BUSINESS REVIEW

Our capitals report

In order to maintain and grow a sustainable business for the future, we have deployed our various capitals in order to drive and generate superior returns for our various stakeholders. We believe that even though being a "guest centric" selected service hotel group for us would be presumed, that what really makes a difference is the way in which our passionate people deliver caring services to our guests with kindness. As a result, we have developed a base of loyal guests who have continued to stay with us over the past 33 years. It is with this in mind that we analyse our strategic achievements of the past year, and look to unpack how we will continue to deliver on our long-term sustainability to you, our providers of capital.

FINANCIAL AND MANUFACTURED CAPITAL

Occupancy performance

The group achieved an average occupancy of 59% for the period compared to 63% in the prior year. In South Africa, occupancies decreased to 61% when compared to the prior year of 63%. The positive sentiment in the country in early 2018 did not translate into higher levels of business confidence, ultimately resulting in less corporate travel. The subsequent weakening of the currency, the value added tax ("VAT") rate increase and rising inflation levels have placed further strain on the leisure consumer, resulting in weakening weekend occupancies.

Following the extended drought conditions in the Western Cape, the region saw a decline in both domestic and international travellers. While the "Day Zero" campaign highlighted the importance of wise water usage, it resulted in travellers rethinking their travel plans to reduce their impact on the available water supply.

Further afield, while economic conditions are slightly more favourable, the lingering impact of the Kenyan presidential election adversely affected achieved occupancies in the country. In Botswana, performance was largely in line with that of the prior year where mid-week trading is strong and similar trends are experienced to South Africa over weekends, while trading in Namibia remained soft at the newly opened Town Lodge Windhoek. Based on prior experience, a new hotel typically takes between 18 and 24 months from opening to reach more sustainable occupancy levels.

Government travel in South Africa has seen a slight improvement following the February cabinet reshuffle and opening of the new budget year. Reservations from selected online travel agencies have increased in addition to the steady growth of the group's own website reservations.

The year ahead will continue to be a challenging one, as the performance of the South African economy is not expected to improve in the lead up to the general election in 2019. This is largely due to the lack of clarity on the policy for land expropriation without compensation and an economic environment where GDP growth of less than 1% is expected in the year ahead.

Average daily rates ("ADR")

The group has seen an improvement in current achieved room rates, albeit at levels below the current inflation rates. The consistent rates philosophy of the group over the long term results in more predictability for corporate travellers, with rate reviews taking place twice during the year.

In order to drive occupancy growth over weekends, the group has a number of special rates in place to encourage group and family travel. Participating in South African Tourism's Sho't Left campaign, encouraging South African's to travel at home, further exposes our various hotel brands to new markets. Our unique auction website, www.bid2stay.co.za, allows guests to bid online for discounted accommodation and other benefits across our portfolio in South Africa. These rates are particularly competitive for the cost-conscious traveller.

Expanding our footprint

Of the 62 additional rooms to be added to the flagship City Lodge at OR Tambo Airport, 39 rooms were opened in June 2018, with the remaining 23 rooms completed in September 2018. Construction of the 154-room Town Lodge Umhlanga Ridge is currently underway, with the commencement of the 90-room Road Lodge Polokwane construction expected to take place following the receipt of final approvals to do so.

The group fully opened its 147-room Town Lodge Windhoek, Namibia in November 2017, bringing its presence to four countries in Africa. The City Lodge Hotel Dar es Salaam and City Lodge Hotel Maputo are expected to open their doors before the end of 2018, bringing the group's total number of rooms to 7 991, across six countries in east and southern Africa.

Future expansion

Investigations into opportunities in the rest of Africa continued during the course of the year with visits to a number of countries in Africa, in order to identify suitable locations and investment opportunities. Where an opportunity was identified, a detailed feasibility was prepared taking into account a number of factors in order to assess the likelihood of a hotel's success. This process is often a lengthy one, and may result in a significant amount of effort being lost if the parties are not able to reach satisfactory agreement on the terms.

It is anticipated that our non-South African hotel portfolio will comprise around 20% of our total number of rooms available and contribute 25% to 30% to our earnings once reaching operational maturity.

