Michigan State University Extension
Tourism Educational Materials - 33510050
06/06/02
Getting Started in a Recreation or Tourism Business
George F. Smith, Professor, Agricultural Economics and
Resource Development
Many people who enjoy the out-of-doors are attracted to a
recreation or tourism business. They see it as a way to
do the things they like to do in a setting they like,
while making a good living and enjoying the freedom of
being their own boss. Unfortunately, like any small
business, a recreation enterprise requires careful
planning and skilled management to be successful. Most
recreation services do not command high prices and
require large numbers of customers to produce a
reasonable return. The season is often short. Competition
from similar private businesses and public facilities
(which may be subsidized by tax dollars) can be intense.
Also, a small business can be very time consuming. For
instance, a person attracted to the marina business
because he or she enjoys boating and fishing, may be far
too busy to do either one as a boat dock owner. This fact
sheet outlines some things to consider before starting an
outdoor recreation or tourism business.
What Business?
The owner/manager, available resources and the market
determine the kind of business.
Owner/Manager: Your skills, traits, interests and
available time should be carefully considered from the
start. Equally important are your goals and objectives.
Questions to ask yourself include:
* Do I want a part-time business or a full-time
enterprise?
* Will it be my primary source of income or a supplement
to other income?
* What is my income goal?
* Do I want to teach a sport or skill?
* Do I desire to protect an endangered plant or animal
species or to preserve a unique environment?
* Would I like to deal with a small number of like minded
clients or large numbers of the general public?
* Ideally, how many customers would I like per day or per
week?
Write down your goals and objectives. This forces you to
be specific and helps you organize your thinking. It also
gives you something concrete to share with friends,
family and potential investors. If you do start a
business, written goals also give you a yardstick to
measure your progress.
Resources: Success in any business depends on a suitable
product. Most forms of outdoor recreation depend on
natural resources, but resources can be exchanged. Thus,
both natural resources and financial resources should be
examined.
A natural resource inventory might include site size,
topography, soil type, vegetative cover, adjoining lakes
or ponds, hunting and fishing areas, scenic views and
caves. A separate evaluation should be made for each
business being considered since the assessment will
change with the intended use. A good trout fishing stream
might make a poor swimming area, for instance.
A financial resource inventory should include both the
capital available and a realistic estimate of the
financial requirements of each business being considered.
Market: The available resources determine what you have
or can develop that is saleable. The next questions are
who will buy your product and how much (or how many) can
be sold. The key concern is: if you establish a high
quality, well managed recreation business, will there be
enough customers to provide acceptable profits? Your
goals, of course, determine what is an acceptable profit
level.
Location and accessibility are important market elements.
Unlike other businesses that ship their products to their
customers, the clients of a recreation enterprise must
come to the business site. The influence of location
depends on the particular business. For instance, people
who travel hundreds of miles fora ski weekend or a week
at an oceanfront resort will not drive far for an
afternoon of swimming or a picnic.
What About the Surrounding Area?
Road networks and traffic patterns are important. The
population centers linked to the area by major highways
often determine a firm's market area and potential
clientele. A business located on a well traveled main
highway can anticipate a good deal of transient or
drop-in customers. A business located at some distance
from major highways becomes more of a destination point
for its customers. These differences influence business
development and advertising plans.
Nearby attractions and facilities should also be
examined. In Tennessee, these may include state and
national parks, forests, wildlife refuges, historical
attractions, hunting and fishing areas, geological
formations, community and industrial attractions and
other private businesses. These attractions can draw
potential customers to the area. Also, it may be to your
advantage when designing your business to complement
established enterprises or to fit the general theme
established by existing attractions.
Duplicating established enterprises should be approached
cautiously. It is possible to divide customers between
similar businesses until all become unprofitable. On the
other hand, a duplicate business may be successful if
demand is high. For instance, a private campground
located near a state park with camping facilities may be
profitable if the park can-not meet the demand for
camping. The quality of the facilities available, the
services offered and the level of management are
especially important in the success of duplicate
enterprises. Targeting a specific client group is also
important. For example, sites developed for large RVs, an
attractive recreation hall, swimming pool and other
amenities may make a private campground more appealing
than a state park to certain segments of the camping
public.
Finally, neighboring communities can play an important
role. Some factors such as solid waste disposal services,
police and fire protection contribute directly to a
business. Other factors like shopping facilities and
community attractiveness affect a business primarily
through their influence on potential customers. The
attitudes of local people toward recreation businesses
and tourists can also influence the success of your
enterprise.
