SA occupancies up to 36% as City Lodge Hotels posts better interim results
Commentary on the performance of the group’s hotels during the six months from July to end-December 2021 and outlook for the coming year follows:
The new financial year had a particularly tumultuous start due to the severe third wave of Covid-19 infections and hospitalisations caused by the Delta variant. This caused travel hesitancy, and the level 4 lockdown restrictions, which banned leisure travel to and from Gauteng during the key winter school holiday period. The violent civil unrest in South Africa in July increased the negative impact on trading operations over this period. Gratefully, the group suffered no property damage as a result of the protests in KwaZulu-Natal, however, the majority of the hotels in the area closed temporarily due to safety concerns and lack of fuel and food supplies, and resumed trading as soon as the situation stabilised.
As infection rates steadily declined, travel confidence returned. This positively impacted occupancies and pricing, and resulted in additional hotel re-openings. The gradual easing of restrictions, the accelerated roll-out of vaccinations across all adult groups including young adults, and the removal of South Africa from international ‘no-fly’ and ‘red lists’, boosted business and leisure travel confidence.
Average occupancies for the interim period at the group’s South African operations, based on total hotel room inventory, was 32%, with the low of 16% in July and a high of 43% in November. The discovery of the Omicron variant in South Africa in late-November 2021, and the almost overnight shutdown of international travel routes to South Africa, resulted in a setback in demand, which was substantially picked up by the domestic leisure market. December 2021 occupancies for the South African open hotels averaged 43% with 53 hotels open, and five hotels open in the rest of Africa.
Cost containment measures applied since April 2020 continue to be enforced, where appropriate, to help preserve and improve liquidity. We are grateful that, even during these turbulent and challenging times, our employees remain dedicated to providing outstanding service to all our guests, as our Rate Us and other feedback forums have registered our highest scores.
The steady improvement in occupancies and demand for hospitality services over the last few months has led to average group occupancies for all hotels in the group for the six months ended 31 December 2021 of 30% (December 2020: 17%) and open hotels 34% (December 2020: 27%). As at December, the group had 92% of the hotels in its portfolio of hotels open, compared to 74% in the prior period.
Total revenue for the period doubled to R436 million compared to R215.6 million for the prior period. Operating costs excluding depreciation and amortisation decreased by 11%, compared to the prior six months, however, excluding unrealised foreign exchange gains and losses on intercompany loans, increased by 40%. Increases were mainly due to the raising of reduced salaries paid in the early stages of the pandemic from 50% up to 70% from November 2020, and then further increased to 75% from November 2021. Operating costs per room sold, excluding unrealised foreign exchange gains and losses reduced by 22% compared to the prior year. The group supported and enabled the UIF TERS claims, which provided necessary support to employees to alleviate the financial burden of reduced salaries.
As more hotels open and occupancy increases, the variable operating costs increase to enable continued operations. The group generated profit from operating activities before interest, tax, depreciation and amortisation (EBITDA) for the six months to December 2021 of R122.6 million compared to an EBITDA loss in the prior period of R131.7 million. Depreciation and amortisation on owned assets decreased by 26%, mainly due to discontinuation of depreciation on held for sale assets and the impact of impairment losses recognised in prior periods.
Courtesy of Bizcommunity – read full article here.