I presented this paper at a tourism conference in Laos in 2000. The contents are still relevant.
Keywords: Leakage, Laos, marketing, Internet, revenues, LDC
Abstract
The paper examines how ecotourism operators can maximise revenues to host nations.
A growing number of developing nations are promoting ecotourism as an alternative to mass tourism. Most of the ecotourism operators are small to medium sized businesses whereas traditional tourism operators are much larger. Many National Tourism Authorities are promoting the sale of ecotourism products through traditional channels that are normally used for the sale of mass tourism. However, the traditional sales channels are not that successful at selling ecotourism products. For example, wholesale / travel agent channels only allow about half of the customer’s money to stay within the host community. By using the Internet and other methods of communication, small ecotourism operators can deal directly with their own customers and gain the opportunity to keep much more revenue within their host community using. In doing so, ecotourism operators can avoid traditional agents and sales chains and can stick to one of the generally accepted principles of ecotourism – the involvement with and the benefit to local people. This presentation will outline the process by which small ecotourism operators and NTOs can use alternative marketing, to gain direct access to their customers and enhance their financial viability.
This case study relates to tourism promotion in the Lao People’s Democratic Republic (Lao PDR). Laos is a landlocked country surrounded by China, Vietnam, Cambodia, Thailand and Myanmar (Burma). The mountainous country has the Mekong River as its lifeline, a population of approximately 4.5 M and is one of the poorest countries in the world. Laos represents one of the last corners of unspoiled Indochina.
Tourism is a relatively new concept in Laos. Years of secretiveness and suspicion of the west followed the communist takeover of the ex French colony in 1975. Tourism was rare in Laos until the opening of the Friendship Bridge in 1994, the first bridge to span two countries across the Mekong River. Before this time, regulated tour groups were allowed, but Visa complications and a very poor infrastructure remained a big barrier to tourism. By 1998, the Lao government had relaxed visa requirements, introducing ‘Visa on Entry’ at Vientiane’s Wattay Airport and the Friendship Bridge.
The Lao government views tourism as a foreign currency generator and official statistics put tourism as the country’s top export earner (WTO/UNDP,1998). The Lao Government’s Board of Investment encourages investment in tourism and to date, there are a few joint venture programmes in the country. The approach of the NTO (The National Tourism Authority of Lao PDR – NTAL) and tour operators has been fairly typical of less developed countries – approved itineraries and programmes marketed to wholesalers and an NTO whose role is more administrative than proactive. Destination marketing is not well organised, indeed the role of the NTAL is more one of registration of tour operators and hotels than actively marketing the country. The ‘Visit Laos Years 1999 – 2000’ are hardly known outside the country and fall as a dim shadow to neighbouring Thailand’s highly lavish Amazing Thailand 1998 – 1999 campaign.
Laos received approximately 500,000 tourists in 1998. (NTAL, 1999) Of those, 370,000 or so were border tourists, most from neighbouring Thailand – probably as day trippers and visits to relatives. Of the remaining 130,000, possibly half of those were business travellers, aid workers and people traveling to Laos to renew visas for other countries. This left approximately 65,000 ‘real’ tourists. The total tourism revenue for Laos was $75M for 1998 (NTAL, 1999). Laos is a charming country that is rich in culture, nature and has specialist interest as an ex French colony. Having no beaches, it is not a Sun, Sea and Sand destination. There are no package tours, and most visitors seem to be highly educated, professional and managerial although no data has been compiled to support this. Most of what Laos has to offer falls within the areas of nature based, ecotourism, adventure travel and cultural tourism. In this respect, the entire country could be viewed as an excellent ‘ecotourism’ destination. On the negative side, there is little infrastructure and a limited number of arrivals by air. The Friendship Bridge is not always convenient for international tourists. The reputation of Lao Aviation is not good, having been the victim of travel warnings from a number of overseas governments (UNESCAP, 1999). Whilst the claims of the airline being unsafe have yet to be proven, the reputation of the airline has been seriously damaged and some operators will not book internal flights. In 1997Discover World Inc, a major subsidiary of the Japanes giant JTB suspended tours to Laos based on the Japanese Ministry of Foreign Affairs warning on travel to Laos (Iiad, 1999). The biggest problem however, is that very few people have even heard of the the country – recent research showed that few Australians, for example knew of the country, many thought it was in Africa. (King, 1999)
The resources of the NTAL are very limited. The staff is not very experienced in marketing to overseas customers, however the situation is improving. A WTO / UNDP plan for marketing has recently been completed, but the plan relies on advertising and promotional budgets that the country simply does not have. (WTO/UNDP, 1999)
Traditionally, NTOs in the Greater Mekong Subregion (GMS) have used the normal routes to promote their products – trade shows and wholesalers. In itself, not so much a problem, especially in developed nations, but with Laos, as with other GMS destinations there are several problems associated with this approach.
