City Lodge Hotels additions fit its Africa expansion plan
147 new rooms in Tanzania, 148 in Mozambique
JSE-LISTED City Lodge Hotels group’s initial R1 billion African expansion strategy is set to gain added impetus with the opening of two new hotels in Tanzania and Mozambique by the fourth quarter of this year.
Andrew Widegger, the chief executive designate at City Lodge, said yesterday that the group’s 148-room City Lodge Hotel in Maputo was scheduled to open in October, and the 147room City Lodge Hotel in Dar es Salaam was expected to open at the end of September.
Widegger said the first 104 rooms of the 171-room City Lodge Hotel at Two Rivers Mall in Nairobi in Kenya opened early this year, with the remaining 67 rooms on track to open by the end of this month.
He said the group would then have a total of 54 hotels in South Africa, with about R800 million invested in its seven new hotels in Africa.
The replacement cost of the group’s 61 hotels, at “a rough guesstimate, was between R6.2bn and R6.3bn”, he said.
Widegger confirmed there had been further delays with the completion of the City Lodge Hotel in Maputo, because it had a cash-strapped contractor, many delays around the regulatory requirements and having to translate every document into Portuguese.
However, Widegger said the group within the next three months would not have any hotels under construction in Africa. “The group continues to assess opportunities in South Africa, Southern Africa and East Africa. This effort will be stepped up once the current expansion phase is completed,” he said.
Widegger added that they had already started the research on a number of countries in Africa, where they were considering establishing a hotel, and this work was continuing. “It’s just really the site visits and the real commercial negotiations if we were to find a site that made sense in a country that made sense,” he said.
Widegger confirmed to Business Report in June that the group aimed to be more selective, as it further increased its African footprint, following initial disappointments and delays with its African expansion strategy that was launched in 2015.
Occupancy decrease
City Lodge yesterday reported a decrease in average occupancies to 59 percent in the year to June from 63 percent in the previous year.
Widegger said this included the group’s African hotels, adding that its occupancies in South Africa had declined 2 percentage points to 61 percent in this period, which was in line with industry average occupancies.
Group revenue declined by 1 percent to R1.49 bn from R1.5bn.
He attributed this to trading conditions in South Africa being impacted by low business and consumer confidence, which had been exacerbated by the lack of clarity on the policy of land expropriation without compensation.
He said occupancies in the greater Cape Town area were also affected by the Day Zero water-saving campaign, which caused some travellers to shorten or cancel their trips.
Normalised diluted headline earnings a share dropped by 8.8 percent to 760.6 cents from 833.6c.
A final dividend a share of 201c was declared, lifting the full-year dividend a share to 454c. This was 9.2 percent lower than the 500c dividend declared in the previous year.
Widegger said that the new financial year had seen a continuation of the soft trend experienced in the previous financial year, and it was unlikely that there would be any meaningful change in senti- ment until after South Africa’s general election next year.
Shares in City Lodge dropped 8.23 percent on the JSE yesterday to close at R134.48.