Our strategy measured

In being a guest-centric selected service hotel group, we believe that what really makes a difference is the way in which our passionate people deliver caring service to our guests with kindness. This is the reason why we have formed a base of loyal guests, who have continued to stay with us over the past 31 years. It is with this in mind that we analyse our strategic achievements of the past year, and look to unpack how we will continue to deliver on our long-term sustainability to you, our providers of capital. After all, that is why you choose the City Lodge Hotel Group.

TO CONSOLIDATE OUR POSITION WITHIN SOUTH AFRICA

Occupancy performance

The group’s South African occupancies for the period reflected an occupancy of 66% compared to 67% in the prior year. Occupancies in the second half of the financial year declined largely as a result of poor economic performance and negative business sentiment. While the location of the majority of the group’s hotels cater towards the business traveller, some locations do benefit from leisure travel business. Demand was subdued, despite the weak Rand making South Africa a value for money destination, as the continued effects of the restrictive visa regulations deterred many foreign travellers from visiting South Africa during this time. The reduction in government business travel in the lead up to the local government elections and as a result of exercising fiscal constraint also had an impact on this typically growing source of business, which we anticipate will resume following the August elections.

With relatively low levels of new inventory coming to market in the past year, the group is well positioned to benefit from the uptick in economic activity.

Average daily rates (“ADR”)

In line with the ADR of the industry, the group has seen an improvement in current achieved room rates. This improvement is not as significant as for the rest of the industry due to the consistent rate philosophy of the group over the long term. This philosophy results in more predictability for corporate travellers.

In order to drive occupancy growth over weekends, the group has a number of “Special” rates in place to encourage group and family travel. Participating in South African Tourism’s Sho’t Left campaign, encouraging South Africans to travel locally, further promotes our various hotel brands to new markets. Our unique auction website, www.bid2stay.co.za, allows guests to bid online for discounted accommodation across our portfolio in South Africa. These rates are particularly competitive for the cost-conscious traveller.

Expanding in South Africa

This year saw the opening of our new 148-room City Lodge Hotel Newtown, in downtown Johannesburg. This uniquely South African property has been featured extensively in the images used in this year’s Integrated Report. Our 90-room Road Lodge Pietermaritzburg also opened its doors this year, being our first hotel in this city. Both hotels will take approximately 18 to 24 months to establish themselves in their respective markets, offering our guests even more locations to choose from.

Keeping our hotels in great shape

Over the past year our refurbishment programme has seen several of our South African hotels undergo major upgrades including City Lodge Hotel GrandWest, City Lodge Hotel Pinelands, Town Lodge Mbombela and Courtyard Eastgate, ensuring that we continue to offer world-class accommodation facilities, features and services to our domestic and international guests.

Continuous focus on quality is maintained at all our hotels through our ongoing maintenance and minor refurbishment programmes, keeping our hotels fresh and in good condition.

Guest satisfaction

Knowing what our guests think about us is key to being able to deliver on our value proposition. Guest comments and feedback are received internally by e-mail at info@clhg.com and online through the Rate-Us guest questionnaire, and externally by monitoring posts on various social media platforms, including Hellopeter.com, TripAdvisor, Facebook and Twitter, where all comments are analysed, compliments are acknowledged and complaints are attended to.

The Rate-Us questionnaire received a total number in excess of 16 500 responses during the year, yielding an average customer satisfaction score of 86% (2015: 85%). This improvement bears testament to the fact that we are constantly striving to deliver an even better guest experience. TripAdvisor also chose no fewer than 14 of our hotels to receive Certificates of Excellence for 2016, based squarely on guest experiences.

Human capital

As a quality hotel provider, one of the most important contributors towards the success of our group is the performance of our people. The management of our human capital is therefore a significant focus point for the group. Our bronze level “Investor in People” recognition clearly demonstrates our ongoing commitment towards growing and empowering our people – which is why they choose to work for us. The provision of an employee value proposition (“EVP”) that also highlights clearly defined career pathing and succession planning, demonstrates its efficacy in the following comparative turnover information. Our current level of turnover at 8,71% per annum, is below that of the industry.

