WHAT we do

The City Lodge Hotel Group is a multi-brand chain offering a variety of locations, features and budget choices to business and leisure travellers.




This report details the activities of the remuneration and nomination committee ("Remcom") and provides an overview of the company's philosophy, principles and approach with regard to remuneration, specifically highlighting remuneration applicable to executive directors ("ED"), the executive committee ("Exco") and NEDs, as well as its implementation during the year.


Remcom is responsible for overseeing the governance of remuneration matters. It is specifically responsible for ensuring that the company remunerates its EDs and senior executives fairly and responsibly, and that the remuneration policies in place serve the company's long-term interests. In discharging its responsibility, Remcom reviews the remuneration policy and its implementation on an annual basis. It also considers management's recommendations and in turn makes recommendations to the board on the fees payable to the NEDs, which recommendation is subject to shareholder approval.

Specifics with regard to the composition, role and responsibilities of the committee, activities undertaken during the year and the remuneration policy are disclosed.


The remuneration policy, which is to be read in conjunction with the employee's letter of appointment, employee handbook containing the company's code of conduct, applicable employment legislation and the rules of the short-term and long-term incentive schemes, will be tabled to shareholders for a non-binding advisory vote at the annual general meeting scheduled to take place on 9 November 2017. At the 2016 annual general meeting held on 10 November, 98,23% of shareholders represented or present, voted in favour of the resolution.

Reward philosophy and strategy statement

The company’s policy is to pay a market rate comparable to similar roles within the market and aims to set its guaranteed pay at the upper quartile in respect of Exco, and between the mean and upper quartile within a normal distribution range of the relevant industry (hotels and hospitality) in respect of the remaining employees.

City Lodge is committed to developing, implementing and upholding total reward strategies and practices which:

  • are consistent with, and aligned to the vision, mission, values and business objectives of the company;
  • pursue the best interests of the company, its shareholders, and its internal and external stakeholder base;
  • offer an appropriate mix of fixed remuneration and variable remuneration, which includes shortterm and long-term incentives;
  • are fair, equitable and justifiable;
  • are market-related;
  • are driven by, and show a commitment to, rewarding performance, integrity and quality innovation;
  • offer competitive benefits; and
  • articulate a distinctive value proposition for current and prospective employees.

Total reward strategy and remuneration mix

The total reward strategy is aimed at:

  • providing an integrated approach for reward management that effectively attracts, motivates, engages and retains the talent required to achieve the desired business results;
  • aligning reward practices with business strategy through a process of analysis, thereby ensuring that they serve the business objectives; and
  • adhering to legal, ethical and best practice standards, and reflecting good corporate governance and citizenship by complying with and exceeding industry and statutory minimum standards.
Remuneration structure

All employees are issued with a letter of appointment detailing their remuneration as well as notice period, which is one month for all staff, except for general manager, head office managers and heads of departments where two months’ notice applies and Exco where three months’ notice applies.

The various components of remuneration applicable to the group are as follows:

Element of pay type       Purpose       Performance period       Performance measures       Settlement       Application

Total guaranteed pay (“TGP”) (monthly salary, retirement funding based on pensionable salary, medical aid, death and disability cover)



The basis of the company’s ability to attract and retain the required skills.

Reflects the individual’s role and position.


1 August to 31 July



Reviewed annually, having regard to the approved increase mandate, benchmark data received from independent remuneration consultants, where applicable, macroeconomic factors, inflation, affordability, scarcity of skills, complexity of role, experience and performance.


Payment takes place monthly and comprises a mix of cash salary as well as compulsory and discretionary benefits.


Employees below manager level*/**

General managers*

Senior and head office management*



Short-term incentive

Performance appraisal linked (“PAL”) bonus


Drive a “pay for performance” culture and reward the achievement of business objectives.


Biannually, 1 July to 31 December and 1 January to 30 June.


To create a performance culture and reward employees for achieving strong annual results when compared against predetermined targets and in so doing, aligning employee focus and shareholder experience.



Cash settlement capped at a percentage of GP depending on individual’s role. The standard target payout level is generally expressed as a percentage of salary and then moderated by the performance score.


Assistant general managers

General managers

Senior and head office management

The merit of putting a qualifying employee forward for participation is debated between the divisional director: operations or head of division and the CE and once reviewed by the external auditors, qualifying candidates are recommended to Remcom for approval.

Executive committee performance management scheme (“ECPMS”)


Drive a “pay for performance” culture and reward the achievement of business objectives and in so doing align employee focus with shareholder expectations while simultaneously promoting retention through share ownership.



