Integrated Report 2020
The COVID-19 lockdown compelled CLHG to cease operations at all but four of our 55 South African hotels on 27 March 2020. Our seven hotels outside South Africa were in lockdown soon after, resulting in a complete halt in revenue for some weeks.
We have reopened our hotels in a phased response to traveller demand as African countries have eased their lockdown conditions. We are continuously monitoring developments as the pandemic evolves, with our responses tailored to the safety of our clients and employees.
At present, CLHG COVID-19 protocols include, but are not limited to:
Maintaining a great guest experience
The impact of COVID-19 presents many challenges for the hotel industry, with opportunities available for those that can adapt to changing consumer behaviour. Guest satisfaction is the key to continued success and remains the most important part of any hotel's existence.
As consumers emerge from their restricted existence during and after COVID-19, their experience and adjustment to the new normal will influence what they expect from a hotel booking. Guests will want to be certain that their safety and comfort are maintained.
As more people leave their homes to resume their work and travel commitments, we want them to know that staying at a CLHG hotel assures a safe accommodation experience. We pioneered stringent safety and hygiene protocols, helped define the industry protocols, and were pleased to have these further benchmarked against international standards as approved by the WTTC.
Specific initiatives to uphold guest satisfaction include:
Delivering safe and healthy meals
We remain hoteliers, even during the lockdown, and want to ensure that our guests are comfortable, happy and safe. Each of our brands offers an in-house breakfast, which has been adapted to be either served in an 'on-the-go' box, with an emphasis on quality, or at socially distanced tables at our restaurants.
Our regular kitchen hygiene audits were expanded, with a dedicated third-party company undertaking COVID-19 audits for our operating hotels. The latest COVID-19 risk assessment audit scores for 34 of our operating hotels resulted in an average of 95% on the hygiene score and 91% on the microbiological index.
Agile response planning
When the threat of the COVID-19 pandemic became apparent, the group immediately created a COVID-19 rapid response team to analyse the pandemic from every angle. They conducted an impact analysis and scenario planning, with a strong focus on the safety of our employees. We also implemented social distancing measures and are continually educating our employees about safety protocols.
Every COVID-19 case is treated with protocols similar to disaster management, where the COVID-19 rapid response team activates track-and-trace and isolation measures. Staff were divided into A, B, and C teams that were kept strictly separate to limit the spread of the disease and ensure business continuity if a staff member should test positive. This enables us to quarantine an entire team if necessary, without a major effect on operations. This strategy has proved effective.
How employees behave outside of work is also a focus area. We screen employees thoroughly as each shift commences. We ask our employees to quarantine if they have attended big events or funerals to ensure that the workplace remains safe.
Financial integrity
The restricted operational and economic environment arising from the COVID-19 pandemic has severely impacted the group's revenue.
To meet City Lodge's liquidity, working capital and expense requirements, management implemented liquidity and capital measures that include:
If necessary, CLHG may consider additional measures, such as selective asset disposal and sale-and-leaseback transactions.
Proceeds from the rights issue will enable CLHG to repay some of its corporate debt and cover the group's BEE funding arrangements. The rights issue also provides sufficient working capital to fund its cash flow shortfall, and a flexible capital structure to position the group for future growth.
Strategic objective: To continue embedding our refreshed brands and realise growing benefits from an individual brand marketing strategy
The group offers a variety of distinct hotel brands that enable us to provide each type of traveller exactly the experience they want, within their available budget. Unfortunately, a historic lack of clear product differentiation in our markets has blurred these product lines and our brand identities. Ongoing education and brand positioning have become prioritised in our overall marketing mix.
The group has developed a standalone marketing strategy and personality for each brand.
Based on a four-star select service model, the Courtyard Hotel offering attracts guests who appreciate the brand's 'clubby' manor house feel and garden ambience. Courtyard Hotel now offers a full a la carte menu that has been well received. The 168-room Courtyard Hotel Waterfall City currently under construction will launch a wholly revamped Courtyard Hotel brand.
The City Lodge Hotel brand is well-established in the upper midscale hospitality market category and is a highly popular working week venue for business travellers. Leisure travellers are attracted by weekend promotions, our great locations and targeted campaigning.
Our Town Lodge brand hotels have recently undergone refurbishments to reflect a modern, connected and welcoming environment. These feature shared working spaces, good connectivity and great WiFi. The Town Lodge brand caters to a younger, millennial guest who values socialised working spaces and good connectivity. Our social media strategy has shown good success, especially in light of marketing budget cuts.
