The strong rand and changing spending patterns have dampened demand for rooms in luxury hotels in the past two years.

A survey by auditing firm Deloitte shows an adverse effect on hotel performance with accommodation being perceived to be more expensive. The hardest hit have been Cape Town and to a lesser extent Durban. Five-star hotels have also felt the pinch.

However, a global rate comparison by Deloitte, and included in its HotelBenchmark Survey, demonstrates that the country still offers value for money.

SA's average $75 for a room in a five-star establishment compares favourably with competitors such as Sydney (125), Buenos Aires (85) and Hong Kong (128).

Rob O'Hanlon, partner in Deloitte's travel, tourism and leisure practice, said it was a sign of changing spending patterns by international tourists, caused by a combination of the stronger rand and the emergence of new markets in Asian countries buying into three-star accommodation.

The addition of the new Arabella Sheraton has resulted in a marked increase in Cape Town's room night availability.

Consequently, Cape Town's luxury hotels averaged just 56,4% occupancy for the 10-month period to October 2004, the lowest of all markets tracked by the SA edition of the HotelBenchmark Survey.

This represented a decrease of 13% against the same period last year. The increasingly competitive Cape Town market has seen local hoteliers turn to discounting rates in an effort to increase market share.

Also since Cape Town sprang onto the scene as a destination of choice there has been an incremental growth in alternative markets, like bed-and-breakfast establishments as well as people who would normally stay at five-star establishments buying into coastal property in SA, according to O'Hanlon.

A slowing down in the US and European markets also meant that the same volume of well-heeled tourists were not visiting SA.

O'Hanlon said that ongoing discounting in SA's five-star hotel market threatened to have a domino effect, crushing the strong performing three- and four-star sectors.

Should demand continue to weaken in the short-term, there is a concern that hoteliers will impulsively discount in an effort to secure market share, he said.

Business Day