My thoughts on safaris in Botswana - part 1
 

I enjoy(ed) my safaris in Botswana a lot but that's not a reason to put in question certain things.

Botswana has never been a cheap holiday destination and it has/had probably the right reasons to do so. But in recent years, we witnessed massive price hikes and to my opinion most of these extra money inflows didn't benefit the country itself. TA's (percentage based commission) and operators (shareholders) were the ones mainly to enjoy the extra income if they managed to keep at least the occupancy stable.

Have f.e. a look at Xigera (marketed by WS):

- in 2006: you had 3 seasons where the official rack rates were as follows:

- green season (december 2005 - march 2006): 430 USD/a day (475 USD for the period around X-mas)
- shoulder season (april 2006 - june 2006+november 2006): 500 USD/a day
- high season (july 2006 - october 2006): 700 USD/a day

- in 2009: you have only two different periods:

- green season + shoulder season (december 2008 - may 2009): 600 USD
- high season (june 2009 - november 2009): 900 USD

So you can see that the price hikes are not the same:

December: 39,5% increase over 3 years;
April: 20% increase over 3 years;
June: 80% increase increase over 3 years;
August: 28,5% increase over 3 years;
November: 80% increase over 3 years.

So if you tell clients that you had to raise the prices (as costs are also massive going up - f.e. fuel), why don't you have the same increase over the all year??? Hopefully staff is also seeing an increase of 80% in wages in June/November.

Telling that the gameviewing is massively improving in June/November (in case you practice you pay more for what you see) is also strange ... as not all operators have f.e. high season rates in November. For this example I picked Xigera as it is a classic water camp. In November f.e. your boating is restricted as some of the channels doesn't have enough water to support full day trips to the middle of Chief's island. On the other hand, you have your summer migrants (but I guess they also frequent the national parks). In general, chances of overcast days/rains are quite high compared to a stay in July/August. Although this year, Northern Botswana experienced some strange weather in June and early July. On the other hand, with lower water levels, your chances are increasing to see the elusive sitatunga but that hasn't changed over the years.

For me the conclusion of all of this is that certain players were/are in for some short-term milking "the cash cow". It will be interesting to see what 2010 will bring and if the same level of price hikes can be realised in the next 3-5 years without risking to decimate their profits. At the client side, I didn't experience much more value added during these 3 years which would justify these rates.

I am inviting everyone to express their viewpoints on this issue.

Cheers,

Johan

hi johan,

as promised i am here (only briefly today since we are having a party tonight). i bought a huge bag of mint at the farmers market this morning and my wife and i have been making mojitos for the past two hours. i thought you would enjoy this since i went to the farmers market to cut out the middle man grocerer. mint at the grocery store was 9X more expensive!

we need to agree on the facts first and then we can chat. let's get "on the same page" and then exchange our thoughts.

june 2009 and november 2009 are both low season. the RSP (recommended sell price) of xigera is $600 per person per night this year. i have sold this camp many many times this year and that is the price people pay (nominally). also, for 2010, june 1-15 and november 16-30 are low season and cost $600 per person per day.

these figures change your math quite a bit.

question: do you argee or disagree with these RSPs?

i run a for-profit business as do the people that own xigera. i am sure they seek to maximize the yield of their product. yield would be the perfect compromise of occupancy and price point. personally, i sell my products at the the price the market will bear. in most cases, this price is RSP or "rack rate" as i make enough commission accross all my business units to run this way. i agree with them that they should charge whatever people are willing to pay and nothing less (or more).

regarding the people of botswana, it can't be as bad as you say. every time i go to a camp there, the same people are usually working their. newman and andre have been guides at chitabe for 10+ years. wouldn't they leave if there was better opportunity elsewhere? also, i think it is the people of the botswana and their elected officials job to take care of themselves. it is not the job of the for profit safari industry.

with this said, i have found most safari lodge owners still have significant community involvement. wilderness safaris (the owners of xigera) spend hundreds of thousands of dollars per year on their conservation efforts.

craig beall

"wouldn't they leave if there was better opportunity elsewhere?"
That's as rhetorical question as stating "if an unemployed person wants work - it will find work".

Anyway - IF people are willingly paying these rates - no one will stop the opertaros increasing their rates.

it's a demand/offer relation.

Regarding wilderness - I must say their properties are mostly frequented by Americans. Here and there other nationalities. But generally speaking particularly WS properties are very much frequented by American guests. Obviously their agents are doing a great job convincing their clientele of WS quality making the clients willingly paying for it.

I think frequenting WS venues has become a kind of fashionable or "status symbol" in America.

Regarding their community work: They have no chance other than being involved in order to secure their future lease. Secondly it's enormously benefiting their tax ratio.
So I would not overestimate that.

