Accommodation providers are unlikely to decrease rates as the rand strengthens, citing volatility and high demand.
While the weakened rand was cited at the beginning of the year as the reason for a number of high-end accommodation providers increasing their 2016 rates, the strengthened rand is unlikely to see rates come down any time soon.
In the six months to 15 January 2016, the rand depreciated 30 percent against the dollar, dropping from R12.82 to the dollar to R16.70. In January, a number of suppliers announced increases to their rates, ranging from 20 percent over and above annual increases and higher. At the time, tour operators expressed concern that when the rand rebounded, the increases would 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,” said Craig Smith, MD of New Frontiers Tours. “It’s a boom-or-bust mentality in an industry that is cyclical by nature.” Since January, in the six months to 15 August 2016, the rand has strengthened 20 percent against the dollar, while it has also strengthened 25 percent against peak season levels of the British pound, when it was trading at around R23 to the pound sterling.
Asked if the weakened rand would bring down rates, both Richard Lyon, GM of One&Only Cape Town, and Robert More, CEO and Owner of More, said the rand had been volatile and rates would not decrease. “I would want to wait for a stabilised exchange rate for approximately six months before being confident that the volatility was over,” said Lyon.
“Based on current booking pace and lack of rate resistance, we have no immediate plans to reduce our rates,” said Lyon. “We feel we are correctly priced for the product and service that we offer.” More pointed out that currency was not the only factor driving the group’s rates up. He said the group’s rate increase had been driven by a basket of items, including the weakened rand, but also demand and escalating input costs caused by the drought.
Compiled by: Melissa Jane Cook. Source: Tessa Reed.