INSIDE TOURISM – EXPORT MATTERS 26 September 2012
Cheaper from China: by President Martin Horgan
The 30 day Asia rate structure we have today was an initiative I expect New Zealand picked up a couple of decades ago from other destinations frequented by Chinese travellers.
The philosophy in New Zealand behind heavily discounting short lead hotel inventory was to “stimulate and unlock new business” from what was then the new and developing China (and other Asia) markets. The industry was also turned on by the prospect of last minute ‘top-up’ business that for many busy hotels represented the icing on the cake.
The forecast and outlook for inbound tourism is changing fast and arrival numbers from China are through the roof year on year. At the same time some of our traditional markets are doing it tough.
This has to mean that we’re selling more rooms to Chinese visitors than ever before, and therefore a higher percentage of rooms are going out the door at Asia/30 day rates – often 30% below traditional wholesale rates.
Is this something the hotel industry is worried about? As standalone room rates – are these short lead room rates sustainable for hotels? If not, is there potential for this to be an issue for the greater industry as hotels can no longer afford to upgrade and re-invest, ultimately bringing quality down?
Increasing arrival numbers suggest we’ve been successful in stimulating the Chinese market and there is no doubt we love the late feed that China and other Asia markets offer. But if we take a step back and look again at why we discount so heavily – is the Asia rate structure still relevant?
China is now the world’s second largest economy and gunning down the US quickly. Wealth has increased significantly in China and so in 2012, in the middle of the ‘GFC’ (that’s messing up other economies all around the world) it would be very easy to argue that markets such as UK, USA and Europe need a hand up and some encouragement to visit to New Zealand more than China does.
As the balance of the world’s wealth creeps east we’ve seen visitor numbers from China rocket, but I wonder if during that time Asia discounting has simply become habitual for us? What about when China becomes the world’s largest economy, will we still be discounting to this market? Should we? Right now that’s what it looks like.
We all know that China naturally has a late booking pattern. What we’ve done over the years is create an industry where the market is aggressively driven by a 30 day rate structure, but I’d like to know… is the bulk of the market actually stimulated by it?
Does Asia discounting now just play into the hands of this market? Would we do it again today? Are we inadvertently supporting shopping tour operators who want cheap destinations to lure shoppers to rRather than positioning New Zealand as a desirable quality destination?
At what stage and under what circumstances should New Zealand consider weaning China off the 30 day rate card? It’s worth thinking about I reckon.