Wednesday, February 28, 2007

Tourist or Traveler?

Himalayan kingdom Bhutan opened its door to tourism a few years ago. Fearing that this little country would be overrun by backpackers like what happened to Nepal, the government of Bhutan decided to woo big spenders on group tour. In other words, they emphasized the quality, rather than quantity, of the visitors.

Closer to home, the government of Malaysia seems to be pursuing similar goal. In Kuala Lumpur, the capital, there are more Arabs than backpackers. Another group of tourists targeted by the government are the Chinese Mainlanders, even though bad publicity has had adverse effects on their arrivals.

But are budget travelers not worth attention by the Bhutanese and Malaysian governments? Carl Parkes, author of Thailand Handbook by Moon Publications, wrote an interesting topic, “Tourist or Traveler?” in his book. His comparison of relative merit of budget travelers and big spending tourists can surprise many of you. I now reproduce this topic here…

Tourist or Travelers?

Tourist offices, resort owners, and visitors alike often debate the relative merit of conventional tourists, who tend to patronize high-cost accommodations and activities, versus independent travelers, who are usually on a more moderate budget. Who spends the most money? Who puts more money into local economies? Which group causes the least cultural and environmental damage? Some very interesting answers were provided in the 1994 Quarterly Review from the Thailand Development Research Institute (TDRI).

The survey showed Thailand attracts visitors chiefly for its warmth, friendliness, moderate cost of accommodations, and interesting nightlife. Thailand ranked fourth in cuisine after France, Italy, and Hong Kong (tough competition); second after Australia in overall appeal; but was rated the second worst polluted country after India Press reports about the deteriorated conditions of Pattaya Beach apparently made an impact.

But the most revealing section of the survey discussed the concept of “tourist” versus “traveler.” Tourism in Thailand is often criticized as aiming for quantity rather than quality. The TAT, in fact, desires to attract only quality visitors to the kingdom – an equation often calculated by multiplying the number of days by average daily expenditures.

Everyone wants quality, but no one can agree on what constitutes the ideal visitor. As you might expect, representatives from the Thai Hotel Association assert that quality tourists are the big spenders – those who stay in international chain hotels, ride in chauffeur-driven limousines, and dine at expensive restaurants.

Others argue that true quality tourists are those who most affect income distribution. Under this socioeconomic definition, the ideal visitor stays in locally owned hotels or guesthouses, eats at local foodstalls, and rides around town in a tuk tuk.

Academic studies conducted by TRDI and several travel specialists conclude that money from big spenders tends to leak outside the country through franchise royalties and remitted dividends to end up on the New York Stock Exchange. TRDI states income generated from budget-to-moderate travelers penetrates into the most needy segments of the Thai population: the guesthouse owners, café managers, and young kids who sell durians in the marketplace.

But who spends the most? The Quarterly Report of TRDI states that although daily expenditures of typical guesthouse visitors are below those of hotel patrons, they ultimately spend more due to their longer stays in the country. Plus, they do more to help the average Thai by patronizing local guesthouses and cafes.

Finally, the report concludes that independent travelers generally cause less cultural and environmental damage than the tourist who stays in international hotels and meets only bellhops and bartenders. Guesthouses, local cafes, and public transportation cause far less environmental damage than the big, international hotels which chew up natural resources and require enormous amounts of energy for air-conditioned rooms, heated swimming pools, and the like. Finally, on a social level, TRDI felt genuine contact with ordinary people is more worthwhile and rewarding than brief superficial encounters with hotel employees and restaurant wine stewards.

[Note: TAT = Tourism Authority of Thailand]

I will add one more point to the arguments given above. Independent travelers are often the best promoters of the countries they visited. Both Carl Parkes and Joe Cummings of Lonely Planet started out as independent travelers. I went to Northern Thailand in Jan 2007, and have been posting photos in my blog.

Governments who are wooing the big-spending tourists at the expense of budget travelers need to review their strategies.

