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CHAPTER 4: TOURISM ENTREPRENEURSHIP

Learning Outcomes
At the end of this chapter, the student will be able to:
• Identify who are tourism entrepreneurs
• Understand tourism entrepreneurship
• Know what is tourism enterprise

TOURISM ENTERPRENEURSHIP

There is a voluminous body of literature on general entrepreneurship, which according to Russel

and Faulkner (2004) dates back to the 19th Century when economists were investigating the role
of entrepreneurs in local and national growth. Thus, well before Schumpeter (1934,1950)
undertook his theory of economic development, in which he suggests entrepreneurship is a
process of ‘creative destruction’, the characteristics of the entrepreneur have been linked to
playing an important role in economic progress and innovation.

This is not to say that the characteristics of the entrepreneur are clearly defined, In fact, finding
one set of definitions has proven to be difficult, as characteristics appear to differ from discipline
to discipline. In systematically reviewing the disciplines vis-a-vis mall firm entrepreneurship,
Henson (2004)points to entrepreneurial skills and characteristics in the entrepreneurial
literature, inter alia, as motivation, managerial experience, education, age (Storey, 2000),
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entrepreneurial vision, social vision and social competence(Baum & Locke, 2004), drive,
independence, task orientation (Hamm, 2002); in the growth barriers literature as skills
shortage, lack of management training, and more intangible aspects such a internal motivation
(Barber, Metcalfe, &Porteous, 1989); in the traditional economics literature as resource-based
(Penrose, 1959), coordinating, arbitrating, innovating and bearing risk (Baumol2003); and in the
strategy literature as contextual and industry structure-conduct-performance related (Porter
1998).It is especially the latter, the make-up of the tourism industry, that appears to be relevant
to the nature of the tourism entrepreneur.

Tourism entrepreneurship is believed to flourish in an environment where the social, economic

and political conditions serve as a motivational force, but such activity needs to be supported by
the community and governing bodies. In undertaking a historical analysis of Gold Coast
destination and applying chaos theory, Russell and Faulkner (2004) found that tourism
entrepreneurs have a role to play in the development of destinations (when conditions are
‘chaotic’ and ‘unregulated’). However, as can be observed on the Gold Coast, the role of the
individual entrepreneur changes with the scale and complexity on the industry. Thus, while
individual tourism entrepreneurs – much like any other entrepreneur might- took advantage of
an identified opportunity and favourable market conditions and went on to play a vital role in the
shaping of holiday resorts along the Gold Coast, the scale of industry development it replacing
individual with corporate entrepreneurship, while ongoing tension between entrepreneurs and
regulators (the moderators of change) may increasingly thwart individual entrepreneurial activity
(Russell & Faulkner 2004). It may be argued that individual tourism entrepreneurs in the Gold
coast were gap fillers who did not display significant process or product innovation to remain
competitive in the long run. In adapting Michael Porters’ view of competition (1990) to tourism,
that the health, vitality and competitiveness of destinations is linked essentially to the
competitiveness of individual firms, one would have to question the health of much of the
tourism industry. In a major study analyzing international destination competitiveness,
(Australia-Korea Foundation 2001) the lack of barriers and flow on effects was cited as key
impediment to competitiveness.

The relatively low entry barriers, few skills required, and few restrictions or regulations imposed
in the tourism industry encourage the proliferation of small firms. Many display lacks of
appreciation of the importance of staff training. Owner managers make bad investment
decisions. Many fail to recognize their dependency on the competitiveness of the destination as
a whole (Australia-Korea Foundation. 2001, np).

Wanhill (1999) and others have noted the dual, though contradictory role the small business
entrepreneur is expected to play in mature and developing economies, as sources of
entrepreneurship and a reservoir of hidden unemployment (for the self-employed). Tourism, it is
argued can only regenerate regional economies in a sustainable way if individual tourism
enterprises are capable of responding to unexpected, external forces. Without the necessary
skills, however a strategic response is unlikely.

