African price wars!

[KWALATA SAFARIS]

I have often been called or criticized on this site for my strong believes in terms of pricing.

Well once again we are at this very point.
After 6 weeks in the U.S. I am astonished at the pricing that some outfitters have come up with....

Now don't get me wrong, each outfitter is entitled to his own pricing but some of it simply makes no mathematical sense....

I have heard many times while I have been traveling this year, You must remember that the Rand to USD exchange rate works in our favor, well how exactly does that work???

Our currency has depreciated by 45% to the USD in 5 months, the effect of this is not rocket science...

-inflation has been raised by a percent this year already.
-fuel is exactly double and in some cases more than double a gallon.
-marketing cost has gone up by 40% in the last twelve months, 40 PERCENT!
-With SA being a major importer, cost of living will go up by 20% this calendar year.

I have really tried and struggled with the idea as many of us are marketing safaris at rates that were acceptable in 2002.

I just don't get it, I believe it confuses consumers and it will hurt outfitters, especially if it goes the route (posted comparison Zim vs SA) as an outfitter what will you do raise your prices by 40% next season????
An interesting time in our industry indeed, for one I am looking forward to a great season ahead, at realistic industry pricing.

Thoughts??

 

[Pheroze]

Tough call for sure. For my own part, with the falling Canadian dollar, I have pretty much stopped ordering from the USA. I hope there are businesses in SA or other countries in Africa that you can turn to in order to reduce the differential in some of your costs. One of India's economic strengths is that it is growing it's economy internally and not through international trade like China. Clearly your inflationary exposure is in travelling and doing business outside of SA. PHASA or similar should try and make negotiate industry wide savings. Eg package Safaris with an airline like SAA to make the whole thing more attractive - think all inclusive safari packages including flights, lodge and trophy return. Or negotiate a reduction is some licensing fees etc. A challenge to an industry cannot be fought alone! Hopefully trade agreements between African countries can help too. Good luck with this very difficult challenge.

 

[KWALATA SAFARIS]

With China being SA's largest trading partner SA is in serious trouble.

 

[spike.t]

"One of India's economic strengths is that it is growing it's economy internally and not through international trade like China."

thats the problem, its only SA that has any real manufacturing industry in southern africa, and if they are stuffed think how it is with most other countries in the region who import the vast majority of anything needed and pay for it in dollars........the prices in zambia change with every shipment of goods. one shop has a sign saying ignore the marked prices on display you will be given the correct price at the till....... the kwacha went from a bit over k6 to $1.00 to over k13 to $1.00 in six weeks last july/aug......

you and the madam home now jaco?

 

[LivingTheDream]

Jaco,

I was just commenting on this with my father. It looked to me that market prices coming out of the conventions especially Sable and Cape Buffalo are getting slaughtered.

In the auctions which I know arent the best indicator but very few Sable hunts are going over 5k with alot in the 4k.

I don't think this is completely to do with the price exchange. I think it is a lot of competition, and a lot of clients bottom shopping without due diligence.

Tough conditions for sure.

 

[Areaonereal]

What is the price of fuel per liter in Rand. Oil being down almost 70 percent and the price has doubled. . Ouch.

 

[CAustin]

I have seen very few discounts here! Yes a couple but not many! So there must have been some big discounting going on at the shows!

 

[billc]

I see it as a market correcting itself for growing to fast in a short time. Playing the going rate game can be a hard game to play and can be tricky.

I see some of this at how good some breeders did there job and a few animals that were very rare and cost more have been breed to great numbers. They found out even at what seemed like a fair price to them on animals like sable and buff it was still to much for the avg hunter. Now to move the extra animals the prices must come down. In a few years the prices will go up because breeders will back off on breeding since it does not pay as well.


I myself just do not like when people cry about prices coming down but have no problem when it goes the other way and makes them extra profit. In any business you must take the good with the bad. I have learned after doing the same business for 30 years now stay true to yourself and do not worry about what everyone else is doing. There is so many different people looking for certain things if you offer good service be fair you will last long term in any business.

