Glad you mentioned the PADI members who maintain the membership but are not necessarily full-time Dive Professionals at a PADI Dive Centre. While it may be argued these members bring little revenue to the “agency”, some of these may be a good source of guaranteed income, in that they renew their yearly membership (automated renewal - hardly labour intensive), require little (if any) assistance from agency staff, and generally maintain high standards (still providing PADI with low cost marketing opportunities), while purchasing training material (already established and available via online platforms, at fairly high cost, to the Dive Professional). My argument: the “benefit” to “cost” ratio (associated with this category of PADI member) is very high, and thus worthwhile keeping, as the margin is high.
I hear that argument, and with an experienced independent operator I am sure you're correct. But what about the newbie who did their IDC down in Wherever last month, has a few sets of gear in the garage and now fancies setting up as an independent or freelance. This is the bigger segment and also the much bigger risk/cost. Someone needs to teach them how to buy materials, assign them, navigate the PADI systems and certify them. Who is overseeing their QA? There is no dive centre with their own brand over seeing what they're doing, or providing them with an experienced shoulder to lean on. Again, if I were advising PADI following a significant out of court legal settlement, I would be saying that independent instructors do represent a significant risk, a risk that can only be managed with a significant increase in spend on QA. If they're looking at the cost obligation for a bigger QA system that can encompass the risks attributable to independents... I'm sure it may outweigh the financial benefit. Or at least significant errode it. Of course, none of us know the numbers or what PADI is truly thinking, but directly or indirectly we're all invested in the brand and the company
Over my 15 years of diving I’ve learned to avoid PADI like the plaque. As you mentioned, they’re not owned by divers but those seeking profits. When I used PADI for my professional certs and operations I would barely make any profit after having to pay their fees and cost. This is a common narrative with every other dive shop or instructor I’ve spoken with and why so many are leaving PADI for TDI/SDI or SSI for example. Both of which the dive center or instructor has very little overhead cost from the agency making it more profitable for the dive center and a better deal for the prospective or advancing SCUBA diver.
A sentiment I've certainly seen many times. It's down to the dive operations to allow a supplier to take a dominant position. We have it collectively within our grasp to vote with our feet and make any company the preferred partner. But.. those preferred partners have to do a job for the market which is better than the incumbent market leader .... And apart from fees I don't see that. Where is SDI/SSI's marketing strategy to drive new diver acquisition? That's something PADI does well
Hi Gary. Very interesting insight into the business of diving. I guess the incentive for training agencies is that it’s a pyramid selling business model, and anyone who pays membership fees and puts materials and certifications their way is working for them, as much as they are working for themselves. And maybe PADI is now big enough to drop less successful independent instructors, if as you imply, they cost the agency more than they make for them and , I guess, create a hassle factor as well. Maybe PADI feels it would get more loyalty and profit if, long-term, it followed the SSI model and tied the instructor to the store. Plus, it’s a bit of a mark of desperation to accept being second or third choice in a business’s selling hierarchy. About 20 years ago, just in time for the UK recession, I opened a dive shop. I had BSAC and PADI instructor qualifications, but crossed over to NAUI. One of the things that was interesting was how people asked to ’do their PADI’. Total brand awareness to the exclusion of other agencies. You’re already on the backfoot when you have to explain what NAUI is! I think PADI might well come out ahead by making this move. It consolidates their position as market leader. Really thought-provoking video, Thanks for posting it.
Thanks for your feedback Steve. I agree... its an interesting policy change, one that I would have suggested be done, from a private equity ownership perspective, but one that I maybe I thought would not happen. I also remember when I got into the industry and people would ask for their PADI, in the same way I would have bought a Hoover.... And PADI are still the best at marketing their brand and creating awareness that other training agencies don't (yet). The reality, something is changing in the market. There is a significant amount of consolidation going on within the industry and organizations look to see where the growth potential is and how they can extract more value. From a BGC matrix perspective I keep asking the question "Is the industry still a mature cash cow, or has it already moved into 'managed decline'?" Consolidations would suggest the latter.... If PADI execute this right, and restrict access to their brand to effectively "wantaway" dive shops, and as you say adopt a model more akin to SSI with regards to instructors, I believe they will make improvements and hopefully make the organisation more dynamic/open to change, which could indeed see them become the clear market leader again.
Private equity firms only care about safety only to the point that it doesn't start costing them more in legal fees. So they will absolutely sacrifice training and service quality to get more instructors. I think they will make it even easier to become an instructor.
While it might seem that PADI’s owners would benefit from lowering instructor requirements to increase pass rates, I’d argue the opposite. Allow me to explain: 1. Standardization Across Agencies: Currently, most training agencies, including PADI, NAUI, SSI, and SDI, adhere to similar instructor qualification standards. By actively participating in the creation of higher instructor standards, PADI positions itself as a leader in the industry. If these new standards become widely accepted globally, PADI will be recognized as the agency driving positive change. 2. Market Dominance: PADI’s dominance in the market isn’t solely due to its high prices. They strategically limit access to low-cost cross-overs and IDCs (Instructor Development Courses). By doing so, they maintain their reputation for quality and exclusivity. If PADI champions higher standards, they can leverage this reputation even further. 3. Trimming the Instructor Base: Implementing new standards won’t be easy, especially with the existing instructor base. However, PADI can gradually phase in these changes. By doing so, they’ll reduce the overall number of instructors while ensuring that those who remain meet the elevated standards. Quality over quantity. 4. First Mover Advantage: Being at the forefront of new ISO standards gives PADI a competitive edge. They can command higher prices, attract serious divers, and enhance profitability. It’s a win-win situation. In summary, PADI’s pursuit of higher standards isn’t about sacrificing quality for profit; it’s about securing their position as industry leaders and ensuring a sustainable future. This is what their PE owners will be looking for. I'm aware from industry insiders that PADI are trying to position themselves as the ONLY people that can be trusted to create a new set of 'ISO" type standards for the scuba training market. They have the leverage to make that happen - and this proposal means they also have the temerity to thrift the number of dive shops and dive instructors (particularly if they're not making them much money).
