• Strategic Market Entry: RTG’s US$5.6 million acquisition of a seven-storey commercial property in Cape Town’s CBD positions it to leverage SA’s robust tourism sector
• Financial and Operational Risks: Funded by a US$6 million loan at a 12.5% fixed interest rate, the acquisition raises RTG’s gearing ratio to 32%
• MICE and Tourism Opportunities: The property’s prime location targets the high-value MICE segment, which contributed ZAR2.5 billion to Cape Town’s economy in 2024

Harare- Rainbow Tourism Group (RTG), Zimbabwe’s second-largest hotel group, has made a bold move to expand its regional footprint by acquiring a seven-storey commercial property in Cape Town, for ZAR98 million (approximately US$5.6 million).

Financed through a US$6 million loan, the property comprising will be transformed into a branded hotel under a leading international hospitality group.

This acquisition, representing 9.3% of RTG’s market capitalisation on the Zimbabwe Stock Exchange (ZSE), marks the company’s entry into South Africa’s dynamic hospitality market and aligns with its strategy to target high-growth regional destinations.

South Africa’s tourism sector is a powerhouse in Africa, contributing significantly to the country’s economy and offering immense potential for hospitality players like RTG.

In 2024, South Africa welcomed 8.5 million international visitors, a 10% increase from 2023, with Cape Town alone accounting for over 3.5 million arrivals, up 12% year-on-year, according to Cape Town International Airport data.

The World Travel and Tourism Council (WTTC) projects that tourism’s contribution to South Africa’s GDP will grow at 7.6% annually through 2030, driven by robust infrastructure, diverse attractions, and government initiatives like the Tourism Sector Masterplan, which aims to attract 15 million visitors by 2030.

Cape Town, consistently ranked among the world’s top destinations, benefits from its natural landmarks (Table Mountain), cultural heritage (Robben Island, Bo-Kaap), and vibrant urban offerings, making it a magnet for leisure and business travellers.

This tourism boom is a big deal for RTG because it provides a stable, high-growth market to offset Zimbabwe’s economic volatility, characterised by currency instability and infrastructure challenges. South Africa’s relatively stable economy, strong rand, and world-class tourism infrastructure offer RTG a platform to diversify revenue streams and enhance investor confidence.

The property’s prime location along Buitengracht Street, a major arterial route into Cape Town’s Central Business District (CBD), ensures high visibility, pedestrian traffic, and proximity to landmarks like the V&A Waterfront, Cape Town International Convention Centre (CTICC), DHL Cape Town Stadium, and Bree Street’s dining scene.

Its unobstructed views of Table Mountain further elevate its appeal, positioning the future hotel to capture both leisure and corporate demand in a market where occupancy rates in branded hotels averaged 70% in 2024, per STR Global data.

For RTG, entering South Africa is transformative. As a Zimbabwe-based operator with a dominant presence in its home market, RTG’s portfolio encompassing hotels, Heritage Expeditions Africa, and the Gateway Stream super app has been constrained by local economic challenges.

The Cape Town acquisition allows RTG to tap into a market with higher purchasing power, a broader international visitor base, and a more predictable operating environment. The partnership with an international hospitality brand further amplifies RTG’s ability to compete with established players like Tsogo Sun and Marriott, leveraging global marketing networks and loyalty programs to drive bookings.

Implications for RTG

The acquisition is a strategic leap for RTG, aligning with its goal of regional expansion and portfolio diversification. The property’s 3,600m² of office space offers ample room for a mid-to-large-scale hotel (potentially 100–150 rooms), while the 221m² retail unit could house a restaurant or boutique shops, enhancing guest experiences and generating ancillary revenue.

The partnership with an international brand mitigates RTG’s lack of South African market experience, providing operational expertise and brand recognition critical for competing in a crowded market.

Financially, the US$6 million loan at a fixed 12.5% interest rate over five years increases RTG’s gearing ratio from 9% in 2024 to 32% post-transaction.

While within hospitality industry norms, this leverage introduces risks, particularly given Zimbabwe’s high borrowing costs and foreign currency constraints. The fixed interest rate ensures predictability, but RTG must generate strong cash flows to service the debt, especially during the capital-intensive refurbishment phase.

Delays or cost overruns could strain finances, while competitive pressures from established brands require RTG to deliver a high-quality hotel that meets international standards.

The comprehensive due diligence process and approvals from the Reserve Bank of Zimbabwe and South African Reserve Bank reduce regulatory risks, confirming the transaction’s viability.

RTG’s Johannesburg sales and marketing office, established to promote foreign arrivals to its Zimbabwean properties, provides a foundation to drive bookings in Cape Town, leveraging existing relationships with tour operators and corporate clients.

The MICE Segment: A Game-Changer for RTG

The property’s proximity to the CTICC positions it to capitalize on the lucrative MICE segment, a key driver of Cape Town’s tourism economy. The MICE sector encompassing Meetings, Incentives, Conferences, and Exhibitions is a high-value niche, with delegates spending 2–3 times more than leisure travellers, according to the International Congress and Convention Association (ICCA).

 In 2024, Cape Town hosted over 100 major conferences, generating ZAR2.5 billion in economic impact, per CTICC data. The CTICC, located just minutes from the property, is a world-class facility hosting events like the Mining Indaba and World Economic Forum on Africa, attracting high-spending corporate travellers.

For RTG, the MICE segment offers significant revenue potential. The hotel’s CBD location and accessibility make it ideal for conference delegates, who prioritise proximity to venues, reliable infrastructure, and urban amenities.

The property’s size allows for flexible configurations, such as meeting rooms or executive suites, catering to corporate groups.

By targeting MICE travelers, RTG can achieve higher average daily rates (ADRs) and occupancy stability, as corporate bookings are less seasonal than leisure travel. The surrounding Bree Street dining scene and cultural attractions like Bo-Kaap further enhance the hotel’s appeal for incentive trips, where unique experiences are a draw.

However, capturing MICE demand requires RTG to invest in specialised amenities, such as state-of-the-art conference facilities, high-speed Wi-Fi, and business-friendly services.

Competing with established MICE-focused hotels like the Westin Cape Town or Southern Sun Waterfront will be challenging, necessitating a strong value proposition and aggressive marketing through RTG’s Johannesburg office and its international partner’s networks.

Outlook for RTG

The Cape Town acquisition positions RTG to leverage South Africa’s tourism growth and establish itself as a regional hospitality player. The city’s role as a gateway to Southern Africa, combined with its robust infrastructure and diverse visitor base, makes it an ideal anchor for RTG’s expansion.

Success in Cape Town could pave the way for further investments in high-growth markets like Johannesburg, Nairobi, or Lagos, with the international brand partnership serving as a scalable model.

RTG’s innovative initiatives, such as Heritage Expeditions Africa and the Gateway Stream super app, demonstrate its ability to integrate digital and experiential offerings, which could be adapted to South Africa to enhance guest engagement. The increased gearing ratio, while manageable, shows the need for disciplined execution during refurbishment and operational ramp-up. If RTG delivers a competitive hotel that capitalises on Cape Town’s tourism and MICE demand, it could significantly boost its revenue and market valuation.

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