Southern Sun’s recovery continued in FY26 as occupancies, conferencing activity and corporate travel improved across key markets.

Management believes the recovery still has further to run, with occupancies remaining below historical norms and room-rate growth opportunities emerging across the portfolio. More from EasyAssetManagement.

Southern Sun’s Recovery Continues as Occupancies Improve

Southern Sun, which operates one of the largest hotel portfolios in South Africa with exposure across Gauteng, the Western Cape, KwaZulu-Natal and selected offshore markets including the Seychelles, Mozambique, Zambia and Tanzania, delivered a strong set of FY26 results as occupancies, conferencing activity and corporate travel continued to recover. The group operates a broad range of hotel brands including Southern Sun, Sandton Sun & Towers, Beverly Hills, Arabella, Garden Court, StayEasy and SUN1 amongst others.

Southern Sun FY26 Results Presentation

Group income increased 9% to R7.2 billion, while Ebitdar rose at a faster clip growing 12% to R2.4 billion. Adjusted HEPS increased 19% to 90.1 cents and the dividend per share rose 20% to 30 cents.

Group occupancy increased to 62.9% from 60.8%, while South African occupancies improved to 64.3% from 61.9%. Occupancy growth was partially offset by weaker offshore trading, particularly due to the temporary closure of Paradise Sun in the Seychelles during refurbishment as well as difficult trading conditions in Mozambique and Tanzania.

Importantly, management believes occupancies still have room to improve. CEO Marcel von Aulock noted during the results call that “we should be reaching normalized levels, and that's still a way off”, adding that Southern Sun historically operated closer to 68% occupancy levels and that “there's still upside”.

That matters because higher occupancies typically support stronger pricing power within hotel markets. Management specifically highlighted this dynamic during the call, noting that “as you get higher and higher in occupancy, your pricing power should start coming through”.

While average room rates increased ~4% to R1 525 during the year, management acknowledged there is still room for further pricing upside, particularly in Gauteng and Sandton where rates remain below what management believes they should be relative to other major nodes such as Cape Town.

The second half of the financial year was materially stronger than the first. Management noted during the earnings call that “we make about two-thirds of our cash in the second half and one-third in the first half”, with the second half ultimately delivering the stronger performance the group had been expecting.

The G20 and B20 conferences provided a meaningful boost during the year, particularly in Gauteng and Sandton. The reopening of Sandton Towers, combined with strong conferencing demand, supported particularly strong growth within the Sandton Consortium portfolio where Ebitdar increased 31%.

Management was careful, however, not to frame the results purely as a once-off G20 boost. The broader message from management was that multiple demand drivers continue supporting the business, including conferencing activity, inbound travel, sports tourism and corporate travel. As von Aulock noted during the call, “there’s always another event”, while specifically referencing upcoming sporting events, including the New Zealand rugby tour, as additional demand drivers for FY27.

The regional performance across South Africa was also encouraging.

The Western Cape continued benefiting from foreign inbound travel, conferences and events hosted at the Cape Town International Convention Centre. KwaZulu-Natal saw improving event activity and stronger leisure demand, while Gauteng benefited from a rebound in conferencing and business travel.

One of the more encouraging aspects of the results was the improving performance from refurbished assets.

Paradise Sun in the Seychelles reopened during the year following a major refurbishment and achieved occupancy of 64.7% versus 59.9% pre-refurbishment. Southern Sun Mbombela, Southern Sun Rosebank and Southern Sun Sandton also benefited from refurbishment-related volume and rate growth.

Management continues to allocate significant capital toward upgrading the portfolio, with ~R600 million spent on maintenance and refurbishment capex during FY26. The broader strategy remains focused on investing behind what management described as an “irreplaceable portfolio of hotels”, with von Aulock noting that “if I gave you R40 billion in 10 years, you couldn't rebuild what we've got”.

The balance sheet also strengthened materially during the year. Southern Sun ended FY26 in a net cash position of R86 million versus net debt of R266 million the prior year. Management repeatedly highlighted the strategic importance of operating with minimal leverage given macro uncertainty and potential future acquisition opportunities.

Von Aulock noted during the call that “if you don't have debt, you just existentially are not facing the kind of risk you do if you have overgearing”, adding that the current balance sheet position gives Southern Sun flexibility.

The group also continued returning capital to shareholders during the year through dividends and share buybacks. Southern Sun repurchased 37 million shares during FY26 at a cost of R359 million, with management indicating that the buybacks reflected their view that the shares remain attractively valued relative to other capital allocation opportunities.

Von Aulock noted during the results call that “the yield on us is still much higher than you can get on most other assets in the market”, while adding that buybacks remain an attractive use of excess capital when compared to alternative investment opportunities.

Geopolitical risks were also discussed during the call, particularly the impact of the Middle East conflict and the war involving Iran.

Management highlighted that the disruption has already affected certain offshore markets, particularly the Seychelles, where a meaningful portion of inbound airlift originates from the Middle East. Management noted that Paradise Sun had reopened strongly following refurbishment before demand softened as regional travel disruptions intensified.

Mozambique also remains challenged by fuel shortages and currency shortages, which management said continue to weigh on demand in the region.

Importantly, management stated that the South African portfolio has not yet experienced a material direct impact from the Middle East conflict, with inbound travel into South Africa remaining relatively resilient so far.

However, management did caution that a prolonged rise in oil prices and fuel costs could eventually impact the domestic economy and local travel demand. Von Aulock specifically highlighted concerns around rising fuel costs, inflationary pressure and the potential for interest rates to remain elevated for longer, which could weigh on consumer confidence and domestic travel activity over time.

Looking ahead, management remains constructive on medium-term occupancy recovery, particularly if South African economic conditions continue stabilising. The company specifically highlighted that a recovery in occupancies towards longer-term averages presents meaningful upside potential alongside further room-rate growth.

At EasyAssetManagement, we take a thematic approach to investing, focusing on long-term structural tailwinds that are reshaping industries and economies. As part of this strategy, we hold positions in Southern Sun as part of our Emerging Consumer theme within our EasyETFs Balanced Actively Managed ETF .

If you are looking for exposure to global equities, AI-themed opportunities, or a balanced investment strategy check out our EasyETFs Global Equity Actively Managed ETF, EasyETFs AI World Actively Managed ETF and EasyETFs Balanced Actively Managed ETF.

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