Unit 6: New Tourism Venture Identification and

Selection Technical Feasibility

A. Business opportunity identification in
tourism: Sources and methods of generating
new ideas.
B. Selection of best tourism idea.
C. Feasibility studies in tourism: Site selection,
factors affecting site selection.
D. Business description in tourism: background,
purpose and objectives.
New Tourism Venture Identification
and Selection Technical Feasibility

The ability to identify business opportunities is

an essential characteristic of an entrepreneur
Opportunity- favorable position or a range for
advancement
 A. Business opportunity identification
in tourism
Sources and methods of generating new ideas.
• Environment: Scan & Understand the needs &
wants of people. Abraham Maslow -psychologist
People generally have different kinds of basic
needs such as food, clothing, shelter, safety ,
socialization, recognition for self-esteem & self-
fulfillment.
• Environment :Taking macro-perspective or
viewing larger environment where business will
be situated (looking at the Social, Technological,
Economic, Environmental, & Political)
 Sources and methods of generating
new ideas
WAYS OF SCANNING THE ENVIRONMENT 1:
• Looking Closely at the market
• Demand & Supply Gap Analysis
• Import-Export Movement
• Product Substitution
• Forward-Backward Industry Linkages

WAYS OF SCANNING THE ENVIRONMENT 2:

• Looking at People’s skills
• Observe your Community
• Looking at Available Business Assistance Program
• Government & Private Institutions
• Non-Government Organizations
 Sources and methods of generating
new ideas
1. Market:
• Careful observation of the market reveal
demand and supply position of tourism
products and services.
• Further, It helps to ascertain the demand is
elastic or inelastic, whether the product is
repeatedly purchased or not.
 Sources and methods of generating new ideas

2. Problems and Change:

• Any social cultural or technological changes
may give rise to new business opportunities.
• E.g.: Opening a nice and standard hotels in the
touristic area where there is no or limited
standard accommodation.
 Sources and methods of generating
new ideas
3. Invention and Technologies:
Inventions bring new technologies which may, in
turn create new things of value. This give rise to
new creative process and methods that add
value to already existing products and services.
 Sources and methods of generating
new ideas
4. Trend and Habits:
Social and economic status and standard of
living are dynamic in nature. Habits, style of
working, tastes, preference of people may also
be observed. E.g: Outbound tourism as Nepali
people have more spending capacity.
 Sources and methods of generating
new ideas
5. Competition:
Competitors products and processes also gives
rise to new and improved ideas. From the data
collected through market observation, one can
identify the product or industries which are in
demand and which require increase in supply.
 Sources and methods of generating
new ideas
6. Consumer
Consumer need and complains also trigger some
new opportunities and ideas. Consumer knows
best what they want and the habits/taste which
are going to be popular in the near future. These
days good business firms generally conducts a
survey among prospective consumers before
choosing the product to be introduced in the
market.
 Sources and methods of generating
new ideas
7. Study of project profile:
Various government and private agencies
publish periodic profiles of various projects and
industries. These profile describe in detail about
the technical, financial and market requirements
and prevailing positions, which helps to
generate new ideas for business.
 Sources and methods of generating
new ideas
8. Industry and Market Structures:
With the change in technology, the existing firm
can become obsolete if they are not attuned to
the changes. Even changes in the social values
and consumer tastes can shift the structure of
industries market.
 Sources and methods of generating
new ideas
9. Demographics:
The characteristics of world population are
changing. These changes influence industries
and markets by altering the types and quantity
of product desired and customer’s buying
power. There can be significant entrepreneurial
opportunity as per the need of the different age
factors.
 Sources and methods of generating
new ideas
10. Changes in Perception:
Perception is one’s view of reality. It changes the
meaning for people. Perception brings changes
in people’s psychographic profiles what they
value and what they believe in changes in
attitudes and value create potential market
opportunities for entrepreneurs.
 B. Selection of best tourism idea.
Among all tourism ideas that click into your
mind, this is the stage when you choose the best
one. This can be done through intense
brainstorming and analysis of market or the
experience that you hoard previously about the
particular business which you are going to take
care of.
 C. Feasibility studies in tourism: Site selection,
factors affecting site selection.
Feasibility Analysis:
An analysis and evaluation of a proposed project to
determine if it
(1) is technically feasible,
(2) is feasible within the estimated cost, and
(3) will be profitable.

