Entrepreneurship andTourism Industry Professor Orhan İçöz, Ph.D. Yaşar University Faculty of Business & Economics Dept. Of Tourism Management
Contents • Basic definitions • The concepts and types of entrepreneur and entrepreneurship. • Why and howto become an entrepreneur. • The common characteristics of entrepreneurs • Entrepreneurship opportunities and domains in Tourism and Travel Industry • Future trends of the industry
Entrepreneurship defined 3 It is the innovatory process involved in thecreation of an economic enterprisebased on anew product or servicewhich differs significantly from products or services in the way its production is organized, or in its marketing.
What is Entrepreneurship? • 1.The Process of • Initiating aBusiness Venture, • Organizing the NecessaryResources, • Assuming the Associated Financial, Psychological and Social Risks & Rewards • 2. Having the Characteristics of an Entrepreneur, e.g. • Brave, innovative, independent, and achievement oriented 4
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
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.
Who Are Entrepreneurs? • Persons who startand/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, andprogress. • All active owner-managers(founders and/or managers of small businesses).
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.
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
Why to become an Entrepreneur? Rewards of Entrepreneurship Profit Independence Personal Fulfillment Freedom from the limits Freedom from supervision Freedom to achieve a and rules of bureaucraticorganizations of standardized pay for satisfying way of life standardized work Escape from routine Escape from anoppressive culture and unchallenging work MakeMoney Be YourOwn Boss Enjoy a Satisfying Life
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
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
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
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
Personal Qualities of Successful Entrepreneurs Leadership Risk Taking 12.5% Need for Achievement 16.7% 10.4% Energy 43.8% Personality 10.4% Creativity 6.2% 19
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
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 area’s residents rely on, such as airports, highways, harborsthat serve visitors Superstructure Facilities built to accommodate tourist needs, hotels, restaurants, theme parks, casinos etc. Tourism Industry
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) Tourism Product
Tourism Product • Tourism products are generally non-tradable services, such as; • a dream, • total experience, • activity, or • business opportunity.
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 The Tourism Product(cont’d.)
Combination of phenomena and relationships Has 2important 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 Characteristics(cont’d.)
Tourism products are not used up Mostly labor-intensive People–oriented(face to face relationships) Multi-dimensional Seasonal Dynamic Characteristics(cont’d.)
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) Interrelated Business
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 about10% of total accommodation • The major chains continue to grow in terms of number of hotels and number of rooms
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.
Typesofaccommodation 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.
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
The distinctivenature 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.
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
Other Industry Segments(1) Lodging Operations • All Suit Hotels • Casino Hotels • Conference Centers • Full Service Hotels • Limited Service Hotels • Resorts • Retirement Communities
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
Industry Segments (3) Other Operations • Airlines • Campgrounds • City Clubs • Country Clubs • Cruiseships • National Parks • Event Management Organizations
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
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.)
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
The Trend ofInternational Tourist Arrivals, 1950–2020and Historical data by region 43
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
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. 45 45
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? • How good are you at making decisions? • Small business owners are required to make decisions constantly, often quickly, under pressure, and independently. 46 46
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 12hour 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. 47 47
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. 48 48
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 anunsupportive 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. 49 49
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. 50 50