Xenophobic fury no answer to foreign competition

by on June 29, 2018

A COUPLE of recent Australian developments show that xenophobic fury and trade wars are not the answer to foreign businesses taking domestic profits and jobs, as President Donald Trump thinks. The answer is to either just to accept the benefits of the cheaper goods and services that foreigners provide or to go out in active competition.

In tourism over the past 15 years and in the short-journey (or taxi) industry in the past five years, foreign operators have come in, under-cutting locals and providing better services, but also taking an ever-growing amount of the profits.

At Canberra Airport last week GoCatch had set up a promotional desk. GoCatch is Australian-owned and in direct competition with US-owned Uber. It is in the process of an Initial Public Offer to raise some more capital.

GoCatch is competing by hitting Uber’s two weak spots: poor driver payment and surge fees that leave passengers paying a lot more than expected when traffic gets heavy.

GoCatch has also picked up a lot of taxi owners who have more dead time on their hands following Uber’s entry into the market. GoCatch no doubt is also hoping some patriotic business will also come its way.

That is a more constructive approach than, say, imposing a tariff or tax on Uber to protect the Australian taxi industry.

I gave GoCatch a go and it works in the same way as Uber: phone app; map showing where your driver is and expected arrival time; estimated fee etc.

Of course, when driverless, electric cars become commonplace, the ride-share business will be disrupted yet again.

Just as the grossly over-taxed and over-regulated taxi industry was vulnerable to disruption so, too, the accommodation business has had to meet a new business model: holiday letting.

Before Airbnb, Homeaway, Stayz, Booking, TripAdvisor and others, holiday letting was done through local real-estate agents who charged very high commissions. As a result there was not much of it and mostly restricted to known holiday destinations. Hotels and motels commanded the market.

Then came the disruptors. People with spare rooms or apartments in large cities could compete with hotels and motels because they could market their properties through the disruptors’ websites to a nationwide, and then worldwide market.

Initially in the holiday market, the Australian-owned Stayz did very well. I know. I used Stayz for our two holiday apartments in Port Douglas. And I am declaring this interest.

But now Stayz has been taken over by the overseas-owned Homeaway. Moreover, virtually every real-estate agent and travel business uses the disruptors, who are now almost all overseas-owned. And, of course, they pay commissions, including on all their Australian-sourced bookings.

Overseas travel agents also gain a large number of commissions on international tourists.

Australia is in the top 10 tourism nations in the world. And we are losing significant amounts of money overseas to commissions – in effect a lost export market.

You could shrug, and say that without the disruptors you would not get the bookings, but that is not how some tourist destinations look at it. And they are doing something about it.

Port Douglas, population 3500, is a key gateway to the Great Barrier Reef. Its tourist operators are not shrugging, but have set up Port Douglas Direct to try to claw back some of the $20 million a year lost to overseas travel agents.

Director Gerry Ireland says, “No-one is looking at this issue.”

Governments and tourism bodies have not “made any attempt to understand or do anything about the damage caused by the syphoning of tourism funds from Australia”.

It is not just accommodation, but also commissions on tours and other tourism services.

Later this year Port Douglas Direct will launch a website that aggregates and markets tourism businesses in the region – those that service trips to two of Australia’s main tourism attractions, the Great Barrier Reef and the Daintree Rainforest.

But it is not just a Great Barrier Reef and tourism issue, but also business travel. Austrade figures put travel by Australians in Australia at 351 million nights, spending $65 billion. International visitors spend 265 million nights worth $41 billion.

When you extrapolate the overseas travel agents’ take it comes to a little over $1.9 billion a year.

Australian small businesses, particularly those serving the Great Barrier Reef could do with some clawing back of that take.

The Barrier Reef businesses have been hit by two destructive bouts of cyclones and floods and see their long-term future horribly compromised by coral bleaching.

You would think the Federal Government would be on to it, instead of its insistence on subsidising and promoting one of the reef’s major enemies: coal.

After all, the Reef Seats (those with coastline opposite the reef from which the tourism businesses operate) are among the most marginal in the country.

Two of the Reef Seats are the most marginal in the Parliament: Labor holds Townsville-based Herbert by just 0.02% and the LNP holds Capricornia by just 0.63%. Three others are held by the LNP by under 4%: Flynn on 1.04%; Dawson on 3.34%; and Leichhardt on 3.95%. (The other Reef Seat, Kennedy, is comfortably held by Bob Katter who heads his own party.)

The Federal Government talks about small business, but seems more interested in giving money, subsidies and tax breaks to big business. It did that with its highly suspect $444 million grant to the Great Barrier Reef Foundation.

The foundation is supported by companies including BHP, Qantas, Rio Tinto, Google and Orica.

There was no open tender or public-grant process and no consultation with the Queensland Government. The Great Barrier Reef Marine Park Authority with its 200 employees and wide expertise was excluded. The foundation, on the other hand, has fewer than 10 full-time equivalents.

In the meantime, the overseas travel agents keep raking in the profits from our reef.
CRISPIN HULL
This article first appeared in The Canberra Times and other Fairfax Media on 30 June 2018.

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