The Iniquitous Practice of Two Tier Pricing November 20, 2007
Posted by Clarissa Hughes in : Tourism , trackback
There are not that many things in life that get my hackles up. But two tier pricing in the tourism industry, for African and non-African residents, is one of them.
I think the practice arose back in the 1980’s when South Africa was the world’s pariah and the sub-continent’s tourism industry was tarred with the same brush (foreigners had to fly via South Africa to get to any of its neighbouring countries). In those days the industry was largely dependent on the South African market and any foreign revenue was seen as the cream-on-top. I imagine the thinking went something along the lines of: “Well if they’ve taken the trouble and risk of being ostracized to come, they really must want to and therefore they’ll pay.” It was common practice well into the 1990’s in Botswana, Mozambique, Namibia and Zimbabwe to have a price for South African residents and another, higher price, for non-South African residents.
However, when the happy day of democracy dawned in South Africa and the tourism industry opened its doors to the world, so came the responsibility of integrating an industry into a world that embraced us as its darling.
Unfortunately, human-nature being what it is, some people found it difficult to let go of that “cream” and the practice of foreigners paying more than locals continued.
Don’t get me wrong. I don’t abhor the system when it comes to state or quasi-state managed enterprises. South African National Parks still have different prices for citizens and not citizens, as do most, if not all, National Parks on the sub-continent. Considering that it’s the taxpayers in those countries who subsidise the parks, this seems quite reasonable. On the other hand a privately owned business raises its revenues from customers and it’s quite realistic to expect that a business plan has been drawn up and that the break-even point and expected profit has been calculated, regardless of where the customers come from. Heads in beds is the simpler way of putting it. So if the private enterprise has done its job properly there should be no need to penalize foreigners.
Yes, yes. I hear all those locals saying “but what about the exchange rate? One U.S. dollar equals so much of our currency.” And the point is that in an open and competitive world it doesn’t really matter what the exchange rates do, it’s about where the operator can offer a fair service for a fair fee and which market is being targeted. If the local market has been ignored in the past it won’t be long before a sound business brain launches a product in that niche. In a competitive world the foreigner will soon figure out which product is the best value for money and will buy accordingly. To try and disguise this is an insult to their intelligence and ultimately bad for business. And in a similar vein to the 1980s, businesslike operators get tarred with the same brush.
Fortunately, in recent years most tour operators have seen the damage that the practice wreaks and having done their homework they now have a single price for everyone. Yet some linger on. And they appear in the tourism retail sector too.
Not only is the practice unfair and discriminatory but it also hampers good business practice. It is, quite simply, bad marketing.
Comments»
I absolutely agree with you Clarissa, but how do you perceive different visa fee’s for different natinalities?! The British seem to be hit especially hard, perhaps for obvious reasons? I’m a New Zealander and my Mother a South African so it never interfered with my experience, although I must say getting into Zimbabwe from Zambia was by no means easy or inexpensive.
Thanks Bruce. Yes, I hadn’t really extended the principle to visa fees before, but I think you’re right. There are probably some government/state security/diplomatic reasons that we’re unaware of but from a marketing perspective it doesn’t gel. From the layman’s viewpoint it appears that the application of visa fees is somewhat tit-for-tat and administered with a fundraising fervour. In my mind it opens up an entirely different debate and that runs along the lines of by “punishing” certain segments one ends up by being “punished” in unforeseen and subtle ways back. Or to put it another way, discrimination backfires on the discriminator.
As I understand the workings of a competitive market, the price will settle at the price that the market will bear i.e. what customers are prepared to pay. As international travellers are generally able, and prepared, to pay more, prices for African destinations and products will converge to a price that is higher than most locals could afford, for all the reasons that distinguish a developing country from a developed country. Locals are thus unable to enjoy the attractions in their own backyards, and that is a dangerous state of affairs when land use and development vs conservation issues arise.
So rather than frame two-tier pricing as “discrimination against” international travellers, I would rather position it - in such cases where locals are offered prices that ensure that they also enjoy the utility of local destinations - as a positive promotion of local tourism.
Under these circumstances, two-tier pricing is entirely justified, in my opinion.
Compelling arguments, indeed….
As Ralph rightfully pointed out, prices in the free market economies like SA are as a result of the interaction between supply and demand forces. It is apparent that SA is one of the most sought after tourism destinations in the world and due to this, prices will inevitably escalate. Unfortunately SA is one of the most (if not the most) unequal societies in the world, due to this, higher prices mean that a considerable part of the society (less privileged majority) is unable to enjoy some of the country’s resources. In my view, the quasi-government entities like SANParks, Voortrekker Monument, SA Apartheid Museum, KZN Ezemvelo and many others are correctly applying two-tier pricing so as to enable those less privileged to experience and enjoy our historical and natural resources.
However, for private entities, I am not certain if the two-tier pricing is justified. I am of the view that discriminate pricing (of any shape or form) within the free market economy not only distort the functioning of the markets but also results in the inequitable allocation of resources.
Private companies can contribute positively in the upliftment of the disadvantaged communities through (passionate and unconditional) skills development programmes. This country needs entrepreneurs (particularly tourism entrepreneurs) who realize that the sustainable future of this country is deeply entrenched in the upliftment of the previously marginalized majority. Any attempts by them to uplift these communities (directly or indirectly) would bring about prosperity and stability in our country. There’s no evidence that these entrepreneurs are currently doing that…the industry employment demographics will reveal the relevance of my statement.
That, in my view, is the most effective and sustainable way of bridging the gap between the haves and have nots than the two-tier pricing.