By Dr. Peter Tarlow
Traditionally, the summer months are a great time to see where one’s business is headed and what future challenges it will have. In this period of rebuilding after so much of the tourism has closed down, the need for a new and updated business plan is more important than ever. Perhaps the number one reason why a tourism business fails be that business a place of lodging, an attraction, a place of dinning, or a form of transportation, is the lack of a well thought through business plan. All business ventures are risky, but as we have seen in this period of pandemics, tourism businesses often have special challenges. Some of these business challenges include: high levels of seasonality, a changeable market, difficulties in developing customer loyalty, needs to serve multiple-cultures and languages, a wide range of tastes, the fact that the public frightens easily and does not have to travel, and multiple expectations by clientele as to time-schedules.
Although no brief summary, such as that found in this month’s Tourism Tidbits, can give you all of the answers to your business plans questions, the information found below should help you to ask some of the right questions about a tourism business plan. Asking good questions prior to the start of a business venture or a business expansion might lessen your problems and save you a lot of money. Given the volatility of the tourism industry we might say that all businesses each season are new businesses, and in this time of rebuilding travel what was perhaps true is now certainly true. In preparing an overall tourism-oriented business plan asking good questions is as important as knowing the correct answers. Here are several things to consider:
-Who is giving you financial advice and how successful have those persons been? Make sure that you have a team of experts backing you, and that these experts have a proven track record. Among the people who should back you are: a good lawyer, accountant, health care professional, marketer, and tourism/travel industry expert. Ask the people whom you are inviting to be on your team about their background. What tourism/travel industry experience do they have? On what projects have they worked? Remember wrong advice is worse than no advice!
-What are the security needs that your business will require? Even a decade ago many tourism businesses had minimal security needs. Today it is essential to know where your business’ soft or weak spots are and to develop a security priority list that touches on everything from robberies to customer and employee pilferage and from acts of terrorism to a lone gunner. Make sure that you consider sanitation and health as part of your security plan.
-Think about your geographic location. Part of any good tourism plan is taking such things as geographic and climate considerations into account, Is your locale and business seasonal or year round? Are you hurricane or earthquake prone? Do you have an economic survival plan in case there is a geographic or climatic crisis?
-What are your regions demographics and how might they change? Just as in real estate, the magic word can often be “location, location, location!” What are your community’s development goals? Who else plans on moving in or out of the area? Does your location have a stable or changeable demographics situation? Is your location going through a populations shift? Make sure that you understand the impact on tourism of not only in those areas where the demographic changes that are occurring, but also in your feeder markets.
-Make sure you know the, laws, customs and rules of where your business is located and from where your clients come. Not taking the time out to know/understand a law, statue, building code, change of code, etc. can be very costly. It is wise to ask local government officials to keep you up-to-date on how legal changes may impact your business.
-Don’t rush. Take the time to have two or three people review your business plan, your health management plan, and your financial plan. Do your homework first. That means it is a good idea to have outside experts look at the possibilities of success, make sure that there is an adequate supply of skilled employees in your region, know something about climatic conditions and also potential health hazards. Do not forget that there are many more places with seismic problems then generally believed by the public at large. In developing a business plan consider the following:
√ state your idea for the new business or its expansion and the reasons that you think it is a good idea. Do others like the idea or is this a project based on the “if I build it, you better come” principle?
√ what are the problems in your plan, what can go wrong, can your ideas be tested prior to investing hard cash?
√ determine if you are asking the right questions about your business plan. Right answers to wrong questions lead to bankruptcy. Are your internal business assumptions valid? What conditions might change the validity of your assumptions about the success of your business. For example, are you assuming no demographic changes or a stable political environment?
√ Determine what and whom are your best sources for accurate information. Do not ask people who are afraid to tell you the truth. Get both professional and personal (friends, relatives, neighbors) opinions. Write these opinions down on a simple chart/list so that you can determine common themes and concerns.
-Figure out a way to test of your ideas. Before investing a great deal of money, try to determine a methodology that will allow you to pretest an idea. Tests might be conducted with questionnaires or a sample of the product you hope to sell.
-Determine if the investment is worth the effort. All too often tourism businesses are based on hopes, rather than realities. Think about such things as:
√ the time that you will need to recover your investment
√ your ability to recruit and train personnel
√ what the opportunity costs will be
√ what will be the cost of added insurance and advertising
√ how long it will take you to earn a profit
√ what the consequences are of investing “X” amount of your capital in this new project.
Working together and gaining accurate information the summer of 2020 can be the tourism industry’s rebirth, a time not to mourn, but a time to plant the seeds for tomorrow’s successes.
The Year 2020 will be the most challenging in the history of tourism.
In these trying times, the travel and tourism industry will need to be both creative and innovative
not only to survive but also to thrive.
