South Africa’s listed hoteliers have finally shaken off the lingering after-effects of the pandemic. Now the question is whether they can grow beyond simply charging more for the rooms they already have.
Results from City Lodge Hotels and Southern Sun tell a similar story on that front: occupancy remains below pre-2020 peaks at Southern Sun and short of management’s targets at City Lodge, so pricing power — not a surge in demand — is doing most of the work.
But beneath that shared backdrop, the two groups are pulling in different directions. City Lodge is leaning on business travel and ancillary revenue such as food and beverage to defend its position; Southern Sun is riding a leisure and tourism recovery, backed by conferencing and eventing demand. Both are looking past occupancy for their next leg of growth — City Lodge through a modest room expansion at Waterfall City and Southern Sun by reinvesting in its existing portfolio rather than adding to it.
City Lodge’s results for the year to June 30 show, in CEO Andrew Widegger’s words, a business that has “most definitely” completed its recovery from the pandemic, but one that is now facing a tougher act: disciplined growth.
Revenue topped R2.2bn for the first time, up 10% on 2025. Occupancy rose two percentage points to 58%, and adjusted earnings before interest, tax, depreciation, amortisation and rent (ebitdar) climbed 15% to R675m, lifting the margin to 30.6%. Profit, though, slipped 5% to R203m.
The full-year number masks a split year. The first half was strong, with group occupancy at 62%, driven by domestic leisure and business travel, easing inflation and interest rates, calmer politics and the G20 summit. That momentum faded in the second half as conflict in the Middle East pushed up fuel prices, inflation and interest rates, squeezing travel budgets and hitting weekend and leisure stays. Full-year occupancy still beat 2025’s 56%, but fell short of the pace set in the first six months.
Rather than discount its way through the slowdown, City Lodge held its rates. Widegger reasons that when demand is constrained by external shocks rather than a lack of appetite, cutting prices achieves little; rates are eased only for price-sensitive leisure travellers actively shopping around. Average room rates rose 7% for the year, matching 2025’s increase.
International demand held up better than domestic. The Western Cape, helped by five refurbished hotels and South Africa’s affordability for offshore visitors, grew revenue 21%. KwaZulu-Natal, Gauteng and the Eastern Cape also grew, and Mozambique beat expectations with growth above 20%. Namibia softened after a strong first half, while Botswana stayed under pressure as its diamond market struggled.
City Lodge’s food and beverage is emerging as a cushion against soft occupancy. Revenue grew 14% to almost R450m and now makes up a fifth of group turnover, helped by new restaurants — each with its own identity, menu and décor — at three refurbished hotels. City Lodge CFO Dhanisha Nathoo says this is due to cost discipline, though utility costs spiked in the second half as energy and fuel prices rose and municipal tariffs increased 13% on average. This was offset partly by solar generation at 40 hotels and borehole or filtration water supply at 14, holding property cost growth to 5.3%.
Below the operating line, profit was dented by a R28.7m unrealised foreign exchange loss, mainly on a rand-denominated intercompany loan in Mozambique, plus tax-related impairments in Botswana and Namibia. Strip those out and adjusted diluted headline earnings actually rose 20% to 41.6c a share.
Operating cash generation rose 20% to R657m, funding R234m in refurbishments and a R153m share buyback that cancelled 38-million shares (roughly 6.4% of the opening count at an average price of 402c a share). The board lifted the final dividend to 11c a share from 9c, and with the 8c interim, the full-year payout rose 27% — a signal of confidence in a debt-free, cash-generative business.
Widegger sees three levers for growth over the next three to five years: occupancy climbing back into the high 60s or low 70s, further rate gains through better yield management, and more rooms.
A 53-room extension at City Lodge Hotel Waterfall City is due for completion by June 2027. On location, he flags Cape Town’s inner city and Waterfront as increasingly expensive; Durbanville, Blaauwberg and Century City are more attractive. KwaZulu-Natal’s north coast, George and parts of Joburg are also on the watchlist, the last partly contingent on the 2026 local government election.
Early signs for the new financial year are encouraging: occupancy ran at 59% in July and 62% in August, and hit 65% month-to-date to September 9 — four points ahead of last year — with room rates and total revenue each up about 10%. As Widegger puts it, the business comes down to “filling rooms at the right price and watching the costs”, while adding to the number of rooms under City Lodge’s control where it can.
Up with the sun
Southern Sun’s recently released trading update points to a business building momentum. For the five months to August 31, occupancy rose to 60.2% from 57.8%, average room rates climbed 9.5% and total revenue was up 12%. South African revenue grew 10%, while the offshore book surged 54%. This was largely due to the relaunch of the Paradise Sun in the Seychelles after a refurbishment closure, alongside stronger volumes in Mozambique and Tanzania.
Domestically, growth in Southern Sun’s ebitdar was underpinned by eventing, groups and conferencing demand in the Western Cape and Gauteng, including a lift from the Rugby’s Greatest Rivalry tour, and encouraging sports and associations business in KwaZulu-Natal. The soft spots were transient domestic leisure travel, squeezed by tighter household budgets, and SADC travel, dented by anti-immigration protests. Cost pressures haven’t eased either: IT costs rose faster than inflation following system upgrades alongside higher utility tariffs, water outages, property rates and distribution costs.
Since April, Southern Sun has bought back R174m in shares at an average price of 998c a share and paid a R393m final dividend. Shareholders have been told to expect earnings for the six months to September 30 to come in at least 20% (or 4.9c a share) above last year.
Southern Sun’s hotels are filling rooms more expensively rather than more often, and the offshore business continues to lag the domestic one. Rather than expand, management reinvested R60m in existing assets, while a new 50-year lease for the Southern Sun Elangeni & Maharani in Durban removed a tenure-risk overhang. The outlook for financial 2027 is upbeat, with domestic leisure and corporate demand both strengthening, and the G20 Summit and easier visa access cited as tailwinds.
Analysing the results
Smalltalkdaily research analyst Anthony Clark says the two sets of results expose a widening gap between the operators’ underlying businesses. “City Lodge was always seen as a business-orientated hotelier,” he says, but this declined post-pandemic because of the rise of online meeting platforms.
Clark says what City Lodge has done after selling off its African interests and reducing debt is pivot from its reliance on business-orientated travellers. He points out that there has been investment in the core City Lodge brands and Garden Courts, while the group has also closed operations in certain areas that are no longer deemed core.
Clark adds that certain City Lodge hotels have pivoted successfully towards tourism and leisure, such as the City Lodge V&A and the hotels in Durban. “But it still has a latency as being seen as a business-orientated hotelier rather than as a pure leisure travel establishment like Southern Sun.”
Clark contends Southern Sun was never as reliant on the business traveller to drive average room occupancy and rate. “As tourism numbers rebuilt sharply post-reopening, Southern Sun was far better placed to capture that inbound leisure demand — the breakfasts, bars, gyms, conferencing; the full package a tourist wants. You won’t find international package-tour operators promoting City Lodge; Southern Sun has that leisure-travel positioning.”
Over the past 12 months, City Lodge has essentially gone sideways, while Southern Sun is up about 10%–11%.
Clark is also wary of arguments that City Lodge trades at a steep discount to net asset value. “Value is only worth what someone is prepared to pay for it. If I wanted exposure to hotels and leisure right now, I’d be in Southern Sun, not City Lodge. The real question for investors is whether they want sector exposure at all.”
