Tyler Cowen on The economics of the Michelin Guide
Michelin stresses though that when taken together, the maps, guides and digital businesses are profitable. But the losses incurred by the red books have become such a concern that Michelin has turned to outside consultants. Accenture looked last year at three different scenarios for the red books, including outright closure.
The nuclear option was quickly rejected, partly in recognition of the undoubted brand value of the guide but also because of the political impossibility in France of such drastic action. However, Accenture warned that to carry on with things as they are today would mean yearly losses at the guide hitting €19m by 2015, representing a cumulative loss of €70m over the next four years.
The thinking seems to be that Michelin would do well to seek a share of the good fortune that its awards bestow on restaurants, possibly by creating a “red book” website that provides paid-for links for those establishments with Michelin stars and allows users to make online reservations.
See article in the Financial Times
Better news for devotees of the red book’s star-system is found in a separate internal study carried out for those now running the company, who wanted to know just how much all that Guide Michelin publicity was worth to the bread and butter business of selling tyres. The study shows that the presence of Guide Michelin in a country means people are up to 3 per cent more likely to buy its tyres. With €5bn of tyre sales in the first three months of this year alone, these are figures to be taken seriously. Certainly, defenders of the faith are eager to stress the huge amount of “buzz” every time a guide is launched or Michelin starts covering a new city.