European research in rural tourism entrepreneurship similarly points to skills, local conditions, in
this case local culture, contributing to the success factors of destinations, as the strength of the
local culture opens up possibilities for future innovation and development, while awareness of
the local traditions forms a natural foundation for entrepreneurial innovation (Kajanus, Kangas,
& Kurttila,2004), In this sense the focus is on the human (social) activity and individual
entrepreneurship which brings change and development to destinations. The latter is in the line
with general entrepreneurial literature characteristics such as entrepreneurial vision, social
vision and social competence (Baum & Locke, 2004).
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In certain cases local culture may be conducive to entrepreneurial networks, consisting of

economic actors collaboratively undertaking entrepreneurial activities to develop new product
and services for the destination (Molinari & Buhalis, 2003) This could be seen as fitting with the
entrepreneurial team literature, which suggests that when team members who have a range of
experience work together, enhanced performance may be achieved (Littunen & Tohmo,
2003)however, as Ryhanen (2003) and Braun (2004) point out, despite obvious
interdependencies between entrepreneurs in regional and remote rural remote tourism locations
, micro tourism entrepreneurs tend to be atomistic in nature, often do not consider themselves
part of a destination, do not but into the whole-of-destination or regional marketing schemes,
and do not have a particular interest in developing collaborative strategies that focus on
geographical destination building.

In Considering the atomistic nature of the tourism entrepreneur and there refutation of even
belonging to the industry, what appears unique especially to the micro tourism entrepreneur is
what is known as their lifestyle choice. Studies in Europe and Canada respectively show that
the nature of the tourism entrepreneur differs from profit and growth-oriented entrepreneurs, in
that the tourism entrepreneur tends to be an autonomy seeker who has entered the industry
predominantly as a lifestyle choice in which entrepreneurship is closely linked to family and
environment. Thus, the attitude to lifestyle dominates the way these entrepreneurs run their
business, which often includes the goal to keep their business from growing (Getz & Petersen,
2003). Research in New Zealand similarly shows that once the business is set up, lifestyle
entrepreneurs’ might even consciously reject certain economic and business growth
opportunities (Ateljevic and doorne, 2000).

In the context of the UK tourism industry, the tourism literature also delineates a forementioned
contextual industry issues, in particular the relative ease of entry into the industry as a core
factor of becoming a tourism entrepreneur. Tourism entrepreneurs surveyed in a study (Szivas,
2001) reported there is most important entrepreneurial skills to be people handling, marketing
and accounting. Interestingly, industry knowledge was deemed unimportant; previous
experience was not deemed necessary in entering the industry; both general and industry-
specific skills could be learnt on the job; and there was a high reliance upon personal and family
savings generated from previous non tourism income. These findings support assumptions
about lifestyle motives for tourism entrepreneurs as a deliberate life choice rather than being
influenced by industry-specific circumstances or labour market forces. Entrepreneurs entered
tourism as it appeared to require only rudimentary levels of skills and success was achieved
through risk taking and/or luck rather than deliberate process innovation.

The above literature on the nature of tourism entrepreneurship reveals the difficulties of applying
accepted concepts that relate to small firm entrepreneurship and innovation in general.
Characteristics of micro tourism operators include:
- Differences in motivators in business start-up. Tourism operators often consciously
reject opportunities for economic and business growth in favour of lifestyle choice and
perceptions of independence.
- Micro and small tourism enterprises have been described as ‘gap fillers’ or constrained
entrepreneurs which do not display evidence of significant process or product innovation
due to extreme seasonality of visitor flows and the uncompetitive nature of the industry
in general
- Entrepreneurship as defined by operators is generally confined to marketing
applications: achievement by effective communication or attaining power by taking risks
or having good luck.
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The authors of this paper do not only support the argument that these characteristics of tourism
entrepreneurship derive from the lack of barriers to entry into the industry, accompanied by the
very low skill base of industry entrants. The authors also argue that the nature and extent of
entrepreneurs that enter the tourism industry has considerable impact on the industry status as
a whole and on the number of tourism business failures in particular,

BUSINESS FAILURE- UNIQUES TO THE TOURISM

ENTREPRENEUR?

