You can also listen to this podcast on iono.fm here.
Welcome to the latest episode of The Property Pod, South Africa’s premier property investor podcast. We are continuing our Tourism Month theme on the podcast this week, and I’m talking tourism and hospitality with another industry leader.
Of course, a part of the property industry is the tourism industry and the hotels and resorts sector. Our guest on the pod this week is Lindiwe Sangweni-Siddo, the chief operating officer of JSE-listed City Lodge Hotel Group. The group brought out much better results for its latest financial year last week, showing continued recovery in the sector.
We are not talking pure results with Lindiwe, but we’ll get some of her insights on the tourism and hospitality sector and City Lodge’s plans for the future. In the interview, we also zone into the importance of domestic tourism, which was the first to recover in the tourism and hospitality sector post the pandemic.
Highlights of her interview appear below. You can also listen to the full podcast above or download it from iono, Spotify or Apple Podcasts.
First off, just a little bit of insight into who is Lindiwe Sangweni-Siddo. How long have you been at City Lodge in the COO role, and what did you do before that? Have you always been in the hotel and tourism sector?
“Yes, I’ve been in the tourism sector since I went to hotel school in 1986. So I’m one of the old magogos, or the doyens, as they would call them. My time with City Lodge Hotels Group started in 2015 as an operations director, where I was responsible for a portfolio of about 12 or 13 hotels, alongside other colleagues.
“We have 59 hotels … we had, at one point, 63 and then we offloaded those in East Africa.”
Nonetheless, my role as chief operating officer began five years ago. So from 2018 to today I’ve been the chief operating officer, including the ‘favourite’ pandemic years, which I think really took us through our test of time.”
What excites you about tourism and hospitality? What are your expectations for the industry going forward, because it seems to be back on the up?
“At a personal level I’ve always loved the hospitality industry because it involves people, it involves international travel people coming into South Africa, or domestic travel. What happened during the pandemic I think was the awakening or the reawakening of the domestic and especially the leisure market. And that’s where we all came to understand and realise how important [domestic tourism] is in every country.”
“I would imagine this was a realisation for every country – that you’ve got to have a very well-established and well-bedded domestic and particularly leisure market …”
“Because we say over the weekend those individuals are relaxing and having a good time, but during the week they are probably doing business, and so the same individual transforms and becomes that business person.”
“I’m mixing my response in that I personally have always enjoyed working with people, working with travellers, working with guests, and ‘people’ also extends to the people who work for us.”
“Coming back to our tourism industry. I think right now what is exciting, is the recovery. Three years ago, we were in the depths of a pandemic that we had never anticipated or even imagined in our wildest dreams. But coming out of it we were able to begin to understand what a recovery plan looks like.”
“The first to come online was the leisure market that brought us back to life once the restrictions started being lifted.
“It took a long time for the international market to come back because, remember, there were all those restrictions about Covid, vaccinations, etc. And so we had to really, as South Africans, as South Africa incorporated, become very self-reliant and look inwards.”
“Shortly after the leisure market, of course, there were the essential travellers. There was government that started working and moving around and, before we knew it, SMMEs were back, also on track. And corporates were really more of a late arrival after the pandemic, due to the fact that they were now discovering and had discovered hybrid work-from-home or the split between working at home and the office. We saw the corporate markets come back a little bit slower.”
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“So we are now back nicely. I can say that when we look at South Africa as a whole the statistics tell us that four million arrivals between January and June 2023 were recorded.”
“This is good news. Why do we say that? Given that last year we had 5.8 million arrivals for the entire year, that in itself just demonstrates that we are now on a really great growth trajectory.”
Mmatšatši Ramawela was our guest last week, and she talked about domestic tourism growing and its importance. But you’re talking about four million international arrivals now. Does the industry go back to how it operated, perhaps taking the domestic tourism industry for granted and really wanting international tourists more than anything? What are your comments on that?
“I didn’t listen to Mmatšatši, who is a very good friend of mine. I would want to say we maybe underestimated the ability of the leisure market, if we focused on it. And really what we did was to evaluate how we could, first of all, attract that leisure market. Remember that we [City Lodge] have these beautiful brands from one-star all the way to four-star, so we’re able to be attractive to different LSMs, I would say, out there.”
“And so there was a lot of pent-up [energy] as we call it, having been holed up. Everyone had been indoors and Covid restrictions gave people ‘Covid fever’. So there was this pent-up demand which was the first part that really demonstrated to us that there was great potential.”
“Once we were able to demonstrate – not just as City Lodge, but I think the entire industry – that our rates had to be adjusted, we [had to] manage the fact that there are different budgets out there …”
“So your families who had people who were in business – wanting to travel with the children, maybe on an Easter holiday – could combine business and pleasure at the same time. We quickly named [that] ‘bleisure’, because we recognise now that there was actually a latent leisure market out there …”
“So yes, I think we underplayed our [hand]. Now City Lodge doesn’t really concentrate on international so much. That in itself became a new lesson. In our recovery plan the international market is one of our focuses. We would never have necessarily looked at it as a significant market segment, given that our mainstay came from the domestic market as City Lodge – but we’ve recognised the importance of a diversified market segmentation.”
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At City Lodge, I see in your results the CEO, Andrew [Widegger], said occupancy levels are now at pre-Covid levels. Can you share some insights on how the group is doing operationally, and what are some of the innovations you’ve implemented from an operational side to boost growth and profitability?
