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Keeping its head above water

Jun 24 2010 00:00 Joan Muller
IT APPEARS CITY LODGE is holding up considerably better than other hospitality counters, including the likes of Hospitality Property Fund, Sun International, Tsogo Sun and Gold Reef, which have all taken a smack in recent months on the back of falling hotel occupancies and revenues. While City Lodge’s share price has come under some pressure of late, its stock is still up around 5% over the past 12 months – for example, comparing well to Hospitality’s (B units) drop of more than 40% over the same period.

Opportunities

* City Lodge’s range of well-priced, affordable products is benefiting greatly from travellers trading down to cheaper hotels.

* Earnings are expected to be boosted by the Fifa Soccer World Cup, with offshore soccer fans reportedly preferring South Africa’s budget hotels to their luxury counterparts.

* The group’s conservative gearing policy will stand it in good stead at a time when trading conditions are expected to remain tough for at least the next six to 12 months.

* Latest available figures show occupancies throughout the group’s four brands – Courtyard, City Lodge, Town Lodge and Road Lodge – are still at 70%, which is well above the industry average.

Risks

* Household and corporate budgets remain under pressure and it’s unsure if and when consumers and companies will again start increasing travel and tourism spending.

* The current oversupply of hotel rooms will affect all players for some time to come. Latest figures from STR global show hotel occupancies in SA were down to 56% in first quarter 2010 – the lowest in more than a decade. 
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