AnotherThought/Question on Botswana prices

Apr 20th, 2008, 05:52 AM
  #1  
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AnotherThought/Question on Botswana prices

If it exists, I'd like to see a pie chart of what makes up the price of the pp/pn rate at the various Botswana camps.

I am wondering if the largest part of the price is to cover the concession fees.

If so, then how much savings is there if you have just decent food and not gourmet cuisine? How much savings for a good canvas tent rather than a fancy one? How much savings for no electricity or very limited electricity?

I don't want savings as a result of inferior guides, so that is not an area for cutbacks. The staff should be paid decently and there must be enough employees so they can do the job well, so I wouldn't want to save money on the backs of the local people employed by the camp.

The portion of price that goes to conservation and community efforts is a good idea, so I don't want to remove that. Besides, I bet that is not huge anyway.

It still costs the same to fly to a 6-Paw or a very few Paw camp so transportation remains a constant. I know that is separate from the pp/pn rate quoted.

Fuel costs for the vehicle are the same whether your accommodations are luxurious or you are sleeping in the vehicle.

If the majority of the costs that do not differ among alternatives are fixed costs for the provider, then is there even much savings to the customer if the variable costs are greatly reduced?

I realize the Wilderness 6-Paws and places like Mombo are at a real premium, but for the other permanent camps, where can we cut corners?

Is that slice of pie that represents profit a huge one, or are thoses slices that make up all the costs to operate the place the majority of the pie?

Anybody out there got a spreadsheet on this? It's probably top secret information, but those of you in the know might be able to speculate.

Thanks.

atravelynn is offline  
Apr 20th, 2008, 07:28 AM
  #2  
pippa13
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atravellynn

first of all: i don't have such chart.

but regarding the difference between super luxurious and fewer paws there is something more involved:

- ratio staff - guests
- fitting of the game vehicles (can make a huge difference in style/comfort and accquisition costs/amortisation)
- activities offered outside the camp
- activities on camp ground as e.g. spa, wellness, fly camping

but nonetheless i think the more upmarket the camp the higher the profit percentage.
 
Apr 20th, 2008, 08:03 AM
  #3  
sniktawk
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Atravelynn

We would all like to know this but I am certain that we will never find out. The costs of concession leases are considerable, I was told that the last 5 years of the Selinda concession was purchased for $1.5 million , but I doubt it was that cheap.
The excessive costs are caused by the apparent requirement of visitors for all of the luxuries of modern life. Personally I cannot imagine why internet acess and aircon is considered to be a requirement.
 
Apr 20th, 2008, 08:57 AM
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I doubt whether the lodges want to cut any corners. They just want to command the highest rate they can.

They can add few luxuries very cheaply and then ask for a higher rate and all the time there are people willing to pay that rate this will continue. If the demand decreases then we might see some cost cutting in relation to the quality of food, staff etc and a slowdown on the rate of luxury refurbishments and then possibly a rate cut.

The same thing is happening in a lot of cities worldwide whereby 3/4 star hotels are being upgraded (usually relatively cheaply) and then marketed as 5*++. Not only does this increase revenue it also increases the value of asset to sell on.



Lynneb is offline  
Apr 21st, 2008, 06:35 AM
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I have a few rough ideas on the costs and sometime long ago I think I posted them but I have no idea where. Bottom line is a huge piece of this theoretical pie is profit. Of course there is a recoupment period when camps are first built.

Everyone seems to think the concession fees are the biggest cost and they probably are but think about this. In Snik's example of Selinda that is $300,000 per year for 5 years. One bed at Zib for less than a year (300 days) pays for that entire concession fee. At the high end a lot of profit is being made.
PredatorBiologist is offline  
Apr 21st, 2008, 06:48 AM
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I assume that a large component is profit, and that portion will get larger based on demand. If the lodges are full at $1,000 pppn, why wouldn't they next season bump that up to $1,100 or $1,200 -- I know that I would. I'd increase my rate to maximize annual average revenue per guest, based on occupancy rates and room night. So long as demand remains high, rates will follow.
thit_cho is offline  
Apr 21st, 2008, 06:53 AM
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Lynn,

FWIW - the rack rates price is inclusive of the commissions of travel agents.

Gourmet cuisine and the strawberries etc etc., naturally the more the price tag, the higher the expectations when you charge upwards of $1500 per night for two people.

Profits, sure - as long as there is a ready demand for Botswana why not?
HariS is offline  
Apr 21st, 2008, 09:04 AM
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Hari has a point regarding commission. I think it's between 20% and 30% so there is some opportunity for reducing costs there but most of the operators see this as their cost of marketing so they are understandably willing to pay this.

We'll just have to see if this recession has any impact on demand.

Lynneb is offline  
Apr 21st, 2008, 03:15 PM
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Thanks for bringing up recession, LynneB. I was going to put this in another thread, but I'll just add to this one.

Earlier I wrote that I thought the recession might make matters much worse for the more budget minded traveler as lower end places might just cease to operate rather than lower prices. On the other hand, I figured the rich would be unaffected and that places catering to that crowd might replace the more economical options.