A consistent pathology emerges across a range of

international studies on small business and failure conducted
over a significant period. New business entrants in general
were found to have failed or under-performed because of

- Poor or non-existent management skills

- Inability to manage adverse external impacts
occurring in the business environment such as rising
inflation & interest rates,
- Insufficient capital, and
- Resistance to accepting the advice of others.

In the tourism industry similar trends can be noted which, as such, does not set the tourism
entrepreneur apart from any other entrepreneur. New tourism entrepreneur entrants were found
to have no formal business skills. No management background, insufficient capital and no prior
industry experience.

In concluding a literature review in their research, McKercher & Robbins (19998) identify lack of
skills as a major impediment for tourism entrepreneurs. While many of these writers emphasize
particular issues the consensus of opinion is that the key to small business success or failure
lies with the quality of management skills and knowledge of the owner/operator. Although there
are clearly factors which lie outside the immediate control of small business managers, well
informed and skilled managers can cope with and anticipate the impact of these factors. It is
apparent that small business will not successful simply because the owner/operator is good at
the core activity…small businesses need to be much more sophisticated in the way they are
managed (McKercher & Robbins, 1998, 28)

What may be different, however, is that the picture for tourism business entry suggests that
tourism entrepreneurs consistently develop their business with minimal strategic planning and
their mediocre performance is believed to be an outcome of lifestyle choice. Leiper & McGibbon
(2001) acknowledge that indicators of failure depend on the aims of the entrepreneur in
question which, as seen earlier, in tourism are not always related to generating a profit.

Although strong lifestyle motivators, such as social interaction with visitors and living in an
aesthetic setting, permeate business performance in tourism start-up, it is necessary to proceed
with a working definition of business failure. Collings, Taylor& Barrile (1994), cut to the chase by
suggesting that failure occurs where the decision to cease trading is not taken willingly by the
operator, but is forced upon them because for whatever reason they have failed to generate a
large enough surplus to meet all their operating costs.
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To increase our understanding of the concept of tourism entrepreneurship and related business
behaviour, in particular tourism business failure, the afore review of the tourism literature on
tourism entrepreneurship in a range of foreign and Australian settings was combined with a
series of in-depth interviews (Hollick 2003) conducted with six key stakeholders representing
tourism industry manages and small business advisory and management services in Victoria,
Australia.

Tourism Enterprise, Entrepreneur and Entrepreneurship

Tourism enterprises refer to the different forms of tourist related business ventures permitted
within the National Constitution. Like any other enterprise, tourism enterprises are also business
ventures having similar preparative principles, but working on a very wide scale.

Sinclair and Stabler (1997) have defined the tourism enterprise as “a composition of products
involving transport, accommodation, catering, natural resources, entertainment and other
facilities and services, such as shops and banks and other tour operators”.

A ‘tourism entrepreneur’ may be defined as a person or a group of persons producing and

managing tourism products. In this process the entrepreneur must have the commonly
prescribed entrepreneurial traits along with service sector specialties.

As revealed by Shaw and Williams (2002), the service sector specialties involve two
fundamental objects: “One concerns the commercial structure of the industry (especially the
dominance of certain activity components and ownership groups), while the second relates to
an underding of the general organization of economic power structures.”

AS regards the definition of tourism entrepreneurship, we believe that the most useful and
convincing way to define tourism entrepreneurship is to establish its congruence with
entrepreneurship it has emanated from.

Accordingly, tourism entrepreneurship can be defined as the professional application of

knowledge, skills and competencies and or of monetizing a tourism related new idea, by an
individual or a set of people by launching an enterprise de novo or diversifying from an existing
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one (distinct from seeking self-employment as in a profession or trade), thus, to pursue growth
while generating wealth, employment and social good.

