RTG on expansion drive
HARARE, Rainbow Tourism Group (RTG) says will invest in excess of $18 mln towards the expansion of its Victoria Falls properties. The group highlighted that they are already fully booked for the year mainly due to increased demand spurred by the expansion of the Victoria Falls airport.
The group plans on adding 102 rooms at Victoria Falls Rainbow Hotel at a cost of approximately $8 mln while at A’Zambezi River Lodge the rooms will be doubled from the current 87.
At analyst briefing for the company’s results for the year ended 31 December 2016.
Tendai Madziwanyika said the Group now has capacity to raise new funding for the projects, this is on the back of successfully liquidating its legacy debts with developmental financial institutions, African Import & Export Bank (Afrexim Bank) and PTA Bank.
In 2012, the debt with Afrexim Bank stood at $7.5 mln whilst the PTA Bank debt stood at $3.5 mln. The $7.5 mlnn Afreximbank facility was for the purposes of refurbishing the company’s flagship, the Rainbow Towers Hotel and Conference Centre while the PTA Bank facility was for the refurbishment of A’Zambezi River Lodge.
“We can borrow again for the expansion of the properties at a cost of approximately $80 000 per room which will cumulatively total about $18 mln, he said.
Madziwanyika added that the company was now operationally sound and positioned for growth. He said during the period under review, all hotel operations were profitable except Rainbow Towers hotel which was affected by economic and political developments which include the introduction of bond notes and political protests that occurred around June last year.
“These resulted in cancellations of confirmed bookings amounting to $800 000 which accumulated to about $3 mln for the year,” he said.
The net effect of social media attacks resulted in Rainbow Towers Hotel which contributes 45% of total Group revenue recording a revenue slide of $3.4 mln compared to its 2015 performance.
During the period under review, Group occupancy was flat at 55% but has grown 14% from 2012 level of 48%. Revenue per Available Room (RevPar) declined to $36 from $41 in 2015, consequently, resulting in Group revenue going down 11% to $24.13 mln compare to $26.90 mln in prior year. According to the chairman’s report “the drop in RevPar was as a result of high volume-low rate strategy adopted in the second half of the year”
According to Madziwanyika, the company achieved a total debt saving and CAPEX investment in the product amounting to $22 mln. At least $10 mln relates to the serviced debts while $7 mln was capex for the year. The remainder is interest on other bank facilities.
Madziwanyika said the company’s $3,8 mln loss arose largely due to the strategic decision to exit non-performing markets, namely Rainbow Beitbridge Hotel and Rainbow Hotel Mozambique.
He however said despite the loss, the company is upbeat following the awarding of a judgment from the Supreme Court of Zambia in the amount of $2 mln from a legal case against Savoy Hotel with which the company had a management contract in April 2017.
During the period under review, foreign business grew 20% with inflows amounting to $8.1 mln compared to $6.7 mln in prior year resulting in a contribution to revenue increase of 31% in 2015 to 33% in 2016.
“The foreign revenue contribution was 24% in 2012 representing a growth of 38% over the past four years,” he said. He said the company is now targeting 40% contribution in foreign revenues going forward through the amplification of investment in international markets.
On the financial review, Finance Director Napoleon Mtukwa said the company centralised procured resulting in a saving of $2 mln, HR costs were aligned to business cash flows and head count reduced from 1143 to 670. Staff costs also reduced from $13.9 mln to $10.6 mln.
Mtukwa stated that gross margins were flat at 67%. During the period the group impaired Mozambique’s exit in the tune of $500 000, while $600 000 was spent on head Office retrenchments. Impairment credit losses stood at $325 000. “This resulted in operating costs growing to $16.7 mln from $15.3 mln in 2015”. Going forward, Madziwanyika highlighted that the Group is poised for profitability, having moved out of the non-performing business units. He added that the group’s structure is now leaner and more efficient, positioning it for growth and profitability.
Madziwanyika reported that since 2013 the Company has invested over $6 mln in upgrading its hotel facilities funded from internally generated cash flows to ensure it delivers service excellence to its guests at all times.
The company has also set its focus on harnessing the use of better technologies to drive e-commerce. This will include the introduction of exciting competitive online packages and initiatives targeted at the Diaspora market to tap into their spending power.
During the past four years e-commerce revenues increased from just under $300 000 in 2013 to $1 mln 2016, and the company is targeting at least $1,2 mln in 2017.