Keeping our hotels in great shape

Over the years, the group has followed a stringent refurbishment programme maintaining a high standard in the quality of our hotel product. This year saw a new look being rolled out into the City Lodge Hotel Durban, Town Lodge Johannesburg International Airport and Road Lodge Isando. In the year ahead, the City Lodge Hotel at OR Tambo will receive a minor update, with soft furnishing upgrades being undertaken at a number of Road Lodges in our portfolio. The upgrade to our Town Lodge brand hotels will also continue with another major refurbishment on the cards for this year at Town Lodge Menlo Park.

Continuous focus on quality is maintained at all our hotels through our ongoing maintenance and minor refurbishment programmes.

Maintaining an innovative technology platform

The group continued to invest in its various technology platforms over the past year, with specific focus on stabilising the existing environment and resources to cater for our expansion beyond the borders of South Africa. A number of new initiatives were piloted to cater for the varying needs of each of our brands and their guests.

Introduction of enhanced technology services for guests and staff

Our new hotels in Kenya and Namibia provided the ideal opportunity to introduce newly available technology that would provide our guests with a richer experience within the property. These included larger in-room TVs, hosted on an Internet Protocol ("IP") platform (otherwise known as IPTV), allowing for broader channel selection, optimal picture quality and advanced interactive TV. The response from our guests has been extremely positive, and the group will therefore continue to invest in this service during refurbishments of our existing hotels. These installations were followed by similar installations during the refurbishment of Town Lodge Johannesburg International Airport and in the extension of the City Lodge Hotel at OR Tambo Airport.

In addition, the telephony service at the abovementioned hotels, for both in-room and back office functions, is an IP telephony solution which provides clearer voice services. This solution has proven itself to be effective and cost efficient and the group will introduce this service in select hotels, thereby removing the legacy telephony systems and upgrading the hotels to a centrally hosted platform. This will result in an operating cost reduction for each property, with less on-premise equipment to service and manage.

Similar installations will be done in the new hotels in Tanzania and Mozambique, ensuring guests receive the same quality service standard across the continent.

Extension of WiFi offering

Our guests rely on fast, reliable connectivity in order to conduct their business and keep them entertained. As a consequence of our partnership with our WiFi provider in southern Africa, we are able to meet and often exceed their needs, while still looking to include further enhancements to the current service offering. We believe that this connectivity provides the platform for us to embrace newer technologies, such as WiFi calling, TV casting and streaming capabilities, which we have been investigating for implementation in the future.

Introduction of mobility platform for our guest

Bringing technology to the forefront of our guest journey is essential in the 21st century. We have investigated and engaged with various providers to further enhance the guest experience, allowing them to engage and interact with us using their own mobile devices. The underlying systems and technologies previously mentioned will form the basis of this, and we aim to further streamline processes, interact with guests (past and present) securely and improve overall satisfaction of a guest while staying in any of our properties.

Introduction of Business Intelligence capability

Since launching our bespoke Property Management System "Lodgix" and the "CLHG Rewards" loyalty system, we have generated vast volumes of consumer data which has allowed us to introduce analytic capabilities to enrich our knowledge of our guests. A new Business Intelligence ("BI") tool was introduced and this is continuously being enhanced to allow for improved decision-making and proactive management on certain aspects of our business.

NATURAL CAPITAL

Environmental sustainability

As a group, we understand how important it is for our stakeholders that we conduct our business in an environmentally friendly and responsible way. Over the past few years we have developed and implemented policies, practices and targets to reduce and limit our impact on the environment and continually encourage some of our stakeholders to do the same and to join us on our journey. We continue to actively analyse, manage and monitor these targets and practices throughout all our brands to ensure we operate as environmentally responsibly as reasonably and feasibly possible.

The importance of these initiatives, with more information provided in this section of our report, was specifically highlighted through the recent severe drought experienced in the Western Cape of South Africa. As a group, we do not, however, believe that environmental issues are restricted to single hotels or areas, and adopt a general approach to responsible operations.

Carbon footprint

Measuring and reporting one's carbon footprint has become a globally accepted measure of one's overall impact on the environment. While this is not the sole indicator of our performance in this area, we are proud of our achievements in reducing our overall impact on our planet since the start of our environmental sustainability journey. We have engaged a third-party expert to assist us in assessing our footprint for the year ended 30 June 2018. The scope of this year's assessment was consistent with last year. Our total greenhouse gas ("GHG") emissions emitted as a result of operational activities amount to 30 352 (2017: 34 321) tonnes of CO2 equivalent ("CO2e"). The figure this year includes one additional hotel, being Town Lodge Windhoek which opened its first rooms on 5 October 2017.