Year   Involuntary turnover   Voluntary turnover   % of total headcount
2013/14   57   29   7,83
2014/15   61   24   7,74
2015/16   62   43   8,71

The group talent manager, assisted by line management, is responsible for the attraction, development and retention of high-calibre employees. All employees are afforded an annual development appraisal, ongoing assessments and feedback from supervisors and management. These ensure that skills and knowledge gaps are identified within current positions. Suitable employees for development into and within supervisory and management levels are acknowledged and proposed for inclusion into succession pools or developed towards such. An emphasis is placed on the development of previously disadvantaged individuals in order to ensure that the group can work progressively towards achieving its employment equity targets.

In order to enhance the recruitment experience of prospective employees in future, a new online module will be launched in the coming year, to cater for the group’s growing recruitment needs on the continent.

Training and development

Providing an environment where our people can learn and develop further skills is key to delivering on our EVP. Our skills development committee meets at least bi-annually in order to assess the group’s skills development requirements.

The committee is mandated to deal with skills development issues and committee members possess the necessary knowledge of legislation in this regard. The committee comprises the divisional director: human resources, the group’s skills development facilitator, a union representative, shop stewards from the regions and members of staff from different levels and backgrounds elected by their constituencies.

Our innovative e-learning platform allows for training spend to be better utilised on content delivery, as opposed to on logistical expenses. This system will be utilised to deliver the ongoing training requirements of the group’s bespoke property management system, Lodgix. In some instances, face-to-face engagement is essential and these learning experiences continue to be delivered in person.

Developing the youth is an essential component of the long-term talent pipeline of our group. We are able to do so by providing learnership opportunities, both internally and externally, as well as graduate internships for students with diploma and degree level hospitality qualifications. These programmes also cater for the needs of disabled learners, which has resulted in the direct employment of eight learners during the year.

Performance against the annual workplace skills plan is monitored by our registered skills development facilitator. All skills levy grants available to the company have been paid out by CATHSSETA for the 2016 period.

A total of 48 people were promoted within the group during the year, 77% of whom were female.

    2016   2015
African   37   31
Coloured   8   9
White   3   14

Total

  48   54

The comparative report below is aligned with the reporting periods for the Sector Education and Training Authorities and provides additional information on our training spend:

    1 January 2015 to 31 December 2015   1 January 2014 to 31 December 2014
% of total payroll spent on training   4,0   3,2
% of total payroll spent on training previously disadvantaged employees   3,4   2,7
Total number of interventions attended by all employees   9 459   8 736
Total number of interventions attended by black employees   8 215   7 391
Total number of interventions attended by black female employees   5 586   5 095

Total spend on training and development

  R9,0 million   R6,1 million

With regards to the training considered as eligible for the pivotal grant, the following highlights are noted:

  • Work integrated learning opportunities were provided to 121 hotel school students from hotel schools across South Africa. The main objective thereof is for them to gain practical experience pursuant to the completion of their formal learning programmes. It also gives the group the opportunity to assess these students for available employment opportunities. The group was recently recognised by the South African Society for Cooperative Education for its commitment to work integrated learning over the years, having hosted many hotel school students in their practical phase.
  • City and Guilds qualifications – The group provides its permanent employees the opportunity of obtaining these internationally recognised qualifications, thereby developing our people’s skills, and contributing towards succession planning and career pathing. A total of 60 employees wrote and passed their City and Guilds exams in November 2015, gaining various certificates, diplomas and advanced diplomas. A further 74 employees are enrolled for 2016.
  • The group provides learnership opportunities to employed and unemployed individuals and is currently involved in providing learnerships to 16 disabled learners, in partnership with the South African Disability Development Trust, who we hope to be able to employ full-time on their completion. To continue the programme into next year we have registered an additional 18 learners on this learnership programme, who will be working towards various qualifications.

Employee and industrial relations (“ER and IR”)

All ER and IR issues are dealt with in an inclusive manner, with the group preferring to invite participation on all substantive issues that may have an effect on the employment relationship or on employees’ conditions of work. The group currently recognises, and has a recognition agreement with one trade union, SACCAWU, which is representative of 18,1% of total employees and 20,7% of those occupying positions within the defined bargaining unit.

As a result of our approach, no days have been lost due to industrial action during the year.

Our “high-performance people” programme is used for ER, with courses held periodically for supervisors and management. This programme is also made available to shop stewards from time to time to ensure a complete understanding of the company’s policies and procedures. In addition, all levels of management are trained in the principles of “managing with intent” to ensure that best practice management techniques are applied within the group.

