Tourism Business Development and Financing Guide
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TOURISM BUSINESS DEVELOPMENT AND FINANCING GUIDE GUIDE FOR TOURISM BUSINESSES FIFTH EDITION Tourism Business Development and Financing Guide TOURISM BUSINESS DEVELOPMENT AND FINANCING GUIDE Tourism Saskatchewan is pleased to deliver It is our hope that this guide will answer many another development tool for the tourism of your questions and help you avoid potential industry. This booklet provides a detailed roadblocks. Please keep in mind that planning approach that can be used to assist in throughout the course of planning and bringing the expansion of an existing tourism venture, or to life a new tourism initiative, you are invited the creation of a new tourism business. and encouraged to keep in close contact with our Industry Development branch, so that we In 2004, our industry generated over $1.4 may provide any additional assistance possible. billion in tourist activity, resulting from urban, rural, and northern visitor experiences. Tourism continues to be the fastest-growing economic Darryl McCallum sector in our province. Sound, effective business Director development is critical to sustaining this growth Industry Development Branch and increasing visitor expenditures. Further development of our tourism economy in Saskatchewan is greatly dependent upon strong and healthy tourism businesses. Tourism Saskatchewan wishes to express our appreciation for assistance with this publication to the following: 1 Tourism Business Development and Financing Guide TABLE OF CONTENTS PART ONE: THE DEVELOPMENT PROCESS . .4 PART TWO: SOURCES OF FINANCING FOR BUSINESSES IN THE TOURISM INDUSTRY . .29 INTRODUCTION . .4 INTRODUCTION . .29 CHAPTER ONE . .5 DEFINING THE PROJECT: Markets, Resources CHAPTER ELEVEN . .30 and Development INTERNAL SOURCES OF FINANCING (a) Owners – proprietors, partners, CHAPTER TWO . .8 shareholders ECONOMIC FEASIBILITY (b) Inventory (c) Accounts receivable CHAPTER THREE . .12 (d) Accounts payable DEVELOPMENT APPROVALS (e) Sale of assets CHAPTER FOUR . .13 CHAPTER TWELVE . .31 STEPS IN THE DEVELOPMENT PROCESS CONVENTIONAL LENDERS (a) Chartered Banks CHAPTER FIVE . .15 (b) Credit Unions MUNICIPAL PLANNING CONSIDERATIONS (c) Other Conventional Lenders CHAPTER SIX . .18 CHAPTER THIRTEEN . .32 SUBDIVISION APPROVAL AND SERVICING ECONOMIC DEVELOPMENT ORGANIZATIONS AGREEMENTS (a) Small Business Loan Associations (b) Community Futures Development CHAPTER SEVEN . .21 Corporations ENVIRONMENTAL AND RESOURCE (c) Regional Economical Development CONSIDERATIONS Authorities CHAPTER EIGHT . .24 CHAPTER FOURTEEN . .33 PUBLIC HEALTH, SERVICING, LIQUOR GOVERNMENT LENDERS LICENSING, FIRE PROTECTION, AND ACCESS (a) Business Development Bank of Canada CHAPTER NINE . .26 (b) Farm Credit Corporation SPECIAL CASES: CROWN LAND, NATIONAL AND (c) Saskatchewan Northern Affairs PROVINCIAL PARKS CHAPTER FIFTEEN . .34 CHAPTER TEN . .28 LEASING COMPANIES SUMMARY LABOUR SPONSORED VENTURE CAPITAL CORPORATIONS AND FOREIGN INVESTMENT FUNDS 2 Tourism Business Development and Financing Guide CHAPTER SIXTEEN . .35 OTHER AGENCIES AND PROGRAMS (a) Saskatchewan Heritage Foundation (b) Northern Enterprise Fund Inc. (c) Saskatchewan Council for Community Development and the Prairie Farm Rehabilitation Administration (d) Agriculture Canada (e) Saskatchewan Learning and Careers & Employment Services (f) Ducks Unlimited (g) Saskatchewan Indian Equity Foundation (h) Aboriginal Business Canada (i) Saskatchewan Native Economic Development Corporation (j) Women Entrepreneurs of Saskatchewan Incorporated (k) Saskatoon Credit Union Micro Loan Program and Western Economic Diversification (l) Co-operative Development Assistance Program (m) Clarence Campeau Development Fund (n) Community First Development Fund of Saskatoon Inc. CHAPTER SEVENTEEN . .38 (A) Sources of Financing for Tourist Attractions (B) Summary ACKNOWLEDGEMENTS . .38 LIST OF CONTACTS . .39 3 Tourism Business Development and Financing Guide PART ONE: THE DEVELOPMENT PROCESS INTRODUCTION positive 'word of mouth' advertising by satisfied Tourism Saskatchewan has the mandate to customers, and achieving a high percentage of promote and enhance the development of the return business. tourism industry in Saskatchewan. This working guide has been prepared to help you assess, plan, Past experience with tourism in Saskatchewan obtain financing, receive approvals for, and indicates that: develop a successful tourism project in • strong 'hands-on' management is essential to Saskatchewan. running an efficient operation that enjoys high customer satisfaction; Some topics covered in this guide are common • tourism operators must look beyond the 'peak' to all commercial ventures. Others are unique to summer tourist season of mid-June to mid- the nature