City Lodge in R1bn expansion plan

Four more hotels next year bring tally to 61

JSE-LISTED City Lodge Hotels group has commenced the development of a 148-room City Lodge Hotel in Maputo in Mozambique as part of its R1 billion expansion into Africa and is considering further opportunities on the continent.

Chief executive Clifford Ross said yesterday that the group believed there were more opportunities, with Kenya’s capital Nairobi still able to take one or two of the group’s brands, such as a Road Lodge and Town Lodge.

Ross said the group also believed it may be able to develop hotels in some of the bigger regional centres in Kenya. Zambia was still on the group’s radar, but it had not found the right site yet, and he had taken a trip to Mauritius, because they believed there may be an opportunity in Port Louis for a business hotel.

Andrew Widegger, the financial director of City Lodge Hotels, said the group was still looking for a suitable site in Kampala in Uganda.

He stressed that things were quite fluid in Africa, but the group hoped to make progress within the next six months with these additional expansion opportunities.

The group was investing about $17.5 million (R228.2m) in the City Lodge Hotel in Maputo, $19m in the 172-room City Lodge Hotel Two Rivers in Nairobi and $17.5m in the 147room City Lodge Hotel in Dar es Salaam in Tanzania.

Widegger said the 147-room Town Lodge Windhoek in Namibia was on track to open in the third quarter of this year. The new Maputo hotel is scheduled to open in the second quarter of next year, the new hotel in Nairobi in the third quarter of this year and the group’s new hotel in Tanzania in the fourth quarter of this year. These four hotels will boost the number of hotels in the group from 57 to 61 next year.

The total number of hotel rooms in the group in South Africa, Botswana, Kenya, Tanzania and Mozambique will increase from 7 072 now to 7 686.

The City Lodge Hotel group did not announce any new hotel developments in South Africa last year, and nor in its financial results statement for the six months to December.

Ross stressed the group was in the hotel business for the long term and believed there were still opportunities in certain areas in South Africa for new hotels.

“We are working on opportunities, but there are none at this stage where we can make an announcement. We will not make an announcement before the ink is dry on the agreement,” he said.

Widegger said the group was a South African company and would continue to look for further opportunities in the country.

But Widegger said the nature of its business in South Africa, with its footprint of 54 hotels, meant there were fewer opportunities.

The group reported a decline in its average occupancy rate to 66 percent for the six months to December from 69 percent in the previous corresponding period.

Ross admitted the 66 percent occupancy rate achieved in this period was disappointing, but it was in line with current occupancy rates in the industry.

“In the current economic climate and with business confidence as low as it is, we’re happy with it. But we would obviously like to get back to the long-term average over the last 30 years of industry occupancy rates of between 72 percent and 73 percent,” he said.

Total revenue rose 5 percent to R791.3m from R753.4m and benefited from an inflation-linked increase in room rates and the contribution for the first time from the Road Lodge Pietermaritzburg and City Lodge Hotel Newtown.

Fully diluted normalised headline earnings a share increased by 1.6 percent to 454 cents from 447c. Shares in City Lodge Hotels dropped 3.63 percent yesterday on the JSE to close at R147.12.