Entrepreneurship and Tourism Industry

Professor Orhan z, Ph.D.

Yaar University Faculty of Business & Economics Dept. Of Tourism Management

Contents
1. Basic definitions

2. The concepts and types of entrepreneur and

entrepreneurship.
3. Why and how to become an entrepreneur.

4. The common characteristics of

entrepreneurs
5. Entrepreneurship opportunities and

domains in Tourism and Travel Industry

6. Future trends of the industry
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Entrepreneurship defined

It is the innovatory process involved in the creation of an economic enterprise based on a new product or service which differs significantly from products or services in the way its production is organized, or in its marketing.
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What is Entrepreneurship?
1. The Process of Initiating a Business Venture, Organizing the Necessary Resources, Assuming the Associated Financial, Psychological and Social Risks & Rewards 2. Having the Characteristics of an Entrepreneur, e.g. Brave, innovative, independent, and achievement oriented
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Entrepreneurship Defined
There is no universally accepted definition of entrepreneurship. Attempts have traditionally been made to describe it relative to: an economic function ownership structure degrees of entrepreneurship size and life-cycle of firm and resource base
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Process of entrepreneurship: Definition approaches and features

Approaches
Economic function

Features
Personal initiative of entrepreneur Risk-bearing function Harnessing of factors of production Creation of business with entrepreneur as founder Size of the firm Personal financial risk Creativity and innovation Growth realization Primordial (primary) to potential production process Association with young start-up firm Conditions of uncertainty and competition Entrepreneurial management and strategy Initiation of change Innovatory process Ownership, structure and size of firm irrelevant Personal initiative through the spirit of enterprise

Ownership structure Degrees of entrepreneurship

Resource base Size and life-cycle of firm Consolidation approach

What is an Entrepreneur?
One who creates a new business in the face of risk & uncertainty for the purpose of achieving profit & growth by identifying opportunities and assembling the necessary resources to capitalize on them.
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Who Are Entrepreneurs?

Persons who start and/or operate a business. Individuals who discover market needs and develop new ideas to meet those needs. Risk takers who provide an impetus for change, innovation, and progress. All active owner-managers (founders

and/or managers of small businesses).

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Varieties of Entrepreneurs

Founder (Pure Entrepreneur)

A person who brings a new firm into existence. entrepreneur who oversees the operations of an ongoing business

Administrative Entrepreneur
An

Franchisee
An

entrepreneur whose power is limited by the contractual relationship with a franchising organization. or more people who work together as entrepreneurs.
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Entrepreneurial Team
Two

Key Elements of Entrepreneurship

Elements Description

Change initiation Capability to identify an opportunity for creation or innovation, and the ability to turn it into a reality Commitment to employees Application of appropriate management practices and reward systems designed to exact employee loyalty, retention and efficiency Ingeniously (creatively) marshalling resources, of both financial and managerial nature, from a complex set of sources in order to mobilize and realize the opportunity Motivation to acquire the necessary knowledge and expertise through relevant exploration and reflection

Creative resourcing

Entrepreneurial learning
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Key Elements of entrepreneurship

Elements Innovation and creativity Knowledge leadership Description Renewal of products and services by adding value through application of expertise and imagination Development of sources of management information to enable first-mover capability, and effective strategy formulation and implementation

Opportunity alertness
Relationship management
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Continuous focus on emerging trends and opportunities to be captured and realized

Maintenance of effective teams, networks, and flexible management structures

Key Elements of entrepreneurship

Elements Risk and uncertainty management Timing of action

Description Evaluation of personal and financial risk elements, self-confidence and determination to succeed Acting within a limited window in which an opportunity can be optimized Formulation of ambitions, and strategies to realize them

Vision and strategic orientation

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COMPARING ENTREPRENEURS TO PROFESSIONAL MANAGERS

ENTREPRENEUR Founder and organizer Achievement oriented Committed to his firm Moderate risk taker PROFESSIONAL MANAGER Keeper and trainer Power oriented Committed to his profession Avoids taking risks individually

Long term strategic thinking

Visionary Centralizing authority

Medium term operational thinking

Rational Delegating authority

Comfortable on his/her chair

Commanding
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Restless about his post

Both commanding and commanded

Why to become an Entrepreneur?

