Lessons from the Road: Pt 2 Indigenous Tourism Start Ups
This is part two of a previous blog looking at the common challenges in indigenous tourism start ups.
From numerous conversations, clients, experience on working groups and national advisory boards here’s a collection of regular challenges and common thinking that comes up in this sector – from the client. And my common responses, from a business consultant point of view, and tourism industry specialist.
Tourism is a social enterprise, we are a not-for-profit, making money is not our aim.
Many large indigenous organisations are set up as not-for-profits for tax and grant funding purposes. With it comes a weird and wild range of internal reporting and budget allocation practices that bend my mind.
Running a tourism entity as an arm of a NFP is common. There are few tourism businesses that can support long breaks between tours, without overheads being paid (power, fuel, stationary) by another area of the business. Which is great, until it’s not. This normally happens about 12 months in, when the tourism arm becomes a drain because no-one has been watching costs go up, while tourism income stabilizes or worse, drops. Definitions and responsibilities for management get blurry. Tourism becomes ‘customer service’, staff expect full time employment and suppliers expect to be paid, regardless whether the organization is for profit or not.
I believe it’s harder to run a not-for profit tourism social enterprise than a for-profit enterprise. Many assume if it’s a NFP we don’t need conversations about the dull stuff of money, business models, and gross profit margins. I argue in this environment that focusing on what things cost and measuring return on investment are MORE important, due to the internal resistance to do so. Also, we don’t need to set up another indigenous business to fail by avoiding the business practices that make successful companies strong. Why shouldn’t aboriginal people learn how to do this?
We are worth more than that price.
I’ve heard many people defend aboriginal artists and crafts-people about why they set high prices for tours or baskets: it’s the only way they make money, they are sick and it takes them a lot to be there…. This may be true. But we are not talking about ‘compensation’ when we set prices.
When indigenous clients set prices, often they have not been tourists themselves, so have little objectivity about what else the tourist is also looking at. $1000 for a traditional owners’ Welcome to Country ceremony is something few can afford to purchase in a regional town like Alice Springs. But if you sold 10 at $400 you are ahead and building a name for yourself as the go-to group for ceremony on Aranda land, for e.g. It’s not what we think we are worth but what the market thinks and can afford when looking at all the total costs they pay to stay in Australia. Regional Australia is not a cheap, especially for a backpacker or family travelling with kids.
Value for money and volume beats high price one-off sales.
New tourism operators will ask themselves: Do I lower my price to get more bookings so that more people can experience it and talk about me? Or do I keep my prices high to attract a higher paying market which may mean a slower start before I get cash in? This depends on your target market, and the value proposition.
This is all about the value being delivered, not the price. Cost (or price) minus Risk = Value. And the customer decides this, not the business owner. It’s a bit of a dance to set the experience and price point just right. Set your price too high and the customer will expect more value. Set it too low and over-deliver the customer will be thrilled. You want to be somewhere in-between and make sure you are covering costs.
In tourism you want repeat consistent sustained business and bookings. The longer you are in market the more reliable you will appear and travel agents and third parties will trust and book your business more often. There are many indigenous start-ups who charge high early and don’t set up to play the long game – which is fine. It’s not mandatory. But the market has learnt not to trust fly by nighters as it is too risky to let down paying customers if an operator doesn’t deliver what is promised. So you have to work hard to gain trust and commit, commit, commit if you want success in tourism.
Clear Vision Consulting is available for consulting, advisory services and presenting on practical approaches to building indigenous tourism.
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