Hotel and restaurant prices can increase in South Africa

An additional in-room TV licensing fee could soon lead to consumers paying even more for hotel rooms, guesthouses, and restaurants in South Africa.

In 2023, the South African Music Rights Organisation (SAMRO) changed how music licensing fees are charged to public establishments, including restaurants and hotels.

Now, the Federated Hospitality Association of Southern Africa (FEDHASA), the recognised national trade association for the hospitality industry, is suing SAMRO over the legality of the Diffusion and Distribution Services (DDS) fee.

FEDHASA argues that this additional DDS fee places an unfair burden on hotels and guesthouses, which will be forced to pay more for no reason.

FEDHASA national chairperson Rosemary Anderson explained to Daily Investor that the DDS fee is charged annually per TV set per hotel room.

“The annual fee appears to vary, with different hotels reporting to be charged different amounts,” Anderson said. “The amount varies from under R100 to R133.16 ex VAT per TV set per hotel room,” Anderson said.

“The hospitality industry and our members have asked us to seek clarity regarding this new DDS fee that SAMRO started billing some hotels for in 2022/23 – since they were never charged for it before.”

For over 30 years, the hospitality industry paid SAMRO for music played in public and common areas such as restaurants, lobbies, conference rooms, and recreational outdoor areas.

Anderson explained that FEDHASA is seeking clarity because the industry does not want to pay SAMRO an additional fee for something they have never had to pay.

Therefore, the hospitality industry sees no reason to pay since it is not receiving more services, and nothing else has changed that would justify this fee.

“The industry feels strongly that since there has been no change in legislation – there is no justification to now start charging for something the industry never had to pay for before,” she said.

Price pain for businesses and customers

Anderson noted that this fee comes at a particularly difficult time for the hospitality industry, which is still struggling to achieve pre-Covid numbers.

“It would incur significant additional costs to the accommodation sector at a time when the industry has still largely not recovered from all the restrictions imposed in 2019 and subsequent years,” she said.

South Africa’s international arrival numbers are still not even 90% of 2019’s inbound numbers, and very few hotels are back to their occupancy levels in 2019.

Simultaneously, the industry’s input costs have increased substantially, which makes financial viability a real challenge.

The industry cannot change external challenges like the economy or shrinking household disposable incomes. However, it can control expenses.

Therefore, the industry certainly does not want to have to pay additional licensing fees when it never had to before, and which it was never consulted on.

The industry is trying to keep its accommodation prices fair for consumers so occupancy numbers can regain their pre-2019 levels. Additional input costs, including the DDS fees, make this more difficult.

Anderson explained that the additional cost would not just affect businesses, as consumers also have to bear this burden.

All accommodation providers’ costs are passed onto consumers, so consumers would carry this additional fee regardless of whether they used the music on the TV set or not, since SAMRO charges per TV set.

In other words, customers will have to pay more, regardless of whether the room is occupied or if the music on the TV set is accessed.

Anderson said that the Declaratory Application that FEDHASA and the hospitality industry have initiated is not confrontational.

“We acknowledge the vital role of SAMRO in supporting South African music creators, and we remain committed to upholding the legal and ethical use of music within the hospitality sector,” she said.

“We would just like legal clarity regarding this new DDS fee that is being imposed. We look forward to continuing a good working relationship with SAMRO for the benefit of the whole industry once this matter is clarified by a judge.”