City Lodge profit weakens as fewer guests check in
City Lodge Hotels has reported single-digit growth in first-half profit as its occupancy levels declined due to low consumer and business confidence.
On Tuesday, the group said that although confidence levels had been affected by the volatile political landscape, it was optimistic about its long-term prospects thanks to an extensive expansion programme.
Headline earnings rose to R197.12m as the occupancy rate dipped to 66%.
Revenue rose to R791.3m because of inflationary hikes in room rates and input from new hotels in Pietermaritzburg and Johannesburg.
CE Clifford Ross said the low confidence level was due to political volatility, which he expected to continue for the remainder of 2017. Group financial director Andrew Widegger said the pressure on occupancy levels was expected, but Ross said the results were still disappointing.
Ron Klipin, an analyst at Cratos Capital, said City Lodge had "business quality" and its results were in line with industry levels.
The group is developing four new hotels outside SA — in Maputo, Dar es Salaam, Windhoek and Nairobi — which it hopes will act as hedges against local political risk.
Intellidex analyst Phibion Makuwerere said the fall to single-digit growth was inevitable due to "the persistent weakness in the South African economy and City Lodge’s reliance on business travel".
He said the expansion may provide scale benefits when the economy strengthens.