Completely agree. In highly regulated markets like Europe and the US I can definitely see this as a potential anti-trust issue, even though I did not touch on it in the video. It's a risk PADI would need to assess in terms of whether the cost saving and efficiency gains would be sufficient to justify the battle. It depends on how they would structure their argument. If they could demonstrate that restricting access to the PADI brand would not significantly impact the players in the industry (since there are many competing training organisations) and that the action was being done to streamline operations as opposed to specifically creating a walled garden.... maybe? But I suspect this is why the plan has not been yet rolled out into PADI America's or PADI Europe
In my opinion if you look at the different diving agencies and put them on a sheet and ask a non diver to point out the scuba one I am sure that 90% will point out padi . Once your In the diving community you learn that there are way more than just padi. I guess what I am saying is that you don't see ford Chevy and dodge dealers in the same building. I kinda see it that way . If my brand brings the customer but you sell them an other brand it's not fair on for my brand. I am not saying one is better than the other. This is just my opinion.
And I'm assuming that's the same approach that PADI is taking too. If I were in the same position I would be likely take the same position. Is there not an argument though that says if your brand is that strong, your product that good, and your service delivery level on par.... Your product should, even at a premium price, stand up well against the inferior competition? And that through competition innovation happens? That said, as I mentioned in the video, if I were advising PADI I would have suggested this exact route. Both the strengthen and solidify the brand, but also to thrift the dealer body and safe on support costs.
And I'm assuming that's the same approach that PADI is taking too. If I were in the same position I would be likely take the same position. Is there not an argument though that says if your brand is that strong, your product that good, and your service delivery level on par.... Your product should, even at a premium price, stand up well against the inferior competition? And that through competition innovation happens? That said, as I mentioned in the video, if I were advising PADI I would have suggested this exact route. Both the strengthen and solidify the brand, but also to thrift the dealer body and safe on support costs.
In some ways, PADI has created its own problem. The pyramid scheme of instructor creation (and fee collection) creates the need to support these instructors with PADI staff. Dive centers are incentivized to get a CD and run IDCs to get better discounts from PADI and drive more shop revenue through instructor training - creating more competition along that way (as every dive instructor has delusions of running their own dive shop - thus perpetuating the PADI support issue). The plethora of instructors does not lead to better training, but just drives prices down is a race to the bottom. PADI has moved to almost all e-learning (in China where I am, physical crews packed are no longer available). This reduces cost significantly, but their IT systems are practically unusable for student management (ie class creation, student tracking, etc. ). And these changes for profits have done nothing to improved quality of training or less QA issues.
It's an interesting move and is probably a response to SSI and SDI targeting these territories fairly aggressively. Will be fascinating to see if they try and roll it out in other regions. In my patch of Oz we currently have 6 PADI, 3 SSI, 3 SDI/TDI, 1 SSI plus TDI, and 1 RAID plus TDI dive centres. There are also a couple of GUE instructors. PADI has some brand recognition amongst non-divers which has to be worth something to their dive centres, but we're not in the tropics and most of the money is found beyond OW where the PADI brand doesn't necessarily mean all they'd like it to.
That's a very good point, in terms of response to other agencies gaining market penetration. In the Americas region, it feels like it's still very much PADI driving the brand recognition and centers being loyal behind the brand. Very few centers within 100 miles of Carriacou are anything other than PADI. I've had debates with other DC owners about how much of our success (or failure) is linked to a training agency brand. Generally the consensus is very little, and yet people still focus on the brand. In my business training represents consistently 12% of revenue. So is a training agency my key/critical for success supplier? Of course not. My merchandise sales are also 12% and I'd switch t shirt suppliers for a better deal in a heartbeat... How this plays out, though, is very interesting...
@@DeeferDiving I assume, but don't know so take it as a question, that a large proportion through to majority of your students are vacationers and you might never see them again. Here it's slightly different as the students are locals and the goal is to convert them into lifelong (and hopefully loyal to the shop) divers. The value of the PADI brand might vary accordingly, but the existence of so many non-PADI dive centers here suggests they've done the sums and come to the same conclusion you have. I think it's a bold play by PADI, and a limited one at that. Travel, as in organised dive tours of more exotic typically blue water destinations, is a huge revenue generator for our local shops. Recreational training is one thing, but I suspect if PADI takes a similar approach to their travel business they'll be wiped out.
Yes. The majority of training is with transient people. We may see them again, but mostly not. Most of our business is on leading run dives, which ironically is higher margin.. so good for us. Attracting customers is through local advertising and marketing. People want to dive once they're certified. Does a training agency help in that? It's a very interesting proposition by PADI though.
If PADI wanted to streamline its operations and save money it would abolish half it’s speciality courses that don’t mean anything e.g. Boat Diver, Drift Diver and Multi Level diver.
