Do they know something we don't?

BON Hotels Blog - Do they know something we don't?

We are all well aware of the adverse effect on the inbound tourism industry due to new Home Affairs legislation. Fortunately (in a twisted way) the rand is coming to our rescue, its poor performance making South Africa an enticing destination of choice for international holiday-makers seeking inexpensive holidays, despite the onerous new requirements. However, putting faith on an underperforming currency to save the day is not the ideal situation.

What is more confusing to me lately is the over-supply of accommodation we are facing in Cape Town’s CBD -- four new projects supposedly bringing 2000 new rooms to Cape Town, and at least three refurbishments bringing even more upgraded, high quality accommodation to the market! All this amidst stunted growth in the tourism market: inbound tourism reports a 25-30% decrease in visitors from BRICS, and the inbound Asian market is down by an official 27%. That’s HUGE! Yet big hotel groups, hotel professionals, tourism bodies and investors are still giving the thumbs up to building more rooms. Have they got a short memory of how an over-supply can saturate a market? Or is there something they know that we don’t?

I’m wondering if we are awaiting hundreds of cruise liners drifting in over the ocean waves. Or are we expecting to host the World Cup, the Olympics or Davos in 2017? I don’t get it.

I understand that there’s a wonderful resurgence in the CBD. But resurgence cannot guarantee bums in beds. What’s baffling me is that the lurking danger is a ‘no-brainer’ to any experienced hotelier or even anyone who survived the downward spiral of the early 2000s and after that, the ‘world cup hangover’.

Nervous and inexperienced hotel owners and managers begin chopping their rates in the hope of filling empty beds. But this leads to a cannibalisation between hotels, groups and properties as we all try to keep occupancies up. The result? A revenue crash for the entire market. A hotel or revenue manager with experience, though, will not fall victim to lowering rates, opting rather to lose market share than lower rates, as we know that there is very little hope of getting those rates back up.

In eighteen months’ time, will we honestly say that we made good decisions? Can we warrant 3000 new rooms in our Cape Town market? In my opinion, the answer is categorically NO. If we are building all these hotels, I truly hope that there’s a plan for the Western Cape to differentiate from the norm and from other long-haul destination options available to travellers.

Author

Chief Executive Officer

Having grown up in the corridors and reception areas of Cape Town hotels, Guy Stehlik is no stranger to the hospitality industry.

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