Price war and niches mark cut-price hotels

Cape Town hotels, battling with low occupancy rates and locked in price wars, will have to weather the economic storm for at least three years, say industry experts.

In the months leading up to the World Cup, a number of high-end hotels opened. Now, because of the sluggish world economy, the tourism industry is suffering and occupancy rates are low. Industry experts, however, say hoteliers set up their establishments with a long-term plan, not just to capitalise on the World Cup, and most will weather the storm.

STR Global, which tracks supply and demand data for the global hotel industry, released its global benchmark report last week. It showed a decline in average occupancy in South Africa of 8.5 percent for the year to June.

There are too many five-star establishments, but this will change in the next three to |five years, Grant Thornton's Martin Jansen van Vuuren said yesterday.

While hotels remain upbeat about their long-term projections, some are cutting their rates and others are throwing in freebies, like spa vouchers, to lure customers.

According to Nick Seewer, CEO of the Pepper Club Hotel and Spa, hotels are locked in a price war.

"Those that offer unique services, products, or facilities will stand out in a cluttered market place. For example, some hotels have elected to cater to a specific market, which make them appealing to a select niche industry."

Jansen van Vuuren, a director at Grant Thornton, does feasibility studies for hotels and the tourism industry. He said if hoteliers started planning new establishments they could reap the benefits of the expected boom in three years' time.

But he acknowledged that there were too many hotels in Cape Town and encouraged them to market themselves to travellers from South America, China and India.

Robin Hyde, hotel manager at Constantia Uitsig, said the situation was good for travellers as hotels were cutting prices.

Danny Bryer, group sales and marketing director for the Protea Hospitality Group, which includes the new 15 on Orange and Crystal Towers, said hoteliers had planned their establishments based on the future potential of the industry.

The number of deluxe rooms had doubled from 1 100 to 2 400 over an 18-month period and this had been premised on a world economic boom. Instead the world economy had collapsed.

Bryer said five-star hotels were under pressure because |of the international economic |situation, but added that the Protea group had seen a small increase in the number of |bookings.

Winter, traditionally, is also a slow time for tourism in Cape Town.

Francois Steyn, general manager of the Upper Eastside Hotel in Woodstock, said there was an over-supply of four and five-star hotels in Cape Town and all were "hungry for business".

This had lead to a cut-throat price war that has seen accommodation and conferencing rates slashed," he said. "The hotels that survive are those that offer good service, value for money and which differentiate themselves from other establishments in the market."

Cape Argus

Posted at 01:07PM Sep 02, 2010 by Editor in Commercial  |