Is There Enough “There” Out There? The Potential and Pitfalls of Exotic Tourism

View of Fogo Island Inn (distant right)

View of Fogo Island Inn (distant right)

The global tourism industry is enormous. One measure, international arrivals, is the number of tourists who arrive in one country from another. It has grown from 528 million in 1995 to 1.1 billion in 2014. This measure by the UN World Tourism Organization (UNWTO) understates the level of tourism activity because it does not include tourism within national borders.

Tourism can have positive benefits, not the least of which is economic benefits for the tourist destinations. Another benefit is the broadening of our horizons — building awareness and appreciation for other cultures that can help to reduce prejudices and xenophobia. In some cases, travel to areas such as the polar regions or the upper Amazon river system raises awareness of the impact of economic decisions and of climate change.

Your correspondent recently visited three places that are indicative of the challenges, potential and possible perils of growth in tourism, especially to areas that are still relatively uncrowded — the Antarctic Peninsula, northern Iceland, and Fogo Island, Newfoundland.

One of the challenges facing tourism operators in these and almost all locales is seasonality. In lean flow process thinking, leveling the demands on a system (“level production” in Toyota’s philosophy) is a key aspect of establishing a healthy process (one that generates sustainable value with minimal waste and stress). In some cases seasonal weather makes travel dangerous (such as journeying to Antarctica during its winter months), difficult (destinations dependent on fiddly airport connections that are often impacted by blizzards or typhoons) or just unpleasant, such as the steamy humidity in cities like Tokyo in mid-August.

These swings in demand load creates a challenge in process planning: can we get heads in the beds during the off-peak seasons and how do we recruit and retain talent in the face of this seasonality? Although tourism creates employment, demand swings can create employment that is precarious and not of the stable, enduring kind that allows for the formation of families and communities. This is one of many reasons why the Toyota Production System seeks to achieve level production — it engenders an environment of stability that fosters a better work environment. For most people, unless one is a student or a retiree, the “gig” economy makes it more difficult to plan for the future.

Some operators use natural off-setting patterns to level-load their business. For example, many expedition operators in Antarctica (I traveled with Quark Expeditions) also operate in the Arctic allowing for a degree of steady work for some of its staff. However, this polar nomadic life, while great for some, is not something that many people can do or do for a long career. In other cases, workers in seasonal tourist operations learn to cobble together 2 or more gigs to fill-up their work year; many of these workers are by nature, or by nurture, able to make ends meet as resourceful entrepreneurs and are able to adjust their lifestyle to match changing cash flow, as well as use the trade and barter economy.

Neko Harbour, Antarctica 2016

Neko Harbour, Antarctica 2016

The Fogo Island Inn (I had the opportunity to visit this past New Year’s Eve) is in some respects an attempt to break the mold on aspects of seasonal tourism and employment. The Inn is situated in a relatively remote location both for its rough beauty and charm as well as its connections to the Inn’s developer, Zita Cobb: her family lived in the fishing village that hosts the Inn. Cobb wanted to build something that would create sustainable employment. In addition to typical hotel operations, almost all of the furnishings and soft goods used at the Inn were made in nearby villages using techniques adapted from the area’s boat-building heritage. Continuing to find markets for these products as a part of the business plan.

The Inn may have also benefited from a unique labor pool. The history of Newfoundland — the collapse of its fishery, forced relocation, and extreme weather — has evolved a populace that is, at least to this visitor, more resilient, flexible and entrepreneurial than most.  In addition to locals, the Inn has benefited from a desire by many Newfoundlanders to return home “from away,” many of whom would prefer to live in Newfoundland if they had prospects of employment.

It is still early days for this Inn but they are working hard to work against the tide of seasonality by appealing to visitors in all seasons — they reckon there are at least 7 of them in this locale — and not just the traditional peak months of June through August, when, to be sure, the island and the Inn are chock o-block full of visitors.

