Integrated Report 2022
The leadership team shares its insights on the 2022 financial year, and how the group is rejuvenated and working toward long-term sustainability through ongoing innovation.
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The volume and scale of the various challenges faced this year were immense, from the insurrection and third, fourth and fifth waves of the Covid-19 pandemic in July 2021, to the climate-change catastrophe in KwaZulu-Natal and world-wide energy shortage and high-inflation in the last quarter. However, it has also been an incredibly rewarding year as the tides of fortune have changed and the economy recovers. The group has faced certain stark realities, not least because the hospitality and tourism industries were arguably the hardest hit by the local and international crises. Riots and looting, load-shedding, low demand, and the closure of three local airlines are all results of the Covid-19 lockdowns experienced in the last 24 months. With remaining lockdown restrictions only being lifted in the fourth quarter of our 2022 financial year, and operating costs rising due to inflation, companies which intended to survive required a lot of flexibility.
Fortunately, CLHG showed that it can exercise this type of flexibility because we own 81% of our hotels, and manage 100% of all 59 hotels and therefore control all aspects of the value chain are able to make rapid and coordinated decisions when faced with a crisis. Agility has been CLHG's mandate.
In fact, since the start of the Covid-19 pandemic, we have seen our people develop from reactive to proactive employees. The industriousness and positivity of our staff in the hotels, as well as the staff in support office, have been invaluable to the group this year. At times it felt as though the challenges to the group were intensifying, but it just seemed to sustain the momentum as each person went about their daily tasks.
Despite the fact that this has not been our highest-earning or most developmental year, this has been a highly successful year for the group in that we were able to prioritise the guest experience, which led to high levels of guest satisfaction of 90.6% in RateUs rating, and to establish direct objectives of operational sustainability and tackling each new challenge with zeal and fortitude. It has also reminded executive management of the importance of every victory (e.g. the return of 100% occupancies at hotels on some nights, breaking post-Covid records on a routine basis) and every step forward, and of the value of a good team. Recognising that the macro-operating environmental are beyond our control, we focus instead on that which we can control – the CLHG offering. We continually improve customer journey by providing outstanding service, innovative digital amenities, and memorable experiences.
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This year has been about increasing our turnover, containing costs, reducing leverage and honouring all covenants in respect of our debt facilities in order to maintain access to bank liquidity. Our first steps were to freeze all uncommitted capital expenditure, and to reduce variable and fixed costs as far as we were able. We are very pleased our total revenue has increased by 117% to R1.104 billion. This is due to a lifting of travel restrictions, resulting in increased occupancies with additional revenues provided by our improved food and beverage offering.
Operational sustainability has continued to be an area of focus over the last 12 months. We have closely balanced hotel re-openings based on demand and growth forecasts, so that hotels could be reopened at the right time, with cash management and cost containment initiatives. These actions allowed us to re-open all hotels by February 2022, and to reinstate full salaries by May 2022.
We completed the disposal of our East African operations at the end of June 2022, which consisted of three hotels in Nairobi, Kenya, and one hotel in Dar es Salaam, Tanzania. On reflection, we underestimated the value of our brand which is strong in southern Africa but weak outside of our core markets. The sale allows us to focus our attention on our southern African operations, where our brand is recognised and trusted by travellers from the region. In addition, two of the hotels were new and would require considerable time and marketing spend in order to develop a following. The board's decision to dispose of the East African operations was to improve liquidity, and create a sustainable route to profitability.
Following receipt of the disposal proceeds in July 2022 (post-balance sheet date), we have repaid a R300 million of R600 million outstanding interest-bearing borrowings at year end, thereby achieving a substantial reduction in debt and lowering ongoing interest charges.
We refinanced R720 million of our outstanding interest-bearing borrowings which were due for repayment within 12 months of year end and, simultaneously entered into a new R600 million interest-bearing debt facility with a maturity profile between three and five years. The financial terms and covenants are more favourable then previous terms and provide the necessary liquidity to re-commence our refurbishment programmes and capitalise on any new acquisitions or developments should the right opportunity present.
