City Lodge needs a decent December

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City Lodge needs a decent December

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Published Date: 2021-11-26 | Source: INCE|Community | Author: The Finance Ghost

City Lodge needs a decent December

City Lodge has released a voluntary operational update.

The financial year got off to a very rough start, as winter in South Africa was an environment of lockdowns and civil unrest. Since then, things have certainly gotten a lot better.

City Lodge highlights "steady weekly growth in occupancies" and "a strengthening of pricing power" as the key trading themes of the past few months. Business and leisure travel have begun to return.

South African occupancies have improved from just 16% in July 2021 to 41% in November thus far. With 53 hotels open in South Africa and 5 hotels open in the Rest of Africa, bookings for rooms in December have continued to come in. This is especially the case at the coastal hotels.

Of course, the narrative around a fourth wave looms large over the country. As much as we all hate this reality, it seems unlikely that we will get through the festive season without a tightening of restrictions to some extent.

City Lodge has been cautious with expenses out of necessity. Staff salaries in November are 75% of normal, up from 70% between November 2020 and October 2021. There has been great hardship across the industry, especially for staff in the hotels. It appears as though the staff cuts didn't apply to staff who could work remotely i.e. at head office.

There doesn't seem to be much headroom in the debt facilities. The group has drawn R720 million of its R800 million loan facilities and has access to an additional R115 million overdraft facility. Covenants have been waived until September 2022 which helps, but the risk of further equity capital raises isn't zero.

The disposals in Kenya and Tanzania are in the process of being approved by relevant competition authorities. It's a slow and frustrating process in Africa, so the long stop dates (the final date by which the transaction must close) have been extended by five weeks to 31 January 2022.

Market punters will be watching the news closely for the prospects of travel restrictions over the festive season. In the meantime, City Lodge needs to generate as much cash as possible.





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