Entrepreneurship and Tourism Industry

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Entrepreneurship andTourism Industry

• Professor Orhan Içöz, Ph.D.
• Yasar University
• Faculty of Business Economics
• Dept. Of Tourism Management

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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 Features
Economic function Ownership structure Degrees of entrepreneurship Resource base Size and life-cycle of firm Consolidation approach 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
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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.
• Administrative Entrepreneur
• An entrepreneur who oversees the operations of an
  ongoing business
• Franchisee
• An entrepreneur whose power is limited by the
  contractual relationship with a franchising
  organization.
• Entrepreneurial Team
• Two or more people who work together as
  entrepreneurs.

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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
Creative resourcing Ingeniously (creatively) marshalling resources, of both financial and managerial nature, from a complex set of sources in order to mobilize and realize the opportunity
Entrepreneurial learning Motivation to acquire the necessary knowledge and expertise through relevant exploration and reflection
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Key Elements of entrepreneurship
Elements Description
Innovation and creativity Renewal of products and services by adding value through application of expertise and imagination
Knowledge leadership Development of sources of management information to enable first-mover capability, and effective strategy formulation and implementation
Opportunity alertness Continuous focus on emerging trends and opportunities to be captured and realized
Relationship management Maintenance of effective teams, networks, and flexible management structures
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Key Elements of entrepreneurship
Elements Description
Risk and uncertainty management Evaluation of personal and financial risk elements, self-confidence and determination to succeed
Timing of action Acting within a limited window in which an opportunity can be optimized
Vision and strategic orientation Formulation of ambitions, and strategies to realize them
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COMPARING ENTREPRENEURS TO PROFESSIONAL MANAGERS
ENTREPRENEUR
PROFESSIONAL MANAGER
Founder and organizer
Keeper and trainer
Achievement oriented
Power oriented
Committed to his firm
Committed to his profession
Moderate risk taker
Avoids taking risks individually
Long term strategic thinking
Medium term operational thinking
Visionary
Rational
Centralizing authority
Delegating authority
Comfortable on his/her chair
Restless about his post
Commanding
Both commanding and commanded
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Why to become an Entrepreneur?
MakeMoney
Be YourOwn Boss
Enjoy a Satisfying Life
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Rewards of Being an Entrepreneur

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

• Time 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.

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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

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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

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

• 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?
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• 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!