 

[dobber]

Have seen a few outfitters pricing hunts in Canadian $$ now, that will really help bring the Canucks over with the exchange rates

 

[thi9elsp]

I agree with Bill that supply / demand will eventually even it out. But, it is rough going either direction for one party or the other (outfitter vs. client). A good business person has the assets squirreled away for the rainy day or to get through the down periods and come out stronger.

I am in the information technology consulting business. Nearly 17 years. In 1999 the company I work for had 160,000 employees in the U.S. and 60,000 elsewhere. Now, it is 450,000 total with only about 60,000 in the U.S. I'm 4 years from retiring and wondering if I can hold on.

I was the beneficiary this year of the lower prices at the conventions. I was up late, remote and bought an auction hunt at an unbelievable price. 80% of the attendees had left the hall and DSC started the auction late. Ann and I are off to Mozambique for buffalo, sable and plains game in September. A hunt I would have been hard pressed to justify without getting the price I got. It doesn't impact the outfitter but reduced the $'s that DSC received. I'll hunt as many animals as I can to get the outfitter some good money for his investment from the trophy fees.

John

 

[Royal27]

Jaco,

I love this topic and find it fascinating. And I do think it is rocket science. This is a VERY complex subject.

Although rand to dollar play in heavily other factors, such as game supply and demand as Bill mentions certainly factor in. And I do think a correction is taking place, or will be shortly.

I'm going to play devil's advocate here for a minute with your figures's though, especially as it still seems that based just on the cost you gave that overall prices can drop and still hold the same profit to the outfitter. Now I did say overall, all is not equal and any outfitter who can command the same price due to other factors should. This is where differentiated services are SOOO important as it is very hard to compete on price alone in the long run.

inflation has been raised by a percent this year already.
-fuel is exactly double and in some cases more than double a gallon.
-marketing cost has gone up by 40% in the last twelve months, 40 PERCENT!
-With SA being a major importer, cost of living will go up by 20% this calendar year.

• 1% inflation so far equates to 6-8% per annun, far below the conversion rate change, so income still outpaces, assuming dollars are paid for the safari
• From a quick search fuel does appear to have gone up YOY, but by roughly 10%, not double. Are the AA statistics really that far off?

https://www.aa.co.za/on-the-road/calculator-tools/fuel-pricing/?petrol-year=2015#petrol

• How have the marketing costs gone up by 40%? Are you saying that a booth here in the states that cost you $1000 last year cost $1400 this year.? Did DSC/SCI really jack their prices up that far? I've found that hotel/food costs haven't risen much YOY (I looked up hotel and they are up roughly 5%). You see my point here I'm sure, you can't factor exchange rate one way and not the other IMO.
• Even if the overall cost of living (inflation) does go up 20% that is still far less than the additional Rand being received from exchange of dollars, and I would argue that cost of living and inflation should be roughly the same, although again, hard to simpilfy that much.

Exchange rate impacts pricing, no doubt, and it should., both up and down. I wonder though, if the larger impact is really a drop in safari demand due to overall economic slowdown in the states and elsewhere (especially from those in the oil industry) combined with a glut of animals from a time of higher demand? Let's face it, demand has certainly gone down and supply has certainly gone up.

I'm no economist but I actually think we're at least a year away from the true bottom of this market. Outfitters will go out of business over the next year.... Culling happens in the business world too...

 

[BRICKBURN]

..................From a quick search fuel does appear to have gone up YOY, but by roughly 10%, not double. Are the AA statistics really that far off?
https://www.aa.co.za/on-the-road/calculator-tools/fuel-pricing/?petrol-year=2015#petrol........

Retail prices of a large provider in RSA.
http://www.engen.co.za/home/apps/content/products_services/fuel_price/default.aspx

List price 897.39 Diesel Feb 2015
List price 947.57 Diesel Feb 2016

http://southafrica.shell.com/products-services/on-the-road/fuels/petrolprice.html
About the same at Shell.

