1. BUSINESS MODELS – USES AND APPLICATIONS Workshop on using the Business Model Canvas for Tourist Organizations

2. WELCOME! Introductions Learning Objectives for this session What is a business model? Why do I need one? How can I work one out? What can I learn from other examples? How can I use it in my own organisation/business?

3. A LITTLE ABOUT ME Age: 38 Nationality: Irish (Republic of Ireland) University Tutor and Manager of Business Department for a UK University in Chengdu, China Am also a student as well (on a Doctoral Program part-time)

4. If you are… Looking to transform your organization Significantly improve what it does Looking to find innovative ways to improve what you do Replace old/outdated approaches YOU ARE IN THE RIGHT PLACE!

5. BUSINESS MODEL? WHAT IS IT AND WHAT DOES IT LOOK LIKE? Analogy – Jigsaw puzzle. They are fun and challenging – WHY? How about without the box? More challenging? While business is not a game, trying to complete a jigsaw puzzle without the box is pretty near impossible or an incredible challenge!

6. A Business Model is IS/NOT… NOT: A business plan, this is…? IS: A framework or set of rules within which a business operates. It is a strategic tool which is part of an organization's DNA. It is usually for “internal” consumption only, in contrast to what a business plan can be used for “Business models take all the complexity of a business and boil it down to an easy to communicate profitable essence” (Muehlhausen, 2013)

7. (Muehlhausen, 2013)

8. TOURISM BUSINESS MODELS - RELEVANCE Why is this needed for tourism business in particular? There is a need to differentiate yourself from others in the industry and from the competitors you have or will acquire – too many imitators don’t succeed Finding the “essence” of your business will make it easier for you to comprehend what you are doing differently to others – how do you stand out? Tourism is a highly competitive industry (one of the worlds largest) – what is your competitive advantage? Are you thriving as a result of it? Future goals, perhaps to expand or sell on the business – how will you convince others to join or be convinced by what you do? Articulation of the businesses business model is central to all of the above

9. THE BUSINESS MODEL CANVAS Applications for Tourism

13. THOMAS COOK – BMC PILLARS

14. An organisation serves one or several Customer Segments

15. CUSTOMER SEGMENTS For whom are we creating value? Who are our most important customers? Mass Market Niche Market Segmented Diversified

16. It seeks to solve customer problems and satisfy customer needs with value propositions

17. VALUE PROPOSITIONS What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment? Which customer needs are we satisfying? Characteristics Newness Performance Customization “Getting the Job Done” Design Brand/Status Price Cost Reduction Risk Reduction Accessibility Convenience/Usability

18. Value propositions are delivered to customers through communication, distribution, and sales Channels

19. CHANNELS Through which Channels do our Customer Segments want to be reached? How are we reaching them now? How are our Channels integrated? Which ones work best? Which ones are most cost-efficient? How are we integrating them with customer routines? Channel phases 1. Awareness How do we raise awareness about our company’s products and services? 2. Evaluation How do we help customers evaluate our organization’s Value Proposition? 3. Purchase How do we allow customers to purchase specific products and services? 4. Delivery How do we deliver a Value Proposition to customers? 5. After sales How do we provide post-purchase customer support?

20. Customer relationships are established and maintained with each Customer Segment

21. CUSTOMER RELATIONSHIPS What type of relationship does each of our Customer Segments expect us to establish and maintain with them? Which ones have we established? How are they integrated with the rest of our business model? How costly are they? Examples Personal assistance Dedicated Personal Assistance Self- Service Automated Services Communities Co-creation

22. Revenue streams result from value propositions successfully offered to customers

23. REVENUE STREAMS For what value are our customers really willing to pay? For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues? Types Asset sale Usage fee Subscription Fees Lending/Renting/Leasing Licensing Brokerage fees Advertising Fixed pricing List Price Product feature dependent Customer segment dependent Volume dependent Dynamic pricing Negotiation (bargaining) Real-time-Market

24. Key Resources are the assets required to offer and deliver the previously described elements

25. KEY RESOURCES What Key Resources do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue Streams? Types of resources Physical Intellectual (brand patents, copyrights, data) Human Financial

26. by performing a number of Key Activities

27. KEY ACTIVITIES What Key Activities do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue streams? Categories Production Problem Solving Platform/Network

28. Some activities are outsourced and some resources are acquired outside the enterprise

29. KEY PARTNERS Who are our Key Partners? Who are our key suppliers? Which Key Resources are we acquiring from partners? Which Key Activities do partners perform? Motivations for partnerships Optimization and economy Reduction of risk and uncertainty Acquisition of particular resources and activities

30. The business model elements result in the cost structure

31. COST STRUCTURE What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive? Is your business more? Cost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing) Value Driven (focused on value creation, premium value proposition) Sample characteristics Fixed Costs (salaries, rents, utilities) Variable costs Economies of scale Economies of scope

39. Meaning – “Icelandic Horse” Location: Hafnarfjörður, Iceland (near the capital) Ownership structure: Privately held Established: 1982 Business: Tour operator, offer a quality service with an emphasis on safety. Íshestar place great emphasis on sustainable tourism offering quality tours in the unspoiled nature of their country. Offering: The company offer horse riding tours divided in three categories; day tours, countryside tours, and highland tours. Although horse riding tours have been their main focus, a variety of different travel services for groups and individuals are offered too. They have been considered a market leader by many, including the Icelandic Tourist Board, in their focus on promoting environmental awareness and promoting sustainable development.

40. ÍSHESTAR Offer day tours 2-7 hours Also multi day horse treks (“equitrekking”) Guides are experienced and multilingual Work with local farmers, transportation services, B&B providers Claim high numbers of repeat customers

41. TYPES OF TOURS

42. ENGAGEMENT & COLLABORATION Partner with Orbitz – large travel booking company Customers can review e.g.:

43. ÍSHESTAR EXAMPLE BUSINESS MODEL CANVAS

44. EXAMPLE, FOR YOU TO TRY If I give you the following elements, can you create your own business model canvas for this tourism business who need to understand what their business model exactly is? Details (this is based on a real company based in Chengdu, China) Outdoor activities on the increase among locals and international visitors, mountain hiking/trekking on the rise in the region because… Trend – experiential travel, knowledgeable guides and locals (relationships and social interactions), exploring places of natural beauty (to escape congestion/stressful lives) Typical customer offering: 700 RMB per adult, 580 RMB children under 10 Includes – Private bus hire, homestay and use of camping equipment, food and drinks, and insurance

46. Some images that might help you…

48. In conclusion… Aware of the importance of business models in tourism and specifically how the business model canvas can be used The Business Model Canvas is a simple tool that can be reveal a great deal of complexity about a single tourist business The tool is a great way to involve a range of individuals from the firm in it’s creation and also an effective way to communicate the “essence” of your business Knowing your business model enable you to “tweak” and improve what you are doing and what you could be doing well Any questions?