City Lodge beginning to see some improvement in pandemic-struck occupancies
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CITY Lodge Hotels passed its dividend after headline earnings per share improved only slightly to -91 cents loss for the year to June 30, from a -123c per share loss in 2020, as room occupancy at its 63 hotels came in at only 19 percent.
The hospitality industry has been trading at extremely low levels worldwide through the Covid-19 pandemic and business leisure travel had slumped.
Total industry occupancies for July, a turbulent month of civil unrest and lockdown restrictions to travel, came in at only 16 percent, but this had improved to 24 percent in August.
As at September 9, the group had 51 out of the 56 hotels open in South Africa and five out of seven open in the rest of Africa.
A R894.4 million net loss was incurred for the 2021 financial year. Revenue slumped 56 percent to R510m. The group’s average occupancy was even lower than the 38 percent in 2020.
Its management said on Friday that the group had nevertheless demonstrated agility and innovation by operating a solutions-based environment, including the ability to temporarily suspend and reactivate hotels as demand determines.
They said the success of the vaccination programme was integral to the recovery of the hospitality industry as a whole, and so far, the take-up of vaccinations had been encouraging, with almost 300 000 vaccinations being administered per day. As of August 31, more than 12 million vaccinations had been administered.
Occupancies based on total inventory had steadily improved from the last quarter of the 2020 financial year, which ended on only 4 percent occupancies, to 7 percent in July 2020, when the group reopened a total of 36 hotels as the level 5 hard lockdown regulations were slightly relaxed.
The June 30 year-end saw a monthly occupancy of 25 percent through adjusted level 4 restrictions. In 2019, occupancies came in at 55 percent.
Operating cost reductions were achieved from cost-containment measures in place from April 2020 to mitigate losses arising from minimal revenues. Interest expense fell by R26.8m, mainly due to redemption and repayment of BEE preference shares and BEE interest-bearing loans, in December 2020.
The prolonged recovery of the sector and the vaccine roll-out also led to the recognition of additional impairments to property, plant and equipment of R390.4m (2020: R245.5m).
This was mainly on impairment to fair value less cost to sell of the East African assets held for sale, reversal of impairment on right-of-use assets of R48.9m (2020: impairment loss R242.9m), impairment of goodwill of R10.6m (2020:R0) and impairment of VAT receivable of R25.9m (2020: R0).
Last August’s rights offer raised R1.2 billion, providing a much-needed injection of liquidity and had led to the group settling its broad-based black economic empowerment (BBBEE) debt through the redemption of the BEE preference shares and settlement of accrued preference dividends, term loans and interest accrued totalling R764.5m in December 2020.
The group’s lenders had been supportive during the challenges.
Some R650m had been drawn off loan facilities of R800m and the group also had access to a R115m overdraft facility.
The 168-room Courtyard Hotel Waterfall City opened on March 1. The new flagship of the Courtyard brand, located in Waterfall City in Midrand, marked a significant milestone in hotel design and development, featuring technological innovation, state-ofthe-art conference facilities and a full culinary team. Initial trading had been encouraging, management said.
The sale of the four hotels in East Africa was expected to be complete within 22 weeks of signing date in July this year. The proceeds would be used to reduce debt, increase liquidity and support working capital requirements.
Local industry associations like Tourism Business Council of South Africa and South Africa Tourism are lobbying hard to get South Africa moved off the “Red List” of all European and North American countries. Good progress has been made in Germany, Switzerland, Netherlands and Canada who have removed South Africa from the “Red List”.
City Lodge’s share price closed 1.96 percent lower at R4 on the JSE on Friday.