Now I am reconsidering when I read that plastic surgeons are suffering because there has been a downturn in cosmetic surgery. There are even excess inventories of breast implants sitting around. So if the economic times are hitting cosmetic surgery, I bet they are hitting safaris too.
atravelynn is offline  
Apr 21st, 2008, 05:19 PM
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Don't some of these places also pay for the hunting concession fees (and, then, not use them)? The EoA site states that these concessions are giving up something like $300,000 per year because of this.
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Apr 21st, 2008, 08:14 PM
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sniktawk
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Lifelist

You just pay for the concession, if you choose not to hunt that is down to you. It does not represent a large percentage of costs, at most one full bed a year. Not hunting does of course reduce potential profits.
 
Apr 21st, 2008, 08:30 PM
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Ken,

I thought the Botswana Govt has banned Lion and Leopard hunting, anyways (a good thing!) ....... if that is true, then there will be an automatic drop in revenue from hunting anyways ....
HariS is offline  
Apr 21st, 2008, 10:18 PM
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sniktawk
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The Botswana government sets limits for all concessions for hunting these are based on game counts, it follows that the less you have the less can be shot. The banning of Lion hunting has changed more tham once, I am not sure aboout leopards.
 
May 19th, 2008, 06:44 PM
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Hi! I was re-reading this thread after the recent "Chitabe fire" thread. Interesting connection between the two?
HariS is offline  
May 20th, 2008, 09:11 AM
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I'm pretty sure that profit is a huge portion of the pie, that's the "business model" followed by most camps in botswana: low volume, high yield. With most camps having like 10 rooms or less, the only way to make money is to have a huge profit margin per room. And as long as demand is there, they will continue doing so!
In my opinion, this is preferable to f.e. 100+ room hotels at a much cheaper rate
torrem is offline  
May 20th, 2008, 11:39 AM
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There seems to be an assumption that these lodges are full year round, which is not the case. I would guess that on average properties run around a 60% annual occupancy. An unsold bed represents lost revenue and could well be the difference between a profitable year or not.

I would say that while it seems that these zillion dollar lodges are raking in the loot and are highly profitable, that that is not quite the case. Many spend a large chunk on marketing. Those wonderful articles that you read in the travel glossies come at a price... you think that those journalists pay up for their travel and accommodation? No I don't think so... and ever wonder how they hear about the properties that they feature before you do? Because these expensive lodges retain the services of wallet busting NY city agencies to keep their profile high and top of mind. Then consider where the product is sold and found.. ten bed lodges are spending roughly the same amount annually on sales as are 100 plus bed hotels.

So that is just the marketing, at least 20 % of the retail price is being handed over to the trade in commissions.. Then there is the cost of doing business, running an office, communication costs etc... Think about it... these guys have to manage their waste as well and at their own expense. Most hotels etc have this paid for in their taxes, or what might be the equivalent of concession fees. Not to mention the liability insurance they need to carry in order to serve the American market.

They run and maintain a fleet of vehicles, they buy fuel, they import all their fresh produce, they develop staff and if they haven't got the right staff need to attract ex pats to develop the standard and train...

What might to you appear to be a seamless safari experience in fact is a massively expensive business. Next time you are at a lodge and dine on fresh fish served with chilled wine, just think what it it took to get it all there to your table! it makes the $1000 a night tag seem silly.
mkhonzo is offline  
May 20th, 2008, 12:21 PM
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This is OT, but I have a question:
How is a game head count obtained? To an ignoramus, it appears to be a non-trivial exercise.
bearable is offline  
May 20th, 2008, 12:40 PM
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Mkhonzo -

Thanks for mentioning the marketing and everyday expense of simply operating these high-end luxury lodges/camps... anywhere. Real profits in the hospitality business takes quite a bit of upfront currency before anyone sees a profit.

And, for sure those writers from Conde Nast, Travel & Leisure, Africa Travel, etc. etc. aren't paying for their stays, at least not anywhere what the regular guest pays.

Whether fresh fish, fruits/veggies, dairy products, bottles of wine and champagne and on and on - big outlay of money for transport... fuel for flights or vehicles, and profits are still aways down the road.

Even a basic camp, plain canvas tents, decent food... costs!

Think of how many restaurants open in your city and close in less than a year, if they manage that long... same thing. No bank is going to give out loans, so owners need to have the money folk there upfront to carry you till profits appear.
sandi is offline  
May 20th, 2008, 01:26 PM
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What do you mean by the game head count? In some countries annual counts are done from the air.. Statistics applied and a assumption on the game density made.

In other areas ground staff keep records and based on what is seen over time a head count is assumed.

So it is not a perfect science, but as close to accurate as can be. It is not a trivial exercise and the results taken seriously as they impact management decisions, such as whether to reintroduce species and or cull others.
mkhonzo is offline  
May 20th, 2008, 06:24 PM
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Mkhonzo,

Isn't marketing part of a TA's job? What part of the marketing responsibility are they taking up to deserve the 20% plus commissions that they charge?

I'm not really convinced about the cost of flying in produce and stuff into the lodges - atleast in this thread we are talking about Botswana and Maun is so well logistically connected. Most of the non-perishable stuff is mostly transported via surface transfer isn't it?
HariS is offline  

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