Johannesburg - JSE-listed City Lodge Hotels group is forging ahead with its R1 billion expansion into Africa but still believes there are opportunities in the South African market.
City Lodge chief executive Clifford Ross said the group was still hopeful about opening five new hotels in Kenya, Tanzania, Uganda, Mozambique and Namibia by the end of next year, despite encountering difficulties with the site for its planned 150-room City Lodge Hotel Kampala in Uganda.
Ross said diversifying the group’s income streams and reducing country risk were taken into account when the group decided to expand into southern and eastern Africa.
“But there are still opportunities in South Africa and we will still do one or two (new) hotels a year in South Africa over the next five years.
“Last year we opened three hotels, but this year we (have) not made any announcements” yet, he said.
Ross said the planned site for its Uganda hotel was difficult and put the building costs “out of the ballpark to have a viable development there”.
The group was still in talks with the developer about cutting costs to make it viable.
“It’s the one most vulnerable of our planned new hotels, but we will certainly look at another site in Uganda,” he said.
Ross was optimistic the other new planned hotels in Africa would open next year.
Progress
He said the site for the 169-room City Lodge Hotel Two Rivers in Nairobi in Kenya had been handed over to the contractor and earthworks and foundations had begun. The hotel was expected to open in the second quarter of next year.
Ross said the handover of the basement by the landlord, on top of which the 151-room Town Lodge Windhoek in Namibia would be built, was on schedule for the end of April.
This will allow construction to commence, with the hotel expected to open in the second quarter of next year.
City Lodge Hotels yesterday reported a 17.6 percent growth in fully diluted normalised headline earnings a share to 447c in the six months to December from 380.2c in the previous corresponding period.
Revenue increased by 17.3 percent to R753.4 million .
Average occupancies at its South African operations rose by 1 percentage point to 69 percent, boosting local revenue by 17.3 percent to R684.3m.
South African operating costs, on a normalised basis, were well contained, increasing by only 4.5 percent on a room sold basis.
Ross said it was not able to quantify the negative impact caused by the changes to the visa requirements for foreign visitors to South Africa, which affected the leisure market that only accounted for about 15 percent of the group’s overall market.
Lost chance
“If any barriers or restrictions are put up for leisure travellers, they will look for alternatives. As a country we have lost out on the weakness of the rand because this really should have been the time that we had double-digit growth in the international leisure market,” he said.
An interim dividend of 269c was declared, which is 17 percent higher than for the prior corresponding period.
Ross said the trend of higher occupancies had continued into the second half of the group’s financial year but at a slower pace.
He said it was likely that business and government travel would be negatively affected in the lead up to and the holding of local government elections this year.
Shares in City Lodge rose 2.68 percent to close at R140 on the JSE yesterday.
BUSINESS REPORT