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The Family Business in and Hospitality

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The Family Business in Tourism and Hospitality

Donald Getz, Jack Carlsen

and

Alison Morrison

CABI Publishing

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CABI Publishing is a division of CAB International

CABI Publishing CABI Publishing CAB International 875 Massachusetts Avenue Wallingford 7th Floor Oxfordshire OX10 8DE Cambridge, MA 02139 UK USA

Tel: +44 (0)1491 832111 Tel: +1 617 395 4056 Fax: +44 (0)1491 833508 Fax: +1 617 354 6875 E-mail: [email protected] E-mail: [email protected] Web site: www.cabi-publishing.org

©D. Getz et al. 2004. All rights reserved. No part of this publication may be reproduced in any form or by any means, electronically, mechanically, by photocopying, recording or otherwise, without the prior permission of the copyright owners.

A catalogue record for this book is available from the British Library, London, UK.

Library of Congress Cataloging-in-Publication Data

Getz, Donald, 1949- The family business in tourism and hospitality / Donald Getz, Jack Carlsen, Alison Morrison. p. cm. Includes bibliographical references and index. ISBN 0-85199-808-9 (alk. paper) 1. Tourism. 2. . 3. Family-owned business enterprises. I. Carlsen, Jack. II. Morrison, Alison. III. Title. G155.A1G439 2003 910′.68--dc22 2003018338

ISBN 0 85199 808 9

Typeset by AMA DataSet, UK. Printed and bound in the UK by Cromwell Press, Trowbridge.

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Contents

About the Authors ix

How to Use the Book xi

Preface xiii

Acknowledgements xvii

1 Introduction 1 Why Study Family Businesses? 1 Scope and Significance of Family Business 1 What is ‘Family Business’? 4 A Life Cycle Model for the Family Business 5 A Framework for Understanding Family Business in Tourism and Hospitality 9 Chapter Summary 18 References 18

2 Entrepreneurship and Family Business 21 Introduction 21 Entrepreneurial Process 21 Industry Specific Modifiers 29 Organizational Modifiers 32 Entrepreneurial Socio-economic Outcomes 35 Chapter Summary 35 References 38

3 Starting the Family Business 41 Introduction 41 Motivations and Goals 42 Research Evidence from the Tourism and Hospitality Industry 42 Antecedents: Where do Family Business Owners Come From? 58 Business Planning for New Family Businesses 60 Ownership, Organization and Governance 62 Chapter Summary 64 References 65

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vi Contents

4 Sustaining and Developing the Family Business 67 Introduction 67 Failure and Success 67 Growing the Family Business 70 Preconditions and Barriers to Growth 72 Strategic Planning 74 Strategic Options 77 Strategic Marketing and Family Branding 81 The Seasonality Challenge and Strategic Responses in Bornholm 85 Chapter Summary 90 References 91

5 Balancing Family and Business through the Life Cycle 95 Introduction 95 Generic Challenges and Issues 95 Gender Challenges and Issues 101 Research Evidence from Western Australia 103 Involving the Next Generation and Succession 104 Barriers to Inheritance 105 Research Findings from Australia, and Denmark 107 Planning for Involvement and Succession 111 Chapter Summary 113 References 114

6 Farm-based Family Businesses 117 Introduction 117 Case 6.1 Alborak Stables 117 Case 6.2 Taunton Farm Park 120 Case 6.3 Ol’ MacDonald’s 123 Chapter Summary 125

7 Family-owned and -operated Small 127 Introduction 127 Case 7.1 Gunnar and Maude Bergstedt, Åre, Sweden 127 Case 7.2 Cricklewood 129 Case 7.3 Millestgården 130 Chapter Summary 132

8 Family-owned Nature-based 133 Introduction 133 Case 8.1 Crystal Creek Rainforest Retreat (CCRR) 133 Case 8.2 O’Reilly’s Rainforest Guesthouse 135 Case 8.3 River Valley Ventures, New Zealand 139 Chapter Summary 143 References 144

9 Family-owned and -operated Tour Companies 145 Introduction 145 Case 9.1 Wild Over Walpole (WOW) 145 Case 9.2 Minnewanka Tours 148 Case 9.3 Åreguiderna 151 Chapter Summary 152

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Contents vii

10 Family-owned Tourist Attractions and Wineries 153 Introduction 153 Case 10.1 Pelham Family Estate Winery 153 Case 10.2 Rivendell Gardens 155 Case 10.3 Billabong Sanctuary 157 Chapter Summary 160 Reference 160

11 Cross-case Analysis 161 Introduction 161 Family Issues 162 Business Issues 164 Ownership Issues 168 Chapter Summary 171 References 171

12 Implications for Family Businesses and Tourism Destinations 173 Introduction 173 Practical Implications for the Family Business in Tourism and Hospitality 173 Balancing Family and Business through the Life Cycle 180 Implications for Tourism and Destination Management 182 Chapter Summary 184 References 184

13 Implications for Research and Theory 185 Introduction 185 Developing a Research Agenda 185 Theory-building 189 Chapter Summary 195 References 195

Bibliography 197

Index 209

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About the Authors

Donald Getz

Donald Getz is a Professor of tourism and hospitality management in the Haskayne School of Business, University of , Canada. His research interest in family business began with doctoral research in the Highlands of Scotland, as many of the tourism and hospitality businesses studied were operated by individuals and families. He has conducted specific family-business research in Canada, Denmark, Sweden, New Zealand and Australia, involving a number of individual and institutional collaborators. This work has been financially supported in part by the Family Business Research Endowment at the University of Calgary. Professor Getz also does a considerable amount of research and publishes in the area of event management and event tourism, and is the author of the book Event Management and Event Tourism (Cognizant, 1997). He has also authored books entitled Explore Wine Tourism (Cognizant, 2000), The Business of (with Stephen Page: Thompson International Business Press, 1997) and Festival Management and Event Tourism (Van Nostrand Reinhold, 1991).

Jack Carlsen

Dr Carlsen is the Malayan United Industries (MUI) Chair in Tourism and Hospitality Studies within the Curtin Business School, Curtin University of Technology, Western Australia. He received his first grant for Family Business Research in 1998 and has since published papers in the Journal of , Tourism Management, and Family Business Review and presented papers at the International Congress of Small Business, Asia Pacific Tourism Association and the Council of Australian University Tourism and Hospitality Education conferences. Jack has a Bachelor of Economics and a Doctor of Philosophy from the University of Western Australia. His other research interests include tourism economics, tourism management and sustainable tourism. Jack is Founder and Co-Director of the Curtin Sustainable Tourism Centre at Curtin University of Technology.

Alison Morrison

Dr Alison Morrison is Reader in Hospitality Management and Director of Research within Strathclyde Business School, University of Strathclyde. She has attained a BA Hotel and Catering

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x About the Authors

Management from the University of Strathclyde, an MSc in Entrepreneurship from Stirling University and a PhD from the University of Strathclyde with the thesis titled Small Firm Strategic Alliances: the UK Hotel Industry. Alison has edited and authored five text books in the areas of marketing, hospitality, entrepreneurship and franchising and has published widely in generic business and specialist hospitality and tourism academic journals. She regularly undertakes international assignments teaching and consulting on entrepreneurship within the hospitality and tourism sectors.

Contributors

A number of researchers have contributed cases or research material to this book, and the authors are very grateful for their valuable efforts. • Chris Ryan, Professor, University of Waikato, New Zealand: author of the case study ‘River Valley Ventures’. • Tage Petersen, Tourism and Regional Research Centre, Bornholm, Denmark: co-researcher with Donald Getz of the family business survey in Bornholm and co-author of a paper on growth-oriented entrepreneurship. • Per Ake Nilsson, Tourism and Regional Research Centre, Bornholm, Denmark: co-author with Donald Getz of a paper on seasonality, based on the Bornholm data. • Tommy Andersson, Professor, University of Gothenburg, Sweden: author of the three case studies from Sweden. • Lynn Batchelor, Griffith University, Australia: co-author of the case study, ‘O’Reilly’s Rainforest Guesthouse’. • Shane O’Reilly, of O’Reilly’s Rainforest Guesthouse: co-author of the case study, ‘O’Reilly’s Rainforest Guesthouse’.

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How to Use the Book

For Academics and Researchers

Given that this is the first book on family business in the tourism and hospitality industry, it has several academic goals: • To define and explain the importance of family business studies to the study of tourism and hospitality. • To present and assess pertinent literature that has previously not been synthesized in the context of family business studies. • To establish concepts and research directions for advancing this area of scholarship. The authors also hope to make a contribution to the mainstream study of family business by demonstrating its application to a specific industry, and the many industry-specific modifiers that affect family businesses. Where can the book be used as a text? Business and management schools with tourism and hospitality programmes are encouraged to incorporate family business studies into their curricula, in recognition of the importance this class of business has in the industry and also because there are increasing numbers of students interested in becoming entrepreneurs. The book could be a stand-alone text or a supplement to more general books on small business management, entrepreneurship, new ventures and even destination competitiveness.

Using Case Studies

The cases developed for this book, most of them original and unpublished elsewhere, are really case histories. They have been a rich source of insights into actual family business operations and related issues. Cases based on in-depth interviews, as they all are in this book, provide a better source of information than surveys because the respondents are directly involved in case prepara- tion and in the end approve of the contents. We also provide original research data from a number of surveys, and the case studies illustrate many of the important findings in those survey results. The cases do present problems for researchers, as they are essentially reflections of the past, frozen at one point in time. Several of our respondents, for example, have reported major changes in their circumstances subsequent to approving the material contained in this book, while several contributions have been updated right to the last possible minute before finalization of the manu- script. Although several of the cases demonstrate problems and how families must face adversity, the

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xii How to Use the Book

authors believe that collectively they understate the problems faced by families in business. System- atic research comparing success stories with failures would certainly add a lot to our understanding of family businesses in tourism and hospitality. In teaching applications, individual cases can be used to introduce or illustrate specific issues, such as entrepreneurship, founders’ goals, strategies, or barriers to inheritance. The cross-case analysis contained in Chapter 11 ties them all together and yields 30 general issues that apply across some or many of the cases. This analysis can also be used to encourage students to become aware of similarities and differences between cases and the underlying reasons, and in particular reveals remarkable similarities in family business experiences. But it is important to emphasize that the cases were not selected randomly, nor do they reflect best practices or success stories. The cross-case analysis is not generalizable to the whole population of family business in the industry nor in any of the countries.

For Students

This book introduces students to the field of family business studies, with numerous references to the main body of literature. The basic definitions, concepts and themes in family business studies are summarized in Chapter 1, with subsequent chapters focusing on more specific family business issues and how they are applied to tourism and hospitality. The ties to entrepreneurship and small business studies are made explicit in Chapter 2 and these important themes are developed through the book. Students coming from a family business background will find this book invaluable in helping them make decisions about entering the family business or starting their own. It is a difficult challenge, but countless people around the world seek that challenge and many find it completely fulfilling. At a minimum, the book will help them assess their own ambitions, goals and priorities regarding a professional career versus self-employment and entrepreneurship. Independent of their own plans, the book will help them understand the numerous family businesses they will encounter, or perhaps work for. Their owners are a special part of the business, and the families face a number of unique challenges. Understanding the family business will also help them appreciate the complexity of the industry when it comes to planning, marketing and fostering growth or innovation.

For Family Business Owners and Managers

Although the book was not designed primarily for the industry, it will prove useful to family business owners and those who manage family businesses. In particular, there are many sections covering the practical management of family businesses, such as ownership and structure, strategic planning, issues surrounding succession and inheritance, and even family branding.

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Preface

This is the first book dealing with family business in tourism and hospitality. Given the importance, and in many areas the predominance, of families, couples (called ‘copreneurs’) and individuals (sole proprietors) running tourism and hospitality businesses, it is long overdue. The Family Business in Tourism and Hospitality provides a comprehensive overview of this emerging field of study, based on available literature, research by the authors and new case studies. It seeks to make a theoretical and didactic contribution both to the study of tourism and hospitality, and to the generic field of family business studies. Researchers will benefit from new insights on the importance of the family in business management, and the significance of family businesses in destination competitiveness, economic and community development. Students in tourism and hospitality programmes will benefit from a greater understanding of the opportunities and challenges associated with family business practice in this industry. Many students in these programmes come from a family business background and might even be expected to join an existing family firm. Others will be contemplating entrepreneurial ventures in the industry, and both groups need to be better educated about the management of a family- or owner-operated business. And, of course, just about every graduate will eventually come into professional contact with family businesses and should therefore be cognizant of what businesses in this sector need. It is not our intention to produce a ‘how-to’ book for establishing or operating a family business, but there are a number of sections that have very practical applications. We address the business plan, strategic planning, succession planning, marketing, organizational and governance issues, and some financing and investment challenges. The principal purpose in doing so is to show where exactly family considerations intrude on business management, and to discuss (wherever possible) industry-specific issues. These management sections have also been added to increase the appeal of the book to the industry, and to show students and scholars where theory and practice must be brought together.

