Martin Wiest, Chief Executive Officer of Tourvest Destination Management, says the current debate, which follows suppliers increasing rates after the weakening of the rand, has overlooked the implications for existing contracts, while many clients have forward cover for foreign exchange.
A lot has been said by various people in our industry - there are some gaps in the currently published arguments and hence allow me to add my comments at this time.
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For starters, I want to highlight the fact that as an inbound wholesaler we are a value-adding channel management business. Part of our job is to manage both suppliers as well as clients as our main stakeholders. By the nature of what we do these stakeholders are individually and separately contracted - and these contracts are valid independently. Hence, regardless of what the supply chain chooses to do, we can be and I guess should be, held to the content of the contracts issued to clients.
After all part of what we do as an inbound wholesaler, is to create contractual security for our clients and we can, under no circumstances, allow suppliers to undermine that principal.
The other point I am currently missing from the public discussion is the fact that numerous clients are in a long term forward cover position for foreign exchange. The SA rand increases for our clients will translate into direct hard currency increases in an environment of overall improvement in terms of competitiveness for our destination. Of course, I have an understanding of the reasons for the price increases and at least some of the explanations that I have heard in the last few weeks.
However, within contractual periods and availability obligations, my guidance to product suppliers currently undecided in terms of the next steps is;
- Drive the rate increases that are no doubt possible at the moment into the dynamic channels that have the benefit of a depreciating currency immediately. This includes bed banks, OTAs (online travel agencies) and OTOs (online tour operators).
- Stick to contracts in a static rate distribution environment and make a call in April as to what increases can be achieved in a static rate distribution channel environment.
