City Lodge has high hopes for poll shake-up
City Lodge Hotels is optimistic the outcome of municipal elections will put pressure on the ruling parties to boost economic activity, which may improve sentiment for the business traveller.
One of SA’s largest hotel groups, which derives most of its revenue from the corporate business traveller, City Lodge said on Friday occupancy levels across its establishments — which include the Courtyard, Town Lodge, Road Lodge and Fairview hotels — were little changed in the year to June.
But CEO Clifford Ross said he believed group occupancies would rise from current levels of 66% as “there was an air of confidence coming”.
This confidence would be driven by the wake-up call voters had given the ANC government, whose support fell from 62% in 2011 to 54% in 2016.
“There are interesting times ahead of us,” said Ross.
He was referring to coalition talks that are under way involving the ANC and the DA with smaller parties to gain control of Tshwane and Johannesburg.
“Whichever party gains control knows that they will have to perform and get business done,” he said.
This would mean improving service delivery of housing, water and sanitation, reducing unemployment from near record levels of about 27% and increasing economic growth, which is forecast to be zero this year by the South African Reserve Bank.
The end result would be a boost to business confidence, which would benefit City Lodge and other companies in SA that have been affected by the soured business mood.
Although City Lodge struggled to increase the number of business clients passing through its doors in the year to June, especially at its Newtown Hotel, which opened in February, the hotelier increased total comprehensive income in the period.
Total comprehensive income jumped 12% to R354.2m, helped by stronger revenues and above-inflation increases at its South African hotels, which make up almost 90% of total revenue.
But the group, which is strongly pushing expansion across the rest of the continent, suffered a setback in Uganda and Mozambique during the reporting period.
In Uganda, failure to agree with the prospective landlord on financial terms relating to the 150-room City Lodge Hotel caused the group to walk away from that particular site.
“We were not happy with the financial terms by the landlord. The building costs came in too high and we could not make the financial feasibility work,” said City Lodge chief financial officer Andrew Widegger.
In Maputo, the group’s plans to build a 148-room hotel had been put on ice due to delays in getting approval from the country’s central bank.
Mozambique is struggling with a debt crisis and rising political tensions.
In April, the IMF froze all aid after the lender discovered the government owed $1bn more to creditors than it had previously disclosed.
Despite the setbacks in Uganda and Mozambique, City Lodge said it would still pursue expansion there as those countries presented promising opportunities. City Lodge said on Friday its hotels in Kenya and Namibia were still on track to be opened in 2017.
The group, which also has a hotel in Botswana, said it would continue assessing opportunities in Southern Africa and East Africa to meet its objectives of boosting revenue from outside SA from 10% to 30%.