Integrated Report 2020
The group’s performance depends on its ability to generate revenue by maintaining or improving occupancy at its 62 hotels. The COVID-19 pandemic and its unprecedented impact have significantly reduced global travel and consumer demand for hotels, resulting in a material slowdown in global commercial activity across the hospitality and travel industries.
As a result, CLHG achieved an average occupancy of 38% for the period compared to 55% in the previous year. In South Africa, occupancies decreased to 41% (2019: 58%). As South Africa progresses through the COVID-19 Risk Adjusted Strategy implemented by national government, more CLHG hotels have undergone a phased reopening to provide accommodation to authorised business and essential services guests. Reopened hotels continue to operate on a reduced basis, with limited occupancy.
At present, approximately 70% of our guests are business travellers, with 12% to 15% being government travellers. Given the impact of COVID-19, the weak economy, and continued low business confidence levels, business travel remains under pressure, while leisure travel is negatively affected by the climbing unemployment rate.
| 30 June 2020 |
30 June 2019 |
30 June 2018 |
||||
| Average group occupancies | 38% | 55% | 59% | |||
|---|---|---|---|---|---|---|
| Average South African occupancies | 41% | 58% | 61% |
These unprecedented times and the slow economic recovery will continue to be extremely challenging in the year ahead. Our pricing must be sufficiently flexible should occupancies continue to decline due to the COVID-19 pandemic and other macroeconomic factors. We will continue to respond to the market dynamics brought about by the impact of the COVID-19 pandemic. Given that local and domestic travel shall be a significant component of our market, value-added rates and promotional packages will be the order of the day for travellers with a lower discretionary income.
The group also faces competition from international hotel groups developing and expanding their offerings throughout Africa. Given the comparatively smaller size of the African market to other international travel destinations, increasing over-supply is a risk.
International competitors may have access to greater commercial, financial and marketing resources and more efficient technology platforms. They could potentially expand and improve their presence in the region in ways which could adversely affect our ability to maintain or increase our own market share. Any of these factors could have a material adverse effect on the group’s occupancy rates.
Achieved room rates improved by 2.2% (2019: 3.5%). ADR decreased in the last quarter as, although certain hotels remained open to provide essential services or quarantine facilities, these were at discounted room rates.
CLHG’s operating expenses and other costs may increase and, given the effect of COVID-19 on consumer demand, may be unable to recover costs through room rate or ancillary increases.
As discussed elsewhere in this report, we introduced a new rates management philosophy to optimise revenue.
As at 30 June 2020, the group operated 62 hotels spread across five brands, 52 of which are directly owned by the group.
| Brand | Number of hotels |
Location | Future development |
| Fairview Hotel | 1 | Kenya | |
|---|---|---|---|
| Courtyard Hotel | 5 | South Africa | 168-room hotel in Waterfall City, due to open in March/April 2020. |
| City Lodge Hotel | 20 | South Africa, Tanzania, Kenya | |
| Town Lodge | 14 | South Africa, Botswana, Kenya | |
| Road Lodge | 22 | South Africa | 90-room hotel earmarked for Polokwane |
We had forged ahead with our expansion strategy prior to COVID-19, with the 154-room Town Lodge Umhlanga (our 55th hotel in South Africa) becoming fully operational in October 2019.
We also expanded into Mozambique by constructing the 148-room City Lodge Hotel Maputo, which proved a challenge. Completion of the hotel was delayed due to contractor-related delays and disputes. The hotel eventually opened three floors in February 2020, shortly before the pandemic halted trading at the end of March. A further 54 rooms were completed in March 2020. Further construction was temporarily halted due to the impact of lockdown on trading operations. During this brief period of operation, the hotel was positively received due to its prime, central location. When normal operations resume, we expect consistent demand from business travellers, especially from those involved in Mozambique’s fast-growing gas and oil industry.
Construction at Courtyard Hotel Waterfall City has resumed following lockdown and is progressing well. We project a four-month delay compared to original pre-COVID 19 estimates, with an anticipated opening of all 168 rooms in March/April 2021. In light of the COVID-19 pandemic, all the group’s nonessential capital expenditures have been temporarily suspended.
Over the years, CLHG has followed a stringent refurbishment programme to maintain the highest quality standard. We upgraded some of our hotels prior to the pandemic. As at 30 June 2020, this investment amounted to R4 million expended primarily on soft refurbishment works at Road Lodge Rivonia and Road Lodge Southgate (South Africa), and the replacement of sundry furniture, fittings and equipment at other hotels. We also invested in solar energy at several hotels and upgraded our WiFi infrastructure throughout the portfolio of hotels. The group invested R49 million into new developments, in particular the construction of the new Town Lodge Umhlanga (South Africa), and City Lodge Hotel Maputo.
As at 30 June 2020, the board had authorised a total of R127.4 million for maintenance and expansion capital items, of which R66.4 million has been contracted.