Financial measure: 1 July to 31 December and 1 January to 30 June

Non-financial measure: 1 July to 30 June


Financial targets (65% weighting) are measured biannually with reference to the group average achieved for PAL.

Non-financial measures (35% weighting) comprise individual key performance areas ("KPAs") which in turn have reference to the group's strategic objectives.

Targets for measuring the achievement of the non-financial performance criteria are individually tailored and are predetermined prior to the commencement of an incentive period, in consultation with the chief executive.

Achievement of these targets incrementally trigger awards.

A point scale of 0 to 7 points per KPA is utilised to measure achievement against each set and agreed KPA.

Below target threshold:

  • 0 points;
  • Target threshold: 1 point;
  • On-target: 5 points; and
  • Stretch target: 7 points.

Financial measure: February and August

Non-financial measure: August



Executive director incentive scheme (“EDIS”)


Drive a “pay for performance” culture and reward the achievement of business objectives and in so doing align employee focus with shareholder expectations while simultaneously promoting retention through share ownership.



Annually: 1 July to 30 June



Financial drivers (65% weighting) comprise the weighting assigned to the group pool drivers, namely normalised group EBITDA (70%) and normalised fully diluted HEPS (30%), with the percentage target performance scale reflecting a bonus rating of 75% if the percentage target achieved is 85% for EBITDA and 90% for HEPS.

The percentage threshold performance scale will reflect a bonus rating of 100% if the percentage target achieved is 100% for both EBITDA and HEPS.

The percentage stretch performance scale will reflect a bonus rating of:

  • 175% if the percentage target achieved is 110% for EBITDA and 115% for HEPS; and
  • 250% if the percentage target achieved is 115% for EBITDA and 130% for HEPS.

Non-financial measures (35% weighting) include, but are not limited to, the achievement of, alternatively progress made towards the achievement of, strategic objectives, group performance against peers/competitors, increase in profit, completing projects within budget and/or prior to deadline and other key performance drivers of the business, eg ROE.

Scale used in evaluating achievement:

  • Threshold target percentage achieved = 80% of each driver;
  • On-target percentage achieved = 100% of each driver; and
  • Stretch target percentage achieved = 120% of each driver.





incentive ("RSP " and
"SAR ")


Align interests with shareholders.



Annual awards with three-year vesting periods and subject to vesting conditions being met.


RSP: earning of a bonus in the preceding financial year.
SAR: achievement of threshold or target performances measured
at time of award.


Settlement takes place as directed by participant.


General managers
Senior and head office

Re-pricing, re-granting and back dating of awards is prohibited. No awards are allocated or exercised during closed periods.

Bonus tables

The bonus achievable for each of the STI schemes is reflected in the tables below:

Bonus achievable percentage – PAL

Scale (total PAL score of 100%)   Assistant general
managers – bonus %
– half-yearly annual salary
      General managers –
bonus %
– half-yearly annual salary
      Head office management
bonus %
– half-yearly annual salary
65% – 69%   2,50       5,00       Group average up to a maximum of 40  
70% – 74%   5,00       10,00          
75% – 79%   8,75       17,50          
80% – 84%   12,50       25,00          
85% – 89%   16,25       32,50          
90% – 95%+   20,00       40,00          

Bonus achievable – ECPMS

Overall PAL scale   Bonus % of half-annual TGP       Exco – bonus %  
65% – 68%   10       Financial element (65% of TGP): measured biannually with
reference to PAL group average
Non-financial element (35% of TGP): measured annually
Total STI capped at 50%
69% – 72%   12,50    
73% – 76%   16,25    
77% – 80%   24,50    
+80%   32,5    

Table explanation:

  • If the group achieves an average PAL score below 65% then the payout percentage is 0% of 50% of total guaranteed package ("TGP").
  • If the group achieves an average 65% to 68% PAL score for the relevant six-month period then the payout percentage is 10% of 50% of TGP.
  • If the group achieves an average 69% to 72% PAL score for the relevant six-month period then the payout percentage is 12,5% of 50% of TGP.
  • If the group achieves an average 73% to 76% PAL score for the relevant six-month period then the payout percentage is 16,25% of 50% of TGP.
  • If the group achieves an average 77% to 80% PAL score for the relevant six-month period then the payout percentage is 24,5% of 50% of TGP.
  • If the group achieves an average 80% PAL score or greater for the relevant six-month period then the payout percentage is 32,5% of 50% of TGP.

Bonus achievable – EDIS

  • Financial element (65% of TGP) achievement of HEPS/EBITDA;
  • Non-financial element (35% of TGP) comprises strategic objectives and other key performance drivers; and
  • Bonus capped at 120% of TGP.


