SOUTH AFRICA: Hotels Increase Their Rates With The Weakening Rand As Excuse

Tour operators and ground handlers have reacted with surprise to the announcement from several high-end rand-based accommodation providers that they will be increasing 2016 rates in response to the weakening rand. Most properties have cited increased input costs as the reasoning behind the price hikes, but tour operators remain sceptical.

Craig Smith, MD of New Frontiers Tours, says he doesn’t believe that contractors in SA or overseas, will accept the increased input costs argument. “They are aware that South African input costs are rand based, and aside from fuel, have a limited correlation to the US dollar rate,” he says.

“They also know that fuel-based costs have been offset to a degree by low oil prices.” “Instead,” says Smith, “they recognise the price increases for what they are – an opportunity to maximise profit at a time when supply is limited.

They don’t take kindly to price gouging.” Tour operators are concerned that this dangerous interim price hike strategy is likely to diminish any boost in tourism they may have initially anticipated as a result of the weak rand. Smith says that the added danger is that when the rand eventually rebounds, increases of 20% over and above annual increases will make South Africa uncompetitive.

“We’ll be in a position similar to 2011 when the market was flooded with special offers that are unwieldy to manage,” he adds. “It’s a boom or bust mentality in an industry that is cyclical by nature.” Paul Coetzee, Executive Director of Explore South Africa, says these unexpected price increases were not factored in late last year, when his rates where advertised for the coming 12 months.

“If local accommodation providers increase their rates, we will simply switch to other options,” he says.