- There is little knowledge of the product down the supply chain from wholesaler to high street travel agent.
- High street travel agents have a fear of selling the unknown.
- There are very few specialist high street agents.
- There is a long time factor of about 18 months in bringing the product to the marketplace.
- Products can be turned on or off instantly by wholesalers.
- There is a lack of control – all the power is in the hands of the wholesaler.
- Financial leakage can be great.
The paper concentrates on these last two points, control and leakage. Leakage is the amount of money generated overseas from a sale that does not reach the host community and can be as high as 90% (Lindberg, 1998) A typical example from Laos follows and is based on published tariffs:
Hotel in Vientiane, rack rate (walk in/book direct) $25 /room / night
Bangkok based wholesaler sells this room to travel agents overseas for $41 / room / night
Overseas travel agent marks up this room, say 15% to $47.
Leakage is 47%, based on the rack rate, however we do not know the rate at which the hotel sells its allotment to the wholesaler. We can safely assume that the leakage in this case would be well in excess of 50%.
Within the business of selling packaged tours, the problem is similar. A typical one week tour retailing in the US for $1,200, would be sold from Laos for about half that figure. It is, of course, fair to argue that the wholesaler and travel agent supply chain does the job of destination marketing, and promotes the product in markets that the host nation operator is unable to do. However, there remains an option whereby operators can deal directly with FIT customers, resulting in the reduction of leakage. As long as the operators do not undercut the high street travel agents this option is fair to the wholesalers. The collapse of the supply chain can have a number of advantages to LDCs:
- Less may equal more – fewer tourists, spending more with local operators will allow greater revenues, whilst handling less individuals.
- There is far less demand on an often non existent, or unsophisticated infrastructure if there are less travellers.
- Empowerment – the local operator has more control of his destiny.
- Badly needed cash is put directly into the community.
- Rate of exchange fluctuations become less of an issue. In 1997, one major Thai wholesaler claimed that he made more from currency devaluation than from trading (Shepherd, 1998). This method of doing business has no part in the development of tourism in LDCs.
The local operators and NTOs in LDC have a number of options to collapse the supply chain. Firstly, dealing directly with independent travellers (FITs), through direct marketing, advertising and the use of the Internet -synergy between the parallel growth in ecotourism and the Internet is well documented (Mader, 1998). Second, FITs such as backpackers can be encouraged – backpackers often put more money directly into the host community although cultural sensitivity has to be treated with care (Luther et al, 1998). In Laos, backpackers will stay in locally owned guesthouses, eat local food, and travel on local buses. Finally, specialist agents can be identified and dealt with directly, without the need for wholesalers who traditionally package hotels and ground transfers and tours that are easier to promote to mass markets.
