RTG growth strategy pays dividends

Harare Bureau
RAINBOW Tourism Group’s growth strategy, which includes cost reduction and boosting of revenue, has started paying dividends with the group achieving a 4 percent growth in revenue to $13,2 million during the half year to 30 June 2013.The growth in revenue was complemented by a reduction in operating costs of $1,6 million resulting in exceptional Earnings Before Interest Depreciation Taxes and Amortisation margin of 12 percent.

EBIDTA grew by a massive 982 percent to $1,6 million from a meagre $152 000 due to cost reduction measures that were implemented from November last year that addressed core cost impact items which will see a sustained efficient system in future.
As a result the group moved into the black posting a profit after tax of $105 000 from a loss position of $3,2 million

Apart from reducing costs the group’s occupancy level was up 10 percent from 39 percent during the prior year to 43 percent during the period under review.

This was after Rainbow Towers Hotel recorded the highest occupancy of 76 percent in May while Bulawayo Rainbow Hotel had a record Zimbabwe International Trade Fair performance in May of $600 000, representing a 30 percent increase from the same period last year.
The group also recorded its highest revenue in any one month since dollarisation of $2,9 million in July as Victoria Falls Rainbow Hotel revenues grew by 135 percent in the same month compared to the period during the prior year.

A ’Zambezi River Lodge revenues also grew by 74 percent in the same month resulting in the group’s Victoria Falls properties revenues growing by 100 percent in the month of July compared to prior year.

Revenue per available room was up 13 percent to $36 during the period under review from $32 in the prior period.
Subsequently the group’s market share rose from 17 percent to 27 percent from 23 percent in 2012 against a fair share of 25 percent.
The group also managed to achieve a reduction in interest expenses of 47 percent to $851 000 from the same period last year after retiring most of its short-term loans.

Other short-term loans were restructured to long term leading to a reduction in average cost of borrowing to 11 percent.
However the group is targeting a reduction in the cost of borrowing to 7 percent by December.

The group’s total debt reduced by 14 percent from $25,5 as at December 31, 2012 to $21,1 million at 30 June 2013 while gearing for the same period came down from 69 percent to 57 percent. Looking ahead group chief executive, Mr Tendai Madziwanyika said he was confident that RTG would be able to deliver on its intended profit target by December 2013.

“We are optimistic of an improved operating environment conducive for tourism,” he said.
He added that the positive performance RTG is registering is only the awakening of the country’s hospitality giant.

RTG chairman Mr John Chikura said they expect the improving occupancy trend to continue in the second half of the year.
“Focus will remain on embedding the “I’M FRESH” service culture and intensifying sales and marketing efforts to grow revenues as well as the RTG brand.

“In addition, continued success will come from enhancing the product, implementing further cost reduction measures, generation of free cashflows and prudent working capital management.

“The group will seek to capitalise on the visibility and destination marketing opportunity presented by the hosting of the UNTWO General Assembly, a rare showcase for the country, to be held in August 2013 in Victoria Falls,” he said.

Meanwhile, Mr Madziwanyika said the group’s refurbishment programme was progressing well.
In terms of the group’s flagship, the Rainbow Towers and Conference Centre he said the first 60 rooms were already complete and were released back in circulation with effect from 31 July. The remainder of the project is expected to be completed by January 2014.

With respect to the Beitbridge Hotel Project, he said construction of the hotel was now complete while funding for equipment, furniture and fittings has been secured and the remaining works will be completed in the third quarter.

“The hotel is going to open on November 1, 2013 but the full impact to the group operations will be felt in 2014,” he said.
The group decided against declaring a dividend in view of the growth and further investments still required in the business.