Hotel group feels the pressure
15 Feb 2019 - by
City Lodge Hotels Group released its interim results this week, showing the pressure the local hospitality industry is facing as a result of the tough economic conditions the country finds itself in.
During the six months to December 31, 2018, average occupancies for the group fell to 58% from 63% in the previous interim period. In South Africa, where the group has the majority of its hotels, occupancies fell by three percentage points to 61%. According to the group, this is largely due to depressed business and consumer confidence ahead of the upcoming national elections.
Overall, the group’s total revenue increased by 3% to R807,4 million. This came from improvements outside of South Africa, specifically in Kenya, as well as a full period contribution from Town Lodge Windhoek, Namibia. Although they saw growth, the achieved room rates in South Africa for the group increased by less than inflation, something that can be attributed to the tough economic conditions and a highly competitive operating environment.
Not all doom and gloom
Looking forward to the second half of the financial year, the group says it is expecting the trading conditions in South Africa to remain under pressure until the May 8 national elections.
Andrew Widegger, group CEO, points out that in the first six weeks of the second half of the financial year there have been improvements, although the trend has not been consistently observed. “The group is encouraged by the overall economic trajectory outlined and envisaged by President Cyril Ramaphosa, which could play an important role in improving sentiment and activity.”
“I think we will get an election result that will be very positive for SA and business,” Widegger is quoted as saying in Business Day. “Better policies will come and investment and economic growth will return. Our business will improve along with it.”
Showing its continued commitment and confidence in South Africa, the group has also signed a lease and development agreement for a 168-room hotel in Waterfall City, north of Johannesburg. The hotel will span 10 levels, and feature a rooftop bar and a 100-seat conference facility. Construction on The Courtyard Hotel is expected to start in March and is scheduled for completion in October next year.
Meanwhile, construction on the group’s 154 room Town Lodge Umhlanga Ridge is on schedule, with plans to open in July. And the development of a 90-room hotel, the Road Lodge Polokwane, is awaiting approval.