Interview: Clifford Ross
Has the rapid increase in the inventory of hotels changed the dynamics of the industry?
CLIFFORD ROSS: The rapid increase in hotel inventory prior to the 2010 World Cup, together with the world economic crisis, which started in October 2008, resulted in an oversupply of rooms in the system. As is always the case in situations like these, discipline in applying rates is the first thing to give way. This led to a “fight for survival” within the industry and the consequent irrational discounting of rates, which are only now starting to recover to 2008 levels. The change in dynamics for the industry is primarily that there is really no longer a four-star market in the country, as these rates are now only marginally above those achieved in the three-star market. The five-star market has recovered well and is commanding the expected premium in rates that it deserves. Moreover, the country has world-class infrastructure following the World Cup and should be targeting events that can utilise this infrastructure, such as international sporting events. The goodwill, and opportunities, that were created through the hosting of the World Cup should be leveraged by the meetings, incentives, conferencing and exhibitions tourism segment.
Do new visa requirements and a lack of open-skies agreements represent a challenge?
ROSS: Without clear and concise rules and proper communication with regards to the implementation of the new visa requirements, backed up by the systems and infrastructure to process these visas, many of the emerging markets are shunning South Africa as a holiday destination and choosing countries that offer visa-free entry or visa on arrival options. The full effects of the requirement for unabridged birth certificates for both inbound as well as outbound travellers under the age of 18 are still to be realised by the industry. These regulations will seriously impede the numerous schools, educational and sporting groups that travel to South Africa annually to foster relationships and encourage healthy competition amongst the many countries (in both emerging as well as traditional markets) which participate in these events. Consideration should be given to the application of these rules for children travelling to the country for group activities, as these activities cannot realistically be considered a threat nor a solution to the worldwide problem of child trafficking.
How would you assess the current state of occupancy rates and revenues per available room?
ROSS: It has become a buyers’ market when it comes to the rates offered, despite inflationary pressures from the cost of inputs such as electricity, rates and taxes, water, wages and the like. Hotels are being squeezed and forced to forgo margins in order to attract clientele in an economy that is only growing at a rate slightly above 1%. As is evident from the fact that there is very little new room inventory coming into the market, occupancy rates and revenues should move slowly upward from the current rate of 60% in the next few years, as long as there is some GDP growth coming through.
How will the emergence of new low-cost carriers (LCCs) improve affordability in domestic tourism?
ROSS: We have always believed that a true LCC service in South Africa will significantly stimulate domestic travel within the country. With the cost of flying within South Africa often being considerably more than the actual cost of accommodation at the destination, families are restricted when using air transport for holidays and weekend breaks. Should the option of a true LCC be available to the domestic travel market, it would significantly increase the opportunities for more spontaneous travel, especially over the weekends, when the industry offers many of the most affordable options for domestic travellers.
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