City Lodge confident in spite of uncertainty
JSE-LISTED City Lodge’s average occupancy rate decreased three percentage points to 63 percent for the year to the end of June, as business and consumer confidence continues to decline amid political uncertainty and negligible economic growth.
The group’s average occupancy rate was 66 percent last year.
Chief executive Clifford Ross said the economy could benefit from an improvement in business and consumer confidence, which has been declining over the past few years.
“In South Africa, the hotel industry experiences local and foreign travellers. But it’s the local traveller who is a lead indicator of the mood the country’s in. Improved business and consumer confidence will be good for the group and the economy,” Ross said.
The RMB/BER Business Confidence Index for South Africa slumped by 11 points to 29 in the second quarter of 2017. It’s the lowest value since the last quarter of 2009 as confidence declined across all of the five sectors surveyed. The FNB/BER consumer confidence index in South Africa dropped to -9 in the second quarter of 2017 from -5 in the previous quarter, highlighting households’ concerns about the weak economic outlook.
Despite the negative outlook, the group said it remained confident about its prospects as it had grown beyond South African borders.
It said it expected to open more businesses across the continent.
The City Lodge Hotel Group expected to open the 147-room Town Lodge Windhoek next month and it was making good progress with the development of new hotels in Kenya, Tanzania and Mozambique.
“We’re still confident in the business because from 2011 we have shown excellent growth,” said Ross.
Town Lodge Windhoek would be the 58th hotel in the group, which has existing operations offering 7 072 rooms in South Africa, Kenya and Botswana across the Fairview Hotel, Courtyard Hotel, City Lodge Hotel, Town Lodge and Road Lodge brands.
The company said there were a few hotel openings in the pipeline, with the 172-room City Lodge Hotel Two Rivers in Nairobi, Kenya to open in October leading the way, followed by the 147-room City Lodge Hotel Dar es Salaam, Tanzania, in the first quarter of 2018 and the 148-room City Lodge Hotel Maputo, Mozambique, in the second quarter of 2018.
The group’s total revenue grew 1.8 percent to R1.52 billion, assisted by an inflationary increase in room rates. Normalised headline profit before tax decreased 2.1 percent to R501.3 million, while normalised headline earnings decreased 3.1 percent to R362.2m. Normalised diluted headline earnings per share fell 3.1 percent to 833.6 cents.
The group declared a final dividend of 228c a share, taking the year’s dividend distribution to 500c, a decrease of 3.3 percent from the previous year.
Ross said trading conditions and occupancies had remained under pressure in the first six weeks of the new financial year.
In South Africa, the group had signed development and lease agreements to extend the City Lodge Hotel at OR Tambo International Airport by 62 rooms to 365 rooms, with the additional capacity expected to be available in the first quarter of 2018. Plans were also well advanced for the development of a 158-room Town Lodge in uMhlanga and a 90-room Road Lodge in Polokwane.
City Lodge’s shares fell 4.51 percent to close at R134.64 on the JSE yesterday.