Price slashing a poisoned quick fix?
Under the banner headline ‘BTA working on tourism plan, says Elcock’ and carried in 4th November edition of the Sunday Sun, the chairman of that organisation was quoted as saying ‘that plans are in the works to boost tourism numbers for the remainder of the year’.
If the quotation is accurate, it begs the question: What on earth could you possibly do at this late stage to dramatically improve 2012 arrivals, even if ‘plans’ were already in place?
The article also mentioned that the Minister of Tourism and BTA Chairman was part of a delegation attending the WTM (World Travel Market) in London last week. The United Kingdom, despite the fall-off in visitor arrivals, is still hanging on as our single largest source market, but numbers are just part of the equation. You also have to evaluate exactly how that business is generated and it remains predominately tour operator driven.
Before moving to Barbados, I owned and ran a tour operator business in England for twelve years, so have some intimate knowledge of how they function there. Planning is done way in advance, for pretty obvious reasons. Even a small aircraft like a B737 can cost US$89 million and that’s before considering all the additional costs including maintenance, crewing, fuel, airport charges etc. So it’s simply not feasible to have it sitting around on the tarmac.
The larger operators own or lease their own aircraft but the smaller ones buy blocks of seats on scheduled or charter airlines. Accommodation has to be contracted with a lead time sufficient enough to market the package, either through High Street travel agents or online.
So if a destination can have any meaningful impact on ensuring those committed seats and beds are filled, it has limited ways of achieving this.
Raising the profile of the destination can help, but if the more traditional ways are used (for instance by advertising in various media options) this can be incredibly expensive even if the national marketing agency has the funds available. Another way is to stimulate demand by pricing – or put another way, discounting the product offering.
As late as 26th April, the Governor of the Central Bank of Barbados was predicting growth in tourism for this year. Included in the three pillars that would make this happen, (and mentioned several times) were the developments at Port Ferdinand, Four Seasons and Merricks Resort. We now realise of course that two out of three of these projects are not going to make any meaningful contribution whatsover, at least for 2012.
After a ‘lacklustre’ summer, any possible recovery seems almost totally dependent on a profitable, but short, four month winter season. Even in normal circumstances it’s a huge gamble – but the situation is anything but ‘normal’ with many tourism businesses economically hanging on by their fingernails.
While several industry players have been outspoken, citing eroded margins caused by unbudgeted increases in operational costs, their cries have largely been ignored by the policymakers.
What this winter offers for many of these enterprises is the bare possibility of survival, so discounting cannot be the solution. Without wanting to sound too dramatic, if tourism enterprises are forced to take this path of price cutting, it could be the recipe for disaster.
The predicament is that the ‘planners’ have left it so late that there may be no practical alternative if a business wants to survive to fight another year.