Labour utilisation

The effective deployment of our human capital is monitored at hotel level, as well as centrally. An analysis of sick and absent days allows for the identification of instances where assistance or a specific intervention may be required, or where possible abuse may be suspected. The number of working days lost due to sickness and absence during the year was 1,5% of all working days available. Similarly, incidents of absence are monitored and dealt with through the group’s disciplinary procedures.

Health and safety

The safety and wellbeing of our guests and people are paramount. Although the group’s properties do not represent dangerous environments, all necessary precautions and measures are taken to ensure their safety. These include adherence to strict guidelines in terms of monitoring and implementing health and safety requirements. Each hotel has an established health and safety committee, as well as an appointed responsible person in terms of the Occupational Health and Safety Act.

The group makes use of a web-based solution to record and monitor all health and safety-related compliance, which allows a central view of overall compliance across the group. In addition, we maintain our commitment to ensuring that levels of hygiene, compliant with hazard analysis of critical control points ("HACCP") legislation, are maintained at all hotels.

The group ensures that all contractors engaged in the delivery of services to the group are equally compliant in terms of their adherence to health and safety requirements.

Number of incidents

Nature of incident   2015/16   2014/15   Outcome
In the kitchen – food preparation and cleaning   12   7   In all instances first aid was applied. In two instances staff were hospitalised briefly. There were, however, no instances of temporary or permanent disability that resulted from these incidents
Incidents on stairs and in built environment   7   3  
Due to carrying and lifting   0   0  
Repairs and maintenance related   4   0  

Total

  23   10    

The year ahead

Following on from the conclusion of the local government elections in South Africa, we are positive that we will see the growth trend, which commenced in 2011, resume. We believe that this assessment is substantiated by the various initiatives which the group has embarked on, which we expect to pay off in the short and medium term. We are well placed to benefit from any increased economic activity in the economies in which we operate.

TO EXPAND OUR FOOTPRINT BEYOND SOUTH AFRICA’S BORDERS

Progress in growing our presence in southern and east Africa has continued over the past year at a slow but steady pace.

Construction on the 169-room City Lodge Hotel Two Rivers in Nairobi, Kenya is progressing well, with expected completion towards the middle of 2017. Work on the 147-room City Lodge Hotel in Dar es Salaam, Tanzania, has also commenced and is expected to be completed towards the end of the fourth quarter of 2017. The handover of the site for our 151-room Town Lodge Windhoek took place in July with completion expected in July 2017. It is hoped that construction of the 148-room City Lodge Hotel in Maputo, Mozambique, will commence in the third quarter of 2016, following delays in obtaining the required regulatory approvals, with expected completion now in the first quarter of 2018.

Trading outside South Africa in Gaborone, Botswana, has continued to improve as the hotel establishes itself in the capital. Weekends, as in our inland hotels in South Africa, are however generally poorly occupied unless a major event is taking place.

The Kenyan operations showed some levels of improvement after experiencing declining occupancies in the previous two years. This improvement was despite a number of new competitor hotels in the market.

Future expansion

Investigations into opportunities in the rest of Africa continued during the course of the year with visits to a number of countries in Africa, in order to identify suitable locations and investment opportunities. Where an opportunity is identified, a detailed feasibility is prepared taking into account a number of factors in order to assess the likelihood of a hotel’s success. This process is often a lengthy one, and may result in a significant amount of effort being lost if the parties are not able to reach satisfactory agreement on the terms.

It is anticipated that our non-South African hotel portfolio will comprise around 20% of our total number of rooms available and contribute 25% to 30% to our earnings once reaching operational maturity.

TO CONTINUE TO TRANSFORM THE GROUP IN LINE WITH the B-BBEE CODES OF GOOD PRACTICE

Transformation of the group remains a priority area of focus for us, particularly given the changing B-BBEE landscape within South Africa. Many of our guests and suppliers are interested in what the group does to embrace and comply with the amended Tourism Sector BEE Codes which were gazetted in November 2015. The group is currently a level 3 B-BBEE contributor. It is anticipated that the group’s rating will drop when it is first measured against the revised targets in 2016, although we will qualify as an empowering supplier, we remain committed to improving our rating over time.

During the year, the group placed a significant amount of emphasis on educating our current suppliers and staff on the effects of the Revised Codes of Good Practice and on identifying new, black-owned SMMEs, to be introduced into the supply chain. Software allows for the monitoring of our performance against internal and sector targets in this regard. Our total managed procurement spend for the 2016 assessment was R430 million, with 103% being spent with BEE compliant suppliers and 27% being spent with qualifying small enterprises and exempt micro-enterprises.