Objectives and Outline of the Book

The book’s specific objectives are: 1. To advance the study of family business within tourism and hospitality, with particular reference to the following perspectives: • its scope and significance; • management of the family business;

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xiv Preface

• destination competitiveness; • economic and community development. 2. To identify the unique opportunities, challenges and issues facing family business in this industry, thereby adding to the generic family business literature. 3. To provide a text or reference work for students in the tourism and hospitality fields. 4. To provide a reference for teachers and academics. 5. To provide a reference work for family business owners and those contemplating a business venture. The starting point in the Introduction (Chapter 1) is to address the questions of why study the family business, and what exactly it is. We identify generic issues that family businesses face and explain a well-known family business model to shape discussion of the evolution of ownership, the business, and the family. We then examine what is unique about family business in the tourism and hospitality industry and how this relates to the core family business issues. A framework has been developed for this purpose, encompassing ‘setting modifiers’ (location, level of economic develop- ment, and culture) and ‘industry-specific modifiers’ (the nature of the service, host–guest relations, cyclical demand or seasonality, destination life cycle, and unique business opportunities). In Chapter 1 we begin to make use of the case studies provided in Chapters 7–10, and the cross-case analysis in Chapter 11. Analysis of the cases led directly to the identification of 30 key family-related issues within tourism and hospitality enterprise, and these are used to inform the more generic and theoretical discussion of family business in Chapter 1. The aim of Chapter 2 is to recognize family business as a distinct form of entrepreneurship. It makes the connection between entrepreneurship, small and family businesses, focusing on the unique entrepreneurial opportunities and challenges that are inherent in the tourism and hospitality industry. The contribution of key industry-specific and setting modifiers as identified in Chapter 1 is explored within the framework of a model that investigates the extent to which they act as ‘filters’ to either intensify or dilute the entrepreneurial process resulting in consequential entrepreneurial socio-economic outcomes. Conclusions are drawn that highlight the unique factors associated with entrepreneurship as related to tourism and hospitality family businesses, how they influence the nature and evolution of such enterprises, and competitive and policy implications. In Chapter 3 the critical issues of motivation and goals are examined first, particularly the contrasts inherent in growth and profit-oriented entrepreneurship versus the more prevalent lifestyle and autonomy motivations. Important antecedents to family business, including the influences of education, experience and training, are considered. Business planning is then examined, as the careful preparation and execution of a business plan is considered to be a major indicator of potential business success, and is certainly associated with achieving growth. Included in this section is an outline of what the plan should include, with emphasis on several family-related issues. Ownership, organization and governance are covered last in this chapter. The first section of Chapter 4 identifies and examines the meaning of success and failure for a family business, then focuses on specific challenges and causes of failure. Next, arguments for growing a business are addressed, then preconditions and barriers to growth. This is followed by analysis of generic and industry-specific strategies, a section on strategic planning, and separate treatment of strategic marketing and family branding. Research findings are then presented on how seasonality affects family businesses and various strategic responses from a sample of owners in Denmark. Chapter 5 examines key challenges and issues together with strategies and actions that are actually employed, or are recommended by experts, to achieve a healthy balance. It starts with a discussion of generic challenges and issues for family business, plus some that are specific to tourism and hospitality. Different stages of the life cycle are addressed, including the sole proprietor, copreneurial arrangements, the young business family with children, and the family working together. There are special sections on the family and the environment, and gender issues. Some research findings are presented to demonstrate real concerns from respondents in Australia, Canada

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Preface xv

and Denmark. Completing this chapter, attention is focused on issues relating to involvement of children in the business, leading to a detailed look at inheritance and succession planning. The concept of a family ‘legacy’ is discussed in this context. Chapters 7–10 contain case studies of real family businesses in this industry, organized by sectors of the industry: farm-based; small hotels; resorts; tour companies; attractions. Chapter 11 consists of a cross-case analysis to identify 30 key themes and commonalities. Two chapters summarize and conclude the book. The first, Chapter 12, draws management implications for the owners/operators of family businesses in tourism/hospitality, as well as implica- tions for tourism destination management, economic and community development. The final chapter draws implications for research and theory, including analysis of gaps in the tourism and hospitality literature pertaining to family business, and a set of detailed propositions that can be used to develop theory. The 30 major themes identified in Chapter 11 are re-visited in the two concluding chapters.

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Acknowledgements

The three principal authors are grateful to the earlier named contributors for their valuable contributions to this book. As well, we are sincerely grateful to all the respondents who provided details about their lives, families and businesses in the case studies. None of them requested anonymity, and so their successes and failures can be tracked. This takes some courage, and per- haps faith. The authors are extremely impressed with all the entrepreneurs and families engaged in enterprise, with the risks they take, and the challenges they face daily. Specific thanks are also owed to the agencies that helped fund or otherwise support the research used in this book. Professor Getz is particularly grateful to the Family Business Endowment at the Haskayne Business School, University of Calgary, and to the Regional and Tourism Research Centre of Bornholm, Denmark. Professor Carlsen acknowledges initial support of the Faculty of Business at Edith Cowan University and more recently the Curtin Business School, Curtin University of Technology. Special thanks also to Ann Hall at Desktop Print for her work on the manuscript.

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1 Introduction

Why Study Family Businesses? owner-operators and families. Rural studies in general almost inevitably touch on family Not all businesses are started for growth, profit business matters (see, for example, Page and maximization, or even for permanence – many Getz, 1997). are established or purchased with the needs and Why is it important to devote research and a preferences of the owners and their families full book to the family business in this industry? being paramount. That is the essence of ‘family There are a number of perspectives to be consid- business’, and it sets them apart from enter- ered, as explained in the following sections. prises in which the owners and their families matter little to the strategy or operations of the enterprise. Although it is widely accepted that the Scope and Significance of tourism and hospitality sectors are dominated by Family Business small, owner-operated business, little has been written specifically about the family dimension. In most countries family business is the domi- The thorough review of tourism and hospitality nant form of business ownership and manage- literature contained in this book reveals growing ment. Historically, companies and other forms attention to small businesses and entrepreneur- of ownership developed following individual ship in this industry, but until now the core and family-run farms and businesses, particu- family-related issues have been neglected. And larly to meet the needs of generating larger while many books and manuals have been amounts of capital and dealing with legal issues published to guide families and owner-operators such as protection against lawsuits and bank- in generic business terms, none have dealt with ruptcy. It was the Industrial Revolution of the the unique set of opportunities and issues that 18th century that replaced family-based craft stem from owning and operating a business in industry with larger manufacturing enterprises. tourism and hospitality. More recently, the rise of a giant service sector Interest in, and research on, family business generated numerous new opportunities for has been accelerating (Sharma et al., 1996; family ventures. Smyrnios et al., 1997). This attention is long Although big, public companies tend to overdue, given the scale and importance of attract the most attention, especially in terms of family businesses in most countries (Lank, 1995; share offerings, stock values and speculation, Wortman, 1995). Small businesses predominate family businesses will undoubtedly endure as in emerging sectors such as nature tourism the backbone of enterprise. The desire for (McKercher, 1998), and most of these are run by autonomy – to be one’s own boss – and

©D. Getz et al. 2004. The Family Business in Tourism and Hospitality (D. Getz, J. Carlsen and A. Morrison) 1

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2 Chapter 1

for family independence, appears to be a basic enterprises qualify as family businesses – that and unchanging human trait. This motivator is, businesses where there is more than one accounts for many career-switching entrepre- proprietor from the same family. neurs who start up tourism and hospitality data suggest that family-owned firms constitute businesses to escape what they do not like about about 80% of all businesses (Dunlop, 1993). their existing work and to steer their own eco- The consulting firm Deloitte and Touche (1999) nomic future. But in lesser-developed econo- said that family firms provided jobs for over mies there might be little choice – either run 6 million Canadians out of a total population a business of your own, or move out. Tourism of approximately 30 million. in developing countries offers numerous In many countries statistics on the scope opportunities for self-employment and small, and significance of family businesses are poor family businesses that otherwise would not exist. or non-existent, partly because of the difficulty Family businesses are especially dominant in separating self-employment from business in rural and peripheral areas because of tradi- ownership, and partly because the term ‘family tional land-owning patterns and the impracticali- business’ is not used or understood. These ties of operating larger corporations in marginal definitional problems are discussed later. economies. Hence, farm-based tourism and hospitality consists almost entirely of family businesses. Increasingly, individual and family investors are drawn to rural and peripheral The business management perspective areas or small towns for lifestyle reasons, and tourism/hospitality provides the economic The importance of family business as a distinct means to realize these goals. form of management has only lately been The exact scale and significance of family recognized by academics, and has clearly been businesses remains subject to definitional and paid very little attention by tourism and hospi- measurement problems, so mostly we have esti- tality scholars. Owner-operators and family- mates. Westhead and Cowling (1998) reported a owned businesses have been lumped into the number of studies that have found that family categories of small and medium enterprises, firms account for over two-thirds of all businesses which ignores the fact that ownership makes in western, developed economies. In Europe, a huge difference and that many are small 70% of businesses are family owned or for very personal, deliberate reasons. Also, controlled (Thomassen, 1992; Lank et al., the literature is full of references to ‘mom and 1994). Middleton (2001) noted that in Europe pop operations’ which is usually a derisive term 95% of tourism businesses, generating perhaps stemming from the supposed insignificance of one-third of total tourism revenue, are micro- this sector. business and most of these are family businesses. Consequently, little is known about the It has been estimated that in the USA family management of the family business in tourism firms generate from 40% to 60% of the gross and hospitality. What has been demonstrated national product (Ward and Aronoff, 1990) repeatedly, in many countries and settings, and employ half the workforce (Gersisk et al., is that tourism and hospitality attracts many 1997). Dyer (1986) and Rosenblatt et al. (1990) investors for lifestyle and autonomy reasons, suggested that 90–95% of American businesses including the desire to be self-employed and the are family owned or controlled. Shanker and opportunity to remain in, or move to, attractive Astrachan (1996) estimated for the USA that as rural and areas. And there are many many as 20.3 million family businesses exist, unique opportunities for individual entrepre- accounting for up to 49% of the gross domestic neurship and family business within the industry. product and 59% of total employment. Accordingly, the motives, goals and busi- In Australia, Smyrnios and Romano (1999) ness behaviour of owners are different from said that family businesses make up 83% of all other business types. Businesses owned and private-sector companies and employ more than operated by individuals and families are typically 50% of the workforce, but the Commonwealth not grown for the sake of getting bigger, nor are of Australia (1997) noted that about half of all they managed as if profit-making was the sole

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Introduction 3

objective. Family issues intrude on all aspects of to create wealth-generating opportunities the business, especially with regard to sharing outside the core areas. responsibilities, involving the children, and suc- There are numerous policy-related issues cession (inheritance) within the family. Tourism/ involving the family business in terms of eco- hospitality businesses impose a number of nomic development, not the least of which is the special challenges on the family, particularly fact that most owners do not want to grow their seasonality of demand causing cash-flow fluctu- business and will therefore not create very many ations, a high level of host–guest contact, almost jobs. But perhaps some can be tempted and unlimited demands on the operators’ time, and assisted to generate employment for non-family the intrusion of guests into family space and members. time. Another concern is the lack of innovation Do these fundamental differences necessar- among the majority of tourism and hospitality ily make family businesses weak and unimpor- operators. Many people purchase existing tant? Are there no growth-oriented entrepre- properties and do little with them. Others create neurs among them? This book tries to answer services that differ little from countless others. these crucial questions. It is also hoped that Indeed, tourism and hospitality services by family business owners will themselves benefit definition are highly substitutable – that is, the from increased understanding of their distinctive consumer can go elsewhere and obtain the same form of enterprise, and that tourism and benefits. So where is true innovation and hence hospitality students reading this book will better long-term viability to come from? appreciate the opportunities available to them Government and agencies wanting to retain and the challenges faced by the many family population in peripheral and rural areas need businesses they will inevitably encounter. to focus on creating employment. They need answers to the questions posed earlier: is it a sound strategy to assist all small destination perspective start-ups? what about people desiring to purchase a business? can the innovator and growth-oriented entrepreneur be singled out for Family business, in many areas, is the founda- special assistance? tion of destination competitiveness. Small, owner-operated businesses provide most of the services and attractions in numeric terms, and are the outlets for much of the visitors’ spend- Community perspective ing. The quality of experience realized in these businesses helps to determine perceptions The family is at the heart of many communities. of the destination as a whole. But if family If the family also happens to be in business, its businesses are marginal in terms of profits and potential contributions to community viability sustainability, the destination can suffer. and culture are magnified, and so too are its responsibilities. Family businesses can and do make a visible difference in rural and peripheral areas, in small towns and resorts. Their contri- Economic development perspective butions to cities and the larger community of nations are more difficult to demonstrate, Services, and tourism/hospitality in particular, but given the economic significance of the have become the economic engines in many family business sector, are undoubtedly of great areas that would otherwise decline or remain importance. impoverished. In a globalizing world that What happens when family businesses favours huge, transnational corporations, and disappear and the families move away? At a concentrates wealth in large cities and conur- minimum the community loses continuity and a bations, mechanisms are needed to distribute degree of stability. And if the departers are not prosperity more widely. People who do replaced by other families, the community loses just that. So do investors who take new money population – and without children – its future.

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4 Chapter 1

Certainly the mechanics of depopulation in rural one or more people, although micro hospitality areas are well understood, as is the potential ventures like B&B provision will not usually meet contribution of tourism in general (see, for exam- this criterion. It is a fine point, and in this book ple, Getz, 1986). The role of family businesses in not too much is made of the real or implicit particular has not been examined. distinctions. Families, their values and actions are also of concern to communities in terms of leadership in economic development and the environment. Because family-business owners tend to be Definitions of family business rooted in their communities, or might want to make a positive contribution to their selected At the most basic level a family business can be homes, they should be expected to provide lead- defined as ‘. . . an enterprise which, in practice, ership. The importance of this role is magnified is controlled by members of a single family’ in areas dependent on tourism and hospitality (Barry, 1975). This definition can encompass for their economic livelihood, and especially in businesses that involve only one owner, often areas basing their appeal on nature and health. called ‘sole proprietorship’ firms. Definitional complications arise when non-family members are involved in management or ownership What is ‘Family Business’? (such as a partnership), or when a family firm ‘goes public’ with a share offering. Other defini- ‘Family business’ has no commonly accepted tions stress the degree of family involvement, meaning. Indeed, Sharma et al. (1996) and whether or not the business has been or will Chua et al. (1999) comprehensively reviewed be kept in the family across more than one the literature and found 34 definitions. Birley generation, or a mix of criteria (Westhead (2001) also argued that in some countries the and Cowling, 1998). In general, ownership and term ‘family business’ is not used, nor is it managerial criteria are both used. understood. All discussion of family business The 1995 Business Longitudinal Survey must therefore start with consideration of defini- (BLS) involving about 9000 businesses in tional issues, and researchers are well advised Australia (Commonwealth of Australia, 1997) always to state their operational definitions. found characteristics of family businesses to be We start with the premise that a ‘business’ of ‘somewhat elusive’, but the three main elements any kind is a profit-making venture or enterprise were said to be: succession (ownership remain- (Alcorn, 1982). There are, however, a number ing within the family); employment of family of complications, especially within tourism members (with or without management involve- and hospitality, such as part-time businesses ment); and shared management responsibilities (e.g. running tours on weekends while otherwise (family members are jointly responsible for employed), home-based businesses (which running the business). sometimes border on being a hobby), economic Chua et al. (1999) argued for an inclusive activities that are secondary to a main operation definition of family business which would permit (such as farm-based tourism), and a business not hierarchical comparisons of sub-types, other- easily separated from the family home (such as wise the lack of comparability between studies B&B). Indeed, this industry is somewhat unique will defeat the whole notion of treating family in presenting the enterprising person or family business as a separate field of inquiry. For with so many business options. example, in the research undertaken by Getz ‘Self-employment’ is a related concept. and Carlsen (2000) in Western Australia, the sole Owning and operating a business makes criterion for including owners in the ‘family busi- one ‘self-employed’, but a person can be self- ness’ category was that respondents answered in employed and not own or operate a ‘business’. the affirmative to this question: ‘Is your business Provision of services (such as the sex trade or family owned (i.e. owner-operated, or one fam- selling things on commission) is not the same as ily owns controlling interest)?’ This self-selection owning and operating a profit-making business. method has the advantage of being easily under- Normally a ‘business’ is a legal entity owned by stood by respondents and does not impose a

