Price correction theory We have seen this happen many times, from housing prices, to crude oil, to recent cryptocurrency price changes. Without getting to complicated and elaborating on demand pull and supply push economics, we are trying to understand why hotel prices are so volatile. In its own right macro and micro factors always affect demand and in Cape Town’s case we can safely assume due to market intelligence that water, over supply of rooms, reduced international arrivals and slow winter trading are the main causes.   But 2018 will be a winter like no other: in addition to the micro/macro factors we have a price correction in play. Looking at the image we see that over time, the rate/revenue will increase as everything else does due to growth and increases, but we had a spike in trading during 2016. This spike emanated from favourable trading, market confidence, a match between supply and demand and at times increased demand which spiked rates/prices. But as it balloons, so is a correction on the way. Since early 2017 the correction came in effect which means demand dwindled, rates struggled to appeal to a softer market and compounded in effect to where now see 2015 rates in the market. Lead times are 50-70% of business being booked 0-7 days from arrival, nothing being booked for 8-90 days, and then again 40% from Aug onwards. This is a common thread in trading for Cape Town at present from all our hotels. We can safely say the price correction should meet its original growth path from Sept onwards and trading should normalise to periods prior to 2016 bubble. Most of us ‘take what we can get’ now, and I see ADR’s plummeting to below R1100 for the sake of cash flow. Also read related post here  Hang in there, its almost over! Need help this winter, not sure how to push low rated volumes? contact us now