City Lodge Hotel Newtown in the central business district of Johannesburg. Picture: SUPPLIED
City Lodge Hotel Newtown in the central business district of Johannesburg. Picture: SUPPLIED

City Lodge Hotels says full-year net profit fell more than a quarter as more of its rooms were unused in the year to end-June amid low business and consumer confidence.

Average occupancies for the group declined to 55% from 59% the previous year, the operator of Courtyard Hotels and Town Lodges said on Friday.

In SA, occupancies slumped to 58% from 61% because of low business and consumer confidence, high unemployment and uncertainty about Eskom’s sustainability as well as land expropriation, the group said. The economy shrunk in the first quarter of 2019.

Further, room rates in SA rose by less than inflation “due to increased competitor discounting”.

Total group revenue increased 3% to R1.5bn, but operating costs rose at a faster rate. As a result, group profit after tax fell 26% to R205.5m.

City Lodge Hotels said it would pay a gross final dividend of 137c a share, bringing the total dividend for the year to 366c, a decrease of 19.4%.

The group said occupancies in Botswana “improved slightly” in the second half, although Town Lodge Windhoek “performed below expectations” amid weak economic growth in Namibia.

The Kenyan business “experienced a weaker second half due to increased hotel supply and economic growth not translating into commercial activity”. Occupancies there were lower than in the prior year.

Meanwhile, the group said that given SA’s economic woes, “the weaker trend of the past year has extended into the new financial year”.

“New catalysts are needed to boost investment confidence and spur economic growth,” it said. “Against this backdrop, there are some encouraging signs, such as the notable efforts by the national department of tourism to develop and grow this industry that is so important to the future of SA.”

The group said its portfolio of hotels in SA, Southern Africa and East Africa “is in excellent shape” thanks to refurbishments and the addition of new properties.

hedleyn@businesslive.co.za