A Work Project presented as part of the requirements for the Award of a Masters Degree in Management from the NOVA - School of Business and Economics Hugo Alexandre Oliveira, #784 A Business Plan under supervision of: Professor Manuel Forjaz 7th January 2013 A Business Plan for Indie Campers Contents 1. Overview ................................................................................................................... 3 2. Tourism Environmental Context ............................................................................... 4 2.1 Market, Definitions and Profile Analysis ............................................................... 5 3. Macro e Micro trends ................................................................................................ 6 3.1 Macro trends ........................................................................................................... 6 3.2 Youth and Student Travel Market........................................................................... 7 3.3 Micro Trend: Campervans ...................................................................................... 7 4. The Market Analysis ................................................................................................. 8 4.1 Market Needs .......................................................................................................... 8 4.2 Campervan International Benchmark ..................................................................... 9 4.3 Itinerant Market in Portugal .................................................................................. 10 4.4 Competitors and Prices ......................................................................................... 11 4.5 Automobile and Rent a car legislation .................................................................. 12 4.6 Market Research ................................................................................................... 14 4.7 Seasonality ............................................................................................................ 15 4.8 Target Market ....................................................................................................... 16 5. Product and Service Offering .................................................................................. 17 5.1 Campervan: Model and Transformation ............................................................... 17 5.2 Services and Extras ............................................................................................... 19 6. Business Model ....................................................................................................... 20 6.1 Vans Purchase ....................................................................................................... 20 A project by Hugo Oliveira under the supervision of Professor Manuel Forjaz 1 A Business Plan for Indie Campers 6.2 Insurance ............................................................................................................... 21 6.3 Infra structures and distribution ............................................................................ 21 6.4 Revenue Model ..................................................................................................... 22 6.5 Partnership and Team ........................................................................................... 23 6.6 Market Communication ........................................................................................ 24 6.7 Suppliers ............................................................................................................... 25 7. Financial Estimations .............................................................................................. 25 8. Implementation and Funding Strategy .................................................................... 26 9. Bibliography ............................................................................................................ 27 A project by Hugo Oliveira under the supervision of Professor Manuel Forjaz 2 A Business Plan for Indie Campers 1. Overview Indie Campers is a touristic services startup project, aimed to replicate in Portugal an international successful concept of Campervans rental, for the youth travel market. This opportunity is a conjugation of three relevant factors: the lack of specific and segmented alternatives for itinerant tourism in Portugal, the unexplored potential of the Youth and Backpacker tourist market and new relevant world trends and innovations in tourism, such as low-cost campervan rentals. First I will study the tourism in Portugal, understanding its strategic relevance and contribution for the national economy, including some relevant definitions, profiles, quantitative and descriptive data. Then, the main trends and market opportunities regarding this specific topic will be discussed, highlighting relevant benchmark trends, potential target market, competitors‟ analysis and, lastly, a legislation and seasonality overview. Further on, I will present what the company intends to offer, describing the services and all the products it incorporates. To support the potential of this opportunity, I developed an international survey with 476 respondents. The results of this research will be discriminated all along the document, however with special incidence in this stage. After that, with the business model, I will elucidate how I intend to position Indie Campers, and describe the critical factors of the business. To conclude, financial estimations based on the average return for this sector, will be conducted in order to determine the occupancy rate needed to reach the breakeven point. Since the author of this document intends to make the project real, a brief implementation plan and funding strategy will also be included. A project by Hugo Oliveira under the supervision of Professor Manuel Forjaz 3 A Business Plan for Indie Campers 2. Tourism Environmental Context According to the World Tourism Organization (UWNTO)1, on 13th December 2012, one billion tourists, for that same year, arrived on their destination somewhere around the globe. Worldwide tourism keeps growing2, and its relevance for countries like Portugal, is clearly expressed in its positive impact