KNYSNA NEWS - A recent article in a prominent tourism daily has once again raised the spectre of price gouging in South Africa, and has anew stirred debate in the tourism sector.
But are prices in Knysna rising inappropriately? And do prices affect the town’s competitive advantage?
In the article (Tour operators shocked by accommodation rate hikes on www.tourismupdate.co.za) Southern African Tourism Update reporter Sue van Winsen wrote, “Tour operators and ground handlers have reacted with surprise to the announcement from several high-end rand-based accommodation providers that they will be increasing 2016 rates in response to the weakening rand.”
An informal survey of pricing in Knysna indicates, however, that accommodation and activity providers alike are acting conservatively towards price increases. Knysna & Partners chief executive Greg Vogt said, “Our ability to remain competitive revolves around value for money rather than price.”
Ypie Kingma, who operates two accommodation establishments (Knysna Country House, Wayside Inn) and a tour company (Platinum Golf) with her husband Erik Ekkelkamp, said their prices are set 18 months in advance because of the way tours and accommodation are sold via operators and travel agents in the international wholesale markets.
She aims to increase her prices by about 7% for the period from mid-2016 to mid-2017.
“Generally we’re selling to two markets - people who save for their long-haul holidays and book through their travel agents well in advance, and people who’re able to take advantage of fluctuating exchange rates and book travel on short notice when the rand falls, as it’s doing at the moment.”
This second group, she said, is more likely to compare prices of South African products against one another before they look at what the actual cost in euros or dollars would be to themselves.
“It wouldn’t make sense to raise my prices when compared to other, similar providers. You have to remain competitive regardless of the exchange rate.”
Lidy van Leent, who owns and operates Aestas Bed & Breakfast, said she has raised her rates by only R10 per person per year over the last five years.
“That translates to an increase of about 2.5% per year, but it’s important for us to keep our rates affordable to ensure that we keep our beds filled,” she said.
“And besides, increasing our prices according to the weakening rand would affect our domestic market.”
Janus Schoeman, general manager of the five-star Simola Hotel, Country Club and Spa, said his rates are fixed until September this year, and that they were determined in January last year. “We haven’t decided on our rates for 2017 yet, although we will be doing so this month - but we’ll probably allow ourselves to be guided by the consumer price index because we want to keep our product attractive to South Africans.
“This is important especially now, because South Africans are more likely to take their holidays at home than abroad when the rand is weak against the dollar.”
Schoeman pointed out that Simola dropped prices in the hotel’s restaurant by 45% in August last year.
“We changed our style from fine dining to bistro to accommodate this, but we did it specifically to tap into the domestic market, and we’ve seen a significant increase in the number of diners we’ve entertained as a result.”
Attractions providers have been similarly conservative in their increases.
The Featherbed Company general manager Ronnie Webster said his rack rates (the rates advertised to consumers) have increased at an average of 6% per year over the last three years.”
And, while the Tsitsikamma Treetop Canopy Tour isn’t a Knysna-based operation - although it is situated close enough to the town to attract visitors staying here - chief executive Ashley Wentworth said the company, which is a member of Knysna & Partners, has increased its rates only three three times since it was founded fifteen years ago. “We aim always to remain sensitive to the local market,” he said.
Vogt said Knysna’s diversity makes it attractive to a wide range of markets, and that consumers in different markets look for opportunities in different price brackets. “But above all, it’s important to stress that price is only one of the determining factors when it comes to choosing a destination.” The exchange rate, he said, should not factor into the equation.
This position is underscored in the research paper "Exchange rate volatility and tourism – revisiting the nature of the relationship*", published in 2013 by Professors Andrea Saayman and Melville Saayman of Tourism Research in Economic Environs and Society at the North-West University’s Potchefstroom Campus in the European Journal of Tourism Research.
According to the authors, “Volatility has a significant influence on both tourist spending and arrivals in South Africa, but [...] it is more prone to influence spending than arrivals in the long-run...”
Vogt said the strategy that Knysna & Partners has adopted to growing the economy of the town focuses on increasing the range of products on offer.
“A rich, diverse selection of professional, ethically sound products that offer value for money will have visitors leaving as friends and even ambassadors for the destination,” he said.
“To make sure they have the best possible experience, though, we need locals to understand and practise the concept of the functioning system in tourism.
“In such a system, our accommodation establishments - which are already delivering excellent service - are integrated with other products like attractions and adventures so that visitors move seamlessly from one experience to the next.
“This will ensure that Knysna stands out when these visitors compare us with other destinations.”
He said that it’s important, too, to integrate the town’s strategies with those of the Eden region and the Western Cape Province.
“Taken together, Knysna & Partners’ various niche marketing strategies - including Cycle Knysna, the Knysna Heritage Route, the Slow Route, and our Home to Adventure campaign - are all examples of how we’ve made sure that we’re in line with regional marketing efforts, and also of how we’re working to enhance Knysna’s attractiveness in the various markets we serve.”
And all of this, Vogt said, is aimed at achieving a competitive edge through establishing comparative advantages, “no matter what the exchange rate may be".
For more information, see www.visitknysna.co.za
* Citation: Saayman, A, M Saayman (2013) Exchange rate volatility and tourism – revisiting the nature of the relationship. European Journal of Tourism Research 6(2), pp.104-121
'We bring you the latest Knysna, Garden Route news'
