THE CITY LODGE share price has been storming ahead adding some 45% in the last year and a number of factors indicate that more upside is likely. First, tourism numbers for South Africa, which came out last month, show great numbers coming to South Africa, and while the majority are from neighbouring countries rather than the richer European and North American countries, these tourists fit right into the City Lodge profile of lower- to middle-income tourists.
Further, we see from the Tsogo Sun results that occupancy levels in the local hotel sector are rising, and this will bode well for City Lodge as the largely fixed cost of a hotel means that most of the increase in occupancies goes straight to the bottom line. The pre-World Cup expansion by the hotel industry has mostly been absorbed (albeit not so much at the top end), which will start to give hotels some pricing power, adding not only extra occupancy levels but at better rate per night.
*The writer holds shares in City Lodge.