Destination Management

Destination Management Lecture 4 University of Applied Sciences Stralsund Leisure and Tourism Management WS 2009/2010

Part Two Explores the issues involved in the developmentof new attractions, including feasibility studies,financing, design and project management.

Factors influencing the successof visitor attractions

Factors influencing the success of visitor attractions Many project never start or fail because of: - unfavourable feasibility studies, funding problems, lack of suitable sites…- lack of investment, less/no respond to market changes… Reasons can be grouped:- Organization and its resources- Product- Market- Management of the attraction Part Two \ Development process \ Factors influencin the succes …

Organization and its resources Experience in developing and managing attractions- awareness of opportunities and pitfalls- previous experiences Financial resources- attractions are expensive to built and run- rapidly changing markets require regular investments- PLC! Few revenues in the development, introduction and growth phase Therefore global players dominate the attraction market Part Two \ Development process Part Two \ Development process \ Factors influencin the succes …

The product Novel approach or a unique idea- high prices for unique products- competitors are copying sooner or later Location- determines catchment area, accessibility- benefit from awareness of an existing destination Variety of on-site attractions High quality environment, service facilites PRICE Part Two \ Development process Part Two \ Development process \ Factors influencin the succes …

The market Targeting growth markets- older age groups (increasing income and leisure time)- people visiting attractions to gain knowledge- people looking for active involvement- growing interest in green issues and healthy lifestyle Watch out for trends in the society! Word-of-mouth recommendation- by far the most important source for decision making- please see the latest figures of the destination M-V Part Two \ Development process Part Two \ Development process \ Factors influencin the succes …

The management of the attraction MARKETING- market research- long-term strategic view- not one big ‘public’ but lots of market segments- reinvesting revenues constantly- pay attention to existing customers- staff is part of the core product Respond to the business environment- competitors! Planning the future Part Two \ Development process Part Two \ Development process \ Factors influencin the succes …

The Disneyland Paris experience Run by highly professional Management Huge investments in developing the attraction(s) Healthy financial background Forecasted revenues £ 781 million in 1993in reality just at £ 561 million at the same period Forecasted net profit £ 71 million in 1993in reality it lost some £ 600 million at the same period Problems are not caused by low visitor numbersbut by the money spent at the attraction(s) Part Two \ Development process Part Two \ Development process \ Factors influencin the succes …

The Disneyland Paris experience Main failures:- opened while a major recession phase- location > suffers cold and wet weather, seasonality! - Too high prices for service facilities- No alcohol with meals available, (in France!!!) - forbidding visitors to bring food into the park - rides are not adventurous enough - bad image “American influences on European culture”- perception that quality of service not equal to USA (attitudes and behaviour of European staff) Part Two \ Development process Part Two \ Development process \ Factors influencin the succes …

Space Park Bremen Site location: Bremen-Gröpelingen, former AG Weser shipyard • Area: 260,000 m², of which:- Retail: 44,000 m² 120 shop units 40 restaurants- Leisure: 22,000 m² Europe‘s biggest indoor entertainment park 1 hotel 1 multiplex cinema (IMAX) • Germany‘s first Urban Entertainment Centre (UEC)Forecasted Visitors: 1.5 Million p.a. / 4,500 p.day Part Two \ Development process

Space Park Bremen Wenzel Consulting: Project: IMPLEMENTATION support space center in the Space park, Bremen Client: Daimler-Benz Aerospace DASA - ELC European Leisure Corporation GmbH, Wiesbaden - Space Park Development GmbH, Bremen Year: since 1993 Location: Bremen, Bremen On the former dockyard area of the Weser AG the Space Center, Europe's largest indoor experience park about space travel, developed in the context of the large-scale project Space Park. Components of the Space Park are beneath the technology-oriented Space Center, a rich entertainment and F & B - offer as well as a shopping mall. Among the numerous indoor attractions on the 22,000 m² large surface are the Star Trek Borg Encounter, Stargate Simulators and the innovative new coaster Galaxy Express, which are partly Europe- or worldwide premieres, an IMAX theatre and a multiplex-cinema. The investment volume for the overall project Space Park amounts to approx. 522 million EUR. Part Two \ Development process \ Factors influencin the succes …

Space Park Bremen Feasibility analysis: - site analysis - market and demand analysis - attendance forecast - competition check - concept and attraction development - economic analysis - cost analysis - investor acquisition - ongoing implementation support - commercial concept - concept optimization and –controlling • layout-controlling After the three-year construction period and an investment volume of 100 million EUR (without building and infrastructure) the Space Center was opened on Feb., 12, 2004. The investment volume for the overall project Space Park amounts to approx. 522 million EUR. Part Two \ Development process \ Factors influencin the succes …