Feasibility studies are almost always conducted where

large sums are at stake. Also called feasibility analysis.
 Feasibility studies in tourism
Feasibility analysis mainly covers the following
aspects:
1. Product or service feasibility
2. Industry or target market feasibility
3. Organizational feasibility
4. Financial feasibility
 Feasibility studies in tourism
1. Product or service feasibility:
• Assessment of overall appeal of the product or service being proposed.
• The evaluation of new-venture idea should start with identifying the
technical requirements, the technical feasibility for producing a product or
service that will satisfy the expectation of potential customers. Eg: Glass
sky bridge.
• Most importantly, it should consider:
– Design and attractiveness
– Durability
– Product safety
– An acceptable rate
– Easy and low cost maintenance
• There are two components of Product or service feasibility:
a. Product or service desirability: serves a need in a market place
b. Product or service Demand: buying intention of public
 Feasibility studies in tourism
2. Industry/Target market feasibility analysis:
• Study of the firms producing similar product or
services
• Also knowing the target market for the product or
services being proposed.
• This include:
– Description of the industry
– Current market analysis
– Competition
– Anticipated future market potential
– Potential buyers and sources of revenue
– Sales projection
 Feasibility studies in tourism
3. Organizational feasibility:
• To know whether a proposed business has sufficient
management expertise, organizational competence,
resources to successfully launch its business.
• Activities includes:
– Description of the business/organizational structure
– Internal/external principle and practices of the business
– Professional skills and resumes
• There are two issues to consider in this area:
1. Management Ability
2. Resource sufficiency
 Feasibility studies in tourism
4. Financial feasibility:
• Process of managing assets wisely to use capital or fund
effectively and efficiently
• Important issues to consider are total start up cash needed,
financial performance of similar business and overall
financial attractiveness of the proposed venture.
a. Total start up cash needed: (Cost of production, cost of
financing, cost of fixed assets, cost of current assets, cost
of developing new business etc.)
b. Financial performance of similar business: (comparing and
analyzing the financial performance of similar business.)
c. Overall financial attractiveness of the proposed venture:
(Projected sales and profitability)
 Site selection: factors affecting site
selection.
• Businesses are started in various locations - which
depends on several factors
• Technology (particularly communications) has
made the choice much easier, particularly for
service businesses
• The location cost and proximity to customers are
key factors in choosing the best location
• An entrepreneur will often have to compromise –
there is rarely a “perfect business location”
 Factors affecting site selection:
• Cost (vital)
• Flexibility
• Communications & Transportation
• Labor
• Customers
• Suppliers
• Government assistance
 Factors affecting site selection:
• Main location costs
– Rent (to the landlord)
– Maintenance charges
– Insurance (can be substantial)
– Rates (local government tax)
– Energy costs (electricity, gas)
– Housekeeping (e.g. cleaning, security)
 Factors affecting site selection:
• Flexibility
A business needs to:
– Minimize its costs
– Set up operations that can be scaled-back or
scaled-up when needed
– Avoid being locked into a location which might not
prove suitable in the future
– Examples of flexibility – Short-term leases
 Factors affecting site selection:
• Communication & Transportation
– This includes transport facilities (road, rail, air) as
well as information technology infrastructure
– Transport links are particularly important if the
business delivers products, sells direct using a
sales force or is dependent on imports and
exports
– Information technology now makes the choice
wider – most start-ups can quickly establish
reliable broadband Internet connections
 Factors affecting site selection:
• Labor
– When a start-up needs to hire employees, then
access to a reliable pool of staff with relevant skills
is important
– Businesses that are labor- intensive often look to
locate in areas of traditionally low wages
– Service oriented businesses tend to locate where
they can access trained employees
 Factors affecting site selection:
• Market
– Customers & Population
– A start-up may need to be located near particular centers
of population For example, if the product is a service
targeted at affluent older-aged people, then it is important
to be located where there is a sufficient population of such
people
– Franchise businesses often analyze the population
characteristics of a potential new territory before setting
up in a new location
– For a retailer, the choice of location for the retail outlet is
critically important – needs to have a strong customer
“footfall”
 Factors affecting site selection:
• Suppliers
– The business may be dependent on supplies of a
particular raw material, so costs will be lower if
the business is located near the source of supply
– This factor tends to be more important for
manufacturing businesses rather than service
businesses
 Factors affecting site selection:
• Government help
– Aims to encourage start-ups & business growth in
poorer locations
– Assisted areas – benefit from grants & low-cost loans
– Regional Development Agencies – focus government
investment in target regions and industries
– Government support can be the difference between
one location and another – particularly if it affects the
location costs
 Business description in tourism: background,
purpose and objectives.
• A written document that outlines the future
activity for an existing or proposed business
venture.
• Is the formal written expression of the
entrepreneurial vision, describing the strategy
and operations of the proposed venture.
• It is a document that brings together the key
elements of a business that include details about
the products and services, the cost, sales and
expected profits.
• Blue Print
 Purpose:
• Provides clarity of thought and purpose
• Introduces Business Model
• Introduces the company and the team
• Attempts to persuade investors
• Highlights risks and challenges
• Serves as an entry point for further
discussions
 Objective
The most effective business objectives meet the following criteria:
SMART
• S – Specific – objectives are aimed at what the business does, e.g. a
hotel might have an objective of filling 60% of its beds a night
during October, an objective specific to that business.

