghana was mutually terminated with effect from August 31, 2015.
Mr Nkala said management is in process of engaging the West African Sun Hotels in Nigeria with a view to exit Nigeria by end of this month. “This rationalisation will result in savings of over $10 million per annum and these savings will be channelled into our profitable Zimbabwe operations,” said Mr Nkala
Legacy Group chairman Mr Bart Dorrestein said Zimbabwe has the potential to become one of the worlds’ best tourist destinations. He said with the weakening of most African currencies, re-energising the South African and African tourist markets are going to be one of the key focuses in the partnerships growth plan.
“The past months of negotiations as well as our constructive interaction with Government has convinced us that Zimbabwe is on the road to recovery. Whilst building confidence in any market takes time, we believe all the ingredients are in place to track the process,” said Mr Dorrestein.