Have You Studied Feasibility?
Learning as much as you can about the proposed business
is the best way to begin a feasibility study. Visiting
similar businesses is a good way to gather information
and insights. Questions to keep in mind during these
visits include: What is their layout and design? What do
they sell? How do they sell it? What prices do they
charge? What is unique about this particular enterprise?
What are their problems? What do I like about this
operation? What would I change? Look at these firms both
as a customer and as the prospective owner of a similar
enterprise.
If you have limited business experience, you might
consider getting a job in the recreation industry for a
season. This can be an excellent way to learn. It can
also help you decide if you really want to own a business
in this field.
Other possible sources of information include business
and trade associations, state and federal agencies and
local and regional libraries. Workshops and training
programs are offered by many of these groups.
The economic feasibility of the enterprise should be
evaluated when all available information on operations,
financial requirements and the market has been gathered.
This estimate of costs and returns can be as simple or as
elaborate as circumstances require. It must include the
best possible expense and income information to help in
making the final decision.
Expense items might include construction costs, equipment
costs, depreciation, taxes, interest on loans, insurance,
employee wages, costs of supplies for operating and
resale and advertising expenses.
Income sources might include supply and souvenir sales,
fees, charges and equipment rentals.
The difference between total income and expenses is net
income-the return to your labor, management and
investment. If the return is too small, consider possible
ways to adjust your plans. You may also want to
reconsider your decision to start this kind of
business.
Use realistic, conservative estimates in the feasibility
study. If a profit cannot be shown on paper, there is
little chance the business will make a profit in
practice.
A long-range plan can be prepared as part of the
feasibility study. Long range planning provides for
business start-up and later growth. Many enterprises
begin with a small, economically sound management unit
and expand as growth can be justified.
During the initial period, potential customers learn
about the enterprise and the owner learns about the
business and the clientele. The long range plan guides
progress to the complete development of the business by
detailing the initial enterprise and outlining the
elements to be added in an orderly, step-by-step fashion.
It could include a site map or blueprint keyed to a
description of the facilities and an initial timetable
for development. The preliminary long range plan is
adjusted to the actual growth in business volume and need
for added facilities.
Ingredients of Success
No guaranteed formula for success exists. Business
experts agree on several important ingredients in the
success of a recreation or tourism business. These are
not absolute necessities but you should consider possible
ways to compensate if one or more is missing.
* The owner is a successful businessperson or is willing
to learn and use the principles of business management.
* The owner, manager and employees like people and
willingly meet customer demands.
* The business meets unsatisfied market demands and
charges rates commensurate with the quality of facilities
and services offered.
* The owner's attitudes and financing permit a 2-5 year
development period to work out problems in operation,
evaluate the market and become established.
* After preliminary development, the business generates
enough income to provide for further improvement or
expansion as well as a satisfactory return to the owner.
* Financial reserves and insurance are sufficient to meet
unexpected problems or needs.
* Advertising and promotion are effectively used.
* The owner is concerned with environmental quality and
the appearance of the property. Site use is in harmony
with nature.
* The owner continually tries to improve his or her
management skills and keeps up with business trends and
the changing recreation market.
* If the enterprise is a part-time or sideline business,
its location, operation and technical demands fit into
existing operations. It also complements and expands the
sales of the other enterprises.
Summary
Developing a successful recreation or tourism business
requires a great deal of thought and effort. The time,
money and energy spent in examining the feasibility of an
enterprise will pay greater dividends than any other
preliminary activity. The time and effort spent on this
examination should increase in proportion to the size of
the proposed business. Considerable assistance is
available from public agencies and private consulting
firms. However, you will be better informed about the
business and better prepared to manage it if you
personally do as much of the feasibility study as
possible.
The actual business will be determined by your interests
and ability, the resources available to you and the
market. When a reasonable business plan has been
developed, give it time to mature. Always be alert,
however, for possible adjustments in your enterprise,
particularly during the preliminary period.
This information is for educational purposes only. References
to commercial products or trade names does not imply
endorsement by MSU Extension or bias against those not
mentioned. This information becomes public property upon
publication and may be printed verbatim with credit to MSU
Extension. Reprinting cannot be used to endorse or advertise
a commercial product or company.
This file was generated from data base TD on 09/30/03.
Data base TD was last revised on 06/06/02.
For more information about this data base or its contents please contact
alexande@msue.msu.edu . Please read our
disclaimer for important
information about using our site.