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Despite the fact that the group has historically prioritised expansion of our hotel footprint into other countries, we have no existing plans to open new hotels at this time. Our capital investment strategy for the 2023 financial year focuses more on refurbishments in our City Lodge Hotel V&A Waterfront and Road Lodge Richards Bay. We have also scheduled the completion of the interior fittings and furnishings of the remaining four floors at Courtyard Hotel Waterfall City, Midrand.
In respect of geographic expansion: for the medium term, the group's focus will be on its home markets in Africa. We will always look-out for new ideas and opportunities, but expanding our footprint geographically is not a priority at this point.
We continue to focus and refine our food and beverage offering, and have an exciting top-quality new menu planned for roll-out at all City Lodge Hotels and Courtyard Hotels. Our menus are bespoke, catering for some local favourites and some seasonal specialities, cooked in our kitchens, and delivered with a smile to your dining table.
Giving our loyal guests more value and more outstanding experiences is the cornerstone of our ethos. With this in mind, we are planning an exciting and invigorated re-launch of our loyalty programme with some exciting partnerships and offers.
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Our intense focus on the group's financial stability saw delays in other plans, such as refurbishment. Expenditure was curtailed and carefully monitored, with a view to resuming our regular ESG activities at the earliest opportunity.
As one of the first priorities in FY23, we intend to review our existing ESG strategy and to implement projects that are beneficial to the environment and communities that exist outside of CLHG, and that align to our values. For instance, prior to the pandemic we implemented a number of solar and water sustainability installations, and there were more in the pipeline. That all fell away during 2020 and 2021 due to cost containment, but more installations are planned for the coming year. Not only are these projects good for the environment, but they also make our business more resilient.
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The appointment of top chef Trevor Boyd as General manager: operations – food and beverage has had many early successes. We have exciting developments in our food and beverage offering. From a brand perspective, Trevor has been very instrumental in showing our guests a different side of CLHG and delighting guests with an enhanced food and beverage offering at every one of our brands. These efforts have already delivered a 150% increase in food and beverage revenue, while still in its infancy, following the launch of Eat-in in our Town Lodge and Road Lodge brands mainly in the last quarter of FY22. We see this growing as the offer becomes better-known.
'Staycations', the new low-cost leisure trend, have increased our occupancies significantly. Leisure travellers have also been attracted by our weekend specials and our weekend occupancies have seen healthy growth as a result. At the end of June 2022, leisure travellers comprised 40% of our total guests.
As a result of the improved food and beverage offering, and Best Available Rates pricing methodology, our brands are more appealing to leisure travellers, an increasingly important market segment which we have, to our detriment, not focused on sufficiently.
Historically, CLHG earned approximately two-thirds of its revenue from business travel and we continue to strive to grow our leisure market share. We have refreshed our brands and their offerings and as a result significantly boosted our appeal to leisure guests.
Our complimentary high-speed WiFi has increased our business travel bookings with remote working being far more common and, with the advent of the 'bleisure' traveller, we are able to enjoy bookings from both the business and leisure markets by offering value-for-money rates for individuals and families, enhanced meal options, and appealing and functional leisure and business spaces. We will prioritise capitalising on this new-found interest from the leisure market in the upcoming year.
During the pandemic we were faced with the difficult choice while hotels were closed, to retrench loyal employees or ask everyone to contribute and work reduced hours with reduced pay. We chose the latter, believing that this was the right choice, as well as, the best for the long-term success of the business. As soon as the group was on a sustainable path to recovery, we were grateful to be able to resume full-time work and full pay for all employees in May 2022.
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We would like to thank our people, who carried the company through the obstacles with their positivity and diligence. To all of our employees, thank you for your continued efforts to keep our hotels operating at the highest standards. Whether you work at the reception desk or behind-the-scenes, your contribution ensures our hotels are outstanding, and we are grateful.
We would like to extend our heartfelt gratitude to our shareholders and our broad community of stakeholders. Thank you for your support and for putting your trust in us to see the group through to the other side of a tough period. Thank you to our board members for your continued guidance and dedication, and most importantly, to our guests and suppliers for your patronage.
The CLHG of 2022 owes its identity, buildings, earnings, and existence to you. Thank you for your patience in the face of enormous challenges and for your encouragement through unchartered waters. We are enthusiastic to start another year on our holistic wellness journey.
