The travel industry used to be an industry of rampant scams, but it has improved. I’ve now found a different industry that’s worse than travel ever was: cable TV.

This week Ron Posner, assistant producer for the Cable TV show Art of Living set up an appointment to speak with me about filming EWT safaris. Skeptically, I made the appointment.

Ron seemed nice enough, but I didn’t want to spend a lot of time on a “scam.”

“How much is this going to cost me?” I asked before the conversation began. The reply was laughter, and Ron immediately started reminding me of all the spots of this show that airs on CNN, especially over CNN’s airport channel.

So we spoke. We spoke for some time about industry trends, about EWT. Ron seemed particularly interested in the baby boomers, as he said, that was the target audience for Art of Living.

As the hour-long conversation was winding to an end, and Ron was beginning to schedule a film crew coming to see us, he mentioned the “collaborative” effort that Art of Living and EWT would be engaged in.

He called it a “scheduling fee.”

Another scam. I don’t mind talking about EWT and travel, and replied by telling him so. But it makes me wonder if every single spot we see on cable is not really news or features, but paid for by the beneficiary of that publicity.

Years ago, the travel industry was just as bad. Do you remember those free cruises, and free weeks in Orlando, which required 80% of your time visiting time-shares? Or the roundtrip to Budapest followed by an inflated ground package? The most striking were the so-called “taxes” that airlines place on their ticket prices. Usually half of the amount wasn’t really a government tax, but a fuel surcharge determined solely and completely by that airline. Some of that still exists, but for the most part these scams are over or disappearing.

So beware, if you aren’t already, your so-called feature spot on cable TV. That waffle pan might not really be the best one!

As tourism to East African continues to plunge, Kenya’s mistaken approach is to lie about the statistics.

Last week Kenya’s Central Bank reported that “tourism continues to do well” and that visitor numbers were up nearly 55.4% over last year. Read a bit further. Actual revenues, which the CBK can’t lie about as easily, dropped 6.5%.

Last year saw a precipitous decline in Kenyan visitors because of the political violence at the beginning of the year. Revenue numbers are inflated by the CBK’s use of Shilling/Dollar conversion techniques.

The Kenya Tourist Board states it more truthfully. Annual numbers this year are likely to be 60% of those in 2007, before the political violence.

The truth is further told by the tourism companies in Kenya. Major companies like Cheli & Peacock, Abercrombie & Kent and Sarova Hotels have instituted 20% pay cuts, and reduced work schedules by 20%. At first this might seem like a fair if generous move, but it’s basically to avoid paying the high severance fees mandated by Kenyan law.

And with nothing at all to do with lying statisticians, Kenya’s drought is devastating tourism even further as many companies (like EWT) substitute Kenyan itineraries with Tanzanian ones.

Uganda reports a decline of 30% in tourist revenues.

Tanzania seems to be fairing the best, but it’s nothing to write home about. At the end of June, eTurboNews reported nearly 30% of Tanzania’s tourist industry workers have been sacked and that revenues are likely to drop by nearly 10% this year.

I’m a numbers’ guy, and I’m frustrated that none of these numbers adds up. You don’t cut 20 or more percent of the working force if revenues are only dropping by 10%. But the cutting is real, can’t be disguised. Tourist numbers can’t be increasing by half, with revenues decreasing by 10%, despite impoverished explanations that discounting prices explains this.

It doesn’t. It can’t.

The truth on the street exceeds the institutional mumbo-jumbo. Nairobi and Arusha are awash with bottom feeders at the moment, like the U.K.’s Pathfinders, representatives of whom were seen scouring all the mid- to up-market properties that are currently stressed. The soon-to-open Holiday Inn in Arusha has reps on the street not just promoting the new property, but looking for other properties they can consume and rebrand.

The biggest rumor on the streets in Nairobi is that Canada’s Fairmont Hotels wants to off-load two nonperforming properties, The Ark tree hotel and the Aberdare Country Club, for under two million. Holy smokes! When Fairmont bought the properties 5 years ago they were valued at $6.5 million.

The reality pressures are building. I fully expect the premature publishing of 2010 rates by most major properties to be revisited, and that actual prices will fall even further.

Safari travelers are getting taken for a ride!

The price of a new car is way down, as is the price of butter. But safaris are getting more expensive! Consumers beware and Fair Trading be damned!

I remain astoundingly dumbfounded at how ridiculously high safari prices are being kept in this economic downturn. The problem is two-fold, one which effects companies like EWT, and one that only effects big companies like Abercrombie & Kent.

I’ve written before about the foolish strategies employed by local East African companies in response to an economic downturn:
they raise prices.