Johan - I was hoping for a much more severe impact of the credit crunch especially towards these over-priced camps. But they rather close then leaving their status quo in order to proceed in the same fashion next year.

And - when they set people free because of the crunch: these are unemployed. They get nada from the operator.

For example Zambia. These camps explain their high rates with "having only a short season" due to rain. Their employees get kicked out every November and have to search other income until May when the camps open again.
Opposite: The owner charge a fortune to get themselves going for 12 month!

Frankly - despite where a camp in located in Botswana any camp's night won't involve more than roughly and max. 200US$/night covering ALL running costs.

Having that in mind one is much more sensitive when booking ;-)

I consider you OP just and somehow overdue.

SV

IMHO, when it comes to the current high prices, well they're the result of a number of things that happened in the past, all of which had the same outcome. Or otherwise put; they all had the same victim; the end consumer.

To name but a few of these factors (but I guess the most important ones):

- The pseudo-monopoly that WS has created for itself. Let's face it; it's a great business plan. The most important factor is the popularity of the brand name. US citizens, their main customers, above all, wish for security. They want to be sure that the money they spend is not lost. WS had the best cards to attract US citizens; they had some of the top lodges/locations, for example. They were already rather big compared to other firms. So they used this to create a comfortable situation for themselves.
It took some effort, like creating a stunning website, and the constant promoting of the less-than-ideal locations, and the hammering on local initiatives that they sponsor. But they did great. They were able to take over the lease of more and more concessions. Open more and more camps. You can only do that if you can show the best business figures. Figures, by the way, that are pumped up even more by the selling of "packages", ic bundling 2 days in a top location with 3 days in a location that is less good and does not sell so easily. Stuff like that.
Well, if you're the biggest you can do these things. Any other company, even if it has a few lodges in it's portfolio, cannot compete with the WS offers.
The consumer who is a bit more critical may not like this, but viewed from a business perspective I must say (being a manager myself); chapeau! Some good managers they must have.

- The popularity of the Delta. It's in every magazine. It's on all nature programs. It's the next Serengeti. We all want to go there. It's the place to be. Botswana govt knows that too. Leasing concessions hasn't exactly become cheaper.

- The agents, ic "the in between man". They have their use. As a company like WS, if you use good agents, you get to attract a lot more customers. So WS made a smart move again; they struck a deal with the agents; "if you guarantee to sell X number of beds, then we guarantee we will not sell any beds directly; the customer has to come through you". To be totally honest; WS is not the only firm to do this. And to be even more honest; the current modus operandi between agents and WS may actually be imposed by the agents. After all; they have a lot of power. Well, for the customer is does not matter; they will need to pay the price, even though they'd rather have booked directly with WS.
Also WS knows perfectly that an agent will sell the product that gives him the biggest product margin. So I assume there's some agreements in place on that level too.

- The drop of the dollar. Even though everything is counted in dollars in Southern Africa, we must keep in mind that the people involved in the safari business are seldom from US. Hence, if they see the dollar drop in value, they lose money. A few years ago, at the start of the "war for terror", the dollar plunged (when compared to other currencies). It even goes on now; the euro is still worth more than the dollar. So how do you compensate for that loss of value? That's right; you increase your prices. Either directly, or by being a bit more creative, like the example Johan gave in his first post.

Add all that up (and more), and you get the situation we're in now.

Myself, I'm not wondering that much about what 2010 will bring. I am almost sure what that will be.

The current crisis must not be good for WS's business plan. Safaris have become much more expensive for their biggest user base, and then, at that point, the crisis has hit. It will be a lot tougher to find Americans willing to part from their money, in order to get "a WS package deal".

So I do see some cracks. But those who are hoping for a big change; I'm afraid they will be rather disappointed. What I see is hardly a bit of a "status quo" for a while. WS will have to get even more creative in their "deals", and the agents, on their part, will also need to be more creative to find customers. But if they combine their efforts I'm sure that WS will be able to keep it's head above the water. Even though they might have some unsold beds. Prices will not drop much.

Nor will the trend to more luxurious lodges be reversed. A lot of people here don't need nor like the luxury lodges, nor do they want to pay for that. I myself am one of those people. But unlike most of these people, I do not think that my type of profile is part of the majority of safari-goers. Most safari people (and certainly most WS customers) are first-timers, doing a trip of a lifetime, used to a certain luxury level (that they've seen year after year on their other holidays, and that they expect on this trip as well).

Again, viewed from a business perspective, if you would be the lodge owner and you have two types of customers being a) the eco-aware-no-luxury-needing-wanting-to-spend-less-tourist and b) the rich-tourist-looking-for-yet-another-perfect-holiday-without-compromise... who would you choose? Right. So WS will do the same; keep choosing the richer customer.

