We do not have great ability to “read” the environment and, therefore, we are unable to make decisions in advance and in time to capitalize on opportunities or avoid hardships.
Four recent examples:
1st Plan to Combat Seasonality in the Algarve (NOV 13/MAR 14) – The good part is that, at least, there is now a plan. That alone is progress, as it makes the industry focus on what matters. Congratulations. The bad part is that it is not clear what the actual potential return is.
Questions: The €400 thousand invested in this Plan intend to generate how much, incrementally? There are incremental low-season flight capacity targets (plus 20.000 tourists and 100.000 overnight stays). That's nice.
But what is the expectation of financial inflows in the country? Was the topic of the price level necessary for this investment to generate a return been addressed? What will hotels have to do about it?
This €400 thousand investment means how much return per additional plane seat?
What I would have liked to see was the Government and ERTA announcing the Plan and informing straight away that for every euro invested, we would expect, for example, to induce €10 in the regional economy. Which would mean that we invested €400 to get €4 million (€200 per tourist, per stay).
Is it good, bad or enough? It would at least be a way of creating logical expectations and measuring the Plan's effective effectiveness, in the interests of future plans. And they could estimate how many jobs and additional taxes for the State Budget we are talking about.
I think we still have a structural problem in the analysis of seasonality. It is a relationship between the volume of business in peak season versus the same in low season. The greater the amplitude between them, the greater the problem of seasonality.
For example, if the number of tourists in the region dropped considerably in high season and remained in low season, the seasonality would also drop. Despite that, it would be bad.
Therefore, seasonality has to be seen through various prisms and surgically attacked in places where it can generate more returns, with the same resources.
In this case, the shot is aimed at the low season and trying to increase the volume of tourists, right at a time when prices in the region are very low (thus, many more tourists will be needed to generate the same returns as would generate, for example, half of these tourists at more expensive times).
Therefore, a combat plan for the months of April and May should have been analyzed. June and October, as I am sure that increasing the volume of occupancy there would increase seasonality (since the low season would still remain unresolved), but this would be positive, as the volume that would enter in these months would return much more capital, which would allow for coping with low season with much more financial means.
In other words, by increasing competitiveness in the intermediate season, increasing seasonality would do the region better than reducing it.
I hope it goes well despite the opportunity cost of the current Plan being enormous.
2nd Quality Certification at ERTA – This initiative has been called the “administrative revolution”. At the same time that €400 is being invested in combating seasonality, ERTA announces that it has sought an additional €290 from the Structural Funds to modernize the organization's operations.
I doubt that this amount could be allocated to promotion or marketing, but it is worrying that now an administrative process is started that will turn the entire organization inward and not to the market.
Clean weapons in wartime. Due to the experience I have in the field, the organization will certainly start to work much better, despite continuing to work on the wrong issues.
3rd Algarve Training – Last year the Government announced a fund to support job creation in low season, worth €5 million. The results were short.
Now it came to announce the same kind of initiative, but only at €2 million. At the time, I wrote that the original €5 million should have been put into promotion and marketing (as the €400 mentioned above has now been put).
I continue to defend him. If the region has a lot more tourists, companies hire more people, and a logic of subsidizing job creation is avoided.
If these €2 million were applied in this way, and using the metrics of the current Plan to Combat Seasonality, we would get 120.000 more tourists and 600.000 overnight stays, for 5 months.
If, for example, we assume that this would create 1 job for every 200 tourists, it would mean 3000 jobs (the same number the government pledged to reach last year, with €5 million). This is a more consistent way of doing math, it would be cheaper and a healthier way of creating jobs.
4th Taxation in Tourism in Portugal – This study was recently presented, carried out by Ernst & Young (E&Y) at the request of CTP. Conclusion: the level of taxation prevents Tourism from being more competitive when compared to competing countries.
News? Not really. The State does not look at taxation as an element of competitiveness (charging less, to receive more and stimulating sectors that yield more to Portuguese society).
And I think any ruler easily dismantles E&Y's argument in light of the ongoing adjustment. What should have been estimated was the amount of taxes lost by the State, resulting from the current level of taxation, compared to what other States have amassed. Surely, before that, the rulers would not whistle to the side.
We continue to do things, by doing things. We specialize in public advertisements, not measuring the product of those advertisements. We analyze the consequences, lateralizing the causes. We hope that some of the measures announced hit the fly, but for the most part not even in the frame has got it right.
As not even what comes from outside is good anymore, we will have to be ourselves the ones to take us out of the wandering we brought ourselves to. From the examples above, it can be seen that this tomorrow will still be late until I sing.
Author Mário Candeias is Hotel Manager
Comments