Your correspondent can report based on my visit during the New Year that during the winter months the weather is often a factor — high winds and snow storms that can affect aircraft and the ferry connecting the island to the mainland. But this is all worth it for those seeking a mixture of solitude, commodious local hospitality (many from villages around the Inn volunteer to show visitors around the island), great food and tasteful architecture and design. In some respects, the out-of-the-beaten-track nature of Fogo Island that is its prime “competitive advantage” as well as an operational challenge.

Tourism is a vast industry. For the purposes of this article let’s focus on a relatively narrow but important slice of tourism focused on specific geographic locations characterized by exotic geography and wildlife and, in many cases, unique cultures. These locations — think of Iceland, Machu Pichu, the Amazon basin, the Grand Canyon, the Northwest Passage,  the Galapagos Islands, tundra regions, coral reef systems, the deserts of the American Southwest, maritime zones such as Fogo Island or the Pacific Northwest running up towards Alaska. In a world where more and more people can afford and aspire to travel to increasing exotic and remote locations (for example, the influx of tourists from new markets such as China is in an early stage and yet is already significant — Quark had several expeditions to Antarctica entirely dedicated to tourists from China) how will tourism balance the need to keep the pipeline full with business with the dangers of depreciating the natural asset that is the goose that lays the golden eggs?

This depreciation takes the form not only of the physical degradation of the air, land and water of these locations but also the risk of eroding the local cultures and customs. Your correspondent noted that whereas in 2014 many inns and restaurants in Iceland, particularly in the areas outside of Reykjavik, featured horse meat on their menus in the same way North Americans and Europeans list cow or swine, by 2015 online comments expressing outrage at the practice of eating horse resulted in the disappearance of this traditional item from many menus serving tourists.

Pricing: Price to Clear or Price to Recover the Full Costs?

Pricing tactics are as old as the hills. Need to goose demand? Consider rate reductions in off-peak months. Yet for many unique locales the issue many not be just about how to entice visitors during the off-peak times, but how to charge rates that would enable a fuller offset of the impact of guests — increased traffic and roads and the impact on the land, increased power and water consumption, waste handling, foot traffic on and through sensitive environs. In most cases, with the exception of things like national parks, the area is a shared resource with no one business operator either responsible for worrying about the systemic impact of activities, nor able to fully recoup any money they might invest in a common asset. Like a fishery, the natural wonder of a location can degrade unless collective action is taken. This suggests greater creativity and cooperation between governments, citizens and businesses than is typical in many regions of the world and in most industries.

An expedition to Antarctica is expensive for several reasons but one is the increased costs of operation due to the requirement to leave no human waste behind. How many other locations make guests pay for the full costs associated with their visit? If such a price is charged, does this lead to access only to the wealthy? How could National Parks, with a mandate to serve as wide a constituency as possible, balance this objective with the idea of charging a fully loaded price that reflects the full costs to the environment?

This year, Crystal Cruises is offering a 32-day expedition from Anchorage to New York (it departs August 16th); the base price $22,000 USD. The ship, the Crystal Serenity, carries approximately 1,080 passengers and has the features one would expect from a luxury cruise ship: butler-serviced 1,345 sq-ft Penthouses, a jewelry shop “restyled to resemble a jewelry box, complete with a mother-of-pearl feature wall and beveled chrome vitrines. Plush chairs upholstered in stone-colored leather allow for a leisurely shopping experience.” Not many cruise ships have traversed the Northwest Passage — it is not as well-mapped as many other sea lanes. According to Crystal Cruises they have invested 18 months of planning along with agencies such as Transport Canada and the Canadian Coast Guard. That is wise given the challenges of operating vessels of that scale in polar regions; one hopes that all such operators are subjected to rigorous standards and requirements, standards and requirements that, however, come with hefty price tags.

West World, the Sequel?

