City Lodge reopens all 56 of its SA hotels

Occupancies at 46% to date in February compared with 16% in July 2021.
The sale of its East Africa operations means the group will be able to resume its South African hotel refurbishment plans. Image: Supplied

JSE-listed City Lodge Hotel Group has reopened all 56 of its South African hotels and six of its seven hotels in the rest of Africa as occupancies slowly improve from the devastating impact of the Covid-19 pandemic.

The group has significantly narrowed its net loss in the six months to end-December 2021 and anticipates completing the disposal of its East Africa operations for R460 million before the end of April.

Read: City Lodge losses widen but CEO hopes worst of the pandemic is over

The 127-room Fairview Hotel, 84-room Town Lodge Upper Hill and 171-room City Lodge Hotel at Two Rivers Mall in Nairobi in Kenya have been sold to Ukarimu Limited, which is owned by leading global sustainable real estate and infrastructure investor Actis Africa Real Estate.

The 148-room City Lodge Hotel Dar es Salaam in Tanzania has been sold to Faraja Limited, also owned by Actis.

City Lodge CEO Andrew Widegger said on Friday the transaction has received unconditional approval from the competition commissions in Kenya and Tanzania and the proceeds of the disposals will be used to strengthen the group’s financial position and enable it to resume hotel refurbishment plans.

Occupancies

Widegger said South African occupancies to date for the month of February 2022 are running at 46% and the group anticipates improved monthly occupancy and pricing recovery during the next two trading quarters.

He said average occupancies for the six months to end-December at the group’s South African operations, based on its total hotel room inventory, was 32%, with the low of 16% in July 2021 and a high of 43% in November 2021.

An occupancy average of 30% was achieved for all hotels in the group in the six months to end-December compared to 17% in the corresponding period in 2020.

Statistics SA reported recently that total income for the tourist accommodation industry, in nominal terms, increased by 46.6% in December 2021 compared with the same month in 2020.

It said income from accommodation increased by 18.4% year on year in December 2021, which it attributed to an 11.5% increase in the number of stay unit nights sold and a 6.3% increase in the average income per stay unit night sold.

Widegger said the discovery of the omicron variant in South Africa in late November 2021, and the almost overnight shutdown of international travel routes to South Africa, resulted in a setback in demand, which was substantially picked up by the domestic leisure market.

December 2021 occupancies for South African open hotels averaged 43% with 53 hotels open, and five hotels open in the rest of Africa, he said.

“The fourth wave of Covid-19 infections and the temporary closure of international borders to flights departing from southern Africa had a limited impact of the group’s operations.

“However, the relaxing of Alert Level 1 restrictions since December 30 2021 has had a positive impact on travel confidence and guest travel during late night hours following the cancellation of curfews,” he said.

Travel hesitancy

Widegger said the new financial year had a particularly tumultuous start due to the severe third wave of Covid-19 infections and hospitalisations caused by the delta variant.

This caused travel hesitancy, as did the Level 4 lockdown restrictions that banned leisure travel to and from Gauteng during the key winter school holiday period.

“The violent civil unrest in South Africa in July increased the negative impact on trading operations over this period,” he added.

“Gratefully, the group suffered no property damage as a result of the protests in KwaZulu-Natal.

“However, the majority of the hotels in the area closed temporarily due to safety concerns and lack of fuel and food supplies, and resumed trading as soon as the situation stabilised.”

The numbers 

The steady improvement in occupancies and demand for hospitality services over the last few months had a positive impact on City Lodge’s financial performance.

Total revenue for the period doubled to R436 million from R215.6 million in the prior period.

The group generated profit from operating activities before interest, tax, depreciation and amortisation (Ebitda) of R122.6 million compared to the R131.7 million loss in the prior period.

The group’s net loss after tax decreased by 94% to R33.7 million from R550.4 million.

The diluted and undiluted headline loss per share improved by 90% to a loss of six cents from the adjusted loss of 60 cents in the prior period.

The group generated positive cash flows from operating activities of R13.1 million, after offsetting the impact of the increase in working capital of R45.1 million from increased trading activity and settlement of accruals associated with the Courtyard Hotel Waterfall City fit-out, compared to negative cash flows from operations of R68.9 million in the prior period.

Read:

A dividend was not declared.

As at end-December 2021, the group had a net cash and cash equivalents overdraft of R51 million compared to R35.3 million in December 2020.

Current liabilities exceeded its current assets, excluding assets held for sale, by R424.8 million compared to R9.4 million in the prior period.

City Lodge directors believe the group has sufficient liquidity to meet its obligations.

Widegger said the group has assessed and implemented various liquidity and capital measures to help ensure that it can withstand the prolonged industry recovery period due to Covid-19 and meet the liquidity, working capital and expenses requirements.

These include:

  • Obtaining access to an additional R80 million of available term loan facilities and R48.4 million of short term overdraft facilities;
  • Securing waivers for original debt covenants for all measurement periods up to September 2022;
  • Having continued cost conservation measures in place, including reduced salaries and the suspension of contract workers until there is a consistent recovery trend; and
  • The proceeds from the sale of its East Africa operations are expected by April 2022 and will be applied to the settlement of the interest-bearing borrowings maturing within the next 12 months.

Shares in City Lodge rose 3.47% on Friday to close at R5.36.

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No point in stimulating tourism whilst the Municipalities are unable to deal with the homeless flooding into our popular tourism hubs….until the government declares the State of Emergency over, the Municipalities are powerless to enact the bylaws that enable them to legally deal with the homeless to everyone’s benefit including the homeless themselves.

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