The Road Lodge brand has gained good traction, providing affordable yet quality accommodation across South Africa. The brand offers basic services, which offers a hospitality solution for guests with simple needs and a lower budget. The Road Lodge brand caters largely to budget-conscious business travellers who are self-employed or who are employed by smaller corporates. The brand is also popular for family travel and school or sports group trips.
In Kenya, the group is fine-tuning the Fairview Hotel brand and its operations, including marketing more actively to South Africans and positioning Fairview Hotel as a first-choice conferencing, events and wedding venue.
Growing our food and beverage offering
Being a trusted brand that has always offered a great breakfast, we are now expanding our food and beverage offering. Our #Cafe product has grown overall revenue significantly. Lunch and dinner are now an important aspect of the City Lodge Hotel brand experience. While we do not serve dinners at Town Lodge, we are busy developing a new light bar snacks menu and we have a new self-service food vending pilot. We have also recently launched an 'eat-in' pizza offering available at all of the CLHG brands. Guests can also enjoy meals from a selection of trusted third-party suppliers without leaving the safety of the hotel. We will continue growing our food and beverage revenue as an adjacent income stream to room rates.
Sales and marketing
CLHG's marketing strategy is designed to drive loyalty and community, while meeting specific hotel operational needs. Each brand marketing team applies data analytics to support the marketing needs of their hotels.
Prior to the COVID-19 pandemic, our marketing team targeted key market groups, particularly travel agents, tour groups and third-party hotel booking platforms, to retain and grow our market share despite intense competition. One initiative was to extend bookings for business travellers who wished to stay the weekend. Another was to introduce weekend rates, which quickly became popular. One of the 2019 Town Lodge radio adverts won several of the most prestigious local and international awards in the creative industry. These included gold, silver, and bronze at the Cannes Lions International Festival of Creativity; several gold awards at the Loeries; and several gold awards at the Pendoring Awards.
When the COVID-19 pandemic and subsequent lockdown began, the initial closure of our hotels prompted the group to suspend all paid advertising. Digital platforms and social media have been the group's primary distribution channels for providing guests, customers, and members with current information on various group hotels and distinct brand experiences. We will drive these initiatives vigorously as COVID-19 restrictions ease. The group's 'safe' stamp of approval from the WTTC is highlighted in our current marketing strategy.
The CLHG loyalty programme and digital platforms are also key components of building loyalty and driving revenue. Our loyalty programme deepens relationships with members to drive repeat stays through tailored services and experiences for the most loyal guests. We are currently planning to implement a reinvigorated loyalty programme offering, which also includes leveraging our recently developed mobile app.
Driving online bookings
We have been working hard to drive more direct bookings through our own website, which enables the group to offer our guests better rates while improving our own margins.
Besides the CLHG website, online bookings are promoted via five platforms:
Our online bookings, including both the third-party sites and the group's website, started declining early in the year when international travel decreased due to COVID-19.
Embedding success through the Wow campaign
While rooms and facilities obviously play a big part in creating positive guest experiences, the main drivers of these experiences are, and always will be, our employees. Based on this understanding, we created and implemented our WOW service excellence programme to encourage the utmost thought, respect and care for our guests. WOW invites innovative thinking and creative ideas from our employees in how to delight our guests and make their jobs easier. Participating employees are rewarded for their WOW contributions through an in-house smartphone app.
The WOW programme is already delivering exceptional results. Highlights for the past financial year include:
We are confident that the WOW programme will continue evolving into a key strategic driver of our sustainable growth.
Strategic objective: To consolidate and expand our position
South Africa
Construction at Courtyard Hotel Waterfall City has resumed following lockdown and is progressing well. We anticipate a four-month delay compared to original pre-COVID-19 estimates, with an anticipated opening of all 168 rooms in March/April 2021.The roll-out of solar power generation capabilities at 25 of the group's hotels was completed during the first half of the year. These systems will generate sufficient energy to supply approximately 30% of individual hotels' energy demands and will lower the group's total energy consumption from non-renewable sources by approximately 10%, further reducing its overall carbon footprint.
Southern Africa
The 148-room City Lodge Hotel Maputo was partially opened in February 2020. The completion of the remaining rooms has been put on hold due to the impact of lockdown on trading operations.
On completion of Courtyard Hotel Waterfall City and City Lodge Hotel Maputo, the group will offer 8 070 rooms at 63 hotels.