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Introduction 5

narrow definition. It allows analysis by other transference. About 20% of the family business factors such as ownership type, participation by literature is related to this issue of succession other family members, expressed motives and (Sharma et al., 1996: 9). goals, or inherited versus new ventures. The concept of a business life cycle is well Chua et al. (1999) also argued that the embedded in the family business literature, and theoretical essence of a family business lies in it is inherently linked to entrepreneurship. This is the vision of its dominant family members. The because of the profound influence of founders in vision must be to use the business for the better- establishing business goals and organizational ment of the family – potentially across more than culture, and in determining the ultimate disposi- one generation. Birley (2001: 75) also con- tion of the business through sale or within-family cluded that ‘. . . owner/manager attitude is a succession. Accordingly, any study of family more productive approach to describing and business must take into account the interactions understanding the family business sector than between family and business over time. the more traditional methods of equity or mana- The three-dimensional developmental gerial control.’ In this approach the vision (or model of family business by Gersick et al. (1997) motives and goals) and behaviour of the firm are is a useful starting point for understanding family differentiated from non-family businesses and business studies. It links three axes concerned from businesses in which family involvement with ownership, business, and family (see makes no difference to its operations or future Fig. 1.1). The business develops through ‘start- development. up’ and ‘expansion/formalization’ to ‘maturity’. In this book we decided to take a very inclu- Ownership potentially evolves from the ‘control- sive approach in order to make it relevant to any ling founder’ through a ‘sibling partnership’ to individual, couple or family involved in owning a ‘cousin consortium’. Along the family axis and operating a business. Our definition is: are four stages of family development: ‘young business family’; ‘children in the business’; The ‘Family Business’ consists of any business venture owned and/or operated by an ‘working together’; and ultimately ‘succession’ individual, couple(s) or family. (or business termination). As noted by Neubauer and Lank (1998), this 4 × 3 × 3 matrix results in Many family businesses in tourism and numerous possible combinations, and a given hospitality are small, but size is not a factor in our family enterprise could be at more than one definition. Indeed, ‘business venture’ applies to stage on any of the three axes. micro-businesses such as B&B establishments or In the following sections we examine each other services that might not even possess legal of the three axes and their interrelationships, status or hold separate assets. Ownership is also including references to pertinent discussions not a hard and fast criterion, as many people in later in the book. We also incorporate issues tourism and hospitality manage businesses that identified in the cross-case analysis in Chapter they do not fully own, through franchise or lease 11, because the cases provide real-world insights arrangements. and elaborate upon the theoretical model.

A Life Cycle Model for the Family Business The family axis

Neubauer and Lank (1998: 4) observed that In this axis a core concern is with entrepreneur- family business studies are academically related ship, foundation motives and goals. Differences to the traditions of research on entrepreneur- can be expected between individual founders ship, owner-managed businesses, and small and married couples (with or without children) and medium-sized businesses. Overlap of these when they establish a business, as families have four traditions results in a complex interaction to be supported through the business and it of themes, issues and approaches. The cannot be treated simply as a financial invest- dominant and most unique family-business ment. When the family is placed ahead of the topic is that of inter-generational ownership business, sub-optimal business decisions might

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6 Chapter 1

Fig. 1.1. Family business developmental model (Gersick et al., 1997).

result. However, we have discovered that the farmers add a tourism or hospitality business it direct involvement of children in businesses is can complicate the process of inheritance, as not at all common, for a variety of reasons, and business and land might have to be separated. therefore inheritance of businesses is an option Nevertheless, it appears that in the industrialized only for a small minority. world the greatest number of businesses in this Our survey research and case studies reveal industry are created by urbanites moving to rural that many founders of tourism and hospitality areas, and not by the farmers who have always businesses are motivated primarily by lifestyle lived there. and locational preferences, sometimes with the Research data also reveal that some found- needs of children in mind but mostly with their ers were highly motivated by profit and growth own preferences being paramount. Shared hob- prospects, and we called these ‘growth-oriented bies, leisure pursuits, values and lifestyles lead entrepreneurs’. They are somewhat different in numerous couples to enter tourism and hospital- their values, attitudes, strategies and business ity businesses and provide them with a measure practices. For example, they tend to seek out of cohesion. Strength can be derived for families good investments, borrow more money, create when work and play coincide in the business. companies, and favour larger businesses like Ties to the land emerged as an important hotels and , but they are also highly theme in our research. In rural areas, and espe- motivated by lifestyle and locational prefer- cially among farmers, holding on to the farm ences. In the conclusions we discuss the impor- is a matter of stewardship and its inheritance is tance of these entrepreneurs for community and viewed as a legacy for the children. When the destination development.

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Introduction 7

The family life cycle has a potentially can be either informal or formal. Open and profound impact on the business. Bringing honest relations were said to be important by children into the business will eventually lead to some of our married respondents. Responding ownership and control issues. If the children do to adversity was also shown to be crucial, as not want to take over the business, the founders anything impacting on family or business affects might start planning to sell it, but when and the entire family business system. Sibling rela- under what circumstances will this fundamental tionships were found to be an important issue in choice become clear? our case studies, particularly with regard to their Family-business interactions are of utmost skills, interest in the family business, and level of concern in the service sector, especially where involvement with it. customers are invited into the home or on to the Family culture interacts with organizational family property. Some owners will be motivated culture at all levels. Where do the values, tradi- to maximize contacts, while others seek to tions and leadership come from, and are they separate their home and business lives. passed on through generations? Are entrepre- The roles of various family members can be neurship and innovation hereditary or deter- an important factor, including age and gender- mined by parental influence? In some families based differences. Female entrepreneurs are there is a strong desire to create or perpetuate numerous in this industry, partly owing to the a legacy of land, business or wealth, while in secondary nature of some of the businesses (for others it is absent. Not only does family culture example, B&B within the family home), and the permeate business decision-making but it sets an desire of many women to earn extra money, emotional climate into which employees and further their children’s prospects, or gain some guests enter temporarily. According to Litz and independence. In some cultures the natural heirs Kleysen (2002: 291) family culture needs more are expected to be males, while daughters face study to develop a theory of the family firm. For an uncertain future in the family business. As example, they asked, ‘. . . what kinds of family well, a division of labour based on traditional cultures support innovation and what cultures gender roles (e.g. females cook and clean, males frustrate it?’ do heavy work) might occur naturally without Broader cultural factors also affect the discussion, while in other family businesses family business. In some cultures entrepreneur- a married couple will plan their roles. Several ship is valued and in others it is atypical. Gender respondents told us that flexibility is a key, roles and inheritance can be greatly impacted by with everyone in the family expected to do cultural norms. whatever is necessary and not worry about job descriptions. Yet invariably it was the women who did the financial work and bookkeeping! Family members have to believe in the The business axis business and show a sense of responsibility toward it. The level of family support given to the The three stages of business development (start- business, including money and labour, might be up, expansion/formalization, maturity) relate to critical in assuring its success. The foundation professionalization of the owners and the busi- stage requires strong support from all family ness, structure, growth, business operations, members, or (as shown in at least one of the owner–worker relations, and planning. One of cases) all members must at least acquiesce. It the central questions in family business studies can certainly be hypothesized that division over is that of control and stability versus a growth the foundation of a family business will lead to orientation. In other words, do family and disharmony and problems later. lifestyle considerations take precedence over A related theme is that of internal family growth? conflicts, specifically over goals and agreement Most family businesses in tourism and on solving problems, plus the issue of finding hospitality never evolve beyond the foundation equal worth within the family business or within stage. Farm families motivated to secure a little the family in general. Dispute identification and extra income, or B&B operators interested in resolution mechanisms are needed, and they meeting visitors, are unlikely and often unable to

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8 Chapter 1

expand. Growth for the sake of growth, or to Financial management skills are essential maximize profit, is often not desired in family for the family business operator. Mostly it is firms. Rather, the owners need to carefully females who do this work, but where do their weigh the merits of remaining debt-free versus skills come from? Formal training in marketing borrowing to expand, and the need to add value and other management skills helps, but is not to the business in order to generate an adequate always available. income. Taking on paid staff or retaining profes- sional managers are big issues for small family businesses. Owner-operators in tourism and The ownership axis hospitality often have to hire staff seasonally, but fall back on family members during low- Some of the key questions along this axis demand periods. Many want to hire managers or are: what ownership forms are used by family lower-level staff to free up the owner’s time, but businesses; who in the family is involved in costs and risks intervene. ownership; and how does that evolve and are Lack of professionalism is a frequent com- there gender differences? The model (Fig. 1.1) plaint levelled at family businesses. In tourism suggests that siblings take over from founders and hospitality, low entry barriers might attract and ultimately a group of cousins might end up investors with little or no relevant training or in control of the business. education. This can severely limit their potential A central issue for all family businesses is to grow or prosper. And if family firms grow that of control. A family firm can be controlled substantially, should they hire professional without total ownership, but many owners might managers or establish a board of directors not want to take on partners or issue public encompassing non-family members? These shares. Also, if founders are determined to per- questions clearly link to ownership and control. petuate family control they need to install legal Our research revealed a number of impor- mechanisms to prevent family shares from being tant challenges for operating a family business in sold externally, such as by establishing a family this industry. There is a real need for excellent trust. Many notable family businesses have customer service, including family branding self-destructed through in-fighting over control and cultivating networks among suppliers and and/or asset disposition. Some of our respon- industry partners. Going it alone is difficult, so dents also showed us that partnerships between alliances and cooperative efforts, particularly in families can be quite problematic, with one marketing, become essential. We observed an ultimately buying out the other as a solution over-dependence on word-of-mouth marketing, to disputes. which works well when demand is steady Financing, ownership and control are inter- or expanding, and a weakness in doing dependent. Equity in real estate, as with farms segmentation to determine key target markets. and houses used in the business, might have Human resource management is quite dif- to be mortgaged to start and operate a tourism ferent in the family business. Most ‘employees’ and hospitality business. Property assets might are family members, and they are not always be high in paper value, but the business might paid a wage or salary. Children might work generate little in the way of cash flow. This leads informally in the business, leading to issues of to difficulties in both paying family members a lifestyle, safety and training. When should they proper income and allowing them to ‘cash in’ on become real, paid employees? Many respon- the business or land value. A classic problem is dents told us they were hoping to be able to deciding how much income to put back into the afford to hire paid staff, in order to lift the burden business as working capital, as opposed to taking of work, but they either could not generate it as income or dividends. It appears that many sufficient and sustained income or they lacked families plough their earnings back into the confidence or trust in non-family workers. Man- business out of necessity or the desire to grow it. aging part-time and casual staff is often required, Access to capital is a real challenge for particularly because seasonality of demand is the family business owner, and so most rely on such an important limiting factor in this industry. their own or family support plus bank loans and

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Introduction 9

mortgages. Under-capitalization limits profits together, with different opportunities and issues and growth potential, although this is common to face at each stage. Ownership might have to to small businesses in general. Too much debt, adapt as children become involved, and ulti- however, threatens the business and the family’s mately a decision has to be made about keeping security. Most respondents in our surveys and the business in the family (i.e. succession), selling cases were debt-averse, except for the ‘growth- out, or dissolving it. Decision-points along one oriented entrepreneurs’ who look for and seize axis affect elements in the others. financial opportunities. The ability to survive a This model also clearly points out the need financial shock, such as a major downturn in for long-term, strategic thinking in the family demand, is a matter of life and death for small, business. Do the founders want to create a family family businesses. Many fail or consistently legacy, or are children and their future in the under-perform, even in their owners’ opinions. business even a consideration? The characteris- In many cases the land and/or business tics of second- or third-generation family busi- might have to be sold outside the family because nesses are likely to be quite different from those owners need the money for their retirement. in the early years. Because research in a number But if owners are looking ahead to within- of countries has revealed a very high level family inheritance of the business, the form of of start-ups, and a small number of family ownership might have to change. For example, businesses that have been inherited, less is potential heirs can be brought legally into the known about the long-standing family business ownership before the founders retire. Problems in tourism/hospitality. might arise if more than one potential successor is involved in the business, especially where real property is to be kept separate from business assets. Major themes in family business studies We found that planning for succession was not at all prevalent, and for many respondents Table 1.2 provides a broader summary of the question of inheritance within the family the main family business themes. A key source was not even an issue – it was not desired or for this tabulation is the annotated bibliography not practical. Those who do want their family produced by Sharma et al. (1996). While all of members to take over a business must plan for the main themes are discussed in this book, it well in advance, especially by getting their as well as the key life cycle-related challenges children involved at an early stage and giving indicated earlier, they are not all treated equally them increasingly responsible roles to play. or in depth. This is partly due to insufficient Many barriers have been identified, and so industry-specific material. Also, because the it is when a successful succession takes place. bulk of family businesses in tourism and Equally, it is unusual to find mutigenerational hospitality never make it to the second or third family businesses in tourism and hospitality. generation, there is less value in dwelling on succession planning, ‘sibling partnerships’ or the ‘cousin consortium’ stage.

Using the life cycle model A Framework for Understanding Family Table 1.1 summarizes much of the discussion Business in Tourism and Hospitality by Gersik et al. (1997) on challenges facing the family business through the life cycle. For each While generic family business issues are applic- of the three axes of ‘business’, ‘ownership’ and able, it is also apparent from the research and ‘family’, some key challenges within each literature examined in this book that that the hypothetical development stage are indicated. tourism and hospitality industry embodies a What is particularly useful about this number of unique or especially important con- life cycle approach is that it encourages inte- siderations relative to the family business. Figure grative thinking and research about the family 1.2 gives a conceptual starting point for under- enterprise. The business and the family evolve standing the family business in this industry.

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10 Chapter 1

Table 1.1. Challenges through the family business stages of development (from Gersick et al., 1997).

