ATEC delegates agree discounting is killing product development and inward investment
Discounting in the backpacker accommodation sector is hampering product development and inward investment, delegates at the ATEC Backpacker and Youth Industry Conference have agreed.
Participants in a breakout session focussing on accommodation cited unsustainable discounting as a major challenge for the industry, with guilty parties unable to reinvest in their businesses and having to cut corners to make the economics work.
Cairns was cited as a frequent offender, with allegations some hostel/bars are giving away the accommodation component in order to fill their bar. One participant said the practice was damaging inward investment into Cairns with large companies shying away from setting up operations there because it is too hard to make money. Another commented the practice would damage Cairns’ reputation in the long term if word of falling standards spreads among travellers.
Session leader and YHA Ltd CEO Julian Ledger said discounting didn’t necessarily equate to value for money, with visitors to the YHA website ranking some of its most expensive properties as offering the best value.
Meanwhile Wake Up!, one of the most expensive hostels in Oceania, boasts 93 per cent occupancy.
By Martin Lane · April 20th, 2010 at 3:28 pm
Comments
21 Apr 10
3:28 pm
I hope that the industry sees the whole picture before if effects everybody if the nett is low and the companies are not making the money then they will cut costs somewhere and when there is an awful accident that makes news Worldwide ‘- all the companies who supported the high commission rates and the discounting war can all say I was partially responsible for that
People selling product based on how much they are going to earn not on what the product delivers to the client effect every single one of us in the whole picture – every single traveler who visits Australia should leave here as an ambassador to our magnificent country not full of stories of how they got ripped off, how they stayed in properties that were filthy rotten dirty, how staff were so rude blah blah blah – if your serious about our wonderful country then why not ask the questions how can we be better, are we supporting the operators that care or the ones that pay the most ??? if it was my family would I put them on that trip or in that accommodation house – if everyone starts treating every person like they were a loved one and we all made sure they had the best time ever, that every person in tourism started welcoming people like they really mattered in their life what would be the outcome.
Lyndell Ross
21 Apr 10
3:35 pm
Hear here. Thankfully this has been tabled and if I were in Hobart with you all I would have lots to say, unfortunately through other Backpacking ‘contributions’ here in Qld I could not make it. I am over my beautiful town being bastardised by such matters and would love to see some sense and cents brought back into the community. After 22 years here living and loving the Backpacking Industry, bed nights of too many hostels are taking us back to the early 90′s. Go figure. I wonder if anyone of these offenders that are charging AUD$10/night actually contribute enough to the Industry to be reading this comment?? I guess not…
22 Apr 10
8:53 am
Overwhelmingly the message I picked up in Hobart was “we need to focus on quality issues.” Quality has many subsets: discounting could be one, most certainly product and equipment standard is another. Surprisingly (or not?) state tourism bodies seem to think some sort of foundation stone or brand or system of quality control (read qualmark NZ) is far from the best interests of tourism. Perhaps things like Sydney airport being voted the worst on the continent, the appalling state of our trains and transport in this State are indicative of the almost careless attitude of the govt in supporting such moves. Again, like 100% NZ, we are playing 100% catchup. And surprise surprise, I just got the train through Sydney airport: no seats, no luggage storage, no easily understood service announcements. No bloody idea if you ask me.
24 Apr 10
1:50 pm
Here in Cairns, this GREAT region, there are many quality products and quality operator’s! Perhaps we should focus more on the positives and not the negatives as so many have for such a long time now!
People, whether they are traveler’s or those of us in the trade are attracted to success and positivity.
Good vibes or bad vibes both spread like a disease, I say we get positive because as we all know one rotten apple destroys the whole bunch!
There’s Nothing Like Cairns!!!
24 Apr 10
8:23 pm
Nice support Vanessa, but words don’t feed a business. While I agree with positive thoughts the problem remains.
26 Apr 10
4:29 pm
We offer low rates and must be one of the main actors in offering cheap beds in Sydney.
