Integrated Report 2020
Risks overview 2020
COVID-19 risks extending across all existing risks
COVID-19
and society
Geo-political
risks
Macro-
economic
conditions
Technological
disruptions
Cyber
security
Over-supply
Competition
and price wars
Loss of travel
supply
Most risks that may significantly impact CLHG’s sustainability originate from the external environment. While these external risk factors are largely beyond our control, we constantly monitor and take steps to manage their actual or potential impacts.
Where we can play a role – such as in regulatory processes that may impact on hospitality and/or tourism as a whole – we do participate energetically and purposefully. Needless to say, planning and forecasting is extremely difficult without knowing how the post-lockdown environment will impact our markets and consumer behaviour with consumer spend likely to shrink.
COVID-19 and society. The COVID-19 pandemic has led to travel restrictions, border closures, business suspension and closures, quarantines, isolation and social distancing measures. These factors have significantly reduced global travel and consumer demand for hotels.
Although the hospitality sector is an inherently social business, consumer behaviours are already changing. CLHG has implemented enhanced hygiene and safety protocols for guests and employees, but an outbreak of infection could expose the group to reputational harm or increased litigation.
Geo-political risks. Until the advent of COVID-19 our geo-political risk focus was largely on Africa, but the global scale of the pandemic has since become the dominating scenario. COVID-19’s aftermath, however, is likely to amplify many of the economic and political strains already evident before this global event.
Macro-economic conditions. Economic insecurity typically goes hand-in-hand with geo-political uncertainty, which is becoming evident in the wake of COVID-19. South Africa, where the bulk of CLHG hotels are situated, is likely to enter a deep recession, while our other African markets will also be hard-hit. How our market economies will emerge from this crisis is unpredictable, but the inevitable consequence is reduced accommodation bookings in the near and medium term.
Technological disruption. We are most aware that digital disruption can and will change the way the hospitality sector operates. The use of video-conferencing during the COVID-19 lockdown, as a cost-efficient and effective mode of communication and remote management, is a risk to business travel. We have embraced technology as a competitive differentiator to keep the group on the right side of disruption. That decision is proving wise, as COVID-19 has accelerated digital connectivity as a societal must-have.
Cyber security. Client data is an immensely valuable asset to the modern business, with hotels being no exception. We accept our responsibility to protect the information that guests share with us, as well as safeguard our own technology systems from the risk of cyber fraud or other forms of technological crime.
Over-supply. COVID-19 has disrupted the already skewed supply versus demand balance in our markets, so that current supply – on paper – is considerably higher than demand. This picture will change steadily as weaker competitors fall out of the market. Room rates and occupancy levels will remain weak until the supply and demand ratio rebalances in response.
Competition and price wars. The hospitality industry was harder hit by the COVID-19 pandemic than most other economic sectors. Those competitors that weathered the lockdowns are in competition to retain or gain their shares in a sharply reduced market. The group’s primary competitors are other hotel chains and independent hotels. The competitive landscape includes other types of businesses, such as web-based booking channels and short-term lets of private property.
Loss of travel supply. The leading airlines in South Africa, SAA and Comair Limited (operators of British Airways and Kulula.com), are already in the process of business rescue. This impacts domestic and international travel by reducing flight options for business and leisure travelers.
OPPORTUNITIES OVERVIEW
COVID-19 and
the Guest 2.0
experience
City Lodge Hotel
Group as a safe
haven
COVID-19
and
innovation
Efficiencies
and cost
reductions
Food, socialising
and
merchandising
Acquisitions
and distressed
assets
COVID-19 and the Guest 2.0 experience. The COVID-19 pandemic is disastrous for hotel chains such as CLHG and has irreversibly changed the face of the hospitality industry. As the world slowly emerges from lockdown and people start travelling and booking accommodation again, their expectations will be different.
The opportunity for CLHG and our competitors is to identify and provide the adjusted hotel experiences that post-COVID-19 guests would expect. We are hard at work creating a ‘Guest 2.0’ experience to retain and grow our market share.
City Lodge Hotel Group as a safe haven. Due to volunteering certain hotels for quarantine and essential services accommodation, the group was at the forefront of developing comprehensive safety and hygiene protocols to ensure all guests can be assured of a safe stay.
As a result, CLHG was the first hotel group in South Africa to receive World Travel & Tourism Council (WTTC) ‘Safe Travels’ stamp of approval. In an unsafe world, the CLHG hotels stand out from the guest houses, Airbnbs and bed and breakfasts (B&Bs) as reputable and reliable safe havens.
COVID-19 and innovation. Before COVID-19 struck, we were already driving major technological shifts within the group as a competitive disruptor in our markets. The pandemic has resulted in market-leading technology being a key differentiator for future viability. Besides introducing the Best Available Rate methodology, we have invested steadily in Lodgix, our bespoke hotel management platform that includes a highly effective guest interaction and relationship system. Lodgix will enable the group to swiftly capitalise on the shifting demands of guests as the COVID-19 environment evolves.
Efficiencies and cost reductions. The economic difficulties of recent years have been amplified by COVID-19, bringing a fresh urgency to uncovering efficiencies that reduce costs without negatively impacting the customer experience. By far the most significant efficiency introduced in this period was our new revenue management model (Best Available Rate), which flexibly improves room pricing for CLHG and our guests in accordance with demand.
Our recent WOW campaign was also instrumental in enabling staff members to suggest efficiencies and cost cutting, based on their hands-on experiences in their working roles. We continuously seek ways to reduce our consumption of natural and scarce resources, particularly water and electricity, as evidenced by the introduction and installation of solar panel installations at 25 of the group’s hotels.
Food, socialising and merchandising. Until recently the group had not viewed food and beverage as a distinct revenue stream, but we have since recognised its robust potential and are rolling out new menu options, in particular through our in-house #Cafe platform.
Pandemic or not, people naturally want to socialise and CLHG offers collective spaces of various sizes, at differentiated levels of furnishing, to suit a broad range of needs. Our recently introduced business intelligence and analytics capacity will guide how we adapt to the socialising demands of our markets.
Each of the CLHG portfolio brands has attracted a distinct following, which has prompted the group to test the potentially lucrative selling of branded merchandise. Although COVID-19 has disrupted the initial roll-out, we hope to start testing the market when our data analyses suggest the time is right.
Acquisitions and distressed assets. Any further expansion into Africa has been placed on hold while we evaluate how
COVID-19 will impact the hospitality industry in the near and medium term.
Nevertheless, exceptional opportunities do arrive in times of crisis. The board will examine these within the constraints of our current and highly conservative risk appetite.