If PADI abolished those specialties would they become a more credible agency in your mind? ML Diver is a legacy course and useful when you planned your dives using slates - perhaps back in 1980. I can still see a relevance for boat and drift. Boat if someone has had all the dives from the shore of a lake and wants to try something different. However, I don't think specialties or distinctive specialties are the issue at play here. It's going to be the team at PADI answering all the emails and calls about using the OLPC (again) and why can't I see the Open Water eLearning code I just bought. I can only imagine the number of contacts they get, particuarly from people who've never read the Training Updates or the FAQ's too. By reducing the number of dive centers call in the sales reps or customer services reps from operators that don't use your systems and services that often.... you can reduce the # of reps you need. That would make a significant saving.
In my opinion PADI earns enough as is and if they become even more greedy it will hurt them in the long run. I am no instructor… only a diver but honestly only doing my cert with PADI as the SSI dive center close to me has an instructor I do not like on a personal level. I would have preferred the SSI… dive center as it offers different courses.. from different companies where PADI only has their own. The Instructor at PADI is awesome but it is hard for him to stay competitive as PADI limits him to their own courses… I am convinced many small but awesome dive centers will have to close as they can not stay competitive. Having only bigger PADI dive centers will kill the family / comfy feeling you have in a small dive center and give it the pure business feel which would for me be a reason to quit. P.s. I live in a pretty “rural” area and if I would have to drive to a big dive center in a bigger city I would have never started diving. So we have 2 small dive centers within a reasonable driving distance.
Lets not forget that each dive shop is independent of any training agency. To the dive shop the agency is simply a supplier (granted one with a great brand presence). If the price for the service/product from the supplier gets to high, the dive shop simply needs to choose a different supplier - that's the beauty of a free market. Will the other supplier have the brand? No, but that's the trade off. I'm sure the guys advising PADI have identified that future growth in the market is not going to come from only offering diver training. It's going to come from offering a diverse service portfolio. PADI have a strong brand and they're starting to use it outside of training. How you see this (good/bad) is the challenge, and how dive shops and other training agencies respond will be key....
3+ decades in industry, most of that as a multi agency instructor etc. Funny enough I posted on this last night on facebook where I told another long time industry member that felt this would backfire on PADI and it was not a world wide strategy but regional offices doing it that "I think that world HQ is fully behind it and using to test outcomes. This is test market 101 stuff for a strategy." The MBA in me is impressed, the dive instructor in me, not so much. But frankly, the MBA in me knows that PADI generally does things very, very smart business wise. Does it benefit the greater industry? Not exactly, it's complicated.
Oh, and I believe that those dive centres heavily invested in the PADI brand will by and large welcome this. They generally believe that people "want their PADI", not their scuba c-card and this aligns with their offering (PADI).
It's the MBA in me that see's the direction Mandarinfish is going. I also firmly believe that if PADI can demonstrate overhead savings gained through dealer body rationalization, added to revenue improvements through diversifying their product offering (new product/existing market), they'll be lining the company up for another flip. I never saw Mf as long term custodians of the brand, and I've worked with too many PE firms to think they would deviate from the playbook. Question is whether PADI would be bought by another PE firm or whether they would look to IPO it?
Absolutely. The big PADI shops, getting tier 4/5 discounts will see this as an opportunity to thrift our competitors and wholly support it. I was talking with a DC owner yesterday who was fully in favour. Talking about the price they pay for an OW eLearning (vs others) meaning they're happy with their competitive advantage. I believe there was a degree of surprise when advised of the price difference between another training agencies eLearning equivalent product. Now, do they have the same brand pulling power or PADI? Of course not. Are they doing 'bait and switch' as PADI suggests? I don't know if I would go that far. I think they're offering choice. Here's the crux of the issue for me. We all would like there to be more margin in scuba training. Hell, a buddy told me how much he makes teaching golf lessons in Canada as a pro.... and he doesn't run the risk of someone drowning during training. The point is people percieve the value of golf training is more valuable to them than dive training. Has anyone looked at why? Why is someone prepared to invest $250 an hour in Kitesurfing instruction, yet won't pay more than $600 for a 4 day OW course? So we need to increase the appeal of diving and drive revenue growth through innovation. Diving has not changed much in 30 years or more. So if one training agency is trying to aggressively grow margins through significant price increases (with huge volume discounts offered to the big guys) and someone else offers similar materials for a significantly lower price, where are dive centers going to go? The question should be what are PADI doing to create demand for their product within the dealer body? As I've said elsewhere in this thread - dive training is not that big a deal for our business. Leading fun divers is where its at for me. Therefore the training agency you're affiliated with is not the most critical thing, but local marketing is. When was the last time PADI featured Carriacou and drove significant eyeballs to this destination? Never is the answer, we're not big enough. And therein lies the crux of this issue. Volume!
