Entrepreneurial Venture Concept

Entrepreneurial Venture Concept

Vision and mission

Rameswaram group is an LTD construction and real estate company in India. The company has been in the market for more than 21 years. Rameswaram group prides itself on having already supervised and sold-out more than 14 projects commercial and residential both in the Dimond city of India, Surat. These projects made an immense contribution to the world by touching the lives of many Indians and promoting economic growth. The Rameswaram group company is run by my family since its inception. However, after graduating my university, I am going to take over the business. My vision for the company is to revolutionalize the real estate industry by providing customers the cheapest and the largest property by area in the market using the latest innovations available in the market. These affordable projects will help enable more people of lower-income brackets to become homeowners. My mission is to take the company multinational and diversify the company revenue chains by starting a motel chain overseas. Moreover, I see myself the right person to take over the company as I have grown up in the business and fully understand its dynamics. Moreover, my ideas are raw and innovative and I also have the education, knowledge, and understanding in this field.

Fig 1: Company Logo

Opportunity

In 2018, the global motel industry was valued at $638.2 billion. The amount is projected to increase by 4.50% to reach $893 billion in 2026 (John, 2019). The global pandemic may have reduced the profitability of the motels, due to the decline in the occupancy rates from 70 % to below 25%, but the market is expected to recover soon (IbisWorld, 2020).  Motels are commonly used by travellers and tourists for a short stay. Motels are ideal for numerous travellers due to their cost-effectiveness. The liberalization of visas in many countries has been a positive impact on the growth of the tourism industry. This has influenced the hotel market to adapt to measures of accommodating the tourists and travellers in transit. Consumer spending is also high in countries such as America and New Zealand, which has also boosted the accommodation market. The currency fluctuation, especially in the host nations has also increased tourism levels. Further, in the advent of social media, solo traveling has gained massive popularity thus increasing the need for budget-travel accommodation (John, 2019). These factors and trends have offered opportunities for profitability and further articulate the need for the Rameswaram group motels.

The Rameswaram Group motels will be located in California. California is one of the tourist preferred destinations in the U.S. In 2019, over 268 million tourists visited California (Easter, 2017). Also, the revenue from travel-related activities in that year amounted to $144.9 billion, which represented a 3.2% rise from 2018’s statistics. Moreover, the motels sold in the state increased by 1.1%, thus representing a high demand for the motels. The GDP from the state’s tourism activities was $84.6 billion, which is 2.5% of California’s GDP (Runyan, 2020).

Fig 2: Travel related revenue forecasts in California. Source (VisitCalifornia, 2019).

For the motels to fully dominate the Californian market and break-even within the first three years, pricing is critical. The average cost of a motel in California is between $45 and $150 per night, depending on the demand, as well as the location. I plan on having a base rate of $40 per night, which is $5 below the market price. This will help our motels gain a competitive advantage. Also, research has shown that most of the hotels are run down with facilities that are not working. I plan on ensuring that our newly constructed motels have paid a keen eye on details. The beds have to be comfortable and big enough. The rooms will be cleaned on a daily basis and clean bedding spread. The aesthetics of the room will be enhanced using good aeration, good lighting fixtures, plants, and some flowers. The supervisor will do a daily to ensure that all the fixtures are working and repair those that are not. The motels’ curb appeal will be enhanced by a well-lawned compound that has sitting areas and a play area for the kids. This will set us above the competition. Another gap that we will fill is in advertisements. Most of the hotels in California rarely market their premises. Our social media pages will be active and we will provide a website where clients can book directly for their accommodation. Finally, the company will have a mobile application that indicates available Rameswaram Group motels in their area and allows them to book from the comfort of their mobile devices.

On market segmentation, our main target market is tourists, travellers on transit, and hunters. Due to our low pricing, our motels are available for people of different income brackets. The motels also cater for all ages. The characteristics of the target customer personas are discussed below;

• Tourists

People looking to unwind for the summer by indulging in what California has to offer. The tourists may be traveling solo, in groups, or families. This target segment tends to book for many days.

• Hunters

California has one of the best hunting grounds. The hunting season will see our motels, which are conveniently located receive occupancies.

• Travellers on Transit

These are people who drop in for a night or two. A huge sign will be placed on the different routes where the motels are located and a few drop-ins are anticipated.

Business model

The model to be used is the Hotel Franchise Operating Business Model. Our value proposition is to build a global presence and grow into a leading brand with the lowest booking rates thus driving a loyalty effect among our clients and becoming a leader in motel performance. Our company will make money by charging a certain amount of money to the franchisee as part of the reimbursement cost of training the franchisee to run the business as well as the recruitment cost. The initial amount also covers the costs of the initial obligation agreements required in setting up the motels and reimburses us for the high involvement in the franchisee’s business in its starting phases. Having a large initial fee will only scare away potential investors in the business.

