Tourism is a global business and New Zealand tourism is competing in a very competitive international market. To maintain our position on the global stage as a premium destination and to achieve an economically sustainable tourism industry, New Zealand needs a tourism industry that competes on value. The price charged needs to be justified by the experience provided. TIA encourages pricing behaviour that is consistent with maximising the value of the visitor experience.
Aligned with the Tourism2025 framework, over the long term the customer focus is on value over volume. Establishing new markets and market segments can require sustainable volumes to be first established and then a move to value.
New Zealand targets visitors with highly valued attributes (such as spend, seasonal pattern, regional dispersal) that deliver the greatest overall economic benefit. Aligned with this, TIA is an advocate for a tourism industry that strives to compete on the basis of value, rather than price. TIA supports pricing that:
- ensures the long term economic sustainability of enterprises, and
- is consistent with consumer perception of the value delivered
There is a diverse range of tourism businesses and sectors within the New Zealand tourism industry, using different pricing approaches and tools. There is no one-fits-all approach. Dynamic pricing and differential pricing are both options but are unlikely to be suitable in all cases.
TIA also acknowledges that the value placed on a product can vary between consumer segments and can be priced differently.
Frequently Asked Questions
Q: Why does TIA have a policy on pricing and value in the tourism industry?
Markets are traditionally good at responding to supply and demand in the short term, but are less good at sending long-term signals about sustainability, investment and value. By having this policy, TIA is signalling the direction industry should consider
Q: What do we mean that different business models will have different pricing strategies and different sectors within the tourism industry will have different approaches and tools?
New Zealand’s tourism industry is large and diverse, ranging from SMEs to large, publicly listed corporates. The business model and pricing strategy of an SME (small and medium-sized enterprise) could differ significantly from a large corporate and there is no one-fits-all strategy. For example, a small adventure operator will most likely have a different pricing model from an airline. Dynamic pricing and differential pricing are both options available to businesses, but are unlikely to be suitable in all cases.
Q: What do we mean by economic sustainability?
Tourism businesses need to be profitable to be viable as long term operations. Such businesses are well placed to invest in product development, innovation and their people, enabling them to become enduring businesses with the ability to act on the opportunities that emerge.
For long-term economic sustainability of the industry, TIA recognises the critical role of business investment plans. Importantly, sufficient funds for these plans need to be generated internally, balanced by funds available from sources external to the industry.
Q: What do we mean by the consumer perception of the value delivered?
As noted, TIA is supportive of an industry that focuses on value over volume. TIA recognises consumer perceptions of value can be driven (and influenced) by information available, marketing initiatives, individual preferences, country of origin, as well as by the price of the offering. Hence, the importance of pricing strategies that are consistent with the perception of value that the industry wishes to foster.
It is important for individual operators to understand how different customers might perceive one and the same product differently.