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

Hotels group City Lodge expects to break-even in the fourth quarter of its 2021 financial year as the Covid-19 economic crisis triggered a fight for survival even among heavyweight players in the industry.  

City Lodge, which swung into a R486.6m loss in the year to end June, is among the biggest losers in the pandemic after governments worldwide rolled out imposed lockdown orders, imposed travel restrictions and cut off the industry from its customers.  

The company, which tapped shareholders for R1.2bn cash injection to cover working capital requirements in August, said it expected to break even on an earnings before interest, tax, depreciation and amortisation (ebitda) level in the last quarter of its 2021 financial year, which ends in June 2021.  

Ebitda is a widely used measure of corporate underlying performance that show earnings before the influence of accounting and financial deductions.

City Lodge, which also operates in Kenya, Botswana and Mozambique, said there was a gradual improvement in occupancy as SA recovered from the Covid-19 shutdown but warned that 2021 would remain challenging.  

The company, which is opening its hotels based on demand, said it expected 2019 trading levels to return only in its 2022 financial year.

“The next year will remain challenging as we continue to bear the impact of the prolonged lockdown measures across the SA and remaining African economies,” the group said.

Graphic: KAREN MOOLMAN
Graphic: KAREN MOOLMAN

The easing of lockdown measures has resulted in the gradual reopening of approximately 30 hotels across SA and the rest of Africa operations.

SA occupancies in the last quarter of 2020 were constrained to 4%, the group said. There has been some marginal improvement in occupancies to 7% in July, which rose to 10% in August, the statement read.

For the whole financial year, occupancy rate — which measures the amount of occupied to the total available rooms — slumped to 38%, compared with 55% in 2019.   

City Lodge posted a net loss of R486.6m in its year to end-June, compared to profit of R205.5m previously, after taking R344.6m writedown charges on a number of its hotels.  

“The impairments are due to management's assessment of the negative impact of Covid-19 on forecast cash flows generated by the underlying hotels and increased risk assessments that had a material impact on discount rates applied across the portfolio,” City Lodge said  

Total revenue fell by a quarter to R1.16bn.

Shares in the company were trading 2.5% higher in afternoon deals on Thursday, trimming losses so far in 2020 to about 80% and valuing it at about R1.7bn.

gernetzkyk@businesslive.co.za

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