on economy. The CEO and president of World Travel & Tourism Council (WTTC) confirmed this statement: “Few countries have a greater dependence on Travel & Tourism than Portugal. During 2012, our industry will sustain directly and indirectly almost 18% of all jobs and contribute 15% of Portugal's GDP”3. Its high touristic services competitiveness4 represents 43% of total exportations of services in Portugal and its resources had been recently awarded with 6 Oscars of Tourism5, including for “The best beach destination in Europe”. In 2012, Lisbon was considered the “best value for the money” destination according to the Trip Advisor‟s6 ranking for the same year. Because of tourism relevance, the Portuguese government7 elected it a strategic priority and elaborated a national strategic tourism plan (PENT)8. The main purpose of the document is to encourage the development of innovative products through four differentiate factors: “Weather and Light”; “Heritage, Culture and Tradition”, “Hospitality” and “Concentrated Diversity”. 1 One Billion Tourists: One billion Opportunities, UNWTO, 6th November 2012 2 The number of tourists in the world was 533 million in 1995 and is expected to reach 1,6 billion in 2020. Source: UNWTO Tourism Highlights 2010, UNWTO, 2011 3 Open letter on travel and tourism, David Scowsill, 6th December 2012 4 Portugal is placed 18º regarding its competitiveness in the tourism sector. Source: The Travel & Tourism Competitiveness Report 2011, World Economic Forum, 2011 5 World Travels awards, 6th October 2012 6It is considered by tourists to be the biggest and the most influent touristic website, entirely based on the tourist’s opinion. 7 Resolução do Conselho de Ministros n.º 97/2003, 1st August 2003 8 Plano Estratégico Nacional do Turismo, Ministerio de Economia e da Inovação de Portugal, 2007 A project by Hugo Oliveira under the supervision of Professor Manuel Forjaz 4 A Business Plan for Indie Campers 2.1 Market, Definitions and Profile Analysis In 2011 Portugal received9 around 14 Million tourists, out of which 7.432 million international, representing a total of 66% of the total touristic accommodation used in the country, distributed essentially in Lisbon (29%), Algarve (21%) and Porto (19%). There were four, the main international emission markets: UK, Spain, France and Germany. The majority arrived by plane in Lisbon, Porto and Faro, where are situated the three international airports with more traffic10. Temporary accommodation services are legally described as touristic ventures11. Regarding Itinerant tourism12 rental practices, only “Caravanning and Camping Parks” are considered ventures and the activity itself is regulated by Rent a Car Legislation13. According to a specialist14, this itinerant tourism activity encompasses three types of touristic products15: “Cultural and Landscape Touring” (niche market); “Sun and Sea” (Mass market) and “Nature” (Mass and Niche market). According to PENT the profile of the tourist in Portugal is changing: The demand for diversified experiences is growing (new products and new travel motivations); the number of organized trips is decreasing and the “Do it yourself” is increasing. The same document refers that because of the disintermediation between supply and demand there are some relevant modifications in the business model, with an increasing relevance of the Internet as a substitute of travel agencies. 9 Turismo de Portugal, Os resultados do turismo 2011, 2012 10 Relatório anual de estatisticas de trafego, ANA, 2011 11 Decreto-Lei n.º 275/93, 5th August 1993 12 It is a kind of tourism based on the use of a vehicle with capacity to travel and sleep. It allows tourism decentralization and enables its users to visit and discover places, where sometimes there are no traditional hospitality services available. 13 Decreto-Lei n.º 181/2012, 6th August 2012 14 Professora Maria João Gomes, Turismo de Portugal 15 PENT predicts 10 different types of touristic products A project by Hugo Oliveira under the supervision of Professor Manuel Forjaz 5 A Business Plan for Indie Campers 3. Macro e Micro trends 3.1 Macro trends International tourism demand is expected to continue growing16 during the following years. Its expansion and diversification will reinforce old and stimulate emerging destinations, rising this way new costumers‟ profile and trends. Tourism experts indicate the following main trends:  Rise of the internet (represent more than half of the bookings17);  The power of the review and Social media18;  Asia‟s rising middle class relevance in travel industry19;  Increasing of the second home tourism and the market for medical tourism20;  Tourism services opportunities for Youth and Student Travel market21;  Low cost services reinforcement such as Airline companies and Hostels. Regarding the low cost services, Portugal has verified a significant growth and consolidation of this trend. In 2004, this category of airlines represented22 10% of the total market, but in 2011 its relevance worth around one third of all demand. The airports of Porto and Faro, the second and third with more affluence, offered mainly low cost flights. According to Hostelworld ranking, the most relevant online hostel booking website, Portugal had in December, 5 hostels in the world Top 6. Lisbon is even considered the city in the world with the best Hostels. The average number of beds occupied growth in 2011, 18% in Lisbon and 30% in Porto. 