The Great Rip-Off! _ Full report V2

The great rip off!“How traditional travel agents are overcharging Kenyans for air travel and

inhibiting tourism recovery efforts”Full Report

Traditional travel agents are ripping Kenyans off, inhibiting all efforts to grow domestic tourism

• Travelstart is cheaper than any other agent 93% of the time

• Traditional travel agents are on average 27% more expensive than Travelstart, representing a massive opportunity for agents to lower their prices

• In addition, competitors respond to requests for quotations a mere 39% of the time. On the other hand, Travelstart is accessible 24/7 and displays live fares

• Traditional agents MUST reduce

their pricing to encourage more

Kenyans to travel. Current pricing

levels go against the nation’s

tourism recovery efforts

• Once average pricing

approximates Travelstart levels,

more Kenyans will begin to travel

• Travel agents also need to

become more accessible, which

will encourage more Kenyans to

make bookings

EXECUTIVE SUMMARY

NOTE: This report pertains specifically to the cost of air travel;

its scope excludes other travel costs

1. Tourism has traditionally been one of the key sectorsdriving the growth of the Kenyan economy

2. However the sector has taken a battering in recent times

3. The decline in foreign visitors is expected to extend into the near future

4. The Tourism Recovery Taskforce was therefore established to ‘stem the bleeding’

5. Though Kenya has a lot to offer, domestic tourist numbers are almost stagnant

6. The Tourism Recovery Task Force recognizes the ‘low hanging fruit’ which domestic tourists represent

7. The president himself has taken steps to increase affordability of travel

8. However traditional travel agents are ripping Kenyans off, inhibiting all efforts to grow domestic tourism

9. In some cases, Kenyans are paying Kshs 56,000 more than they need to for one air ticket!

The great rip off: Contents

Kenya

desperately

needs domestic

tourism,

but Kenyans are

getting ripped off

by traditional

travel agents

• Deputy President, William Ruto recently described Kenya as a magical

destination, pointing out that the magic is mainly four pronged: 1. Kenya is the Cradle of Mankind

2. Kenya is home to the Big Five

3. Kenya is home to one the seven wonders of the modern world

4. Kenya offers Beach, Wild and an incredible picturesque topography

• Travel and Tourism contributes 12.1% to Kenya’s GDP in total, which in 2013

translated to KES 463bn. Total contribution to employment sits at 10.6%, or

589,500 jobs. This stems from the economic activity generated by industries

such as hotels, travel agents, airlines and other passenger transportation

services (excluding commuter services). But it also includes, for example, the

activities of the restaurant and leisure industries directly supported by tourists*

• Kenya’s vision 2030 envisions that the Tourism sector will quadruple its direct

contribution to Kenya’s GDP and make Kenya a global leader in sustainable

tourism.

Tourism has traditionally been one of the key sectors driving the growth of the Kenyan economy

* World Travel and Tourism Council ‘Economic Impact 2014 - Kenya’

• The battering began with a devastating fire at JKIA in August 2013 which destroyed the entire arrivals complex of the country’s largest airport. This cut Kenya off from the rest of the world for two days.

• The Westgate attacks in September 2013 had perhaps the most devastating effects on Kenya’s image as a secure destination, followed by the terrorist attacks across the country in market places, small food kiosks and public transport vehicles, with weapons ranging from grenades to homemade explosive devices. These led to the issuing of travel advisories by several foreign missions including Britain’s Foreign and Commonwealth Office.

• The recent Ebola outbreak in West Africa has also had a negative impact on the tourism sector in Kenya and other unaffected parts of Africa according to reports from CNN and Reuters. A survey recently conducted by SafariBookings.com shows that following the Ebola outbreak, half of safari operators experienced a staggering 20 to 70% decrease in bookings. It is a heavy blow for the industry and the numerous wildlife reserves that rely on these earnings.

However the sector has taken a battering in recent times

“The country has

already seen a

sharp 30 percent

downturn in

tourism this year” -

Calvin Cottar,

Cottar’s Safari

Service

• Most tour companies plan their arrivals months in advance, which means the

current negative publicity will affect foreign visitor numbers into 2015.

