A PRICE war is raging among hotels in Cape Town as occupancies drop to levels not seen since 2006 because of the global recession and the Cape’s traditionally slow winter season.
Some establishments are experiencing a drop in revenue and/or occupancy of up to 45%. This is according to a snap survey by Fedhasa Cape among 16 Cape Town hotels, representing a spectrum of three-, four- and five-star properties. Hoteliers agree that while discounting is prevalent amongst three- to five-star hotel categories, it is predominantly in the five-star sector. They also agree, almost without exception, that the price war is unnecessary, self-defeating and bad for the market. “It is rather silly, because it does not bring any additional business. It is just diluting what we get anyway,” says one respondent. Another comments that higher star ratings are trading down into lower territories, allowing guests to stay in five-star hotels at four-star prices. A quick search on the Internet confirms that a four-star Protea hotel room can now be had for as little as R699 per night – almost as low as guesthouse rates in the city – while a three-star City Lodge room costs R466 pps and a two-star one R352 pps per night. Strategies being employed to counter the situation include targeting the online market, government, local business and leisure markets. Value is being offered through added specials, good packages, flexibility in pricing, partnerships in marketing, better service, closer relationships with clients, cutting costs and finding new markets. Cape Town hoteliers are cautiously confident that business will pick up later this year from October/November onwards, with a boost expected pre and post the 2010 Fifa World Cup. "We will continue to host our normal numbers of international events, perhaps with slightly smaller delegate numbers, but there will be three city-wide conventions in the next 12 months." “It will improve towards the summer season, but it will remain slower than in previous years and rates will be under pressure. This will not improve substantially until business activity starts improving,” says one respondent.