In ither words, it embraces all sorts of activities involved in creation and operation of a legal
tourism enterprise. A legal tourism enterprise excludes all forms of tourism or tourism like
activities which are against the generally accepted laws of the land. For example, in India,
wildlife hunting, flesh-trading (prostitution), drug trafficking, etc. are considered illicit and illegal
and hence, do not fall within the purview of tourism enterprises.

Kindly check the video link below for some ideas about Tourism Enterprise Development
Programme - Innovation and Entrepreneurship

VIDEO GUIDE:
Please check the video guide below of ‘Tourism Enterprise Development
Programme - Innovation and Entrepreneurship’
https://www.youtube.com/watch?v=-LU-G523yaA

Travel and Tourism Entrepreneur

Travelling and tourism can be considered as one of the best businesses in the contemporary
world. The ever increasing need of tourism and travelling has made this business low risk and
successful because people from all over the world travel and arrange tours. Moreover, tourism
is the most growing business and high revenue generating source for some countries like
Malaysia, Thailand, America and Australia. Every business is determined feasible or not based
on the calculations or the risks in that particular business. When we talk about business of
tourism and travelling, very low risk factor is involved. Individual which want to initiate the
tourism business with an appropriate level of information and interest can generate good
revenue with minimum recourses, The profit margins in travelling and tourism is generally high,
and it is the most feasible business for investors. The history of travelling and tourism is very
old. There are hints of ancient travelers who travelled across the world. Though at times the
recourses were not sufficient. However in the present day world, with the assistance of travelling
medium tourism facilities and technology, the risk factors are minimized. Moreover, the
individuals interested in the business can get good profit just by organizing and managing a trip
plan.

Kindly check the video link below of perspective of Entrepreneurs in T&T Tourism
Industry

VIDEO GUIDE:
Please check the video guide below of ‘Entrepreneurs in T&T Tourism
Industry’
https://www.youtube.com/watch?v=lICnHtg5Axg

Qualities in the Travel and Tourism Entrepreneur

Travel and tourism entrepreneur ship are based on certain influencing factors. These factors
can be called the qualities which should be present in a good entrepreneur. Among them are
the knowledge, leadership and management skills, the awareness of new technology,
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information about the most appealing tourism and travelling and tourism business is not only
about investment and revenue. It is more related to interest and creativity. Interest gives us an
opportunity to peep inside the industry and creativity gives us an edge to prepare schedules and
travelling packages for the clients. A good entrepreneur will always look for the needs and
demands of the customer. Moreover, he will ever try to adjust his offer accordingly (Kucherawy,
2002, http://www.gaebler.com/From-Travel-Industry-job-to-TravelEntrepreneur.htm.). Besides
any successful entrepreneur will be good enough at marketing. with his business skills, he can
win the hearts and minds of the client age. In the long run, these clients will come back to him,
resulting in the growth of his business. More precisely, a good entrepreneur is a multi skilled
individual with the best command on business tactics and the need of the customer.
Subsequently, best tourism entrepreneur must have the required information about the
launched packages in the market. What the competitors are doing and how his/her company
can compete with the deals that are already present in the market. It is right to say that a
travelling and tourism company has to be very vigilant, cooperative and linked under the
supervision of a skilled entrepreneur.

Development of Entrepreneurial Enterprises and Significant Influential Factors

In order to develop an entrepreneurial enterprise certain initial steps are highly important.
Among them are the global trend of tourism business, local market saturation levels, targeted
business domain, appropriate modes of marketing, social contacts, awareness about the global
changes in the business of travelling and tourism, the creativity levels while organizing the
business deals and the appealing promotional deals.