While the majority of our transformation targets are driven centrally, there is a link to our hotel-based performance appraisal linked (“PAL”) bonus scheme, creating accountability at an operational level too.

Current measurement and performance

The group’s 2016 level 3 B-BBEE status, as measured against the Tourism Sector Charter, was verified by National Empowerment Rating Agency and is summarised below.

Tourism sector charter

Scorecard element   Weighting   Score
2015/16
  Score
2014/15
Ownership   15,00   15,00   15,00
Management control   14,00   4,66   4,66
Employment equity   14,00   8,32   8,13
Skills development   20,00   17,41   17,42
Preferential procurement   15,00   14,28   14,07
Enterprise development   14,00   14,00   14,00
Socio-economic development   8,00   8,00   8,00

Total B-BBEE score

  100,00   81,67   81,28

The group currently has an overall black ownership percentage of 26,26%. It has conducted a detailed evaluation of the impact of the revised tourism codes on it going forward, along with the potential continuing consequences following the end of the 2008 BEE deal lock-in period. The actual effect will only be known once the rating verification takes place, due to the current share price being a required input.

The lack of a readily available pool of skilled candidates from designated groups at senior and management levels continues to challenge our employment equity plans. Our ability to develop a pipeline through succession pools and attendant development programmes and the accelerated development and deployment programme (“ADDP”) will, however, mitigate this to a degree in the medium to long term.

The employment equity consultative committee meets at least bi-annually to assess progress towards the achievement of quantitative goals, as well as to consider the qualitative elements which may influence the aforesaid achievement of the goals. The committee is representative of all individuals in the company, and is currently chaired by the divisional director: human resources, appointed as the senior manager responsible for compliance with the Employment Equity Act, and enjoys the participation of the representative trade union.

The following comparative table displays the company’s employee profile as at 30 June 2016 and as at 30 June 2015.

        Male   Female   Foreign nationals   Total
Occupational level   Year   African   Coloured   Indian   White   African   Coloured   Indian   White   M   F    
Top management   2016           1   8   1                       10
2015           1   9                           10
Senior management   2016   5   3       32   1   1       20           62
2015   3   3       33   1   1       22           63
Middle management   2016   3   3   2   22   18   4   2   18       1   73
2015   5   2   3   22   16   4   2   19           73
Junior management   2016   40   12   1   19   102   25   2   18       1   220
2015   35   12   1   23   102   19   1   17           210
Discretionary decision-making   2016   101   13   3   14   178   27   6   60   1       403
2015   94   9   3   12   171   37   8   58       1   393
Defined decision-making   2016   118   12       4   177   36       1   3       351
2015   112   13       5   179   37           2       348
Total permanent   2016   267   43   7   99   477   93   10   117   4   2   1 119
2015   249   39   8   104   469   98   11   116   2   1   1 097
Non-permanent*   2016   21   3       1   51   7   1       1   1   86
2015   14           1   36   3       4   1   3   62
Grand total   2016   288   46   7   100   528   100   11   117   5   3   1 205
2015   263   39   8   105   505   101   11   120   3   4   1 159

* Including 60 experiential learners.

Growing sustainable suppliers and businesses is a vital component of our broader transformation initiatives. By supporting them with human resource capacity, coaching and in some cases interest-free loan funding, we are able to support economic growth and job creation. In addition to these benefits, we continued to offer payments within two weeks of invoicing, to qualifying suppliers.

Continuing to make a difference

As a group that always wants to make a difference in the society in which we operate, we also want to assist our guests to make a difference when they choose to stay with us. Our long-running Cuppa for CANSA campaign at Road Lodges has been helping the fight against cancer for more than a decade. By giving our online bookers a choice for us to contribute to either hospice or Food & Trees for Africa, at no additional cost to them, we are also affording our guests the opportunity to help great causes by staying at our hotels.

Our ongoing relationships with organisations and events such as the MAD Foundation, the Sunshine Tour, the South African Golf Development Board, the RAC City Lodge Tough One 32 km road race also play a role in making a difference and helping to answer the question “why choose City Lodge Hotel Group”. This difference was worth R3,4 million to our various beneficiaries during the past year.