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Lord Howe Island SWOT - part 1

01-May-2014

Many of our guests ask about the big picture strategic issues – the sort of issues that can make or break a remote holiday destination. Below are some notes we contributed to the Lord Howe Island Destination Management Plan.

Current perception from existing guests

Beautiful, unique, relaxed, rustic, informal, no touts or hard sell, good value, disconnected from technology and distractions, genuine holiday, rejuvenating, safe, perfect for families, beautiful beaches, close to Sydney/Brisbane, “we should have come back sooner”.

Current perception from potential guests

Expensive, daggy, “out there somewhere between the Barrier Reef and Tasmania”, “where that girl was murdered”, “near Norfolk Island”, destination for old people, no night life, no shopping, “always wanted to go there, but haven’t yet”, “never heard of it”

Ideal perception

Beautiful, unique, pristine, exclusive (but not necessarily up-market), fun, challenging, active, clean, simple, no hard sell, relaxing, healthy, genuine holiday, disconnected from distractions and technology, rejuvenating, safe, perfect for families, egalitarian, close to home

Unique selling points

1. Beautiful – colours, landscape, lagoon, ocean, beaches, mountains, forest, sunsets

2. Pristine – no pollution, no graffiti, no litter, limited human impact, protected by islanders

3. Forests, birds, fish, turtles and coral (not “flora and fauna” or “ecosystems”)

4. Timeless – not bothered by trends, not clinical or impersonal, ability to trigger happy memories from childhood holidays

5. Simple – simple, honest and rustic – walking, riding, swimming, socialising, eating and drinking – no need for cars, keys, phones or shoes

6. Safe – free of crime and dangers to allow complete relaxation and trust

7. World class adventure activities in close proximity without the need to commute

8. Scarcity – restrictions on beds and flights should create demand, appreciation and prestige

9. Mild climate – warm in winter and cool in summer compared to the mainland, mild ocean temperature all year, perfect walking weather, always a sheltered beach out of the wind

10. Disconnected – no mobile phones and limited internet encourage people to disconnect whether they like it or not (and the vast majority love it)

11. Genuine hospitality – authentic and warm family service (sometimes a bit rough around the edges but still endearing)

12. Great choice of activities to keep busy

13. Fascinating local community – rich history, long connection to the land, resilient, “Australian islanders”

14. Perfect family holiday – safe, easy, no commute, short flight time, no “Bali belly”, great activities

15. Riding bikes – short distances, limited number of cars on the road and speed limit of 25km per hour, safe

16. Wood BBQs – one of the few places left with wood BBQs, which fit perfectly with the rustic and simple style of Lord Howe (a highlight for many guests!)

Positive feedback from guests

Beautiful island, pristine, few people, amazing coral and fish, amazing snorkelling, specialty interests are all world class (birds, diving, surfing, walking, fishing), ideal beach holiday, no need to shop or clean, simple pleasures, no distractions from technology, sunset drinks, wood BBQs, ideal family holiday, fascinating cultural history, interest in islander lifestyles and livelihoods

Negative feedback from guests

Poor service from some operators and lodges, cancelled flights, limited wet weather activities, expensive airfares, poor service from Qantas (particularly problems with baggage), too many cars, cars driving too fast (from bike riders), not enough hire cars (from walkers), basic accommodation which is poor value compared to rival destinations, slow and unreliable internet, poor state of boatsheds and waterfront infrastructure, no shelter on Lagoon Beach, not enough public toilets, too slow to fix the Muttonbird Point Track, nothing to do at night, expensive alcohol, difficult to buy groceries, limited choice available, limited new activities and tours for repeat guests – “it’s been the same for years”

Challenges, barriers, weaknesses and threats

1. Uncertain air service creates risks to business and inhibits reinvestment 

2. Uncertainty over the runway. Will it be extended? Has the Board seriously considered the options? What is the timeframe? What is the chance that the island will have no functioning air service once the DASH 8 – 200s are retired (or sold)? Two of the five planes were recently sold without warning.

3. Expensive flights with up to 11 fare classes that use a dynamic pricing model that prefers unfilled full economy seats over discounted seats

4. Unreliable internet inhibits online business options (and associated cost savings) and excludes likely market segments

5. LHIB taxation (liquor, license fees, wharfage, rubbish etc) raises the tax burden on local business far beyond the tax burden of mainland businesses

6. Land tenure – leaseholds and the complexities of the Lord Howe Act offer poor security to banks, resulting in no finance options, or expensive finance options with more stringent conditions

7. Insurance for islands and resorts (including LHI) is more difficult to obtain and more expensive, while covering less (often with exclusions for flood, cyclone, storm damage and other seemingly likely events. Also high excess for claims). However, adequate insurance must be maintained to satisfy mortgage conditions, LHIB licence etc

8. Public transport - only 6 hire cars on the island and no bus service, difficult for elderly people, disabled people, mums/dads with kids to get around the island if they cannot ride a bike

9. Monopoly thinking by some businesses creates a protectionist culture which limits the ability to improve services and products (through competition, new ideas, reinvestment etc)

10. Strong barriers to entry make it difficult for new lodges or tour operators to start businesses that compete with existing businesses, and by default, this means that services and products are stagnant and do not improve over time

11. Limited expert tourism knowledge and marketing knowledge on the island – only 3 lodges have a substantial marketing and PR budget, knowledge of Lord Howe alone isn’t enough

12. Heavy dependence on one travel agent (Oxley), which is risky (what happens if Oxley goes bust or raises commissions to an unsustainable level?) – the dependence also creates a comfortable and complacent attitude among lodge owners

13. Few options to book Lord Howe accommodation online with instant confirmation, which may alienate a portion of the market (maybe those who are younger or more IT savvy?). How many people book Bali, Fiji, Hawaii, Malaysia, Thailand or Tahiti instead because they can research, decide and book instantly, and then move on with their day?

14. Poor off season visitor numbers, despite years of expensive Autumn campaigns and substantial discounting by lodges

15. Conversely, poor visitor experience in winter when lots of businesses are closed and there are limited wet weather options

16. 400 guests per night bed limit is meaningless – in practice, we only reach the 400 bed capacity for maybe 6-8 weeks of the year, with maybe 300 people per night for 6 months of the year and 200 people per night for 4 months of the year (there’s no data collected on this, so we really don’t know)

17. Uncertain shipping service – everything arrives by ship including, food, fuel, building supplies and the mail. The Island Trader has less than 10 years left and the current owners have been discussing sale options. What happens if the Island Trader is sold? Does the Board or State Gov’t have a plan?

18. Weekly freight flight operated by Macquarie Air brings some fresh food and emergency freight, but the business is marginal. The business would be more sustainable if it could carry some freight off the island (eg the mail)

19. Poor community relations - divided by controversial government programs, family allegiances and small community politics – inhibits the ability of the island community to progress and work at strategic level

20. Limited desire of the community to solve its own problems and increasing dependence on the Board to fix problems

21. Poor destination marketing if expert advice is no longer used

22. Failure to learn from rival destinations and understand our products and destination in a broader context

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