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Bali’s Tourism Industry: Price Wars or Quality Wars??

Bali's Tourism
Bali's Tourism

Key stakeholders in Bali’s tourism industry are drooling at the possibility of the island reopening again.

They’re thinking this will be the “new normal“, hoping the sun will rise after a long dark year of corona-fear and Bali will once again be breaking year-on-year records for visitor arrivals.

But the world and the way we do business has changed and there is no going back to the way things used to be. Travel has changed. People’s perceptions and expectations have changed. For those of you who read our blogs and hear us speak, you’ll know we’ve long been calling for a serious look at “Quality vs. Quantity.” We don’t think the knee-jerk, short-term solution is a Cheap-Charlie-Price-War.

We’re advising our clients to look to long-term sustainable initiatives that not only respect but nurture Bali’s unique culture. And that doesn’t mean discounted room rates and bargain-basement buffets. Fortunately, some within the industry also believe improving the quality of Bali’s tourism industry is what our “new normal” should be focused on, and in doing that, business opportunities will thrive.

Bali’s culture

What is quality?

The perception of quality is an interesting subject. David A. Garvin from Harvard University wrote an interesting article for Sloan Management Review a few years ago about quality. While the article is very academic and not specifically around tourism and hospitality, his well-researched and informative piece presents some very logical and important approaches to defining quality, which I think, can be adapted to Bali’s tourism industry. Stakeholders might want to take note.

Garvin suggests there are five approaches to determine quality:

1. The Transcendent Approach
This suggests that quality is indefinable; we recognize it from experience and there is universal recognition of innate excellence, uncompromising standards, and high achievement.

2. The Product-based Approach
This is a little different because here quality is both precise and measurable and is linked to specific attributes, which most people will pay more for.

3. The User-based Approach
This is very subjective and comes from the idea that “quality lies in the eyes of the beholder”. Everyone is different, so when something satisfies someone, it can be considered to be quality.

4. The Business-based Approach
This is not based on the market wants and needs because it’s focused on “conformance to requirements” from a business perspective. The fewer deviations from specifications and associated lower costs are, therefore “quality”.

5. The Value-based Approach
This is the business-based approach on steroids and quality is only about the cost to produce and the price to buy. Here quality as a measure of excellence is equated with cost as a measure of worth. It leads to something called “affordable excellence”.

Fundamental Differences
Marketing and branding people tend to follow user-based approaches where customers determine what quality is and what it’s not. In this way of thinking, higher quality generally means being better and that comes at a price.

Business folks, on the other hand, are more likely to lean towards meeting certain specifications because if they do, costs will be lower.

Finding Balance is Key
We need to be aware of these differences when discussing Quality vs. Quantity and how Bali’s tourism industry can recover from COVID-19. One way to do this would be to use more than one approach and to find balance, maybe by conducting market research (a user-based approach) and use the results to identify specific attributes (a product-based approach).

When Bali’s tourism industry declares it wants to focus on quality rather than quantity, it has to actually mean something. It could, for example, focus on performance and features, or it could focus on aesthetics and the perception of its target markets or it could focus on service and standards.

Whatever path it takes, the industry needs to be clear about what it’s doing, who it’s doing it for, how it’s going to do it, and most importantly, why it’s doing it in the first place.

And hopefully, the answer won’t be just to make more money because that is short-term and it just won’t work! Making money is important, yes, but it’s not just about raising prices. There has to be valued. Read some Simon Sinek to understand that better.

Garvin references Peter Reisz as saying that if perceptions and consumer decisions are only correlated to price (that means it’s high quality and therefore expensive … and because it’s expensive it must be high quality) there is a real danger of setting inflated prices to suggest quality is higher without considering the customer experience.

Brand Bali has to Deliver

In my opinion, two things have to be taken very seriously in these sorts of discussions around tourism in Bali:

1. Bali’s brand and marketing have to be re-thought and upgraded to better reflect an idea of quality tourism. This doesn’t mean just changing the logo and having a new slogan. Research needs to be done, strategies have to be developed, awareness must be created and all stakeholders, from taxi drivers to hotel General Managers, need to be singing off the same song sheet.

2. When the brand and advertising campaigns successfully target and attract a particular market segment, the perceptions and experiences of why people decided to come here must have value and have to be realized. It is critical that customer satisfaction be understood and changes made to better suit the ultimate goals.

If these aspects are ignored, there’s a real danger of inflated prices for poor quality products and services. Price wars follow, memorable experiences disappear and sustainability goes out of the window. But, if the mindset changed and we became focused on providing better products, better services, and more memorable experiences we could have “Quality Wars” and in the long run, that’s a win-win for businesses, communities, and the environment.

At Seven Stones Indonesia, we’re encouraging our clients to clarify their brand and consolidate investments, streamline and restructure, and look at smarter ways to create quality services, products, and experiences. If your business needs help doing this let us know how we can help. Send an email to [email protected]

Sources: Bali Post, Gapura Bali, Antara News, Sloan Management Review, Journal of Consumer Affairs, Forbes

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