@@DeeferDiving Diving has NEVER been less expensive, ever. Gear, training, trips, etc. The margins have never been worse either. There are a couple factors for this, the ability for consumers to price shop easier and the more problematic IMHO is the target demograpic direction the industry took in the early 90's (driven by PADI) to market diving to everyone. They identiffied well that diving wasn't the "extreme" sport that many percieved it as, that training could be shortened, and expanding who could dive (kids to grandparents) instead of just adventure types would increase business. Funny enough, the wealthy (those that could afford to travel when it was expensive) already knew this, and were doing it on vacations that the average middle class family couldn't afford. They also didn't mind paying for it, it was just normal to pay whatever the asking price in their world. The cost to travel dropped, more middle class travelled, the industry by and large pivoted to service this market (which PADI/agencies loved because it sold more c-cards and student packs) and so did the gear companies at first. Then, over time it went from middle class versus upper middle and wealthy that dived, to lower middle class and working blue collar middle class. That actually made it less appealing to the old demographic of the wealthy (they like feeling exclusive, which they are willing to pay for, even if that "exclusive" is a fiction like Rolex watches that uses marketing, high prices and consumer behaviour to maintain their brand position ,and sales, my god the sales) These new demographic consumers were more likely to look for the cheapest price, the internet assisted them and the industry having built a model on the delusional idea that with the right marketing and shorter courses that the insane growth of the early 90's could continue forever (as MBA's, how many case studies have we done that has seen that particular delusion play out in almost every industry?). To "feed the machine", discounting was the "answer" (wrong), and we discounted into stagnant and negative growth. That has indeed left a mark. So, in a industry that has been shrinking (don't believe the cert numbers) there has been room for discounting the high margin training agency publishing side, and indeed we see more agency choices than ever, when we have less equipment brands than ever because they had less room for margin erosion and indeed the model needs higher margin for sustainable strategy. (why we see the largest brand , Aqua Lung currently bankrupt) Now, we could do a history walk on PE and the dive industry, that occured in the 80's and was not a good experience for the PE firms involved, then the more recent entry with PADI/Aqualung and to a lessor degree Huish that are proving that history does inded ryhme if not repeat. This latest entry by PE driven by cheap money and excess of it and of course the reality that traditional profit was somewhat ignored for a while. However a cash furnace is still a cash furnace as some have discovered and while cash flow can cover many sins, it isn't always possible to flip it when the economy changes (as is what is happening now with interest rates) So, PADI, they have done the MBA cost control stuff pretty heavily, and there is for sure more room to do so but it isn't the full answer. They have increased margins in a competetive market of discounting while looking to leverage their brand and market share/position to justify the higher costs. The question is, will it work? It depends on their marketing strategy and the dive shops actually. Funny enough the dive shops market PADI more than PADI can ever afford to, so in response PADI has to "shape" how the shops market the PADI brand more. This is part of that. If done well, PADI and their shops WILL make more money, the question in my mind is can they sustan that as the industry is still contracting? If they can get growth in diving again it will be one hella home run. IMHO, we are at a point where cheaper, faster WON'T drive growth (except tech, where we are seeing it and more deaths) and the lower quality of cheaper/faster is in fact impeding growth on the recerational side (many aren't enjoying their diving entry experiences and not recommending nor pursuing it further). So PADI has lost a old tool that worked well for them in the past. PADI has some competetive advantages, indeed I would argue some absolute advantages but some very big challenges as well. One thing we can rely on however is that they indeed will "MBA" the hell out of it and not make (but WILL leverage what is "shaped" to be percieved as it in their customer base which is shops, instructors and unlike what many of the shops and instructors believe is "their" customer, the joe/jane diver consumer that PADI does indeed view as "theirs" even while maintaining a fiction to their "professional" affiliates that the diver is the pros customer) emotional "diving passion" decisions strategically while their competition will make them. That is part of PADI's "secret sauce" and anyone that discounts it is a fool indeed. (in fairness, I know this and yet will still lean into my diving passion, even when I know I am leaving money on the table..aka a mistake, I am weird that way). So, is PADI making a mistake? No, I don't think so. They are following a well considered strategy, that is based on the best data anyone in this industry has , looked at with with the cold unblinking eyes of a top 10 MBA school grad that for this particular issue knows the pareto principle well and how to lean into it as part of their transformation strategy. Now, regulatory capture and PADI's involvement is another shoe that is coming, and very few see it coming. That will put a bow on it if what I believe is PADI's strategy is proves correct.
PADI needs to close the gap on offerings before executing this. Perfect example is cave diving. They don't have it at all. Would you go to telum or the yucatan to not learn to cave dive? No. Dive shops there NEED both PADI and (let's say for example) SDI/TDI because of that. That's a good chunk of dive shop revenue in cave/cenote destination locations.
Do they really? Lets be honest, as much as I enjoy a cave or cavern dive, we are talking about a niche of a niche in terms of market size. PADI made a forray into Tech/Rec but its not where the specialism is - which is in mass market training. PADI have also been clear in their policy implementation - if you're dual branded with a technical training agency, offering products which PADI does not offer, they're OK with that. Its just if you're offering NAUI, SDI or SSI products which directly compete with their core products too.
@@DeeferDiving agree, yours a cave insructor evaluator. PADI entered tech to annoy/hurt other agencies, not because they cared about tech per say in diving or a profit center but because they wanted to reduce the chance the agencies that do tech can use (which has been the strategy of) to move into the bread and butter recerational market better. protecting the recerational market the "own" is job 1. It's like protecting a trade mark really Funny enough, tech is one area that PADI is using the old tool of cheaper/faster to put pressure on the tech centric agencies. Business wise I see it, ethically given the risk to the diving public's safety I find it repugnant.
As a diver I wish I would have certified under another agency. PADI is so money hungry and they don't support divers. $56 to replace a c card? I'll never take an expensive useless PADI course, I will get experience instead.
Yeah. I got no defense to that. Although I will also state the prices the other agencies charge for a replacement C card is also a joke! Most of the specialty or more advanced training does have a place for many divers. Its about understanding the risks and mitigating controls associated with a new type of diving or diving equipment. Some people don't feel they need it, many others do. I see many divers where I am thinking there is no difference between diving to 60ft and diving to 130ft. Yet they keep getting bent! They don't know why they get bent or how they can prevent it, so in effect they're accepting risks they don't even know exist. They know nothing about what to do in the event..... But its is a balancing act. Divers with qualifications up the wazoo and only a dozen dives doesn't make sense either.
Glad you mentioned the PADI members who maintain the membership but are not necessarily full-time Dive Professionals at a PADI Dive Centre.