Business Ownership Family

Start-up Controlling owner Young business family • Survival (market entry, • Capitalization • Creating a workable marriage business planning, • Balancing unitary control with enterprise financing) input from key stakeholders • Making initial decisions about the • Rational analysis versus • Choosing and ownership relationship between work and family the dream structure for the next • Working out relationships with the generation extended family Expansion/formalization • Raising children • Evolving the owner- Sibling partnership manager role and • Developing a process for Entering the business professionalizing shared control among • Managing the midlife transition the business owners • Separation and individuation of the • Strategic planning • Defining the role of younger generation • Organizational systems nonemployed owners • Facilitating a good process for initial and policies • Retaining capital career decisions • Cash management • Controlling the fractional orientation of family branches Working together Maturity • Fostering cross-generational • Strategic refocus Cousin consortium cooperation and communication • Management and • Managing the complexity of • Encouraging productive conflict ownership commitment the family and the stakeholder management • Reinvestment group • Managing the three-generation • Creating a family business working together family capital market Passing the baton • Senior generation disengagement from the business • Generational transfer of family leadership

The core of the framework has already been and hospitality businesses exist act as modifiers discussed, consisting of the family vision and the of the core elements. The setting is important three interdependent axes of family, ownership both in terms of location (urban, rural, resort and and business evolution. One can look for unique peripheral are discussed) and with regard to aspects of vision (and related goals), and of the cultural influences and the level of economic evolution of ownership, family and business that development. are found in no other industry. Researchers can also try to identify particularly dominant forces within the industry that affect the family business. The core The nature of the industry itself acts to modify family business issues. We first address Why people get into and stay in tourism and the general business environment for tourism hospitality businesses is a crucial question, and hospitality, then look at a number of specific particularly when the industry offers so many modifiers including the nature of the services challenges and often delivers a poor return on provided, host–guest relationships, cyclical investment. For a small minority there is little if demand (especially seasonality), the influence of any family consideration, but most owners and the destination life cycle, and unique business operators in the industry work with one or more opportunities. family members and many are preoccupied Tourism and hospitality is a truly global with family matters. It is vital to understand their industry, and the many settings in which tourism motives, goals and family vision, particularly as

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Introduction 11

Table 1.2. Major themes in family business studies.

Themes Specific topics within themes

Definitions • Criteria for defining a family business • Types of family businesses Uniqueness of family business • Their unique strengths (e.g. family branding; loyalty) and weaknesses (e.g. nepotism; lack of growth) Life-cycle • Evolution of ownership, the family, and the business Succession and inheritance • Succession and estate planning • Barriers to involvement of children Governance • Ownership, control and organizational structure • The owner/founder, CEO and Boards of Directors • Family trusts Strategic management • Family vision (e.g. taking the long-term perspective) • Strategies and strategic planning The founders • Motives and goals • Entrepreneurship • Leadership • Reluctance to ‘pass the baton’ Family influence and dynamics • Family culture (e.g. the legacy; innovation) • Sibling rivalry • Copreneurship (couples working together) • Gender roles • Intergenerational relationships • Nepotism Culture and ethnicity • Variations in family business • Influences of culture or ethnicity Professionalism • Working with employees • Transition to a professionally managed firm; professional advisers The family in society • Social and community responsibility • Environmental attitudes and practices • Social and family networking

Source: Sharma et al., 1996.

Fig. 1.2. A framework for family business theory and research in the tourism and hospitality industry.

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12 Chapter 1

they might affect business viability and wider hospitality. In most cases, the autonomy and economic and community development. lifestyle goals prevail and the business is deliber- Our examination of core issues begins in ately kept small and manageable. Mobilizing the Chapter 2 with a detailed discussion of entre- growth-oriented entrepreneur should be a prior- preneurship as it applies to the family business. ity of economic and destination development This theme also figures prominently in Chapter 3 agencies, as should the task of identifying latent where motives and goals of family business entrepreneurship among those constrained by a owners in the industry are examined in detail, lack of capital or professional advice. and again in the case study chapters. Indeed, Where is the family vision in all this? First, consideration of family vision and business autonomy and lifestyle motives are a family-first goals permeates the book. A number of major vision, making the business a means towards an conclusions about the core vision are discussed end. For a sub-set, the business offers the specific in this book’s conclusions. By way of preview, type of family life the owners (typically couples the following paragraphs summarize the most working together) are seeking. Either way, the important points. dominance of these types of family business The need for autonomy drives many entre- in tourism and hospitality, at least in highly preneurs, and control-related motives and goals developed economies, ensures that the sector are found to be very important among owners of will remain largely one of small and micro tourism and hospitality businesses. Autonomy businesses. Second, the family vision as related also leads many people specifically to service- to children and possible succession is revealed sector ventures where they can manage an to be of secondary importance and frequently establishment in a hands-on fashion. Autonomy is not an issue at all. As will be demonstrated, and lifestyle motives are closely bound. most family businesses in this industry do Lifestyle motives are a dominant reason for not involve children at all, and very few get setting up or purchasing a tourism or hospitality inherited. business, particularly the desire to live in an While motives and goals have been clearly attractive (often rural) area. Related motives identified, less is known about evolutionary include the desire to stay in or return to family processes within and among the three axes of property, and the notion of creating or ownership, family and business. Most do not perpetuating a family legacy. Resorts and other involve children or make it to the next genera- recreational environments attract a lot of people tion. Researchers will have to focus on selected interested in pursuing their favourite sports, multi-generational family businesses to deter- while hospitality businesses afford operators mine if they behave differently from other family the opportunity to pursue life-long interests businesses. in a creative environment (e.g. cooking, arts and crafts, flowers, catering, decorating, events production). Some entrepreneurs and self-employed The business environment and persons have little choice. They either need industry-specific modifiers extra income (such as to support a farm) or the economy does not provide good employment Tourism and hospitality are not always alternatives. Migrants might find their new envi- considered together, nor are they universally ronments to be hostile and self-employment acknowledged to be an industry, but from the is therefore preferred, particularly where family perspective of family business studies they are and ethnic networks can be of assistance. sufficiently similar to be studied together. For Migrants returning home from abroad have the purposes of this book, the tourism and been found to be a source of investment in hospitality ‘industry’ is defined as consisting tourism and hospitality, as they can bring back of those businesses catering for travellers and new capital, skills and attitudes. persons pursuing leisure activities, including The profit-maximizing, growth-oriented accommodation, catering (food and beverage entrepreneur has been found to be a small services), and tour services, attrac- minority within family businesses in tourism and tions, activities and entertainment. As well,

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Introduction 13

in many tourist destinations a large number hostile to the family business. It is a tribute to of retailers and arts and crafts manufacturers individual and family vision, hard work and cater primarily to visitors, so a broad range of persistence that the sector endures and that enterprises can be included. However, the full many families actually prosper. extent to which tourism and hospitality services resemble other service-sector family businesses Nature of the service remains to be examined. Tourism and hospitality are highly experiential The business environment in nature. In fact, the family can be an important part of that service, especially when Westhead and Cowling (1998: 44) discovered the business brings customers into the family’s through systematic research in the UK that home or land. Wanhill (1997) noted that fami- ‘. . . family companies are over-represented lies can be part of the tourism experience, and in services activities with low capital require- can help to increase customer satisfaction by ments.’ They are also over-represented in rural providing good local information to visitors. areas, and especially in hotels and catering, and When the family becomes part of the attraction are smaller in terms of sales and number of it can be said that ‘family branding’ is occurring, employees. and this could become a powerful competitive Part of the explanation for this over- advantage. Researchers and teachers in tourism representation of family businesses is the fact and hospitality have not paid much attention that many types of tourism and hospitality busi- to family branding, but this book contains ness are easy to enter and exit. Either they do not an excellent case and a pertinent discussion require special skills, lengthy experience, or large of issues. amounts of capital, or entrepreneurs think they do not. Naivety and over-optimism seem to be Host–guest relations commonplace in small family businesses in these sectors. One result is that many such businesses Many tourism and hospitality businesses require fail to meet owners’ performance standards, or a high degree of host–guest contact, often to the fail outright. point where family and work become blurred. Policy regarding economic development The owner or owner’s family members directly generally favours tourism and hospitality invest- provide guests with accommodation, hospital- ments, at least in designated areas – typically ity, entertainment, information and inter- those peripheral to urban and economic centres. pretation, food, or activities. Regardless of their Ironically, the industry is also highly regulated growth orientation, families must usually add and taxed. Consumer rights, health and safety, value to their business to earn enough money environmental codes, land use planning and to hire staff so they can gain relief from much more impact on small and micro busi- long hours and constantly being ‘on call’. For nesses disproportionately. example, Long and Edgell (1997: 73) observed Tourism and hospitality services are experi- in their case study of a couple running a ential, and therefore highly substitutable. Com- campground: ‘The owners did note the value of petition is frequently intense, not only between being able to leave the property from time to businesses offering virtually identical products time and the importance of having dependable and services, but between all destinations. Large employees to look after the operation when corporations and franchise chains have tremen- they are away.’ dous advantages, leaving family businesses to Contact between hosts and guests is some- find viable niche markets. Small businesses in times a motive for establishing the business, general can organize to achieve greater efficien- but also a potential source of stress through cies in operations and a wider market reach, but loss of privacy, handling many demands and often there are not enough of them in an area to complaints, and time pressures. Some of the make a real difference this way. businesses require a high degree of technical To some, the tourism/hospitality business expertise, but many are rooted in ‘people skills’ environment is typically challenging and often like friendliness, helpfulness and integrity.

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14 Chapter 1

Cyclical demand and seasonality owner-operators and resident versus in-migrant owners. Din (1992) specifically hypothesized One of the hallmarks of tourism is cyclical that local entrepreneurs dominate in the demand (Murphy, 1985). Many destinations early stages of development, while Shaw and tourism settings are particularly hard hit and Williams (1997) suggest that it cannot be by seasonal and weekend peaks, followed by assumed that residents have access to capital or low demand periods. In the Western Australian are entrepreneurial enough to take advantage sample (Getz and Carlsen, 2000), 61% agreed of new opportunities. Cooper (1997: 87), com- or strongly agreed that their business was highly menting on the decline of British coastal resorts, seasonal. Another 17% were uncertain, which said that many resorts suffer from a lack possibly reflects their newness. of investment in the accommodation sector. The main problems presented by seasonal- ‘This is due to a combination of seasonality, low ity relate to cash flow and overall profitability, occupancy patterns and the characteristics of even threatening their viability (Baum, 1998), ownership in the sector, all of which conspire to but it does offer families a lull during which pur- drive down profitability.’ suit of family and lifestyle goals can dominate. It remains questionable whether or not any In fact, Brown (1987) concluded that taking a stage in the hypothetical life cycle of destinations long, seasonal break from work was a motivator presents better opportunities for family business, for some family business owners, and this fact for residents versus in-migrants, or small versus impeded growth potential. large companies. A connection between family Can small businesses survive the potential business and resort decline has been hypothe- cash-flow problems? Can families adjust to the sized and should be tested in a variety of settings. peaks and troughs in terms of workload? Is staff available to help out? These represent very seri- Unique business opportunities ous challenges to the family business owner. A study of seasonality in the Danish island of Born- Tourism and hospitality present a number of holm (Lundtorp et al., 1999) revealed some of unique business opportunities that appear to the pressures that are generated on family busi- have specific appeal to individual entrepreneurs nesses. They found that owners relied heavily on and to families. People interested in outdoor summer student workers to meet peak demand, recreation can start touring or outfitting com- and often worked 100 hours a week themselves panies, or provide facilities. Those with rural over a 16–20 week season. Some took another property can establish farmstays, campgrounds, job in the off-season, while others had to sustain and B&B houses, all of which have their own the business (e.g. repairs, marketing). niche markets. Opportunities also exist to meet Seasonality of demand is such a global tourists’ needs and desire for fresh produce, phenomenon, and usually so predictable, that antiques, or other merchandise with a unique owners and potential investors in tourism and rural flavour. There is virtually an unlimited hospitality have to carefully weigh the implica- scope for creativity, hands-on operations, and tions for business viability and decide whether or provision of new types of services and service not they can handle (or even prefer) the seasonal environments. lifestyle swings. A number of strategies can be employed by family businesses to either counter cyclical demand or adapt to it, as discussed in Chapter 4. All of the options have impacts both Setting modifiers: location on family life and business prospects. Although there is a spectrum of settings to Destination life cycle consider in geographical terms, most attention within the tourism literature has been given to The destination life cycle model (Butler, rural, resort and peripheral settings. Not much 1980) incorporates an evolution of business has been said about small and family businesses investment and ownership with implications for in urban locations.

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Introduction 15

Urban settings with access to animals and social contacts with the owners, or merely accommodation. They are Urban areas should present numerous opportu- usually established to supplement farm income nities for family businesses, but as discovered by and apparently perform poorly in financial Westhead and Cowling (1998) in the UK, they terms. are actually over-represented in rural areas. Numerous issues pertaining to tourism and Mostly there are no comparative data available hospitality businesses in the rural environment on urban versus other business environments have been identified and discussed by Page and for tourism and hospitality enterprises, so it Getz (in The Business of Rural Tourism, 1997). remains a topic in need of study. Some of these are especially pertinent to family The urban environment certainly presents businesses, although there has not been any numerous opportunities for family businesses in systematic research aimed at making that retailing, catering, accommodation and other connection. First, dependency on the natural services, because of large local and travel mar- resource base is high, and often an essential part kets to draw upon and presumably less seasonal- of the tourism experience. Accordingly there ity of demand. As most cities have areas or high- is a need for sustainable development and way strips where and restaurants flourish, operations in all businesses, and an appropriate it can be hypothesized that family businesses will ethic among business operators. find niche markets and be spatially concentrated People interested in the environment in the urban setting. A contrary hypothesis (and in outdoor recreation) might therefore might be that large corporations and chains will make better prospects for rural tourism and dominate urban markets to the point where hospitality investments. smaller, family businesses are not competitive. Rural areas are frequently remote from markets and have accessibility problems due to Rural areas distance or poor infrastructure. In such areas businesses can be highly dispersed, increasing Many researchers have written about farm their dependence on intermediaries to connect and rural tourism, and it has generally been supply with demand, and on destination organi- concluded (e.g. Evans and Ilbury, 1992; Page zations or industry partnerships for marketing and Getz, 1997) that there has been substantial efforts. Some families living in remote areas growth in this industry in recent decades. Part might desire the new revenue and social inter- of the explanation for expansion is that of sub- actions that a tourism business can bring, while sidies to farmers for diversification, and partly others do seek out remoter areas for lifestyle it is attributable to the lifestyle and locational reasons and use tourism as a means to survive choices of numerous entrepreneurs. there. Remoteness and/or poor accessibility Komppula (2000) noted that there are have serious business implications (from extra about 3600 rural tourism enterprises in Finland, costs to increased risks of theft and fire) and of which three-quarters were originally farms. also impact directly on the family in terms of However, tourism is a major source of income relationships, shopping, leisure opportunities, for only about 15% of these mostly family- schooling, and other essential services. This owned enterprises. They are characteristically environment most likely attracts and sustains part-time owner-operators possessing limited certain types of personalities, or families with financial resources, low skills and little commit- unique backgrounds, and repels others. ment to development. The businesses them- Another feature of rural tourism and selves consist of cottages and farm buildings for hospitality businesses identified by Page and rent, B&B accommodation, farm visits, group Getz (1997) is that of financing difficulties. Many catering, holiday villages and recreational are self-financed, in part to retain control, and activities. partly because of the difficulty in obtaining loans In Denmark about 10% of farms have or external investors. This can expose the family developed some form of tourism service business to high financial risks, and can easily (Hjalager, 1996). These include farm limit their ability to grow or adapt.

