City Lodge Hotels Shows Strong Financial Performance in 2024 Annual Report
CITY LODGE HOTELS REPORTS STRONG FINANCIAL PERFORMANCE IN ITS 2024 ANNUAL REPORT. THE COMPANY SHOWED SIGNIFICANT GROWTH IN REVENUE, PROFITS, AND OCCUPANCY RATES.
City Lodge Hotels has published its Annual Financial Statements for the year ending 30 June 2024. The hotel group has shown strong growth in occupancy and revenue, marking a positive recovery from the effects of the pandemic. The group reports a 13% revenue increase and an occupancy rate of 58%, which is two percentage points higher than in 2023. Additionally, the group has seen a significant boost in food and beverage (F&B) revenue, which is up 22%. These results highlight City Lodge’s commitment to providing value for money and excellent service.
Here is the table summarizing City Lodge Hotels’ financial performance highlights for the year ended 30 June 2024:
| Metric | 2024 | Change | 2023 |
|---|---|---|---|
| Group Occupancy | 58% | Up 2% points | 56% |
| Revenue | R1.9bn | Up 13% | R1.7bn |
| Adjusted EBITDAR | R586m | Up 14% | R516m |
| Profit for the Year | R189m | Up 15% | R164m |
| Headline Earnings per Share (Diluted) | 33.2c | Up 10% | 30.3c |
| Adjusted Headline Earnings per Share (Diluted) | 31.8c | Up 37% | 23.2c |
| Total Dividends Declared | 15c | Up 15% | 13c |
| Return on Equity | 16.5% | Up 0.9% | 15.6% |
Economic Challenges Impact Financial Performance
According to Chief Financial Officer Dhanisha Nathoo, the financial year has been challenging but also promising. The year started with strong demand for occupancy, which was about eight percentage points ahead of the previous year. However, high inflation, increasing interest rates, and ongoing power outages (loadshedding) have put pressure on corporate demand. Political uncertainty leading up to the South African national elections has also hurt investor and consumer confidence.
Moreover, austerity measures implemented by the National Treasury in October further dampened demand. These factors caused a one percentage point drop in occupancy between November 2023 and June 2024 compared to the prior year.
The Western Cape has shown the fastest recovery in both occupancy and room rates. Johannesburg has also seen a slight increase in demand, as more business travelers return to offices, boosting travel needs. In contrast, KwaZulu-Natal has faced challenges. Socio-economic issues, sporadic beach closures, and concerns over safety and security have negatively impacted leisure demand in the region.
Financial Performance Reflects Resilience
Despite these challenges, City Lodge Hotels has delivered stronger occupancies compared to the prior year. The group achieved an 8% increase in rates and a total revenue increase of 13%, reaching R1.9 billion. Room revenue alone increased by 11%. The enhanced F&B offerings across all brands have been well-received, contributing to a 22% rise in F&B revenue, which now accounts for 19% of total revenue.
Operating costs rose by 10%, driven by higher occupancies, inflation, and a focus on consistent service delivery. Staff upskilling and adjustments in the F&B sector resulted in a 12% increase in salaries and wages, totaling R553.3 million. The group has also mitigated property cost increases by expanding solar power use, with 16 more hotels installing solar panels during the year.
Revenue and Profitability Improve
Rooms-related costs and F&B expenses remain largely variable. Increased corporate travel led to a 19% rise in commissions paid, recorded under room-related costs, which totaled R226.2 million. F&B costs increased by 17%, reaching R146.2 million. Gross profit margins for F&B improved to 60% from the previous year’s 58%.
City Lodge generated Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent (EBITDAR) of R574.4 million, up from R556.3 million last year, resulting in an EBITDAR margin of 29.8%. The adjusted EBITDAR margin, excluding unrealized foreign currency losses, stood at 30.4%.
Depreciation costs increased by 7% to R171.3 million due to higher refurbishment capital expenditures. Lease-related expenses, including depreciation on right-of-use assets and interest expenses, exceeded cash lease payments by R58.6 million.
The group’s taxation increased by 19% to R65.8 million, which includes a R20 million credit for recognizing a deferred tax asset in Namibia. The improved financial performance resulted in a profit after tax of R188.7 million, up from R163.7 million last year, with a 16% increase in diluted earnings per share to 33.2 cents.
Strategic Capital Allocation
City Lodge Hotels used its strong cash flow of R576.7 million to strengthen its balance sheet, return capital to shareholders, and continue investing in its hotels. The group repaid its interest-bearing borrowings and is now debt-free, while maintaining access to R600 million in debt facilities and R115 million in overdraft facilities.
During the year, the group repurchased shares, reducing the number of shareholders by more than half. This included acquiring 0.3 million shares in the odd-lot offer at an average price of R4.71 per share and repurchasing 11.4 million shares at an average price of R4.37. The total consideration for all shares acquired amounted to R51.6 million.
Investments in Sustainability and Growth
The group embarked on an extensive capital expenditure program. This includes completing room refurbishments at City Lodge Hotel at OR Tambo International Airport and City Lodge Hotel V&A Waterfront. Additionally, phase two of solar installations was completed, bringing the total number of hotels with solar energy access to 41. These installations generate 16.3% of the group’s energy needs, with battery storage added to two hotels as part of a pilot program.
Water resilience projects continue, with new boreholes, filtration plants, and additional water storage tanks being implemented. The group is also working on a pipeline of refurbishment projects at several other hotels, including City Lodge Hotel Lynnwood and Town Lodge Bellville.
City Lodge Hotels’ efforts in transformation and diversity have resulted in an improved B-BBEE level 2 scorecard rating.
Outlook for The Financial Performance Amid Challenges
Looking ahead, City Lodge Hotels is optimistic about the future. The formation of a Government of National Unity and potential interest rate cuts later this year are expected to bring relief to the stagnant economy. The group has authorized R459.4 million in capital commitments for the 2025 financial year, focusing on modernizing hotels, enhancing guest experiences through technology, and prioritizing environmental sustainability.
The group is also actively exploring opportunities for new hotels in high-growth areas within South Africa. While occupancy rates in the early months of the 2025 financial year have been slightly lower than the previous year, City Lodge remains hopeful that improved economic conditions and consumer confidence will boost demand.
City Lodge Hotels has declared a final dividend of 9.00 cents per ordinary share, up from 8.00 cents last year. This reflects the group’s commitment to delivering value to its shareholders while continuing to invest in its future growth.