While it may be argued these members bring little revenue to the “agency”, some of these may be a good source of guaranteed income, in that they renew their yearly membership (automated renewal - hardly labour intensive), require little (if any) assistance from agency staff, and generally maintain high standards (still providing PADI with low cost marketing opportunities), while purchasing training material (already established and available via online platforms, at fairly high cost, to the Dive Professional).
My argument:
the “benefit” to “cost” ratio (associated with this category of PADI member) is very high, and thus worthwhile keeping, as the margin is high.
I hear that argument, and with an experienced independent operator I am sure you're correct. But what about the newbie who did their IDC down in Wherever last month, has a few sets of gear in the garage and now fancies setting up as an independent or freelance. This is the bigger segment and also the much bigger risk/cost. Someone needs to teach them how to buy materials, assign them, navigate the PADI systems and certify them. Who is overseeing their QA? There is no dive centre with their own brand over seeing what they're doing, or providing them with an experienced shoulder to lean on. Again, if I were advising PADI following a significant out of court legal settlement, I would be saying that independent instructors do represent a significant risk, a risk that can only be managed with a significant increase in spend on QA. If they're looking at the cost obligation for a bigger QA system that can encompass the risks attributable to independents... I'm sure it may outweigh the financial benefit. Or at least significant errode it.
Of course, none of us know the numbers or what PADI is truly thinking, but directly or indirectly we're all invested in the brand and the company
Over my 15 years of diving I’ve learned to avoid PADI like the plaque. As you mentioned, they’re not owned by divers but those seeking profits. When I used PADI for my professional certs and operations I would barely make any profit after having to pay their fees and cost. This is a common narrative with every other dive shop or instructor I’ve spoken with and why so many are leaving PADI for TDI/SDI or SSI for example. Both of which the dive center or instructor has very little overhead cost from the agency making it more profitable for the dive center and a better deal for the prospective or advancing SCUBA diver.
A sentiment I've certainly seen many times. It's down to the dive operations to allow a supplier to take a dominant position. We have it collectively within our grasp to vote with our feet and make any company the preferred partner. But.. those preferred partners have to do a job for the market which is better than the incumbent market leader .... And apart from fees I don't see that. Where is SDI/SSI's marketing strategy to drive new diver acquisition? That's something PADI does well
Hi Gary. Very interesting insight into the business of diving.
I guess the incentive for training agencies is that it’s a pyramid selling business model, and anyone who pays membership fees and puts materials and certifications their way is working for them, as much as they are working for themselves. And maybe PADI is now big enough to drop less successful independent instructors, if as you imply, they cost the agency more than they make for them and , I guess, create a hassle factor as well. Maybe PADI feels it would get more loyalty and profit if, long-term, it followed the SSI model and tied the instructor to the store.
Plus, it’s a bit of a mark of desperation to accept being second or third choice in a business’s selling hierarchy. About 20 years ago, just in time for the UK recession, I opened a dive shop. I had BSAC and PADI instructor qualifications, but crossed over to NAUI. One of the things that was interesting was how people asked to ’do their PADI’. Total brand awareness to the exclusion of other agencies. You’re already on the backfoot when you have to explain what NAUI is!
I think PADI might well come out ahead by making this move. It consolidates their position as market leader.
Really thought-provoking video, Thanks for posting it.
Thanks for your feedback Steve. I agree... its an interesting policy change, one that I would have suggested be done, from a private equity ownership perspective, but one that I maybe I thought would not happen. I also remember when I got into the industry and people would ask for their PADI, in the same way I would have bought a Hoover.... And PADI are still the best at marketing their brand and creating awareness that other training agencies don't (yet). The reality, something is changing in the market. There is a significant amount of consolidation going on within the industry and organizations look to see where the growth potential is and how they can extract more value. From a BGC matrix perspective I keep asking the question "Is the industry still a mature cash cow, or has it already moved into 'managed decline'?" Consolidations would suggest the latter....
If PADI execute this right, and restrict access to their brand to effectively "wantaway" dive shops, and as you say adopt a model more akin to SSI with regards to instructors, I believe they will make improvements and hopefully make the organisation more dynamic/open to change, which could indeed see them become the clear market leader again.
Private equity firms only care about safety only to the point that it doesn't start costing them more in legal fees. So they will absolutely sacrifice training and service quality to get more instructors. I think they will make it even easier to become an instructor.
While it might seem that PADI’s owners would benefit from lowering instructor requirements to increase pass rates, I’d argue the opposite. Allow me to explain:
1. Standardization Across Agencies: Currently, most training agencies, including PADI, NAUI, SSI, and SDI, adhere to similar instructor qualification standards. By actively participating in the creation of higher instructor standards, PADI positions itself as a leader in the industry. If these new standards become widely accepted globally, PADI will be recognized as the agency driving positive change.
2. Market Dominance: PADI’s dominance in the market isn’t solely due to its high prices. They strategically limit access to low-cost cross-overs and IDCs (Instructor Development Courses). By doing so, they maintain their reputation for quality and exclusivity. If PADI champions higher standards, they can leverage this reputation even further.
3. Trimming the Instructor Base: Implementing new standards won’t be easy, especially with the existing instructor base. However, PADI can gradually phase in these changes. By doing so, they’ll reduce the overall number of instructors while ensuring that those who remain meet the elevated standards. Quality over quantity.
4. First Mover Advantage: Being at the forefront of new ISO standards gives PADI a competitive edge. They can command higher prices, attract serious divers, and enhance profitability. It’s a win-win situation.