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16 Chapter 1

Peripheral areas The special issues applying to tourism in peripheral areas have been examined in ‘Peripherality’ in the European Union context some detail (Brown and Hall, 2000). Island is based on distance from the economic tourism studies, which often embodies centre, and implies some or all of the following peripherality issues, has also produced a characteristics (from Nilsson et al., 2004): number of specific books and special issues • Sparsely populated, and often of academic journals. Although family-related depopulating. issues are frequently mentioned in these studies, • Dependent on primary resource extraction notably gender roles and the prominence of or farming; a small manufacturing sector. lifestyle entrepreneurs, nothing systematic has • Relatively isolated communities (particu- been reported on family business themes in larly on islands, along coastlines and in peripheral tourism. rural areas). • Costly and/or difficult accessibility. Resorts • Extreme seasonality. • Potentially high impacts on communities Resorts are self-contained settings for vacations and the ecosystem. or other overnight trip types. By definition they are visitor-oriented and focus on services of all The tourism industry is often of great kinds for meeting visitor needs and preferences. economic importance in peripheral areas, given They range from small ecolodges in natural the lack of viable alternatives. European Union areas to fully-planned, integrated resort com- policies have favoured tourism development plexes and major cities. Resort environments (Wanhill, 1997) as an organic solution, with the should be the richest of all for family businesses assumption that farms can add facilities and in tourism and hospitality, mainly because of fishing communities can adapt to recreational the wide range of required services and a huge activities. However, peripheral tourism typically scope for niche marketing. But are they? Later suffers from high costs, low accessibility, a lack of in this book comparative data are presented infrastructure or quality facilities, and a depend- from research on family businesses in two resort ence on intermediaries. The local population environments – an island, coastal resort area might not have the skills, capital or inclination to (Bornholm, Denmark) and a mountain resort develop tourism, and a dependence on govern- (Canmore, Canada). Large, urban resorts have ment aid might actually stifle entrepreneurship not been studied from the family business (Morrison, 1998). Marketing and planning perspective, nor have remote eco-resorts. functions for tourism are also likely to be The nature of the resort attraction base under-developed in these regions. might play a major role in determining family Morrison (1998: 195) defined ‘positives’ business opportunities (e.g. small tour compa- and ‘weaknesses’ for the small tourism and nies) and of course the markets – such as a hospitality firm in peripheral areas. In addition preference for B&B or budget accommodation. to the challenges mentioned earlier, these firms It might also be that the resort life cycle favours (in most cases they are family businesses) family businesses at the early stage of develop- face scarce human and constrained financial ment, before chains and large corporations resources, declining traditional markets (such as make substantial inroads. the long, seaside holiday in hotels and pensions), and a fragmented industry. On the positive side, small businesses can attempt to capitalize on the appeal of nature and solitude, cultural authentic- The setting: level of economic development ity, personalized service, and where available, public-sector support. As well, Haber and Highly developed, industrialized economies Lerner (2002) suggested that tourism ventures in can be expected to generate more and different peripheral areas might be able to take advantage opportunities and challenges for entrepreneurs of under-exploited factors of production, such as and family business. Cultural factors will also existing farm buildings. vary along the development continuum. One

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Introduction 17

probable difference is the dominance of a life- the hinterland as a resort or tourist enclave style orientation among tourism and hospitality develops. owners in developed economies, whereas in Culture influences entrepreneurship in poorer economies it can be expected that general and family business specifically, as some people have less money and less choice, giving cultures are more open to personal and family rise to a family business by necessity. business initiatives, and among some cultures In tourist-receiving societies in less- continuation of a family business is either developed nations, according to Harrison shunned or encouraged. For example, Dondo (1992), structures inherited from the colonial and Ngumo (1998) said that Kenya does not period might act against entrepreneurial activity have a culture strongly supportive of entrepre- by residents, or restrict them to specific sectors. neurship – it is too conformist, with collective In-migrants (often retiring in a new location) rather than individualistic values predominating. or returning migrants often dominate the entre- Also, Kenyans tend to live for the moment, lack preneurial class. Local elites are often favoured independence, and are reluctant to accept in developing business links with international responsibility. Much of this stems from tribal tourism firms, and these elites might stem from traditions. racial or ethnic differences. Family business exists within aboriginal Research by Haber and Lerner (2002) or indigenous communities, but it has not revealed that the inherent attractiveness of been examined in any systematic manner. The the location (within Israel’s Negev region) was tourism and hospitality literature contains many more important than institutional support in examples of indigenous or aboriginal tourism explaining business profits, but organizational development, but few deal with individual and managerial variables were the most impor- entrepreneurship or family matters. Getz and tant variables. They also examined various types Jamieson’s (1997) case study of one native of support that could be utilized in remote entrepreneur in , Canada, demonstrated areas and lesser-developed economies, special concerns of ownership (i.e. who owns including business ‘incubators’, financial and the cultural ‘product’?) and the potentially wide informational/advisory support. extent of family involvement in any business Resorts often occupy a special place in venture. When community ownership of developing economies. If the resort is a fully self- resources prevails, entrepreneurship and family contained enclave, it might generate few if any business take on different characteristics. local business opportunities. Larger, integrated Notzke (1999) reported on one married resort complexes present many opportunities for aboriginal couple in the Canadian Arctic who both ‘grey-market’ self-employment (e.g. drugs, were firmly rooted in a way of life tied to the the sex trade) and local investment in service land, but who provided a tourism product for enterprises. part of the year. This combination maximized the family’s ability to maintain their way of life. Many tourists want this type of authentic cultural experience, especially as it provides The setting: culture opportunities for learnig about everyday life in aboriginal communities and families. Family business in tourism and hospitality will In Western Samoa, Fairbairn-Dunlop also be linked to culture, although this theme (1994) concluded that customary land owner- has only been touched upon in the research ship results in the necessity that tourism ventures literature. The core–periphery model was used be family or village initiatives. Samoan woman by Britton (1981) to explain the development of have built successful businesses out of an initial entrepreneurial enclaves in developing nations, small-scale activity because the endurance of and these hypothetically present similar oppor- customs has meant that women have received tunities for family business as those existing an education, are used to taking initiatives and in fully industrialized economies. Lundgren’s accepting the consequences, and can use the (1973) evolutionary model suggests increasing traditional family system for the benefit of entrepreneurial opportunities for residents of the family and the business.

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18 Chapter 1

Frideres (1988) argued that capitalism runs modifiers make family business somewhat counter to the interests of indigenous people, unique in tourism and hospitality. The most and that development must be based on important modifiers are likely to be the nature of community control rather than individual the service environment, including host–guest enterprise, but there are many examples of interactions that are frequently home-based, the both collective and individual native enterprise owners and family as part of the experience, in tourism and hospitality, so it remains an issue cyclical demand (i.e. seasonality), the destina- for research and debate. tion life cycle, and unique business opportunities such as those stemming from farm operations or personal leisure interests and skills. Setting Chapter Summary modifiers have also been explored in detail, beginning with the differences imposed by a Issues specific to the family business in tourism peripheral, rural, resort or urban location for the and hospitality have long been subsumed under family business. The level of economic activity in the more general headings of small business the environment will have an impact on family and entrepreneurship. What makes the family business, as will cultural factors. business unique and worthy of special interest is not merely its almost global significance in terms of numbers of enterprises, nor its typically small References size. Rather, it is the vision of owners to start a business to serve personal and family Alcorn, P. (1982) Success and Survival in the Family- needs, potentially across generations, that sets owned Business. McGraw Hill, New York. them apart. Often they are based on lifestyle Barry, B. (1975) The development of organisation and locational preferences, plus the desire for structure in the family firm. Journal of General autonomy, and do not seek or are incapable of Management Autumn, 42–60. supporting growth and profit maximization. Baum, T. (1998) Tourism marketing and the small island environment: cases from the periphery. In: A greater understanding of the family busi- Laws, E., Faulkner, B. and Moscardo, G. (eds) ness and its environment will not only aid in the Embracing and Managing Change in Tourism: betterment of this important industry sector, but International Case Studies. Routledge, London, will provide benefit to economic and community pp. 116–137. development, and to destination competitive- Birley, S. (2001) Owner-manager attitudes to ness. They are so important, particularly in family and business Issues: a 16 country rural, resort and peripheral areas, that ignoring study. Entrepreneurship Theory and Practice their special goals and needs can potentially 26(2), 63–76. be very damaging to industry and community Britton, S. (1981) Tourism, Dependency and Develop- sustainability. ment: a Mode of Analysis. Occasional Paper No. 23. Development Studies, Australian National This introductory chapter defines ‘family University, Canberra, Australia. business’ and utilizes a well-known life cycle Brown, B. (1987) Recent tourism research in south model (Gersik et al., 1997) to establish a east Dorset. In: Shaw, G. and Williams, A. (eds) framework for examining the inter-dependent Tourism and Development: Overviews and Case evolutionary processes of ownership, family and Studies of the UK and the South West Region. business. Major themes in the generic family Department of Geography, University of Exeter, business literature are also summarized, and Exeter, UK. these are revisited in the concluding chapter in Brown, F. and Hall, D. (eds) (2000). Tourism in the context of identifying research needs specific Peripheral Areas: Case Studies. Channel View to tourism and hospitality. Publications, Clevedon, UK. Butler, R. (1980) The concept of a tourist area An industry-specific framework was devel- cycle of evolution: implications for manage- oped for understanding the family business, ment of resources. Canadian Geographer 14, starting with the generic core of family vision 5–12. and the three evolutionary processes of family, Chua, J., Chrisman, J. and Sharma, P. (1999) Defining business and ownership. It has been argued that the family business by behaviour. Entrepreneur- the business environment and industry-specific ship Theory and Practice 24(4), 19–39.

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Introduction 19

Commonwealth of Australia (1997) A Portrait of environmental factors on performance. In: Australian Business. Department of Industry, Krakover, S. and Gradus, Y. (eds) Tourism Science and Tourism, Canberra, Australia. in Frontier Areas. Lexington Books, Lanham, Cooper, C. (1997) Parameters and indicators of Maryland, pp. 141–163. the decline of the British . In: Harrison, D. (1992) Social consequences. In: Shaw, G. and Williams, A. (eds) The Rise and Harrison, D. (ed.) Tourism and the Less Fall of British Coastal Resorts: Cultural and Developed Countries. Belhaven Press, London, Economic Perspectives. Mansell, London, pp. 19–34. pp. 79–101. Hjalager, A. (1996) Agricultural diversification devel- Deloitte and Touche (1999) $1.3 trillion at stake as opment into tourism. Evidence of a European Canada’s family businesses face leadership crisis. Community development programme. Tourism www.deloitte.ca Management 17(2), 103–112. Din, K. (1992) The ‘involvement stage’ in the evolution Komppula, R. (2000) Definitions of growth and of a tourist destination. Tourism Recreation success – case studies in Finnish rural tourism Research 17(1), 10–20. industry. Paper presented at the 12th Nordic Dondo, A. and Ngumo, M. (1998) Africa: Kenya. Conference on Small Business Research, In: Morrison, A. (ed.) Entrepreneurship: an Inter- Kuopia, Finland. University of Kuopia national Perspective. Butterworth Heinemann, Department of Business Management. Oxford, UK, pp. 15–26. Lank, A. (1995) Key Challenges Facing Family Dunlop, M. (1993) Parents’ beliefs can cause trouble Enterprises. IMD Publication, Lausanne, in family firms. The Toronto Star 20 November, Switerland. pp. K2. Lank, A., Owens, R., Martinez, J., Reidel, H., de Dyer, W. (1986) Cultural Change in Family Firms: Visscher, F. and Bruel, M. (1994) The state of Anticipating and Managing Business and Family family business in various countries around Traditions. Jossey Bass, San Francisco. the world. The Family Business Newsletter Evans, N. and Ilbery, W. (1992) Advertising and May, 3–7. farm-based accommodation: a British case Litz, R. and Kleysen, R. (2002) Old men will dream study. Tourism Management 13, 415–422. dreams, your young men will see visions: a Fairbairn-Dunlop, P. (1994) Gender, culture and conceptualization of innovation in family firms. tourism development in Western Samoa. In: In: Chrisman, J., Holbrook, J. and Chua, J. (eds) Kinnaird, V. and Hall, D. (eds) Tourism: a Innovation and Entrepreneurship in Western Gender Analysis. John Wiley & Sons, Canada: From Family Businesses to Multi- Chichester, UK, pp. 121–141. nationals. University of Calgary Press, Calgary, Frideres, J. (1988) Native Peoples in Canada: Canada, pp. 269–298. Contemporary Conflicts, 3rd edn. Prentice-Hall Long, P. and Edgell, D. (1997) Rural tourism in the Canada Inc., Scarborough, Canada. U.S.: the peak to peak scenic byway and KOA. Gersick, K., Davis, J., Hampton, M. and Lansberg, I. In: Page, S. and Getz, D. (eds) The Business (1997) Generation to Generation. Harvard of Rural Tourism: International Perspectives. Business School Press, Boston, Massachusetts. International Thomson Business Press, London, Getz, D. (1986) Tourism and population change: long pp. 62–76. term impacts of tourism in the Badenoch- Lundgren, J. (1973) Tourist impact/island entrepre- Strathspey district of the Scottish Highlands. neurship in the Caribbean. Cited in: Shaw, G. The Scottish Geographical Magazine 102(2), and Williams, A. (1994) Critical Issues in 113–126. Tourism: a Geographical Perspective. Blackwell, Getz, D. and Carlsen, J. (2000) Characteristics and Oxford, UK, p.126. goals of family- and owner-operated businesses Lundtorp, S., Rassing, C. and Wanhill, S. (1999) The in the rural tourism and hospitality sectors. off-season is ‘no season’: the case of the Danish Tourism Management 21, 547–560. Island of Bornholm. Tourism Economics 5(1), Getz, D. and Jamieson, W. (1997) Rural tourism 49–68. in Canada: issues, opportunities and entre- McKercher, B. (1998) The Business of Nature- preneurship in aboriginal tourism in Alberta. Based Tourism. Hospitality Press, Melbourne, In: Page, S. and Getz, D. (eds) The Business Australia. of Rural Tourism: International Perspectives. Middleton, V. (2001). The importance of micro- International Thomson Business Press, London, businesses in European tourism. In: Roberts, L. pp. 93–107. and Hall, D. (eds) Rural Tourism and Recreation: Haber, S. and Lerner, M. (2002) Small tourism Principles to Practice. CAB International, ventures in peripheral areas: the impact of Wallingford, UK, pp. 197–201.

