Zimbabwe Stock Exchange-listed entity African Sun said the recently terminated deal it had with Legacy Hospitality Management Services Limited (Legacy) was just a management contract and did not require the latter putting money into the business.
Speaking on the deal, African Sun said the market had a wrong impression that Legacy had planned to invest US$60 million towards refurbishing African Sun Hotels.
“They were never to come as an investor, they were just coming in as a manager with human skills and expertise.
“As is the norm in the hospitality industry management agreements, all capital expenditure is done by the owners of the business,” African Sun managing director Edwin Shangwa told The Herald Business.
“There is an impression that Legacy was going to spend US$60 million towards refurbishing African Sun Hotels which is not so. The company (African Sun) is the one that was always going to pick up the whole capital expenditure in the period which by the end of 2018 stood at US$4 million for the five hotels managed by Legacy,” Mr Shangwa said.
He added that African Sun, as the owner of the business, carried all risk and profits associated with hotels that where being managed by Legacy.
African Sun recently completed room refurbishments at Holiday Inn Mutare. At Holiday Inn Bulawayo, the hotelier was able to unveil a new restaurant, kitchen, gym and conference venue to the ZITF 2019 visitors.
Holiday Inn Harare is in the middle of upgrading the Vumba restaurant and a gym is also being constructed for the benefit of guests.
The deal in question commenced on October 1, 2015 and gave Legacy the responsibility for managing the day to day operations of five of African Sun’s hotels for a monthly fee for these management services.
Upon assuming management of the Hotels, Legacy brought in a few senior managers, most of whom have since left the organisation according to African Sun.
The deal was, however, terminated last week after Legacy took the local Hotel Group for arbitration following some disagreements.
Termination of the deal will mean African Sun will have to re-brand in areas where the Legacy brand was being used.
It will also mean reverting management of the hotels in question to the company, with effect from April 24, 2019.
Mr Shangwa said managing its own hotels will not be a new experience to the company as they have previously and currently do so with the five other properties that were not covered by management agreement.
“This is all due to the fact that all employees responsible for the day to day operations at these hotels have always been and continue to be employed by the company,” said Mr Shangwa.
“The company’s biggest asset has always been its people, who hold excellent human and intellectual skills and have undergone the best training and development programs with Pan-African experience to ensure that to ensure that we always deliver the best value for our guests.
Mr Shangwa said the company remains committed to providing the best experience to all our guests and promises to further improve on this position with planned product expansion and product improvements scheduled for 2019 and beyond.