City Lodge saw its hotel occupancies fall 4 percent in the six months to December 31, 2019, as consumers tightened their belts amid a moribund South African economy.
City Lodge said yesterday that average occupancies declined to 54 percent from 58 percent in the previous interim period.
The group said room rate increases in South Africa were below inflation as a result of increased capacity, competitor discounting and pressure on business and consumer travel budgets.
Despite all of its African hotels showing improved occupancies on the previous corresponding period, City Lodge said the group continued to perform below expectations.
“Occupancies in South Africa, where the group has the majority of its hotels, were also 4 percentage points lower, declining to 57 percent from 61 percent in a challenging operating environment impacted by persistent low levels of economic growth and business and consumer confidence,” it said.
“It is hoped that the forthcoming National Budget announcement, along with efforts to restructure Eskom and other state-owned enterprises, will help to revive the economy.”
The South African economy is expected to grow at a muted 0.4 percent in 2019, partly due to unstable energy supply, down from 1.5 percent forecast at the beginning of last year.
On a brighter note, City Lodge chief executive Andrew Widegger said the first seven weeks of the second half of the financial year had seen some better trends, with occupancies running at similar levels to the prior year.
“The group’s portfolio of hotels is in excellent shape to benefit from economic growth and improved business and consumer confidence levels, as and when they occur,” Widegger said.
City Lodge said it was encouraged by some new government initiatives such as the e-visa system being piloted in Kenya, and the long-awaited scrapping of the requirement for unabridged birth certificates for foreign minors.
“These are both measures that can assist the growth of inbound tourism to South Africa, yet on the other hand, the coronavirus may have a negative impact on global travel,” it said.
City Lodge’s total revenue increased by 0.2 percent to R809.3 million with a decrease in revenue in South Africa being partially offset by increased revenue in the other African countries.
Normalised profit before tax for the group declined by 50 percent to R112.8m while normalised headline earnings declined by 51 percent to R80.4m. In South Africa, the normalised headline earnings at R132.6m were down by 14 percent. Fully diluted normalised headline earnings per share decreased by 51 percent to 184.8 cents.
The group declared a gross interim dividend of 153c, a third lower than in the previous year.
City Lodge's shares closed 2.07 percent lower at R53.37 on the JSE yesterday.