Global Trend of Tourism Business

The foremost step in developing an enterprise entrepreneur should have deeply observed
global trends of tourism. Which country do people prefer to go, and at which rates or packages?
Moreover, he should try to reorientate him/herself accordingly. For instances the events of
Christmas or New year are the best examples. These festivals are celebrated all over the world.
Now a smart entrepreneur should notice the general orientation of traffic, or in other words,
where people want to go on Christmas or New Year? Secondly, within the country what are the
most probable sights which can be targeted for tourism and travelling. Moreover, travelling and
tourism unlike many other businesses, is a whole year business. There is no particular time of
decline in business. No matter the global economy is decreasing or increasing the individuals
travel. The main reason can be the dependency of some countries. There are countries, which
rely on the business of travelling and tourism. Therefore, it is very important to update yourself if
you are functioning as an entrepreneur of any travelling enterprise.

Kindly Check out some of the Trends in the Hospitality and Tourism.

VIDEO GUIDE:
Please check the video guide below of ‘TOURISM MATTERS | Episode 7:
Trends on Tourism and Hospitality’
https://www.youtube.com/watch?v=cDmOVa9Iwjg

Local Market Saturation Levels

The local market saturation is one of the important elements, which can minimize the business.
If in your area there are several companies, which are established that it may be hard to
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survive. Moreover, to compete with the pre-established company is a difficult task. It becomes
harder if your funds are limited. Saturation of business can be categorized into levels. For
instance, if your funds are limited. Saturation of business can be categorized into levels. For
instance, if you are functioning in a place with companies dealing in travel and tourism, you
should go for a targeted domain for better outcomes. It is wrong to target the most famous
companies in the initial levels. Moreover, the company should try to focus on the detailed study.
What other companies (the real competitors not the highly established ones) lack. After detailed
study, we can have an idea that what other companies lack and what are their strong points.
Based on this survey we can establish a work plan focusing on the areas of weakness in the
market. Moreover, the quality standards and meeting deadlines and arrangement requirements
also enhances the repute of any particular company in case of saturation. If you are initiating a
business in a hub, it is important to consider , that if they do not capture the needs and
confidence of the client next time he/she will be taking assistance of some other company.
Therefore, the best thing that should be done is to satisfy the customer for the propagation of
the business.

Targeted Business Domain

The company should focus on the target domain. The targeted business domain should be
easily coverable. Moreover, it should be flawless. If you cannot try to win the market dealing in
Europe for instance, you should focus on some other areas which that company lacks and with
flawless management and attractive packages one can win the trust of the client and make
him/her to be your regular customer. This is important to state that the targeted business
domain can act as a vital source of marketing.

Modes of Marketing
The selection of appropriate modes of marketing is very significant factor. In some cases when
you are going to target your primary services the selection of appropriate marketing technique
can boost the business. For instance, selecting the medium of marketing, based on resources is
important. Either you select the printing medium, or electronic medium, the decision should be
taken according to the resources.

Social Contacts
Social contacts also play a vital role in development of a business
The contacts with the business community and clients can act like an effective marketing tool.
Moreover, the social contacts can also assist in generating several resources regarding the
promotion of business.

Awareness about the global changes in the business of travelling and tourism
Some regional accidents or terrorist attacks sometimes, influence the travelling business. The
extent of business decrease within no time and the tourism industry may collapse. However,
with the alteration in targeted sites can be helpful to sustain the business. For instance after the
attacks of 9/11, any tourism company should re-orientate its services to some other sites like
national tourism or to the sites which are safe for travelers and tourisms.

Appealing promotional packages

The promotional packages either for tourism if remain successful to grab the attention of the
client age, can boost the business. The attractive travelling packages along with the best
facilities can be a vital tool for an entrepreneur to run the business even in hard conditions..
Therefore, it is very important to organize the tourism packages based on the requirements of
the tourists. Moreover, it is very important to organize the tourism packages based on the
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requirements of the tourists. Moreover, it is the duty of a successful entrepreneur to assure the
best quality to the clients.

Business Start-up Plan

There are several significant steps involved in starting a business. The foremost step prior to
establish any business is the feasibility report for this project. One should determine initially that
either this business is suitable or not in the coming times. The detail of major steps is given as
under market reconnaissance and feasibility analysis.