In summary, PADI’s pursuit of higher standards isn’t about sacrificing quality for profit; it’s about securing their position as industry leaders and ensuring a sustainable future. This is what their PE owners will be looking for. I'm aware from industry insiders that PADI are trying to position themselves as the ONLY people that can be trusted to create a new set of 'ISO" type standards for the scuba training market. They have the leverage to make that happen - and this proposal means they also have the temerity to thrift the number of dive shops and dive instructors (particularly if they're not making them much money).
If PADI is so large that it could be considered dominant, this exclusivity obligation may potentially violate competition/antitrust laws.
Completely agree. In highly regulated markets like Europe and the US I can definitely see this as a potential anti-trust issue, even though I did not touch on it in the video. It's a risk PADI would need to assess in terms of whether the cost saving and efficiency gains would be sufficient to justify the battle. It depends on how they would structure their argument. If they could demonstrate that restricting access to the PADI brand would not significantly impact the players in the industry (since there are many competing training organisations) and that the action was being done to streamline operations as opposed to specifically creating a walled garden.... maybe? But I suspect this is why the plan has not been yet rolled out into PADI America's or PADI Europe
In my opinion if you look at the different diving agencies and put them on a sheet and ask a non diver to point out the scuba one I am sure that 90% will point out padi . Once your In the diving community you learn that there are way more than just padi. I guess what I am saying is that you don't see ford Chevy and dodge dealers in the same building. I kinda see it that way . If my brand brings the customer but you sell them an other brand it's not fair on for my brand. I am not saying one is better than the other. This is just my opinion.
And I'm assuming that's the same approach that PADI is taking too. If I were in the same position I would be likely take the same position. Is there not an argument though that says if your brand is that strong, your product that good, and your service delivery level on par.... Your product should, even at a premium price, stand up well against the inferior competition? And that through competition innovation happens?
That said, as I mentioned in the video, if I were advising PADI I would have suggested this exact route. Both the strengthen and solidify the brand, but also to thrift the dealer body and safe on support costs.
And I'm assuming that's the same approach that PADI is taking too. If I were in the same position I would be likely take the same position. Is there not an argument though that says if your brand is that strong, your product that good, and your service delivery level on par.... Your product should, even at a premium price, stand up well against the inferior competition? And that through competition innovation happens?
That said, as I mentioned in the video, if I were advising PADI I would have suggested this exact route. Both the strengthen and solidify the brand, but also to thrift the dealer body and safe on support costs.
google "PADI ANTI TRUST", they have no issue with violating those laws historically. Justs aying.
In some ways, PADI has created its own problem. The pyramid scheme of instructor creation (and fee collection) creates the need to support these instructors with PADI staff. Dive centers are incentivized to get a CD and run IDCs to get better discounts from PADI and drive more shop revenue through instructor training - creating more competition along that way (as every dive instructor has delusions of running their own dive shop - thus perpetuating the PADI support issue). The plethora of instructors does not lead to better training, but just drives prices down is a race to the bottom.
PADI has moved to almost all e-learning (in China where I am, physical crews packed are no longer available). This reduces cost significantly, but their IT systems are practically unusable for student management (ie class creation, student tracking, etc. ).
And these changes for profits have done nothing to improved quality of training or less QA issues.
I can not argue against any of those salient points, unfortunately...
It's an interesting move and is probably a response to SSI and SDI targeting these territories fairly aggressively. Will be fascinating to see if they try and roll it out in other regions. In my patch of Oz we currently have 6 PADI, 3 SSI, 3 SDI/TDI, 1 SSI plus TDI, and 1 RAID plus TDI dive centres. There are also a couple of GUE instructors. PADI has some brand recognition amongst non-divers which has to be worth something to their dive centres, but we're not in the tropics and most of the money is found beyond OW where the PADI brand doesn't necessarily mean all they'd like it to.
That's a very good point, in terms of response to other agencies gaining market penetration. In the Americas region, it feels like it's still very much PADI driving the brand recognition and centers being loyal behind the brand. Very few centers within 100 miles of Carriacou are anything other than PADI.
I've had debates with other DC owners about how much of our success (or failure) is linked to a training agency brand. Generally the consensus is very little, and yet people still focus on the brand. In my business training represents consistently 12% of revenue. So is a training agency my key/critical for success supplier? Of course not. My merchandise sales are also 12% and I'd switch t shirt suppliers for a better deal in a heartbeat...
How this plays out, though, is very interesting...
@@DeeferDiving
I assume, but don't know so take it as a question, that a large proportion through to majority of your students are vacationers and you might never see them again. Here it's slightly different as the students are locals and the goal is to convert them into lifelong (and hopefully loyal to the shop) divers. The value of the PADI brand might vary accordingly, but the existence of so many non-PADI dive centers here suggests they've done the sums and come to the same conclusion you have.
I think it's a bold play by PADI, and a limited one at that. Travel, as in organised dive tours of more exotic typically blue water destinations, is a huge revenue generator for our local shops. Recreational training is one thing, but I suspect if PADI takes a similar approach to their travel business they'll be wiped out.
Yes. The majority of training is with transient people. We may see them again, but mostly not. Most of our business is on leading run dives, which ironically is higher margin.. so good for us.
Attracting customers is through local advertising and marketing. People want to dive once they're certified. Does a training agency help in that?
It's a very interesting proposition by PADI though.
If PADI wanted to streamline its operations and save money it would abolish half it’s speciality courses that don’t mean anything e.g. Boat Diver, Drift Diver and Multi Level diver.