According to one industry participant the fear of Ebola by itself has reduced

confirmations for next year by an additional 20 percent - Calvin Cottar,

Cottar’s Safari Service

• “Tourism orientated hotels work with tour operators that work in 12 month

segments, and violence or political instability in a region can hurt their tourism

accommodation business for 12-18 months. Whereas if it is a business hotel

and there is political instability or an outbreak of a virus, it is only really going

to slow a businessman down by probably 30 days” - Charles Robertson,

global chief economist and head of macro-strategy at Renaissance Capital

The decline in foreign visitors is expected to extend into the near future

• The urgent need to close the gap in domestic tourism numbers led the

President to establish a Tourism Recovery Taskforce (TRTF) led by hotelier

Lucy Karume. Its mission is to breathe life back into the struggling tourism

industry.

• The committee is expected to identify key challenges facing the sector and

come up with turnaround strategies. To empower these strategies, the

government has availed Sh200 million

• According to Karume, short-term strategies include implementation of tax

measures helping corporate and business entities to take their staff on

holiday and receive tax rebates. The strategy will also include a digital aspect

with Donald Kipkorir, chairman of marketing and branding committee of the

task force recently calling on active social media users to collaborate with the

TRTF to position the country as a preferred destination for tourism,

conferencing and investment.

The Tourism Recovery Taskforce was therefore established to ‘stem the bleeding’

“If you are eager for your own African

experience, there are plenty of

fascinating places to explore in Kenya.

The country is steeped in history,

lauded with bountiful natural beauty,

and renowned for refining its rustic

ambience and cultural elegance. As a

matter of fact, Kenya may simply

be the best-kept travel secret

in Africa….”

– ‘20 Fascinating Places That Prove That

Kenya Is A Beautiful Country’ from

Travelstart Kenya Blog (Over 2,200 Social

Media shares in 2 weeks)

Though Kenya has a lot to offer, domestic tourist numbers are almost stagnant

• Clearly there is a lot to see in

Kenya, a value proposition which

should be even stronger for locals

who do not have to go far to

experience the sights and sounds

• However the growth in domestic

tourism numbers has declined

rapidly from 9% growth in 2012 to a

mere 1% growth in 2013, even

before the Ebola1. Domestic visitors

are therefore stuck at a 40%

contribution to the sector1

• Meanwhile tourism in Mombasa

alone is down 60 percent this year2

1. Statistical Abstract 2014, Kenya National Bureau of Statistics

2. Lucy Karume, Head of the Tourism Recover Task Force

speaking on 18/10/2014

The Tourism Recovery Task Force recognizes the ‘low hanging fruit’ which domestic tourists represent

• Domestic tourists are more accessible than international ones due to their

geographical concentration. It should be easier for the government to reach

them through their myriad initiatives aimed at tourism recovery

• In addition, Kenyans should in theory be less affected by the negative

publicity received by Kenya, especially when it is centred around the Ebola

outbreak, which is yet to materialize as a real risk factor

• The recovery strategy will aim to encourage Kenyans to become active

participants in domestic tourism to boost the sector. Recovery strategies often

achieve this through:1. Creating a network of stakeholders who will contribute to its growth and organising forums

where they could exchange ideas

2. Maintaining a constant flow of information and data on local tourism through production of

tourism media — electronic and print – and organising exhibitions

3. Aggressively marketing local tourism through product investigation and analysis

4. Facilitating access of local people to products and educate Kenyans on local attractions

5. Negotiating with stakeholders to subsidise the rates for Kenyans throughout the year

The president himself has taken steps to increase affordability of travel

• Making travel affordable is a key component of any

recovery strategy (see appended case study on Bali

recovery after 2002 bombings)

• As one of the first measures aimed at stimulating the

tourism industry, President Uhuru Kenyatta early this

year exempted all air ticketing services supplied by

travel agents from the VAT Act, 2013. This was

intended to have a knock on effect on prices of air

tickets.

• At the same time he instituted other measures

specifically targeted at lowering the costs of travel.

These included:

• tax free holidays designed to entice Kenyans to visit

tourism sites

• reductions in park fees to USD 80 per non-resident and

Sh1,000 per resident from USD 90 and Sh1,200

respectively.