• M - Measurable – the business can put a value to the objective, e.g.

€10,000 in sales in the next half year of trading.

• A - Agreed by all those concerned in trying to achieve the objective.

• R - Realistic – the objective should be challenging, but it should also

be able to be achieved by the resources available.
 Market Feasibility
• Once you have validated your idea by assessing
the legal validity of your project; the next step is
preparing the market feasibility study.
• Market feasibility study is considered to be the
most important study of the detailed studies.
• This study is essential to the rest of the feasibility
studies, without having a market study it’s
difficult to go for further studies of the detailed
feasibility study
 Tourism Market Segmentation
The tourism market segmentation can be broadly divided into the following
types −
• Geographic
Geographic market segmentation is done considering the factors such as
tourists’ place of origin. This factor is important as the tourists belonging to
different places are brought up with different cultures and show different
traits of behavior. It is the most basic type of segmentation.
• Demographic
This segmentation is done by considering the tourist’s gender, age, marital
status, ethnicity, occupation, religion, income, education, and family
members.
• Psychographic
The marketing people do this segmentation by taking into account the psyche
of the tourists. They gather information about the tourists’ interests,
attitudes, their way of living life, opinions, and overall personality.
 Goals for Market Study:
We can set up the goals of the market feasibility study as
follows:
• Determine the market structure and shape.
• Determine exact demand for product.
• Identify the factors affecting the market demand and
supply.
• Identify the micro and macro size of the market.
• Identify market targeted groups, and market segments.
• Selecting the price policy and the best price
mechanism to sell the products.
 Overall and Specific market
• Overall Market
Markets generally fall into two broad types, namely consumer markets
and business markets. A consumer market consists of individuals or
households who purchase goods for private consumption and do not
intend to resell those goods for a profit.
A business market consists of individuals or organizations who
purchase goods for one of three main purposes;
(a) for resale;
(b) for use in producing other goods or services and;
(c) for general use in daily business operations.