 

[BRICKBURN]

I have often been called or criticized on this site for my strong believes in terms of pricing.

Well once again we are at this very point.
After 6 weeks in the U.S. I am astonished at the pricing that some outfitters have come up with....

Now don't get me wrong, each outfitter is entitled to his own pricing but some of it simply makes no mathematical sense.... .......

You have always been straight up with your views. Somebody does not like it, oh well.

 

[siml]

I don't think the so called "price war" has anything to do with the exchange rate. It got to do with supply and demand, and at this stage, people are needing their cash for more important things. The big oil gents would buy up a whole concessions quota for a season, not even hunt half. Now the outfitters are needing the income and dropping prices.

 

[ActionBob]

I actually wanted to stay in the US this year for my hunting, like the Western US and Alaska..But the exchange rates with not only the Rand, but also the Euro and even Canadian Dollar make it seem a bit stupid on my part to spend any large amount hunting the US right now. Economically it makes sense to hunt the countries with the wider gaps in exchange rate and especially were I can do those hunts priced in their local currency. From my perspective, too many of the African outfitters are trying to stick to their prices in USD. Several Canadian outfitters offered their hunts in CAD so I get full benefit of the exchange rate. Also some of the Europeans. I may still end up going to Africa, but not at last years cost! I'd be a chump for paying peak prices.

I do agree with the bigger impact of supply and demand in Africa. Sable being a prime example and they were coming down already last year... Buffalo hunts sure seem to have leveled off and come off their highs... Leopard is probably the biggest exception... But that whole story may not be in yet, this end of season could be interesting?

It is a great time to be shopping for hunts. Those Outfitters who can control their costs or at least are willing to adjust the best they can and still offer a great hunt... Will succeed and be the long term suvivors... My business is all about producing top quality at the same time we strive to control costs. There are para-dime shifts in the business world all the time. Yesterdays small time start up may be tomorrows success story and today's king of the hill may be sliding to the bottom tomorrow... The only certainty is change.

 

[Royal27]

It is a great time to be shopping for hunts.

I've said that 2018 will be my next big hunt because that is when I can afford it. With the prices having dropped and probably going to drop further I'm thinking seriously about 2017 if I find the right deal. I'm afraid I can't afford not to. Wel, that, and I'm looking for any excuse that will work with the wife.

 

[KMG Hunting Safaris]

... I'm thinking seriously about 2017 if I find the right deal....

Well....what are you looking for?

 

[Royal27]

Well....what are you looking for?

Stull working on the excuse to the wife. For some silly reason saying "honey, the guys on AH said...." doesn't hold up very well....

 

[LivingTheDream]

I'm think it has a lot to do with Supply and Demand. As we have mentioned before hunting has made it profitable for there to be a lot of animals in South Africa. This might be where supply has met demand.

I am thinking 2018 or 2019 for me. I am doing some hunts in the US, but I see some of the auction prices and I go well maybe I should make a bid.

 

[CAustin]

A lot of great points being made here! I will say that when I first started hunting Africa three years ago the advertised trophy price of a Sable with the outfitter was $10,000 but a special was available at $8,500. Granted that particular outfitter was not the low cost leader. But now I see Sable five day hunts, day rates and transfers included for $6,500 and less in South Africa. I see Sable in Zimbabwe fir $4500 ! Folks that speaks to supply and demand! Supply gies up and demand goes down so will price!
One my second trip to the concession where I took my Kudu the owner had been raising Sable to sell to other farms! He was up to over 100 head of Sable! And planned to begin selling them when he reached 120 which no doubt happened this last year! He was buying buff , ten cows two bulls and three of the cows were pregnant. Give him six to eight years and that herd will be very good size!
My point is as others have mentioned the exchange rate is not alone impacting pricing ! Lot of game farms in South Africa raising these animals sooo many people want to hunt. Prices can not be artificially held high under these conditions of over production.