Finance and Funding in Tourism Sector - Case Study Example

Finance and Funding By Finance and Funding Finance and Funding in Tourism Sector Sources of Fundingfor Pubic Tourism Government Funding and loan programs There are various government grant programs at municipal, federal, or provincial level that fund public tourism project. In most cases, there exists a percentage limit, which a particular project can secure, and normally the funding needs to be secured prior to applying the funds. The public tourism sector selects tourism programs at local, provincial, and federal level, including the tourism sectors that support the cultural project sectors (Neill & Sullivan, 2013). Public Fundraising A robust fund raising campaign is a need of most public tourism projects. Generally, this includes the major financial gifts from certain foundations and individual. The success of the public tourism depends on the past record of securing the financial gifts, the community and personal commitment to ensure the project succeeds, and the affinity and capacity of those sectors within the tourism circle. Partnership Increasingly, additional public sources beyond the conventional public and private funds are needed. Creative and innovation thinking are required to identify how the interests and needs of other related parties can help the public tourism sector to meet its goals. Based on partnership, the public tourism will consider other organizations that could collaborate with and share costs for the tourism project. The sector might choose to co-develop with the companies, dividing, or sharing responsibilities to secure and manage the funds. Capital Financing Additionally, depending on the operating model of the sector, the sector ought for long-term debt. With the help of cost recovery model, the project needs to cover the operating cost in addition to principal repayment and some interest level. Sources of Funding for Non-Public Tourism Foundations Non-public tourism can source their funds through tourism program related investments. Rather than awarding grants, some of the foundation is able to set aside a certain percentage of their capital in form of loans to companies that are related to the objectives of their programs. This source of funding is high risk, but assuming the non-public tourism project is viable, then they will not have a rough time repaying the loan. In this form of funding, some interest level will be paid. Individuals Another source of fund for non-public tourism are individuals especially those that contributes to the sector as donors. The donor can be a possible source of funds. The non-public tourism need to be aware of the loan contractual terms and ensure that the terms are fulfilled, as the lenders are likely to be strong shareholders of the firm. Community Organizations In most cases, community organizations are in a position to place their loans on projects that will fulfill their program objectives, therefore, making them one of the viable sources of fund for non-public tourism. Banks Most banks have officers dealing with commercial lending whose responsibility is to offer loans. Depending on the previous relationship with the organization, they tend to have a lesser or greater degree of flexibility and interest in dealing with corporate allocation. The banks are normally concerned on the worthiness of the company to repay the loan and securities attached to the loan. When non-public tourism company related to the project has few assets, they will face challenges of securing the bank loans without other loan guarantees (Hines, 2006). Feasibility Report Executive Summary Syndicate Heritage and Artisan Company is a leader in the domestic tourism sector in the US. The company is normally concerned in selling handicrafts and cultural heritage products. The company product, are sold throughout the nation and maintain a superb reputation for quality and superb taste. The sales have grown in the past decade, but the growth rate has slowed. One key factor attributed to the slow growth marketplace shift is cultural heritage and artisan business has shifted online. The company has failed to host its e-commerce benchmark online; this has made the company to lose its customer to their rivals. Description of Products and Services The company wants to provide and create an online platform where it will create the existing products line for wider market. The company has limited its business to local people, thereby, making it not able to capitalize on the rising trend of sales online within the tourism market. To develop the international tourism, the company will market its cultural heritage and artisan products online. This will increase the company’s revenues and projections of its growth. This online sale will include the current products. Technology Consideration The technological capability of the firm will be upgraded to shift towards offering their products online. The customers will need simple ways of conducting online transactions where they will be able to buy the company’s products. The online functionality will be required to be integrated in the company’s website. The new online market will be considered to target the existing and the potential clients in the entire method such as loyalty discounts, email list, and promotional advertisement (“Tourism