Cresta fears market nearing saturation
Staff Writer | Friday April 7, 2017 17:08
Although Cresta is still turning satisfactory profit margins, the Botswana Stock Exchange listed company says the operating environment in Botswana is increasingly becoming challenging and retaining customers will be key going forward.
“The challenges in the Botswana market continue to increase.
The market is nearing saturation point as evidenced by increased competition and influx of new entrants, primarily in Gaborone and Francistown, which has exerted pressure on the company’s market share,” Cresta said, in a statement accompanying their results for the year ended December 31, 2017.
In the past five years, lodges and hotels that have opened shop in Gaborone in the three to four star category include, Town Lodge, Indaba Lodge, Phakalane Hotel, Masa Square, Regent Hotel.
In the year, Cresta registered a four percent increase in revenues to P333.6 million from P319.6 million in the previous year.
Operating profit was up 15% to P47.3 million while net profit increased by 40% to P37.5 million. The company realised savings of P8.1 million in the year in administration and operating expenses primarily due to conversion of a facility at Golfview Hotel in Zambia from a loan to equity. Strict cost controls and improved operating margin contributions at key units also helped boost cash savings.
Earnings per share were 20.10 thebe from 16.01 thebe in the year ended December 31, 2015. The balance sheet grew by four percent to P255.5 million. A final dividend of 5 thebe per share has been declared.
On their Zambian operations, Cresta said last year’s election in that country affected business, but occupancies started improving towards the end of the year leading to a six percent rise in revenues.
The company is planning to open further hotels in Maun and Gantsi as it seeks to compensate for the increased competition in urban centres. The Cresta Maun Hotel will have 83 rooms, a presidential suite and a conference facility with a capacity of 230 people.
However, Cresta said construction of the Gantsi hotel has been delayed by regulatory approval with the project now expected to start in the last quarter of 2017.
Cresta and the Botswana Public Employees Union (BOPEU) last year signed a deal to build a 70-room lodge in Gantsi as they sought to capitalise on the township’s accommodation potential.