Stop unethical practice of Undercutting
My Dear Bhutanese Travel agents there, I hope that catchy title got your attention. I didn’t just write this title to shock you, it’s the truth.
“When you undercut your price to win a piece of business, you are not only screwing your competitor, you are screwing yourself, your industry as a whole and not to forget that you are going against the Bhutan Government policy of High End Destination. It’s Illegal”
Bhutanese travel agents who provides, the best tour packages are bit nervous. In Bhutan just like in other developing the price of all essential goods, purchase of new tourist SUV, hotel rooms rents have increased significantly therefore the future of the economy is a big question mark.
First, I want to explain to you what undercutting in Bhutan is (and what it’s not). If you are brand new to the Travel industry, and have very little experience, it’s ok if your price is bit lower than someone who is established. But remember you should not offer tour less than the government fixed tariff. A Bhutanese travel agent thinks that as we gain experience and set up our business after few years, we will increase our price (right?).
Well! My Dear Bhutanese travel operators you must be thinking it’s also not undercutting when you cater to a budget clientele. Perhaps your inventory or the product you offer has a lower wholesale price, or your service is less comprehensive. You are just targeting your niche. And maybe you think it’s your strategic sale just to be at survive be in travel business. But I assure you are lying to your selves.
Undercutting is a product of fear, desperation, or good old ill will. When a client tells you they will select vendor and you say “I’ll charge you 10% less than whatever they are charging” that’s undercutting.
When you offer a service that barely makes profit just to push your competitor out of the market, that’s also undercutting. When you make the choice to undercut, you are screwing everyone in the process (especially yourself!). When you are charging your guest less than the government fixed tariff then that’s undercutting,
Negative effects of under cutting for Travel agents and Tourist.
1. No profit margin at all for tour operators.
When you offer a service/product for less than your standard price, you are decreasing your profit, which means it’s going to get more and more challenging for you to make ends meet. As you grow more desperate, and lower your prices further, you may end up with business with no profit margin at all (because your time isn’t free!!).
2. Tourists provided with poor service.
When you drop your price Willy nilly, you are telling the client that the service you offer doesn’t have value. In fact, you are telling the client that hiring travel professional doesn’t have value. In the Tourism Industry especially, If the guest wants the best service tour package in a Bhutan and book the tour package at a very minimum cost.
They might as well hire Uncle Joe to do their travel itinerary and plan their vacation in Bhutan because we assure you that the service they will receive in terms of guide, drive, suv will be below the normal standard and not to forget the Resorts.
I have seen some High end tourists been accommodated in 2 star hotels/ resorts where bed bugs resides are said to be thriving. lol. Tourist been provided SUV’s which break down after every 30 minutes during the tour or food being bargained by the travel operators before the orders.
3. Low tour cost referrals for travel agents.
When you undercut, you are most likely developing a client base you don’t want. They don’t value or respect your time (mostly because your tactics have cued them not to respect you), and the already low priced service is most likely going to take you more time. You are also going to start getting referrals on your new low price point, bringing more and more bargain hunters to your door.
4. Tourist should be cautious about Fake Visa.
Be cautious you might be issued a Forged / fake visa. Under cutting of tour payment can led to forged Visa. The immigration Act states that a person, who enters the country illegally, shall be removed to the country from where the person has boarded the aircraft or vehicle, after imposing the penalty of Nu 10,000.
Or can be sentenced to a minimum of one year and maximum of less than three years imprisonment.
4. Price Wars for tour operators.
If your competitors feel forced to follow suite and price match you’ve just successfully shrunk the pie for everyone. Getting those prices back up to pre-price war levels is going to take years.
How you can compete with Under cutting.
1. Provide the best service to your clients.
I’ll use an example from my business Yelha Bhutan Tours and Travels are at the top end of the pricing spectrum in this area. Know what? My profit margins on this service are already low because at Yelha Bhutan Tours we provide the best tour package ever.
Our Guide are well trained Professionals (Minimum 10 Years experienced) so are our Drivers, they are well paid too. Our SUV’s, buses are all new , Our Resorts, hotels are upgraded to Top 3-4 Stars and offered complimentary all year Deluxe rooms.
We not only provide our guest 3 meals a day (in best restaurants both ale carte and buffets but snacks as well during tours. Therefore we have very limited profits after 30% BST to government but our priority is not maximizing the profits, it’s about providing the best service and have a good reputation in Market. (90% of our clients are all recommended guest)
2. Offer discounts on previous clients.
If you still communicate with past clients, now is the time to send out an email and offer re booking bonus. You can offer this bonus to your clients for being obedient and loyal to your company.
3. Allocate more time to marketing.
If you’ve been coasting in the marketing department, it’s time to set aside time each week to get the word out there. Blogging, Social media presence, and attendance at networking events are all excellent ways to get business in the door.
4. Go the Extra Mile.
This is a golden quality to have in a travel agent because sometimes, even the most carefully laid plans can go askew. When that happens, like terrible weather or an act of God spoils your vacation plans, you may already be in a foreign country or have invested a lot of time and money into the trip. When things go south, you really need an advocate on your side and someone who knows how to get you out of trouble and can quickly re-assemble new plans at a moment’s notice.
Before I wrap this up, I should mention that undercutting (and fronting) as a great risk for Bhutan’s image as travel destination. All the stakeholders in the industry have made their share of sacrifices to create a positive image for the country as a destination, and we must at any cost safeguard this image before it is too late.
Undercutting (and fronting) is certainly not a way to sustainable responsible tourism in the country. Once this image is gone, Bhutan will pay a heavy price for generations. Better safe than sorry for the sake of our future generations.
I’ve seen it used as a growth strategy by new businesses, by entrepreneurs with large Ego. who need to maintain the facade of success or by folks who have immature personal vendetta’s against a particular competitor. It’s a terrible strategy folks, and it needs to stop.
Stop under cutting, Stop providing cheap tours to the visiting guest, Stop breaking laws of the Kingdom,Stop jeopardizing their dream vacation………