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BizDay Zimbabwe

RTG Aiming for Profitable Year


HARARE – Hospitality group, Rainbow Tourism Group (RTG), says it has made several organizational changes fundamental to its successful recovery of and will turn the corner this year.

Speaking at the company’s Annual General Meeting on Wednesday RTG Chief Executive, Tendai Madziwanyika said the group was engaged in several strategies to restructure its business model and bring new skills, results of which are starting to pay off.

He said the group was pleased with the marked increase in performance starting March and anticipates this trend to continue for the rest of the year

“The fruits of this re-organisation are now being realized as the group has started registering a positive operating performance since the beginning of the second quarter albeit a soft performance in the first quarter of the year,” Madziwanyika said.

RTG has set its sights on strong exponential growth over the 2013-2015 period, after a lukewarm performance in the 12 months to December 31, 2012. The hospitality group lined up a series of measures aimed at enhancing occupancy, average daily rate, revenue per available room and current ratio.

To increase revenue, RTG has targeted volumes’ growth instead of rates hike. The strategies are the brainchild of Madzivanyika, its newly-appointed CEO.

RTG is targeting 50 percent occupancy this year and the rate is projected to reach 55 percent and 60 percent in 2014 and 2015, respectively. ADR is seen at US$87 this year, US$95 in 2014, US$110 in 2015 while revenue per available room is projected to top US$44 this year, US$52 in 2014 and US$66 in 2015, as the hospitality group becomes bullish about the future.

Madziwanyi said cost reduction was the first area of business to respond to the company’s push for more efficient and effective operational systems. He said the group had made significant strides towards achieving its 20013 objectives as adopted by management.

“Results to date indicate that the group, had successfully managed to deal with costs,” he said at the company’s AGM on Wednesday.

He said there was a 15 percent drop in telephone costs due to the heightened use of Skype and VoIP, riding on the fibre optic backbone linking the group’s hotels. Cost sales now stood at 10 percent compared to prior year of 11 percent.

“There was a 64 percent drop in water costs through the roll out of boreholes. 11 percent drop in electricity cost due to use of gas in kitchens and energy saving monitors and 13 percent drop in cost of goods purchased through Central Procurement as compared to November last year,” he said.
He said the challenge going forward was to ensure that the group does not lose sight of the cost reduction gains achieved to date in the wake of rising revenues.

“RTG’s revenue has been on an upward trend since the beginning of the year due to the revenue driving programmes that are now on the market, we are confident that trajectory will be sustained. A marked recovery in occupancies was recorded in March, April and May. May closed with a record high occupancy as compared to the previous years,” he said.

On the same note – the country’s biggest hospitality concern – which operates Rainbow Towers, Rainbow Victoria Falls, Rainbow Bulawayo, New Ambassador, Kadoma Hotel and Conference Centre and A’Zambezi River Lodge says its phased recovery programme would include stabilisation in 2013, consolidation and strengthening in 2014 and expansion in the third year from now.

The group is convinced measures the management has put in place would also enable it to reduce its gearing from 67 percent to 35 percent by 2015.

Measures that management has employed to achieve the set targets include centralisation of sales, introduction of proprietary loyalty and promotional programmes, central reservations office reconfiguration, promotion of e-commerce and jolting inflows from the re-opened South Africa sales office.

Centralisation of sales is projected to contribute 62 percent of revenue at US$22 million, promotional programmes 14 percent at US$4,8 million, central reservations 15 percent at US$5,1 million, e-commerce 3 percent at US$1 million and  South Africa bringing in 6 percent at US$2,1 million.

Broadly, deliverables expected to lift the Zimbabwe Stock Exchange-listed group into sustained profitability include revenue generation, enhanced efficiency, tighter cashflow management, enhanced service delivery and refreshed products.

With targeted revenue of US$35 million in 2013 RTG has geared to reclaim its market share of at least 25 percent next year from 20 percent at the moment. The foreign business is predicted to bring in US$9,4 million — a 58 percent rise.

RTG contends that centralisation of procurement for strategic synergies with suppliers would save it US$750 00, utilities (water and power) US$418 000, fibre optic US$165 000 and staff costs 28 percent of revenue. Average costs have already been reduced by 50 percent from 23 percent to 11 percent. More savings are expected following a reduction in staff numbers by 170.

A US$10-million loan secured locally on favourable terms fully restructured short-term debt while US$4,5 million rights issue funds were used for working capital and retiring  short-term debt that was saddling RTG.

Central procurement is also expected to ease pressure on cashflows. Cash credit ratio is seen improving to 70:30 by December 2013 from 54:46 in 2012.
Enhanced service delivery is targeted at enhanced connectivity, differentiated turndown, Rainbow drinks, differentiated guest welcome, signature Rainbow fragrance, smart check in and pillow menu for convenience.

The group is coming from a difficult financial period in 2012 when revenue surged by only one percent to US$28 million, leading a loss before-tax of US$4,576 million.