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20 Chapter 1

Morrison, A. (1998) Small firm cooperative marketing Shaw, G. and Williams, A. (1987) Firm formation in a peripheral . International and operating characteristics in the Cornish Journal of Contemporary Hospitality Manage- tourist industry – the case of Looe. Tourism ment 10(5), 191–197. Management December, 344–348. Murphy, P. (1985) Tourism: a Community Approach. Smyrnios, K. and Romano, C. (1999) The 1999 Methuen, New York. Australian Family Business Lifestyle Audit. Neubauer, F. and Lank, A. (1998) Family Business: its AXA Australia Family Business Research Unit, Governance for Sustainability. Routledge, New Monash University, Melbourne. York. Smyrnios, K., Romano, C. and Tanewski, G. (1997) Nilsson, P., Petersen, T. and Wanhill, S. (2004) Public The Australian Family and Private Business support for tourism SMEs in peripheral areas: the Survey. Monash University, Melbourne, Arjeplog project, Northern Sweden. The Service Australia. Industries Journal (in press). Thomassen, A. (1992) European family-owned Notzke, C. (1999) Indigenous tourism development in businesses: emerging issues for the 1990s. the Arctic. Annals of Tourism Research 26(1), In: The Family Firm Institute, Family 55–76. Business at the Crossroads: Proceedings of Page, S. and Getz, D. (1997) The Business of the 1992 Conference, Boston, Massachusetts, Rural Tourism: International Perspectives. Inter- pp. 188–191. national Thomson Business Press, London. Wanhill, S. (1997) Peripheral area tourism: a Rosenblatt, P., de Mik, C., Anderson, R. and Johnson, European perspective. Progress in Tourism and P. (1985) The Family in Business: Understanding Hospitality Research 3(1), 47–70. and Dealing with the Challenges Entrepreneurial Ward, J. and Aronoff, C. (1990) To sell or not to sell. Families Face. Jossey-Bass, San Francisco, Nation’s Business 78(1), 63–64. California. Westhead, P. and Cowling, M. (1998) Family Shanker, M. and Astrachan, J. (1996) Myths and firm research: the need for a methodological realities: family businesses’ contribution to the rethink. Entrepreneurship Theory and Practice U.S. economy – a framework for assessing family autumn, 31–56. business statistics. Family Business Review 9, Wortman, M. (1995) Critical issues in family business: 107–119. an international perspective of practice and Sharma, P., Chrisman, J. and Chua, J. (1996) research. In: Proceedings of the 40th Interna- A Review and Annotated Bibliography of tional Council for Small Business Conference, Family Business Studies. Kluwer, Boston, Sydney. NCP Printing, University of Newcastle, Massachusetts. Newcastle, Australia.

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2 Entrepreneurship and Family Business

Introduction Fig. 2.1 model is applied to structure the content of this chapter. The aim of this chapter is to recognize family business as a distinct form of entrepreneurship and to delve into the more submerged and Entrepreneurial Process under-researched variables of importance to enhancing understanding and knowledge. The entrepreneurial process represents the level Furthermore, Goffee (1996) cautions against one filter and is an interaction of a complex, simply attaching ‘family’ as a prefix without fully multi-dimensional and dynamic set of factors pursuing and understanding what distinguishes and circumstances. These arise from the such enterprises from presumably ‘non-family’ characteristics and attitudes of individual ones. Thus, the chapter makes the connection entrepreneurs who are motivated to take part between entrepreneurship, small and family in entrepreneurship as a consequence of their business, focusing on the unique entrepreneur- genetic make-up and social development within ial opportunities, challenges and issues that are their host community’s culture. Discussion sur- inherent in the tourism and hospitality industry. rounding entrepreneurship, culture and entre- The contribution of key industry-specific and preneurs is now explored and understanding setting modifiers as identified in Chapter 1 is developed as to how they combine into an explored within the framework of a model entrepreneurial process. that investigates the extent to which they act as ‘filters’ either to intensify or dilute the entre- preneurial process resulting in consequential entrepreneurial socio-economic outcomes. This Entrepreneurship three-level filter model is presented in Fig. 2.1 and emphasizes the cyclical nature of the pro- As with many other academic fields of study, cess as negative and/or positive consequences there exists little consensus as to a universally feed through the system, promoting or inhibit- accepted approach to the definition of entrepre- ing future entrepreneurial activity within a neurship. For example, according to Timmons host society. Conclusions are drawn that (1994) it is about innovating and building highlight the unique factors associated with something of value from practically nothing. It is entrepreneurship as related to tourism and hos- the process of creating or seizing an opportu- pitality family businesses, how they influence nity, and pursuing it regardless of the resources the nature and evolution of such enterprises, currently personally controlled. Hisrich and and competitive and policy implications. The Drnovsek (2002: 175) provide a further useful

©D. Getz et al. 2004. The Family Business in Tourism and Hospitality (D. Getz, J. Carlsen and A. Morrison) 21

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22 Chapter 2

Fig. 2.1. Family business entrepreneurship filter model.

approach in defining entrepreneurship as: the contemporary world this uni-dimensional, and creation and management of new businesses, economically directed, approach is becoming to small businesses and family businesses, and the be regarded as overly simplistic (Greenbank, characteristics and special problems of entre- 2001). It fails to account for non-economic preneurs. Hence, in these definitions the roots determinants of entrepreneurship including of family business may be taken to originate in ideology, legitimacy, social mobility and psycho- the essence of entrepreneurship, with a focus on logical factors (McKay, 2001). This is particularly understanding the interaction of entrepreneur significant within the context of family entre- and organizational contexts, structure, behav- preneurship, which Cromie et al. (1999) suggest iour and resources (Craig and Lindsay, 2002). differs from economic entrepreneurship in that it From a European perspective, entre- incorporates a domestic dimension. preneurship has its roots in classical economic Consequently, over recent decades the way literature as embodied in the seminal research of thinking about the process of entrepreneur- by authors such as R. Cantillon (1680–1734), ship has broadened considerably. While it is J.B. Say (1767–1832) and J. Schumpeter recognized as being at the heart of an economic (1883–1950). For example, Schumpeter (1934) development task it is now acknowledged to be approaches it from a normative perspective, driven by the motivations of individuals and arguing that entrepreneurs seek business objec- families, who are seeking to satisfy their unique tives such as profit and growth. However, in the social and economic personal goals (Fass and

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Entrepreneurship and Family Business 23

Scothorne, 1990). Drucker (1986) describes this community learn these shared characteristics endeavour as translating into an effort to create through different stages of socialization purposeful, focused change in a business’s eco- processes of their lives in institutions, such as nomic or social potential, plus the application family, religion, formal education, and society as a whole. of distinct entrepreneurial management and (Tayeb, 1988: 42) strategies. This indicates that entrepreneurship has: ‘its foundations in person and intuition, and Thus, societies can be distinguished from society and culture. It is much more holistic than each other by the differences in the shared simply an economic function, and represents meanings they expect and attribute to their a composite of material and immaterial, prag- environment as is evident in the oft cited work matism and idealism’ (Morrison, 2000a: 59). of Hofstede (1991). However, Tayeb (1988) Furthermore, interpretations of what represents and Van der Horst (1996) astutely point out entrepreneurship are likely to vary cross- that none of us are slaves to the culture in which nationally according to the distinctive patterning we live. There will be those persons who are of social values and norms of behaviour moved to deviate or escape from accepted (Morrison, 1998a). This highlights the influence cultural norms. of culture in the entrepreneurial process. The combination of the terms ‘entre- preneurial’ and ‘culture’ has become popular, Culture widely accepted internationally, and is an It is tempting to be seduced by the notion that expression of an attitude towards commerce at a entrepreneurs concerned with family business business level. It can be described as one in will behave in a homogenous manner the world which a positive social attitude towards personal over, robotically conforming to theories and enterprise is prevalent, enabling and supporting insights generated within the worlds of the entrepreneurial activity. The existence of an academic and policy maker. For example, in entrepreneurial culture represents societal sup- such a knowledgeable world triggers or cues port for an enterprising spirit that will flourish that result in entrepreneurial behaviour could within certain communities in response to uncer- be isolated and mechanically triggered – by tainty and competition (Kirzner, 1979). Gilder government officials concerned with tourism (1971: 258) describes this spirit in inspirational and hospitality development – to stimulate the terms as it: ‘wells up from the wisdom of ages process and beneficial economic and social out- and the history (of the West) and infuses the most comes of entrepreneurship. However, we live in modern of technological adventures’. Thus, any a much more human and unpredictable world explanation of what triggers the release of the awash with rich individual, family and national spirit of enterprise leading to the initiation of cultural diversity that cascades a colourful entrepreneurship must work from an under- mosaic of cues and behaviours. These often standing of the collectives generally accepted as defy academic and policy-maker capture and characteristic of certain societies, and respect sense-making. This was alluded to in Chapter 1 and acknowledge the individuality and unique- relative to the impact of industry and setting- ness of members of such societies who are specific modifiers to family business attitudes, personally motivated to act entrepreneurially values and activities, and a similar stance can (Morrison, 1998b). be adopted relative to deepening understand- The following provide some illustrative ing of the role of a host culture in the filtering of examples of entrepreneurial cultural norms and what may be considered as a ‘pure’, undiluted diversity. process of entrepreneurship. • Gender: strong ideological support for Tayeb presents a definition of culture and its traditional familial labour divisions and scope as: societal presumptions of the appropriate a set of historically evolved learned values, atti- roles for both sexes means that deviations tudes and meanings shared by the members of from the norms are challenging. For exam- a given community that influence the material ple, an emphasis on the role of women and non-material way of life. Members of the in ‘homemaking’ in many societies may

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24 Chapter 2

mean that the provision of hospitality ser- the notion of a potential entrepreneur’s evalua- vices is deemed to be socially acceptable tion of social legitimacy, desirability and as a ‘female-type’ business. Consequently, feasibility influenced by cultural values, eco- there is a concentration of women in nomic factors, and the relationship between the domestic and personal services-related entrepreneur and their host environment endeavours, such as, providing B&B for (Jones, 2000). Thus, having a thorough under- tourists and business travellers (Blackburn, standing of cultural values, motivations, and 1999; Cameron and Massey, 1999; Carter aspirations of various cultural sub-groups within et al., 2001). populations is critical to increasing the knowl- • Politics: in Russia there has not been a edge base about factors that contribute to indi- history of an entrepreneurial culture. The viduals being influenced to become an entre- first law on small business and entrepre- preneur (Collins, 2002). neurship was not adopted until 1991. Some individuals managed to overcome the traditional complex of inferiority and Entrepreneurs lack of creativity and initiative and have created new ventures that are prepared to Pearce (1980) succinctly depicts the process of compete in a market-oriented economy entrepreneurship as a metaphor in comparing (Hisrich and Grachev, 1995). entrepreneurs with bees to describe what they • Economic: in Tajikistan (former USSR) do. He believes that, in most respects, entrepre- the economic environment presents little neurs are ordinary human beings, seeking to opportunity for legitimate entrepreneur- do good for themselves in terms of material ship. Many economic activities are still gain and social status. In the process they are illegal, and therefore conducted in a covert unwitting catalysts, as with bees whose strictly way in order to avoid punitive measures private activities are the first cause of almost from law-enforcing authorities. This repre- everything else, as their honey-seeking serves to sents a parallel, underground, officially pollinate. In this respect, entrepreneurs can be ‘fictitious’ economy to that of the formal. regarded as first among equals in the process of It offers a different interpretation of an wealth creation. In creating their own wealth, ‘entrepreneurial class’ that lives in the entrepreneurs also stimulate wealth creation shadows in some societies (Dana, 2001). opportunities for others, and with the potential • Religion: many of the Kenyan people are to bring about positive social consequences in God-fearing and when it is preached from the wider society. the church pulpits that it is ‘easier for a The key to unlocking the process of camel to pass through the eye of a needle entrepreneurship would appear to be in the than for a rich man to get into heaven’ it power of these entrepreneurs. Over centuries has a profound impact on the societal their endeavours have significantly contributed attitude towards entrepreneurship. Some to change and growth in the business world. members of the population might see it They are also credited with most of the material as representing selfish capitalism. This progress in society (Hurley, 1999). Within the attitude is prevalent in a society which tourism and hospitality industry, for example, we prioritises support for the community and can make mention of the likes of Walt Disney, extended family, with wealth being shared Conrad Hilton and Thomas Cook, all of whom with ‘kith and kin’ first, leaving little left have radically innovated within their respective over for investment in enterprises (Dondo sectors, significantly redefining the nature of and Ngumo, 1998). products, services and markets that have con- These examples help understanding of the ways tributed to the growth of the tourism and hospi- in which culture may filter the entrepreneurial tality industry over the decades. In this respect, process, either intensifying or diluting it. It has Day (2000) likens the entrepreneurial process to its roots in the dominant politics, history, reli- bush fires. Just as they are natural occurrences gion, ideologies and economies. This includes that raze forests to the ground, and in the very

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process engender new life, so do entrepreneurs experienced within the corporate arena transform industry and society through their (Smith, 2000). energized and radiating endeavour. Table 2.1 summarizes a range of examples of Within academic circles debate abounds as entrepreneurial behaviour cues. Clearly, they to whether these entrepreneurs are proactive or represent a complex and somewhat ethereal reactive individuals in the process of entrepre- weave of positive and negative social and neurship. According to Kuratko and Hodgetts economic factors, and those of a psychological (1998: 97): ‘every person has the potential and nature that may be categorized either as nega- free choice to pursue a career as an entrepre- tive or positive dependent on interpretative neur’. However, this underplays the complex stance (Morrison, 2001). and multidimensional interaction of entrepre- As an illustration of entrepreneurial behav- neurial behaviour ‘cues’ that are embedded in iour cues, Collins (2002) provides an historic the contemporary world of the individual, soci- example of immigrant entrepreneurs to Australia ety and economy. These are not necessarily seeking an upward transformation of social class, driven by factors such as maximization of a rather than continuity of what they had experi- return on investment, or exploitation of a market enced in their country of origin. Some came to opportunity. Instead, they may be prompted Australia as refugees from peasant or unskilled by the following range of examples of critical backgrounds, others were educated profession- incidents that have acted as entrepreneurial als, and there were undocumented immigrants behaviour cues: who lived in a shadow world. Discriminatory • ‘Buy’ themselves and/or family members a legislation was introduced in 1896 that confined job (Harper, 1984). non-Anglo-Celtic business people to the periph- • Avoid unemployment and respond to eco- ery of the business system. Hence, the likes of nomic necessity (Cameron and Massey, the Irish Catholics, Lebanese and Jews were 1999). restricted in their access to business opportuni- • Earn enough money to allow them to leave ties, and faced block employment mobility. This the community to search for a better life created a movement of the Chinese and many (Dahles and Bras, 1999). other immigrants such as Italians, Greeks and • Be a solution to adversity (Dahles, 1998). Lebanese into restaurants, not as a preferred • Pursue intrinsic goals such as independ- choice but as a consequence of limited options ence, gaining control over life, and a flex- (Glezer, 1988). By the mid-1980s Chinese cafes ible lifestyle (Middleton and Clarke, 2001). were an established feature of the Australian • Provide an alternative economic means to suburban and country town landscape. They overcome blocked upward career mobility were the vanguard of encroaching Australian

Table 2.1. Entrepreneurial behaviour cues.

