A year to forget for City Lodge
City Lodge ‘remains very profitable’ but is looking for momentum in our local businesses
The 2018 financial year is one to forget for City Lodge, with incoming CEO Andrew Widegger saying the hotel group’s core customer — the business traveller — had made much fewer visits than anticipated due to a weak economy.
"The anticipated pick-up in business after Jacob Zuma left office just didn’t happen. We haven’t seen business people renting rooms for conferences and the like as much as we hoped," said Widegger as he commented on financial results for the year ended June, which were released on Thursday.
As much as 70% of City Lodge’s revenue comes from business travellers and these customers paid fewer visits to City Lodge’s 54 South African hotels and other accommodation in the year to June, sending group revenue down 1% to R1.5bn. South African occupancies decreased to 61% from 63%.
"Trading conditions at our 54 hotels have been hurt by … low confidence and this has been exacerbated by the lack of clarity on the policy of land expropriation without compensation," Widegger said.
In line with the group’s policy of paying out 60% of its normalised headline earnings, adjusted for foreign exchange gains and losses, a final dividend of 201c was declared, bringing the full-year distribution to 454c, 9.2% lower than in 2017.
City Lodge’s Western Cape performance was especially poor. Occupancies were affected by the Day Zero water-saving campaign, which caused some travellers to shorten or cancel their stays.
Across SA, the length of business travel stays also shortened, with customers often telling City Lodge that budgetary constraints were to blame.
Widegger said it is possible that the upcoming SA national elections will lead to better results in 2019.
"City Lodge remains very profitable, but we and many other SA companies really are looking for momentum in our local businesses.
"Travel during election campaigning would help our revenue growth," he said.
The group’s financial director, Alastair Dooley, said a significant improvement in earnings and dividend growth will take time to reflect in its financials.
The company is expanding further into the rest of Africa in search of growth.
It expects to open new hotels in Dar es Salaam and Maputo by the end of October.
After this it will have exposure to 63 hotels in six countries, including SA.