The Capital Hotels, Apartments and Resorts CFO Dale Smith reflects on navigating the Covid-19 pandemic, his entrepreneurial career and his approach to building a nimble finance function that supports the group’s long-term growth.
Hospitality was one of the sectors hardest hit by Covid-19, yet The Capital Group’s chief financial officer, Dale Smith, ensured the group not only weathered the storm but profited from it.
Dale, a devout family man and proud Witsie, had been CFO for two years when news of the pandemic began to trickle in. His instincts kicked in, and in December 2019 he started drawing up contingency plans to cushion the business against the potential fallout.
“When the president declared the Level 5 lockdown and South Africans were being repatriated, we immediately got six of our hotels registered with the Department of Health as isolation and quarantine facilities. While our peers were closing down and running for cover, we were punching well above our weight,” he says.
As uncertainty deepened under the restrictions, Dale pivoted again, clinching a partnership with Discovery to use one of the group’s hotel facilities as a treatment hub for its clients. “We also teamed up with a large telesales insurance firm and allowed them to repurpose our conference area at Park Hotel as a call centre and sleepover facility for their staff. We constantly kept sniffing for opportunities and we found them,” he recalls.
When restrictions eased and borders reopened, the group’s hotels were inundated with visitors, particularly at its Durban property.
“I learnt important lessons during the pandemic and they made me a better CFO. I learnt how to deal with, and mitigate, an event that could potentially kill your business. The hotel business has high fixed costs, and when you are forced to turn as much of that fixed cost as possible into variable cost, you uncover some very creative ways to keep the doors open. When everyone was closing, we were the shining light that continued to operate. We even acquired 15 on Orange and Zimbali Hotel at the height of the pandemic.”
The Zimbali acquisition, he says, is a transaction he won’t forget. “We purchased a hotel that was in business rescue. It was interesting to see how we structured the deal so that all creditors, even bondholders and Sars, were cleared by the business rescue practitioner before we came in.”
An entrepreneur at heart
Dale’s audacity can be traced to his entrepreneurial background, his courageous personality and The Capital’s business model, which gives him room to be less risk-averse than most finance executives.
Unlike many of his peers, whose careers began at an auditing firm and progressed into industry roles, Dale veered into entrepreneurship shortly after completing his articles at Deloitte.
“From an early age, I have always wanted to do lots of things all the time. I get bored easily with routine, which is probably why I have been an entrepreneur more than a salaried corporate employee. I love and embrace change happening daily, even hourly. Some people might find that draining, but for me it is the tonic that keeps me going,” he says.
True to form, in 2006 Dale was part of the team that created SAPRO, a company listed on the AIM stock exchange that raised just short of R1 billion in equity to invest in South African property development. The 2008 global financial crisis scuppered its success as capital markets tanked and UK investors demanded their capital back.
Undeterred, he went on to co-found a lending business for cycling enthusiasts buying high-end bicycles. He also served as consulting CFO to Grid Worldwide, a branding agency its management bought from shareholder TBWA, and helped launch another advertising agency, House of the Brave.
“I have spent the better part of my career in entrepreneurship rather than as a salaried employee, and that has given me first-hand exposure to how business works, the wins and the losses,” he says reflectively. “One of the most important lessons I learnt was risk mitigation. It is very easy to get carried away with a business idea in your 20s and not see the potential pitfalls.”
Those experiences, he says, have shaped an approach that blends entrepreneurial drive, a few grey hairs and disciplined risk management. “I’ve learnt that there is no place for complacency in business. Things might be great today, but that may not be the case tomorrow. Building and then growing a business is what drives me.”
Three roles in one
Unlike a finance professional in a conventional hotel group, Dale’s portfolio spans three areas: operations, real estate management and fund management.
Operations is the nuts and bolts of running a hotel. He oversees performance, revenue, margins, expenses and working capital, and tracks the group’s results against the market and its competitors. Here, The Capital consistently earns EBITDA margins well above those of its peers.
Real estate management comes with the territory, because the group’s model is anchored in owning its hotels and apartments. It covers valuations, gearing ratios, building insurance and debt refinancing, along with securing the best returns across various lenders, work more typical of a property owner. “Recently, we syndicated over R1 billion of debt across our portfolio with three large banks on a master PropCo structure. That first required extensive legal and tax planning to move all the assets from close to 30 entities into one in the most efficient way,” he explains.
The third element is fund management. Since 2019, Dale has helped build and run a Section 12J fund, which brought him into the world of the Financial Sector Conduct Authority (FSCA). The fund has raised over R300 million in equity, which has been deployed into various hotel assets.
A strong finance team
Dale credits his finance team for their support, and the group’s CIO for developing bots that now automate a significant portion of their workflows. “When I joined, we had seven hotels. Over the years we sold two that did not fit the brand and opened another eight. We have been through Covid-19 and a number of corporate finance transactions, and the team has consistently been there for me.”
Asked what leadership lesson he has learnt as a finance professional, Dale explains that the same number can mean different things to different people. A good leader, he says, interprets and translates that number so each audience can act on it.
Legacy
The 48-year-old hopes to be remembered for building a finance function that is nimble, grows as the business grows and keeps its entrepreneurial energy.
“That will ensure the person who succeeds me is not a ‘Mr No’, but someone who tries to figure out how to make things work,” he says.
Dale is a doting father of two young children, a boy aged nine and a girl aged seven, whom he regards as his hobby. “I was diagnosed with multiple myeloma in 2021, so for me personally, I want to be as present as I can be for my family,” he concludes.