To attract more investors into the business, our motels will not have any hidden charges or hidden profits techniques that we will charge to reveal. As the franchisors, we will be transparent on all income streams needed to make your franchisee successful. We will also give you a list of all our suppliers who we have negotiated a subsidized amount for our franchisees. As the franchisor, we will make our money from taking 8.5% of the profits made by our franchisees indefinitely. This is the management service fee. This cost will help in reimbursing our assistance in opening up the motel.

The company’s customers, value proposition, resources, and infrastructure are highlighted in the Business Canvas Model below;

Financials

Obtaining the finances needed is one of the biggest problems when it comes to starting up a business. According to my franchised Hotel business, I need minimum financing of 16 million dollars which is not possible for my company to gather at one time. This is where partnership plays a big role in my business. As I am an Indian national, I cannot borrow a loan from a US bank. However, one of the family friends, a citizen of the U.S will help me acquire 35% of the amount. The other amount will come from the profits that the Rameswaram group has made over the past 21 years.

Understanding the amount of profit generated is critical in providing the utmost value to the customers and adopting the necessary strategies needed to maximize profitability. To achieve this, I will use the profitability and revenue KPIs.  The Recurring Revenue KPI will be used to determine the amount of revenue generated from the subscription services, management fees that are calculated on quarterly and annual subscriptions. The KPI will also map the plan for future growth. The second KPI will be the gross profitability KPI. The gross profit KPI will reveal how the franchisees are effectively balancing production costs with the pricing for the services delivered.

Prototyping

            A prototype for the model of the franchise represents the working model of the vision.  The prototype provides a medium where assumptions on which project idea can be tested and acts as a buffer between the actions and the hypothesis. Every decision about to be implemented by the franchise and the methods of operations are looked into. The business system is also looked into. The system has to be clearly defined. The end product of prototyping is the consistency and smoothness of the business systems (Nieveen, 2009). Our prototype model will mimic that of McDonald’s, one of the most successful food chains in the world that have remained profitable despite being affordable to many users. The franchise is also run by staff with ordinary skills and managers with little experience. The success of this franchise lies in their attention to detail and paying attention to the discipline of their staff. Cleanliness is also a major factor and the consistency in meeting customer needs.

Go-to-market strategy

Our go-to marketing strategy is the use of digital marketing through the use of Social media platforms, Google Ads, and SEO optimization. Social media is the quickest gateway to building a global audience. Most importantly, social media provides an important gateway for a franchise by providing a unique way to understand the subtle nuances that drive local trends and promote the uniqueness of the market. Therefore, as a franchise, we can benefit from having good social media marketing. Each of the franchisees will run their distinct social media accounts within the overall brand parameters. This will enable the company to create a wide network cost-effectively. Google ads and SEO marketing will further supplement the social media marketing. Franchise marketing differs greatly from the marketing adopted by other businesses. This is because different factors have to be considered and the different implementation tactics needed in different locations. A single mistake in the marketing strategy might affect the entire brand’s credibility. Having effective marketing techniques will also grow the franchise as a whole. The final marketing strategy is the world of mouth. This is one of the most powerful marketing tools. Inspiring people to spread the word through incentives is a foolproof method of raising awareness on the brand and providing recognition, as well as building an honest relationship with the franchisees and the customers.

References

Easter, M. (2020, May 9). California tourism industry grows for the 7th straight year, report says. Los Angeles Times. https://www.latimes.com/business/la-fi-ca-economic-impact-20170504-story.html

IbisWorld. (2020). Industry market research, reports, and statistics. IBISWorld – Industry Market Research, Reports, & Statistics. https://www.ibisworld.com/united-states/market-research-reports/hotels-motels-industry/

John, J. (2019, March 8). Global hotels market expected to reach USD 211.54 billion by 2025: Zion market research. GlobeNewswire News Room. https://www.globenewswire.com/news-release/2019/03/08/1750501/0/en/Global-Hotels-Market-Expected-To-Reach-USD-211-54-Billion-By-2025-Zion-Market-Research.html

Nieveen, N. (2009). Prototyping to reach product quality. In Design approaches and tools in education and training (pp. 125-135). Springer, Dordrecht.

Runyan, D. (2020). Economic impact. Visit California Industry | Visit California. https://industry.visitcalifornia.com/research/economic-impact

VisitCalifornia. (2019). California travel tourism forecast state 2019 April. Visit California Industry | Visit California. https://industry.visitcalifornia.com/research/report/california-travel-tourism-forecast-state-2019-april