project feasibility guide”, 2009). Product/Service Marketplace Majority of Syndicate clients are returning customers and referrals from the present customers. Providing a convenient purchasing means for the products, the company is expected to retain its customers while carrying out their online marketing for their customers. The company will distribute their online handicrafts purchases via direct shipping from their local store location. This will enable the company to offer timely shipping and remove the warehouse from where their products will be stored and shipped. Such a facility will need a significant investment of $10M as well as maintenance costs and increased operation. Based on the anticipated projections, the company will ensure that the store locations maintain their inventories to satisfy the demand of their customers. Marketing Strategy The company will implement the emailing list of its customers to send their product promotions, sales advertisement, and other offering to clients who register with them. The company will also send their referral incentives to clients who refer their products to their family and friends. The company will also maintain database for their customers to determine their target geographical and customer groups (“Directory multilateral sources of financing for tourism development”. 2013). Organization and Staffing To successfully implement the program, the company will have to employ more staff. The company will employ the online sales manager and the online marketing manager. The online sales manager will identify the opportunities in sales and convert the opportunities to the actual sales. The person will report to the company’s sales director and will work in the company’s headquarter. The online marketing manager will lead the staff in marketing to identify the target customer markers and conduct online advertising efforts in maximizing the traffic to the market place of the company. The person will report to the company’s director and will work in the main office of the company. Schedule The cultural heritage and artisan online sales campaign will take 6months from the approval of the project to the launch of the platform. The company will also install high-speed internet and capability of web server. The following provides a schedule for the initiative. Time Description January 1 2015 Initiate the project February 1 2015 Meeting to kick off the project March 1 2015 Completion of the site design April 1 2015 Completion of online testing June 1 2015 Completion of beta testing of the site July 2 2015 Go Live with the launch Financial Projections The assumptions underlying the projections are that the projection of sales will remain unchanged and the milestones will be performed according to the schedule. Measure Year 1 Year 2 Year 3 Year 4 Year 5 5Year Total Projections of online sales $ 360,000.00 $ 430,000.00 $ 610,000.00 $ 800,000.00 $ 1,000,000.00 $ 3,200,000.00 Staffing Cost $ 160,000.00 $ 180,000.00 $ 200,000.00 $ 250,000.00 $ 350,000.00 $ 1,140,000.00 Insurance cost and projected material $ 90,000.00 $ 210,000.00 $ 140,000.00 $ 90,000.00 $ 170,000.00 $ 700,000.00 Additional IT hosting and maintenance $ 50,000.00 $ 70,000.00 $ 120,000.00 $ 50,000.00 $ 80,000.00 $ 370,000.00 Marketing Staff and Sales Training $ 160,000.00 $ 190,000.00 $ 280,000.00 $ 250,000.00 $ 300,000.00 $ 1,180,000.00 Contract for implementation, Build, and Design $ 100,000.00 $ 190,000.00 $ 180,000.00 $ 250,000.00 $ 700,000.00 $ 1,420,000.00 Total Additional cost for Sales $ 400,000.00 $ 260,000.00 $ 600,000.00 $ 350,000.00 $ 380,000.00 $ 1,990,000.00 Cash Inflow $ (1,000,000.00) $ 3,500,000.00 $ 4,000,000.00 $ 2,000,000.00 $ 1,000,000.00 $ 9,500,000.00 Sources of Funds for the project The project will source funds from foundations and certain individuals. The project will source their funds through tourism program related investments. Rather than awarding grants, the company will convince renowned foundation to set aside a certain percentage of their capital in form of loans to the company. This source of funding is high risk, but since the project is viable, then the company will not have a rough time repaying the loan. In this form of funding, some interest level will be paid (Holtz, 2013). Additionally, the company will source funds from donors. This will involve individuals especially those that contributes to the sector as donors. The project is aware of the loan contractual terms and ensures that the terms are fulfilled since the lenders are likely to be strong shareholders of the firm. The grievances of the stakeholders will be met by disposing the assets to meet their demands. Additionally, they will be paid bonuses for any delay payment in their dividends Reference Directory multilateral sources of financing for tourism development. 2013. Madrid, Spain: World Tourism Organization. Hines, T. I. 2006. Financing sources of income for public park and recreation departments [Rev.]. Ed. Arlington, Va.: National Recreation and Park Association. Holtz, H. 2013. 2001 sources of financing for small business. New York: Arco. Neill, J., & Sullivan, D. J. 2013. Sources of funds to colleges and universities, Berkeley, Calif.: [Carnegie Commission on Higher Education]. Tourism project feasibility guide. 2009. Queensland: [National Centre for Tourism?]. Read More