• reduction of landing charges at Moi International Airport

and Malindi Airport, to a level which would make Kenya

competitive in the region.SOURCE: Official statement by the President

on the tourism sector, issued at State House,

Nairobi, 23rd may, 2014

There exists a massive opportunity for agents to

lower their prices (1/2)

Travelstart is cheaper Market is cheaper

Source: Millward Brown - “Establishing pricing competitiveness of Travelstart” (Oct 2014)

Travelstart is

cheaper than any

other agent

93% of the time

Traditional travel agents are

on average

27% than Travelstart

There exists a massive opportunity for agents to

lower their prices (2/2)

Source: Millward Brown - “Establishing pricing competitiveness of Travelstart” (Oct 2014)

More

expensive

57

15

72

67

33

09

1

13

23

0

14

72

5

90

00

0

KISUMU MALINDI DUBAI

COMPARISON BETWEEN PRICE FLOOR1 AND PRICE CEILING2

Travelstart Competitor

In some cases, Kenyans are paying Kshs 56,000 more than

they need to!

• Kisumu, Malindi and

even Dubai are among

the most Googled

destinations for

Kenyans

• Kenyans want to travel

there, but they are

inhibited by high prices

charged for air tickets

to these destinations

1. Travelstart price checked on same day as 2.

2. Highest price available for route as per sample checked

SOURCE: Millward Brown - “Establishing pricing competitiveness of Travelstart” (Oct 2014)

Δ =103%

Δ =131%

Δ =126%

Responsiveness must also be addressed

Traditional travel

agents respond to

requests for

quotations a mere

39% of the time,

but Travelstart is

always available

SOURCE: Millward Brown - “Establishing pricing competitiveness of Travelstart” (Oct2014)

Stephan Ekbergh CEO Travelstart

“The travel agent’s role is to make dreams comes true.

We'd like to think we're fulfilling that role with a combination of

technology and humanity”

SUPPORTING SLIDES

• Making travel affordable is a key component of any recovery strategy

• As an example, the Indonesian island of Bali was hit by terrorist attacks in

2002 which led to a major depression in visitor numbers, the island’s main

economic contributor.

• The country refocused its attention on domestic tourists, by taking steps to

make Bali a more affordable destination.

• The results were incredible: • 18 months after the attacks, visitor numbers to Bali were all but recovered. The sector was

revitalised and growth in visitor numbers was promising

• As Bali became a more affordable destination, the type and quality of tourist has also changed.

The traditional long-haul North American and European market segment was well surpassed by

domestic, Asian and budget Australian travellers with shorter visits and reduced daily

expenditures

CASE STUDY: Bali’s tourism recovery following 2002 bombings

SOURCES:

• Pitts, W. J. (1996). “Uprising in Chiapas, Mexico: Zapata Lives—Tourism Falters.” In Tourism, Crime and International

Security Issues, edited by A. Pizam and Y. Mansfeld. New York: John Wiley, pp. 215-27.

• Bali Update (2004) Bali Update Homepage. Available: http://www.balidiscovery.com

• BPS Statistics Indonesia (2004). Tourism Statistics Homepage: http://www.bps.go.id/sector/tourism/index.html.

Average monthly search numbers on Google reveal the most popular destinations for Kenyans

SOURCE: Google Adwords Keyword Planner, January 2014 – June 2014 data, inclusive

Full

Ranking Destination

Searches for

destination

name

Searches for

“flights to …

<destination>”

Searches for

“<destination>

…. Flights”

1 Nairobi 9,900 30 20

2 Mombasa 5,400 110 30

5 Kisumu 1,300 50 10

6 Malindi 1,000 40 10

7 Eldoret 1,000 40 10

19 Ukunda 170 20 10

Local destinations



Full

Ranking Destination

Searches for

destination

name

Searches for

“flights to …

<destination>”

Searches for

“<destination>

…. Flights”

4 Zanzibar 1,600 30 10

9 Dar es Salaam 880 20 10

11 Kampala 480 10 10

12 Addis Ababa 480 10 10

16 Kigali 320 10 10

17 Juba 320 10 10

18 Entebbe 210 10 10

Regional destinations



Full

Ranking Destination

Searches for

destination

name

Searches for

“flights to …

<destination>

Searches for

“<destination>

…. Flights”

3 Dubai 2,900 40 10

8 London 880 30 10

10 Amsterdam 720 10 10

13 Johannesburg 390 10 10

14 Cape Town 390 10 10

15 Bangkok 390 10 10

20 Ahmedabad 140 10 10

21 Bombay 90 10 10

International destinations

Establishing pricing competitiveness of travelstart

Version 2

04-Nov, 2014

“Is the Travel Agent Dead?”

