Majority of Cape Town hotels not reacting to tourism crisis!

Three months ago we conducted a survey of top-end hotel rates in Cape Town.  Given the tourism crisis in the Cape, I repeated the survey on Monday, calling the same hotels, asking them for their August rates.  Ellerman House remains the most expensive Cape Town hotel by far, starting at R5000 per room, and the Peninsula All Suite Hotel remains the least expensive 5-star hotel, at R1500 per room.  The survey found that the average rate of the sixteen 5-star Cape Town hotels is R 2715 per room, just under R1400 per person, an average decrease by 8% relative to the May rates.   Across all 27 hotels surveyed, the average rate per room is R2227, or just over R1100 per person, only 8 % lower on average than in May. 

Once again it was interesting to hear how the calls were handled, most hotel reservation departments asking careful questions, to identify if the caller was a travel agent/tour operator or a corporate caller, the questioning being very specific in this regard. Holders of a South African ID book or a Protea Hotel Prokard would have had different rates quoted.  Few hotels called had a rate sheet from which to quote immediately, having to access their computer for the ‘best available rate’ information, costing time.  I was shocked at the poor quality of the call handling and quoting by the hotel Reservations departments, quoting odd rates (i.e. not rounded off) very quickly, making it difficult to understand and record them accurately; interrupting while one was still speaking;  having a radio blaring in the background, affecting their ability to understand and hear the request; not all quoting rates with breakfast included, despite being asked for this rate (Protea Hotels quote room only, and refused initially to quote the add-on breakfast rate); an hotel line rang engaged three times; another hotel line was not answered at all; one hotel had a trainee answer the phone, and she did not know that hotel’s telephone number;  one staff member sounded in the depth of depression, as if she hated her job; one hotel did not disclose that it is undergoing major renovations, and its rates have not changed due to the renovations; and one hotel switchboard put me through to the kitchen when I asked for reservations, and I had to call again, as they could not transfer me back to the board.  Worst of all for the hoteliers whose rooms the staff have to sell is that only one (Victoria Junction Hotel) of the 27 hotels I called had a call to action, asking if I would like to book!

Some hotels have not changed their rates in the past three months, or only by a small percentage.  The Protea Hotel Fire & Ice increased its rate by an astounding 64 % to R1480 per room, making this 3-star hotel more expensive than a number of 4-star hotels.  Interesting is that a number of 4-star hotels are more expensive than some 5-star hotels.  The Queen Victoria Hotel rate has increased by 25 % relative to its opening special rate.  However, only eleven of the surveyed 27 hotels dropped their rates, noticeably the Newmark Hotels’ The Ambassador and Dock House (by 35%), and V&A Hotel (by 40%). The Cullinan Hotel has also dropped its rate sharply, by 30%, as have the Westin Grand Cape Town Arabella Quays, the Twelve Apostles, and the Crystal Towers hotels.

The rates were checked for 3 – 6 August per room for 2 adults sharing and inclusive of Breakfast per day, so as to compare the rates fairly.  We added breakfast to the rates where these were quoted separately.   We have ranked the hotel rates from most to least expensive, and reflect the rate change relative to our survey for May 2011 in brackets:

Ellerman House, 5 star, R5000 – R15700 (the new villa has 2 rooms offered at R48600 and 3-rooms at R60500), Tel (021) 430-3200 (no rate change)

Cape Grace Hotel, 5 star, R 4980 – R 14 530 for the penthouse, Tel (021) 410-7100 (10% rate increase)

Cape Royale Luxury Hotel, 5 star, R 3590 – R20816 for the Presidential Suite.  Tel (021) 430-0500 (1% rate increase)

One&Only Cape Town, 5 star, R3489 for South Africans – R5590 for non-South Africans. Tel (021) 431-5888 (10 % rate decrease)

Table Bay Hotel, 5 star, R3166  Tel (021) 406-5000 (International rate dropped, no rate change)

Mount Nelson Hotel, 5 star, R 3000 – R 9000. Tel (021) 483-1000 (no rate change)

15 on Orange Hotel, 5 star, R 2620 – R 2820, Tel (021) 469-8000 (5 % rate decrease)

Dock House, 5 star, R2430 (but pay for 2 days, stay for 3 days offer). Tel (021) 421-9334 (35% rate decrease)

