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african journal of hospitality tourism and leisure vol 3 2 2014 issn 2223 814x copyright 2014 ajhtl open access online http www ajhtl com pricing and domestic tourism performance in ...

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                African Journal of Hospitality, Tourism and Leisure Vol. 3 (2) - (2014) 
                ISSN: 2223-814X Copyright: © 2014 AJHTL - Open Access- Online @ http//: www.ajhtl.com 
                 
                   Pricing and domestic tourism performance in Zimbabwe 
                                                     1*                  1                        1 
                                     Kabote Forbes , Mashiri Berthur , Vengesayi Sebastian
                                                 1
                                                  School of Hospitality and Tourism, 
                                                 Chinhoyi University of Technology, 
                                               Private Bag 7724, Chinhoyi, Zimbabwe 
                                       e-mail: kabote123@gmail.com, or fkabote@cut.ac.zw, 
                                                      Phone: +263 772 967 367 
                 
                *Corresponding author 
                Abstract  
                 
                There has been too much attention to international tourism in developing nations than domestic tourism. 
                However; international tourism has proved that it is highly sensitive to international  trends like global 
                financial crises, terrorism, sustainability issues and politics. On the contrary domestic tourism is stable 
                and has proved to be a source of tourism development in other nations. Thus this study sought to explore 
                the  extent  to  which  pricing  was  affecting  the  performance  of  domestic  tourism  in  Zimbabwe  using  a 
                descriptive survey. Domestic tourists staying in hotels made up the population. Results indicated that 
                most tourism products were moderately priced. It was also revealed that Zimbabwean domestic tourists 
                are  highly  price  sensitive.  It  was  concluded  that  in  Zimbabwe  pricing  policies  are  affecting  domestic 
                tourism performance. Major insights were that domestic tourists were in favour of least pricing, discount 
                pricing, differentiated pricing and price bundling. 
                 
                Key Words: Pricing; Domestic Tourism, Tourism Performance, Zimbabwe, Tourism Economics 
                 
                Introduction                                            development planning towards international 
                According to Garin-Munoz (2009),) tourism               tourism  as  opposed  to  domestic  tourism 
                is  an  industry  that  provides  services  and         (Ghimire,    2001)  yet  the  volatility  of 
                experiences  of  domestic  resources  to                international tourism and relative stability of 
                foreign    and    domestic     consumers  in            domestic tourism are widely recognised in 
                exchange  for  revenue.  Roe  et  al  (2004)            research  (Coshall,  2009;  Mkono,  2012; 
                defines tourism as the activities of persons            Ritchie and Crouch, 1993). 
                travelling  to  and  staying  in  places  outside       Mkono (2012)  and  Moseley  et  al.,  (2007) 
                their  usual  environment  for  not  more  than         identified  a  number  of  reasons  why 
                one consecutive year for leisure, business              domestic  tourism  is  not  favoured.  These 
                and  other  purposes.  Countries  the  world            includes    minimal    discretionary    income 
                over, particularly developing countries with            among the majority of  developing nations’ 
                unstable     economies      have     come     to        population,  the  presents  and  demands  of 
                recognize the importance of tourism to local            immediate  challenges  facing  developing 
                economies       (Mazimhaka,       2006)     and         nations’  governments  that  include  HIV, 
                domestic tourism in particular has played a             dilapidated  infrastructure  and  poverty  that 
                key role (Ndlovu et al., 2010). In Africa there         constraints their ability to stimulate domestic 
                is  a  systematic  bias  in  national  tourism          tourism.   
                                                                                                                      1 
                 