16The number of international tourist arrivals worldwide is expected to increase by 3.3% a year on average from 2010 to 2030. Source: tourism highlight 2012, UNWTO, 2012 17ITB World Travel Trends Report 2011/2012, IPK International, 2011 18World Travel Market Global Trends Report 2011, Euro Monitor International, 2011 19ITB World Travel Trends Report 2011/2012, IPK International, 2011 20Tourism trends for Europe, European travel commission, September 2006 21Youth Travel Matters, UNWTO by WYSET, 2nd June 2008 22Relatório anual de estatisticas de trafego, ANA, 2011 A project by Hugo Oliveira under the supervision of Professor Manuel Forjaz 6 A Business Plan for Indie Campers 3.2 Youth and Student Travel Market The traditional youth market age, which used to be 18-24, has now changed to 16-3023, increasing the relevance of this market “as more young people have begun to travel more frequently and over greater distances.”24 Between the year of 2000 and 2010 the number of world international arrivals of this specific segment rose from 136 million to 187 million, representing 20% of all the world tourism market and total recipes of US$165 billion. These tourists are pioneers and trendsetters and they stay in average four times longer than another tourist. These trips usually have specific purposes, which led to the developing of new concepts and niche markets such as “specialized youth accommodation, work experience, volunteer, travel, „au pairing‟, language learning and educational travel.”25 Youth tourists do not see themselves as a tourist26 and significant part of them travel to locations outside major gateways27. Normally they stay in hostels28. Price is the most important purchase decision factor29 and the Internet and social media are the main channels used for bookings and advisory. 3.3 Micro Trend: Campervans A campervan can be defined as a van, station wagon or even a car transformed into a basic travel home in a way to provide transportation, cooking equipment and sleeping accommodation30. The concept got famous in 1950 with the introduction of the VW Transporter. Since then, different versions were used for itinerant tourism 23Industry Review no.1: Youth and student travel market, WYSE Travel Confederation 2011, 2012 24Youth Travel Matters, UNWTO by WYSET, 2nd June 2008 25Youth Travel Matters, UNWTO by WYSET, 2nd June 2008 26Young people like to develop their own identity and travel style – only 23% view themselves as tourists. Source: WYSET 27Over 46% of Youth and Student Travel segment travelled to locations outside major gateway cities in 2007. Source: WYSET 28Hostels continue to be the most important youth accommodation product, hosting over 60% of Travellers in 2007 compared with just over 50% in 2002. Source: WYSET 29Price is still the most important factor in making purchase decisions – cited by 94% of young people in 2007. Source: WYSET 30 There is a difference between campervan and motorhome. Motorhome is basically a purpose-made cabin on the back of a much larger chassis frame. A project by Hugo Oliveira under the supervision of Professor Manuel Forjaz 7 A Business Plan for Indie Campers proposes. Campervans low cost rentals got famous in UK, USA, New Zeeland and Australia, where specialized firms operate with considerable fleets of at least a thousand vehicles. Based on my experience in the tourism sector31, I can say there is an increasing demand by the segment “Youth and Student travel” tourism for this service in Portugal. According to one of the main players in Iberia, this campervan rental market “is starting growing now and in some season‟s periods it is already facing a global demand four times bigger than the offer available”32. Also, analyzing relevant trends and innovations, “All in one Camping Vans”33 were considered one of the main references of the year 2012, in a trend reference website, with a classification of 8.4 out of 10 (17.845 votes). 4. The Market Analysis 4.1 Market Needs The previous analysis leads to the conclusion that presently the main business opportunities in Portugal lie essentially in the tourism sector, which still has a very high potential to be explored. Recent modifications of tourists‟ profiles and new relevant trends show new products for niches and market segments. The product trend, Low cost Campervan rentals, seems to be a relevant solution for the segment youth and student travel. In some countries, these rentals are already an established and successful solution for this target. Thus this project is aligned with strategic priorities for touristic products in Portugal and based on my experience I can say there is a demand for it. Besides, being a low cost and flexible product, campervans allow tourists to reach locations outside major gateways and at the same time lies in the sphere of the hostels, popular 31It is the result of one year experience as a Front Office Manager in a Hostel. 32 Mr. Bill, CEO of Surf-Cars 33 Trend hunter website, http://www.trendhunter.com/trends/comfortable-doubleback A project by Hugo Oliveira under the supervision of Professor Manuel Forjaz 8 A Business Plan for Indie Campers products for the target in reference. In order to better understand the opportunities and potential of this project, an international benchmark will be conducted; market competitors and prices will be analyzed, as well as rent a car and automobile legislation. 4.2 Campervan International Benchmark Since they represent some of the best practices in this field, the campervan tourism market of United Kingdom and New Zealand are described, In 2008, UK, which is the country that contributes the most for the number of tourists in Portugal, according to a study34, had in its own borders 17% of the tourism accommodation based on camping and caravanning trips. Taking in consideration only the class touring Caravan35, there were in 2009 about 19.14 million nights, which represents an increase of 16 % comparing with the previous year. This trend is a result of an increasing demand for budget accommodation, credit constrains and marketing strategy conducted by the industry. The profile includes 27% of users under 34 years old, the majority for the social classes AB and C1 and the Seaside is consider the main reason for a trip. The same document highlights music festivals, freedom, flexibility and green incentive as the main motivations for this type of tourism. New Zealand is a small country that annually receives 2.5 million36 of international tourists. Its natural constitution and difficulties to reach some touristic attractions, led to the development of the itinerant tourism in this country. Taking in consideration only Campervans and Motorhomes for rent, in 2011, the country had 11,539 registered vehicles, which represent an increase of 5% comparing to the previous year. This represents a potential of more than 4 million nights per year. 34 Camping and Caravanning: Why So Popular and is it Sustainable?, Siân Ellis, Jan 2010 35It includes motorhome and campervans 36 Tourism Satellite Account:2011, New Zealand government, 2012 A project by Hugo Oliveira under the supervision of Professor Manuel Forjaz 9