City Lodge almost doubled interim revenue and declared a dividend as consumers resumed travelling and eating out after the lifting of Covid-19 restrictions.
The hotel group reported headline earnings per share of 17c in the six months to end-December — compared with a loss of 6c in the previous corresponding period — on a 94% jump in revenue to R848m.
It will pay a dividend of 5c a share after suspending payments during the pandemic.
Profit was also boosted by a one-off insurance payment of R27m — equating to almost 10% of operating profit — for the interruption of business during the pandemic.
The group’s average occupancy rate recovered to 57% from 30%. Still, the average rate is just one percentage point above that of 2019 before the coronavirus swept across the globe.
The number is in line with official tourist statistics for December. They show SA did not attract the same number of tourists in the festive season as it had done in the same period before the pandemic — even as tourism in East African countries such as Kenya rebounded to levels above those of 2019.
In December 2022, Stats SA reported 677,838 foreign tourists, more than double the number reported in December 2021 but still well below December 2019’s 981,038.
City Lodge relies on domestic and business tourists at two-thirds of its hotels in Gauteng and offers one-star through to five-star hotels to capture a wide range of budgets.
But the group noted that SA consumers are strained “by the higher prices of groceries, petrol price fluctuations, and the increased interest rate”. It therefore expects a period of “economic hardship and lower household disposable income”.
Still, the hospitality company is in a healthier financial position, with a year-end cash balance of R247.9m compared with an overdraft of R50.9m previously.
City Lodge uses software to decide on what it calls the “best available rate”, with prices adjusted higher or lower depending on demand. It said its software is better able to forecast booking patterns now that the pandemic is over.
The company repaid almost half its R600m debt after selling East African hotels and resumed a maintenance programme as traveller volumes improved.
Operational costs rose as the group had to manage more guests, end prepandemic salary cuts and resume hotel maintenance programmes while also carrying the cost of load-shedding.
Staff costs increased 43% to R230.3m after the previous period’s overheads were reduced by a 30% cut in salaries and wages. Property costs increased 25% due to rising water, rates and power tariffs as well as higher usage due to the increased number of guests.
The cost of running the group’s backup generators during power outages increased to R7.4m from R900,000.
The City Lodge hotel at OR Tambo International Airport completed a kitchen extension and now offers meals and drinks and room service 24 hours a day. The group has also focused on adding to its food and beverages offerings since the pandemic to drive revenue diversification.
It improved food services at its Town Lodge and Road Lodge brands and reported overall food revenue more than doubled and now accounts for 16% of total revenue.
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