Approaches to segmentation will vary depending on whether the total

available market (TAM) is a consumer market or a business market.
 Overall and Specific market
Specific market:
A niche market is the subset of the market on
which a specific product is focused. The market
niche defines the product features aimed at
satisfying specific market needs, as well as the
price range, production quality and the
demographics that it is intended to target. It is
also a small market segment.
 Tourism Marketing Strategy and sales
forecasts
Marketing strategy is the section of your
business plan that outlines your overall game
plan for finding clients and customers for your
business. ... Marketing strategy focuses on what
you want to achieve for your business and
marketing efforts.
 Tourism Marketing mix
1. Product:
• The product can be intangible or tangible as it can
be in the form of services or goods.
• You must ensure to have the right type of product
that is in demand for your market.
• Product should be uniquely designed to attract
potential customer.
• All in all, marketers must ask themselves the
question “what can I do to offer a better product
to this group of people than my competitors”.
 Tourism Marketing mix
2. Price:
• It is also a very important component of a marketing plan as it determines
your firm’s profit and survival. Adjusting the price of the product has a big
impact on the entire marketing strategy as well as greatly affecting the
sales and demand of the product.
• Pricing always help shape the perception of your product in consumers
eyes. Always remember that a low price usually means an inferior good in
the consumers eyes as they compare your good to a competitor.
• Consequently, prices too high will make the costs outweigh the benefits in
customers eyes, and they will therefore value their money over your
product. Be sure to examine competitors pricing and price accordingly.
• There are 3 broad categories to set prices:
• A. Cost based pricing
• B. Customer value-based pricing
• C. Competition based pricing
 Tourism Marketing mix
3 Place:
• You have to position and distribute the product in a place that is
accessible to potential buyers but tourism product is not
transportable.
• Place refers to the accessibility of the product in the area or
location where potential buyers can be found and do transaction
through any means.
• Place refers to the location where the customer buys the collection
of services. Ideally, the operator who sends out the promotion uses
it to encourage the potential customer to visit the operator's
location and complete the purchase. With the convenience of
online payments, the operator may find that the best strategy is to
direct potential customers to an attractive website where they can
complete the purchase.
 Tourism Marketing mix
4. Promotion:
• Promotion is a very important component of marketing as it can boost
brand recognition and sales. Promotion is comprised of various elements
like:
– Public Relations
– Advertising
– Sales Promotion
– Personal selling
• In creating an effective product promotion strategy, you need to answer
the following questions:
• How can you send marketing messages to your potential buyers?
• When is the best time to promote your product?
• Will you reach your potential audience and buyers through television ads?
• Is it best to use the social media in promoting the product?
• What is the promotion strategy of your competitors?
 Tourism Marketing mix
5. People:
• The company’s employees are important in marketing
because they are the ones who deliver the service. It is
important to hire and train the right people to deliver
superior service to the clients, whether they run a
support desk, customer service, or any other tourism
related services.
• Since the product is a collection of services, the people
who provide the services are a key to the success of
the transaction. Operators must have top-level service
to initially complete the sale and to encourage repeat
customers.
 Tourism Marketing mix
6. Process:
• The systems and processes of the organization
affect the execution of the service.
• So, you have to make sure that you have a well-
tailored process in place to minimize costs.
• It could be your entire sales funnel, a pay system,
distribution system and other systematic
procedures and steps to ensure a working
business that is running effectively.
 Tourism Marketing mix
7. Physical Evidence:
• It is the physical evidence of a business' presence
and establishment. A concept of this is branding.
For example, when you think of “fast food”, you
think of McDonalds.
• You immediately know exactly what their
presence is in the marketplace, as they are
generally market leaders and have established a
physical evidence as well as psychological
evidence in their marketing.
 Financial Feasibility
a) Start-up Cost
b) Financial requirement
c) Sources of fund
d) Projected profit and loss statement
e) Projected cash flow statement
f) Projected balance sheet
 a) Start-up Cost
New venture involve legal, advisory and other
overhead costs. Further, furniture and fixtures
are other cost which are to be analyzed during
start-up.
 B) Financial Requirement
• The capital required to fund the new venture
has to be analyzed. It can be for fixed and
working capital. Big ventures need large
capital investment.
 C) Sources of fund
• The sources of funds to finance the new
venture are analyzed. The sufficiency of funds
to finance implementation of the new venture
is examined.
D) Projected profit and loss statement
• Forecast of income and expenditure are
analyzed to assess profitability of new
venture. Tax implications are also examined.
Breakeven analysis is done to analyze no profit
and no loss point of operations.
 E) Projected cash flow statement
• Cash flow is the difference between cash
receipt and cash payments. Projected cash
flow is carefully analyzed to assess the
capacity of new venture to meet financial
obligations. The debt serving capacity is also
examined. Capital budgeting technique such
as pay back period, net present value, internal
rate of return are used to access repayment
capacity of the new venture.