If PADI abolished those specialties would they become a more credible agency in your mind? ML Diver is a legacy course and useful when you planned your dives using slates - perhaps back in 1980. I can still see a relevance for boat and drift. Boat if someone has had all the dives from the shore of a lake and wants to try something different. However, I don't think specialties or distinctive specialties are the issue at play here. It's going to be the team at PADI answering all the emails and calls about using the OLPC (again) and why can't I see the Open Water eLearning code I just bought. I can only imagine the number of contacts they get, particuarly from people who've never read the Training Updates or the FAQ's too. By reducing the number of dive centers call in the sales reps or customer services reps from operators that don't use your systems and services that often.... you can reduce the # of reps you need. That would make a significant saving.
In my opinion PADI earns enough as is and if they become even more greedy it will hurt them in the long run. I am no instructor… only a diver but honestly only doing my cert with PADI as the SSI dive center close to me has an instructor I do not like on a personal level.
I would have preferred the SSI… dive center as it offers different courses.. from different companies where PADI only has their own. The Instructor at PADI is awesome but it is hard for him to stay competitive as PADI limits him to their own courses… I am convinced many small but awesome dive centers will have to close as they can not stay competitive. Having only bigger PADI dive centers will kill the family / comfy feeling you have in a small dive center and give it the pure business feel which would for me be a reason to quit.
P.s. I live in a pretty “rural” area and if I would have to drive to a big dive center in a bigger city I would have never started diving. So we have 2 small dive centers within a reasonable driving distance.
Lets not forget that each dive shop is independent of any training agency. To the dive shop the agency is simply a supplier (granted one with a great brand presence). If the price for the service/product from the supplier gets to high, the dive shop simply needs to choose a different supplier - that's the beauty of a free market. Will the other supplier have the brand? No, but that's the trade off.
I'm sure the guys advising PADI have identified that future growth in the market is not going to come from only offering diver training. It's going to come from offering a diverse service portfolio. PADI have a strong brand and they're starting to use it outside of training. How you see this (good/bad) is the challenge, and how dive shops and other training agencies respond will be key....
3+ decades in industry, most of that as a multi agency instructor etc.
Funny enough I posted on this last night on facebook where I told another long time industry member that felt this would backfire on PADI and it was not a world wide strategy but regional offices doing it that "I think that world HQ is fully behind it and using to test outcomes. This is test market 101 stuff for a strategy."
The MBA in me is impressed, the dive instructor in me, not so much. But frankly, the MBA in me knows that PADI generally does things very, very smart business wise. Does it benefit the greater industry? Not exactly, it's complicated.
Oh, and I believe that those dive centres heavily invested in the PADI brand will by and large welcome this. They generally believe that people "want their PADI", not their scuba c-card and this aligns with their offering (PADI).
It's the MBA in me that see's the direction Mandarinfish is going. I also firmly believe that if PADI can demonstrate overhead savings gained through dealer body rationalization, added to revenue improvements through diversifying their product offering (new product/existing market), they'll be lining the company up for another flip. I never saw Mf as long term custodians of the brand, and I've worked with too many PE firms to think they would deviate from the playbook. Question is whether PADI would be bought by another PE firm or whether they would look to IPO it?
Absolutely. The big PADI shops, getting tier 4/5 discounts will see this as an opportunity to thrift our competitors and wholly support it. I was talking with a DC owner yesterday who was fully in favour. Talking about the price they pay for an OW eLearning (vs others) meaning they're happy with their competitive advantage. I believe there was a degree of surprise when advised of the price difference between another training agencies eLearning equivalent product. Now, do they have the same brand pulling power or PADI? Of course not. Are they doing 'bait and switch' as PADI suggests? I don't know if I would go that far. I think they're offering choice.
Here's the crux of the issue for me. We all would like there to be more margin in scuba training. Hell, a buddy told me how much he makes teaching golf lessons in Canada as a pro.... and he doesn't run the risk of someone drowning during training. The point is people percieve the value of golf training is more valuable to them than dive training. Has anyone looked at why? Why is someone prepared to invest $250 an hour in Kitesurfing instruction, yet won't pay more than $600 for a 4 day OW course? So we need to increase the appeal of diving and drive revenue growth through innovation. Diving has not changed much in 30 years or more. So if one training agency is trying to aggressively grow margins through significant price increases (with huge volume discounts offered to the big guys) and someone else offers similar materials for a significantly lower price, where are dive centers going to go? The question should be what are PADI doing to create demand for their product within the dealer body?
As I've said elsewhere in this thread - dive training is not that big a deal for our business. Leading fun divers is where its at for me. Therefore the training agency you're affiliated with is not the most critical thing, but local marketing is. When was the last time PADI featured Carriacou and drove significant eyeballs to this destination? Never is the answer, we're not big enough. And therein lies the crux of this issue. Volume!
@@DeeferDiving Diving has NEVER been less expensive, ever. Gear, training, trips, etc. The margins have never been worse either.
There are a couple factors for this, the ability for consumers to price shop easier and the more problematic IMHO is the target demograpic direction the industry took in the early 90's (driven by PADI) to market diving to everyone. They identiffied well that diving wasn't the "extreme" sport that many percieved it as, that training could be shortened, and expanding who could dive (kids to grandparents) instead of just adventure types would increase business. Funny enough, the wealthy (those that could afford to travel when it was expensive) already knew this, and were doing it on vacations that the average middle class family couldn't afford. They also didn't mind paying for it, it was just normal to pay whatever the asking price in their world. The cost to travel dropped, more middle class travelled, the industry by and large pivoted to service this market (which PADI/agencies loved because it sold more c-cards and student packs) and so did the gear companies at first. Then, over time it went from middle class versus upper middle and wealthy that dived, to lower middle class and working blue collar middle class. That actually made it less appealing to the old demographic of the wealthy (they like feeling exclusive, which they are willing to pay for, even if that "exclusive" is a fiction like Rolex watches that uses marketing, high prices and consumer behaviour to maintain their brand position ,and sales, my god the sales) These new demographic consumers were more likely to look for the cheapest price, the internet assisted them and the industry having built a model on the delusional idea that with the right marketing and shorter courses that the insane growth of the early 90's could continue forever (as MBA's, how many case studies have we done that has seen that particular delusion play out in almost every industry?). To "feed the machine", discounting was the "answer" (wrong), and we discounted into stagnant and negative growth. That has indeed left a mark.
