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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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