Rewards of Entrepreneurship

Profit
Freedom from the limits of standardized pay for standardized work

Independence
Freedom from supervision and rules of bureaucratic organizations Escape from an oppressive culture

Personal Fulfillment
Freedom to achieve a satisfying way of life Escape from routine and unchallenging work

Make Money

Be Your Own Boss

Enjoy a Satisfying Life

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Rewards of Being an Entrepreneur

o High degree of independence-freedom from constraints o Get to use a variety of skills and talents o Freedom to make decisions o Accountable to only yourself o Opportunity to tackle challenges o Feeling of achievement and pride

o Potential for greater financial rewards

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Benefits of Small Business Ownership

The opportunity to: create your own destiny make a difference reach your full potential reap unlimited profits contribute to society and be recognized for your efforts do what you enjoy and have fun at it
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Challenges of Being an Entrepreneur

Must be comfortable with change and uncertainty Must make a bewildering number of decisions

May face tough economic choices

Must be comfortable with taking risks Need many different skills and talents Must be comfortable with the potential for failure
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Drawbacks of Small Business Ownership

Uncertainty of income Risk of losing entire investment Long hours and hard work Lower quality of life until the business gets established High levels of stress Complete responsibility Discouragement
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Personal Qualities of Successful Entrepreneurs

Leadership
Need for Achievement 10.4 % 12.5 % Risk Taking 16.7 % Energy 43.8 %

Personality
10.4 % Creativity 6.2 %

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The Tourism Industry a glance at

Means millions of people moving from the countries they live and work to another country, or countries The Third Largest Industry all over the world after Petroleum and Electronic, Producing 935 million international visitors (2010), and $ 852 Billion (US) Revenues (2009), and The largest and fastest growing services industry
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Tourism Industry

On the Demand side Tourists motivations and behaviors - traveling people On the Supply side Sectors that satisfy tourist needs and supplying products - tourism businesses and products Infrastructure Components that an areas residents rely on, such as airports, highways, harbors that serve visitors Superstructure Facilities built to accommodate tourist needs, hotels, restaurants, theme parks, casinos etc.
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Tourism Product
Narrow sense
Consists

of what the tourist buys (Mostly

goods and services)

Wider sense Combination of what the tourist does at the destination and services used
(package)

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Tourism Product
Tourism products are generally nontradable services, such as;
a dream, total experience, activity, or

business opportunity.
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The Tourism Product (contd.)

Characteristics of tourism products;

Mostly services, which is intangible

(e.g., cannot be inspected physically)

Psychological in attraction Varies in quality and standards Supply fixed (e.g., more hotel rooms
cannot be instantly created to meet demand) Meet/satisfy social needs, not necessities
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Characteristics (contd.)

Combination of phenomena and relationships Has 2 important elements;

- dynamic (the journey) and - static (the stay / accommodation)

Movement to destinations is temporary Not connected with paid work Tourist goes to the product, not to the market
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Characteristics (contd.)

Tourism products are not used up Mostly labor-intensive People oriented (face to face
relationships)

Multi-dimensional Seasonal Dynamic

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Interrelated Business
Tourism and leisure industry involves a complex set of interrelated businesses Hospitality, travel and tourism businesses consist of; Retailers Transportation sector (carriers) Recreation or gaming facilities Hotels and restaurants (Hospitality)
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Accommodation providers (1)

Hotels

Most significant and visible subsector The largest part of the industry Major employer in the industry Dominated by small, family-run operations offering a variety of accommodation types Groups or chains of hotels account for about 10 % of total accommodation The major chains continue to grow in terms of number of hotels and number of rooms
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Accommodation providers (2)

Guesthouses, bed and breakfasts, farmhouse accommodation, inns provide limited facilities and food and beverage.

Self catering accommodation, apartments, cottages, sites comprise accommodation, recreational facilities and food preparation facilities.
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Types of accommodation providers (3)

share very popular in Mediterranean holiday resorts, this provides the opportunity to own an apartment for a week or two per year. Youth accommodation YHA and backpackers accommodation. This is very popular in Australia where backpackers form approximately 10 % of all international tourists.
Time
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Accommodation providers (4)

Camping and caravan sites ranging from basic fields with few amenities to sophisticated resorts.

Medical facility accommodation providing accommodation for the increasingly important medical tourism industry
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The distinctive nature of accommodation

Accommodation is distinct from other industries in three basic areas:

It comprises both tangible (product) and intangible (service) factors; The production and consumption of accommodation is inseparable and the guest must be present at both production and consumption Accommodation is highly perishable and cannot be stored for future sale.
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Travel Intermediaries

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The Nature of Intermediation

Benefits

Producers are able to sell in bulk and so transfer risk to intermediaries Producers can reduce promotion costs by focusing on the travel trade, rather than consumer promotion, which is more expensive Consumers can avoid search and transactions costs Consumers can benefit from the specialist knowledge of intermediaries, their market power and the resulting lower cost of products
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Other Industry Segments (1)