The reporting methodology used by Promethium Carbon advisers follows the reporting principles and guidelines provided by three complementary international standards, thereby enhancing the environmental integrity of the carbon footprint.

  2018       2017  
Source of emissions WBCSD** scope       Total CO2e (t/year)   Proportion of total CO2e (%)       Total CO2e (t/year) Proportion of total CO2e (%)  
Premises – LPG consumption     55   0,2   28 0,1  
Premises – Backup diesel generators 75   0,3   108 0,3  
Premises – Refrigerant gas loss 1 962   6,4   818 2,4  
Premises – Fire extinguishers 26   0,1   63 0,2  
Subtotal Scope 1       2 118   7,0   1 017 3,0  
Premises – Electricity consumption     25 206   83,0   27 444 80,0  
Subtotal Scope 2       25 206   83,0   27 444 80,0  
Upstream activities  
Premises – Water consumption     768   2,5   822 2,4  
Premises – Waste disposal 454   1,5   464 1,4  
Business travel – Flights 170   0,6   207 0,6  
Business travel – Employee-owned cars 4   0,01   24 0,07  
Downstream activities  
Fuel and energy-related emissions not included in Scope 1 and 2 1 552   5,1   4 269 12,4  
Downstream transportation and distribution 80   0,3   74 0,2  
Subtotal Scope 3       3 028   10,0   5 860 17,07  
Total* 30 352   100,0   34 321 100,0  

* Errors due to rounding.

** World Business Council for Sustainable Development (“WBCSD”).

Through our ongoing commitment and implementation of resource-efficient technology, we have successfully controlled our GHG emissions and carbon footprint over the past year.

Specific sustainability focus areas

Energy consumption

In our South African operations, we mainly use electricity generated by the national energy provider Eskom, similarly so in Botswana, Namibia and Kenya. It is, however, important to our guests that we ensure security of supply, and therefore all hotels have backup diesel generators installed for use during power outages.

The majority of our consumption is as a result of water heating, air-conditioning, lighting and laundry operations, with the total energy consumption for the period of 25,6 million kWh. This contributes towards 83% of our carbon footprint and remained a key focus area as a result.

By maintaining a sustainable energy management programme at each of our hotels, we were able to continue our focus on operational and technical efficiencies. In our South African operations, our absolute energy consumption decreased by 5,2%. Comparative consumption per room night sold was down by 0,4%.

Our electricity consumption per occupied and per available room and the resultant per room cost thereof were as follows:

Brand  kWh per 
occupied 
room 
(2017/18)
     kWh per 
occupied 
room 
(2016/17)
    Cost per 
occupied 
room 
(2017/18)
     Cost per 
occupied 
room 
(2016/17)
    kWh per 
available 
room 
(2017/18)
     kWh per 
available 
room 
(2016/17)
    Cost per 
available 
room 
(2017/18)
     Cost per 
available 
room 
(2016/17)
  
Courtyard  30,0       30,9      R51,01       R51,77      13,5       14,7      R22,85       R24,66    
City Lodge  18,4       18,7      R27,21       R26,60      11,2       11,9      R16,62       R16,97    
Town Lodge  18,7       17,6      R28,39       R31,06      9,1       9,6      R14,41       R17,00    
Road Lodge  12,7       13,2      R23,13       R22,51      8,8       9,1      R15,97       R15,55    

Renewable energy

As previously reported, in February 2017 the group commenced with a pilot project to assess the viability and feasibility of solar power generation at our Road Lodge Centurion. The duration of the study has been extended as part of ongoing initiatives to ensure the system operates as efficiently as possible. We continue to closely monitor and evaluate the performance of the system, which underwent some tweaking in an attempt to enhance system output. Our findings will then be worked into the evaluation of similar installations at other group hotels in the future.

Water consumption

Reducing water consumption is a joint effort between our hotels, staff and their guests. Never before has this been more evident or important than through the recent severe drought conditions experienced in South Africa's Western Cape. Through some very innovative thinking, hotels operating in this region were able to reduce their water consumption by almost half, when compared to the prior year. No idea was too small in ensuring that we made every drop count. From implementing operational changes such as removing excess bed linen and napkins, to changing linen and towel exchange criteria. Water was harvested from commercial area air-conditioners and heat pumps to water plants and wash public area floors. Guests were encouraged to limit consumption through creative messaging throughout the hotels and in guest bedrooms. While a number of our operations are located in water scarce regions, some of the ideas developed and learnt in Cape Town have become common place across our group.

