Why Tsogo Sun sold iconic Maia Resort stake for R465m

JSE-listed hospitality major Tsogo Sun Hotels has sold its 50% stake in its trophy Maia Resort property in the Seychelles for R465 million to MH Limited, which is part of the Bangkok-based Minor Hotels Group.

The deal, announced in a JSE Sens statement on Tuesday, is aimed at reducing the group’s dollar-denominated debt. But it’s also timely considering Tsogo Sun Hotels being hit hard by the economic fallout of the Covid-19 pandemic on the tourism and hospitality industry.

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“The stated intention of the group since its separate listing [unbundling from Tsogo Sun Holdings in June 2019] has been to reduce its US dollar-denominated interest-bearing debt,” it noted in the Sens statement.

“Covid-19 has limited the group’s ability to apply its cash resources towards the settlement of this debt. The disposal consideration allows the group to achieve this objective and accordingly, the company believes that it is in the best interest of the group to dispose of the assets at this time.”

Tsogo Sun Hotels’ wholly-owned subsidiary, Southern Sun Africa Limited, jointly developed the Maia Luxury Resort & Spa back in 2006 with Seychelles group United Resorts and Hotels.

The property, on the island of Mahé, is Tsogo’s most luxurious resort, with just 30 bungalows that can be booked for up €2 500 (around R47 300) a night.

Speaking to Moneyweb, Tsogo Sun Hotels CEO Marcel von Aulock, said: “The sale was a tough decision as Maia is arguably one of the top island resorts in the world and trades in the ultra-luxury segment. However, it made financial sense for us. We achieved a great price for our stake.”

He pointed out that the $27.8 million (approximately R465 million) proceeds from the sale will effectively bring down the group’s dollar-denominated debt by more than a third.

“In this context, we believe that we’ve absolutely made the correct financial decision…. In addition, while the Maia Resort is a very profitable property, it was the only resort we operated in the super-luxe segment of the hotel sector,” he added.

Read: Historic Edward and Mount Grace hotels to reopen under Tsogo Sun

Asked whether Tsogo Sun Hotels has more asset sales on the cards, von Aulock replied “nothing to talk about at the moment”.

He said the sale of its Maia Resort stake does not mean the group will exist the Seychelles tourism market.

“We still own the Paradise Sun resort in Seychelles, which was our first property on the island in the 80s. We don’t have plans to sell it or any of our other hotel properties in South Africa currently, despite the uncertainty around Covid-19.”

Only around 30 of its more than 100 hotels in South Africa are currently operating due to the impact of the pandemic, which has seen restrictions to domestic and international travel.