Prior to the outbreak of COVID-19, we refurbished Road Lodge Rivonia and Road Lodge Southgate. Additional refurbishment has been put on hold due to the impact of COVID-19 on liquidity.
Partial opening of City Lodge Hotel Maputo
The construction of City Lodge Hotel Maputo (Mozambique) experienced significant delays, primarily due to contractor cash flow constraints. The hotel opened its first 68 rooms in February 2020, with a further 54 rooms becoming available in March 2020, before trading operations were suspended due to a national lockdown in response to the COVID-19 pandemic. We look forward to reopening and completing the construction of the remaining rooms on resumption of trading and accommodating our longawaited guests.
Following completion of City Lodge Hotel Maputo, our African expansion programme will end for the medium term. We will focus on building on our existing hotels and brands, as COVID-19 requires us to re-evaluate our turnaround strategies. This will be a key focus in the year ahead.
Occupancy and market share
In the digital age, guests are mainly looking for accommodation online. The guest experience starts there, and our offering is usually listed alongside our competitors, with price being a major deciding factor. Several new market entrants in all our operating areas have led to an over-supply in the market, especially in high-density areas. While we previously maintained the best price in the range, the new over-supply challenges this position, especially for our City Lodge and Town Lodge brands. However, this trend is less pronounced in outlying areas and towns where we still provide the best service and rate for many government, corporate, and leisure travellers.
Demand prediction and pricing strategy
The group's performance depends on its ability to generate revenue by maintaining or improving occupancy at an optimal price. We are currently operating in an exceptionally low occupancy environment that is shifting the competition toward pricing and promotions. Coupled with the discounting already prevalent throughout the hospitality industry, pricing cuts exert downward pressure on the group's revenue and profitability.
The group is making a fundamental shift from fixed room rates to a Best Available Rate philosophy which will yield the right price according to demand. In simple terms, yield management is a strategy based on selling to the right customer, at the right time, for the right price.
We are introducing an AI function to improve demand prediction and inform our pricing strategy.
Strategic objective: To continue transforming the group in line with the BBBEE Codes of Good Practice
Given the vast numbers of employment opportunities created by the hotel industry during the normal trading era, transformation has a vital role to play in developing the societies where we operate. For our group, the people we employ are integral to our ability to deliver on our brand promise and delight our guests. As such we are committed to empowering, upskilling and developing our employees to maximise their potential and ensure they can take advantage of every opportunity to further their careers.
Although transformation and empowerment targets for the hotel industry are higher than many other industries, we have never viewed transformation as purely a compliance issue. We see it as a moral obligation to make a real and lasting difference to the lives and futures of our staff, our industry and our country. We also recognise that transformation is a business imperative. Our staff demographics should match those of our guests. Therefore, the group will transform itself in line with how our markets are steadily transforming.
In line with this understanding, we continue to make real progress in our transformation efforts. We have had no gender or race-based income disparity in our organisation since 1985 and we are absolutely committed to equal opportunities and advancing opportunities for women in our business and the hotel industry as a whole. As a result, more than 40% of our general managers today are women and we continue focusing on increasing this percentage.
We also continue to focus on training and developing future executives across all race and gender groups to ensure we have a well-established succession plan and a deep pool of leadership talent to facilitate our continued brand and market share growth. As part of our commitment to an inclusive culture and environment, we encourage and welcome innovation and input from our staff.
We have also prioritised enterprise development and work closely with our suppliers to ensure a positive impact on the transformation of our entire supply chain. The group is committed to ongoing supplier education and development and provides ongoing guidance and transformation inputs into our partner businesses.
These commitments to transformation have resulted in CLHG retaining a BBBEE level 4 scorecard rating of 90.45, until September 2021, compared to 91.34 in the prior year.
We made good progress on all pillars of transformation excepting equity ownership, which was hampered by the falling share price. The general scarcity of skilled candidates from designated groups at senior and management levels is also slowing our transformation efforts.
To address this issue sustainably, we are developing our own talent pipeline of skilled and experienced individuals to lead our transformed organisation into the future. The group's accelerated development and deployment programme (ADDP), linked with individualised employee development, is our primary tool for developing our people.
Driving transformation through training and development
We currently have 76 employees registered on various City and Guilds courses, as well as 90 hotel school students gaining work experience at our hotels. During this period, the group offered learnership opportunities to 10 disabled or unemployed learners in partnership with the South African Disability Development Trust.