The altoKeysenian theory is that reduced demand shouldn’t lead to reducing prices, but rather increasing them! In an environment where there’s no unemployment insurance or hiring/firing codes, and where contracts are adjudicated in bars rather than on them (in courtrooms), this protects the owners and investors while killing the employees.

EWT’s survey of local price increases in East Africa shows about 15% for 2009 over 2008! Remarkable! This effects everyone who ends up buying an East African safari, whether they walk into a store in Nairobi, buy from EWT or buy from Abercrombie & Kent.

But that’s just half the story.

The weirdo economics has now infected even U.S. markets. America’s three largest tour companies selling East Africa have announced price increases for 2009 that were more than 20% higher than 2008!

I ran their tour programs through EWT’s price database to figure out their real costs. Here’s the astounding outcome:

(Timeout: make sure you read the fine print. All these companies publish a certain safari cost, and then hit you with “internal air fare” costs, so make sure you do the addition… Second timeout: all these companies are offering some kinds of specials, and I haven’t incorporated them into the analysis. It’s usually less than a 10% discount on the cost… Third timeout: prices from all of them fluctuate throughout the year, so I’ve used June 1 as the first day on safari.)

The cost to selling price ranges from 108% to 185%! Yes, that’s right. At the very least the cost price is doubled, and in some cases, nearly tripled!

Abercrombie & Kent
Wings over the Migration
Retail Price (with internal air fare) : $15,595
True Cost : $6057
Markup from Cost: 157%

Micato Safaris
The Micato Grand Safari
Retail Price (with internal air fare) : $21,150
True Cost : $7,414
Markup from Cost: 185%

Big Five
Tanzania Explorer
Retail Price (with internal air fare) : $16,550
True Cost : $7,940
Markup from Cost: 108%

These are three very good companies: reliable, long in business, with pretty impeccable credentials. At least as far as pleasing customers, but do these customers realize how they’re being taken for a ride and not just a safari?

What bothers me most of all is how terrible all of this is to the employees and local businesses in East Africa. One of the few local companies that has an American selling presence, Thompson’s Safaris, just laid off almost half its work force. There’s no insurance for these good folks; no government paycheck, no retraining programs, nothing. They’re being laid off, so that the handful of owners and resellers — who do nothing ultimately to provide guests with a good safari on the road – maintain their situation in life at the expense of dozens of local employees who find themselves at the edge of collapse.

The three companies described above are not local companies, despite sharing names with local companies over in East Africa. These are American companies, and their despicable prices and markups from the cost they give the local companies is kept here, in America. That means for every $10 that a safari customer gives Micato Safaris in New York, $6.50 stays in America, and $3.50 goes to East Africa. That’s outlandish.

Fourth timeout: all these companies have foundations, do some good work locally in East Africa, support charities and basically because of their volume are essential to East African tourism. So let’s say that I’ve overestimated by HALF (which I haven’t). Even if I exaggerated that much, it would still mean that more than half of everything a consumer in America pays for a safari, stays in America.

That’s outlandish.

“Fair Trading” which I’ve also written about before and which is being broadly adopted by tourism companies worldwide, insists that at least $6 of every $10 goes to the source, and that’s a minimum. Many companies like EWT operate with a minimum of $8 of every $10 going to the source.

Fifth timeout: but small companies like EWT do not have the huge marketing costs of the big giants.

A-ha! And that’s the explanation, and least a big part of it.

Much of East African tourism in America is still sold in anachronistic ways: through what in the rest of the world is ancient distribution systems. The safari that a customer might buy from Big Five is likely to come through a travel agent, a wholesaler, and then a global wholesaler, and then through an inbound operator, before it finally reaches the hotels and transport owners that provide the safari services.

Smaller companies like EWT leapfrog all the middle men. All those necessary markups don’t exist. Does this explain everything?

Not quite, but it goes a big way. I think the final analysis also has to do with the infectious weirdo economics of local East African company owners as it seeps through an anachronistic distribution system to America. I think these American companies are also using voodoo economics.

Consumer to East Africa, beware!

Both! For Less!

Who could not have been inspired last night by President Obama’s budget address? It’s like we’ve been in the darkness for so long that the light at the end of the tunnel is blinding, and so exhilarating!

But one of my clients had Obama’s spirit before the rest of us knew it!

Jodi Eckenhoff is the mother of three daughters, a practicing physical therapist in the suburbs of Chicago. In a few weeks, I’ll be guiding Jody and her recently university graduated daughter, Alison, on my premier Great Migration Safari. Wow, now that’s some graduation present! you say with awe. Uh-huh, but there was a catch!