               African Journal of Hospitality, Tourism and Leisure Vol. 3 (2) - (2014) 
               ISSN: 2223-814X Copyright: © 2014 AJHTL - Open Access- Online @ http//: www.ajhtl.com 
               In  most  developing  countries  tourism  is        conditions surrounding a company’s internal 
               focused  primarily  on  international  market       or  external  environment  (Lowengart  and 
               causing  prices  to  increase  beyond  the          Mizrahi,  2000).  Pricing  objectives  provide 
               affordability  of  most  domestic  tourists.        direction  for  action  when  setting  prices. 
               Zimbabwe along with most of its neighbours          Empirical  research  has  indicated  that  the 
               adopts  a  differentiated  charging  system         objective   functions  of   companies  are 
               throughout  much  of  its  tourism  industry.       versatile  in  that  the  viability  of  companies 
               Zimbabweans  pay  the  lowest  amount,              rests  on  a  combination  of  different  pricing 
               residents  of  neighbouring  countries  pay  a      objectives  (Diamantopoulos,  1991).  These 
               moderate fee and international visitors are         objectives are flexible and change over time 
               being  charged  the  highest.  However  this        due  to  environmental  or  organizational 
               three tier system was designed years before         conditions. 
               Zimbabwe experienced an economic crisis             Pricing  methods  depend  on  the  specific 
               between  2000  and  2009  (Murray,  2010).          formulas  used  in  order  to  levy  a  price. 
               Murray (abid) argues that the purpose of the        These  formulas  might  range  from  highly 
               policy  appears  to  be  more  of  revenue          sophisticated  ones  to  rather  simple  ones 
               maximisation  based  on  visitor’s  nationality     that  employ  a  more  general  approach  to 
               than  allowing  poor  African  to  enjoy  their     setting  a  price  (Diamantopoulos,  1991). 
               heritage as the fees are still too high for the     Moreover,    the    complexity   of   pricing 
               average citizen.                                    decisions imposes the need to adopt more 
               Poor pricing policies have lead to a decline        than one pricing method in many cases. For 
               in domestic tourism (Walpole et al., 2008).         instance, a particular pricing method might 
               According  to  Mazimhaka  (2006)  in  most          be used in everyday pricing decisions, while 
               developing  countries  tourism  is  focused         another method may be adopted in some 
               primarily  on  the  international  market  and      special  circumstances,  for  example  to 
               this has caused prices to increase beyond           discourage a new competitor from entering 
               the affordability of most domestic tourists. If     the market. After a review of the literature 
               pricing   policies   are   not    addressed,        on  industrial  pricing  and  service  pricing 
               developing  nations’  tourism  industry  will       eight pricing methods were revealed, which 
               loose the economic benefits that could have         fall into three broader categories which are 
               accrued through domestic tourism (Walpole           cost-based,      competition-based       and 
               et  al.,  2008).  Thus  this  study  sought  to     customer-based. During the pricing process 
               explore the extent to which pricing affects         tourism establishments consider a number 
               the  performance  of  domestic  tourism  in         of factors. These include the location of their 
               Zimbabwe.                                           business unit vis-à-vis the Central Business 
               LITERATURE REVIEW                                   District (CBD). Those closely located to the 
                                                                   CBD are highly priced than those located far 
               Pricing                                             afield  (Lee  and  Jang,  2012).  During  high 
                                                                   demand season proximity to the CBD allows 
               Price  is  a  measure  by  which  industrial        hotels to enjoy a high room rate premium. In 
               customers  judge  the  value  of  an  offering      low demand season proximity to the CBD 
               and it strongly impacts on brand selections         forces hotels to discount the room rates in 
               among competing alternatives (Avlontis and          consideration  of  the  actions  of  adjacent 
               Indounas, 2007). Furthermore, pricing is the        properties.  
               only  element  of  the  marketing  mix  that        Yield management is another key element 
               brings in revenue for the firm, while it is also    in pricing policies in recent years (Rondan-
               the  most  flexible  element  of  this  mix         Cataluna  and  Rosa-Diaz,  2014).  Yield 
               because  the  pricing  decisions  can  be           management  is  a  way  of  managing  the 
               implemented relatively quickly. For example         demand  and  supply  by  simultaneously 
               price changes can be adapted easily to the 
                                                                                                               2 
                
