JULIUS BAUMANN

Aviation and Tourism Editor

CITY Lodge Hotels has weathered the slowdown in the economy well, reporting a 4,2% rise in normalised headline earnings of R236m in the year to June 30.

This was achieved after an 11% increase in revenue to R665m.

Occupancies were maintained at 77%, down from 82% last year. CEO Clifford Ross said while occupancies had dropped this year, the number of rooms sold increased as more rooms became available in the year under review.

He said trading in April had been badly affected by the number of public holidays and the general elections. “We had only 12 business days in April. As a hotel group catering largely for the business market, trading was very poor.”

He said in the first six months occupancies averaged 81%, with occupancies at 77% for the full year. “This implies occupancies in the second half were about 73%, largely due to a dismal April.”

The group’s headline earnings were less pleasing, falling 42% to R131,96m, largely due to a R56,9m charge related to the empowerment transaction the group concluded last July. Andrew Widegger, the group’s financial and development director, said most of the BEE charges were once off and they would not reappear next year.

Ross said the group was pressing ahead with its aggressive expansion plan in the year ahead.

City Lodge has nine new hotels and one extension to an existing hotel in various stages of development, all to be completed ahead of next year’s World Cup.

The group’s largest hotel to date, the 303-room City Lodge OR Tambo Airport, is due to open towards the end of the first quarter of next year, while the 211-room City Lodge Fourways is on track for completion by December.

The group has settled a legal dispute holding up the development of the Town Lodge, Port Elizabeth and construction has begun.

In Pretoria, construction at two new properties is proceeding well while construction of hotels planned for Port Elizabeth and Bloemfontein airports starts soon.

Once construction on these projects has been completed, the group will have increased the number of its hotels to 53 with 6629 available rooms, a 36% increase in inventory. Widegger said the group had secured a R400m facility to fund the expansion, of which R100m had been drawn down.

Chairman Hans Enderle said due to the cost of its expansion plans, the group had also revised its policy of paying out 70% of normalised earnings for the final dividend to 60%. The group declared a final dividend of 158c a share, down from 194c last year.

Ross said the trading in the first weeks of the new financial year were in line with the softer trend observed in the first six months of the calendar year and occupancies would remain under pressure in the short term. However, he was also not too concerned by the huge increase in available rooms in the group’s portfolio.

“Most of the hotels will open ahead of the World Cup and therefore will benefit from the tournament. It is what happens after the tournament that we need to be concerned about.”

This email address is being protected from spambots. You need JavaScript enabled to view it.

Source: Business Day