Morulane’s Testing Times at Cresta
With just two years at the helm of Botswana’s leading hospitality outfit, Cresta Marakanelo Group, Managing Director (MD) Mokwena Morulane finds himself having to take head-on, the Coronavirus Disease(COVID-19) pandemic which threatens to totally collapse the hospitality industry. With his corporate experience, he believes Cresta is in good hands. He spoke to KEABETSWE NEWEL.
Morulane recalls the plunge of copper prices sometimes in 2015, which brought copper mining companies to their knees. He was Country Manager at Discovery Metals Limited (DML) from 2013 to 2015, then, one of the leading copper mining outfits in Botswana. He remembers that at some point, he had to deal with collapsed copper prices which squeezed DML revenue, despite that mining companies are cash-intensive operations by nature. While DML had to eventually liquidate, Morulane learnt at that time to manage a company under distress, with diminishing cash reserves and in need of bold business decisions. To him, the outbreak of the deadly Coronavirus Disease (COVID-19) is as much a threat to the tourism and hospitality industry as was the collapse of copper prices to copper mining outfits. Government, through the Botswana Tourism Organisation (BTO) announced a travel ban, while travellers from across the globe have also cancelled their travel plans.
At Cresta, Morulane had made business cash-flow projections and prospects looking at booked conferences, and hotel rooms. Most of these have been cancelled because of the Coronavirus. He is well aware that Cresta will obviously take a knock.
“Our occupancy rate will decline and that will seriously affect our revenue and consequently the profitability of Cresta in the current financial year,” he revealed.
Morulane said Cresta has since he took over, been profitable and was meeting all its set targets. For the full year ending 31st December 2018, Cresta made P28.5 million in profits. Morulane is sure that the Coronavirus Disease (COVID-19) will wipe out these profits.
Obviously, Morulane said the Coronavirus Disease (COVID-19) will negatively impact all businesses. It is unknown how long the virus will spread, but Morulane said travellers have cancelled bookings and business has been disrupted.
“This year we had big plans, which we will have to put on hold until the Coronavirus Disease (COVID-19) has been contained. We had plans to expand the business and increase foot print and the number of rooms, as well as refurbish our properties,” he said, adding further that since the virus will obviously eat into profits, he has taken a decision to stop the expansions in pursuit of cash preservation, to ensure that they continue paying employees and keeping the business afloat.
Cresta has embarked on health education, to ensure that staff and customers are aware of hygienic practices.
“We have appointed a company doctor to ensure that he rolls out health training to Cresta staff. We are pro-active to ensure that our customers and employees are not at risk. We may at some point have to quarantine our guests into our rooms, so we need to have the right skills set to do that,” he stated. At Cresta, hand sanitizers are also available everywhere. Morulane said Cresta is working hand in hand with government and that their doctor is liaising with the World Health Organisation (WHO), Centre for Disease Control (CDC) and the Ministry of Health to ensure that recommended procedures are adhered to.
Customers are also allowed to postpone their bookings to a time when Coronavirus Disease (COVID-19) is contained.
CRESTA REMAINS COMPETITIVE
With the mushrooming of hotels and hospitality outfits in Botswana, Morulane is confident that Cresta will remain as market leaders. “We are in a position of privilege and we will do everything to remain market leaders. We ensure that customers’ experience at Cresta is always world class,” he stated.
Recently, Cresta after an agreement with property outfit Letlole La Rona (LLR) bought properties from LLR which Morulane said has resulted in an increment of Cresta’s asset value.
Letlole sold its commercial immoveable hotel properties worth P235 million to hospitality outfit, Cresta.
The properties had initially been leased to the hotel operator for years. The disposed properties were the remaining Extent of Plot 50719, Cresta Lodge, Gaborone; Plot 1169 Main Mall, President Hotel, Gaborone; Plot 6348, Thapama Hotel, Francistown; and a portion of Plot 276, Bosele Hotel, Selebi-Phikwe.
These were the LLR legacy assets which contributed a 3rd to the company portfolio.
Morulane said, as a hotel operator, they are not into property development, but under the circumstances, they found it advantageous to buy the properties. “We felt the rentals were untenable and we came to a mutual agreement of buying the properties,” he said. He said Cresta now has a balanced portfolio of six owned hotels and six rented hotels. Further, Cresta had an immediate uplift in terms of profitability after negotiating better terms with their financier. On the downside, Morulane noted that the company went from zero debt to about P250 million debt. However he said the debt is manageable, and that the money was used for a good course.
Cresta’s growth resulted from a deliberate determination to increase shareholder value especially since 2010 when it listed on the Botswana Stock Exchange (BSE), according to Morulane. It started with a marriage between a company then called Marakanelo owned by BHDC a subsidiary of Botswana Development Corporation (BDC). Cresta at that time won a management contract to manage four hotels owned by Marakanelo, which was loss making at the time. Through the determination of Cresta, they were eventually turned around to be profitable. It is then that Cresta started expanding its footprint to become a leader in the hospitability sector. Cresta has the largest footprint and a representation in all major centres in Botswana, with over 12 properties in Botswana. The company also has about 5 hotels in Bulawayo and Victoria falls.