Adding value can help save Tourism and make destinations futureproof– How applying scarcity can drive revenue and profit in Tourism

Over the past couple of months my team and I noticed that the trend of “over tourism” was getting more and more traction. The number of articles, blogs etc. is still increasing as we speak. It started with reports of cities battling the Airbnb phenomenon, and subsequently overcrowded tourism destinations; mainly cities.

One of the best articles I have read so far on this topic is:

https://www-spiegel-de.cdn.ampproject.org/c/www.spiegel.de/international/paradise-lost-tourists-are-destroying-the-places-they-love-a-1223502-amp.html

Written by a team of people at Der Spiegel, a German magazine

As the director for a DMMO (Destination Marketing & Management Organization) active I Europe, I often battle with the conflicting factors of growth and product development. Most destinations want quality over quantity, but due to circumstances have to deal with a quantity situation and therefore “mass tourism” model. Most press releases are about the growth of number of tourists. The WTO propagates that Tourism is good for the economy and development of countries. I agree that it is an important industry and branch, it generates employment, income and investment. This is key for developing nations and regions. I myself earn my bread and butter through Tourism. That does not take away the question running through my mind for a long time: how much is enough, and can we keep on growing by applying the same models and still generate quality?

I try to put it into an equation: Increased income (salaries, tax, profit, GDP, whatever it is you seek) needs a combination of amount touristsmultiplied by their expenditure. Therefore, most destinations try to push and increase both factors at the same time. However, an increase in the number of tourists can lead to a decrease of the quality of the destination and overall experience of the tourist (over tourism). And this may lead to a decrease of spending (cheap tourism). Based on this, my short answer to the earlier question is “no”.

In looking for a solution that is feasible and not too radical, I have pondered about the question on how to increase expenditure while still looking for growth in absolute tourist numbers. I went back to basics and looked at what drives increase in price, revenue and profit. It is scarcity (providing the product is of quality). This indicates that a strategy could be to decrease the availability and cater to a smaller number of tourists, while driving up demand. This will in theory increase rates, revenue and profit. However, very important to keep in mind is the quality of the product. If this deteriorates, the scarcity strategy will fail and lead to discounting to save what you can save. Besides, if a destination has a certain number of accommodations/hotel rooms, it is difficult to scale back in a short period of time to speed up the scarcity. Therefore, this strategy is not very easy to apply in mature destinations.

Deeper into my research for an answer/solution, I read more about the knowledge that one should not only look at the Tourists, but also at the locals. The tourism industry and its income have to benefit both groups. If you ignore the local population it can lead to negative perceptions on tourism from their side and push-back. We can see it happening in some European cities where locals are communicating their discontent with tourists, through graffiti and even protests (Barcelona and Venice come to mind). And in the article, I shared above it pointed out beautifully what the risks are of ignoring the local population:

“Tourists sit in traditional restaurants devoid of locals as they watch other tourists. They are no longer places where people come together, but where divides seem to deepen. At times, it really does feel like a tourist invasion. They come, they stay briefly and then they are gone again, but they act as though they own the cities they visit.”

……

“Or when people no longer feel comfortable in their neighborhood because they have become a minority in the cafés and restaurants they traditionally frequented. That is, assuming they can get in at all or afford the new prices.”

This is a very important development when considering that one of the latest and fastest growing trends in tourism is “authenticity”. The very thing that is attracting the tourists is actually being destroyed or converted into something un-authentic by the sheer numbers of them. It is a weird circle or loop if you will.

Often infrastructural development is heavily influenced by tourism & tourist demand. If the tourist demands a snack bar, then that is what will materialize. This might be against the needs of the locals as they prefer a certain shop or service to be provided at the same location. It can also lead to historical buildings  being transformed to “tourist traps” or “cookie cutter designed” establishments. Most of the time these tourism developments happen in the locations that are what constitutes the “authentic” part of the destination, hence amplifying the disconnect between local and tourist needs.

To end this article with some sort of solution, or at least indication on “what now” and “where do we go from here” I remember the words of one of Aruba’s (Dutch Caribbean) most successful hoteliers. It was during the crisis years of 2008, and the tourism industry was as affected, perhaps more, as everything else. The behavior all around was: discounting….

People were scrambling to keep up the numbers (quantity) with discounting actions. Again, in my opinion based on an old model of quantity driven tourism. Amidst all of this panic and discounting, this hotelier told me to add value. That was his mantra, “add value”. Despite the crisis, there were still people out there with expendable income and willing to travel. And in order to keep up revenue and profit (quality) rather than absolute numbers (quantity) we needed to focus on convincing these customers that we offered value for money, and as a destination we kept our cool. Making sure we did not harm (cheapen) our brand value and image. It is always easy to discount, but very tough to get back to where you were price wise. So, what we did was focus on driving demand, by communicating value for money. Very important here is the fact that everyone was part of the strategy, Government, Tourist Board (DMMO) and the Hotel association. Making sure the product was up to date, improved, renovated or whatever it took to stay relevant. The numbers did not increase, but did not decrease heavily either, and the revenue and profit did not drop drastically. We managed.

For me the lesson learned in those years brings me to the conclusion that in order to turn around “over tourism” and “mass tourism” induced by cheap airlift and accommodation, a destination can be quite bold and decide not to sell itself cheap for the sake of quantity. But make a calculated decision instead and sell itself at the right price to the desired customer. I am sure that customers who really value the worth of for example culture, heritage and history are willing to pay a bit more for the experience.

On a personal holiday to Mexico back in 2007 I noticed this. We were on a Mexican Maya city tour which I booked with a high-end niche Tour Operator in The Netherlands. We would visit many cities and locations and spend some hours there with a guide learning and experiencing the beauty of it all. At one of these locations we had to get up very early in order to be able to enjoy it. We were told that at 9 am Cruise Ship tours would arrive and that we would not be able to move around like we were used to by now. Indeed, at 9 am about 2000 tourists overran the site and it was impossible to take a picture, look at something from certain angles, or even walk easily from temple to temple. Yet these tourists only stayed for 1 hour and a half. I observed them, and could safely conclude that about 75% did not really appreciate where they were, the history, the authenticity etc. Therefore, quantity is not necessarily good and by focusing on quality by adding value (in our case proper guidance and information about the site) it can be a win-win for the interested tourist and the local population.

It is difficult to turn time. We have become used to cheap travel, easy access and taking 2 – 5 trips a year. Nevertheless, I still believe in the principle of exclusivity (not to be confused with luxury) and scarcity. This will drive up prices, revenue and rates. It will take investment and making sure the product/destination stays attractive, but it can pay off. It also gives the local population (not only owners but everyone) more control over the development and the future of their home and what they want us, as travelers to see and experience.

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