The promotion of Laos, by the NTAL and tour operators / hotels has been encouraged by the establishment of a Visit-Laos website and associated promotion. The website is provided by the private sector at no cost, but endorsed by the Lao government as the ‘official’ website. Funding comes from sponsorship and advertising. A number of low cost strategic marketing points have been established and are many are currently being implemented to help promote tourism. All of this work is provided by the private sector and attempts to push enquiries to both the website and individual operators. These strategies include, but are not limited to:
- The website itself, and associated website Laos-Travel.net, acting as a pointer to the Visit-Laos.com website. Search engines, whilst often good are only as successful as the data that is entered for a search. A recent report showed that ‘international leisure travellers use a website after they decided where to go’ (PATA, 1999)- bearing in mind that the country is relatively unknown, search engines may well not be the best method getting to the information for the end user.
- A postcard campaign has been launched to media that covers Indochina and South East Asia. The postcard – a full colour image of the website’s home page encourages media and other recipients to visit the website and find out more about the country. Publicity in traditional print media and television will educate the traveling public about the destination.
- Links from other non commercial sites covering travel in Asia have been encouraged.
- Press releases are planned from the website, informing media, agents and other interested parties of tourism activities in Laos.
- Targeted email lists are being established. These lists will be compiled from people who have visited the websites and other travellers who have registered at other websites for information about travel in Indochina. Purchasing email lists from organisations in being investigated, but the danger of ‘spamming’ is also being seriously looked at.
- The country and its websites are being promoted through specialist private subscriber only newsgroups.
- Specialist tour operators and adventure clubs are being contacted to make them aware of tourism potential in the country.
- In the US NGOs can in some cases, offer tours to tourists that are tax deductable – this option is also being investigated. The conditions of such a tax deductible holiday is only that locals should benefit directly from the tour.
Internet access in Laos is a relatively new thing and most operators have little understanding of the power of the Internet. To this end, it has been proposed by UNESCAP, that training in the use of the Internet be encouraged in Laos. Currently, a proposal is being prepared that will set up private sector and donor agency sponsorship of such courses to be held at the Mekong Institute in Thailand.
Conclusions
The empowerment of the NTAL and local tour operators and hotels will help to encourage tourism, especially ecotourism in Laos – such tourism may well result in greater revenues with less of an impact on the fragile infrastructure. Operators should be encouraged to be more independent of agents and wholesalers through intensive training in the use of not just the Internet, but also other methods of marketing tourism.
References
Iida, Y (1999) Approaching the Japanes Market, UN-ESCAP Seminar on Tourism Promotion in Lao PDR. UNESCAP, Bangkok
King, B. (1999) How to approach Major Travel Markets – Australia, UN-ESCAP Seminar on Tourism Promotion in Lao PDR. UNESCAP, Bangkok
Lindberg, K (1998) Economic Aspects of Ecotourism, p 105, in Ecotourism – A guide for Planners and Managers, Vol 2, The Ecotourism Society, 1998
Luther, HU., Faltin, G., Erber, G (1998) Backpackers: A Niche Market, in Entrepreneurship and Development, Lao-German Economic Training and Advisory Project, Vientiane.
Mader, R (1998) Marketing Ecotourism on the Internet. 8th Annual World Congress for Adventure Travel and Ecotourism, held in Quito, Ecuador, October 1998.
NTAL (1999) 1998 Statistical Report on Tourism in Laos, NTAL Statistics, Planning, Marketing and Cooperation Division
PATA (1999) USA Report (pp 26 – 28), Menlo Consulting Group, USA
Shepherd, N (1998) Ecotourism in Thailand – Where Does the Money Go? Institute of Ecotourism Third Conference, Bangkok, 1998.
UNESCAP (1999) Seminar on Expansion of Tourism in the Greater Mekong Subregion Through Improved Air Transport, Vientiane
WTO/UNDP (1999) Support for Tourism Development and Ecotourism, National Tourism Marketing Plan for Lao PDR. UNDP, Vientiane
WTO/UNDP (1998) National Tourism Development Plan for Lao PDR. UNDP, Vientiane