SUMMARY OF KEY FINDINGS

Study scope

22

•A total of 60 travel agents were phoned, noting that for some big competitors

multiple branches were included as multiple competitors so as to compare

uniformity within agencies

•Enquiries were made for 12 routes, all ex-Nairobi: 3 local, 5 regional and 5

international• 3 local: Kisumu, Malindi, Lamu

• 5 regional: Zanzibar, Dar-es-Salaam, Entebbe, Juba, Addis Ababa

• 4 international: London, Johannesburg, Dubai, Guangzhou

•The enquiries were made on 10th, 14th, 15th and 18th October 2014

•3 types of dates were checked for each travel agent and each route, all

checked in the second week of October 2014• Immediate: depart last week of October 2014, return second week of November 2014

• Short term: depart late February 2015, return mid March 2015

• Long term: depart early May 2015, return late May 2015

Research methodology

23

•Telephonic ‘mystery audit’ for traditional travel agents

• Executives from Millward Brown called travel agents posing as customers and asked

for flight fares for specific dates and routes

•A total of 254 such calls were made which received responses, out of

a total of 657 calls (39% success rate)

• 12 routes x 3 date types = 36 types of enquiries

• For each enquiry type, 5-10 calls made across different travel agents

• See next slide for detailed sample sizes

•Travelstart fares for all enquiry types checked online and recorded

every day

•For analysis, the same day’s fare’s were matched against each travel

agent quote

In total 254 data points were collected, from 657

calls – a 39% response rate

24

COLECTED DATA POINTS

Immediate Short Tem Long term TOTAL

Kisumu 11 6 8 25

Malindi 9 6 5 20

Lamu 10 10 4 24

Zanzibar 8 9 8 25

Dar e Salaam 10 5 5 20

Entebbe 8 3 8 19

Juba 6 5 6 17

Addis Ababa 10 8 4 22

London 8 5 7 20

Johannesburg 8 9 5 22

Dubai 11 4 6 21

Guangzhou 9 3 7 19

TOTAL 108 73 73 254

How often is Travelstart cheaper than the competition? (1/2)

Immediate Short term Long term Total

Kisumu Total successful calls 11 6 8 25travelstart cheaper 11 4 7 22% wins 100% 67% 88% 88%

Malindi Total successful calls 9 6 5 20travelstart cheaper 8 6 5 19% wins 89% 100% 100% 95%

Lamu Total successful calls 10 10 4 24travelstart cheaper 6 8 4 18% wins 60% 80% 100% 75%

Zanzibar Total successful calls 8 9 8 25travelstart cheaper 8 8 8 24% wins 100% 89% 100% 96%

Dar e Salaam Total successful calls 10 5 5 20travelstart cheaper 10 5 3 18% wins 100% 100% 60% 90%

Entebbe Total successful calls 8 3 8 19travelstart cheaper 8 3 8 19% wins 100% 100% 100% 100%

How often is Travelstart cheaper than the competition? (2/2)

Immediate Short term Long term Total

Juba Total successful calls 6 5 6 17travelstart cheaper 6 4 6 16% wins 100% 80% 100% 94%

Addis Ababa Total successful calls 10 8 4 22travelstart cheaper 10 7 4 21% wins 100% 88% 100% 95%

London Total successful calls 8 5 7 20travelstart cheaper 6 4 7 17% wins 75% 80% 100% 85%

Johannesburg Total successful calls 8 9 5 22travelstart cheaper 8 9 5 22% wins 100% 100% 100% 100%

Dubai Total successful calls 11 4 6 21travelstart cheaper 11 4 6 21% wins 100% 100% 100% 100%

Guangzhou Total successful calls 9 3 7 19travelstart cheaper 9 3 6 18% wins 100% 100% 86% 95%

GRAND TOTAL Total successful calls 108 73 73 254

travelstart cheaper 101 65 69 235

% wins 94% 89% 95% 93%

On average, traditional travel agents are 27% more expensive than

Travelstart

Immediate Short term Long term Average

Kisumu 26% 47% 88% 54%

Malindi 16% 47% 68% 43%

Lamu -2% 11% 15% 8%

Zanzibar 27% 9% 11% 16%

Dar e Salaam 29% 26% 36% 30%

Entebbe 11% 10% 12% 11%

Juba 42% 21% 20% 28%

Addis Ababa 22% 39% 31% 31%

London 14% 17% 19% 16%

Johannesburg 27% 37% 21% 28%

Dubai 26% 21% 77% 41%

Guangzhou 12% 32% 7% 17%

TOTAL 27%

Comparison of average prices shows Travelstart to be

cheaper than competition in all destinations except one

Immediate (depart last week of Oct, return second week of Nov)

