South African tourism businesses are urged to remain cautious when pricing or planning to increase rates as this can impact the performance and future growth of the industry.
Charnel Kara, Tourism Specialist at FNB Business, says when reviewing pricing, businesses should consider various macro-economic factors and the overall impact on the entire tourism value chain. Inadequate pricing can lead to unsustainable revenue growth and further disrupt the sector by placing pressure on other businesses to adopt similar pricing strategies.
Cost and affordability
The majority of travellers still consider cost and affordability when choosing a destination, products or services. From an international tourism perspective, while South Africa is seen as a long-haul destination, a weaker rand makes the country extremely attractive as it becomes a value-for-money destination.
“We always try to sell South Africa as a great value-for-money destination with a favourable exchange rate in our key source markets,” says Yolanda Woeke, Vice President: Sales and Marketing of Dragonfly Africa. “Clients need to feel that they are receiving value for money. This encourages referrals to other potential clients and repeat visits. We are in competition with many other First World countries and we therefore need to offer realistic pricing to play successfully in this arena,” she says.
“It's very important to encourage our suppliers to exercise restraint in terms of annual or seasonal price increases. It is best we see increases that are in line with inflation,” says Woeke.
Kara adds that, to benefit from the weak rand, businesses should price attractively. “As an example, hotels should consider selling block or group bookings at a slightly lower rate than single bookings, or perhaps charging less for longer stays. This is one way to ensure ‘bums in beds’ where there is potential to spend more on other offerings,” she says.
“We need to offer tangible value-adds for our clients. It could be a VIP Meet and Greet at the door of the aircraft on arrival in South Africa, a negotiated hotel or game lodge upgrade, interaction with the local community, or a special rate for a long-stay holiday,” says Woeke.
On the other hand, it is also important that pricing is kept in line with competitors. However, should there be an increase, the business should be able to justify the higher price, says Kara.
“Lastly, in tourism the relationship between price and quality is as important as price and service. Customers understand there will be a difference in premium when choosing a specific product or service. For example, customers know the rate charged at a select-service hotel would be less than that charged at a full-service hotel. Irrespective of price, while some customers are willing to pay a higher rate for a premium product, all customers are non-negotiable when it comes to the service they receive,” Kara concludes.