City Lodge cans deal
CALLS UP R40M GUARANTEE: MOZAMBICAN CONTRACTOR OUT AFTER ‘DELAYS’
The group still hopes to complete and open the hotel within the next six weeks.
The City Lodge Hotels Group has called up the R40 million performance guarantee of Mozambican contractor Lutios it appointed to build its new 148-room City Lodge Hotel in Maputo and cancelled the contract.
This follows “contractor-related delays and disputes” during construction of the hotel, which delayed the conclusion of the group’s initial R1 billion African expansion strategy.
The new hotel was scheduled to open last year.
The group’s CEO, Andrew Widegger, says it’ll be bringing in a dedicated contracts manager to supervise the various subcontractors working on the project, including the group’s own installers of furniture, fittings and equipment.
“The subbies are essentially the same ones that were on site already,” he says. “The difference now is that we will pay and supervise them directly.
“We understand that some of them haven’t been paid, which is why there has been a go-slow on site but they are fully on board and hopefully we can get this thing going and be done in the next four to six weeks.”
Widegger says it wants to have the first few floors of the hotel completed in the next four to six weeks, with the balance following in the two weeks after that period.
He adds that Lutios is taking legal advice about the action taken by City Lodge – and that City Lodge will seek an urgent court interdict to be given access to the site if Lutios does not hand over the keys.
“Practical completion has been certified, which means that [the site] should not be under the control of the builder and is now ours, and the interdict will essentially order [the contractor] to grant us access.”
The group’s African expansion strategy, which was launched in 2015, involves the development of seven new hotels, including City Lodge hotels in Nairobi in Kenya, Dar es Salaam in Tanzania and Windhoek in Namibia, as well as Town Lodges in Namibia and Botswana.
When the Maputo hotel opens, the group will have completed its initial targeted expansion into Southern Africa and East Africa and will then comprise 63 hotels with 8 070 rooms in six countries.
Widegger says of all the new projects in Africa outside SA, the Maputo hotel is probably the one it’s most excited about in terms of the current prospects for that market. “We think it will do very well.”
He indicates the group will undergo a period of consolidation and introspection once its Maputo hotel has opened.
He says it believed its African expansion strategy would provide the group with some kind of contra-cyclical risk benefits to the SA market – but things didn’t work out that way.
He says the group possibly underestimated Africa because each country in which it has opened a new hotel has its own unique circumstances and problems, all of which have unfortunately been negative.
The group’s still looking for SA opportunities, Widegger says.
Some haven’t been paid, which is why there has been a go-slow