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Comprehensively discussed throughout the media, the once-thriving tourism industry has endured a severe beating for just over 15 months and counting. With international terminals collecting dust and countries further restricting travel to our bushveld luxury businesses, the dependency on local markets has become paramount to keeping the doors open. However, how are these lavish resorts changing?
Owner of the De Hoop Collection in the Western Cape and Chairman of Cape Country Routes, William Stephens affirms, due to the pandemic international tourism might only resume in 2023. Moreover, Stephens explains how premium lodges are dealing with this seemingly never-ending obstacle by offering attractive pricing or discounts to the local market. This, coupled with identifying requirements to enable clients to work from lodges, appears to be the way forward.
Furthermore, he explains that up-market lodges are also looking at minimising overheads. “Premium lodges generally require a high overhead level to operate. Operating costs have needed to be minimised where possible and changed from fixed to variable to match sales levels.”
However, Stephens stresses that service providers also need to match this flexibility.
Protecting one’s hard-earned image is pivitol during these time trying times, but intelligent spending is just as important; Therefore, Stephens states that the option to close temporarily is not recommended. This will impact brand awareness and the perception of whether the lodge will be operating in the future. “Where possible overheads are converted into variable costs. For example, employees are paid hourly rather than monthly so that employee hours requirements match occupancy requirements.” He further emphasises, herd immunity resulting from a highly vaccinated population is required to see the industry gain ground. This, coupled with decreased travel restrictions and vaccinated travellers, will significantly impact the currently chugging along tourism sector.
With the market turning 180 degrees and facing back into the country, luxury lodges are evolving offerings and prices to attract the local market. Reflecting on this, Stephens points out that with existing travel restrictions, it is essential to market to the local community, where they would otherwise have travelled overseas.
One of the ways this is being achieved is by offering 40-50% price reductions on packages. Another facet being investigated is including children sharing at no charge.
However, Stephens notes, “Discounted prices are not sustainable.” This is because profitability is required. “Revenues are not sufficient to ensure profitability without source markets being able to travel.” Adding, the current aim is focused on minimising losses until business becomes sustainable. When looking at the steps being taken to address the climate in which lodges find themselves, the question on everyone’s lips is how can premium accommodation drastically discount their rates?
Stephens reiterates, “Deeply discounted prices are not sustainable and because locals cannot travel internationally, from September onwards, one should harden the rates to capture this sector of the South African Market at better base prices – but at lower discounts than the winter specials for locals.”
As the tourism industry continues to run a road with no clear destination insight, what are your forecast for the sector and the above mentioned?
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