Moving towards long-term sustainability
The leadership team shares its insights on the 2021 financial year, and how the group is rejuvenated and working toward long-term sustainability through ongoing innovation.
Chief executive officer
Chief operating officer
Chief financial officer
In times as turbulent as these, the balance between short-term liquidity and investment in opportunities that support long-term sustainability is more nuanced than ever. In this interview, the leadership team outlines the trade-offs that brought CLHG to its current state of stability.
WHICH KEY EVENTS STOOD OUT THIS YEAR?
FY2021 was, by far, one of the most difficult periods in the group's 36-year history. The Covid-19 pandemic, fuelled by ever-more infectious variants of the virus, regularly shut down countries, regions and economic sectors across the planet. While all industrial sectors were impacted by the pandemic, many negatively and some positively, its impact on the hospitality sector was particularly brutal. International and domestic tourism dropped to a trickle, severely disrupting all our markets.
South Africa, as CLHG's base of operations and largest market, was subject to lockdown restrictions that oscillated between Level 5 in March 2020, during which all the country borders were closed and interprovincial travel was halted, to the considerably less arduous Level 1. The country endured three waves of infection, each worse than the previous one. The repeated closure of restaurants, combined with a curfew, movement restrictions and the ban on alcohol sales, limited demand for our hotels and venues, which ebbed and flowed under the level of lockdown restrictions.
Our other southern African geographies mimic South African hospitality to a degree, as much of their travel demand originates from this country. However, our Kenyan and Tanzanian properties in East Africa are more reliant on travel from Europe and North America. International travel is expected to take longer to recover in this region.
WHAT WERE YOUR MOST IMPORTANT STRATEGIC ACHIEVEMENTS?
Our Covid-19 rapid response team, consisting of exco and senior management members, was fundamental to the group's ongoing operability. This team was responsible for ensuring that CLHG remained nimble and responsive in the face of the pandemic and has matured into a smooth running and agile entity.
However, waves of Covid-19 infections directly impacted our revenues. When cases subsided, CLHG hotels reopened and the group gathered momentum as occupancies increased. By end June 2021, for example, 50 out of 56 CLHG hotels in South Africa were open again. Future waves of Covid-19 infections are expected to once again close or restrict our hotels for periods of time. 53 South African hotels were open at the time of publishing this report.
When operations slowed, we used the opportunity to explore and implement improvements to the CLHG business model, operations, messaging, and pricing methodology.
With health and safety highlighted by the pandemic, CLHG used innovative technologies to introduce a contactless environment for our guests. QR codes replaced our paper-based menus and information pamphlets, while the new and improved iteration of the City Lodge mobile application now enables guests to check-in and complete their Covid-19 screenings online. At our new Courtyard Hotel Waterfall City, room doors, air conditioners and televisions are now controllable by mobile phone.
Our back-of-house focus shifted to yield and revenue management. The group's customer relationship management system (CRM) is individualising the customer experience for each guest and provides us with valuable data on guest experiences. Our new CLHG artificial intelligence (AI) predictive demand analysis tool merges insights from the CRM and BI with external information to inform our Best Available Rate (BAR) methodology.
Methods of expanding our share of the guest wallet were explored. For example, we give guests more reason to stay safely at our hotels rather than heading out for meals. In addition to our excellent breakfasts, we launched a gourmet pizza offering at all four hotel brands in South Africa and enhanced our Eat In bar snack options at Town Lodges and #Cafe restaurants in City Lodge Hotels. We also refreshed the lunch and dinner menus at City Lodge Hotel and Courtyard Hotel restaurants. CLHG's incoming General Manager: Operations (Food and Beverage), Trevor Boyd, brings 25 years of master chef experience to the management team and is tasked with making the most of culinary trends using our existing catering infrastructure.
All of these factors have helped us to target our pricing and marketing more accurately, remaining conscious that domestic travel will recover more quickly than international travel. Business travel is resuming as organisations realise that the pandemic is unlikely to end soon and vaccinations are becoming more prolific.
We remain committed to helping our communities and the challenging economic environment did not preclude our social investment initiatives. CLHG hotels in Sandton and the CBD node of Johannesburg donated bedding, towelling, crockery, and amenities to the value of nearly R228 000 to the Emthonjeni Community Centre in Zandspruit, Johannesburg.
HOW ARE YOU MANAGING YOUR BRANDS AND HOTELS?
Opening the new Courtyard Hotel Waterfall City was an enormous milestone in our journey towards a revitalised brand and service offering. Launching this hotel during the pandemic demonstrates our confidence in the future of South Africa. It also shows confidence in the growing destination appeal of the Waterfall City precinct with the Mall of Africa and major corporate head offices as anchor tenants. This upscale hotel also showcases CLHG's strategic trajectory towards additional services, technological innovations, new bespoke food and beverage offerings, refreshed design elements, and Green Star building rating.
At the same time, we are evaluating each hotel's performance, especially those that were underperforming before the pandemic. Certain assets were rebranded to align with the target market demographics and preferences. Others may be repurposed or sold. We are exploring all avenues to returning our assets to profitability, including hotel-specific marketing and branding campaigns.
HOW DID THE COVID-19 ENVIRONMENT AFFECT THE GROUP'S PERFORMANCE?
While new initiatives mitigated the effects of Covid-19 to a degree, the group was still hit hard by the industry-wide impact of the pandemic. Our average occupancies across open hotels for the year was 26%, compared to 38% in 2020 and 55% in 2019. The average occupancies of hotels that could open were 26%.
