Tourism Tattler Issue 1 of 2018

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BUSINESS & FINANCE The information below was extracted from data available as at 23 February 2018. By Martin Jansen van Vuuren of Grant Thornton. ARRIVALS The latest available data from Statistics South Africa is for January to December 2017*: Current period Change over same period last year UK 447 901 0% Germany 349 211 12% USA 370 747 7.5% India 97 921 2.7% China (incl Hong Kong) 97 069 -17% Overseas Arrivals 2 713 133 7.2% African Arrivals 7 559 342 0.8% Total Foreign Arrivals 10 285 197 2.4% HOTEL STATS The latest available data from STR Global is for January to December 2017: Current period Average Room Average Room Revenue Per Available Occupancy (ARO) Rate (ARR) Room (RevPAR) All Hotels in SA 64.8% R 1 221 R 792 All 5-star hotels in SA 65.2% R 2 275 R 1 482 All 4-star hotels in SA 66.0% R 1 128 R 744 All 3-star hotels in SA 65.1% R 940 R 612 Change over same period last year All Hotels in SA -0.4% 3.6% 3.1% All 5-star hotels in SA -0.9% 4.5% 3.5% All 4-star hotels in SA 1.4% 3.3% 4.7% All 3-star hotels in SA -0.2% 1.9% 1.6% ACSA DATA The latest available data from ACSA is for January to December 2017: Change over same period last year Passengers arriving on Passengers arriving on Passengers arriving on International Flights Regional Flights Domestic Flights OR Tambo International 2.6% -3.2% 2.0% Cape Town International 20.9% 5.4% 2.3% King Shaka International 2.6% N/A 6.7% CAR RENTAL DATA The latest available data from SAVRALA is for January to December 2016: Current period Change over same period last year Industry Rental Days 16 936 276 7% Industry Utilisation 71.6% 1.5% Industry Revenue 5 294 680 207 12% For more information contact Martin at Grant Thornton on +27 (0)21 417 8838 or visit: http://www.gt.co.za 10 Tourism Tattler Trade Journal Quarter 1 2018 Jan/Feb/Mar WHAT THIS MEANS FOR MY BUSINESS At first glance the increase of 7.2% in overseas tourism seems good but is only on par with the global tourism arrivals average of 7%. Overseas tourism to South Africa also slowed down in the second half of 2017. Hotel occupancies remained subdued and growth in average room rates were either on par or below inflation i.e. no real growth. Cape Town International Airport continued to benefit from more direct international connections. Overall, the ACSA data shows an improvement in the number of passengers arriving on domestic flights in the second half of 2017. *Note that African Arrivals plus Overseas Arrivals do not add to Total Foreign Arrivals due to the exclusion of unspecified arrivals, which could not be allocated to either African or Overseas.
BUSINESS & FINANCE The REVENUE Journey Part 4 Now that the revenue team is in place it is time to look at the distribution infrastructure of the property. Selling a product requires an infrastructure to put that product on a shelf so customers can buy it. This infrastructure can be made up of systems, manual processes or a combination of the two. In many cases infrastructure setup is not complicated. Typically it includes a system on property, linked to a Central Management System (CMS) that connects to different channels like Online Travel Agents (OTA), Global Distribution System (GDS) or Central Reservations Offices (CRO). Each of these channels puts the product in front of the buyer, thus creating an opportunity to ‘revenue manage’ the business. That is, if you have chosen the components of your infrastructure carefully! Revenue Management Levers Fully optimising revenues for a property with limited inventory and a perishable product consists of two key areas. Firstly, setting the price for the product, and secondly, managing the inventory. Both of these have further detailed elements that need to be considered. Pricing strategies can be implemented in different formats. For example, there is length of stay based pricing where a price is quoted based on the arrival day and the length of stay of the booking. If daily pricing is used then a different price is quoted for each day of the stay. Finally, if the property chooses continuous pricing then any price can be sold between a lower and upper rate boundary. Inventory management includes two key areas, one is length of stay and the second is overbooking. The chosen infrastructure needs to be able to handle