Tourism industry underselling itself, says new YHA chief

By ASHLEY CAMPBELL

Hugh Canard's mother was a hosteller from way back. She used to tour Australia in her Mercedes Benz, parking outside Youth Hostels when she bedded down for the night.

"She never saw the irony in that," he laughs down the phone.

That was when Youth Hostels provided basic, single-sex dormitory-style rooms for mainly young, impoverished travellers who toured the world with nothing but a sturdy backpack and the smell of an oily rag. Or oil of some sort.

Book at a hostel now and you'll be able to choose between a shared room with three to five others and private rooms for two, with ensuites. All at a price backpackers can afford.

Which is a problem. New Zealand's 24 Youth Hostels are victims of their own success. Those in popular areas are frequently booked out, and not just by those sandal-wearing backpackers of old.

"You're just as likely to meet a couple of lawyers from Washington," says Canard, the Youth Hostel Association's new CEO.

The reason is simple: The YHA offers a world-class, dependable product and a brand that people trust and are prepared to pay for. But in New Zealand it charges peanuts. The highest price you'll pay is $38 a night, and that's per person for a double room in the centre of Auckland. Queenstown is $11 cheaper.

It is a typically New Zealand affliction, says Canard, this unwillingness to charge what we're worth. But it's about time the association - and New Zealand in general - got over it.

Yup, you read it, the CEO of YHA - that icon of new age, socially conscious travel - reckons the market should set the price. And if occupancy rates and the growth in tourist numbers are anything to go by (visitor numbers increased 14.3 per cent from 2000-2002 and their spending rose by 28.8 per cent), the market is prepared to pay more than we're asking. Even after Sars.

"I think the New Zealand backpacker bed is the bargain of the planet," he says. "It could easily be double the price and still be bargain of the century."

If you go to Tokyo, Sydney or London (and many of the travellers filling our hostel beds do) you'll pay 25 per cent to 100 per cent more for a hostel bed of the same, or worse, quality.

And, okay, at $130 a day, white-water rafting costs in Queenstown are comparable with those in the United States, Canard says, but sea kayaking, at about $80 a day is only half the price.

There are parts of New Zealand where tourists can book a four-hour horse trek, with lunch provided, for $40, he says. Are we mad? Don't we appreciate what we've got and how much tourists are prepared to pay for our product?

These questions have been playing on Canard's mind since his first venture into tourism in 1992. An engineer and entrepreneur ("I've started five businesses and four of them have been successes") Carnard admits it began with a mid-life crisis.

"I just woke up one morning and realised I didn't want to be doing that." So he bought a sea-kayaking company - as you do.

He and wife Biddy grew Ocean River Adventure Company until it had 20 staff, 6000 clients a year and the New Zealand Tourism small operators award for 1997.

But Canard saw the sector developing to a point where he'd no longer have such an influence, so he sold. If he had kept the company, he would have increased service quality and yield by upping prices, not the number of boats and customers.

"By increasing our prices we could have then delivered the most amazing product, offering two different kinds of Nelson wine a night ... we could have paid our guides more, we could have put in place a better safety backup."

And he confronted the same issue as chairman of the board of Awaroa Lodge, that magical hideaway in the middle of Abel Tasman National Park that's almost impossible to get into, for love or money.

At the time the lodge offered backpacker accommodation at $18 a night or twin rooms at $120 a night, but nothing in between or better. It was turning away three times as many people as it could accommodate, Canard says, and needed an upgrade.

Because the shareholders didn't want to put in the necessary investment, they sold.

But the new owners weren't afraid to improve the product, and the Awaroa Lodge website now quotes prices from $90 to $275 a night. It doesn't seem to have hurt business - the website advises people to book early "as Awaroa Lodge is immensely popular with New Zealand travellers and international visitors".

And that, it seems, should be a lesson to us all.

"A lot of New Zealanders don't realise just how good this country is," he says. "It's a dream. If you live in a crowded city in Asia or Europe or America, it's a dream."

Tourism New Zealand's "100 per cent pure" marketing campaign (labelled by Australians as the world's most successful marketing campaign) is selling that dream to the world. But what if everyone wants that dream to come true?

"There are 25 million people from India who can afford to visit New Zealand, some staggering number from China, the whole of Europe, the whole of North America ... who can come to New Zealand and we can't accommodate them."

Not only do we have infrastructure issues, but constantly increasing tourist numbers would turn the dream into a nightmare and kill the product.

The only solution, for the YHA and New Zealand, is to lift the service - and the price.

"We have to assume our clients are 85 per cent from overseas, that they have incomes that are nothing to do with our economy. Whatever they will stand is what we should be charging."

But wait, I hear you protest, what about the other 15 per cent? What about New Zealanders - won't we be pricing the locals out of the market? What's happened to the YHA we know and love? Shouldn't its CEO be worried about social responsibility or something?

Listen carefully and you'll hear the sound of a trickle down.

New Zealanders can't afford international prices, says Canard, because they're not paid international wages. And they're not paid international wages because their employers don't charge international rates.

Change that last part and the first part will follow.

He harks back to an experience in his previous job as a regional economic development adviser with Industry New Zealand.

Marlborough wine growers were complaining they just couldn't get the vineyard staff. The problem disappeared when the local freezing works closed and vineyards raised the pay from $10 an hour to $12.50 an hour. It's amazing what a 25 per cent pay rise will do for recruitment.

But, he says, Marlborough markets itself as producing world-class wines. "Why should we be paying our vineyard workers less than half what they would be earning in France?

"If you can get a world-class product and sell it at an international price and it's value for money, then normal forces of competition will take over."

On the other hand, "If you want to have all your staff on work experience, subsidised by Winz then you can charge these dumb prices".

So can we expect to see higher rates quoted on the YHA website in the future? It is, says Canard, something the association has to face.

It's just spent $3.5 million extending and refurbishing its Wellington hostel - expanding its capacity in Queenstown has become urgent and other expansions are in the pipeline. And the association takes part in "a substantial number of social programmes". All of that has to be paid for somehow.

The YHA can keep its triple bottom line - reporting environmental and social results as well as financial - without underselling itself, says Canard. Just you watch.

But will New Zealand's tourism businesses ever get over its underpricing affliction and start going for increased yield?

Quick as a flash he answers: "I think we can get over it quite quickly. Queenstown has."

YHA New Zealand

Awaroa Lodge