Image via WikipediaThe Airline Industry is currently going through an overhaul. New alliances are being forged (the latest being that of American Airlines, British-airways and Iberia ) and new pricing and yielding strategies implemented as a result of new (green) taxes. In The Netherlands a lobby by a.o. Schiphol and KLM have led to the government eliminating the "vliegtax" whilst in Germany the Federal government is pushing plans to implement a tax for 2011. Following their British colleagues who already increased theirs about 325% in four years time.
For countries and destinations who depend largely on tourism, these are alarming trends. The flight rates are continuously rising while consumers are getting evermore price conscious. The pressure on accommodations to lower their rates is getting higher. defining a price positioning and strategy is getting more difficult. Their dilemma has been for years that they do not have control over none of these rates. They have to accept the prices and deal with it. After September 11 and the financial crisis of 2008, more and more Caribbean destinations started focusing more on Europe. Hoping to gain their US losses there. And with the strong euro, being able to attract the Europeans with good value for money deals (most hotel-rates are in US dollars).
In less than 20 years the competition for tourists has increased dramatically. With sometimes even regions within a country having their own promotional organizations. It really has become a buyers market where the customer king (in the past customers would be presented a choice of holiday packages they could book). The internet also contributed to the price transparency, enabling the consumer to compare prices and evaluate what gives them the best quality and value. Why would someone pay 1.000 Euro's to fly from Europe to the Caribbean when they can fly to Asia for only 750 Euro's. In their eyes they will get the same sun sea and beach experience.
The answer I see most Caribbean islands have to this is one the one hand subsidize charter flights by guaranteeing empty compensation for seats (trying to keep flights reasonably priced). And on the other hand invest in expensive branding and marketing concepts in an attempt to re-position themselves and communicating their extra value to a travelers experience (and therefore justifying the higher rates).
The Caribbean has the misfortune of being surrounded by many countries whose people lack the wealth to come on a holiday. There will always be an elite segment, but with everybody competing for the same customer, this segment is quite small. Especially when growth is a common target for all these destinations. Again the focus is being re-directed towards the US. There, new low-cost airlines such as Jetblue are creating new opportunities by granting the possibility for great value for money when choosing a vacation in the Caribbean.
Image via WikipediaThere are still many opportunities in Europe. The market's desire for the Caribbean allure is strong. I guess the laid-back, happy and fun image are still strong brand assets for the Caribbean. If what the islands offer stays keeps improving and keep generating demand, the ones that dominate yield management/marketing can still do great things in Europe.
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