                   African Journal of Hospitality, Tourism and Leisure Vol. 3 (2) - (2014) 
                   ISSN: 2223-814X Copyright: © 2014 AJHTL - Open Access- Online @ http//: www.ajhtl.com 
                   manipulating prices and available capacity                        Importance of Pricing 
                   (Avlontis  and  Indounas,  2007).  Through                        Pricing is an art and its main goals are to 
                   yield  management managers may allocate                           optimize profit, reduce losses and maintain 
                   the     available      capacity      at   any  time,              market share for the organization and the 
                   monitoring the market segments and setting                        industry (Sangkaworn and Mujtaba, 2010). 
                   prices  according  to  market  demand  and                        According  to  Gallego  and  Şahin  (2010) 
                   price  sensitivity.  Lower  prices  will  be                      price  is  a  very  important  factor  in  the 
                   charged  to  price  sensitive  segments  and                      operational market because this is the only 
                   higher prices to those segments that show a 
                   greater willingness and ability to pay. As a                      element  among  the  four  P’s  of  marketing 
                   result  organisations  are  able  to  maximise                    mix  that  generates  income.  Sangkaworn 
                   revenues from the available capacity (Selmi,                      and Mujtaba (2010) states that pricing is a 
                   2010). According to Christie and Crompton                         science  however  it  is  not  necessarily  an 
                   (2001) pricing of hotel rooms is aggressive                       exact science because it requires some skill 
                   and  both  sophisticated  and  opportunistic.                     and  research.  Through  an  exhaustive 
                   Each hotel room within the same hotel sells                       accumulation             of         decision-making 
                   for  a  different  price  depending  on  its                      information       combined         with     how      the 
                   location,  view  and  size.  To  add  on,  the                    company operates, managers can create a 
                   same hotel room sells for a variety of prices                     good  pricing  policy.  According  to  O’Hara 
                   depending on several additional factors. For                      (1995)  pricing  plays  a  major  role  in  any 
                   example, because hotels have fixed costs                          business establishment. He suggested that 
                   that  are  high,  capital  and  operating  costs,                 the right price is one which the customers 
                   occupancy rates can be as important to a                          will be willing to pay and at the same time it 
                   hotel  manager  as  price,  provided  that                        allows a reasonable margin of profit. Prices 
                   variable  costs  are  covered.  Therefore,                        influence  the  market  share,  competition, 
                   prices lower than the rack or advertised rate                     profit,    product  quality  and  the  entire 
                   may be offered to groups in order to cover                        marketing program. 
                   the unit fixed costs. Similarly, prices vary in                   Effects of Pricing 
                   the off, shoulder and peak seasons for the 
                   same room. Sometimes for social, political                         According to Christie and Crompton (2001) 
                   or  even  economic  reasons,  preferential                        competition in the tourism industry is driven 
                   prices apply to domestic tourists.                                not  just  by  price  and  volume,  but  also  by 
                   Sahay  (2007)  noted  that  most  companies                       innovation,       technological       advancements 
                   use  comparatively  simple  strategies  to                        and entrepreneurial management. However, 
                   determine prices and these include: uniform                       without  a  doubt  price  is  a  key  element  in 
                   pricing,  competitive  pricing  and  cost-plus                    influencing the tourist’s decision to choose 
                   pricing.  In  uniform  pricing,  companies  let                   one destination over another. This is usually 
                   prices     remain  the  same  over  time,                         what happens with mass tourism where the 
                   regardless        of    the     changes        in    the          demand for a beach, sun and sea holiday 
                   environment  (Farahmand  and  Chatterjee,                         often     overrides      differentiation      between 
                   2008). In competitive pricing, companies set                      resorts  because  such  packages  are  sold 
                   prices  based  on  competitors  prices  while                     almost as commodities. A holiday organised 
                   companies with  cost-plus  pricing  calculate                     by  an  international  tour  operator,  who 
                   the cost of a good or service and then add a                      receives  a  commission  for  the  service, 
                   profit  margin.  Uniform  pricing  has  been                      includes         transport        as       well       as 
                   evaluated  as  not  viable  since  the  tourism                   accommodation  and  tourist  services.  The 
                   business today is so dynamic that it needs                        total cost of the package plays a significant 
                   to adjust to changes (Sahay, 2007).                               role in the selection of a destination for all 
                                                                                     but high income tourists.  
                                                                                                                                            3 
                    
