Tourism is an amazing industry. Someone has described it as the best product in the world: the customer arrives, empties his wallet and returns back home. Properly managed, tourism is a sustainable, profitable and very rewarding industry for any society. How come then, parts of it are fragmented with low margains? Well, from my point of view there are a number of reasons. One is that nobody “owns” the whole product – in this case a chain of services. Tourism described as a product is something the guest consumes at the very same moment it´s being produced. Talk about moments of truth! Cooperation between producers is a keyword.

From a tourism study I did a while ago, where I interviewed a number of international top level tourism consultants, I´ve listed “10 secrets of tourism success” factors for attracting tourists to a destination.

1. You need a major attraction to build destination appeal. One that are outstanding in its field, motivating distributors to include your region in their brochures at the expense of other tours. In Sweden, one example is the famous Ice Hotel.
2. There needs to be a cluster of service providers in the area surrounding the major attraction. A wide range of services, accommodations and other amenities/attractions that are available for visitors, which builds the destination´s profile.
3. Don´t create a major attraction unless you also develop the destination profile (and vice versa).
4. A critical factor for the community is to invest in the destination for small entrepreneurs and at the same time invest in entrepreneur training so that the services, guides and products are of sufficient quality to meet target market demands. If you do, it´s sustainable year after year.
5. It is imperative that the target markets and activities are compatible. You need to sometimes keep some market segments separate.
6. You need professional tour producers creating packages including your destination, combined with others to cross-county or even international programs.
7. Make your programs saleable in the already existing distribution network of travel agencies and tour operators, that already has your potential guests, by quoting the prices from their perspective, not yours, allowing them an acceptable commission. You´ll most probably have to negotiate your costs with your suppliers to reach an acceptable market price.
8. You need a destination manual with facts, information, photos/films. A price list for simple services. A program of tour packages (combined services).
9. Maintain the price level. Allowing guests a cheaper price when booking directly with you, rather than through their travel agent, makes you loose the distribution network.
10.  Most major attractions that I know of are created by “mad entrepreneurs”. Find one and support him.

So it´s not really business as usual nowadays? You´ve got some cancellations? Media are flooding us with bad economy news at the moment. Even though not much has yet actually happened that affect peoples life in reality, there´s a sense of urgency in the air. Keep smilin´ and be pro-active! There´s a lot you can do to manage the situation.

Even in a recession, there are a number of options to maintain or even increase your market share. Take  a look at your marketing and check the balance between price and perceived quality. Of course, you can do nada. If your customers are loyal and you accept to loose some of the poorer ones, you´ll most probably survive to a smaller market share and lower profitability. Doing nothing but raising the price will maintain your level of profit but probably leave you with a reduced stock of customers. What to do?

Maybe you´re one of those many that, more or less by routine, are passing on unexpected price rises for fuel costs, airport taxes or whatever, to your customers just because it´s allowed in the small print ? No wonder they´re cancelling. Everybody´s on pins and needles and you raise the price…

It´s cheaper to maintain the price and raise the customers perceived value. Your suppliers will surely help if you just initiate the discussion. Local destination management companies has a range of possibilities to balance costs or raise the guests experiences by small means. Ask them. They can often negotiate better rates for lodging, change to cheaper hotels with a similar service level, add an experience or even change the route if communicated properly. In the best of worlds, this might even allow you to cut prices and get a better market share. Of course, it depends on what kind of tours you are operating and how these are described in your programme. Remember, your customers want to go on your tour. Your local DMC and their suppliers want them to come.

In a recession, I´d suggest that you exhaust your low-visibility price moves first: eliminate cash & group discounts. Curtail your low-margain services. Charge for valuable services that until now has been offered as free. Try to absorb one or two cancellations, it will benefit you in the long-term.

A successful price increase can certainly have a strong effect on profits. If your margain is 3% of sales, a minor 1% price increase will get you a 33% profit increase if sales volume is unaffected. So, if you choose to raise the price there must be a sense of fairness surrounding increase to avoid cancellations. Prepare people. Give time to adjust to the new circumstances. Explain in simple and understandable terms what actions you are taking to avoid further price increases, what options they have and why prices are going to change.

Communicating with customers means dialogue, a two-way street. Sending a newsletter is not. A bulletin at your website is even worse. You need interaction that engage people. Ask questions. Invite customers to an exciting and informational event. Inform about your preparations and actions.

How about your re-sellers? You have them for profit- & effectiveness. Likewise, they sell your stuff for the very same reasons. Dump distributors that don´t give high priority to your products. Activate, engage and evaluate the others. Visit them. Arrange a seminar. Initiate a sales contest. An award for “Top seller of the month”. Launch a sales campaign together.

Then of course there´s also an option to reduce the perceived quality. You cut marketing expenses to combat rising costs. Even here there´s a road to success. Next time I´ll let you in on one of the best marketing tools I´ve ever seen. Does it work? You bet.

