City Lodge Hotels’ management is optimistic that demand will continue to improve as business and consumer confidence returns and interest rates decrease, thereby contributing to better disposable income in businesses and households,” chief financial officer Dhanisha Nathoo said.
The group, which Friday reported a 10% increase in adjusted headline earnings per share to 31.8 cents, reported Friday that room occupancies and revenue had continued to grow in the year to June 30, as it continued to recover from the legacy of the Covid pandemic.
“The group is well-positioned, with no outstanding debt, revenue up 13%, and group occupancies of 58%, two percentage points (pp) ahead of 2023. Food and beverage (F&B) revenue has grown 22% in the year,” said Nathoo. A dividend of 9 cents (2023:8 cents) was declared.
CEO Andrew Widegger said the 2025 year had begun with a cautious improvement in economic sentiment, compared to the last few months of the previous financial year, as the new government establishes itself.
This sentiment had, however, not yet translated into occupancy trends, with softer occupancy for July 2024 of 56% (July 2023 – 61%), August 2024 of 55% (61%) and month to September 5 2024 of 61% (60%), he said in a statement.
Nathoo said the year under review had been a tale of two halves.
“The financial year kicked off with fervour and optimism with strong demand for occupancy in the first quarter, which was about eight percentage points ahead of the prior year,” she said.
However, the strain of high inflation and interest rates, and the cumulative effects of load shedding, with poor investor and consumer confidence caused by the political uncertainty in the run up to the elections, eroded corporate demand and consumer purchasing power.
Government austerity measures put in place in October also contributed to subdued demand. These factors led to a one percentage point cut in occupancy, between November 2023 and June 2024, compared to the prior year, she said.
Regionally, Western Cape saw the fastest recovery in occupancy and rates. The greater Johannesburg area also experienced a slight recovery as more business travellers were working from their offices, and travel needs increased.
In contrast, leisure demand in KwaZulu Natal had suffered in the year due to the socio-economic challenges including sporadic closure of beaches, departure of many Durban beachfront businesses, and safety and security concerns.
Over the past year the upskilling and right-sizing of the F&B and staff complement resulted in a 12% increase in salaries and wages to R553.3m. The group mitigated increases in property costs by using more solar power generated by the 16 hotels that had installed solar panels in the year.
The improved performance for the year resulted in taxed profit rising to R188.7m from R163.7m, and a 16% increase in diluted earnings per share to 33.2 cents.
“The group has repaid interest-bearing borrowings and is now debt-free, while still retaining access to R600m in debt facilities, and R115m in overdraft facilities,” said Widegger.
He said they had used the strong cash generated by operations of R576.7m (R539.5m) to strengthen its balance sheet, return capital to shareholders, and continue with investment in hotels.
BUSINESS REPORT