Chief Executive Motel Association of New Zealand Inc
AMG Sept/Oct 2008 Issue 1
THE WINTER IS NEARLY OVER AND A WINTER OF DISCONTENT HAS RUN ITS COURSE. TOURIST TRAVEL IS DEPENDENT ON DISPOSABLE INCOME; the more you have the further or more often you can go.
When the bite is on the pocket then trips are deferred! This includes trips to see friends and family. The other determinant is weather and here it has been lousy!
Floods, landslides, snow etcetera have conspired in the wrong time of the year to convince people not to do the over-nighters. The increase in costs as well as a static housing market has stopped the general public from accessing their equity that has been funding their credit cards and consequently their little trips away.
It would be easy if the economy was uniform all over the country but no! We have distinctly different performance statistics from the provinces. Those regions with a strong agricultural base may have had a little psychological blip but their spending and travelling patterns have held up well. There are areas where too many beds have been developed and the number of visitors hasn’t grown so an oversupply has occurred.
There are areas where the distribution model that the accommodation was built to service is no longer valid and they are struggling.
The repeat commercial business, the bread and butter of the industry, has taken little hits but it still gives a solid base for accommodation operations. There has been some realignment of travel patterns among commercial travellers but not significantly.
Where there is an enlightened regional tourism organisation, a wellbalanced events programme has kept occupancy rates up over winter. Some areas have been very well served by small targeted events and holding the All Blacks versus Samoa rugby test in New Plymouth provided an excellent lift for the operators in the whole of the Taranaki.
Some industry thoughts
The one thing we know is that change is constant and consequently the models that have been set in stone and asking the travelling public to conform to their idea of Utopia are starting to lose ground.
We can’t save the dinosaurs and have to accept that commercial evolution will take place.When the communication channels are controlled then it is easy to push the public into what you have available.
Unfortunately, the Internet has given the public the ability to see the entire world through their eyes not through the windows of travel agents. They are making informed choices and are asking the question, why can’t I do it? We know from dealing with teenage children that this is a very compelling question! We need to be able to answer rationally or accept that they will go their own way. It means that some of the old travel distribution models won’t stack up to the demands of the public. The capital invested in these models will be lost and as they leave this world they will go kicking and screaming and discounting everything in sight to try and stay in the game.
A cynical view, I hear you say but the winners will be those who adapt to the new regime quickly and are agile enough to be able to reallocate resources adroitly. Tourism/accommodation is not the only industry to face these issues, we are just doing it later than some.
The rationalisation of the meat industry in the 70s and 80s left a whole range of unused and ultimately abandoned plants as newer more efficient types of abattoirs were built. I am not suggesting that we are as inefficient as the meat industry was but it is inevitable that there will be casualties.
We are seeing a huge increase in online accommodation bookings; this is, I believe, a reality that we are all seeing. We are seeing a plethora of companies that can solve problems that I didn’t even know I had. I am distribution channelled out. Interestingly, anecdotally we are seeing the public make the decision on who they use and it seems that if you have sufficient quality inventory then they will find you.
Vast distribution networks are irrelevant if there is insufficient inventory to support them. It certainly is a growing area and the figures for average sales values, sales number and overall turnover are of double or even triple digit proportions. As yet the quantum of all these sales don’t rate 5% of all rooms sold. It will grow, of that there is little doubt but the vast bulk of our customers are coming from traditional sources.
So why have I made such a song and dance in the comments above? It is the way of the future, the ability for the consumer to talk directly to the provider will inevitably lead to the lessening importance of the middle man (person!). The product that was provided to aggregate travellers will become less important. The assets and infrastructure that were developed to service that type of traveller will become less relevant if they are totally dependent on that trade.
We are part of a global economy; this isn’t limited to the transfer of goods it also lessens the fear of the exotic. What were exotic locations are now part of our television experience. The globalisation of English as the language of trade has made the fear of communication difficulties less of a challenge and thus opened up for the travellers their own personalised adventure organised over the Internet, paid for by credit card and done without a third party to guide them!
How do we take advantage of this phenomenon? Who will benefit and who will suffer?
It will be a reasonably quick evolution not a fully fledged revolution so the transition will be hard and traditional friends and enemies will change their relevant roles in our lives. Above all as we go through the change we need to make sure that we are making a decent return on investment otherwise it will all be irrelevant; no dough no reason to be involved!
