Following earlier concerns that South Africa’s tourism recovery is being constrained by a “missing middle”, industry stakeholders say the segment remains under pressure from rising costs, supply gaps and structural constraints, limiting its ability to drive volume growth and geographic spread.
Insights from inbound operators, airlines and accommodation representatives point to a combination of affordability pressures, shifting traveller behaviour and weakening investment conditions with challenges showing at multiple points in the travel value chain.
Airfares and total trip cost
Speaking to Tourism Update, Johan Smit, AAA Travel Contracting and Product Developer at African Ample Assistance, said international airfares remain the primary pain point and a significant portion of the total package cost. However, he added, land costs have “nearly doubled post-COVID”, compounding pressure on overall pricing.
FlySafair Chief Marketing Officer Kirby Gordon said airline operating costs are limiting fare reductions.
“The core issue is that the cost of operating an airline has increased faster than consumers’ disposable income,” he said, citing fuel prices, reliance on imported jet fuel and global aircraft supply constraints that have increased leasing and maintenance costs.
While some macro indicators have improved, volatility in oil prices remains a key risk, added Gordon.
“If sustained, it could continue to limit how far fares can come down and therefore constrain growth in the mid-market segment.”
Gordon said domestic connectivity has improved, with expansion into regional destinations, but structural cost dynamics remain.
“Smaller or thinner routes tend to have higher per-seat costs because demand doesn’t support larger aircraft. As a result, fares on these routes are typically higher, which is a structural reality rather than a short-term constraint.”
Growth in the segment depends on supply and demand-side shifts, added Gordon.
“For fares to come down sustainably through improved operational economies of scale, we need more consumers with sufficient disposable income. That means improvements in employment levels, lower inflation and a more stable interest rate environment.”
Conversion pressure and shifting demand
Operators report that South Africa is still attracting interest in key source markets but conversion rates are weakening as total package costs become clearer.
African Eagle Day Tours GM Neil Dilgee said the issue is not a collapse in demand but increasing price sensitivity and slower decision-making.
“The drop-off tends to happen once the full cost becomes clear,” he said, adding when airfares, internal flights, transfers, accommodation and activities are combined, packages often move out of reach for mid-market travellers, particularly families and small groups.
Dilgee said South Africa is no longer perceived as a low-cost destination once all components are included with competitors benefiting from simpler packages, shorter travel times or stronger airline access.
Group series are “particularly affected” as tight margins mean small cost increases in transport or accommodation can render itineraries unviable, he added.
From European markets, Dilgee said demand remains strongest among travellers motivated by experience but the mid-market is being squeezed between high-end spenders and highly price-driven travellers. “Many travellers in this segment are comparing more carefully, shortening stays, reducing inclusions or delaying decisions.”
Supply-side pressures and positioning
On the supply side, operators say structural shifts in product positioning and cost pressures are reshaping what is available to the mid-market.
All About Africa Owner Claire Oertle said the core issue is “strategic drift” with many properties repositioning into boutique or affordable luxury categories, effectively thinning out true mid-market supply. She pointed to gaps in serviced mid-market accommodation, family-friendly options and consistent three- and four-star equivalents in high-demand regions.
Rising operational costs, particularly around energy and water resilience, are forcing upgrades that push properties out of mid-market pricing “despite no corresponding product uplift”, creating a mismatch between what travellers expect and what is available at accessible rates, added Oertle.
Structural and investment constraints
From an accommodation perspective, structural barriers are limiting development.
“The mid-market segment is caught in a structural trap that has very little to do with appetite and almost everything to do with economics,” said Brett Tungay, FEDHASA East Coast Board Member.
He noted that domestic demand, which underpins the segment, remains weak while currency dynamics push international travellers into higher-end products.
At the same time, operating conditions are deteriorating.
“Energy and labour costs have ballooned yet the rate ceiling in many secondary markets has effectively been set by platform-driven competition.”
Access to finance is a critical constraint.
“The asset-to-revenue ratios typical of mid-market accommodation do not fit conventional bank lending models. As a result, finance is largely unavailable to this segment.”
Over-regulation and infrastructure failures are compounding the challenge, added Tungay. “A 10-room guesthouse faces compliance requirements that bear no rational relationship to its scale or risk profile.”
