City Lodge Hotels is back on solid ground as it yesterday forecast a 100% rise in earnings, saying that travel trends continued to rebound and the ebb and flow demand patterns had normalised to pre-Covid-19 pandemic patterns.
City Lodge now expects its headline earnings per share and earnings per share (eps) for the year ending June 30 to show a more than 100% improvement compared to the headline loss per share of 8.7 cents and eps of 14.3 cents for the year ended June 30, 2022, before adjusting for any impairment reversals and/or charges and unrealised gains and losses.
“We are buoyed by the continued recovery of the hospitality sector, the return of international guests and the enduring travel behaviours of domestic guests,” it said.
After an extraordinarily strong festive season, as leisure demand reached new highs, January’s performance was soft, the group said. Monthly occupancies had since steadily improved and exceeded 2019 occupancy levels, peaking in March 2023 with both group and South African hotels achieving 63% occupancies.
May monthly group occupancy of 56% exceeded 2019 by just more than 4%. The group average occupancies for the 11 months to May was 56%, 18% higher than the prior period.
Average room rate (ARR) continues to rebound following the discounting which was prevalent during the Covid-19 pandemic. After being up by only 1% on 2019 ARR’s at the interim period, ARR’s for the months since January had shown high single digit percentage increases against the equivalent 2019 ARR’s, the hotel group said.
This as the May year to date ARR for 2023 was 12% higher than the prior corresponding period.
“We are encouraged by the improvement in rates, but are cognisant that there is still a way to go to recover the cumulative inflationary increases in expenses over the past three years since the onset of the Covid-19 pandemic. We continue to apply our Best Available Rate yielding methodology to optimise returns,” City Lodge said.
The group said its strategy to expand its food and beverage offering continued to deliver positive returns in addition to supporting increased occupancies, now contributed roughly 17% of its total revenue.
The improved financial well-being of the organisation has enabled the group to relax the strict cash management practices necessitated by the impact of the Covid-19 pandemic on the business, reinstate the refurbishment and maintenance programme and further adopt more sustainable alternatives to electricity and water.
In April City Lodge said it had completed the refurbishment of Road Lodge Richard’s Bay and commenced the major refurbishment of City Lodge Hotel V&A Waterfront, which was expected to complete in October.
“The new financial year will herald the further roll-out of our new generation hotel room designs through intensive reinvestment in a few older generation hotels to make the products more appealing to our changing guest profile and delivering an enhanced return for our shareholders,” it said.
Looking at financials, City Lodge said the improved overall performance and the continued strong cash generation from operations had supported the capital reinvestment programme and had resulted in a near neutral net debt position.
As at the beginning of June it had a cash balance of R297 million and borrowings of R300m. City Lodge said it continued to have access to a further R300m unused debt facilities and R115m in overdraft facilities.
“A further trading statement will be released once the group has reasonable certainty on the range,” it said.
Anthony Clark, an independent analyst as Small Talk Daily research, (@smalltalkdaily), tweeted, “Solid & highly encouraging FY2023 year-end trading update from $JSECLH CityLodge. Bounding back in occupancy; Average room rate up and Fiscal position sound. Share at 500 cents back to January levels. Makes you wonder what HSS (Tsogo) is really up to with its 10% stake in #CLH.”
BUSINESS REPORT