and requirements of the tourism August to justify large capital investments; industry. Major sections will assist in • a concerted effort must be made to set aside understanding: funds for reinvestment and upgrading; • the regulatory environment in which tourism • developments which proceed without a clear businesses and attractions operate; and realistic plan for attracting specific, targeted • which aspects of a proposed development markets can get into financial trouble very should be defined early in the process, and quickly; modified as more information is obtained; and • adequate working capital will be required to • which steps you may have to follow as the sustain the operation through poor market proposed project passes through the conditions, and to cover unexpected costs; and development process. • tourism businesses and attractions benefit from co-operative marketing and active participation No guide can answer all questions or cover all in regional and sectoral tourism associations. issues that developers of tourism projects may confront. However, this guide attempts to Private lenders, outside investors, and provide a clear framework for what is involved government agencies view many proposed in developing a successful tourism operation. tourism developments as high-risk ventures. They require a clear indication of viability and SUCCESSFUL TOURISM OPERATIONS managerial capability. The following chapters A successful tourism operation requires strong will help you understand and deal successfully management, well trained employees, and the with their concerns. ability to serve the market. This is especially true for operations where visitors have high expectations of quality personal service. Creating a comfortable, friendly atmosphere should be a primary consideration in the selection of employees. It is a key to ensuring 4 Tourism Business Development and Financing Guide CHAPTER ONE DEFINING THE PROJECT: MARKETS, RESOURCES AND DEVELOPMENT At the outset you should define the proposed development, which sets out its markets, and physical and financial requirements in a clear and comprehensive way. In the case of attractions involving interpretation, be sure to briefly outline your interpretive plan at this time. The project and its definition can be modified, as more information becomes If preliminary market information is not available over time. positive, a rethinking of the development project is required. It is also important to anticipate: • the types of regulatory approvals required; PRELIMINARY RESOURCE ANALYSIS • the information required to obtain these Tourism developments depend on the use of approvals; various resources to attract visitors. These can • the sequence in which approvals will take include natural, heritage, cultural, recreational, place; and paleontological, and archaeological resources. • a realistic time frame over which the approval For example, unique and/or outstanding quality process is likely to occur. natural resources are essential to ecotourism and adventure tourism. Aboriginal cultures offer The Industry Development Branch of Tourism attractive opportunities to explore and Saskatchewan can advise you on moving experience historically different ways of life. projects through the approval process. Recreational fishing and hunting depends on the proven presence of a sustained resource base. A FIRST LOOK AT THE MARKET Begin the overall project description by If the success of a tourism attraction or service identifying the markets which you will seek to depends upon resource-based activities, then it is attract. Keep in mind the existing and any essential to evaluate the quality and long-term planned competition in relation to these supply of the resource. This is a crucial first step markets. Also consider tourist attractions which in defining the project. bring visitors to your area and can complement your project with co-operative marketing opportunities. While a more detailed analysis will be required later on, this first look at market demand and supply factors will help to identify the types of facilities and services which the development should offer. 5 Tourism Business Development and Financing Guide PHYSICAL CHARACTERISTICS: THE Both off-site and on-site services should be DEVELOPMENT PROGRAM considered in planning the project. For example, Once the preliminary market and resource if electric power is not available the cost of analysis has been completed, the next step is to extending power lines can add significantly to prepare the physical development plan. This the cost of the development. involves identifying all the components needed to accommodate the proposed venture, and Many attractions provide interpretive relating them to the site which has been programming, which presents unfamiliar, and tentatively