Listed hospitality firm, Rainbow Tourism Group (RTG), expects a speedy post-pandemic recovery, having cleared its debts last year, completed renovations of the flagship Rainbow Towers Hotel and positioned itself to leverage on snowballing digitisation opportunities.
The tourism sector is arguably the hardest hit sector by the Covid-19 pandemic, but players in the industry are pinning hopes on vaccination programmes that have commenced in Zimbabwe and across the globe.
The group is now debt-free after it managed to pay off its remaining debt during the 2020 financial year.
“During the year, the group repaid the debenture of $16,7 million in full. This instrument was issued in February 2018 at an interest rate of 6 percent and tenure of seven years. The early repayment of the debenture released the group’s assets which were pledged as security,” said board chairman Arthur Manase in its FY2020 report.
The repayment of the debenture reduced the group’s gearing to 1 percent. This is in comparison to a 70 percent gearing in 2012.
The debenture enabled the group to restructure its balance sheet and put closure to the last of its long-standing legacy issues.
The liquidation of the debenture is a significant milestone achieved during one of the most trying times for the tourism industry at large.
“While the current situation is likely to persist, we remain confident that the tourism industry will in time rebound and set the hotel business on the path to recovery. A glimmer of hope has come from the ongoing vaccine efforts around the world and in Zimbabwe. This process is expected to facilitate the quick recovery of economies worldwide as well as the gradual recovery of international travel,” Mr Manase said.
Notwithstanding the challenges posed by the pandemic, the group’s profit before tax margin grew to 39 percent last year from 29 percent in 2019, while the group achieved an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 42 percent, up by 31 percent compared to 32 percent posted in 2019.
The positive performance was also underpinned by the company’s strategy to pursue an asset light business model, which contributed to revenue generation despite the tourism downturn.
RTG’s Gateway Stream web and mobile application is a global diversified and unified online business ecosystem that delivers perpetual, passive and active income through the ownership of markets.
Group CEO Tendai Madziwanyika told The Sunday Mail: “In response to the decline in business activity brought about by a highly uncertain environment perpetuated by the Covid-19 pandemic, we embarked on a stringent cost-suppression programme in response to the reduction in revenue. This helped maintain profit margins at 2019 levels.”
During the year, the group successfully completed the refurbishment of the Rainbow Towers Hotel and Conference Centre in the first quarter of 2020. The refurbishment included the rooms rebuild of 183 rooms. Works included the complete stripping and reconstruction of the rooms and the replacement of all furniture and fittings to modernise the rooms to world-leading standards. The refurbishment was completed in a record three months at an investment of US$4,4 million, using funds generated from operations.
“The refurbishment was completed in record time, just before the Government announced the Covid-19 lockdown. It was this investment that assisted the group to win the bid to host over 1 400 returning citizens who worked on cruise ships who had to undergo mandatory quarantine” said Mr Madziwanyika.
Occupancy for the period under review went down from 47 percent in 2019 to 26 percent in 2020 due to the Covid-19 pandemic lockdown restrictions which resulted in the temporary closure of the hotels.
The most severely affected of the Company’s hotels were the two Victoria Falls resort hotels; Azambezi River Lodge and Victoria Falls Rainbow Hotels, which were closed from March 2020 to December 2020. This was further compounded by the temporary closure of the Rainbow Towers Hotel and Conference Centre for refurbishment in the first two months of the year.
It is during this period that RTG activated the Gateway Stream mobile and web application which made a positive impact on its profitability. The Covid-19 pandemic and the subsequent lockdowns led the group to focus on growing the digital business.
“Gateway Stream has been positioned as a driver of revenue and continues to capitalize on the opportunities presented by e-commerce. The platform entails several revenue generation channels which are expected to drive revenues in 2021 and beyond,” said the CEO.
Mr Manase said the group will continue to prepare for the inevitable rebound of the travel and tourism sector by continuing to recruit rooms and activities across Africa onto the Gateway Stream platform.
“Many travel and tourism players will require visibility when the industry rebounds. Gateway Stream seeks to be a significant player in that space alongside global e-commerce giants that provide access to hospitality and leisure products.”