Queen Victoria Hotel, not graded yet but seeking 5 stars, R 2350 – R 2715, Tel (021) 418-1466 (25 % rate increase from its opening special)

Twelve Apostles, 5 star, R  2190 – R  3940.  Tel (021) 437-9000 (24% rate decrease)

Westin Grand Cape Town Arabella Quays, 5 star, R 2160 – R 3640. Tel (021) 412-9999 (27 % rate decrease)

The Taj Hotel, 5 star, R 2150 – R 2650. Tel (021) 819-2000 (2% rate decrease)

Crystal Towers Hotel & Spa, 5 star, R 1700 – R3250.  Tel (021) 525-3888 (20% rate decrease)

V & A Hotel, 4 star, R 1640 – R1905 (but special pay 2 days stay for 3 days offer), Tel (021) 415-1000 (40% rate decrease)

Commodore Hotel, 4 star, R1600 – R 7780.  Tel (021) 415-1000 (no rate change)

Portswood Hotel, 4 star, R 1600 – R 3960.  Tel (021) 415-1000 (no rate change)

Bay Hotel, 5 star, R1600 – R2100 for South Africans, R 2600 – R 5500 for non-South Africans.  Tel (021) 438-4444 (no rate change)

Cullinan Hotel, 5 star, R 1515 – R 3400.  Tel (021) 415-4000 (30 % rate decrease)

Peninsula All Suite Hotel, 5 star, R 1500 – R 3240.  Tel (021) 430-7777 (4% rate decrease)

Protea Hotel Fire & Ice Hotel, 3 star, R 1 480 – R 2300, Tel (021) 488-2555 (64% rate increase!)

Winchester Mansions Hotel, 4 star, R 1470 – R 3390.  Tel (021) 434-2351 (no rate change)

President Hotel, 4 star, R 1460 – R 2550. Tel (021) 434-8111 (no rate change)

Southern Sun Waterfront Hotel, 4 star, R1450 – R 3000. Tel (021) 409-4000 (17% rate decrease)

Cape Sun Hotel, 4 star, R1300 – R 5500.  Tel (021) 488-5100 (13% rate decrease)

Ambassador Hotel, 4 star, R 1250 – R 1950 (but stay for 3 and pay for 2 nights offer), Tel (021) 439-6176 (35% rate decrease)

Protea Hotel Breakwater Lodge, no star grading, R 1220 standard, R1465 business rooms. Tel (021) 406-1911 (5% rate decrease)

Victoria Junction Hotel, 4 star, –  Tel (021) 418-1234 (Only re-opening in September, with rate of R1990)

On Moneyweb yesterday, the FEDHASA hotel association was quoted as saying that the ‘hotel industry is being hard hit by the economic climate and there is very little light at the end of the tunnel’. FEDHASA CEO Brett Dungan, who tried to sell South African hotels down the MATCH river for the World Cup, is quoted as saying that hotel rates have come down ‘dramatically’ (by about 10%, according to him) in the past three years, and that hotel occupancy has decreased by 10%.  The African Sun hotel group, which operated the 5-star The Grace and The Lakes Hotel and Conference Centre in Johannesburg, has not renewed its operating agreement with these two hotels, saying that the 5-star hotel industry in Johannesburg is ‘no longer sustainable’!  The Southern Sun on Grayston Drive in Sandton is also expected to close its doors next year.  Singing a somewhat different tune, to that of a few weeks ago, Arthur Gillis, CEO of Protea Hotels, expressed his optimism for the industry.  Location is the prime asset of a hotel, he said. “I don’t think the industry is in trouble.  I think certain individuals and institutions are in trouble”, he said.  Many would disagree!

