A price war is raging among top-end hotels in Cape Town with all players jostling for their share of a depressed market resulting from a sharp increase in inventory, a slow pace of business and an overall slump in tourism after the Soccer World Cup.
This is the assessment of Ajoy Misra, Senior VP Sales & Marketing of Taj Hotels Resorts and Palaces, who visited the city recently. A TU Online spot survey of online hotel rates in Cape Town shows that five-star hotels, especially recently built ones, are playing in the four-star and three-star markets. "This has a downward spiralling effect on rates across the board, which quite easily leads to horse trading," comments Newmark Hotels Operations Director, Andy Nold.
Average online five-star room rates on September 2 were R2 400 per night, with at least 12 five-star properties charging less than R2 000 a night, the lowest being Bantry Bay Luxury Suites at R1 000 per night. The average room rate of four-star hotels was R1 300 per night, with at least 10 properties charging less than R1 000 a night, the lowest online rate being R550 per night at the Harbour Bridge Hotel & Suites. The average three-star room rate was R736 per night, the highest rate of R1 035 per night charged by Protea Hotel Cape Castle and the lowest rate of R370 per night offered by the Ritz Hotel.
"It is definitely a buyer’s market with the number of quality rooms in Cape Town outstripping demand," says Andy. "Although occupancy has increased in some of our properties over last year, the actual AVR (average room rate) achieved has not grown or even slightly decreased which, at best, has resulted in flat RevPAR (revenue per available room). The consumer is not down and out but trading down and is lucky in this environment to have a plethora of choice available, especially on the Internet, which is easily accessible to all and sundry and dynamic in terms of hotel pricing," he says.
Taj Cape Town Director of Sales & Marketing, Theo Cromhout, sees a downward trend of hotel prices but says this must be interpreted in the context of the current market situation. "The traditional lowest of the low season is August and September, post-World Cup trends, significant new inventory, and the impact of the global recession have all contributed to somewhat of a perfect storm," he says.
However, Vernon Kirsten, MD of ReservHotel, says it is customary for demand to decline after a major event. "This I call the consumer settling period. Thereafter, the economic climate tends to lend itself to an increase in hotel bookings and we will see this pick up in October/November."
He adds, "I have requested CTRU and Acsa via the CTRU board of directors to drive business plans [that will] lure airlines to fly directly to Cape Town. This in turn will start to positively impact on the low occupancy in hotels."