Positive Negative

Social • Role of the family and intergenerational • Political/religious displacement role models • Political unrest • Conducive culture • Discrimination • Supportive networks • Unhappy with position in society Economic • Move towards services • Corporate downsizing and redundancy • Reversal of highly vertically integrated • Dissatisfaction with/blocked company structures employment opportunities • Phenomenon of ‘dot.com’ business • Discriminatory legislation • No other way to make money Psychological • Entrepreneurial aspirations of independence, wealth, need to achieve, social mobility, etc.

Sources: Scase and Goffee, 1989; Storey, 1994; Hurley, 1999; Morrison et al., 1999; Morrison, 2000b; Collins, 2002.

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26 Chapter 2

cultural diversity as Chinese restaurants pro- in that it combines wider environmental forces vided a culinary diversity in food that did not with the intrinsic motivations and social context exist at that time. Thus, it can be seen from this of the entrepreneur, and Fig. 2.2 summarizes the illustration that many of these immigrants used findings from one application to a study of entre- entrepreneurship as a vehicle to break through preneurs (Morrison, 2001). Such an approach social and/or economic negative cues of a class recognizes that entrepreneurs do not emerge or ethnic ceiling, satisfying their psychological from a vacuum, but that the entrepreneurial needs, and as a consequence transformed process is influenced by the social and business industry and society. systems within which they are located and con- Naffziger et al. (1994) contribute to under- ditioned (Carson et al., 1995). It is only when standing by supplying a useful analytical model the social and business system-derived cues con- that approaches entrepreneurial behaviour cues verge that entrepreneurship will be activated. as an experiential process, and suggest that It is therefore understandable that existing the initial decision to be an entrepreneur is the and emergent entrepreneurs navigate through result of the interaction of a range of factors as their respective social and business systems to has been presented in Table 2.1. Their model present themselves in many different guises, as includes the individual’s personal characteristics, indicated in Table 2.2. Consequently, there is personal environment, personal goal set, the rel- evolving recognition of the need for understand- evant business environment, and the existence ing of different variants, behaviours and dynam- of a viable business idea. This model is attractive ics of entrepreneurs (Hurley, 1999; Department

Fig. 2.2. Model of entrepreneurial cues. (Source: adapted from Morrison, 2001: 78.)

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Entrepreneurship and Family Business 27

of Trade and Industry, 2001). For example, Kets with the exception of ‘serial’. For example, it de Vries (1996) proposes that many are, in would appear that: it is a flexible means to effect, misfits who need to create their own envi- integrate work and family responsibilities; the ronment. They do not want to be at the mercy of family acts as a business asset through the ‘vol- others, and are motivated to move away from untary’ contribution of work; traditional family controlling influences. Furthermore, they have domestic gender roles transfer to the workplace; difficulties with authority figures and structured and the pursuit and continuity of the family unit situations even after they have moved away and lifestyle is facilitated. Furthermore, it is clear from controlling influences. For example, this that these typologies of entrepreneur guises is often manifested within the tourism and should not be regarded as sterile, static and hospitality industry in the form of the rejection divorced from each other, as many overlap and of the urban and corporate lifestyle for one that will change and alternate according to respective is rural, with relative organizational autonomy family and business lifecycles. These ten guises achieved through being self-employed. (Table 2.2) are now discussed in more detail. What is particularly significant within the context of family business is the permeation of • Copreneur: many family businesses are ‘family’ throughout all the entrepreneur guises established by spouses or life partners,

Table 2.2. Entrepreneur guises.

Guise Description Example

Copreneur Marital and business partners managing Husband and wife contribute work and family responsibilities more complementary skills and resources to the effectively management of a winery visitor attraction Ethnic Entrepreneurs drawn from ethnic minority Chinese, Greek, Italian restaurants in groups often operating in ethnic niche Europe, Australia and North America markets Family Meshing together social and business Multi-generations servicing the tourism systems market as a means of generating family employment to maintain the family unit Female Using business as a vehicle for accommodation that enables the greater flexibility in managing family combination of commercial, domestic and responsibilities child-caring responsibilities Intrapreneur A family member, other than the Second-generation family member working founding-entrepreneur, adopts and applies within a traditional hotel adopts a business entrepreneurial characteristics within the re-engineering strategy transforming it into existing business serviced accommodation Lifestyle Primary concern is to provide a sufficient A ski instructor operates the business for a and comfortable living to maintain a 4-month season to earn enough to live all selected way of life year round in a mountain retreat Micro Employing less than ten persons Extension of a family home to offer B&B deliberately constraining size accommodation Portfolio Concurrently own more than one business Farm diversification into tourism-related that may bring additional benefits for the businesses such as accommodation and entrepreneur and enterprise sports activity Serial Entrepreneur will own a consecutive With ICT redefining travel marketing a series of businesses with entry and exit traditional high street retailer may move into coinciding with market opportunities travel consultancy, then a dot.com business Social Entrepreneur combines commercial skills Rurally located tour guides that are with social aims and objectives primarily concerned with environmental preservation and community values

Sources: Scase and Goffee, 1989; Greenbank, 2000; Carter et al., 2001; Carter, 2001.

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28 Chapter 2

these copreneurs seeking self-employment make to family businesses, which are in order to achieve greater control over masked by co-ownership. These busi- their lives, allowing the flexibility to inte- nesses tend to cluster in the lower financial grate work and family responsibilities more turnover categories, use informal sources effectively than would be possible within of finance, and operate in traditionally a corporate environment. They tend to female sectors of the economy such as adhere to traditional sex role orientations hotels and restaurants (Hurley, 1999; at home and in the business, with women’s Orhan and Scott, 2001; Carter et al., 2002; traditional family roles as primary caregiver Collins, 2002). and housekeeper reinforced in the work- • Intrapreneur: is a person who acts place. For example, this is often the case entrepreneurially within the existing family in the provision and servicing of tourism business in terms of re-engineering organi- accommodation (Smith, 2000; McKay, zational and economic development. They 2001). are concerned with business diversifica- • Ethnic: niche markets are often the seed- tion, innovativeness, self-renewal and pro- bed of ethnic entrepreneurship, such as activeness, often essential to sustain the within the independent sector, family business over generations. Impor- which is established as a popular activity tant factors contributing to the emergence for ethnic minority businesses inter- of such behaviour are the structural and nationally. Accounts of ethnic minorities relational aspects within the environment in business have generated controversy that may nurture or stifle family members on a number of issues, including: different (Carrier, 1996; Antoncic and Hisrich, patterns of self-employment among ethnic 2001). groups; relative importance of cultural • Lifestyle: this represents an extremely resources including the support of immedi- elusive and qualitative concept, deter- ate and extended family; constraining mined by the values and expectations nature of the market environment; and the that the owner-managers largely select for relationship between ethnic enterprise themselves. Their motivations and aspira- business and support agencies (Ram et al., tions relate to the quality of life and place, 2000; Collins, 2002). and economic activity that is bounded by • Family: the significant involvement of seasonality and profit satisfying rather family in the ownership and management than conventional measures of financial of small businesses has been established, success, such as growth of sales turnover or and within the tourism and hospitality number of employees (King et al., 1998; industry specifically this is even more Kuratko and Hodgetts, 1998). pronounced. Examples of this type of • Micro: the majority of family businesses entrepreneurship are prevalent within can be classed as ‘micro’, which is officially rural, peripheral and resort locations defined as employing less than ten per- with families often involved in a portfolio sons. In the reality of the tourism and of economic activities combining the likes hospitality industry ‘micro’ dominates and of farming, homestay accommodation and frequently consists of only one self- rural tourism experiences (Cromie et al., employed owner-operator or copreneurs. 1999; Carter et al., 2002). While there may be market opportunities • Female: over the centuries many to grow the business, this is frequently not women have run home-based businesses, pursued as protection of a specifically frequently attributed to the need to accom- selected lifestyle may dominate over ratio- modate work and child-rearing roles simul- nal economic goals (Lynch, 1999). taneously, and this emphasizes the impor- • Portfolio: or multiple business ownership tance of the family and life cycle context. has been associated with a range of Statistics on female-owned firms are sorely benefits for the individual and enterprise. lacking and estimates often exclude the For example, it can be evidenced in entrepreneurial contributions that women agricultural literature relative to farm

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Entrepreneurship and Family Business 29

diversification into tourism, and within the hard way, a vision without action is nothing urban tourism, entrepreneurs use self- more than an hallucination. To be successful employment in other industry sectors such entrepreneurs must have both vision and drive. as financial services to augment the mea- Kets de Vries (1996: 24) gre returns from tourist accommodation in Within the context of family business, vision low season. These portfolio activities can and drive tends to be directed at the betterment serve as a means to cross-subsidize eco- and sustainability of family first, with the busi- nomic activities in order to maintain the ness element being a means to that end. continuity of the family as a unit (Carter, 2001; Morrison and Teixeira, 2002). • Serial: these entrepreneurs lack an emotional attachment to one business or Industry Specific Modifiers another. They display strong characteristics associated with market opportunity spot- The tourism and hospitality industry specific ting, speed of action, and versatility to modifiers act as a second-level filter in the fam- move in and out of business as ‘windows’ ily business entrepreneurial model presented in of open-and-shut opportunity. This is not Fig. 2.1. This industry sector presents itself to a guise of entrepreneur that is prevalent entrepreneurs as a potential site for them within family businesses that tend to mesh to apply the entrepreneurial process, rich in the family emotional system more closely many unique opportunities that particularly to that of the business. It tends to lend itself hold appeal to those attached to the land, rural to dynamic market places, such as has and natural environments. They will evaluate been seen in recent years with the develop- the feasibility and desirability of entry into this ment of the Internet which has revolution- industry sector against opportunities elsewhere, ized travel distribution processes (Day, and a persuasive factor is frequently the rela- 2000; Carter, 2001). tively low capital entry requirements of small • Social: may be considered as active in service sector operations such as homestays the ‘third sector’ or ‘social economy’, and and restaurants. What is unique about the can be distinguished in that these entrepre- tourism and hospitality industry is that it has neurs combine trading viability with social held consistently solid appeal to those individu- aims and ownership. The businesses tend als seeking to combine lifestyle, domestic and to be niche- and locality-focused. Their commercial activity. Furthermore, as Blackburn activities are financed by a combination of (1999) notes, although the family has ceased to earned income from the sale of goods and be a productive unit in the market economy, services (market resources), government it remains one in the domestic economy, such subsidies (non-market resources) and as represented by the tourism and hospitality voluntary family ‘employment’ (non- sectors. For example, within the context of the monetary resources). Evidence of this type Scottish tourism industry, it is of significance to of entrepreneurship in the tourism and note that the majority of tourism accommoda- hospitality industry is provided in the form tion operations are small and often family- of lifestyle operators, and those concerned run (Lockyer and Morrison, 1999). Many have with sustainability of the natural environ- been lured by the appeal of, often romanticized, ment, who contribute something to com- notions of the quality of lifestyle that may be munities that have recognized social value experienced. This reflects a naivety as to the (Thompson et al., 2000; Smallbone et al., 24 hours-a-day, 7 days-a-week service orienta- 2001; Shaw et al., 2002). tion that may place pressure on the founding- entrepreneur and family relationships as family Kets de Vries encapsulates the essence of domestic space is shared with commercial these entrepreneurs as: customers. Certainly, a significant feature of Many people have ideas, but very few have the tourism in Scotland has been inward migration stamina to turn their ideas into action; and as to selected communities with tourism and hos- some aspiring entrepreneurs have discovered pitality market potential by people from outside

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30 Chapter 2

of the area looking to enter into business. They sufficient assets/capital in previous living are often prompted in their choice by initial to move to a peripheral location without familiarity with the location through touristic significant debt burden; and/or visits. For example, the islands of Mull, Skye • Operate a commercial concern, which and Arran located off the west coast of Scotland does not demand 12-month attention but are home to communities where a substantial benefits from the effects of seasonality with number of in-comer lifestyle families settled a 6–8 month annual closed season. during the latter part of the 20th century However, the range of possible business (Morrison et al., 2001). entry motivations derived from entrepreneurial This strong lifestyle business entry behaviour cues (Table 2.1) is endless and any motivation is reflected in the traditional image attempt at fashioning a comprehensive list would presented of small tourism and hospitality be a futile exercise. Simplistically they may be businesses. For many, particularly in rural categories such as ‘opportunity entrepreneur- and peripheral locations, maintenance and ship’ – taking advantage of a market opportu- protection of a certain lifestyle will be prioritized nity, or ‘necessity entrepreneurship’ – pursuing over commercial focus on profit-maximization the best and often only option available (Ram, (Sherwood et al., 2000; Thomas et al., 2000). 1994; Neck et al., 2001). Furthermore, it could In this respect, maximization of derived family- be argued that within the context of the tourism value may well be the driving goal rather than and hospitality industry these categories could that of business-value. For example, Morrison be expanded to include ‘lifestyle entrepreneur- et al. (2001) summarize the following range ship’ and ‘social entrepreneurship’. of lifestyle entrepreneur business entry Table 2.3 summarizes the factors that motivations: Morrison (2002) identified to explain the reasons • Meet people and act in a host capacity why the small family business endures within the while still maintaining a relatively tourism and hospitality industry and those that unencumbered lifestyle. may endanger certain members of the popula- • Live in a place that has natural scenic tion in the future. This information should be beauty but may be remote and hence few viewed as a continuum with ‘enduring’ at one outside visitors. end and ‘endangered’ at the other, as it is not an • Inhabit accommodation and/or location either/or situation and there will undoubtedly be that might be otherwise outside of the differing degrees in between. comfortable envelope of the proprietors’ Thus, it can be observed that the entre- income. preneurial process will filter through the industry • Move away from the perceived ‘rat race’ of setting as the entrepreneurs in their various modern urban living while having built up guises assess the feasibility and desirability of it

Table 2.3. Enduring and endangering factors.