“I’ll start with your last bit of the question first, because while we were sitting holed up [during Covid] in our offices or at our homes, working and trying to get our business back – we’re talking about every single hotel being closed – we called it TSOS, temporary suspension of services – we only had a few hotels operating as repatriation hotels or a few taking care of essential workers like security guards, etc, who were travelling around the country.”
“So coming back out of that I think Andrew, our CEO, has already indicated that we are back to pre-Covid numbers. The first highlight is that if you just look at the last year, we recorded 56.1% [occupancy] ending June for the year, compared to 37.5% last year.”
“So that’s a significant increase. One of the key aspects also is that our revenue, which includes accommodation, food and beverages and other services, closed at R1.7 billion, which is 55% up on last year. Now that is significant.”
“One of the key drivers that was an innovation was the introduction of food and beverage. We realised during Covid that people didn’t want to be out there foraging for food. They wanted everything under one roof. They’re now in a hotel, they’ve sanitised, it’s clean, it’s comfortable, they’re safe. To suggest that they must go out and look for lunch and dinner was not really what they were looking for. So we quickly converted our breakfast-only offering in our Road Lodges and our Town Lodges to a fully-fledged ‘eat in’ offering. You could have breakfast, lunch, and dinner.”
“Just in the last year alone, we have recorded a 17% contribution to top revenue, the R1.7 billion, being driven by food and beverage. That demonstrated to us [the result of sitting] down to innovate and think differently and also respond to the guests, listen to the guests …”
“And then the other innovation, which we had started before Covid, was the rollout of our sustainability programme, which includes our boreholes and our solar panels to augment our energy, especially in light of load shedding and the challenges that we face with energy – and just the cost of energy.”
“We had 25 hotels [with energy solutions] pre-Covid, and we have a programme that by the end of this financial year we anticipate that up to 40 of our hotels will have had a full installation of solar panels.”
“And then now with water scarcity in some of the municipalities, we’ve also recognised that the installation of boreholes is also quite an important aspect. So we’ve introduced that, and that is also currently part of our expansion programme.”
“Also, Suren, during Covid we put a halt on a lot of our refurbishments – the things that always suffer, your refurbishments and your renovations and marketing. So we’ve got a really big capex that has been approved by our board, in excess of R367 million.”
“This is going to play a big part in just repositioning ourselves in terms of the investment of modernising some of our hotels. We have about 10 hotels that are going to get a really beautiful overhaul. Included in that will also be the ongoing maintenance programmes of our hotels.”
“So these are all exciting developments. City Lodge V&A, as an example, is already halfway with its renovation of 207 [rooms]. It’s going to look stunning.”
You said some R360 million capex. That was my next question – around what the spending plans are … is it purely on revamps? Are there no new hotel openings or anything like that planned in the near future?
“The R367 million is a combination of a number of projects. R280 million of that will go into full refurbishments and soft refurbishments. We don’t have any new hotels on the cards. We’ve called this our time of consolidation and recovery, so we just want to focus on our existing properties and make sure that these properties are up to scratch.”
“You’ll remember during the pandemic we actually opened a new hotel. We had it already on the cards, the Courtyard Hotel Waterfall [City] in Midrand. That was our newest baby, and we opened that one during the pandemic.”
“So going forward it’s the refurbishments and then the rest will be spent on IT capex – significant upgrades in our IT generally. And then a significant amount, up to R23 million, will be on sustainability and business continuity, like I mentioned: the solar panels, the water, the boreholes, the water tanks, just bolstering that whole environment of being far much more sustainable.”
“And again, always with the objective of giving our guests a seamless stay and a nice seamless feeling of never anticipating whether there’s going to be electricity or no electricity, or whether there’s going to be Wi-Fi or no Wi-Fi. So we do our best to do that.”
What keeps you up at night as City Lodge COO? What are the biggest challenges facing the tourism industry?
“I think the reality – which none of us can really run away from – that continues to keep us up at night would be the load shedding. The country has seen quite a lot of impact of what load shedding can do. Fortunately, we’ve always had all the sort of infrastructure that’s required, especially generators.”
“But even with that, the growing costs – just generator costs in themselves – went up nearly fourfold in terms of our spend on generator diesel.”
“So load shedding keeps us up at night, but we believe that with all the projects that we have in terms of our environmental sustainability programme, we’ll be able to ride that period until government is able to stabilise the environment.”
Safety and security
“The other of course would be safety and security, which is a big conversation that the industry is having. I’ve just come back from the Tourism Leadership Conference which took place last week, where all the fraternity – the entire sorority and fraternity of tourism – had met. We had government as well as the private sector really debating what is going to be done about safety and security, and the assurances that our tourism minister gave us in terms of some of the conversations that are happening and how to make tourist action areas so much safer came up. We do have work there.”
“But again, it doesn’t stop us from doing what we do. We always make sure our hotels are safe and that our infrastructure gives guests a feeling of ‘once you’re in you feel safe’. Our locations are also beautiful locations but, nonetheless, we are part of the bigger tourism picture. So we are always making sure that we use all platforms where we have a voice, like [at] the Tourism Business Council of South Africa, which is one of our associations, really making sure our voice gets heard, especially [by] government.”
“So those are some of the things that are of concern. Other than that, we’ve seen the pandemic. We never know what unknowns the world will throw at us, but we hope that our business continuity programmes and our ability to understand what can happen has also sharpened us in looking at our risks and managing our risks in a far more proactive manner.”
Listen to the full episode here.
You can also listen to previous episodes of The Property Pod here.