In designing our hotels, we have reduced the number of rooms with baths in our newer and refurbished City Lodge Hotels to approximately 60%, installed low-flow showerheads and taps and looked at other ways to reduce overall water consumption.

Our guests are encouraged to play their part in saving water by reusing their towels and linen, choosing to shower instead of bath and flushing wisely using the dual-flush toilet systems. Reducing the volume of laundry on a daily basis has a direct impact on the volume of water consumed. Additionally we have together with our laundry chemical suppliers, worked at alternative solutions that allow for shorter wash cycles, without compromising the quality of the linen produced by our in-house laundries. Housekeeping and laundry remain an ongoing area of focus in reducing consumption.

All water for supplying guest rooms and for use in the laundries and kitchens is drawn from municipal supply, with the exception of our Kenyan hotels, where the majority of water is supplied from boreholes. In isolated instances in South Africa, borehole water is used to supplement municipal supply for garden watering purposes. New boreholes have been drilled at our Cape Town hotels and feasibility studies are currently being finalised to commence a process of moving viable sites off the grid. This would entail providing filtered and treated borehole water for hotel and guest use. Similar explorative exercises will be conducted at our Port Elizabeth hotels, where similar water shortages are being predicted.

Total water consumption for the period was 547 635 kilolitres ("kℓ"). This represents a decrease of 83 859 kℓ (15,31%) when compared to the prior period, highlighting the group's efforts to reduce water consumption during the recent droughts.

Brand kℓ per 
occupied 
room 
(2017/18)
kℓ per 
occupied 
room 
(2016/17)
Cost per 
occupied 
room 
(2017/18)
Cost per 
occupied 
room 
(2016/17)
kℓ per 
available 
room 
(2017/18)
kℓ per 
available 
room 
(2016/17)
Cost per 
available 
room 
(2017/18)
Cost per 
available 
room 
(2016/17)
 
Courtyard 0,71 1,09 R22,23 R15,65 0,32 0,52 R9,96 R7,45  
City Lodge 0,35 0,38 R10,34 R9,44 0,21 0,24 R6,32 R6,02  
Town Lodge 0,34 0,36 R8,08 R8,68 0,16 0,20 R4,13 R4,75  
Road Lodge 0,27 0,30 R6,81 R5,30 0,19 0,21 R4,70 R3,66  

In addition to conserving water, we have a responsibility to manage the quality of water discharged by reducing the consumption and/or controlling the discharge of materials and products that may contaminate water. We achieve this through the use of biodegradable chemicals and products, the installation of grease traps and making use of salt water chlorinators to maintain hygiene in our pools.

Waste and recycling

While the volume of solid waste generated by the group is relatively low given our selected service product offering, we do leverage opportunities which exist to recycle paper, glass, plastics, aluminium and steel cans. Hotels in the City Lodge Hotel brand ensure the sorting of waste on premises and the subsequent recycling thereof, with limited waste to landfill being generated. Various recycling options are currently in operation at our other hotels. We continue to work on cost-effective solutions to reduce waste to landfill within our hotels.

Compliance

No environmental accidents occurred during the year nor were any environmental-related fines imposed upon the company.

Our goals for the year ahead

In the year ahead we aim to maintain and where possible further reduce energy consumption on a per-room-sold basis, continuing to investigate the viability of additional photovoltaic solutions and installations for use in selected hotels. Through our water-saving initiatives we will endeavour to reduce our water consumption on a per-room-sold basis and will continue the journey of supplying identified hotels with an alternative source of water. Additionally we will continue to investigate options around grey water reuse and water conservation in general, while aiming to reduce our total waste to landfill.

Intellectual CAPITAL

Our group continues to focus heavily on sales and marketing as a key support process for operational activities.

Embedded in the sales and marketing department's DNA is the harnessing of important intellectual capital such as the maintenance and enhancement of positive brand reputation and awareness, a constant quest for innovation, improving operating efficiencies, and the utilisation of standardised operating systems, policies and procedures that streamline all that we do in our industry.

