The increases in interest rates in the past few months were unlikely to dent the performance of City Lodge, CEO Clifford Ross said on Wednesday.

City Lodge's performance in the year ended June benefited from the buoyant domestic economy, with average hotel occupancies rising from 77% to 79% - the highest annual average in a decade.

"We do not believe that the 100 basis points increases in interest rates will have a material impact on our performance," Ross said. "Maybe the interest rate hikes will give people a reality check. Inflation is still within the target band."

He said the company stood to benefit from government and parastatal infrastructure expenditure, which is expected to stimulate domestic business travel.

The midweek business traveller is City Lodge's core market. Ross said the company had, however, seen an increase in leisure travelling at weekends.

"The advent of low-cost airlines has opened the leisure market even further."

Because of the emerging middle class, the company had seen a "new class" of first-time holiday makers

City Lodge has set aside R143m for new hotels, extensions on existing properties and general refurbishments.

The company's current expansion projects include the construction of a 106-room Town Lodge in Roodepoort, the 90-room Road Lodge in East London and an addition of 24 rooms to Road Lodge in Germiston.

A site had been acquired in Richards Bay, where a 90-room Road Lodge would be built "once the necessary regulatory approvals are in place".

Ross said the company was evaluating other sites around the country.

The company's brands - Courtyard, City Lodge, Town Lodge and Road Lodge - all performed well during the year.

City Lodge revenue increased 13% to R442,1m. Operating profit was up 17% to R211,5m. Headline earnings increased 18% to R144,6m, with headline earnings a share also up 18%, to 337,9c. Net profit increased 17% to R143m.

City Lodge declared a final dividend of 121c a share, taking the total distribution to shareholders to 238c a share, up from last year's 203c a share.

Business Day
Publisher: I-Net Bridge
Source: I-Net Bridge