City Lodge lifts dividend after boost from food and beverages, improved occupancies

Hotel operator City Lodge has hiked its full-year dividend 15% amid strong profit growth, stable occupancies and a standout topline performance from its food and beverage segment.

However, this overall performance was offset somewhat by a tougher second half of the year.

Reporting results for the year ended in June last Friday, the group reported total revenue grew 13% to R1.9 billion, while its profit for the year increased 15% to R189 million. The strong performance enabled City Lodge to increase its dividend to 15 cents from 13 cents previously.

Its food and beverage segment, a relatively new addition at City Lodge, also performed strongly, growing revenue by 22%.

Valued at about R2.8 billion on the Johannesburg Stock Exchange (JSE), the group owns a total of 59 hotels – including 56 in South Africa and three in Botswana, Namibia and Mozambique. These are spread across its City Lodge, Road Lodge, Town Lodge and Courtyard brands.

Chief financial officer Dhanisha Nathoo described the financial year as a "tale of two halves" in a statement accompanying results, with the first quarter kicking off with some strong demand for occupancy, which was about eight percentage points ahead of the prior year.

But the effect of high inflation and interest rates, load shedding and poor investor and consumer confidence in the run-up to elections had dampened corporate demand and consumer spending, she noted, and average occupancies for the full year only rose two percentage points to 58%.



Bright spots

At the same time, the government austerity measures put in place by National Treasury in October had also contributed to subdued demand.

All these factors led to a one percentage point reduction in occupancy between November 2023 and June 2024, compared to last year, she said.

Bright spots for the group included the top-performing Western Cape and the Johannesburg area to a lesser extent. But the company said KwaZulu-Natal suffered due to "socioeconomic challenges including sporadic closure of beaches, the departure of many Durban beachfront businesses and safety and security concerns".

The group said the Western Cape continued to have the "fastest recovery" in both occupancy and rates, while the greater Johannesburg area had experienced a slight pick-up in demand as more business travellers were working from their offices and travel needed to increase.

In late afternoon trade, City Lodge was down about 2.6%, recovering from a sharper fall earlier. Its shares have fallen by about 3% in the past year.



-FIN24-