The “beginning of the end” for AfSun and RTG?


A couple of years ago as other sectors of the economy were reeling under sub-optimal capacity utilisation levels, the tourism industry in Zimbabwe was surfing a wave of optimism.

Hotel groups went full-swing on refurbishment and room expansion programmes. 

Now, the tables have turned and the sector finds itself at the front of another, less admirable pack. Global tourism experienced its worst year on record in 2020, with international arrivals dropping by a massive 74% according to the World Tourism Organisation report. 

Destinations worldwide had 1bn fewer international arrivals in 2020 due to an unprecedented fall in demand and widespread travel restrictions in response to the Covid-19 pandemic. We opine that turning around affected companies in the sector post Covid-19 would be as difficult as “turning the Titanic’’!

Both African Sun Limited (AfSun) and Rainbow Tourism Group (RTG) released FY2020 financial results.

As expected, the performance was dismal. AfSun reported a low occupancy of 23% compared to 48% recorded in 2019. The Group’s inflation adjusted revenue declined by 55% to ZWL1.84 billion.

Room nights sold went down by 52% to 137,162. Similarly, RTG posted an inflation-adjusted revenue decline of 65.7% (occupancies declined from 47% to 26%). Gross Profit and EBITDA declined by 69.0% and 47.6%, respectively. 

With the closure of the two Victoria Falls hotels for the greater part of FY2020, RTG’s performance was mainly sustained by its city hotels. That said, both companies cited Covid-19 as the main culprit.

However, there is something that is potentially bigger and more permanent that we could not find in the published statements; “The Airbnb Disruption Effect”.

The infograph shows how Airbnb has disrupted the global hotel management business and is now one of the largest accommodation providers in the world.

Airbnb is a company that capitalised on the “sharing economy” to disrupt the travel industry big time, building a business and operating model leveraging digital capabilities.

The company found a way of sharing excess capacity and improving productivity of residential real estate assets. 

Their business model consists of a digital platform that serves as a marketplace for anyone with as little as a room to “run their own B&B” by renting it out and market it themselves.

Airbnb owns no real estate as it relies on hosts to join the platform and list their own property. In business, any change on the demand or supply side of the marketplace tends to have a near immediate effect on prices.

The rise of Airbnb has not only drastically impacted the supply-side of the hotel industry equation. Airbnb has increased competition (and lower RevPar) for established hotels.

With more rooms on the market in any given city, the price per room drops as hotel operators and Airbnb hosts compete for guests. It has also altered guest expectations, changing the face of demand as well.

Essentially, through Airbnb, consumers have been exposed to guest experiences that can differ greatly from that offered by conventional hotels. For example, Airbnb’s often feature kitchen amenities as guests are left to prepare their own meals. It also provides convenience and a different level of privacy that is not offered by traditional hotel groups.

Morgan & Co Research contends that as Airbnb continues to grow its supply of properties around the world (including Zimbabwe), it represents a permanent contest to hotel chains.

While there are efforts to regulate the home rentals that makes up the Airbnb properties and other sharing platforms – which could curb its growth – decisions on how to regulate these platforms have not been straightforward. In other words, hoteliers should continue to fear Airbnb.

Based on our estimates, RTG is currently trading on a demanding Fwd PER of 31.5x while we are projecting a FY2021 loss for AfSun.

We maintain our bearish outlook for the tourism sector given (i) the resurgence of Covid-19 cases globally and (ii) the Airbnb disruption effect. Sell AfSun and RTG!

Batanai Matsika is the Head of Research at Morgan & Co, and Founder of He can be reached on +263 78 358 4745 or      /

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