Monday, February 26, 2007

Management Lite & Ezy 26 - Make-or-Buy Decision

A wholesaler or retailer buys everything that it sells; a manufacturing operation hardly ever does. Manufacturers, restaurants and assemblers or products often buy components and subassemblies that go into final products. For example, a computer maker may purchase the processor chips from Intel or AMD, hard disks from Seagate or Western Digital, and DVD drives from Sony or Toshiba.

Since I am a shutterbug, I will give an example in the camera industry. Canon and Nikon are the major producers of digital Single Lens Reflex camera, or DSLR. Three of the most important components of a DSLR are the lens, image sensor and image processor. Canon makes all these three components for its DSLR, but Nikon buys image sensors and image processors from Sony. Nikon sources the components from outside because it is primarily an optics company. Electronics isn’t its core competence.

A variety of considerations in the make-or-buy decision are listed below.

Reasons for Making:

  • Maintain core competence
  • Lower production cost
  • Unsuitable suppliers
  • Assure adequate supply (quantity or delivery)
  • Utilize surplus labor or facilities and make a marginal contribution
  • Obtain desired quality
  • Remove supplier collusion
  • Obtain unique item that would entail a prohibitive commitment for a supplier
  • Protect personnel from a layoff
  • Protect propriety design or quality
  • Increase or maintain size of the company (management preference)

Reasons for buying:
  • Free management to deal with its primary business
  • Lower acquisition cost
  • Preserve supplier commitment
  • Obtain technical or management ability
  • Inadequate capacity
  • Reduce inventory costs
  • Ensure alternative sources
  • Inadequate managerial or technical resources
  • Reciprocity
  • Item is protected by a patent or trade secret

Reference: Heizer & Render, "Operations Management", 8th edition

Friday, February 23, 2007

Hilltribes of Northern Thailand

Hilltribes are minority ethnics who traditionally inhabited the hills of Northern Thailand. The Thai government recognizes six major groups of hilltribes, which can be further divided into dozens of sub-tribes with distinct languages, religious beliefs, customs, costumes and historical backgrounds. The six major hilltribes are:

  • Akha
  • Hmong (Meo)
  • Karen
  • Lahu
  • Lisu
  • Mien (Yao)

Akha women selling souvenirs in Chiang Mai’s night market…

Akha village near Mae Salong

Water supply in the Akha village…

On Jan 10, 2007, I visited a ‘human zoo’ not far from Mae Salong. Here, hilltribe people dressed in traditional costumes posed for photo-snapping tourists. The entrance fee for the human zoo was “sam roi baht”.

This picture shows a Lahu woman with her daughter. Sadly, even this little girl had learned to ask for money whenever her picture was taken

An elderly Lahu man playing with traditional music instrument…

Also in the human zoo were the “long-necked” Padaung women, who belonged to a sub-tribe of Karen. These women lengthen their necks by adding brass rings from about seven years of age to the day of their marriage…

This outdated tradition might have been preserved because of tourism . I feel guilty for visiting the human zoo.

On my way back from the human zoo, I came across this young girl who sold souvenirs beside the road. I asked to take her picture. Guess what, she insisted that I buy an item from her. This picture cost me “ha sip baht”…

Thursday, February 15, 2007

Shinsane Guesthouse, Mae Salong

During my visit to Mae Salong, I stayed in Shinsane Guesthouse for two nights. The owner of the guesthouse was very friendly, so I decided to do some marketing for him. (OK, OK, I know I am not Joe Cummings.)

The bungalows. I stayed in the left one…

Guests in the dining area…

This is the owner of Shinsane Guesthouse…

Shinsane Guesthouse & Bungalow

119/1 Moo 1, Mae Salong

Mae Fahlaung

Chiangrai 57100

Tel: (66) 53-765026

Tuesday, February 13, 2007

Independent Travel and the Future of Travel Agencies

Ages ago, when I was a teenager, I liked to browse through the advertisements of travel agencies in the newspaper. I told myself, “If I have money, I will join this tour. I want to travel to this country.”