So, in a industry that has been shrinking (don't believe the cert numbers) there has been room for discounting the high margin training agency publishing side, and indeed we see more agency choices than ever, when we have less equipment brands than ever because they had less room for margin erosion and indeed the model needs higher margin for sustainable strategy. (why we see the largest brand , Aqua Lung currently bankrupt)
Now, we could do a history walk on PE and the dive industry, that occured in the 80's and was not a good experience for the PE firms involved, then the more recent entry with PADI/Aqualung and to a lessor degree Huish that are proving that history does inded ryhme if not repeat. This latest entry by PE driven by cheap money and excess of it and of course the reality that traditional profit was somewhat ignored for a while. However a cash furnace is still a cash furnace as some have discovered and while cash flow can cover many sins, it isn't always possible to flip it when the economy changes (as is what is happening now with interest rates)
So, PADI, they have done the MBA cost control stuff pretty heavily, and there is for sure more room to do so but it isn't the full answer. They have increased margins in a competetive market of discounting while looking to leverage their brand and market share/position to justify the higher costs. The question is, will it work? It depends on their marketing strategy and the dive shops actually. Funny enough the dive shops market PADI more than PADI can ever afford to, so in response PADI has to "shape" how the shops market the PADI brand more. This is part of that. If done well, PADI and their shops WILL make more money, the question in my mind is can they sustan that as the industry is still contracting? If they can get growth in diving again it will be one hella home run. IMHO, we are at a point where cheaper, faster WON'T drive growth (except tech, where we are seeing it and more deaths) and the lower quality of cheaper/faster is in fact impeding growth on the recerational side (many aren't enjoying their diving entry experiences and not recommending nor pursuing it further). So PADI has lost a old tool that worked well for them in the past.
PADI has some competetive advantages, indeed I would argue some absolute advantages but some very big challenges as well. One thing we can rely on however is that they indeed will "MBA" the hell out of it and not make (but WILL leverage what is "shaped" to be percieved as it in their customer base which is shops, instructors and unlike what many of the shops and instructors believe is "their" customer, the joe/jane diver consumer that PADI does indeed view as "theirs" even while maintaining a fiction to their "professional" affiliates that the diver is the pros customer) emotional "diving passion" decisions strategically while their competition will make them. That is part of PADI's "secret sauce" and anyone that discounts it is a fool indeed. (in fairness, I know this and yet will still lean into my diving passion, even when I know I am leaving money on the table..aka a mistake, I am weird that way).
So, is PADI making a mistake? No, I don't think so. They are following a well considered strategy, that is based on the best data anyone in this industry has , looked at with with the cold unblinking eyes of a top 10 MBA school grad that for this particular issue knows the pareto principle well and how to lean into it as part of their transformation strategy.
Now, regulatory capture and PADI's involvement is another shoe that is coming, and very few see it coming. That will put a bow on it if what I believe is PADI's strategy is proves correct.
PADI needs to close the gap on offerings before executing this. Perfect example is cave diving. They don't have it at all. Would you go to telum or the yucatan to not learn to cave dive? No. Dive shops there NEED both PADI and (let's say for example) SDI/TDI because of that. That's a good chunk of dive shop revenue in cave/cenote destination locations.
Do they really? Lets be honest, as much as I enjoy a cave or cavern dive, we are talking about a niche of a niche in terms of market size. PADI made a forray into Tech/Rec but its not where the specialism is - which is in mass market training. PADI have also been clear in their policy implementation - if you're dual branded with a technical training agency, offering products which PADI does not offer, they're OK with that. Its just if you're offering NAUI, SDI or SSI products which directly compete with their core products too.
@@DeeferDiving agree, yours a cave insructor evaluator.
PADI entered tech to annoy/hurt other agencies, not because they cared about tech per say in diving or a profit center but because they wanted to reduce the chance the agencies that do tech can use (which has been the strategy of) to move into the bread and butter recerational market better. protecting the recerational market the "own" is job 1. It's like protecting a trade mark really
Funny enough, tech is one area that PADI is using the old tool of cheaper/faster to put pressure on the tech centric agencies. Business wise I see it, ethically given the risk to the diving public's safety I find it repugnant.
As a diver I wish I would have certified under another agency. PADI is so money hungry and they don't support divers. $56 to replace a c card? I'll never take an expensive useless PADI course, I will get experience instead.
Yeah. I got no defense to that. Although I will also state the prices the other agencies charge for a replacement C card is also a joke! Most of the specialty or more advanced training does have a place for many divers. Its about understanding the risks and mitigating controls associated with a new type of diving or diving equipment. Some people don't feel they need it, many others do. I see many divers where I am thinking there is no difference between diving to 60ft and diving to 130ft. Yet they keep getting bent! They don't know why they get bent or how they can prevent it, so in effect they're accepting risks they don't even know exist. They know nothing about what to do in the event..... But its is a balancing act. Divers with qualifications up the wazoo and only a dozen dives doesn't make sense either.