Michael Moore, the famous American author, once asked his (American) readers: “So you think you´re clever? OK, who´s the president in Mexico? See… Most people in other countries knows who´s leading the country next to them”.  A quick glance at the Swedish incoming tourism market shows that, with a few exceptions, everybody´s basically promoting the same recipe: a dash of Stockholm, sweetened by an archipelago cruise, some crystal glass shopping in Småland and possibly spiced up by a night at the Ice Hotel winter time.

If you´re a standard tour operator or travel agent that´s fine with me. They are great first time in Sweden-experiences. But if you´d like to offer outstanding tours and this is what you suggest to your clients, I would say you´re on the wrong track.

Creating outstanding tours in Sweden is simply a question of cooperation but, honestly, how well do you really know those who are taking care of your clients in Sweden? And why would you cooperate more with them than just buying the ordinary tours?

Well, 1 + 1 = 3. Two approach angles are better than one. You complement each other, which improves your chances to close the deal with your customers and you get better sales results. When you get to know someone you also support each others in times of trouble and share the joy in happy days. You get inspiration, have fun at work and, more importantly, you´ll learn a lot, which improves your competence and sales ability. Your customers get a better service and quality, you get more customers, more money and hopefully a better life.

From my experience, there are a number of distinctions for non-functional teams:

• Watched communication
  If you speak up about something, you´re quickly criticized
• A lack in disagreement
  Actually, a degree of disagreement is good for business. In a team it must be allowed to express different opinions. Winning teams can handle it. Losers can not.
• Unwillingness to share information
  You keep some “secrets” to yourself. It might be good to you, but not to the team. And in the long run, you´ll most often end up being dumped. Tourism is teamwork.
• Low level of trust
  In tourism you can´t control everything. You have to rely on others. Double checking details is good, but if done repeatedly the wrong way you might rub a few feathers. Trust me…

So, what´s the characteristics of a winning team? I would say there are a number of trails leading to the road of success:

• A common vision and goal
  Do you and your Swedish supplier see the same picture of the future? Where are you heading within a couple of years?
• An identity as a group
  Are you talking about “we” and “them” or are you and your suppliers the same “we” ? Which one? Are you included in their “we” or is there a gap in between?
• Each member has a clear role within the group
  Do the people at your suppliers company understand what you´re expecting from them and do they realize the importance of their contribution to your tours?
• Clear and obvious “game rules” (routines, responsibilities, behavior)
  Tourism is a chain of services provided by a number of people at the same time it´s consumed by the guests in a series of moments of thruth. Successful tourism companies delivers. What they promised. Consequently, everyone involved must know exactly what to do, how and when. Do you?
• A high degree of motivation
  Tourism is about exploring and experiencing. You´re actually selling something that doesn´t exist (yet). It´s something that will be produced later, upon arrival of the guests. Thus, the staff involved has to be engaged and motivated to convey a sense of feelings and emotions for the destination or program you´re promoting.

The swedish tourism entrepreneurs I´ve met are a bunch of nice chaps, so why don´t you give a few of them a call just to get to know each other. It´ll boost your business and you´ll get a new friend or two.

Travel trade commission structure

Are you one of the lucky guys that are running a tourism business with more demand than what you´re able to supply? I thought not… they´re a rare species. Have faith, there´s help to get if you activate a network of distributors. One of the most effective tools to get others to provide you with lot´s of customers is your pricing strategy.

A packaged tourism product generally contain three core elements: Transportation, accommodation and activities. It´s as simple as that. Or is it? A closer look reveals that these elements might contain a number of components, such as arrival services, transfers & in-country transport, accommodation, food, guiding, activities, experiences, lectures, entrance fees, rental equipment, tipping, baggage handling, service charges, taxes, commissions and administration costs.

It may seem appealing to be able to sell your product exclusively to clients that book direct with you, thus saving on commission, but it can be quite stressful with todays client trend to book later and later. It also leaves you with all the marketing and sales stuff. If you´re cooperating with the travel trade they do it for you, handle all the pre-tour enquiries, administration and provide you with the resulting business, planned and prepared.

When you´re developing a pricing structure for your products it´s s important to understand that there could, and in most cases should, be one or more other entities involved. If you allow them to make a reasonable profit on your tours, they´ll open their customer databases and give you access to an audience you would never have reached by yourself.

Overseas tour operators and clients booking direct often want service providers to provide a range of services rather than having to book and pay 3 or 4 directly service providers in the region they are visiting. If there´s no incoming tour operator or destination management company available, one of the service providers has to be the product owner. This means taking  responsibility for finding, booking and paying for all the services the tour operator or client needs and, consequently, taking this into account when making the quotations and pricing.

One of the most common mistakes tourism entrepreneurs make is to sell their services cheaper to direct sales customers than if they´d booked through an agency or tour operator. Big mistake. You´re out of your distributors´ programmes in the wink of an eye. Instead, your rack price should be the same no matter where the end client makes his reservation.

Commission should always be viewed as a marketing cost and budget for as such. The image above presents briefly the travel trade commission structure and the effect it has on the end price for services booked prior to client travel to the destination. There are of course a number of other requirements to meet if you´d like to be taken seriously by the travel trade. More on that next time.