One Thing You Can't Do When You Depend On Tourism

[Johan Knols]

Look in the direction where the money is coming from!

Price hikes of safaris

Last month it was announced that the VAT in Botswana gets raised from 10% to 12%. Still not bad if you live in a country where one pays 19%. Yet, there is an outcry
from the international tourism industry about this announcement by the Botswana
government. Why?
It is quite simple actually.
You are a tour-operator doing your utmost in these difficult economic times to
keep your head above water and you try to minimize your expenses to the
extreme. You get prices from the local operators, you negotiate rates, decide
on how to publish your competitive prices and you are ready when (amongst other
tools) your brochure is printed. Than disaster strikes.
The African country that you focus on decides to hike its VAT with 2%. Not a
big deal I hear you say, since 2% is not that much. But hang on, there is more
to it.

Consequences

You as an operator might as well take your printed brochures back home and light the fireplace with it. All the work that went into developing it is down the drain
since prices are not correct anymore.
The administrative system of the tour-operator has to be adjusted and all
online prices will have to be changed accordingly. This all requires hours of
manpower and therefore (lots) of money.

Example 1:
Client: “Good day. Here speaks Mr(s) X. I had a look at the brochure that you sent me and I would like to hear more about that 10 day safari to Botswana for
€ 5600,-“.
Tour-operator: “Good morning Mr(s) X. Let me start by saying that this
particular trip, due to a VAT increase from the Botswana government, is not €
5600,-, but unfortunately € 5712,-”.
Client: “But your brochure says that the price is € 5600,-, surely you have to
give me that trip for the price that you advertise it for? And I would like to
come with a family of 5, that makes a difference of € 560,-!”.
Tour-operator: “We are very sorry about…….etc, etc.

Example 2:
Tour-operator: “Good day Mr(s) X. I am calling you with regards of your Botswana trip that you booked two weeks
ago and for which we still have to receive payment. Unfortunately I have to
tell you that the invoice that we sent you is, due to an unexpected VAT
increase in Botswana, not correct. We will send you a new invoice, which will
unfortunately be € 560,- higher”.
Client: “What? Are you guys out of your mind? We have a verbal agreement on the
price that we discussed…..etc, etc.

The result of the VAT-hike will be a very unhappy client and a very unhappy tour-operator. Since that client doesn’t know anything about Africa or Botswana, it is the
tour-operator that looks like a fool and looks unprofessional. Clients are
clients and it is not strange that if we confront them with a price DE-crease
(like the price reductions in Kenya after the 2008 violence), that they don’t
mind and become all ears. But price IN-creases are seen in a completely
different light.

Are price increases right or wrong?

The fact that African countries increase their prices or their VAT percentages is not a problem in itself. In difficult economic times we do the same in the
western-world. But what is a problem is the timing. If, in the case of
Botswana, a reasonable time-frame could be implemented and the international
tourism industry would get a warning that in six month time this and this is
going to change, a lot of anger,
unbelieve and mis-communication could be avoided. Not only would that benefit
safari clients and the oversees operators, but also the image of the African
countries themselves.