City Lodge Hotel Group Reports 95% Increase in Revenue for H2 2022

City Lodge Hotel
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South African hotel group, City Lodge Hotels, has posted a 95% increase in revenue for the six months to 31 December 2022 compared to the same period in 2021, with revenues up to ZAR848m ($55m). CEO Andrew Widegger said the return to normal trading conditions had helped to boost figures, with occupancy rates increasing by more than 20% compared to pre-pandemic levels. Despite promising numbers, City Lodge highlighted supply chain issues and electricity shortages as some of the issues hampering business.

City Lodge Hotel Group has released its unaudited consolidated interim financial results for H2 2022, covering the six months ending 31 December 2022. The Group has experienced a 95% increase in revenue, which totaled R848m (2021: R436m). The average occupancy for the Group rose to 57% (2021: 30%), with EBITDAR increasing to R304m (2021: R125m). The earnings/(loss) per share has improved to 17c (2021: (6c)), and the Headline earnings/(loss) per share are also 17c (2021: (6c)), with dividends declared per share of 5c (2021: Nil).

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Commentary on the Group’s Performance

The pandemic-related impacts on the Group’s operations are tapering off, and the revenue lost during the past two years is being recovered. The improvement in domestic business and leisure travel and foreign tourists visiting South Africa contributes to this recovery. In December 2022, StatsSA reported a significant increase of 158% in foreign tourists, totaling 677,838, compared to 263,108 foreign tourists in December 2021. The trend is promising but still below the December 2019 numbers of 981,038.

The Group’s CEO, Andrew Widegger, is pleased to report sustained growth in average occupancies, with December 2022 monthly occupancies closing at 62%, compared to 50% in 2019. South African hotels recorded average occupancies of 58% (2021: 32%) compared to 57% in 2019, with an increase in average room rates of 10% compared to 2021, but only 1% above 2019.

Challenges

In South Africa, the business has been hampered by electricity load shedding, interruptions to water supply, and higher operational costs. Interruptions such as those caused by the war in Ukraine have resulted in longer lead times and higher prices, contributing to operational costs and delays to planned capital investment projects.

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Financial Review

At City Lodge branded hotels, new food and beverage offerings and service enhancements resulted in an increase of 132% in food and beverage revenue, which accounts for 16% of total revenue at Town Lodge and Road Lodge. The Group settled Covid-19 business interruption claims for R27m, which is included in other income.

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As a result of operating costs, salaries and wages, property costs, and running generators during power outages, revenue for the six months ended 31 December 2022 rose by 94% to R848m (2021: R436m). As of 31 December 2022, the Group generated EBITDAR of R303.8m, an increase of 143% (2021: R124.9m) and an increase of 35.8% (2021: 28.7%). From a loss of R33.8m in the previous period, profit after tax rose to R97.9m.

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City Lodge Hotel Group’s strategic developments, refurbishment programs, and environmental sustainability journey

Strategic development – As a result of the pandemic, a new demographic of guests has emerged that the City Lodge Hotel Group is well-positioned to attract. A growing leisure market has driven the Group’s ability to expand its offering while enhancing its offering for regular leisure and business travelers. Town Lodges and Road Lodges offer lunch and dinner menus, and City Lodge Hotels and Courtyard Hotels offer revamped lunch and dinner menus. Additionally, the company will launch cocktail and drinks menus in 2023.

Best Available Rate The City Lodge Hotel Group’s Best Available Rate continues to grow revenue by allowing hotels to optimize rates during periods of high demand and offering competitive pricing during low demand periods. Following the pandemic, the hotel industry is experiencing a more consistent buying pattern, and the Group is deriving maximum benefit from its AI investment.

Refurbishment Programs – The Group’s refurbishment programs are underway to ensure its products are in top condition. OR Tambo International Airport’s City Lodge Hotel has completed its kitchen extension, which includes equipment installation, and now offers food and beverage solutions to guests 24 hours a day. 68 Studio Rooms and six Junior Suites were added to the Courtyard Hotel Waterfall City in mid-December 2022. The refurbishment at Road Lodge Richards Bay started in January 2023 and is expected to be completed by the end of April 2023. City Lodge Hotel V&A Waterfront will commence its big revamp of bedrooms and commercial areas in April 2023, with completion expected by the end of October 2023.

Environmental Sustainability Journey – The Group’s environmental sustainability journey is gathering momentum to mitigate against ongoing energy and water scarcity, with more hotels earmarked for solar solutions and four more borehole installations scheduled for this year. These steps will give guests a seamless experience while ensuring improved business resilience.

Outlook

Despite challenges such as high unemployment, poverty, crime, and corruption, the Group has achieved encouraging occupancy growth, with group occupancy for January 2023 of 43% and up to 23 February 2023 of 59%. The Group’s guests will seek hotels with a seamless operating environment. They can run their business and personal lives online hassle-free, enjoy delicious and contemporary food and beverages, and meet and relax. They will be after great rates and good deals, which the company’s technology tools help to deliver. Additionally, they will expect service excellence from check-in to check-out, delivered by the company’s friendly, professional staff.

Declaration of Ordinary Cash Dividend

The City Lodge Hotel Group has declared an interim dividend of 5.0 cents per ordinary share (gross) for the six months ended 31 December 2022. The dividend will be subject to Dividend Tax. The last date to trade cum dividends is Tuesday, 14 March 2023. Shares will commence trading ex-dividend on Wednesday, 15 March 2023; the record date is Friday, 17 March 2023.

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