South Africa Hotel Price Gouging Study

Michael Giberson

International accounting firm Grant Thornton has surveyed 2,500 hotel and other properties in South Africa and concluded that about half of the properties will not be charging a premium rate during the upcoming World Cup.  In some cities, however, a majority of properties were raising rates, sometimes significantly. (Another summary: “Fifty three percent of Durban accommodation establishments were planning to charge more than 50 percent above their peak season rates for the World Cup, a survey into price gouging has found.  This is the second highest in the country after Gauteng with 65 percent, the survey commissioned by South African Tourism has revealed.”)

Tourism, hotel associations, and government officials in South Africa have put significant effort into trying to persuade property owners not to raise rates dramatically.  But demand will be extraordinarily high for a few weeks this summer and the supply available to meet that peak demand will be around for years.  It seems odd to encourage property owners not to adjust prices to reflect the extraordinary demands associated with World Cup.

At least in the South African case the anti-price gouging effort is rooted in persuasion rather than force.  Unlike, say, in several states of the United States, where the state government may impose potentially substantial fines, or in Venezuela or Sri Lanka, where government troops have conducted raids on businesses with prices violating government policy.

It also seems odd that this topic gets discussed under the category of “price gouging.”  Prototypically, price gouging involves sharp price increases on necessary goods during emergencies.  While hotels are frequently targets of price gouging allegations, typically it is when victims of a hurricane or other natural disaster find themselves charged higher-than-usual rates.

No emergency is driving consumers to seek housing in South Africa during the World Cup. Hundreds of millions of people worldwide will watch the World Cup on television, me parochially rooting for CONCACAF teams included. Maybe that explains why I’m not particularly concerned about the fans that are wealthy enough and committed enough to fly into South Africa for a few games. Whatever might be said about the benefits of restraining price increases, it this cases the potential “victims” are incurring the hazard.

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