So we are sure we can continue to complain about safari prices here on Fodors, for some time to come. :-)

-----

Craig,

Comparing a small purchase like mint with booking an expensive safari; faut le faire! This does not add to your credibility, in my book.

But if you insist; we've got farmers here in Belgium that are on strike; they get paid less than it costs to produce the milk. And yet, the price of milk in the stores has gone up. All profits end up in the pockets of the distributors. What am I trying to say with this example? Not that I can match your flawed comparison with an equally flawed one, LOL. What I mean is; the percentage the middle man can take can be a lot, and depends on a lot of factors. It's a complicated matter, and things are not that simple as you try to put them here.
For instance, we all know that, given the choice, any salesman will push a product over the counter that yields, for him, the largest profit margin. It's OK if you do that too. You're a businessman after all. So you say you sell WS deals the most? Well I know why.

And I also understand why you are here on Fodors; there's a large base of WS customers on here. But you have to understand as well that, when you try to sell your business here, there's bound to be some level of criticism. Certainly when the info you give is incomplete, incorrect, or skewed. I saw in some other thread that you defended a green season trip in the Delta. That was in comparison with a trip to Northern Tanzania in the same time period. Come on now.

Ciao,

J.

Just reread my message. "War FOR Terror". LOL. Sometimes I think I should be a standup comedian.

j - thanks for jumping into this thread and providing such a nice discussion. i got onto this thread because i promised johan/skimmer that i would.

i can't argue with most of your points. i can say that wilderness safaris places no performance threshold on the agents that support them. they do not measure us in any way that i know of?

i also disagree with you one other point. a better business person will sell the product the produces the highest customer satisfaction and results in repeat and referral business. this is not always the highest margin product on one particular sale.

why am i here on fodors? well, perhaps for the same reasons so many other people are. i am simply passionate about safaris. i have made 25+ trips to africa and over 1,200 posts on trip advisor in the past year. when trip advisor gets quiet i often come over here. either way, i try to reveal my commercial interests within the framework of the forum rules. some people (not you) get very agitated about me being an agent which i find sort of ammusing. it is almost as if they fear some unsuspecting forum user will book a trip with me so they have to instantly go after my credibility.

thanks again and iam looking forward to more of your writings. i am from a dairy state here in minnesota. my family gave up farming when i was 6 years old and started the safari business as my mother was south african.

craig beal

Pixelpower,

I would like to quickly point something out in your argument that may be of interest.

You mention the drop of the dollar following US fiscal and monetary policy since 2001. Whilst the dollar has fallen against a basket of major currencies, the situation in Botswana was different, if the profits remain in the Pula denomination.

During the period where prices were significantly hiked 05-07, the dollar actually strengthened against the Pula. Increasing their bottom without any pricing shift. (Botswana devalued their currency in 2004/5 by 15%)

It also acts as an excellent hedge against exchange rate fluctuations in terms of commodity prices.

Commodities did rise dramatically, though that rally did not occur until after the decision to significantly increase pricing had already started.

You mentioned the dollar depreciating against a basket of currencies, which allowed more European guests to start using WS from 2005/6, keeping demand stimulated. The exhange rate reduced the cost of a safari by between 25-35%, a considerable saving.

I am not suggesting that this was all some masterplan by WS. USD pricing has been common in Africa long before its emergence. Though the volatile nature of economies and currency devaluation has benefited them.

You mention the cost of leases, they are significantly lower than these companies would have you believe, it all plays into the mythology of the safari industry.

Camps until this year were granted 15 year leases. Companies would submit business plans with concession fees and their increases agreed for the time period. Take a camp like Duba Plains, operated since the mid-nineties.

The lease has not been renegotiated, but the cost of staying there has risen exponetially. Probably a 100% increase. The increases can not be justified except for an organisation exploiting the high demand and their excellent method of capturing the market place.

What does the future have in store?

I would say look at some of the anacdotal evidence and the wider economy.

The number of vacancies in the updated reservation system on ATR shows most camps have lots of vacancies for the remainder of the high season. Remember, alot of these people probably booked these safaris before the fall of Lehman Brothers.

The number of trip reports and planning threads has almost been non-existent this year.

Read some of the feedback on the expert Africa website, the number of people who were the only ones in camp is quite revealing.

Will prices drop, probably not, though I am sure the discounts will increase at the start of next year when bookings are down even further. The world cup being a small blip.

Most of the return posters on these boards seem resigned to not safaring for the next couple of years. Poeple are still uncertain about their job security and the how deep this recession will be. Correct if I am wrong?

People were willing to pay for safaris on credit cards or perhaps borrow in the short term. I believe that peoples' attitudes to this approach are changing - paying down credit card debt or finally saving for that rainy day.