In a highly competitive environment, it is vital for a group such as ours to differentiate its brands (Courtyard Hotel, City Lodge Hotel, Town Lodge, Road Lodge and The Fairview Hotel), highlight the quality and value of offerings, and build a strong base of satisfied guests who regard our hotels as their "home away from home".

Monitoring and building our brands

In the City Lodge Hotel group, we have always focused on making our booking process as streamlined and user-friendly as possible. This has been part of our growth story over the past four decades.

With the growing trend towards online bookings and driving more bookings through our own channels, we are working to refine online bookings that take place on our website www.clhg.com.

This refinement process is heavily focused on enhancing our users' experience, the intention being to make the process as easy, intuitive and seamless as possible – from selecting a room, to completing payment. The specifications for this project have been approved and development is under way.

There's a saying that if you do not know where you are going, anywhere or any direction will do! In the highly competitive and constantly evolving hospitality sector, it is vital that you know where you stand in the market, how you are perceived by your target market and what you need to do to get to where you want to be.

Our 2018 brand tracking report has given us some extremely valuable insight into crucial aspects of our business. By drilling down into each of these areas, we are able to accurately define, measure and meet guests' needs and identify any gaps that may exist in our value propositions.

Our research shows that top of mind awareness of our brands has improved, but there is still a need for us to do more education on differentiating the offerings guests can expect from our different brands.

From a brand usage and brand consideration point of view, our challenge is to attract more non-users to our brands and to minimise the defection rate away from our brands. This has to be based on a very clear understanding of what we offer and what competitors offer.

By regularly measuring and interpreting guests' needs, we are able to make informed decisions that will help us to retain guests loyal to our brands and attract guests who are currently not utilising our brands.

Marketing and selling our brands

Importantly, from a guest loyalty and rewards point of view, we are looking into enhancing the value proposition that we offer our regular guests through our CLHG Rewards programme.

Targeted outdoor and radio advertising continues to play a significant role in our group's marketing strategy. During the year, a City Lodge Hotel brand campaign was rolled out to raise awareness of that brand.

For our refreshed Bid2Stay online auction offering, an online campaign was devised around a theme of "Have you Bid2Stay?". This campaign included various online advertising, "Spin to win" competitions and in-room table talkers, where the core objectives were to drive awareness, registrations and bookings.

Within the sales side of our sales and marketing department, the sales team was restructured, moving to more full-time sales personnel, complemented by some part-time personnel in key business sourcing areas.

Building and developing relationships with travel management companies and corporate clients remains key. We participated in many of their workshops and travel days, creating awareness and encouraging trial across all our brands.

Interacting with our guests

In this age of regular interaction made possible through the incredible advances in social media, it is encouraging to note that our social media footprint is constantly growing as more and more people use channels such as Facebook, Twitter and others to communicate with us. Sometimes they share their experiences, sometimes suggesting possible improvement ideas, sometimes just entering a competition, or wanting to thank an individual staff member for great service – it really is a wide range of interactive messaging.

Our aim is definitely to continue growing our social media follower footprint as we continue to seek ways to interact and build ongoing relationships with those very special people – our guests.

The bottom line is that engaging with guests is a vital part of our business of "people caring for people". Guest comments are received internally by email at info@clhg.com and online through the Rate-Us guest questionnaire and externally by monitoring posts on channels such as Hellopeter.com, TripAdvisor, Facebook and Twitter. All matters are attended to by the appropriate respondents as timeously as possible.

Human capital

As a quality hotel provider, one of the most important contributors towards the success of our performance is the performance of our people. The management of our human capital is therefore a significant focus area for the group. Our "Investor in People" recognition clearly demonstrates our ongoing commitment towards growing and empowering our people. In terms of human capital, we direct our efforts in three main areas: leading, supporting and improving.

Leading

Our five leadership drivers guide our leaders in motivating our people and achieving the group's objectives:

  • City Lodge Leaders lead by example;
  • City Lodge Leaders innovate and own their businesses;
  • City Lodge Leaders empower people to engage and act;
  • City Lodge Leaders inspire a shared vision; and
  • City Lodge Leaders encourage the heart.

Our leaders are primarily grown within the group and our ability to attract and retain skilled people, underpinned by the provision of an employee value proposition that specifically highlights clearly defined career pathing and succession planning, is key to ensuring a sustainable pipeline of leaders for the future. Demonstrating the efficacy of this approach is the following comparative turnover information, which indicates an annual level of turnover that is below the industry norm at 7,9%, ensuring that high performers and potentials are retained.

