Monday 6 October 2008

Recession or the slippery slope to disaster?

The news is bad and gets worse each day. We have moved from a subprime problem that only affected the feckless and the poor who the financial sages said “should have known better”, to a full blown financial crisis orchestrated by the clever chaps in banking circles who taught us that not only was debt good, but that it was essential to the global economy.

Now governments are rushing to rescue these financial institutions in the USA, the UK, Germany and China. Other European legislators are cautiously pointing to flaws in this type of support. They encourage risk taking without pressing for better and tighter regulations. Giving money to people who cannot pay their mortgages only delays foreclosure and even governments can only borrow so much.

Commentators in London expect that Government borrowings will rise from £63.3 billion in 2008/9 to £90.1 billion in the next financial year. This means that debt will exceed 43.3 % of the gross domestic product by 2010/11, considerably higher than the so-called sustainable investment rule, which stipulates a ceiling of 40%.

For people, anxious to get onto the housing ladder the news is mixed. House prices are down by nearly 15%, but lenders are being more cautious and demand higher deposits. Homeowners who don’t have an urgent need to sell are staying put. The results-an even greater fall in approved mortgage applications of about 40% in August.

Imported inflation on fuel and food prices are adding to the general gloom and most people are feeling poorer. They have responded by reducing their driving mileage, switching off the lights, turning the thermostat down a couple of degrees and shopping more in discount stores.

In the travel industry, the fall-out includes airlines like EOS, MAXJET SILVERJET, ZOOM and XL. Fuel is the highest single cost for airlines so expect further failures, consolidations, closures of routes and flight cancellations. Even national airlines are not exempt, as Alitalia’s troubles make clear.

Tour operators are consolidating but as Thomas Cook and TUI are finding out it is difficult to raise the standards of rescued companies to that of the White Knight.

Carbon emissions are a handy excuse to reconsider travel abroad, though the terrible British summer of 2008 might cause people to reconsider the domestic option.

So whilst Spain may suffer, Turkey and countries further east, with reputations for good value may fare better, particularly now that more efficient aircraft like the Airbus 380 and the Dreamliner are coming on stream.

The British love their holidays and will be loath to abandon their trips to sunnier climes. However unemployment or the fear of redundancy may make people reassess their priorities. Now it is even more important to keep your Brand top of mind when planning your marketing campaigns.

Thursday 5 June 2008

Do countries need a brand identity?

Australia is apparently rethinking its advertising approach to tourism. Some countries were upset by the current advertisements which ask: “Where the bloody hell are you?”.

Personally I liked the line. It has the brash good humoured charm we expect from our friends down under. Anecdotal evidence suggests that most British people also found this appeal credible and persuasive. However this acceptance was not matched in Japan who now send fewer tourists to Australia.

It proves that culture and customs are still different across the world,
even in today’s global village.

Perhaps the British attitude is informed by our shared history and
their ready willingness to fight by our side in two bloody world wars.
They sacrificed a lot of young men to help protect their cousins half the earth away.

Now the Australian authorities are to develop an all encompassing
brand identity which will hopefully reflect all the positive elements
that make the country what it is.

A country’s image is affected by its geography, geology, history, people, politics, economy and its position in the world. Branding a country is therefore a complex task, since we are talking not just about tourism, but also exports, off shore banking, foreign and domestic policy, inward bound investments, culture and

The danger is projecting an identity that conflicts with current
perception. Psychologists call this ‘cognitive dissonance’.

Countries that need a new and credible image, need to adapt rapidly and there is usually not the will or resources to do it.

Consider three countries as examples.

Sri Lanka is an ancient land, culturally interesting with a strong rooting in Buddhism. It offers great value for tourists, wide sandy beaches, wild elephants, but once again in turmoil because of the actions of the Tamil tigers.

China is a huge country, accounting for a quarter of the world’s population. Many peasants are poor, though there is a burgeoning urban middle class. It is home to one of the great civilisations but currently ruled by a repressive totalitarian regime with a bad human rights record at home and in Tibet which they occupy illegally. They are the hosts for this years Olympics and have just suffered a calamitous earth quake.

Indonesia has the worlds greatest concentration of Muslims and a source of militant Islamism. Bali, is one of their beautiful islands, inhabited by gentle Buddhists and favoured by Australian tourists. It was targeted twice by terrorists.

Perhaps all most countries need is correct positioning for each of their many target sectors.

New Zealand provides incentives for film makers. Much was achieved by the shooting of the ‘Lord of the Rings’ trilogy, which was watched by millions all over the world.

The ad concept of ‘Pure’ is simply true and stronger for the lack of hyperbole.

Egypt cleverly positioned their Red Sea resorts by describing the strip as the Red Sea Riviera. This succeeded in shifting the perception of the place from the Middle east and all that implies to Europe, safe and sophisticated.