Long-term incentive (“LTI”)

Each of the LTI plans in place are governed by their own set of rules, as approved by shareholders and in line with the Listings Requirements.

    Share Appreciation Rights
(“SARs”) Scheme
      Restricted Share Plan ("RSP")  

Participants receive a conditional right to receive shares in the company, equal to the difference between the exercise price and the grant price multiplied by the number of SAR awards exercised.


Participants will receive a full share and become a shareholder on the award date, but subject to forfeiture in the event that the employee leaves the employment of the company within a specified period. These shares entitle participants to share in dividends and to exercise voting rights. However, the participant cannot sell or encumber the shares prior to vesting.


To attract, retain and incentivise employees.


To attract, retain and incentivise employees.

To provide selected employees with the opportunity of receiving shares in the company.

The RSP was initially used as a retention mechanism or as a tool to attract prospective employees, but is now being used as a tool to incentivise and retain employees.


Executive directors

Divisional directors

Senior management


Executive directors

Divisional directors

Senior management

Head office management

General managers

Company limit  

The aggregate number of shares which may be allocated under the SAR and RSP at any time may not exceed 2 997 074 shares. This limit excludes shares purchased in the market and shares forfeited.

Individual limit  

The maximum number of shares which may be allocated to any one individual in respect of unvested SAR and RSP awards may not exceed 428 154 shares.

Settlement method  

The rules of the LTI plans do cater for the following:

  • Market purchase of shares.
  • Issue/subscription of new shares.

However, the company's preference is to settle all awards under the SAR and RSP from a market purchase of shares. The rules of the RSP have been drafted wider to also include the use of treasury shares as a settlement method. As a fall-back provision only, the employee may be paid cash in lieu of shares (SARs and DBP).

Termination of employment  

Participants terminating employment prior to the vesting date of a particular award will be classified as a good or bad leaver.

Bad leavers will forfeit all awards on the date of termination of employment.

In the case of good leavers, a pro rata portion of all unvested awards will vest on the date of termination of employment. The pro rata portion will reflect the number of months served since the date of grant and the extent to which the performance conditions (if any) have been met. The balance of the awards will lapse. In the case of the SAR, all vested awards should be exercised within six months from the date of termination of employment.

Change of control  

In the case of a change of control, a pro rata portion of all unvested awards will vest on the date of change of control. The pro rata portion will reflect the number of months served since the date of grant and the extent to which the performance conditions have been met.

The portion that does not vest early will continue to be subject to the terms of the letter of grant unless these are no longer considered appropriate in which case Remcom shall make an adjustment to the number of awards.

Variation in share capital  

In the event of a variation in share capital, the participants will continue to participate in the various LTI plans. However, Remcom may, where the company’s value has been materially affected, make an adjustment to the number of awards to give a participant an equivalent fair value of the equity capital as to which he/she would have been entitled prior to the event.

Allocation methodolgy  

Annual, subject to the discretion of Remcom.

(SAR face value % of TGP x TGP)/grant price.


Restricted shares: retention and attraction: ad hoc, as determined by Remcom.

Bonus shares: annually subject to the discretion of Remcom and subject to the earning of a cash bonus as measured against the defined performance criteria of the STI.

Value of bonus = bonus match % x total bonus.

Bonus shares = (individual bonus/total bonus)/number of bonus shares acquired.

Grant price  

The volume weighted average share price for the 10 business days prior to the date of grant.



Vesting period  

Three years


Three years

Lapse period  

Seven years



Performance conditions  

Growth in normalised, fully diluted, headline earnings per share ("HEPS"). Two HEPS targets will be set:

  • Threshold – consumer price index ("CPI") over the three-year performance period;
  • Target – CPI + 2 percentage points per annum over the three-year performance period; and
  • 25% will vest if threshold performance is achieved and 100% will vest if target performance is achieved. Linear vesting will occur between the threshold and the target.

The earning of an STI, which is subject to defined performance criteria, is the proxy for participation. No other performance conditions, save for continued employment, are imposed.

Executive Share Incentive Scheme (“ESIS”)

In terms of the ESIS eligible employees were granted share options, without performance conditions. Allocations were subject to a two-year waiting period whereafter options could be exercised as follows:

  • Year 2: 20%
  • Year 3: 20%
  • Year 4: 20%
  • Year 5: 40%

Share options are subject to being exercised within 10 years from grant date and continued employment, failing which they lapse.

The ESIS is closed with no further awards having been made since 2007. Existing vested and unexercised options, however, remain in effect until they have been exercised or lapse. The last of the options is expected to be exercised by November 2017, failing which they will lapse.