  Year   Voluntary
turnover
  Involuntary
turnover
  % of total
headcount
 
  2015/16   62   43   8,71  
  2016/17   60   37   8,69  
  2017/18   74   19   7,88  

The group talent officer, assisted by line management, is responsible for the attraction, development and retention of high-calibre employees. All employees have annual development appraisals with ongoing assessments and management addressing the skills and knowledge gaps identified within current positions. Employees suitable for development into and within supervisory and management levels are acknowledged and proposed for inclusion into succession pools or developed towards such. By placing an emphasis on the development of previously disadvantaged individuals, the group can also ensure that it works progressively towards achieving its employment equity targets.

Supporting

Employee and industrial relations ("ER and IR")

All ER and IR issues are dealt with in an inclusive manner, with the group preferring to invite participation on all substantive issues that may have an effect on the employment relationship or on employees' conditions of work. The group currently recognises, and has a recognition agreement with one trade union, SACCAWU, which is representative of 16% of total employees and 18% of those occupying positions within the defined bargaining unit.

No days have been lost due to industrial action during the period.

The group continues to use its programme "high performance people" as the model for its ER, and courses are held periodically for supervisors and management in this regard. This programme is also made available to shop stewards from time to time to ensure complete understanding of the company's policies and procedures. In addition, all levels of management are trained in the principles of "managing with intent" to ensure that best practice management techniques are applied within the group.

Labour utilisation

An analysis of sick and absent days recorded in the group indicates a loss of 1,6% of all working days available due to sickness and absence during the year.

Sick leave is monitored on an individual basis to ensure that patterns are noted, either to offer assistance or to take steps where possible abuse is noted. Similarly, incidents of absence are monitored and dealt with through the group's disciplinary procedures when required.

Health and safety

Although the group's properties do not represent dangerous working environments, all necessary precautions and measures are taken to ensure the safety of our guests and employees. This includes the adherence to strict guidelines in terms of monitoring and implementing health and safety requirements. Each hotel has established a health and safety committee, as well as appointed responsible persons in terms of the Occupational Health and Safety Act.

The group utilises the Worktrainer software program to record and monitor all health and safety compliance. Further, adherence to the health and safety policy and legislation is reviewed as part of the internal audit process. In addition, the group maintains its commitment to ensuring that levels of hygiene, compliant with Hazard Analysis of Critical Control Points ("HACCP") legislation, are maintained at all hotels.

The group ensures that all contractors engaged in the delivery of services to the group are equally compliant in terms of their adherence to health and safety requirements.

The following health and safety incidents were experienced during the year:

Nature of incident   Number of incidents
  2017/18   2016/17     General outcome
In the kitchen – food preparation and cleaning     8   9     In all instances, staff members either received first aid and returned to work immediately or were booked off for a period and returned to work thereafter
Incidents on stairs and in built environment     8   10      
Due to carrying and lifting     1   1      
Repairs and maintenance related     2   3      
Total     19   23

Employment equity

The employment equity consultative committee meets at least bi-annually to assess progress towards the achievement of quantitative goals, as well as to consider the qualitative elements which may influence the aforesaid achievement of the goals. The committee is representative of all individuals in the company, and is chaired by the divisional director of human resources, appointed as the senior manager responsible for compliance with the Employment Equity Act, and enjoys the participation of the representative trade union. The lack of a readily available pool of skilled candidates from designated groups at senior and management levels continues to hamper transformation efforts. However, the group's ability to develop its own pipeline through succession pools and attendant development programmes and the accelerated development and deployment programme ("ADDP") will mitigate this to a degree in the medium to long term.

