The question of ethics is always one that’s worth considering.
A restaurant owner reports that some guests travelling in groups out of India have complained that the retailers who sold them the packages have charged three-, four-, and even five times more than the prices advertised on the shop’s menu, and that the local tour operators’ representatives have asked the shop’s managers to hide the menus from the guests so that they won’t see the prices. And given that the owner doesn’t want to be identified for fear of losing business – well, you almost have to ask around.
What are the best practices in situations like this?
According to the Chief Operating Officer of Tourvest Destination Management, Martin Botha, “Our Indian business is always packaged (groups and FITs), so our clients would not be able to compare costs of the individual services making up an itinerary.
“Packaged or not, this market is very competitive and price sensitive, and in our experience it is impossible to win business if any component of the package is marked up to the extent claimed by the restaurant owner.
“From our side we work on extremely small margins for the Indian market, but there is still outbound wholesalers and retailers in India and we have no influence over what the traveller ultimately pays for the tour and services.
“We work with established traditional tour operators in India who, like ourselves, appreciate that our sustainability depends on remaining honest and providing the market with fairly priced packages.”
Martin pointed out, though, that the barriers to entry into the market are low both in India and in South Africa.
“In recent years there has been a surge in the number of opportunistic operators who have cut through the distribution channel, dealing directly with customers in India and suppliers in South Africa.
“Permanency does not seem to have been part of their game plan and consequently in the short term they may have been able to get away with questionable pricing practices. But I’m just speculating,” he said.
This begs two questions: are the guests trying to pull a fast one, or are the tour guides and tour leaders in on this?
Craig Drysdale, the General Manager of Global Sales at Thompsons Africa, said that his company’s clients wouldn’t know the prices of the individual components of a package, either, because they’re negotiated in confidence with the suppliers.
He said, though, that guides can either make or break a tour, and that the problem might arise when they and/or the tour leaders decide to create their own packages to take advantage of, say, an evening at leisure.
“If the group takes a collective decision to go out to a restaurant and wants to use the coach to save on individual taxi fares for example, the guide is required to get a price from us, and the rate is divided between all the members of the group if they accept it.”
This would apply if the guests want to eat from a set menu, too, of course.
“Certainly we would never put a mark-up on those prices because we have other arrangements with the restaurants – either they pay us commission on their rack rates, or, depending on the volume we send them, they may pay us an override at the end of the year.”
Who pays what?
But what happens when some guests in a group have paid the full-board rate for a tour, while others are travelling on half-board, with dinner for their own accounts?
“In our experience, this is more likely to happen with groups out of Europe,” said our restaurant-owning friend.
“It’s a question of what’s fair. You can’t charge half-board guests the lower rate that operator pay for full-board guests – so our solution would be either to feed them off our a la carte menu, or to publish rack rate on a menu designed specifically for groups, and which we’d only bring out when they come into the shop and ask for a group rate.”
As Vivian Guo says in ‘5 Must Know Pricing Strategy Ethics Issues’ on priceintelligently.com: “Some ethical issues are extremely easy to understand: don’t steal, treat others with respect, and always put down the toilet seat for your lady friends. However, when it comes to the market, the concept of what is right and wrong is a bit blurrier.”
So what do you think? What should restaurants and STOs do? And – while we’re about it – what is fair when it comes to mark-ups or discounts between restaurants and STOs? And what’s the role of the guide or the group leader in all of this?
- Please share your comments with the world – online at thistourismweek.co.za.
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