de Silva Wijeyeratne, G. (2002). What Price Eco-Tourism? LMD. November 2002. Page 140.Volume 09, Issue 04. ISSN 1391-135X.
Dangers of employing traditional pricing in eco-tourism.
Gehan de Silva Wijeyeratne warns of the dangers of employing traditional tour pricing for the infant eco tourism industry
Without any doubt, Sri Lanka possesses all the natural advantages which are required to develop as an eco-tourism destination. Our topography allows a small island to have a remarkable diversity of terrain and climates which one would normally have to traverse a continent to experience. A mountainous core and two monsoons create pronounced climatic zones through which over a hundred river systems flow. Rainforests, scrub jungles and human created habitats create a patchwork of habitats which are biologically diverse and scenic. Our bio-diversity richness makes it one of the richest per 1000 sq km for many key taxonomic groups. Furthermore, rather surprisingly for an island of its size we have glamorous, large animals such as the Elephant, Leopard and Sloth Bear.
The small surface area with a varied topography gives Sri Lanka the potential to become a leading adventure destination in the world, perhaps the best in Asia. This should be tapped by nation wide initiatives such as the recently launched National Cycling Trail and followed up with further initiatives such as a National Trekking Network.
I am often asked for a definition of eco-tourism. A number of definitions exist. For my purpose of product development, I define eco-tourism as tourism which is based on the topographical, cultural and bio-diversity fabric of the country. Good eco-tourism will have a number of attributes such as being responsible, sustainable, seek to minimize adverse physical and social impacts and benefit the local communities. Such a wide definition will embrace both adventure tourism and nature interpretation based tourism. Most people’s view of eco-tourism is based around nature watching, bird watching tours being a good example.
The biggest risk faced by eco-tourism in Sri Lanka is that we will not understand the knowledge – price premium equation. Tourism in general, in Sri Lanka has regrettably been positioned at the low end. To put it colloquially and harshly, we have trashed general tourism and we should not trash eco-tourism in the same way. This will not be easy to avoid. Sri Lankan Tour operators work on a ‘sum of the parts plus mark up’ principle. Thus our Traditional Price equals the sum of the component costs (accommodation, transport, guide fees etc) plus a Mark Up (say 10%).
If the costs were provided at an advantageous price to the sellers, then a 10% return on this may be a viable return. Although this may be below the return on relatively risk free bonds. Given that the costs, for example the hotel accommodation is priced at bitterly negotiated low prices, it is clear that 10% on low costs is not providing an adequate economic return. Our pricing has economic hubris built into it, although this may not be obvious. If this is not obvious, ask yourself why even in a four star property a receptionist may not speak good English, why the average safari jeep is falling apart at the seams. This is because we are not pricing in what it takes to build, rather than throttle, our tourism infrastructure.
Eco-tourism may allow us out of the trap, but only if we have the courage. Bear in mind traditional pricing may hold sway in our traditional mass market tourism product, which will remain important for many decades to come. With good eco-tourism we should price in several factors. A factor for the Experience or Scarcity of a commodity. Sri Lanka is the best place in Asia for seeing Leopard. It is also the best in Asia for Elephant. Only a Sri Lankan rainforest will have Blue Magpie and other endemic birds. This is worth a premium. We consistently fail in perception marketing and not surprisingly fail to charge a premium for the perception factor. Perception is worth something. This a nebulous quantity, created by good marketing, good service and leaving a customer feeling it was worth the price. This factor could be reflected in the Scarcity factor as we can create a perception that they should be prepared to pay more to visit a Sri Lankan rainforest as opposed to a beach.
We also need to price in a factor for Expertise. This is partly to recognize the expertise already possessed and partly to encourage others to enter eco-tourism. We should strive to price in premium rates for our wildlife and adventure tour leaders to encourage the best talent to come in. We should also further encourage further those already in the business. Nature Interpretation in particular calls for an altogether more ‘cerebral personality’.
The other factor we need to price in is an Investment premium . This is partly to recover costs already expended. For example, under the Jetwing Research Initiative, a significant sum of money has been expended. This needs to be recovered by sensible pricing. Also, we need to price in the need to pay better rates for the providers of accommodation, jeep hires, transport, guides etc. These service providers cannot ‘up the level’ if they are chained down to lower prices. Better room rates will lead to room refurbishments etc. We also need to price in the cost of further investment, whether it is on research initiatives or investing in skills development. With eco-tourism the correlation between investment and pricing is easier to see.
This calls for an ‘inversion of large scale economics’ which flies in the face of traditional economics, not just tour economics. For example, imagine you can buy a hundred jeep safaris. The traditional approach would be to squeeze the local jeep operator for the ‘best price’. The jeep operator caves in, but is left little scope to upgrade the jeeps which the tour operators and clients complain bitterly about. Supposing you offered a higher price than usual with the caveat that money is invested in upgrading the vehicle fleet? It may work out, if the jeep operator can be convinced of a ‘positive feedback loop’.
On the basis of the above factors (not necessarily exhaustive), a price for an eco-tourism product can be seen as the sum of the Traditional Price plus a factor for Scarcity, Expertise and Investment. By breaking it down to component factors, I am merely articulating some of the factors we need to price in to grow our eco-tourism industry to set it on an upward spiral as opposed to consigning it to the dismal fate our traditional tourism product. Of course, the pricing equation can be simplified to the sum of the component costs plus a very large mark up. All this is easier said than done. We are all guilty of haggling for the lowest price. The challenge is to take a long term view and to work in partnership with your service providers for everyone to up their game. Every tour operator in Sri Lanka knows the price at which the component element of a package can be bought at. The challenge is to understand the value of the package. Sometimes, the value is more than the sum of the component parts and we need to price accordingly. To achieve this, eco-tourism operators need to realise that expertise is their principal commodity. They are not traditional tour operators but instead they are knowledge merchants.
The writer manages a wildlife and adventure travel company. He is the lead author of A Birdwatcher’s Guide to Sri Lanka (OBC) and A Photographic Guide to the Birds of Sri Lanka (New Holland). To subscribe to his free, wildlife e-newsletter, e-mail him at gehan@jetwing.lk with “subscribe wildlife news” in the message header.