Many years have past. This never happens. Rather than joining a package tour, I have chosen to travel on my own. I booked my flights, hailed a taxi to the airport, and flew to another country. I traveled in that country guided by books in my hands, information provided by locals and other visitors, or my own intuition. I was, so to speak, an independent traveler.

Millions of people do the same thing. Independent travel is made possible because of these reasons:

(i) Availability of travel guide books such as Lonely Planet.

(ii) Advent of Internet makes it easy to obtain updated information.

(iii) English is widely spoken.

Why do I choose independent travel over package tour? Because it is flexible. I want to “design” my own itineraries and travel on my own pace. It also gives me more opportunities to interact with local people as well as travelers from other countries.

I expect independent travel to grow in popularity, especially among younger generations. This raises a question: what is the future of travel agencies which offer group tours to other countries? It doesn’t look too rosy if more people choose to travel on their own. Worst still, we can now book our flights online, thus depriving travel agencies another source of revenue.

Is their future bleak? Not really. Independent travelers do not eschew guided tours altogether. For example, in my recent trip to Northern Thailand, I joined a one-day tour to an elephant camp. Other tourists have taken part in guided trekking into the forest. Still others have tried mountain biking or bamboo rafting.

Note that these tours are usually short – from half day to two days – and are arranged by local travel agencies for inbound tourists. The tours advertised in newspapers which I mentioned earlier on are for outbound tourists and the duration is generally longer – between three days and two weeks.

When independent travelers are having time or financial constraints, or when certain destinations are not accessible by public transport, short guided tour remains a viable option.

To be sure, there are many people who don’t belong to the DIY-type. They, when go for travel, want professionals to take care of everything, from hotel booking to purchase of entrance tickets. Nonetheless, short, flexible tours for inbound foreign visitors should be where the action is.

Sunday, February 11, 2007

Management Lite & Ezy 25 – SWOT Analysis – Part II

Internal Environment Analysis

To perform internal environment analysis, one can use a checklist like the one show below:

Checklist for Performing Strengths/Weaknesses Analysis

Apparently, a firm does not have to correct all its weaknesses, nor should it gloat about all its strengths. The question is whether the firm should limit itself to those opportunities where it possesses the required strengths, or whether it should consider opportunities which it might have to develop certain strengths.

Reference: Koter & Keller, “Marketing Management”, 7th edition

Thursday, February 08, 2007

Cherry Blossom, Mae Salong

According to Tourism Authority of Thailand, Mae Salong “is especially picturesque in December and January when sakuras are in full bloom.”

I arrived at Mae Salong on Jan 9, 2007. Unfortunately, the cherry blossom reason had been delayed, possibly due to warmer weather. There were not many flowers

I traveled around Mae Salong and the nearby hill tribe villages. Finally, I found a few cherry trees in full bloom . Here are the pictures…

Tuesday, February 06, 2007

Wat Santikiri, Mae Salong

The government of Thailand has built a magnificent, Thai-style temple in Mae Salong, the settlement populated by descendants of Kuomintang (KMT) soldiers in Northern Thailand.

The main complex of Wat Santikiri is located in the village of Mae Salong, but its impressive chedi, shown below, is built on the 1200-m summit. A staircase of 700 steps connects the chedi to the main complex of the temple.

The chedi is accessible by paved road. Visitors who are more physically fit can, of course, try the staircase.

Sunday, February 04, 2007

Management Lite & Ezy 24 – SWOT Analysis – Part I

SWOT refers to strengths, weaknesses, opportunities and threats. SWOT Analysis is the overall evaluation of a firm’s internal and external environment. Internal environment reflects the firm’s strengths and weaknesses, while external environment presents opportunities and threats.