both of these controls. Length of stay controls may be used at the total property level or the room type level. They may also be used at the rate level. Overbooking is typically implemented at the house level and room type levels, but for optimal revenue management it should also be applied at the rate level. Choosing Infrastructure Components The next step in setting up the infrastructure is to look at booking statistics and data. What percentage of bookings come in via OTA, GDS or CRO and what goes directly to the property? You want to optimise as much of your business as possible, so understanding how the business reaches your property is critical. For example if most of the business comes directly to your hotel via the reservations offices, then you want to have a Property Management System that can handle the revenue management levers mentioned earlier. If half of your business comes via OTAs, then you definitely want to make sure you can revenue manage that channel effectively and choose a channel manager that can handle the revenue controls that a revenue management system puts in place. By Derek Martin. Infrastructure components can be a significant investment and you should carefully evaluate the options available. Infrastructure Opportunity Cost After evaluating the functionality of the different infrastructure components, pricing has to be reviewed. Often when asking property GMs or corporate revenue managers why a certain component was chosen, the answer is that there was a budget limitation or the owner did not want to spend more money. The question that needs to be asked is whether opportunity cost was considered when making the decision to go with a certain system. What is this opportunity cost? Let’s look at an example. You run a hotel with 100 rooms running at 80% occupancy with an ADR of $100. OTAs bring 40% of your business. The revenue generated via OTAs is calculated as follows: • Rooms sold per day: 100 x 80% = 80 rooms • Rooms sold via OTA: 80 rooms x 40% = 32 rooms • Revenue sold via OTA: 32 x $100 = $ 3,200 Typical revenue uplift when installing a revenue management system is between 5-15 percent. I will use 5% uplift to be conservative. This means that if the revenues via OTA cannot be revenue managed, this 5% uplift on those revenues cannot be achieved. This additional revenue that cannot be achieved is called opportunity cost. In the example given here the opportunity cost is $3,200 x 5% = $ 160 per day. Per month this would be 30 x $160 = $ 4,800. To finish our example, the property is evaluating two channel managers, Option A which does not integrate with a revenue management system and Option B, which integrates fully with a revenue management system. Option A is quoted at $ 500 per month flat fee and option B is quoted at a transaction cost of $2 per booking. The price for option B, based on current booking volume is: 32 rooms x 30 days x $2 = $ 1,920. At first glance this makes option B much more costly than option A. After taking the opportunity cost into consideration of $ 4,800 it is clear that option B is by far the best choice. Going for cheap can be a very costly choice! About the Author: Derek Martin is the founder and CEO of TrevPAR World – a hospitality data analytics company that specialises in revenue management. For more information visit www.trevparworld.com Jan/Feb/Mar Quarter 1 2018 Tourism Tattler Trade Journal 11
Page 1 and 2: ISSUE 01 | Quarter 1 2018 IN THIS I
Page 3 and 4: Jan/Feb/Mar Quarter 1 2018 Tourism
Page 5 and 6: EDITORIAL IN THIS ISSUE: ISSUE 01 2
Page 7 and 8: RESPONSIBLE & GUILT-FREE REHYDRATIO
Page 9: The Natural Choice in 5-Star Luxury
Page 13 and 14: SNAPSHOT: Strongest Growth: Lagos G
Page 15 and 16: CONSERVATION About the author: Liez
Page 17 and 18: CONSERVATION BENIN FAST FACTS Benin
Page 19 and 20: DESTINATIONS Be inspired. Watch thi
Page 21 and 22: EVENTS Cape Town 19-20 April WTM Af
Page 23 and 24: EVENTS Jozi set to Attract Thousand
Page 25 and 26: Grow your business, earn your stars
Page 27 and 28: LEGAL SUPPLY CHAIN & LIABILITY What
Page 29 and 30: In terms of where solo travellers l
Page 31 and 32: RISK & INSURANCE instances, claims
Page 33 and 34: TECHNOLOGY Chatbot Technology in Bu
Page 35 and 36: TRANSPORT concept, with a short, lo

Tourism Tattler Issue 1 of 2018

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