Rainbow Tourism Group trading update

Rainbow Tourism Group trading update
Published: 13 June 2019 (2480 Views)
The company delivered a strong performance in 2018 achieving revenues of  $34.3 million which was 27% 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% and 28% respectively. Gross profit margin (GP%) for the year closed on 68% which is an improvement of 1 percentage point compared to full year 2017.

It is against this background that the Company declared its first dividend since 2006 of 0.041cents in respect of all ordinary shares, firmly confirming that the Company has completed its turnaround journey which began in 2012. We are proud to have kept our promise, made at last year's annual general meeting, to deliver a dividend to our valued shareholders.

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.

In the first five months of 2019, the Company grew revenue by 131% from $11.1 million to US$25.6 million. The growth was spurred by an increase in foreign currency business received across all the Company's hotels. Foreign currency revenues grew by 15% from US$3.7 million in 2018 to US$4.2 million., Occupancies for the period under review declined to 46% compared to 55% 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%.

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.  

A Gross Profit Margin (GPs) at 71% was achieved in the month of May 2019, representing a 6% growth from 67% recorded in 2018. The growth in GPs was driven by increased rooms and Food & Beverage profitability.

The Company is 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 Company invested US$1.8 million in the  Bulawayo Rainbow Hotel refurbishment. The scope of the works covered the overhaul of the hotel's entire plumbing system – the first such comprehensive works since the hotel was built in 1952; the replacement of all critical in-room fixtures, the installation of aluminium single and double-glazed glare and sound reduction windows as well as the complete refurbishment of all the 181 bathrooms. The second phase of this exercise will see the two guest elevators replaced with brand new, state of the art elevators by the end of July 2019.

The Company aims to finish the refurbishment of the remaining 54 guest rooms at Kadoma Hotel & Conference Centre by 31 December 2019. The focus is also on the product improvement of the flagship Rainbow Towers Hotel & Conference Centre with a target to complete 180 guest rooms by 2020. In December 2019, New Ambassador Hotel will 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.  

Customer service is the foundation of our business delivery system. In this regard the Company successfully completed the certification to the ZW ISO 9001: 2015 standard for all the six hotels plus the Rainbow Tourism Group Corporate Office. The new standard is premised on the risk-based approach to the Quality Management System and will help the Company in the delivery of quality service through efficient systems and processes. The Company continues to deliver positive performance on all quality indices.

The operating environment remains under stress due to continued foreign currency shortages, rising inflation, fuel shortages and erratic electricity supply.  However, we remain optimistic that the business will continue to perform well driven by the Company's foreign currency earning capacity.

RTG is deploying an asset-light business model which includes the RTG Virtual partnership platform to grow its revenues.  We will continue to own and operate hotels. However, in order to achieve the multiplier effect for our shareholders we will also seek to unlock value from our extensive marketing, procurement and operational systems of our value chain by activating the network effect of our partners in the hospitality space. The effectiveness of the platform was proven in 2019 during the temporary closure of the Bulawayo Rainbow Hotel. Revenues of $528,000 were generated over this period compared to $38,000 in 2018.  Furthermore, the Company will pursue the following initiatives in the remaining seven months of 2019:
i.    Rooms expansion; The Company is focusing on expanding rooms capacity in Victoria Falls and is exploring new efficient technologies.
ii.    Value chain optimisation; The Company has created two tour operations arms which specialise in the consolidation of hospitality packages in Zimbabwe, Africa and the world.

Exotic Travel International (ETI) is the tour operations business based in the United States of America. This operation will drive foreign business from the key source markets into RTG hotels and sell destinations around the world to American market. The Company is focused on growing our share of business from the current 5%.

Through the local tour operations arm - Heritage Expeditions Africa (HeXa) - RTG is engaging partners in Zambia to develop activities on the Zambian side of the Zambezi River. This is over and above the domestic tour packages and other hospitality services.

iii.    Digitisation; Technology will become even more important as access to  data continues to improve and the availability of other distribution systems such as Wi-Fi become more pervasive. We believe that the future will be driven by technology. RTG will expand its tentacles into Africa using the Gateway Stream Application, through various partnerships with hotel groups across the continent.

We thank the RTG Shareholders for their unwavering support, the Board for its steadfast leadership and commitment which is evident in the positive performance of the Company, RTG management and staff for their tremendous effort, resilience and passion for the delivery of service excellence to our customers every day. We are confident and ready to transform the Company to ensure the delivery of value to all our stakeholders.


- Rainbow Tourism Group


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