Group chief executive officer, Tendai Madziwanyika
RAINBOW Tourism Group (RTG) says the remodelling of its pricing and reduced expenditure, driven by the domestic market, resulted in the group posting an operating profit of US$50 000 for the first time since 2012.
The favourable trading position also saw revenue, for the first half of 2016, increasing by four percent to US$11,8 million from US$11,3 million during the same period in 2015.
Group chief executive officer, Tendai Madziwanyika, said the price remodelling was out of necessity to suit the current macro-economic environment in order to remain viable.
“In response to the market liquidity challenges the group custom designed packages to suit the evolving customer and market dictates. These included a high volume-low yield strategy as well as menu re-engineering and the market responded positively as evidenced by the 16 percent growth in occupancy to 54 percent from 47 percent against an average of 44 percent,” said Madziwanyika while presenting the group’s interim results.
During the period under review, hotel resorts occupancy grew to 56 percent from 46 percent, thus strengthening the group’s strategy to focus on growing foreign markets, which will support the fragile domestic market.
Room nights sold went up 15 percent to 98 517 compared to 85 719 during the same period of 2015. As a result, Revenue per Available Room (RevPar) grew three percent to US$36 from US$35 recorded in 2015.
“The gain in the group’s RevPar was due to a higher occupancy, which outweighed the negative impact of the market-led softening of rates,” he said.
During the period, market share increased 19 percent to 31 percent compared to prior year same period share of 26 percent.
The market environment resulted in the group focusing more on cost reduction and as a result the cost of sales per room sold reduced 20 percent resulting in gross margin growth of five percent from 64 percent in 2015 to 67 percent.
The group’s earnings before interest, taxes, depreciation, and amortisation margin was 57 percent up at US$1,1 million compared to US$US700 000 million in the corresponding period last year.
“The various cost saving initiatives deployed across the business continued to drive operating margins and will remain a strategic focus given the current operating environment,” said Madziwanyika.
During the period under review, the group exited the Rainbow Beitbridge Hotel following perennial losses. The group would also exit Mozambique, by September 30 2016, due to poor results.
“As a result of the impact of the discontinued operations, the group posted a loss of US$2,9 million compared to a loss of US$1,9 million recorded same period last year of which US$1,6 million was from discontinued operations,” he said.
During the period staff costs reduced 12 percent to US$5,01 million compared to US$5,71 million same period prior year.