My question is this however: How do you compete with 18 people in a 3 bedroom apartment, being charged $110 per week in the CBD? imagine $110 a week includes a gym, 24 hour concierge desk, heated indoor pool…. etc etc ….. don’t believe me? just walk down George street Sydney or visit Regis or world square towers.. the only negative being the not so often ” lets pack the bunk beds because the inspector is here today”…
27 Apr 10
12:39 pm
That`s another area that definitely needs looking at, Henri. From Sydney to Cairns, illegal hostels are costing us pax AND promising a disastrous media run, a rise in insurance rates and even more ridiculous fire regulations when the next share-house goes up in flames.
28 Apr 10
8:03 am
I vividly remember my first visit to Airlie Beach in 1995. The Whitsunday Village Resort was a great hostel, luring backpackers with rock-bottom prices ($13 per bed in a nice Fiji-style, 4-bed ensuite bungalow with its own kitchen, porch and coconut palm) into Magnum’s Bar & Grill, where the profits were made. So obviously, a pub subsidising its guest-generating hostel is not a new concept. Four years later, the Whitsunday Village Resort was gone, maybe because the concept didn’t work out for them.
So who was to blame? Maybe I was, because I shunned the pub hullabaloo, preferring to buy some beer at the supermarket and consuming it on the porch with my other low-budget friends. Maybe there was a price cartel by competitors, which is – or should be – forbidden anyway. But most probably it was a simple result of market forces. Probably the competitors were better at economising. Maybe they had lower costs and could therefore survive on competitive prices. However, for all I know, the management of the WVR was to blame for its failure and nobody else.
What’s my point? The backpacker industry wants to make money. Fair enough. Some operators are so keen to make money that they have lost track of their customers needs. Wrong priority. Upon failure, they blame their competitors for being successful with rock-bottom prices. That’s just gross.
Many corporate managers who discovered backpacker tourism as a money-making machine in recent years don’t seem to have realised that despite the flashpacker hype with its on-site massage parlours and gyms, most backpackers are still budget travellers who don’t give a damn about such amenities, and many will go for the cheapest option available. This is even more the case in times of crisis, with little work available to pay for costlier accommodation or activities. You may want to bother asking your guests what they actually want every once in a while before slashing out on colleagues who do so every day. Lyndell made the same point in his comment.
I am wondering about the composition of attendants at this year’s ATEC BYIC. (For the future, try to find a wording with a catchier abbreviation, btw!) If really all of them agreed that discounting in itself lowers quality standards, they have a very simplistic view on the price-quality coherence. I suspect that again, the conference was dominated by large operators, who want to “make money” in the first place in order to open a new posh branch in a downtown location every two years. If they deem Cairns not worth investing in, it’s their problem rather than that of Cairns or of backpackers.
In fact, backpacker destinations may benefit from investment by many small rather than a few large companies. This creates more employment, more diversity and therefore more economic stability. After all, lesser comfort, but lots of charm and personality with hosts caring for their guests individually is a domain of small hostel and tour operators. Since a friendly smile and a ‘home away from home’ atmosphere don’t create high costs, they can afford to offer them free of charge. Yet this ‘nest warmth’ is invaluable to their guests.
Another point: Small operators don’t need high profits, because they don’t aspire to expand constantly. Since variable costs are a negligible factor in the accommodation industry, there’s plenty of flexibility for discounts if market forces demand them.
Having said that, dumping prices are sometimes a product of quality-damaging cost-cutting policies, some of which are practiced throughout all backpacker business types and sizes. For example, many hostels let backpackers do the cleaning, laundry, etc. in exchange for a free stay. You can’t expect them to take much care of your business if this means they work for an equivalent of $5 or less an hour – definitely not if they’re used to earning 8-12 Euros (!) an hour back home.
And certainly illegal hostels (i.e. rental homes shared by five people per room – a lifestyle also widespread among Aussies in London) are a problem in the cities. But since they are illegal, this is an entirely different issue.
Finally a word to Vanessa: A rotten apple is a rotten apple, no matter how much you praise it.
Sorry for the length of my comment, I got carried away.
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