In alignment with a value creation and pay-for-performance culture, the company places a greater emphasis on variable pay for executive directors, which Remcom monitors on a continuous basis.

Employee share ownership – City Lodge 10th Anniversary Employees’ Share Trust ("10th Anniversary Trust") and Injabulo Staff Share Scheme ("Injabulo Trust")

All employees not participating in the company’s LTI plans and who, at the relevant date, being the first day of the month following that during which the company pays its final dividend, have been
in the full-time employ of the company for at least 12 months, are eligible to participate in the 10th Anniversary Trust and when it unwinds, the Injabulo Trust.

10th Anniversary Trust

The 10th Anniversary Trust holds approximately 1,17% of the company’s issued share capital, which was acquired through an interest-free loan from the company, the details of which can be found in the directors’ report on page 94.

The Injabulo Trust

The Injabulo Trust was established with the implementation of the City Lodge black economic empowerment transaction whereby the Vuwa special-purpose vehicle ("SPV") and the University of Johannesburg School for Tourism and Hospitality ("the Hotel School") together with the Staff Trust SPV acquired 15% of the company’s issued share capital. The Injabulo Trust is the sole
shareholder of the Staff Trust SPV, which holds 5,87% of the company’s issued share capital. The note provides more information in this regard.

Subject to the provisions of the respective trust deeds, including, inter alia, funding arrangements, beneficiaries are entitled to the following:

  • A proportion of all dividends received.
  • A proportion of the growth in the value of the shares held, distributed in the form of shares.

No income and/or growth distributions will be made under the Injabulo Trust until the loan in respect of the shares held by the Staff Trust SPV has been repaid in full.


Appointment and term

The appointment of directors is a matter for the board as a whole, assisted where appropriate by Remcom, and subject at all times to the approval of shareholders. Board appointments are governed by the Act, JSE Listings Requirements and the company’s MoI, which provide for at least one-third of the NEDs to retire by rotation at the company’s annual general meeting. The directors so retiring may, if eligible, offer themselves for re-election. New directors hold office until the first annual general meeting following their appointment. They may offer themselves for re-election.

Termination of office may occur at retirement age, alternatively will occur if a director is prohibited by law from being a director, fails to be re-elected, is found to be guilty of misconduct or fails to attend meetings without good reason, or poor performance.

NEDs do not have service contracts, but are issued with letters of appointment detailing, among other things, their responsibilities.

They do not participate in the company's STI and LTI schemes.

Fees and basis of remuneration

Fees payable to the NEDs are reviewed annually and are not linked to the company's share price or performance.

In recognition of their ongoing responsibilities and contribution outside of meetings, as well as historically good meeting attendance, NEDs receive an annual fee, not a base fee and fee per meeting attended. The same applies to sub-committees, with a premium being paid to the chairmen. The fee paid to the chairman of the board is inclusive of all board and committee attendances as well as other responsibilities across the group.

The fee structure is as far as possible aligned with the market, taking cognisance of the size and market capitalisation of the various companies included in the sample, as well as macro-economic factors, CPI, the financial position of the company and additional responsibilities placed on board members by new legislation and corporate governance principles.

Based on management's recommendations on fees, Remcom and in turn the board reviewed and proposed the same to shareholders at the annual general meeting.

Fees are:

  • paid quarterly, in arrears, in cash;
  • pro-rated in line with the period served in the case of appointments or resignations during a financial year.

The fee structure, as approved by shareholders, remains in place for the financial year.


Travel, hotel and other expenses reasonably and necessarily incurred on company business is covered by the company, subject to production of the appropriate supporting documentation in accordance with the documented travel policy.

Premiums for directors and officers' insurance cover are also paid by the company.


Fixed pay (total guaranteed package)

In order to attract, motivate, engage and retain the talent required to achieve its overall business objectives, the company must offer market-related and competitive remuneration packages.

City Lodge follows a total cost-to-company approach to structure remuneration for Exco and certain specialist staff and a basic plus approach in the case of the remaining workforce.

Guaranteed pay is reviewed annually taking the approved increase mandate, macro-economic factors and performance into account. Mandated increases take effect on 1 August.

Exco members are formally graded using the 21st Century Pay Solutions Execumeasure system ("Execumeasure"), as well as in terms of the Patterson grading model in an effort to ensure effective benchmarking.

The annual review of Exco's fixed remuneration, which takes place between May and July of each year, is benchmarked to the market. In carrying out its mandate to promote fair and responsible remuneration, Remcom engaged the services of 21st Century Pay Solutions and PE Corporate Services to benchmark and advise on the level of pay for Exco.

