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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.
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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
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
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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
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.
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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
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
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