Lodging Operations

All Suit Hotels Casino Hotels Conference Centers Full Service Hotels Limited Service Hotels Resorts Retirement Communities
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Industry Segments (2)

Food Service Operations

Commercial Cafeterias Education Food Service Employee Food Service Full - Service Restaurants Health Care Institutions Lodging Food Services Quick Service Restaurants Recreational Food Services Social Caterers
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Industry Segments (3)

Other Operations
Airlines Campgrounds City Clubs Country Clubs Cruise ships National Parks Event Management Organizations

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Travel Related Businesses and Entrepereneurship Opportunities (1)

Marketing Representative/Agent Travel Agent Recreation Specialist Incentive Travel Specialist Policy Analyst E-tourism Expert/Specialist Destination Development Specialist Tourism Investment Projects Consultant
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Travel Related Businesses and Entrepereneurship Opportunities (2)

Tour Wholesaler Tour Broker Travel Counselor Meeting/Conference Planner Advertising Agency Entertainer/Animator Health Specialist (Health SPA etc.) Small Business Owner (Guest House, Hotel,
Restaurant, Souvenir shop etc.)
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Doing Business in Tourism Industry

Tourism and travel Industry has the reputation of being a relatively clean and pleasant industry in which to invest Requires relatively low start up capital
Setting up in the industry is often seen as simple and requiring few skills other than the off-claimed ability to get along with people

Doing Business in Tourism Industry

It is therefore attractive to those leaving from other jobs and investments or do not enjoy them, to buy into a bar, guest house or travel business for example.
Provides opportunities for those who would like to use individual skills in a beautiful environment. i.e., a chef may happily work in pleasant resort and a tour guide/travel agent use his/her talents in the related field Provides new business opportunities, such as event management

Industrys Future
Year 1950 1960 1970 1980 1990 2000 2002 2008 2009 2010 2023 (prediciton) # of tourists 25 70 165 285 458 698 714 913 877 935 1700 Total tourism income 2.1 6.8 18 105 268 475 470 941 852 2000
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The Trend of International Tourist Arrivals, 19502020 and Historical data by region

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Future Markets
Keep in mind that the new tourists are Knowledgeable, discerning, seeks quality and participation Ageing Motivated by education and curiosity Sophisticated and flexible Technologically skilled
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Before Starting up,

ASK YOURSELF! - 1

Is Entrepreneurship For You?

There is no way to eliminate all the risks associated with starting a small business. However, you can improve your chances of success with good planning and preparation. A good starting place is to evaluate your strengths and weaknesses as the owner and manager of a small business. Carefully consider each of the following questions.

1. Can you start alone?

It will be up to you - not someone else telling you to develop projects, organize your time and follow through on details.
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Before Starting up, ASK YOURSELF! - 2

2. How well do you get along with different personalities?

Business owners need to develop working relationships with a variety of people including customers, vendors, staff, bankers and professionals such as lawyers, accountants or consultants. Can you deal with a demanding client, an unreliable vendor or cranky staff person in the best interest of your business?
3. How good are you at making decisions?

Small business owners are required to make decisions constantly, often quickly, under pressure, and independently.
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Before Starting up, ASK YOURSELF! - 3

4. Do you have the physical and emotional stamina
(power) to run a business? Business ownership can be challenging, fun and exciting. But it's also a lot of work. Can you face 12 hour work days 6 or 7 days a week?

5. How well do you plan and organize? Research indicates that many business failures could have been avoided through better planning. Good organization of financials, inventory, schedules, production can help avoid many pitfalls.
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Before Starting up,

ASK YOURSELF! - 4
6. Is your drive strong enough to maintain your motivation?
Running a business can wear you down. Some business owners feel burned out by having to carry all the responsibility on their shoulders. Strong motivation can make the business succeed and will help you survive slowdowns as well as periods of burnout.
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Before Starting up,

ASK YOURSELF! - 5
7. How will the business affect your family?
The first few years of business startup can be hard on family life. The strain of an unsupportive spouse may be hard to balance against the demands of starting a business. There also may be financial difficulties until the business becomes profitable, which could take months or years. You may have to adjust to a lower standard of living or put family assets at risk.
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Before Starting up,

Motivate YOURSELF!
It's true, there are a lot of reasons not to start your own business. But for the right person, the advantages of business ownership far outweigh the risks. You get to be your own boss. Hard work and long hours directly benefit you, rather than increasing profits for someone else. Earning and growth potential are far less limited. A new venture is exciting. Running a business will provide endless variety, challenge and opportunities to learn.
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End of Slides.

Thanks for attention!

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