The following comparative table displays the company's South African operations employee profile as at 30 June 2018 and 2017:

    Male       Female       Foreign nationals       Total  
Occupational level   Year     African     Coloured     Indian     White       African     Coloured     Indian     White       Male     Female          
Top management 2018             1     8       2                 1                     12  
  2017             1     7       1             1                 10  
Senior management 2018     5     4           32       2     1           19                     63  
  2017     5     3           31       2     1           18                     60  
Middle management 2018     7     3     2     17       22     5     2     15             1       74  
  2017     4     4     2     19       21     5     2     16             1       74  
Junior management 2018     47     10     2     21       110     25     2     15             1       233  
  2017     41     11     2     19       105     26     2     17             1       224  
Discretionary decision-making 2018     99     15     3     11       194     29     9     54       1     1       416  
  2017     105     12     3     11       183     27     5     59       2           407  
Defined decision-making 2018     118     12           5       184     36                   2             357  
  2017     116     12           4       174     34                 1             341  
Total permanent 2018     276     44     8     94       514     96     13     104       3     3       1 155  
  2017     271     42     8     91       486     93     9     111       3     2       1 116  
Non-permanent* 2018     24     2           1       51                 1       2             81  
  2017     8     1           2       57     4     1     2       2     2       79  
Grand total 2018     300     46     8     95       565     96     13     105       5     3       1 236  
  2017     279     43     8     93       543     97     10     113       5     4       1 195  

* Including 38 experiential learners.

Improving

Training and development

The skills development committee meets at least bi-annually in order to determine the group's skills development requirements.

The committee has been mandated to deal with skills development issues, and committee members are therefore knowledgeable with regard to legislation surrounding skills development. The committee consists of the divisional director of human resources, the group's skills development facilitator, a union representative, shop stewards from the regions and members of staff from different levels and backgrounds elected by their constituencies.

The group continues to focus on providing learnership opportunities, both internal and external, as well as graduate internships for students with diploma and degree-level hospitality qualifications.

The group has a registered skills development facilitator who submits a workplace skills plan annually and reports on training achieved against that plan. A training coordinator assists the skills development facilitator with logistics and administration and allows for a greater focus by the skills development facilitator on ensuring return on investment in respect of the training interventions provided.

Training interventions covered training priorities ranging from legislative compliance to management and leadership skills, as well as client service and employee development.

A total of 42 employees were promoted in the group during the year, 67% of whom were female.

  2017/18       2016/17  
African 26       57  
Coloured 5       12  
Indian 1       0  
White 10       13  
Total 42       82  

The comparative report on the following page is aligned with the reporting period for the Sector Education and Training Authority which requires calendar year reporting and organising of training activities.

1 January
2017 to
31 December
2017
      1 January
2016 to
31 December
2016
    1 January
2015 to
31 December
2015
 
% of total payroll spent on training 3,75       3,94     3,95  
% of total payroll spent on training previously disadvantaged employees 3,40       3,23     3,4  
Total number of interventions attended by all employees 15 631       11 320     9 459  
Total number of interventions attended by black employees 14 209       10 041     8 215  
Total number of interventions attended by black female employees 9 494       6 441     5 586  
Total spend on training and development R10,5 million       R9,7 million     R9,0 million  

With regards to training considered as eligible for the pivotal grant, the following highlights are noted:

  • Work integrated learning – This opportunity was provided to 80 hotel school students from hotel schools across South Africa, to gain practical experience in the group's hotels, pursuant to the completion of their formal learning programmes. This programme not only serves to provide students with the opportunity to gain experience, but also allows the group to assess these students as potential employees for the future.
  • City and Guilds qualifications – The group provides its permanent employees with the opportunity to attend these programmes and thereby obtain an internationally recognised qualification. This contributes to the group building a pool of skills for succession planning and assists in career pathing. A total of 52 employees wrote and passed their City and Guilds exams during the first half of the financial year, obtaining various certificates, diplomas and advanced diplomas while a further 64 employees were enrolled during the second half of the financial year.
  • The group also provides learnership opportunities to employed and unemployed individuals and is currently involved in providing learnerships for disabled learners in partnership with the South African Disability Development Trust. We are currently hosting five disabled and previously unemployed learners, some of whom we again hope to absorb into our operations upon successful completion of their programme.

Broad-based black economic empowerment (“B-BBEE”)

Over the past few years, the B-BBEE landscape within South Africa has seen some significant changes, with an increased level of awareness shown by our guests and suppliers. Through our BEE committee, the group continues to remain abreast of the latest developments and identifies key focus areas for the future, to highlight to the executive and board.

The group achieved an overall Level 4 B-BBEE contributor rating under the amended Tourism Sector Codes during the year, previously being a Level 5, having achieved the sub-minimum scores in all the priority elements. The scores obtained are presented in the following table and the required submissions were made to the BEE Commission following the publication of the group's BEE scorecard, who have confirmed the group's current compliance. In addition, the BEE Commission also confirmed the group's compliance for the prior year.

