Following Founder & CEO of Rhino Africa David Ryan’s defence of recent increases in rates by accommodation providers, Craig Smith, MD of New Frontiers Tours has responded to the points raised.
A number of our esteemed suppliers – and industry players – have come out in support of interim rate increases (although notably not all suppliers, which would suggest that the reasons for the increases are not shared concerns with all service providers). I’ve also been surprised by the urgency and earnestness of the increases, which gives the impression that we’re an industry in crisis because of the rand devaluation. We’re not, and we’re largely having the best first quarter in many years.
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I’ve read all the reasons that have been sent to us or proposed online, and I remain unconvinced. I still fail to see the immediate necessity or the long-term benefit to the industry.
Let’s unpack the various motivations behind the increases:
- Increased international marketing costs
My response is threefold:
• The rand is currently doing the marketing for you
• Increased marketing costs are being offset by higher volumes – and in the case of accommodation providers – higher room occupancies
• The increases of between 10% and 20% are disproportionate to the increased costs in international marketing. If, for example, you are a 10-bedroom lodge charging R10 000 (€555) a night and increase by 10%, you are raising an extra R3,65 million (€20 300) a year to cover your increase in marketing. It’s crude, as this doesn’t take into account commissions and supposes a 100% occupancy rate, but I’ve been conservative on rooms, rate and increase. So you get the picture.
- Increased input costs
I stand by my previous comments that the vast majority of costs are rand driven and are contained in the higher than average 12-22% annual increase that was implemented by accommodation providers for 2016.
- Increased conservation and anti-poaching costs:
As the trade, we are all open to discussing the financial impact of increased anti-poaching patrols. But in the Sabi Sand, the Rhino Conservation Levy was introduced three weeks ago. And a blanket increase is too vague to be sure that increases are going directly to anti-poaching initiatives.
- “Brand integrity in the international environment”:
It’s phrased slightly differently per supplier, but it’s sufficiently nebulous and unproven to be able to comment on. Perhaps that’s the point. I can only speak from our clients’ point of view and none of them has indicated the slightest concern that they are now able to buy a top-quality product at a better price, and that the brand has suffered because of this.
As a ground handler, we prefer rational consistency in pricing, with the current exchange rate a marketing boon for the country, and volumes driving profit rather than excessive interim price increases.