POSTSCRIPT 3/8: Cape Town Tourism has sent the following response to this blogpost: Cape Town Tourism met with hoteliers recently to review the value proposition of luxury hotels in Cape Town in particular. The outcome of our meeting and position on price, value and demand will be included in our next industry communication and feedback given at the industry sessions scheduled for next week.  As alluded to by MEC Winde, business will react to pressures in different ways as they see fit in terms of their own strategies, market demands and business imperatives. It is common knowledge that published rates are not necessarily what are achieved, particularly in the current climate. Whilst we can offer advice, intelligence, guidelines and input in terms of customer feedback and trends, the market will dictate and business will adjust to market demands as they see fit. Our concern must be with the over-all value proposition of the destination i.e. full pallet of accommodation, experiences, restaurants and services rather than too much focus placed on one segment of the industry. Here is an extract from our industry communication to be published:  It is clear that the current depressed nature of arrivals has more to do with externalities and the consumer climate than with accommodation pricing. Cape Town boasts an exceptional, quality product offering and if you look at the complete pallet of accommodation and, experiences on offer, excellent value. We don’t want to undermine the strength of our destination brand by devaluing it. Visitors to Cape Town leave the destination overwhelmingly impressed and willing to return. Post World Cup figures found that 92% of foreign visitors said they would recommend South Africa to others and 96% said they would return. This does not suggest a fundamentally flawed product or pricing problem.  Cape Town boasts some of the world’s best small hotels, B&B’s and guest houses that are competitively priced and offer excellent value for money. The fact that Cape Town has a luxury hotel offering that compares with, and in many instances exceeds, our competitors in terms of quality and setting is an asset to our destination. It is commonly recognised that destination price perceptions are driven more by travel time and distance (transportation costs) than by in-destination costs. There is no evidence to suggest that Cape Town’s in-destination costs have detracted from its value proposition. If we can address the demand problem we face, then the cost of flights should become more competitive.”

POSTSCRIPT 3/8 : Provincial Minister of Tourism Alan Winde has responded as follows:It is always interesting to see how markets and management react to these pressures. I am also very interested in the new season where we have seen new airlift directly to CT. From France, Switzerland, UAE, Zambia and more in negotiation at the moment. I have asked for a report on our market fact into these places. This will only be good news if we see bums in seats. I will keep you posted once I get the report”.

Chris von Ulmenstein, Whale Cottage Portfolio: www.whalecottage.com  Twitter: @WhaleCottage 

10 replies on “Majority of Cape Town hotels not reacting to tourism crisis!”

  1. Rob says:

    The experiences you had with telephone techniques is very disturbing … or should be, for those in the hospitality industry … I wonder how many people actually KNOW how their staff answer the phones and deal with queries?

  2. David snoek says:

    Hi Chris,
    Keep this up as it makes for very interesting reading indeed. I would love to see % variance figures for say the last two years over the entire country. Pity Statistics SA does not do this.

  3. joanne clegg says:

    A most interesting article. I am hoping this will see the rise in rentals of luxury accommodation, which may be good news for me as a Personal Chef. Thanks once again for an informative read. Joanne Clegg, The Food Crew Personal Chef Service

  4. Thank you for your compliment Joanne.

    Good luck for the season ahead.

    Chris

  5. Thanks for your input Rob. I was shocked at how ‘automated’ the reservations staff sounded – surely they should know the rate for the day off by heart, and be able to answer automatically? I don’t think I would have had the confidence to book at any of the hotels, with the exception of Ellerman House, based on the Reservations interaction.

    Dave, your call is a good one, and I hope that FEDHASA Cape will see it. They promised us a rate survey in May, but I have yet to see the results!

    Chris

  6. darren says:

    how on earth can these places charge different rates for RSA citizens and tourists..

    Way things are going they should be charging lower rates for tourists as they have bugger all money and more for locals, maybe ask if people live in Fesnaye or Bantry Bay and charge them more…what car do you drive, oh a merc then thats 10% more

    wouldnt get away with this anywhere else

  7. Brandon says:

    I agree wholeheartedly with Darren. Tourists are being ripped off by this practice

  8. I agree Darren and Brandon – it is discrimination that the tourists will pick up – it is blatantly unfair. The National Parks are doing this as well.

    Chris

  9. Ryan says:

    Not so sure about this one anymore….

    this has become common practice in “developing” countries for quite some time already. (thailand,russia,czech,etc)

    On the face of it…discrimination?

    But then, how much different is it really from establishments/businesses having winter and summer rates?

  10. Rebecca says:

    Fab article!
    I do agree with the fact that charging rates for SA residents and tourists is shocking! What extra service do tourists get for paying so much more? It would be interesting for the One & Only to answer that question!

Leave a Reply to David snoek Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.