During the year, the group continued to place significant emphasis and resources on supplier and enterprise development initiatives. Under the guidance of the transformation steering committee, the beneficiaries of this programme continued to receive support and mentorship to varying degrees. A further enterprise development interest-free loan was granted to a company servicing the tourism sector in the Western Cape.

Following the support received last year, our fresh produce suppliers purchased farm land north of Johannesburg, and commenced with small-scale farming operations. The funds were deployed to fence the property, build a pack house and cold storage facilities and hydroponic growing tunnels. By connecting our beneficiary to some of our suppliers, they have managed to secure additional funding to increase their land investment and grow their own production of fresh vegetables, being sold to us and large retail customers.

With regards to ownership, the net value created in the hands of black people is influenced by the closing share price on the measurement date. Given the period of time which has passed since the implementation of the group's 2008 BEE transaction, the full value of outstanding debt is taken into account when measuring the benefits attributed to the beneficiaries. Given the current performance of the company's share price, the termination date of the BEE funding deal was extended to January 2021, with an option of early settlement should the circumstances allow for an exit, which delivers meaningful value to the beneficiaries.

The employment equity consultative committee meets at least bi-annually to assess progress towards the achievement of quantitative goals, as well as to consider the qualitative elements which may influence the aforesaid achievement of the goals. The committee is representative of all individuals in the company, and is chaired by the divisional director of human resources, appointed as the senior manager responsible for compliance with the Employment Equity Act, and enjoys the participation of the representative trade union. The lack of a readily available pool of skilled candidates from designated groups at senior and management levels continues to hamper transformation efforts. However, the group's ability to develop its own pipeline through succession pools, attendant development programmes and the ADDP will mitigate this to a degree in the medium to long term.

While the majority of our transformation targets are driven centrally, there is a link to our performance appraisal linked ("PAL") bonus scheme, creating accountability at an operational level too.

Scorecard element Weighting   Score
2017/18
      Score  
2016/17  
 
Ownership* 27,00   19,45       18,43Δ  
Management control 19,00   9,46       11,66    
Skills development* 20,00   14,78       17,84    
Enterprise and supplier development* 40,00   30,40       26,82Δ  
Socio-economic development 5,00   8,00       8,00    
Total B-BBEE score 111,00   82,09       82,75    

* Priority element.

Δ Sub-minimum score not achieved, resulting in a one level penalty to overall rating.

The group currently has an overall black ownership percentage of 21,46%, with 10,85% being held by black women. It is mindful of the impact the winding up of the BEE funding deal may have on this ownership and will strive to minimise a potential decline in black ownership given that the amended Codes have a black ownership target of 30%.

Social and relationship capital

Continuously making a difference

Living out our "people caring for people" philosophy, means that we do not just give handouts to needy communities, we get involved and engage with them too. Whether it's supporting girl learners in Kenya, or providing young expectant mothers with care packages in Johannesburg, over the past year R4,0 million was donated to our various CSI initiatives. By booking online on our group's website, we made contributions of R230 000 on behalf of our guests to our online beneficiaries, Food and Trees for Africa and Hospice. In addition, as part of the Cuppa for CANSA campaign, our guests did not just buy a cup of coffee at our Road Lodge brand hotels, but they contributed to the R210 000 donation to this worthwhile cause.

Guest satisfaction

The Rate-Us questionnaire received approximately 19 000 responses during the year, yielding an average customer satisfaction score of 86% (2017: 86%). Using this instant feedback mechanism, our guests are able to share their experiences directly, allowing us to give them more of what they want, and addressing any concerns which they may have.

Awards

While our major award or reward is achieving guest satisfaction, it is very special to be acknowledged by other service providers.

Online booking channel Hotels.com recognised several of our hotels for delivering exceptional service and an outstanding guest experience in 2017. Online booking channel Agoda presented City Lodge Hotel V&A Waterfront and City Lodge Hotel at OR Tambo Airport with its 2017 Gold Circle Awards.

Since 2011, the TripAdvisor Certificate of Excellence has honoured hospitality businesses that deliver consistently great service. This designation is presented to approximately 10% of total businesses on TripAdvisor that have consistently achieved great reviews over the past year. In total, 12 of our hotels received this accolade during the past year, representing around 20% of our hotel footprint.