Price war likely in tour coach market

A drop in international visitors, the high dollar and fierce competition in the motorcoach market has prompted a leading backpacker tour operator to maintain its off-season discount throughout the peak holiday travel period.

Magic Travellers Network, which operates backpacker coach services throughout the country, is offering a 15 per cent discount on all tours until the end of May.

It's as yet unclear whether Magic's move could trigger a price war in the already fiercely competitive travel coaching market.

Group sales and marketing manager Rob Burnell said the company had to be "aggressive" in order to attract the price-sensitive backpacker market.

"It's not something we would want to do as a long-term strategy, but it's important for us to maintain our position as the leading operator in the backpacker market," he said. "Unfortunately in order to do that we've had to discount."

Burnell oversees sales and marketing for Kiwi-owned Tourmasters South Pacific, which operates several tour offerings, including Magic.

In the past three years, the tour coaching sector has grown.

Magic once shared the backpacker market with one competitor - Kiwi Experience, which is owned by Tourism Holdings. But as the overall tourism sector enjoyed a boom from well-attended sporting events such as the Lions rugby tour and blockbuster movies like the Lord of the Rings, the coaching industry grew crowded.

"If it was just us and Kiwi Experience, we wouldn't have a huge problem. But because other operators have come into the marketplace it has made our share smaller," said Burnell. "Now that there are fewer passengers, it's smaller again."

Burnell said the discount had proven so successful that it was largely responsible for Magic's 2005 sales being on par with last year.

Tourism Holdings has said its coaching division had felt the squeeze from not only competitors but car rental and campervan companies.

The airlines, with their cheap domestic fares, also compete for the backpacker dollar.

At its annual meeting in November, Tourism Holdings chairman Keith Smith warned shareholders that the high dollar was deterring thrifty travellers such as backpackers and Japanese from travelling to the region - a trend that was likely to persist for the rest of the year.

"Coaching continues to be highly competitive in a difficult market," Smith said last month.

"Tour coaching [pre-scheduled] represents the travel mode of 16 per cent of international tourists and the market has remained static in recent years.

"The strong growth in semi and free independent travellers has declined due to the high currency."

The company also said its coaching division had been the subject of a major internal review.

The latest international visitor arrival figures show there were nearly 6000 fewer travellers in November, a decrease of roughly 3 per cent compared with the same month last year. Japanese visitor numbers showed the biggest decline last month, with nearly 17 per cent fewer arrivals or about 17,000 fewer people.

The next biggest drop in November was from the US, down 6 per cent, followed by the UK, down nearly 1 per cent.

Tourism New Zealand chief executive George Hickton said earlier this month that several factors, including the high dollar, had tempered the growth the industry had enjoyed in years past.

"After years of exceptional growth, New Zealand is facing far more issues, such as the exchange rate, as well as more competition for the traveller's dollar through the introduction of increasing numbers of low-cost airlines in Asia and Europe," said Hickton.