Short term (depart late February, return mid March)

Long term (depart early May, return late May)

Competition travelstart Competition travelstart Competition travelstart

Kisumu 13,167 10,485 14,674 10,000 13,683 7,266

Malindi 15,904 13,727 18,212 12,397 15,580 9,298

Lamu 24,864 25,352 28,023 25,352 25,422 22,183

Zanzibar 34,928 27,412 36,150 33,019 34,857 31,506

Dar e Salaam 39,391 30,616 38,591 30,616 41,628 30,616

Entebbe 33,220 29,904 32,918 29,904 33,347 29,904

Juba 56,925 40,139 48,596 40,139 48,182 40,139

Addis Ababa 25,819 21,093 29,392 21,093 27,718 21,093

London 79,342 69,776 81,308 69,776 80,598 67,754

Johannesburg 54,165 42,664 58,531 42,710 51,620 42,667

Dubai 43,158 34,265 41,003 33,909 59,903 33,909

Guangzhou 104,747 93,935 109,862 82,948 91,812 85,529

How cheap is Travelstart when compared to the best alternative

available in the market, for specific routes and time periods?

Immediate Short term Long term Average

Kisumu 80% 68% 53% 67%

Malindi 86% 68% 60% 71%

Lamu 102% 90% 87% 93%

Zanzibar 78% 91% 91% 87%

Dar e Salaam 78% 79% 84% 80%

Entebbe 90% 91% 90% 90%

Juba 71% 83% 83% 79%

Addis Ababa 82% 72% 76% 77%

London 88% 86% 84% 86%

Johannesburg 79% 73% 83% 78%

Dubai 79% 83% 57% 73%

Guangzhou 90% 76% 93% 86%

TOTAL 81%

Travelstart is cheaper across the 3 time periods, even when compared to the cheapest alternative available

Destination vs. Cheapest

alternative price




Minimum price-KES

travelstart same day cost-KES

Minimum price-KES


Minimum price-KES


Kisumu 12000* 5715 13700 7267 3500 7267#

Malindi 14500 14535 14700 9298 14725 9298#

Lamu 14800 25352 19715 25352# 22186 12676

Zanzibar 28000 27412 29750 32663# 32100 31506

Dar e Salaam 33000 30616 32485 30616 30616* 30616#

Entebbe 31506 29904 31595 29904 31506 29904

Juba 49000 40139 34290 40139# 45000 40139#

Addis Ababa 24475 21093 20025 21093 22250 21093

London 69509 69776 69420 69776# 72802 67729

Johannesburg 44500 42720 47170 42720 44500 42720

Dubai 35000* 34265 37380 33909# 39300 33909

Guangzhou 99324 94429 99680 88644# 85440 85529

* Negotiated rate

Cheaper More expensive

# Different flight

How about when compared to ceiling prices in the market; how

much cheaper is Travelstart?

Immediate Short term Long term

Kisumu 131% 120% 126%

Malindi 103% 103% 102%

Lamu 25% 94% 75%

Zanzibar 53% 23% 15%

Dar e Salaam 52% 43% 46%

Entebbe 25% 13% 32%

Juba 68% 48% 26%

Addis Ababa 37% 133% 75%

London 32% 29% 37%

Johannesburg 78% 93% 69%

Dubai 128% 34% 165%

Guangzhou 25% 51% 18%

TOTAL

Compared to ceiling prices in the market, Travelstart is

cheapest across destinations and time periods




Competition travelstart Competition travelstart Competition travelstart

Kisumu 13230 5715 15980 7267 16430 7267

Malindi 14725 7267 18900 9298 18800 9298

Lamu 31680 25352 49095 25352 22186 12676

Zanzibar 42000 27412 40851 33197 36100 31506

Dar e Salaam 46560 30616 43710 30616 44560 30616

Entebbe 37500 29904 33820 29904 39325 29904

Juba 67335 40139 59452 40139 50500 40139

Addis Ababa 28900 21093 49217 21093 37000 21093

London 91900 69776 89700 69776 93000 67729

Johannesburg 75779 42631 82400 42720 72090 42631

Dubai 78000 34265 45390 33909 90000 33909

Guangzhou 118000 94429 121325 80100 100900 85529

Documents

The Great Rip-Off! _ Full report V2