Remcom authorised Exco total cost of employment increases, effective 1 August 2017, of between 6% and 8% (2016: between 6% and 9%), which averaged out at 6,5%, with higher increases being awarded to certain packages which were found to be lagging the market.

The board further, on recommendation of Remcom, approved a general salary increase of 6,5% for manager level employees (2016: 7%), 7,25% (2016: 7,25%) for minimum wage earners and 7% (2016: 7%) for the balance, with effect from 1 August 2017.

Moving the Group Life and Disability cover resulted in enhanced employee benefits in terms of additional funeral, dread disease and educational cover.

Variable pay (short-term and long-term incentives, which promote a pay-for performance culture)

Short-term incentive (“STI”)

STIs are self-funded and budgeted for.

PAL bonus

Hotel performance averaged at 68,62% and 65,26% respectively for the two measurement periods, with only a few units achieving scores in excess of 80%. This translated into a group average pay
out of 9,35% and 6,62% of half-annual salary respectively, reflective of challenging operating conditions.


Achievement of non-financial measures averaged at 12,42% of TGP.


ED performance yielded an average bonus percentage payable of 33% of TGP for the year under review.

Long-term incentive (“LTI”)

There have been no changes to policies regarding SAR and RSP. The details of the allocations made during the financial year are set out as follows:

SAR Scheme

Annual awards are made with reference to the face value of the award and determined using the below formula:

TGP x set multiple = number of SARs to be allocated.

106 964 awards were granted to 12 participants during the year ended 30 June 2017.

Performance conditions
  • Threshold performance condition
    Average annual percentage growth in normalised fully diluted headline earnings per share (“HEPS”) (as reported in the published annual financial statements for the year ended 30 June
    2016, being 859,9 cents) over a three-year period exceeds the average annual growth in the consumer price index (“CPI”) per annum over the same three-year period.
  • Target performance condition
    Average annual percentage growth in normalised fully diluted HEPS (as reported in the published annual financial statements for the year ended 30 June 2016, being 859,9 cents) over a three-year period exceeds the average annual growth in CPI + 2 percentage points per annum over the same three-year period.
2014 SAR Award

Following confirmation on the achievement of the performance conditions imposed in respect of the 2014 grant, the Remcom is satisfied that the performance conditions have been achieved and as a result vested in full on 1 September 2017.


The RSP operates in conjunction with the STI. There are no performance criteria other than the earning of a cash bonus as measured against the defined performance criteria of the STI and continued employment with the company.

In total, 45 268 shares were allocated to 69 participants during the financial year.

Having considered the provisions of the Act with regard to the disclosure of the remuneration of directors and prescribed officers and the definition of prescribed officer, the board has concluded that Exco members are deemed prescribed officers and that the disclosure requirements around remuneration be observed.

Note 18 sets out further detail on executive director and senior executive remuneration including STI and awards made under the LTI.

Employee share ownership – 10th Anniversary Share Trust

In total, 925 employees received a total distribution of 19 shares and R2 485 cash, from the 10th Anniversary Trust during the reporting period (2015: 912 employees received a cash distribution amounting to R2 330).


The fees currently paid, as approved by shareholders at the annual general meeting held on 10 November 2016, together with the proposed fees for the 2017/2018 financial year, reflecting increases in fees payable ranging from 6% to 7,5%, are detailed hereunder.

    1 July 
per annum 
      1 July 
per annum 
Services as a director   235 400       220 000     7,0  
Chairman of audit committee   165 000       155 500     6,0  
– Other audit committee members   75 900       71 600     6,0  
Chairman of remuneration committee   145 650       137 400     6,0  
– Other remuneration committee                    
members   65 800       61 500     7,0  
Chairman of the risk committee   112 900       106 500     6,0  
– Other risk committee members   51 500       48 100     7,0  
Chairman of social and ethics committee   74 500       69 600     7,0  
Chairman   952 300       890 000     7,0  
Lead independent director   307 450       286 000     7,5  
* Ad hoc committee fees per hour: R1 890 capped at R37 485.

The board, having considered both the King III recommendation that NEDs' fees comprise a base fee as well as an attendance fee, and attendance by the NEDs over the past year, has determined that the current policy with regard to NED fees remain unchanged. Accordingly, it recommends that NEDs continue to be paid a fixed fee for their services on the board and committees and that the chairman of the board be paid an inclusive fee for his services.


Remcom, having considered the principles and guidelines detailed in the remuneration policy, is satisfied that there has been no material deviation in the application of the policy during the year under review and having reviewed the report, including details relating to executive director and prescribed officer emoluments, confirms its inclusion in the Integrated Report.

F W J Kilbourn
Chairman of the remuneration committee

4 September 2017