Pamodzi Hotel plc has announced that there was a decline in room occupancy and fine dining at half-year 201, according to unaudited six-month financial results issued in a statement from the company.
“The total revenue decreased by 3.3 percent from ZMW43.02 million to ZMW41.59 million over the same period”, read a statement issued by BDO, the hotel’s official company secretary on 15th January 2020 through their sponsoring broker Pangaea Securities. “Gross profit decreased by 3.6 percent from ZMW36.92 million to ZMW35.58 million for the period ending 30th September 2019”.
The luxury hotel faced a decline in a number of value-generating segments. “The decreases are due to decrease in-room segment income and Food and beverage segment income as compared to last year”.
However, the hotel still remains profitable albeit with a haircut to its bottom-line at half-year. “Overall this contributed to a Profit after tax decrease of 59.2 percent from ZMW3.23 million to ZMW1.32 million over the same period”.
Lowering of room occupancy was not the only thing to hurt income from Operations. “The average daily rate increased due to the Kwacha depreciation”. Inflationary pressures leading to escalating room prices led to the paradox of increasing prices. Consumers sought cheaper alternatives that inevitably led to the “overall revenue per room decrease”. This led to cash from operations in 6 months falling from K9.5 million in 2018 to K2.8 million in 2019.
Curiously, the condensed financial narrative does not include the aspect of competition that is ubiquitously event with the opening of new hotels in Lusaka. Consumers are now seeing new options when it comes to luxury accommodation when they visit Lusaka. For example, two beacons in the Lusaka skyline (one on Cairo Road and one opposite Manda Hill shopping mall) brought much-needed competition to their segment.
The management team remains upbeat by declaring the future outlook as being positive despite macro indicators. Furthermore, they believe that value creation will be achieved through a focus on cost control and productivity. “Management will remain focused on cost control and productivity improvements”.
To achieve this vision, they “aim to drive growth through their operations and have also embarked on a strategy to maintain and enhance operational efficiency while remaining focused on delivering a high-quality service that is unrivaled on the Zambian market”.
Critical investors will ask the management team how their preferred strategy will beat the competition’s ones. Financial Insight has noted that new entrants are spending large sums of capital in modern, state of the air infrastructure. Furthermore, with multiple choices available and the advent of Air BnB, the management team will need to do more that hope for value creation through cost control. Brand preservation is key for the legacy hotel to remain its position as a prefered hotel destination.