LEISURE chain Rainbow Tourism Group (RTG) is going through a renaissance on its way into becoming Zimbabwe’s top hotel group. Part of this includes upgrading hotels across the country and partnering international players to become the preferred booking platform in Africa. Our deputy group business editor, Tatira Zwinoira (TZ) recently interviewed RTG chief executive officer Tendai Madziwanyika (TM, pictured), about their plans. Find below excerpts of the interview:
TZ: RTG last year signed a partnership with Grand Metropolitan Holdings (GMH). How has that partnership been so far?
TM: We are excited about that partnership agreement. We signed what we call the strategic partnership agreement back in around December as you say and ever since what we managed to do is to launch it in Cape Town. We launched it to the public, and not only in Zimbabwe, but we also launched it in Cape Town. We launched it at what we call the World Tourism Market Africa.
TZ: So, now what follows?
TM: And so, following that, we managed to then form the various companies to activate a strategic partnership agreement. This strategic partnership agreement is a series of joint ventures. So, it is not like a merger of companies, but it is forming joint ventures. It is project-driven. In other words, we formed a joint venture in Zimbabwe. We formed a joint venture to drive business in Africa, and we formed a joint venture to drive the Gateway Stream (an online platform and application that offers hospitality and tourism services). We also formed a joint venture for the hotel school. So, we formed a series of joint ventures that we aim to then use to activate the various opportunities that we included in the strategic partnership agreement.
TZ: May you elaborate further?
TM: If you were to look at Zimbabwe, the joint venture agreement is that we will own 55% as RTG and they own 45%. What it means is that if we find opportunities in Zimbabwe, we will jointly manage that and they will bring in their skill. They will bring in brands and they will bring in the sort of international standards that we can then incorporate into that particular hotel. We are basically going to put international brands on local properties, and we own 55% profitability of that type of a business.
If we were to look at sub- Saharan Africa that is aimed at driving management contracts because we are following an asset light business model. It is not like we are going into Africa and building hotels. We will actually be identifying existing properties or new properties that are being developed, and we will then try to get management contracts. So, we will get those and then manage them under the sub-Saharan Africa JP (joint partnership), where we will own 25% and they will own 75% on the understanding. Of course, they have a lot more international exposure, international experience, and they are bringing a pipeline of hotels outside of Zimbabwe.
TZ: You talked about Gateway Stream. What role will it play?
TM: We are going to be doing Gateway Stream to become the sort of gateway or main booking platform for African properties. You know how people, when they want to go to Dubai, to America? They will go to Booking.com or to Expedia, and so forth. We want, when people think of coming to Africa, to go onto Gateway Stream and make their reservation and that is a big business because we see a six times growth in that business to about a trillion dollars by 2030.
TZ: Why Africa?
TM: Africa is really the bedrock for growth into the future. Right now, there are 52 000 hotel rooms on the African continent. They are projecting that by 2030; there will be 125 000 hotel rooms. So imagine that growth in the next six years or so. If you look at the GDP (gross domestic product), the general GDP of Africa is at US$3 trillion right now and they are anticipating that by 2050, Africa will reach a GDP in excess of US$30 trillion. What is US$30 trillion? It is the GDP of the United States economy. So, we are excited about the opportunities that exist on the African continent. That is why we felt we cannot do it alone, let us find a partner, and that is the GMH.
TZ: What projects have you launched for this partnership?
TM: Remember, once you sign an agreement, it is a master agreement. What then happens is you now go into the detail of the various agreements that activate that master. So, that is what we have been busy with. We then work on actual activation plans to say what exactly we are going to be focusing on in Zimbabwe, in Africa, in the Gateway Stream, and in the hospitality school. All of those now need proper planning where we now have to get down to real work and beyond just strategic thinking and visioning.
TZ: How soon do you think you will be able to see some of those activations?
TM: We believe in the second half of this year. We will come to the market with, you know, tangible stuff.
TZ: How many properties do you have in Zimbabwe registered on the Gateway Stream platform? TM: In Zimbabwe, I think the number stands at about 40 and then inAfrica we have about 400 properties that are registered on GatewayStream and of course, you know, those 400 properties represent a substantial number of rooms if you get my point. So, we are very excited about the future, and we feel that is the future of tourism. It is being tech-driven; it is giving people access, and you getting something out of that event.
TZ: How many homestays in total are registered?
TM: To be honest, we have not been focusing on homestays. We have been more focused on hotels and lodges. So yeah, it is basically 40 hotels and lodges.
TZ: How much revenue came from the government in the five months of this year?
TM: So, the government has provided us slightly more than it was last year. This year it was about 40% and a whole lot less last year. In the same period, it was less than 30%. Why is that? It is because last year the government budgets were released very late. In fact, from the first quarter to the end of the first half, there was not much money released for spending by the government. This year, there is a lot more activity coming through.
TZ: Do you have a strategy which is not reliant on the government considering that it may have other priorities this year?
TM: This is why you saw that we focused a lot on actual United States dollar revenues. It was to try and indicate that we are diversifying our business beyond just the government, you see. So, we will reduce the contribution of the State, not by restricting government, but by growing other businesses that are beyond just government. And I think in the meeting, I talked about how we have also invested in South Africa where we now have a sales team going to South African government departments, South African corporates and also going to people on the ground.
TZ: On the ground?
TM: Yes, in South Africa. We have got an office. So we are really driving business from outside of Zimbabwe. So, you know, whether it be feet on the ground or whether it, you know, be online because we participate in what we call requests for proposals for global entities, we have been participating a lot more this time.
TZ: Your liquidity ratio stood at 0,88 last year. How are you going to fund your projects considering that your liquidity is a little bit strained?
TM: Look, when you talk about liquidity ratio, I know you are pushing for one, a liquidity ratio of 1,0. But, look at the 0,88, with the sort of makeup of our balance sheet, it is not bad because as you know our gearing is at one, so really we do not have much exposure. So, at 0,88, it is pretty comfortable. Remember this is a government property and we have been receiving money for the works that you are seeing here as well as the works that you saw in those suites that we showed you. That is money coming from the government because it is their property. However, there are other things like the lifts and so forth that are within the lease arrangement that we fund. So, we have got our normal capex that is well funded and then these, as we have said, this is the first time this (upgrading HICC) has ever happened ever since the building was constructed.
This becomes a government investment, which is a good investment because obviously the value of their property on their balance sheets really shoots up. And, our ability as a lessee to generate substantial revenues as a much improved facility, we will be able to also generate very good revenues and then they get a share of that in terms of a percentage of turnovers.
TZ: Your foreign currency revenue dropped from 54% to 51% this year. Why did it go down?
TM: Last year we did not get as much government business. Remember, government business is local currency. So last year, we did not get as much government business. Why, because they were still not releasing their budgets. So, the contribution of the government, in terms of real revenues, was lower than this year. Which means last year, because of the lower government contribution, which is lower local revenues it meant, because we continue to drive a foreign revenue, the contribution of foreign revenues was then higher as the local revenues were lower.
Then this year, the government did not hold back like they did last year, so the portion of local revenue rose and even though our foreign revenue grew by a US$1 million, which was higher than last year because the government is now active. The local contribution also grew significantly. So, in the end, although the forex grew by a US$1 million, that contribution was diluted because of the local currency component, which had outgrown the forex.