 F) Projected balance sheet
• The projected balance sheet summarizes the
projected assets, liabilities and net worth of a
new venture
 Development, Production and
Technology Analysis
Production analysis examines the technical viability
of the new venture. The area to be analyzed are:
a) Technical Specification
b) Production process and Technology
c) Layout
d) Resource requirement
e) Technical human resource
f) Quality assurance
a) Technical Specification:
The technical specifications related to product
packaging or designed is examined. Unique
features of product are assessed.
b) Production Process and Technology:
Appropriateness of process are examined.
Computerization and digitalization needs are
examined. Technical risk are also assessed.
c) Layout
The Layout of the organization along with
machinery and equipment used are during
production process are examined.
d) Resource Requirement:
Resource specially cost are required for
acquisition, installation and maintenance of
development and production product or service
are carefully examined.
e) Technical Human Resource
The need and availability of human resources
are examined. They can be technical,
professional and operative human resource.
They are the key factor for the success of any
organization.
f) Quality Assurance
The new product thus developed are examined
in terms of quality. It is the maintenance of a
desired level of quality in a service or product,
especially by means of attention to every stage
of the process of delivery or production.
• Environment Impact Assessment (EIA) is also examined. Environmental
assessment (EA) is the assessment of the environmental consequences
(positive and negative) of a plan, policy, program, or actual projects prior
to the decision to move forward with the proposed action.
• The purpose of the assessment is to ensure that decision makers consider
the environmental impacts when deciding whether or not to proceed with
a project.
• There are seven key areas that are required to do while doing EIA:
1. Description of the project
2. Alternatives that have been considered
3. Description of the environment
4. Description of the significant effects on the environment
5. Mitigation
6. Non-technical summary (EIS)
7. Lack of know-how/technical difficulties (This section is to advise any
areas of weakness in knowledge)
 Organization and management
Key personnel resources:
• The new venture consists of a founding team
consisting of key personnel. The background,
experience, skills and networks of the team members
to make the concept operationally successful is
examined. The key stakeholders of the ventures are
identified and their impact on venture is assessed.
• Because the focus of businesses varies greatly, the
number of key personnel and organizational
structure can also vary substantially.
Human resource management strategy:
HRM consists of acquisition, development,
utilization and maintenance functions. The
strategy adopted to acquire competent human
recourses, continually develop them to update
their knowledge and skills, utilize them
effectively and retain them in the new venture
are examined.
• Forms of Ownership in Tourism Business:
The legal structure adopted for the new venture
is examined in terms of its appropriateness. It
can be a Sole proprietorship, Partnership and
Company.
 Sole Trading/Proprietorship: A
business that is owned by one person
Partnership: A voluntary association of two or more
people to act as co-owners of business for profit
 Corporation/Joint Stock Company: A voluntary
association created, operated and liquidated by law. It
has separate legal existence.
 Equity position
• Total equity is the value left in the company after
subtracting total liabilities from total assets. The
formula to calculate total equity is Equity = Assets -
Liabilities. If the resulting number is negative, there is
no equity and the company is in the red
• Equity position refers to an investment made by a third
party in a business in exchange for stock. Such a
position may be taken by a third party for a variety of
reasons, including the following:
• Expectation of a return.
• Converted debt
• Alternative payment.
 Deal Structure.
• The deal structure outlines a set of terms that will help
guide a smooth transfer of business ownership, and will
usually reference whether the transaction is leveraged (use
borrowed capital for an investment), unleveraged, a joint
venture, or will include convertible/participating debt, or a
traditional debt transaction.
• The key objectives for a successful deal structure include
coming to a fair agreement on price (including meeting the
seller’s price expectations) and ensuring that the buyers
will be capable of operating the business in line with their
current financial goals.
• The buyer and seller, the industry, the economy, the
financial market, and, of course, the business itself all will
play a role in defining the deal structure.
 Critical risk and contingencies in
Tourism
Where business opportunities have been identified,
risks are usually associated with capitalizing those
identified business opportunities. It is important to
identify any risks associated with setting up a
business. This also applies in the case of an existing
business that intends to expand, diversify or grow.
The identification of risks helps you come up with
contingencies to mitigate the risks. Risks include
financial risks, market risks, operational risks,
human resource risks, economic risks, technological
risks and other risks. Given below is a list of factors
to look at when identifying and assessing risks.
 Contingency Plan
• If a business decides to mitigate or accept the risk, it
will benefit from having a contingency plan in place to
deal with the situation should it occur. This can range
from a fire evacuation plan to appointing an
emergency coordinator to help with evacuations or
media contacts. Risk managers can create detailed
plans to deal with the most likely situations the
organization will face or those that will do the most
harm. They must then communicate these plans to all
necessary personnel in the workplace and possibly
schedule drills, provide training or purchase
equipment.