Hoteliers have supported CEO of Platinum Hospitality Holdings, Arthur Gillis’s statement that Average Daily Rates for hotels need to be raised to ensure not only profitability but survival in some cases.

Yet, while acknowledging that hotels are under pressure, buyers (such as tour operators, agents and business travel professionals) have cautioned that raising rates – particularly in an economically depressed market post-COVID – could negatively impact South Africa’s competitiveness and attractiveness as a destination.

“Remember South Africa is an expensive place to fly to and the air offerings are limited. It is difficult to add expensive on-the-ground products to these airfares and come up with an affordable package,” said Jan Jenkins, MD of Umvuselelo Tours and Travel in a comment to Tourism Update.

“If hoteliers raise rates, it would certainly detract from attractive packaging for tourists and corporates alike.”

Founder of The MICE Academy, Helen Brewer, agreed, highlighting that the MICE industry was still price sensitive in mid-2022. She advised caution in raising prices for primarily the corporate sector and certainly the association sector.

“Increasing ADRs could have a negative effect on group bookings of 50 plus. It’s the smart venues that will be sensitive to price increases and offer real valuable incentives,” she said.

The other side of the coin

Yet, MD of Providence Hospitality, Neil Hughes, echoed a sentiment shared by many hoteliers, that hospitality ADRs should be raised to bring the industry back to profitability. 

“While increasing ADRs as we move out of COVID operating conditions is vitally important, it does not come without risk. Booking lead times remain much shorter than during pre-COVID times, which means that occupancy levels can stay very low until the last minute, leaving independent hotels scrambling and feeling forced to discount their rates,” explained Hughes.

He added that low booking lead times have also been paired with a sharp increase in reopened supply. “Many hotels remained closed during winter last year but have now reopened as restrictions lifted, flooding the industry with additional rooms we weren’t competing against last year and all now competing for the same clients.”

Owner of Centre Stage Travel, Colin Fryer, maintains that the quality of the host, the property and the experience comes at a cost, and that  remaining a solid, sustainable and future-focused product requires cognisance that investing in tomorrow’s offering is going to cost more than today's income.

He pointed out that, should hoteliers seek to cut corners and cut back on the experience to retain low rates, South Africa would become a destination where there was no added value, and no reason to travel to for the inbound tourist to grab on to.

Fryer added that there were other accommodation alternatives, such as Airbnb, for the budget-conscious tourist.