City Lodge feels the business-travel pinch
LOW business confidence, costcutting on government travel and the high number of public holidays are starting to bite into the hotel and leisure industry, business travel hotelier City Lodge said on Friday.
City Lodge, which released its annual results to the end of June, said average occupancy for the financial year decreased by one percentage point to 66%.
Group CEO Clifford Ross said guests had been choosing less expensive options when it came to business accommodation, especially in the second half of the group’s financial period.
“We have certainly seen some buying down. There is also less government travel than there was previously, which indicates that there is a bit of belt-tightening taking place there,” said Ross.
City Lodge registered a three percentage point decrease in the occupancy rate in the second half of its financial year.
“We had indicated in our interim results that we were expecting a decline in the second half of the year, and after Nenegate business confidence was at all-time-low levels and was not at all buoyant and we had a lot of public holidays, which lowered business travel,” said Ross.
Business travel makes up about 70% of City Lodge’s overall business.
The lead-up to the local government elections also resulted in fewer bookings.
“We are quite comfortable now that the elections are behind us. We have stronger reservations moving forward,” said Ross.
The group’s normalised headline profit before tax grew 12.4% to R511.8-million while normalised headline earnings were up 12.5% to R373-million. Revenue for the year grew 14.6% to R1.5-billion, boosted by a full year’s contribution from new hotels including the City Lodge Hotel Waterfall City, the Road Lodge Pietermaritzburg and City Lodge Hotel Newtown.
De Wet Schutte, a hotel, travel and leisure analyst at Avior Capital, said: “Public holidays and perhaps slightly softer business travel patterns have weighed on occupancies over the second half, but broadly the industry business cycle remains on an upward trajectory.”
The hotel group, whose core business is midweek travel, had delivered a good set of results, he said.
The slow growth in the domestic market has not deterred the hotel group from growing its footprint on the continent. The group is planning to open hotels in Namibia, Tanzania and Kenya next year.
City Lodge has 57 hotels, of which 54 are in South Africa, two in Kenya and one in Botswana, with a total of 7 072 hotel rooms.
The developments in the pipeline will bring the number of hotel rooms to 7 539 in 2017.
Due to regulation and language barriers, City Lodge has had to move its time frame and delay opening a hotel in Mozambique, planned for next year, until 2018.
Ross said challenges in setting up hotels elsewhere in Africa had a lot to do with understanding the particular country’s regulations, and the language.
On the group’s African expansions, Schutte said despite some delays in opening hotels, City Lodge had made its intention to grow into Africa very clear. “There are some [economic] headwinds in some parts of Africa , but City Lodge is in it for the long haul. With that in mind, it is always a good time expand into these markets, but selectively,” said Schutte.
Less government travel indicates belt-tightening there