Last month, SA company, More, alerted tour operators that it was looking at developing a dynamic pricing system that would be able to cope with changes in demand and currency. “The system will be simple, dynamic and will protect commission structures. Our objective is to develop and launch this pricing system by February 14, 2016, for rate period 2017,” the company said in its communication.
More’s portfolio includes Lion Sands Game Reserve, Madikwe Safari Lodge, Marataba Safari Lodge, and Marataba Trails Lodge, Cape Cadogan Boutique Hotel and More Quarters Hotel.
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Both Onne Vegter, Director of Wild Wings Safaris and Bettina van den Hurk GM at Private Safaris Destination Management, point out that dynamic pricing is particularly challenging in the game lodge environment. Van den Hurk suggests that lodges are less likely to have enough rooms to offer dynamic and static rates. Craig van Rooyen, Director at Tour d'Afrique, points out that the company would probably be the first to implement dynamic pricing in the game lodge environment. Van Rooyen says his take on the move is that it is aiming to get more business out of the direct channel and close out tour operators.
Other concerns expressed by tour operators include the impact on brochuring, forward contracts and tour operator relationships with their clients.
Felicity Vieira, Tourvest Destination Management Chief Marketing/Procurement Director and Vegter explain that brochuring and website listings require static rates as do forward contracting with agents abroad. Vieira points out that overseas wholesalers print brochures. “They don’t have the mechanism to on a daily basis change rates,” she says. Vegter also points out that the traditional supply chain still accounts for a significant percentage of bookings for safari lodges. “Dynamic rates are generally not welcomed by the industry, both locally and abroad,” he says.
“In practice, we strongly support suppliers that stick to predictable rack rates and offer generous STO rates. We tend to avoid suppliers that use dynamic pricing,” Vegter says. Commenting on the development, Van den Hurk said: “We do not welcome this since it will not allow us to service the traditional international agents who have rates printed in their brochure and/or require tailor-made quotes.”
The move could also hurt smaller tour operators. Vegter says smaller operators who do not have the volume to negotiate deep discounts, block bookings or forward contracts will find it hard to compete in a dynamic pricing environment. Van Rooyen also points out that while tour operators that have the required technology will be able to access the dynamic rates, smaller operators that lack this technology will suffer, having to continuously phone and enquire about that rate.
Dynamic rates can also detrimentally affect the relationships between tour operators and their clients, says Vegter. For example, he says this can happen when a tour operator sells a room at a specific rate and the client subsequently sees a better rate available online or when a tour operator advertised or quoted a room at a specific price but when the client wants to confirm the rate has increased due to higher demand. He adds that, in some cases, the tour operator may be forced to honour their original quote and take a loss as a result of the rate increase.
However, most tour operators are prepared to work with dynamic rates. “We can work with dynamic rates as long as they remain commissionable at our usual commission percentage and do not undercut our STO rates,” says Vegter. “The ideal situation would be that the STO rate is static for each season, and always based on an agreed percentage below the lowest Best Available Rate, so that dynamic pricing does not affect contracted agents with an STO agreement in place. If the price changes, the published rate may go up according to demand, but STO agreements remain valid to protect the supply chain and industry relationships.”
Vieira points out that while dynamic rates are inevitable, the process to introduce them needs to be consultative and allow for education of the channel. “We all know that dynamic rates are inevitable, but our objection right now is that we have to educate the channel on dynamic rates,” she says.
Robert More, Co-founder & CEO of More, did not reveal the reasons for the move, but said the company was still in the discussion phase. “Nothing concrete yet,” he said.
What are your thoughts on this development? Do you expect to see more lodges introducing dynamic rates? Share your thoughts in the comments section below.
