Is a two-tier pricing model the answer to encouraging domestic tourism growth in South Africa amid much uncertainty around the recovery of inbound tourism? Especially as industry still awaits confirmation on the list of ‘high-risk’ source market countries that may be temporarily barred from entering South Africa.
Speaking during the World Tourism Day celebrations in Maropeng on Sunday (September 27) Minister of Tourism, Mmamoloko Kubayi-Ngubane, said domestic tourism had solidified the tourism and hospitality sector’s road to recovery but the most common feedback from domestic tourists was that prices were too high.
She encouraged those who normally marketed to the international market to “be innovative and adapt to the needs of the domestic market”, suggesting a two-tier pricing model in which operators offered higher prices for international visitors and lower rates for South African travellers.
CEO of the Federated Hospitality Association of South Africa (Fedhasa), Lee Zama, told Tourism Update that the operating costs were the same for local, regional and international travellers.
These costs are the same, whether for international guests or domestic travellers. This includes labour, municipal rates, taxes and all other input costs.
“And what is the right price?” she queried, noting that operators knew their business models best and would price accordingly.
“There are a myriad accommodation options in South Africa – from super-luxurious seven-star game lodges to low-rate backpackers – a veritable rainbow of products for travellers of all budgets and tastes to choose from,” said Zama.
She added that there was a reason for this range of pricing and product offerings and that certain properties, especially those with low-impact developments and exclusivity, were tailored to specific markets and could not adapt their offering and pricing in a sustainable manner.
What is the solution?
The Minister’s suggestion elicited a variety of comments from Tourism Update readers as well, with tourism market access expert, Emilie Hagedoorn, commenting: “Should we not ask what the Department of Tourism has structurally done to create tourism supply options that are suitable for domestic travellers with different tastes and budgets?”
You don't need dual pricing if you have a broad range of tourism options, she said.
Tourism Professor at the UK’s Middlesex University, David Harrison, also cautioned against dual pricing, saying it could be embarrassing to explain when guests compare notes.
“Can I suggest a more reasoned approach? Operators should do their budgeting and establish pricing that covers costs and provides a profit, which gives a fair return on investment and charge this rate to all,” he said.