Market reconnaissance and feasibility analysis

These steps are taken before the establishment of the business and are considered the most
significant elements of an effective business plan. These steps deal with detailed investigation
of the existing business and the selection of suitable initial components. In the instance, these
steps may involve the name of the travelling agency, selection of place, distance from the main
hub, products and services other companies are giving, drawbacks in the enterprises we will be
dealing with the future and many more like that (Lohr, 2002,
http://www.myownbusiness.org/s2/).

Financial Analysis and Capital Calculation

Every business needs some initial capital to start up business. It should be determined earlier
what is the size of business should be and all that will be dealt with. For big business we need
big financial support and vice versa. The approximated values and calculations about the size of
the business and the fields we will be dealing in must be calculated earlier. The subsequent
step deals with the financial arrangements. It is preferable to initiate the business with less or no
financial support which is interest based. However, subsequent the calculations of site,
members, and services, the financial arrangements should be taken into account. Investments
should welcomed and investors are guaranteed success. Moreover they should be satisfied that
investing in their company is the best investment opportunity (Bellis 2010,
http://inventors.about.com/od/businessplans/a/business_plam.htm).

Agenda of the company

The agenda of the company is the main element which boosts the business. The agenda is an
accumulation of aims and objectives along with the success targets. The agenda should be very
clear and appealing for investors who want to invest in the company. Moreover, the agenda is
the backbone of any business. In case of tourism and travelling agency, the importance of
agenda cannot be ignored. It may be used as a marketing tool if it is promising. The agenda
should not be altered in the later stages of the business. Therefore, it is very important to
compose all the aims and objectives which the company is looking forward to in the coming
times.

Objectives of the business

The objectives are determined as per agenda of the company. On the very basis level, they can
be either long term or short term. Both the objectives are equally important and assist business
to sustain a good profile in the market.

Short Term Objectives

Short time objectives are generally much more target based compared to the long term
objectives. They are in general include the efficient and potential degrees of business at the
coming time. Mostly the time-span is calculated, it can be a year or six months. The short term
objectives are mainly used as a technique to attract investors. Moreover, these objectives can
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be oriented to cut down the loans and other financial liabilities required by the company on
marketing and establishing the workplace in the early stages of the business.

Long Term Objectives

Long term objectives mainly deal with spreading the business and turning into a high profile
company. These objectives are plans of five turning into a high profile. These objectives are
plans of five or ten years. Long term objectives may include additional features in the business.
Moreover, they may be dealing with spreading business nationwide or even internationally.

Appropriate Targeted Marketing Techniques

Appropriate marketing techniques can be applied on targeted client. These techniques can be
either physical or virtual. The virtual techniques can be cyber advertisements and use of internet
for floating the advertisements allover the internet. The physical marketing techniques are
frequently in the form of print based advertisement These techniques are highly, effective to
grab the attention for the national tourism and travelling enterprise. Services and quality
assurance services and quality assurance techniques also have a major role in the company’s
rise. The company dealing in several fields differs from a company who is an expert in a couple
of fields. Thus quality assurance to the client age and investors also contributors in spreading
the business ad targeting the client age.

Conclusion
Travelling and tourism, is a growing industry and feasible enough to be taken as a business.
With the appropriate level of knowledge, planning and targeting the client age, it can be a good
source of generating revenue. Moreover, it is less risk oriented compared to other business
forms. If instructions followed in the developmental stage along with the influential elements
listed in initiating the business plan, it can be a permanent source of income. With slight to no
modification, the appealing packages and decent marketing techniques can grasp the interest of
customers and the business can spread with smart marketing tools.

DISCUSSION QUESTIONS:

1. What factors encourage the proliferation of smalls firms in the tourism industry?
2. Discuss the global trends of the tourism business?
3. Explain what is a tourism enterprise. Give examples.

REFERENCE/S:
BOOK SOURCE: Entrepreneurship in Tourism & Hospitality by: Dr. Rene D. Osorno and Dr.
Grayfield T. Bajao