Branding a country with a universal message may be very difficult.

Repositioning a country differently for its different targets may be all that’s needed.

Monday 12 May 2008

Tourism - a bumpy ride ahead?

The tourism industry is set for a turbulent time.

Oil has just reached a record high of $120 per barrel. Ethanol production, touted as the green alternative has now attracted criticism as the cause of lower food production and subsequent higher prices. Butanol, Richard Branson’s alternative fuel aircraft may be a passing phenomenon.

More serious is the growing consciousness that human activity is the cause of global warming, serious storms and human tragedies. Flying is believed to be the worst offending act. Since giving up holidays completely is not an option, ways of salving our green conscience will be sought. One way is taking at least one holiday each year in the UK. Kelkoo, a price comparison site reports a 39% increase in the number of people searching for UK holidays.

For overseas destinations however, a demonstration of the measures being taken to combat global warming is required. Tropical countries should be getting more of their energy needs from the Sun with solar panels and photo voltaic cells. Another renewable source is hydro-power. ICELANDAIR trumpets their green credentials in their advertising: “Discover the source of green energy”, is the headline with an image of waterfalls.

Another measure is offering greener vehicles, particularly for tourists. Hertz has a green collection of cars that meet the EU’s 2008 voluntary target of 140g/km C02 Output. Avis offers natural gas cars in Germany and Hybrids in Portugal. The real breakthrough may be in Electric cars. Carlos Ghosn, the Chief Executive of Nissan has embarked on an ambitious plan to dominate this sector by the year 2012. He is confident that improved batteries and the problem of speedier re-charging will be solved soon. The country that adopts this technology will reduce smogs caused by traffic jams and generally improve the quality of the air.

Planting more trees is another ideal. A Swedish tour operator has bought land in Malta and plants one tree for every tourist he flies in. Governments should not rely on such generosity. Sugar cane fields should be bordered by long lasting trees like jacaranda, and Le flamboyant for beauty and Tamarind, Neem and Jamboul for usefulness. Such a strip would have the added advantage of being a fire break. Off shore and uninhabited islands could be made green havens to encourage endangered bird species and wherever possible new mangrove plantations could be created to make habitats for fish nurseries.

Governments could also provide incentives for hoteliers who provide green eco-friendly resorts. According to the Sunday Times Travel magazine, The Jet wing hotel in Sri Lanka recycles its waste and pays local farmers to produce organic produce.

The idea of getting local people to benefit is a good thing. The Feynan Eco lodge in Jordan is run on solar power and is run by Bedouin in collaboration with Jordan’s Royal society for the conservation of nature. The ll Ngwesi is an eight room thatched lodge in Kenya’s uplands that also runs on solar power. The Masai who help manage it get 40% of the profits.

The time has passed when tourist boards had only to organise themselves for growth. Growing tourist numbers or even maintaining your share will depend on how efficiently you anticipate social and political trends and prepare for them.

Tuesday 22 January 2008

Are we talking ourselves into a recession or are we already in one?

Recessions are usually characterised by a decline in economic activity over three quarters.

This is typically accompanied by falls in consumer confidence and spending, caused by price inflation, rising unemployment and a bear stock market.

The stock market has more red ink than black and share prices in sectors such as banking, property and retail have taken a particular pounding. Financial companies, particularly those involved in the USA’s sub prime shambles have suffered badly.

Some might say that their plight has more to do with greed, fraud and incompetence than general economic woes.

And a correction in house prices has been anticipated for at least two years when the ratios between wages, rents and house prices began their journey into economic craziness. The Economist in 2005 said that prices would fall by 20%, proving again that it is possible to forecast events or timing, but rarely both correctly.

Problems in the high street are being presented as another indicator of the recession and though Marks and Spencer has had a decline of 2.5 % in their Christmas sales, John Lewis at one end and Primark at the other have done well. Online sales are on the up.

So what is really happening?

Unemployment is falling. Oil prices as defined by Brent Crude are 10% down on the $100 dollars a barrel threshold. Inflation is still a risk which is why interest rates remain on hold. If consumers rein in their spending it will be no bad thing and if savings ratios start rising again, that’s all to the good.

In the advertising industry, a slump in ad spend is indicated by the IPA’s Bellwether report. Advertising activity is a function of corporate liquidity and consumer spending.

Previous recessions point out the dangers inherent in reducing communication investment in times of economic slowdowns. It will be even more damaging now that we have more knowledgeable and empowered consumers.

But advertising weight alone is not enough, nor clever creative advertisements.

Emulate Steve Jobs whose Apple showroom in Regents Street is one example of how to do it correctly. Give people what they want and they will besiege your store.