eBusiness Weekly
Tawanda Musarurwa and Enacy Mapakame
Hospitality group, Rainbow Tourism Group, maintained its growth trajectory with a 131 percent revenue jump to US$25,6 million for the five months to May 2019 compared to US$11 million recorded during the same period in the prior year.
RTG attributed the growth to an increase in foreign currency business received across all its hotels. Resultantly, foreign currency revenues grew by 15 percent to US$4,2 million from US$3,7 million in the comparable prior year period.
In 2018 full year, revenue amounted to US$34,3 million that was 27 percent above the prior year despite an increasingly challenging economic climate. This performance was supported by increased occupancies and Average Daily Rate (ADR), which grew by 6 percent and 28 percent respectively.
Group chief executive officer Tendai Madziwanyika told shareholders at the group’s annual general meeting in the capital on Wednesday that occupancies for the period to May 2019 declined to 46 percent compared to 55 percent recorded over the same period in 2018.
The closure of Bulawayo Rainbow Hotel for two and half months due to refurbishments weighed down the company’s occupancies during this time.
“On a like-for-like basis which takes account of the closure for two and a half months of the Bulawayo Rainbow Hotel, the occupancy for the period closed at 54 percent.
“A deliberate and persistent investment in the product as well as service delivery systems have been the cornerstone of this growth. The company posted a positive set of performance indices with the exception of occupancies,” he said.
At 71 percent, gross profit margin went up 6 percent from 67 percent recorded in the same period last year driven by increased rooms and Food & Beverage profitability.
Madziwanyika indicated the hospitality group was leveraging its foreign currency earnings to drive down costs through the importation of service stocks and product refurbishment materials.
Negotiations with suppliers on US$ pricing have yielded positive results that have further reduced costs.
During the period under review, the RTG invested US$1,8 million in the Bulawayo Rainbow Hotel refurbishment to improve its ambience in line with international standards.
This covered the overhaul of the hotel’s entire plumbing system — the first such comprehensive works since it was built in 1952 as well as the replacement of all critical in-room fixtures, the installation of aluminium single and double-glazed glare and sound reduction windows.
All the 181 bathrooms at the hotel were refurbished and the second phase of the project will result in the replacement of two guest elevators with brand new, state of the art elevators by the end of July 2019.
RTG also anticipates to finish the refurbishment of the remaining 54 guest rooms at Kadoma Hotel & Conference Centre by end of this year.
By 2020, RTG targets to complete refurbishment of 180 guest rooms at its flagship, the Rainbow Towers Hotel & Conference Centre while New Ambassador Hotel will this December temporarily close for two months to make way for the refurbishment of all 72 bedrooms, replacement of the guest lift and the upgrade of all public areas.
Management at the hospitality group are upbeat of a good earnings performance this current financial year and going forward.
“With a solid balance sheet now in place and a healthy working capital position, the Company has entered its growth phase that has as its main objective; the delivery of superior value to shareholders, customers and all stakeholders concerned,” said Madziwanyika.
What do the analysts say?
Market analysts Morgan & Co are of the opinion that the group’s strategic refocus puts them in a strong position going forward.
“Our view is that the fundamentals for the (hospitality) sector are improving. RTG’s strategy going forward is hinged on asset-light growth that closely mimics the highly successful framework of AirBnb.
“Furthermore, the group plans to expand into regional tourism through its mobile app (The Gateway Stream) and tour operation services.
“At a PER of 42.5x, the group is relatively over-priced when compared to its close peer Africa Sun (33.4x). However, the group’s transition to regional and digitally-driven expansion is in line with market trends in the tourism and hospitality sectors, thus positioning the business for an exciting year ahead.”