Societal transformation – SMME support
Our sustainability as a business is wholly dependent on the sustainability of the societies and environments in which we operate. Healthy, thriving societies underpin healthy, thriving businesses. Helping to transform and empower our communities is both a moral obligation and a business imperative.
Much of our societal support takes the form of targeted social investment. We deliberately focus our social investment efforts on the initiatives and people who can be realistically enabled to prosper and grow.
Our social beneficiaries presently include a training provider, a furniture manufacturer, a transport provider and a fresh food supplier. These beneficiaries not only receive financial support and business guidance from us – they have also become part of the group's supply chain.
Strategic objective: To be a leader within the hospitality sector in environmentally sustainable business practices
Solar energy
In the past financial year, we completed 25 solar energy installations, at a total investment of approximately R20 million. As each of these installations will generate 30% of their hotel's total energy and lower the group's overall energy consumption from non-renewable sources by approximately 10%, we foresee that the costs saved during normal trading operations will cover the investment in less than four years.
Reduced plastic usage
We are driven to eliminate single-use plastics throughout our operations. We reduced the need for bottled water by introducing new water filter stations that provide magnesium-enriched water to our guests at no cost.
Together with our South African supplier, The Bespoke Amenities Company (TBAC), we launched an all-new range of bathroom amenities to reduce the amount of plastic used in our hotel rooms. All products are now packaged in Forest Stewardship Council certified cardboard packaging that is completely recyclable.
The Zero Bars are a waterless solution, and reduce the carbon footprint of the supply chain, as previously the liquid products meant trucking water around the country.
As stock of the existing amenities runs down in hotels, these are being replaced with the new environmentally friendly range.
In the year ahead we aim to maintain and, where possible, further reduce energy consumption on a per-room-sold basis. We acknowledge that we need to find more ways to reduce overall consumption in the hotels during periods of low occupancy, especially until the COVID-19 pandemic subsides.
Our water-saving initiatives will continue reducing our per-room-sold water consumption. We are investigating options for grey water reuse and seeking additional water sources in water scarce regions.
As occupancies increase from current COVID-19 levels, we will prioritise initiatives for managing and reducing waste.
Strategic objective: To maintain and implement an innovative technology platform
To take our guests' experience to a new level, we mapped out every step of the guest journey:
Each step in the guest journey has been analysed to determine how we can streamline and improve the guest experience.
The process begins with the guest searching for accommodation, usually online. We therefore redesigned our website by updating the hotel page layout, adding attractive new images, and showcasing local attractions. We also included new payment options, such as SnapScan, to ease the booking process. From the early stages of the COVID-19 pandemic, we added a pop-up on our home page to direct guests to more information about how we keep them safe and provide information about which hotels are open.
To enhance the guest experience, we are thrilled with the third iteration of our new City Lodge mobile application. This application features increased functionality, including an option for online guest check-in so that guests can simply collect their key card on arrival. It also features information about room service, food menus, and local attractions.
Taking advantage of these digital opportunities is more important than ever during and after the COVID-19 pandemic. Since March 2020, we have focused on reducing physical touch points to protect our guests and staff. One initiative was to introduce online forms and QR codes to minimise paper usage and the resultant health risk. Our COVID-19 screening process also takes place electronically rather than in the form of paper-based surveys.
During the past year, we upgraded our IT infrastructure in all our hotels to achieve a premium connectivity experience for our guests. The new WiFi solution also reduces monthly expenditure and gives us more flexibility around levels of service. Where available, we provide our guests with free and uncapped fibre. The group experienced some delays in the roll-out of the new WiFi due to COVID-19 lockdown restrictions, but all upgrades are due for completion by the end of 2020.
When lockdown was announced, we moved our entire central office to remote working conditions, to ensure safety and continuity of service. The migration of central office team members from being office bound to working remotely was seamless, with the necessary IT tools in place to support productivity and efficiency.
We are leveraging predictive analytics and machine learning to inform our pricing decisions. Our new business intelligence (BI) tool helps to analyse key clients, track new business and personalise offerings for guests, corporate clients and agents. It also reviews historic, environmental and industry data. Although we are still integrating the BI tool into our operations, we will leverage its advantages as the travel industry gets back on its feet.
Data security and cyber threats are high on the global agenda, following data breaches at high-profile companies. The hospitality industry has not been exempt. Although we already had industry-standard security features in place, during this financial year we invested additional time and resources to strengthen our security posture. A group-wide cyber security awareness programme was launched to continually prioritise data security and implement specific responses to potential incidents.