                 African Journal of Hospitality, Tourism and Leisure Vol. 3 (2) - (2014) 
                 ISSN: 2223-814X Copyright: © 2014 AJHTL - Open Access- Online @ http//: www.ajhtl.com 
                 Factors Considered When Pricing                            the  country  of  residence.  Thus  domestic 
                 Avlontis  and  Indounas  (2007)  argue  that               tourism constitutes the activities of persons 
                 pricing  objectives  provide  direction  for               travelling  to  and  staying  in  places  outside 
                 action     when      setting    prices.    Pricing         their  usual  environment  but  within  the 
                 objectives  can  either  be  quantitative  or              country of residence for not more than one 
                 qualitative  in  nature.  Quantitative  can  be            year  for  leisure,  business  and  other 
                 measured more directly and are related to                  purposes without engaging in remunerative 
                 profits,  market  share,  sales  or  financial             work and with intention to go back. 
                 indices  such  as  liquidity  or  return  on               Importance of Domestic Tourism 
                 investment. They are expressed in terms of                  According  to  Mazimhaka  (2007)  the 
                 money or in the form of ratios for example                 development of domestic tourism can bring 
                 return  on  assets.  Qualitative  are  hardly              stability  to  a  volatile  industry  and  create a 
                 operational and describe relationship of the               more      sustainable      path    for    tourism 
                 company  to  its  customers  for  example                  development.  In  Kenya  it  was  recently 
                 determination  of  fair  prices  for  them,                observed  that  domestic  tourism  forms  the 
                 competition  that  is  price  stability  in  the           basis for a stronger international tourism. It 
                 market.  If  the  focus  of  pricing  is  purely           also  bridges  the  seasonality  gap  and 
                 financial,  then  profit  maximisation  is  the            therefore  creates  jobs  and  stability  in  the 
                 most  advantageous  strategy.  Given  the                  employment  sector  (Mazimhaka,  2007). 
                 overall demand function, a price is selected               Domestic  tourism  can  also  help  non-five 
                 to  maximize  profits.  In  many  cases,  it  is           star  hotels  and  restaurants  in  the  country 
                 possible  to  charge  different  prices  to                secure steady business and since domestic 
                 separate readily identifiable groups. In this              tourism is the biggest generator of jobs can 
                 case,  the  profit  maximisation  problem                  create a more consistent market demanding 
                 becomes  one  of  selecting  a  number  of                 consistent       service.     The       economic 
                 different prices that match with the number                contribution  of  domestic  tourism  can  be 
                 of  different  groups  to  maximise  the  profit           significant even when domestic tourists do 
                 function.  Such  a  policy  is  called  profit             not have high spending power (Scheyvens, 
                 maximisation  through  price  differentiation.             2007).  According  to  Scheyvens  (2007) 
                 The  approach  is  commonly  applied  with                 domestic  tourism  requires  little  foreign 
                 concessionary  prices  extended  to,  for                  exchange to develop and it is not vulnerable 
                 example,  children,  students  and  senior                 to  fluctuations  in  numbers  caused  by 
                 citizens.  The  ability  to  differentiate  prices         seasonality or problems arising from travel 
                 between different groups will enable the site              booking  system,  international    airline 
                 to increase profits vis-à-vis the single price             schedules,  changing  international  tastes, 
                 solution,  as  long  as  the  groups  have                 perceived      security    threats     or    world 
                 different  demand curves for access to the                 economic recession. Furthermore domestic 
                 site. While price differentiation can be used              tourists  can  contribute  immensely  to  local 
                 effectively to capture more revenue for the                economic       development       because      they 
                 site management, it can also be applied to                 typically  purchase  more  locally  produced 
                 achieve  other  goals,  such  as  ensuring                 goods and services than other categories of 
                 access  for  vulnerable  groups  (Mourato  et              tourists     thus     supporting      small-scale 
                 al., 2004).                                                enterprises     and     the    informal     sector 
                 Domestic Tourism                                           (Scheyvens         2007).       According        to 
                 World Tourism Organization in Mena (2004)                  Athanosopoulos  and  Hyndman  (2008) 
                 defines  domestic  tourism  is  the  class  of             domestic tourism plays a significant role in 
                 tourism  in  which  the  place  of  visit  of  the         maintaining  and  improving  infrastructure 
                 traveller is within the political boundaries of            especially     in    regional    Australia.     An 
                                                                            Australian  tourist  is  more  prone  than  an 
                                                                                                                             4 
                  
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...African journal of hospitality tourism and leisure vol issn x copyright ajhtl open access online http www com pricing domestic performance in zimbabwe kabote forbes mashiri berthur vengesayi sebastian school chinhoyi university technology private bag e mail gmail or fkabote cut ac zw phone corresponding author abstract there has been too much attention to international developing nations than however proved that it is highly sensitive trends like global financial crises terrorism sustainability issues politics on the contrary stable be a source development other thus this study sought explore extent which was affecting using descriptive survey tourists staying hotels made up population results indicated most products were moderately priced also revealed zimbabwean are price concluded policies major insights favour least discount differentiated bundling key words economics introduction planning towards according garin munoz as opposed an industry provides services ghimire yet volatility...

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