World Cup price probe fails to find widespread gouging

{ Posted on Aug 13 2013 by B-man }
Categories : Travel news

The Minister of Tourism, Marthinus van Schalkwyk, is satisfied that most accommodation establishments in South Africa are acting responsibly when it comes to pricing for the 2010 FIFA World Cup.

He has released the outcome of a survey commissioned by the national Department of Tourism and undertaken by Grant Thornton to determine accommodation rates during the World Cup and compare these to regular accommodation rates.

The survey is a blow to the tour operators, poorly informed “investigative reporters” and radio chat show hosts who have claimed – and will no doubt continue to maintain – that South African hoteliers charge rip-off prices and are discouraging tourists from visiting the country.

Van Schalkwyk said: “The research shows that 74% of all accommodation establishments in the country are charging a premium less than 50% above their highest rate for 2010. Half of all establishments will not be charging a premium at all”.

The respondents to the survey were accommodation establishments in all nine provinces in South Africa and included hotels, guest houses, bed and breakfast establishments, lodges and camping and self-catering facilities. A total of 2 479 responses were analysed.

As part of the bid process the accommodation industry contracted pricing in 2007 in order to ensure that price gouging did not occur.

“The survey has found that the addition of price premiums to normal high season rates for accommodation during major events is a global norm. During such events, normal economic principles of supply and demand result in premium pricing,” the minister said.

“I am also pleased to note that the survey found that many operators do recognise the damaging impact that exorbitant accommodation prices will have on the legacy objectives of the 2010 FIFA World Cup.”

The research shows that about a quarter of accommodation providers in the sector are charging price premiums of more than 50% above the high season rate for 2010. In areas such as Gauteng, with significant demand from 21 matches, 14 team bases, the International Broadcast Centre, the FIFA and the Local Organising Committee (LOC) headquarters and the major international airport, more establishments are charging higher premiums with 65% charging more than a 50% premium.

“Establishments closer to stadiums are charging higher premiums, and for example we see that 53% percent of Durban establishments are charging premiums higher than 50% compared to 7% of establishments in the rest of KwaZulu-Natal.

“For establishments with lower base rates, such as many lower-graded properties, bed and breakfast establishments and guest houses, a 100% premium on a low rate may only mean moving from say R300 to R600 per person per night, where one can say that an extra R300 is not a significant increase.

“The contracted rates were negotiated in 2007. The economic circumstances over the last 18 months have pressurised accommodation rates in general and have resulted in an effective higher premium.

“We will continue to do everything to discourage excessive premiums when these do occur. I have already consulted with the tourism industry in this regard. I am satisfied that by far the majority of accommodation establishments are acting responsibly and are sensitive to our warnings about price hiking and its effects,” Minister van Schalkwyk said.

The industry has committed unequivocally to take further steps. A code of conduct for major events will be rolled out. In addition, industry will encourage membership of the industry associations in order to extend their reach and influence more stakeholders. The main associations will continue with their commitment to take strong steps against price gouging transgressors.

The global norm is for premium pricing during mega events which create significant demand. During the Olympic Games in 2004, Athens, a small city which hosted one concentrated event, saw actual average hotel rates of 260% more during the event.

In Germany where 12 venue cities hosted the 2006 FIFA World Cup, average accommodation rates were 37% higher than the same period in the previous year. These, it should be noted are achieved rates, whilst in South Africa the research is providing advance quoted rates and the actual may well be quite different.

The minister and the industry concluded that “given the fact that South Africa is a robust freemarket economy, fans are encouraged to shop around, and avoid, establishments with exorbitant pricing, in line with our desire that South Africa continues to remain a value for money destination”.

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