This resulted in a substantial decline in revenues to R0.5 billion (FY2020: R1.16 billion), with the group incurring a net loss of R804.6 million (2020: R486.6 million) for the year.
To bolster the group's liquidity, CLHG completed a rights offer in August 2020. This provided a R1.2 billion cash injection to settle maturing debt in the B-BBEE SPVs and provide necessary liquidity to support the working capital requirements of the group during low-levels of operational activity brought on by the Covid-19 pandemic. Post year-end, the sale of our four hotels in East Africa will provide welcome working capital and shorten the road to profitability.
Our employees remain our most important assets and we are relieved to have avoided retrenchments. Salaries continued to be paid, albeit at a reduced rate. The board regularly reviews the salary reductions to consider any further increases as the economic recovery sustainably improves. To support our people, we made mental health and wellbeing counselling available to all employees, and the newly-launched in-house Facebook group has grown into a fun and supportive community platform.
WHAT ARE YOUR STRATEGIC PRIORITIES OVER THE SHORT AND MEDIUM TERM?
Regaining profitability remains CLHG's primary priority and challenge. The group's current overarching theme, 'getting back to living', is about welcoming our guests back and communicating the positive aspects of the 'new normal' hospitality experience. Our new AI tool has been rolled out to 25 of our hotels - we aim to expand this number to 50 soon, pending the speed and accuracy of machine learning. The group is already reaping rewards in the form of improved actual room rates.
In the interim, CLHG is using the opportunity to continue strengthening our operational processes and governance. As an example, cyber-security is prioritised as a growing risk in an increasingly virtual world, with many of our central office staff still working from home.
Transformation also remains a key focus area, especially in light of our previous B-BBEE ownership structure being unwound during the rights offer process. While there is no immediate action to reinstate a new B-BBEE ownership structure, the group will evaluate and consider a new B-BBEE ownership structure over the medium term. We have re-emphasised transformational skills development, procurement and management control as B-BBEE priorities.
WHAT DO YOU EXPECT IN THE FORTHCOMING YEAR?
In a year characterised by highs and lows, our highs may not yet have resulted in profitability, but we are encouraged by how quickly occupancy rates bounce back each time infection rates decline. Stifled wanderlust periodically results in small surges of travel as lockdown restrictions ease, indicating that latent demand remains strong. We are optimistic that local and international vaccination rollouts will steadily restore confidence in leisure and business travel and regrow our occupancy levels. At the time of publication, South Africa had extended its vaccination campaign to include everyone over the age of 18 and young adults are proving eager to receive the vaccine.
At the same time, successful vaccination programmes in North America, Europe and parts of Asia are already driving increased international travel, although the advent of the Covid-19's Delta variant was a temporary setback, as will hopefully be the case with other emerging mutation or variants. If African governments, including South Africa's, can implement clear guidelines for safe travel from overseas that recognise vaccinated travellers, we could benefit from a spike in pent-up demand from early on in southern Africa's summer season. The group is ready to make the most of any upswing. Nevertheless, our occupancy levels still depend on the success of the Covid-19 vaccine rollout in our markets and the length and severity of future waves of infection.
WHO STOOD OUT FOR YOU IN THIS YEAR OF CRISIS?
We were encouraged by the resilience and innovation of our people and their willingness to do whatever was necessary to keep our guests satisfied. We encounter amazing stories daily of people caring for people, both guests and colleagues. Our Rate Us guest satisfaction questionnaires are returning higher satisfaction scores than before the pandemic, demonstrating how well our customer-facing staff stepped up. We also applaud our central office and support staff for so quickly adapting to the remote working environment and for always being available to deal with the curveballs that came their way. Our Covid-19 rapid response team kept the group responsive to the changing realities of the pandemic. As a leadership team, we are unbelievably proud of our CLHG family.
At the same time, CLHG commemorates with deep sadness the people we lost to the pandemic: Megan Kinsey, Mandi De Wet, Clencinah Malego Malesa, and Rose Mathabathe. We are also heartsore for staff members who contracted the virus, sometimes en route to work in a taxi or bus. Some of our colleagues suffered from 'long Covid' for weeks after the fact. We extend our sympathy to those who lost loved ones.
We are comforted by the support from our external stakeholders. Our guests have shown remarkable loyalty and understanding while we updated our processes to align with Covid-19 protocols and implemented innovations. We are grateful for the trust placed in us to provide them with a safe accommodation environment.
The support from our shareholders was overwhelming. They stood by us and their generosity during the rights offer process demonstrates faith in CLHG and our prospects.
Our suppliers also assisted us through this rough period. Flexible payment terms and quick responses to our changing requirements helped to keep the group operating at peak efficiency.
We acknowledge the faith placed in us by all our stakeholders, whether employees, shareholders, guests, suppliers or communities. On behalf of CLHG, we look forward to sharing the journey ahead with you as we all get back to living through the ups and the downs, with the confidence that we will come out stronger on the other side.
It's our pleasure
to welcome you
Step into our stylish new Courtyard Hotel Waterfall City in Midrand, which opened on 1 March 2021, and takes the brand in a fresh and exciting new direction, merging contemporary with timeless design.
This four-star brand captures the essence of South African contextual elements merged with a subtle Art Deco feel. The hotel embraces a richness of layers, details and textures, while remaining functional and transitioning from a light-filled cosmopolitan space, ideal for daytime meetings, into a night time venue where lighting shifts to create a moodier atmosphere.
Our local talent is showcased throughout the public areas, creating timeless aesthetics in this beautiful 168 room hotel. There is synergy between technology, sustainability and design, to create an unforgettable guest experience.