It was often said that safari was designed for the newly wed and the nearly dead. Pensions have suffered which will make people more averse to such holidays.
A lot of people align their feeling of wealth and subsequent consumption on the value of their home. With property dropping significantly, many of these baby boomers will have to be more conservative with their spending. (no more giant nest egg)

I could be completely wrong, as deal could be signed tomorrow to offer year round safaris to the 27,000 workers of Goldman Sachs.........

this has been a good thread!

pixelpower - i cannot find the thread where i tried to talk someone out of going to tanzania in jan-mar in favor of botswana. the only such recent thread had a person inquiring about doing both and i did not discourage them. here it is:
http://www.fodors.com/community/afri...stion-long.cfm

once again, thanks to all who contributed opinions.

craig beal

Hey Craig,

About agreements made between agents & WS; perhaps there is no volume agreement specifically for you, but I'm sure there are for the bigger "players" out there. Or are these sort of agreements created on consortium level; ic are you by any chance part of a consortium of US-based agents that sell WS?
Whatever the case, I'm sure we can agree on this; WS sets the bed prices, hence they also set the profit margin for their agents, and we all know that this is higher than any other company out there. Right? Well then I'm sure this is a business tactic, in particular a tactic to make sure WS camps are more promoted that the competitor's camps. And in normal circomstances, it works. Yet, we are no longer facing normal circumstances.

About selling the product that produces the highest customer satisfaction; well allow me to take that with a grain of salt. What a coincidence that it should just be the product giving you the biggest profit margin. ;-) Or maybe the truth is rather: "the product that produces the highest customer satisfaction for inexperienced customers". I don't know.
Note that I do not consider you to be a "bad guy" persé. At least you're one step ahead of most other agents here; you are honest about your role in the business. That's better than some guys who hide behind a nickname, and then provide a wealth of time and info for the people on these boards, apparently all for free. There's nothing as expensive as a chicked received for free (African proverb).

Ciao,

J.

Insightful thread, war-for-terror and all. Thanks.

Hey lbj2 (Russell?),

About dollar vs other Pula; that may be true but I think most companies that operate in the Delta do not have the Pula as their "currency of reference". ;-) Any which way you turn; I'm sure they used the value-delta between dollar and euro to their advantage. The safari business environment is international enough. They'd be dumb not to.
Again otherwise put; if a part of that price raise is NOT because of the dollar devaluation, then that's even more disgusting (from a customer view); pure selfishness.

About the lease cost of concessions; thanks, great to know. Much appreciated. Didn't know that! So again, in fact, I was fooled by them in some way. Annoying.

About the future of this business strategy; I said I don't think much will change. Of course that's what I FEAR. But there's always HOPE. The info you provide makes me think a bit more positive.

Ciao,

J.

Craig,

That's the thread I was actually talking about. Seems I see your post in a different light than yourself. Well, that's what you get when people know you're an agent. Sorry. :-)

Ciao,

J.

Thanks everyone for your participation. I am quite busy at the moment but I'll be posting again either on Tuesday or Wednesday.

Cheers,

Johan

j - i am not part of any consortium but i think you are referring to the virtuoso travel agent consortium.

although my contracts are confidential, i will tell you that my highest commission product in africa is actually &beyond...

craig

One more point here -

With all the price increases, how has the safari portion of the client's trip improved from years gone by?

For example., what about guiding? Has the guiding standards (across the board) improved, declined or is the same as always?

What about the quality of the game drive experience? Has this improved in all or any areas?

Any thoughts on this?

I do realize the skills/personality/experience levels of guides are all different ........ Yet....?????

Interesting stuff, guys. Do any of you "experts" know how many safarigoers are repeat businesss? It'd be interesting to know in light of all of the above. I'm guessing a tiny portion (particularly among Americans?). And if that's true, you don't really need to "improve" the safari experience as the price rises. It's all about selling safari mythology to first timers, and making sure people had a valuable experience so there's good word of mouth. WS does both well.

I think it was 2 years ago, about 7% of the number of tourists were Americans. But the dollar spent was the highest per tourist. I can imagine with the US economy effecting the number of tourists going on safari, they must miss us alot. Boo-hoo.

Pixelpower,

You would be surprised by how nuchg of the income remains in Botswana. A number of non-WS companies are actually Botswana companies.

Wilderness do own a number of the properties, with the earnings after management fees remaining in the country.

As for the changing business strategy, I just read a thread on in the lounge about debt levels.

A couple of people raised the issue that their travel plans have been put on hold until the economic situation changes. For the average tourist, when looking at your options, there are currently great bargains to be had.

Hotels across the world are slashing their rates, making other areas far more attractive to visit. Safari can be an addiction, but people are rational and want to visit other countries too.

The problem is that even with vacancies, lodges are still making healthly profits. They can absorb the fall in the demand in the short run, though when people start visiting camps with a lot of occupancy, they will surely question the high prices?

*should have read, Wilderness do not own a number of properties