the g spot
City Lodge: A casualty of Covid
City Lodge has been one of the casualties of Covid, thanks to lockdowns, Zoom calls and vanishing disposable income. For more than two decades one of the JSE’s most dependable performers, the group was recently compelled to ask shareholders to support it with a R1.2bn rights issue. Much now hinges on a 2021 bounce-back. We spoke to COO Lindiwe Sangweni-Siddo.
What will win guests back next year?
LSS: International travel is very important in terms of what will get us back on track. At a macro level, [it’s about] building confidence … in our safety measures.
Is the bigger issue the fear factor, or people not travelling because they’re all on Zoom calls, for example?
LSS: Virtual platforms have obviously impacted us. If you’re in conferencing or events, it hit those businesses big time.
For us as a hotel group that has historically catered to business, we realised that we needed to reposition some of our product offering. We introduced #YourPrivateOffice and it’s growing. The sell is: you’re in the home, your Wi-Fi is not stable, you’ve got kids, you need to get out of your spouse’s hair, so come into our hotels for the day and have your private office.
We’ve also noted leisure business growing. When we opened up for interprovincial travel we were all shaking off cabin fever, and we introduced very attractive weekend rates … We now see greater movement taking place and it’s easy for families to drive to Durban, say — Durban has really surprised us. On the long weekend we hit our first 100% occupancy. Domestic tourism is an area that we must all concentrate on.
Pre-Covid, what percentage of City Lodge’s occupancy was leisure related?
LSS: Previously, we would have recorded 33% in our leisure business, and this is when we were sitting at around 60% occupancy across our hotels.
We’re coming off a much lower base, as you can imagine, and trying to close at 25% occupancy until we finally get to breakeven at 40%, forecast to be in the second quarter of 2021.
Of my current business, 38% is leisure. And that is a result of some of the campaigns we’ve been running.
There’s a big question mark as to whether City Lodge can pull through this. Can you?
LSS: We’re going to come back strong. We’ve always been a savvy company, we’ve always been an astute company when it comes to cost. We’re simple and we don’t have a very complex operation — its simplicity makes it easier for a comeback. Also, Covid has pushed us to become innovative. My example of #YourPrivateOffice was a group of us sitting around, saying: "What are we going to do? We need new products."
The naysayers might say City Lodge’s only value is in its property portfolio. Are you saying that the value is still in its operations as a hotel group?
LSS: I think it’s a combination. It’s recognising that local travellers are pinched for disposable income but want to travel, so how do we put that value-added package together?
And because we’ve always been competitively priced it’s stood us in good stead to be able to move very nimbly. So I think our operations are our strength. Yes, the asset base definitely also strengthens our case from a shareholder point of view.
What were some of the discussions you had with investors and bankers about your assets, ahead of your recent rights issue?
LSS: The banks definitely feel a greater sense of assurance in that our collateral is strong.
Do you think you’ll need to go back to the market to raise money?
LSS: We don’t anticipate so; we don’t wish so. I think shareholders have sacrificed a lot and done a lot and it’s really all eyes on management right now, on the team on the ground that is going to turn this business around.
We want to break even sooner — conservatively I keep saying second quarter next year and optimistically I say maybe even sooner.
Can SA travellers make up for a loss of international tourism?
LSS: We really need international travel, there’s no doubt. At the end of 2019 we’d recorded more than 10.2-million arrivals into SA, so it’s an integral part. I’m very focused on regional travel, because of that 10.2-million, a great part — maybe 74% — is regional, meaning coming from Southern African Development Community countries. That’s what we need to get going sooner than later.
The opening of Mozambique, for example, means we will see much more travel to our ports; people coming in to shop, people coming for medical tourism … But the government needs to help us resolve, very quickly, the stumbling blocks.
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