Disney Land and then later Disney World were the prototypes for “manufactured” experiences or destinations. In this scenario the location is much less important than the design, building and operation of an environment that consistently meets customer expectations. Almost literally a “factory” for generating experiences, this approach has several advantages. First, one can site such an operation anywhere. A hitherto empty desert (Las Vegas, Dubai) is now ripe for use as a destination. One can surf, ski and visit a faux Eiffel Tower within the same complex. Second, through heating and air-conditioning an amenable 365 day-per-year environment is possible. But there is a significant environmental cost. This kind of “terraforming” consumes prodigious amounts of power and water. Unless equally ambitious efforts are made in alternative energies, recycling and energy reduction, such sites create their comfortable climates at great expense to the total environmental system.

With advances in computing and clever interfaces with our brains, virtual reality one could perhaps create mental experiences that have the kind of immersive and experiential impact as actually travelling to “the real thing.” Perhaps some day such a virtual experience might replicate the sensation of walking up the Inca Trail to Machu Pichu. In 1973 Michael Crichton wrote and directed a science-fiction film called “West World” about an adult theme park featuring robots (Yul Brynner famously played the robot gunslinger-run amok). Might the future of tourism in part lie in this kind of experience? Even if technically possible, it is an interesting question how this would affect “analog” travel to the actual place. Might the virtual or robotic experience satiate traveler’s appetites and reduce visits to the actual spot, or it might only serve to drive greater demand to see the real thing.

Tourism as Education

Pricing is one way to manage demand. Another is a form of qualification. For example, if people who wanted to visit a location they might need to demonstrate relevant skills in order to qualify. For example tours to a remote cave complex that requires a skills and knowledge certificate in order to book a spot. Operators such as Adventure Network International have some expeditions in the Antarctic that extensive experience resumes are required to gain acceptance to expensive extreme tourism offerings. Or perhaps potential visitors would need to propose a project — such as piece of research, writing or some other cultural activity — in order to move to the top of the list of people wanting to visit. Much like a form of post secondary education, some travel could be tied to knowledge and skills enhancement; much like a college, some travelers without the financial means could qualify for a form of tourism “scholarship,” a reduction in the rate in recognition of the return on investment on that person’s visit in the form of social capital (such as becoming a cultural ambassador for the locale).

Travel by ships to polar areas usually have extensive educational programs — it both part of the appeal for the segment of travelers they target as well as a necessary tactic to occupy guests during periods of the trip involving lengthy days at sea. Fogo Island Inn, while ostensibly a high-end hotel, is in many more like a sea vessel (appropriate given its maritime setting) in that extreme weather can make a virtue of staying within the Inn (which is very homey for a luxury property). Documentary films shedding light on the Inn and the history of the area and other cultural activities are much like the science briefing conducted during an Antarctic voyage. Indeed, Fogo Island Inn could very well push this kind of activity far further; the notion of guests staying at the Inn for more extended periods of time in the off-season to work on creative projects or to learn how to build things using boat-building derived, wood-working skills might find a small but enthusiastic market.

Iceland is a nation trying to determine how it should approach tourism. Aside from a few sites in and around the capital, Reykjavik, and some whale watching charters departing from the northern port of Akureyri, the tourism industry in Iceland is largely under-developed, consisting of mom and pop inns and a handful of entrepreneurial outfitters specializing in 4×4 tours into the glacial areas and helicopter excursions. Yet the food, history and culture of the island is fascinating and there is considerable potential for appealing to a segment of traveler interested in more than a quick trip to the Blue Lagoon geothermal spa on a 48-hour stopover on the way over the U.K.

Process excellence has always focused on the optimization of a process for stakeholders, but if the “process” is an interconnected planetary eco-process, there are no externalities, no ways of creating more Antarctica’s or Great Barrier Reefs; we have to look at the entire end-to-end value chain and manage it accordingly as a society.

Tourism is an interesting and challenging industry. As the number of tourists increases and our need for novelty, recreation, social-media bragging rights, as well as intellectual and spiritual desires continues to grow, it’s going to get even more challenging and represent a sector with implications for us all.

Iceland: No one in sight, but for how much longer?

Iceland: No one in sight, but for how much longer?



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