Space Park Bremen  Please visit: http://www.space-center-bremen.de

Space Park Bremen Main failures:- insufficient Public Transportation System - shopping mall is closed due to the lack of tenants - average guests per day count to 450 (not 4.500)- no unique rides or attractions - underdeveloped educational approach - low media coverage Part Two \ Development process \ Factors influencin the succes …

Space Park Bremen Part Two \ Development process \ Factors influencin the succes …

Financing visitor attraction projects Part Two \ Development process \

Purposes … … for which capital funding is required:- project preparation incl. feasibility studies- site acquisition - site preparation - constructing new buildings and attractions- pre-launch marketing costs- fitting out and decorating buildings and structures - expenditures relating to the launch and opening - money to cover costs at the earliest days of running Part Two \ Development process \ Financing visitor attractions

Sources of funding Direct funding= direct financial contributions in terms of loansand grants for example. Indirect funding= indirect financial ‘help in kind’ (contribution in kind),providing goods and services to reduce capital costs Part Two \ Development process \ Financing visitor attractions

Sources of funding Private sector Public sector Voluntary sector Direct funding Indirect funding Project Part Two \ Development process \ Financing visitor attractions

Purposes for funding a project Rate of return on the investment Job creation potential Ability to stimulate economic development Regeneration of urban areas Conservation and education Private sector Public sector Voluntary sector Part Two \ Development process \ Financing visitor attractions

Direct funding – Private sector Overdrafts- short term, cover small expenditures, provide cash flow Loans – short, medium and long term- amount><duration, property as security, buying fixed assets Commercial mortgage- flexible repayment conditions, finance property purchases Venture capital- often stake in company and say in decision making required Equity- sale of shares, profit is shared, risk of losing control Individual Investors- usually made in return for a shareholding in the company Part Two \ Development process \ Financing visitor attractions

Direct funding – Private sector Often a combination of funding methods is used Success in receiving financial support depends on:- reputation in tourism industry- experienced management- substantial financial resources- precise estimated costs of the project Funding by capital generated within the business- often used, but mainly for minor projects- opportunity costs- leverage effect Back > Part Two \ Development process \ Financing visitor attractions

Direct funding – Public sector Obtain financial support by- European Union- central government- local authorities Often long and extensive application phase Detailed and cost intensive monitoring required Numerous agencies and institutions involved in the financing process Part Two \ Development process \ Financing visitor attractions

Direct funding – Public sector Financial support by the European Union- European Regional Development Fund(help correct regional imbalances caused by industrial change) provides up to 50% of project costs project should be wholly or largely funded by public sector and must be located in an ‘assisted area’- European Social Fund supports training programs particularly in disadvantaged regions- European Investment Bank- European Agriculture and Guidance Fund … Part Two \ Development process \ Financing visitor attractions

Direct funding – Voluntary sector Financial support from voluntary organizations- plays a minor role in financing attraction projects- only for small projects with strong conservation or educational purpose Don’t forget religious organizations! Part Two \ Development process \ Financing visitor attractions

Indirect funding – Private sector Leasing- reduces initial costs, payment of a rental over a period of time Hire purchase- paying a deposit and then regular amounts, higher total costs Sale and lease back- property is sold to a third party and then leased back Concessions and franchises- third parties operate units in return for a rent or percentage of profit Sponsorship- please see next page! Part Two \ Development process \ Financing visitor attractions

Indirect funding – Private sector Sponsorship- providing ‘help in kind’, in term of labour and materials In return for some perceived marketing benefits:- an improved image of the sponsoring organization- greater awareness of it’s products and services- direct sales of products and services Success in gaining sponsorship is based on:- precise targeting of potential sponsors- matching the desires of the potential sponsors- providing promotion opportunities- positive media coverage >>> Part Two \ Development process \ Financing visitor attractions

Indirect funding – Private sector 10 Steps to sponsorship success- Take Inventory- Develop Media and Retail Partners- Develop Sponsorship Offerings- Research Sponsors- Contact the Potential Sponsor- Go for the Appointment- Be Creative- Make the Sale- Keep the Sponsor in the Loop- Post-Event Sponsorship Maintenance Part Two \ Development process \ Financing visitor attractions

Indirect funding – Public & Voluntary sector Provision of land and buildings free of charge orat reduced costs Tax ‘holidays’ and tax allowances on capital expenditures Provision of expensive infrastructure (transport …) Duty concession on the import of materials Availability of labour through job training schemes Provision of voluntary labour (Volunteers) Part Two \ Development process \ Financing visitor attractions

Attracting external funding The ways of obtaining finance differs in terms of:procedures, criteria, paperwork, rules, conditions … Attraction developers need to decide:- how much money they need- when the money is needed- how long the money is needed- what securities they are able to offer Standard tool for attracting external funding:= Business Plan Part Two \ Development process \ Financing visitor attractions

Destination Management