External Environment Analysis

A firm’s ability to earn profit is affected by key macro environment forces such as economy, demography, technology, politics, laws, social-culture etc. In addition to these, it is also affected by micro environment factors, e.g. customers, competitors, suppliers, distributors and dealers. The firm’s management needs to identify the opportunities and threats based on the external environment analysis.

We can classify opportunities based on their attractiveness and success probability. This is illustrated in the Opportunity Matrix, shown below. Apparently, the best opportunities are those with high attractiveness and success probability. Opportunities with low attractiveness and low success probability are too minor to consider.

We can also classify threats based on their seriousness and probability of occurrence, as illustrated in the Threat Matrix show below. A serious threat with high probability of occurrence has to be dealt with promptly. A less serious threat with low probability of occurrence can be ignored.

Reference: Koter & Keller, “Marketing Management”, 7th edition

Friday, February 02, 2007

AirAsia X, the Long-haul Budget Airline

Now the dust has settled. Tony Fernandes, owner of no-frills airline AirAsia, announced a new company. The new company is named AirAsia X - X for eXtra long.

Unlike most no-frills airline, AirAsia X will offer long-haul budget flights. Its first planned route is from Malaysia to UK. Apparently, Tony Fernandes is going to reuse the business model of his original company in AirAsia X, but will it work? I am not familiar with aviation industry, but would like to do an “outsider’s analysis”.

In the original AirAsia, aircrafts do not take off at full throttle, i.e. they take off at smaller gradient. This requires longer runway but the advantage is that fuel consumption is reduced. This cost-saving strategy can be applied to AirAsia X without difficulty.

Budget airlines usually fly just one model of aircraft to keep cut maintenance costs low. Again this strategy can be re-used in AirAsia X.

Budget airlines also don’t offer in-flight meals, though food and drinks can be purchased on-board. For short-distance flights less than 3 hours, passengers can endure hunger. But for Malaysia-to-UK flight, practically everybody wants 2 meals or more, unless they are fasting or on diet. This is where long-haul and short-haul flights diverge.

AirAsia X will also rely on e-ticketing to cut cost. This strategy, however, has been imitated by full-service airlines, so the competitive advantage of AirAsia X, or any no-frills airlines for that matter, is being eroded.

Budget airlines schedule quick turnarounds to keep planes in the air longer. For example, I flew to Chiang Mai from Kuala Lumpur recently with the original AirAsia. The plane turned back in half an hour after touching down in Chiang Mai. For inter-continental long-haul flights, I am not sure whether the aircrafts need maintenance, but the pilots and cabin crew definitely need rest. Accommodation and meal will add to the operating costs.

I suspect Tony Fernandes will look to on-board advertising as an alternative source of revenue. Traditional full-service airlines have always done this with their in-flight magazines. I doubt AirAsia X will offer its own in-flight magazine. More likely, we will see advertisements on the back of passenger seats. This strategy, however, can be copied by competitors.

Finally, there is the question of whether the market is big enough. (I discussed this issue in one of my previous posts.) As we know, we are not allowed to re-schedule our flights easily with budget airlines. I feel that for long-distance trips, flexibility becomes more important. It may be just me. Or perhaps there are many others who think in the same way.

For flights longer than 6 hours, I also believe that many passengers will choose comfort over cost. This is similar to overland journey. For city trips, we don’t mind ‘standing’ inside a bus or a train. For trips longer than half an hour, we want seats. For overnight travel, we want reclining seats. If we fly from one continent to another, larger legroom is certainly desirable.

Destinations of the flights will also affect our decision. While I may be able to get roundtrip flights at affordable price, a 5-pound meal in UK’s McDonald’s is still too much for me. I suspect majority of the AirAsia X passengers will be Europeans rather than South-east Asians. Or I may be wrong. Tall Europeans may find the legroom in the aircrafts too restricting.

So will AirAsia X succeed? This is certainly possible. But Tony Fernandes will have to be very ingenious to make his company competitive.