(As a parent whose children are now out in the real world on their own, I know how difficult it is to finance a child’s higher education. I had the fortune of children who managed to perform well enough to get some substantial financial assistance, but even so, my daughter went to Bryn Mawr, studied at the University of Cape Town, then got a law degree, and also following Obama’s spirits, now teaches junior high school!)

The average cost of a college education broke $30,000 in October, 2006, according to the College Board, a non-profit association of 4,500 schools, colleges and universities. The College Board, in fact, has a little web tool that lets you estimate the cost of higher education in different places in the country, by different degrees, etc:

How Much Does College Cost?

Today, that tool renders a private institution for 4 years around $37390, 4-year public (in-state): $18326. When you add text books and materials, pizza deliveries, other living costs, car repairs, bond money, trousers that allow 2.567″ of paisley boxer shorts to show, text messaging, keg deposits, it becomes substantially more. But there’s the rub, and Jody knows it well! The tool is fixed on determining a “four-year” education, and today, most kids take 5 years. That adds another hard $9350 in college costs, plus another year of incidental expenses. Guess what, that could equal the cost for TWO on my premier Great Migration Safari. So Jody gets to go, too!

That’s right, parents, Jody tells her daughters that if they get their degree in 4 years, they can choose a “big trip” that she’ll accompany them on! I promise to give homework to everybody!

I’m very grateful that Jody chose my safari, and kidding aside, I can’t think of a more educational trip than the GMS. The two-week experience, I hope, is as enlightening as a good school-room education strives to achieve over a much longer period of time.

Congratulations, Alison, and even more so, congratulations, Jody!

It’s Too Little, Too Late.

Sitting here on Valentine’s Day, I am surrounded by oodles of unrequited love: for only $99 I’ve been offered 5 nights in Orlando including a public bus ticket; a 5-night cruise to Antigua for $230; 6 nights during the mud season in Budapest including roundtrip air on Malov airlines (from Lisbon) for only $399; a week in Cancun for $444 at a condo next to the pineapple factory; or free tickets to the winter ballparks of major leagues in Phoenix including a free $100 coupon for a Canadian drug company.

For my East Africa, it’s even more embarrassing, and this is for real. CCAfrica (who I refuse to call by their new name, “&beyond”) first offered 4 nights at any of their $1000 per night camps for only the price of three and now (!) offers 6 nights for the price of four, Governor’s Camps has extended the low season pricing into the high season as have many other companies, and mega-giant Abercrombie and Kent has announced that next week it will begin lowering the price of many of their East African products by 5% per hour until they reach 60% off or sell out.

Meanwhile, the Bernie Madof ponzi scheme has even hit my circuit. A silent American partner in Sangare Ranch in the Aberdare is listed by the New York District Attorney’s office as one of the effected investors, and on this complex is Sangare Tented Camp, an important part of Kenya’s northern circuit for tourists. Greed. Greed in pricing East African products, and then greed to use the ridiculous returns to get even more.

Doesn’t anybody get it? Heavy discounts are meaningless when the baseline product is so overpriced to begin with! According to the offers on my desk right now, I could go cruising the Caribbean on an all expense paid boat like Carnival, for SIX WEEKS(!) for the cost that CCAfrica is now discounting for six nights in Kenya. Good Lord, WAKE UP EAST AFRICA!

More importantly for us in African travel and tourism, we should be using this critical moment to restructure our entire idea of future business in East Africa, not just discounting what had become ridiculously overvalued to begin with.

Business models for East African tourism haven’t changed for 40 years. The ROI (Return on Investment) must be 100% in 3-4 years, and after that’s achieved, you do as little as possible to maintain the property or company in working order, making hay while the sun shine and hibernating in the cold season. This is a horrible model, but it was a rational one, because both the political and economic climate of a developing area is so volatile. So the risk when compared to building a Holiday Inn at the intersection of I94 and I80, is considerable, and if things looked promising and peaceful for the next three years, there was a glimmer of opportunity.

This model left us with some of the most decrepit buildings, bathrooms, 4x4s, restaurants, and yes even tourism welcome stations, ever conceived. And whenever a good 3-year period seemed to appear on the horizon, a thin veneer of repair was slapped over everything.

Most East African lodges and tented camps, and most of them in southern Africa, too, are probably overpriced by 100-150%. If structured into a more customary business model with a longer ROI and smaller annual return, they would cost that much less. And despite press reports as eager to claim Kenya is imploding as Obama is mistaken, East Africa is growing more and more mature financially and socially, and it’s time to realize that travelers are comparing an East African safari with a vacation most anywhere else. And when this type of comparison is made, the ridiculously high prices we have seen over the last few years come into clear perspective.

Time to rethink, East Africa. Time to use this otherwise awful catastrophe as an opportunity to realign ourselves with mature tourism business worldwide.