Enduring Endangering

Located in sectors and peripheral geographic and/or Located in sites of corporate activity, financial economic locations that are unattractive to corporate investment and new product development investment Providing an ‘authentic’ tourism and hospitality Floating product and service within the market experience, with clearly differentiated quality place that is undifferentiated and vulnerable to products and services to niche markets the competitive practices of corporate groups Lifestyle attraction, low barriers to entry and Economic climate and general external forces sustenance of operation despite human and severe, discouraging lifestyle indulgence and financial resource poverty unmasking resource deficiencies Contribution to sustainable regional development Policy makers lack awareness of potential and adding value to the economy, society and the contributions, and neglect to provide environment appropriate support infrastructure

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as a site for the social and economic investment. businesses, which have been identified (Morri- Evaluatory criteria may include: son, 2002). The positive features emphasize the value of industry-specific, community and • Economic feasibility of combining domes- regional contributions that may be achievable, tic and commercial domains. while the negatives illuminate the tensions and • Aesthetic appeal of a particular geographic contradictions that are involved in the realization location. of potential. The ease of entry and exit may • Compatibility with an aspired lifestyle. be regarded as a positive or negative feature • Potential for psychological gratification according to consequences and perspectives. through the likes of hosting and visitor This summary contributes to the development of satisfaction; and/or a deeper understanding of the contemporary • Fulfilment of social and moral obligations positioning of small businesses within the such as family cohesion, provision of an tourism and hospitality industry. inheritance for future generations, sustain- ing the natural environment or adding value to local communities. The foregoing provides an explanation of why Setting modifiers the tourism and hospitality industry continues to be dominated by the small rural business model Should the entrepreneurial motivation survive in most developed and developing countries through the second-level filter of the tourism (Baum, 1999; Middleton and Clarke, 2001). and hospitality industry setting, attention then This is evident in the UK, where the Department turns to the organizational setting modifiers of Trade and Industry (2001) indicated that of the small family tourism and hospitality 99.8% of hotel and restaurant businesses business. This represents the third- and final- employed less than 50 persons in 2000. Thus, level filter in the family business entrepre- what is important is not their contribution to neurial model (Fig. 2.1), and can be analysed employment, but that their collective critical relative to the components of organizational mass provides the bulk of the essentially local structure, behaviour and resources. This ambience and quality of visitor experiences at approach employs a trinity of definitional rural and peripheral destinations, on which the approaches to address holistically the multi- future growth of overseas and domestic visits dimensional milieu of entrepreneurship and depends (Middleton and Clarke, 2001). For family business that will ultimately impact on guests such businesses can add value socially in entrepreneurial socio-economic outcomes. This that they may reflect the special values of ‘place’ approach corresponds to the Gersick et al. and ‘host encounters’ allowing a glimpse into (1997) model referred to in Chapter 1 that local life and traditions. encourages integrative thinking and research Table 2.4 summarizes the negative and pos- about family business, as decisions within one itive features associated with small hospitality sphere will impact elements in others.

Table 2.4. Negative and positive features of small hospitality businesses.

Positive • Valuable element in a tourism destination infrastructure • Respond to market characteristics and demand satisfaction • Sustainable economic, social and environmental contribution • Instrumental to regional development Negative • Often ignored in national and regional policy development • Operate out with the hospitality industry • Defy economic logic in their manner of operation • Fragmented sector difficult to co-ordinate and control • Variability and inconsistencies of product quality and visitor experience Positive/negative • Low barriers to entry and exit

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Organizational Modifiers • Concern about market potential and any resultant loss of the distinctive differentiat- Kets de Vries (1996) logically points out that ing features associated with ‘smallness’. every family business starts somewhere, usually • Managerial capacity is sufficient to cope with a founder-entrepreneur who has not only a with existing size, but growth would bring business concept but also the will and persis- with it the need to employ from without the tence to bring that concept to fruition. He calls family circle, which is not perceived as these founder-entrepreneurs ‘societal misfits’. desirable. They are instrumental in structuring the organi- • Financial poverty: while it is relatively zation, and have a profound influence on it. easy to raise additional funds for expan- Carter et al. (2002) found that the majority of sion, securing an adequate return on small tourism and hospitality businesses take investment to pay back loans was the form of partnership shared among spouses, problematic. immediate and extended family members. Thus, in combination these physical, human Family members are active in the businesses, and financially derived factors stunt growth and taking on roles such as general management, protect the status quo of smallness. At best this supervision, accounting, cleaning and catering. can be likened to a ‘bonsai tree’, which presents In many cases it is a husband-and-wife team, or itself as a specialized, quality niche product copreneurs, that make all the decisions and deal whose roots are deliberately and expertly with most of the work, assisted by very few staff, tended to ensure the retention of its defining many of whom are part-time. This reflects one features. At worst it is a mass market common of the paramount organizing principles in many house plant that has gone to seed and hidden societies, that of gender, and just as it is a under the soil its roots are stealthily strangling dominant factor in families, it is also reflected in and killing it. Thus, it can be summarized that: the organizational structure of family business (Omar and Davidson, 2001). This leads Goffee • The heart of the organizational structure and Scase (1995) to refer to it as an ‘entrepre- contains the founding-entrepreneur, the neurial family’ that functions quite differently entrepreneurial family, and their respective from the normal Western pattern of business, family and business value sets, within for the inextricable linkage of social and which social and economic goals are often business systems means that they cannot be contested. divorced from each other. This will inevitably • Emotional attachment to predominately influence the entrepreneurial process as family family values may dilute the entrepre- values and emotional attachments interact and neurial process, deliberately preserving the compete with commercial market-driven values ‘micro.’ (Cromie et al., 1999). • Alternatively, the family structure could Other than ownership, organizational provide the business with a significant structure also manifests itself through the charac- entrepreneurial advantage that the corpo- teristic of ‘smallness’, which can be regarded as rate organizations may find extremely either an asset or a constraint dependent on difficult to mimic. perspective. Family businesses in the tourism and hospitality industry rarely grow to any signif- icant size and the majority remain as micro. The question why this is so has vexed academics and Organizational behaviour policy makers over the decades. Explanation can work from a number of different angles as Brockhaus (1994) defines family business in was identified by Morrison and Teixeira (2002) terms of organizational behavioural character- as follows: istics, in that it is represents an enterprise in which family members influence the direction • Emotional attachment associated with the of the business through the exercise of kinship physical space, in that it is often also the ties, ownership rights or management roles. family home, constrains business growth. This definitional approach is supported by

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Chua et al. (1999). A quote from Kets de on the founding-entrepreneur, business and Vries succinctly summarizes the spirit and external environment, and resulted in the sets of challenge of organizational behaviour in family factors presented in Table 2.5. In concert these businesses: interact and impact on the entrepreneurial pro- Founder-entrepreneurs and owners of family cess within the organizational context as it moves firms and their employees are like partners in a through the various life cycle stages of entrepre- dance: the experience can be very exhilarating, neurial families and their respective businesses. but the dancers sometimes fall over each Thus, from Table 2.4 it can be observed other’s feet . . . making the organizational how entrepreneurial activities may be further ‘fil- ‘dance’ gracefully – is the real challenge for all tered’ through the interacting range of factors to concerned. influence the entrepreneurial process. These can (Kets de Vries, 1996: 56) lead to a heavy reliance on family members for Goffee (1996) cautions against assuming managerial talent that may restrict choice and that all family businesses will exhibit similar intrapreneurial capabilities. Cromie et al. (1997) behavioural characteristics. Differences will suggest that this is not a problem. Provided they derive from varying structures, cultures and are trained in technical and managerial areas life cycle stages of entrepreneurial families. This they can assist in business development. Fur- was apparent in a study of small family-owned thermore, as Kets de Vries (1993) argues, early tourism accommodation businesses in Scotland, immersion in the business as a child may provide where Morrison and Teixeira (2002) analysed training opportunities for family members. How- organizational behaviour through the applica- ever, these positive perspectives are challenged tion of a three-category framework. This focused by the findings in Table 2.5. They reveal that:

Table 2.5. Factors influencing organizational behaviour.

Founding • Middle-aged, limited formal education or experience directly related to the entrepreneur hospitality industry • Low professional and financial barriers to sector entry • Perceptions of a ‘simple’ business to operate • Managerial constraints, limited capabilities and constrained resources to solve gaps in managerial competencies • Business entry decision driven by personal and family-related considerations to the subordination of business • Meshing of personal and business goals may lead to profit satisficing, and/or an unhealthy work/life balance • Limited ambitions and vision, and protection of lifestyle over business expansion Business • Family involvement may lead to sub-optimal efficiencies and masked financial viability • Simple organizational structures mean that decision-making is embodied in a few individuals, and management resources are strained • Involvement in multiple income generation activities may detract from commitment to the small business • Failure to attract and manage quality, skilled human resources could impact negatively on the quality of the product and service • Size negates economies of scale, has consequences for financial viability, is physically contained, and deliberately constrained for reasons of product and service differentiation and lifestyle protectionism External • Industry restructuring to favour the economics of the larger corporation environment • Weak power position, vulnerable to the micro and macro economic and political environments and natural disasters • Dependent on local human resources that are deficient in satisfying needs • General high dependencies on externalities

Source: Morrison and Teixeira (2002).

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• Low entry barriers attract entrepreneurs • Family members are more productive than with limited formal education or experi- non-family employees. ence directly relating to the industry sector. • A shared ‘family language’ allows more • There is a significant deficit in management effective communication. competencies and resources. • Family relationships generate unusual • The material and non-material needs of motivation, cement loyalties, and increase the family tend to dictate the amount of trust. income to which involved family members • Transaction costs are lowered. aspire. • Decision-making is informal and efficient. • Businesses operate to sub-optimal levels in This emphasizes the significant resource terms of profit and growth. base that an entrepreneurial family has the potential to contribute to a business. Moreover, it has been recognized within the context of the Organizational resources tourism and hospitality industry that it can be a valuable part of the tourism experience as family and customers interact. The significance of this Habbershon and Williams (1999) adopt a critical asset is intensified within the context of resource-based definitional approach in ethnic entrepreneurship. For example, relative describing family business resources as the to Chinese immigrant entrepreneurs in Australia, ‘familiness’ of a given business. More Collins (2002) found that both the immediate specifically, ‘familiness’ is defined as the unique family, along with the extended ‘ethnic family’, bundle of resources a particular business has represent resources critical to entrepreneurial because of the systems interaction between the success. Such resources may include moral and family, its individual members and the business. financial support, business advice, access to This provides a unified systems perspective valuable networks and represent an accumula- on family business performance capabilities tion of social capital that could enhance entre- and entrepreneurial advantage. Working from preneurial knowledge, skills and capabilities a Chinese perspective, for example, Yu (2001) (Dana, 2001). highlights the fact that the cultural and famili- A further significant resource is variously ness of resources facilitate competitive strategies described as the deployment of family members that are non-contestable by Westerners. Such a in ‘voluntary’, ‘unpaid’, or ‘unwaged’ employ- definitional approach has advantages in that it ment, and is particularly prevalent in domestic may focus attention on the largely hidden con- gender division of labour as is often evidenced tribution of family members, and in particular in the tourism and hospitality industry. This female entrepreneurs, in enterprise manage- use of family labour is a traditional, important ment and development (Carter et al., 2001). and differentiating feature of the entrepreneurial From an organizational resource perspec- family (Gorton, 2000). Indeed, according to tive a family business’s founding and ongoing Scase and Goffee (1989) in the personal service goals can act as both a bonus and a constraint to sectors many enterprises, such as small hotels, business. They are instrumental in the making are only profitable because the overheads are and shaping of the business’s resources (Craig subsidized by unpaid services of family members and Lindsay, 2002), and a long-term perspective and by the use of domestic facilities to accommo- can provide a distinct entrepreneurial resource date business. Thus, in addition, to the apprecia- advantage (Cameron and Massey, 1999). For tion of land and buildings and annual profits, example, Habbershon and Williams (1999) income is derived in kind, because the family summarize elements of such a resource base as lives on the premises, and often ‘off the land’, as follows: well as any salaries they may pay themselves. As • A unique working environment which a result it is often difficult to differentiate clearly fosters a family-oriented workplace and between profit as return on investment and inspires greater employee care and loyalty. the emoluments of the owners in the form of • More flexible work practices. cash and non-cash benefits (Medlik, 1994). This

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suggests that many family businesses operate as contribute social, economic and environmental social entrepreneurs in a form of ‘domestic- outcomes to rural and peripheral communities in economy’ as opposed to a ‘market-economy’ which they are located by: and may represent an economically efficient • Offering sustainable solutions to economic mode of enterprise with special entrepreneurial and social challenges in terms of providing advantages (Blackburn, 1999). This represents a employment and services, purchasing vital differentiating feature of family businesses goods and services from local suppliers in comparison to corporations. Thus, it can be and traders. summarized that organizational resources are • Preserving the natural environment and composed of economic, market and socially heritage in which they locate. derived capital. This presents a different • Attracting inward investment from those interpretation from that of strict economic persons seeking a lifestyle change. entrepreneurship. • Adding value to the social fabric of the community as a whole. However, Middleton and Clarke counter Entrepreneurial Socio-economic these positive outcomes in stating that: Outcomes At the leading edge, they embody the entre- preneurial spirit and vitality of places . . . at Finally, after its journey through the three-level the trailing edge many exist on the fringes of filtering system, the entrepreneurial process the industry damaging the environment of the reaches the resultant socio-economic outcomes destinations in which they are located, reducing as evidenced within the tourism and hospitality visitor satisfaction and perceived quality of the industry. It has been a complex and challenging overall visitor experience. process and it is perhaps understandable that (Middleton and Clarke, 2001: 41) some of the intensity of the entrepreneurship may have somewhat diminished. The actual contribution to socio-economic Chapter Summary outcomes of small family tourism and hospitality businesses is difficult to gauge accurately Figure 2.3 summarizes key points identified (Kovassy and Hutton, 2001), however, Middle- in this chapter relative to the entrepreneurial ton and Clarke (2001) summarize it in economic, process. It suggests that understanding of the social and environmental terms in the following process, as it interplays with family business, is manner. They are embedded in local communi- best served by reference to the cultural, social ties, so the money earned tends to be retained and business systems within which entrepre- within the community and they provide a vital neurs are embedded. These combine to filter source of employment. For the guests, they can the perceptions and behaviours of entrepre- add value socially in that they may reflect the neurs as to the potential to achieve their aspired special values of ‘place’ and ‘host encounters’, material and/or social gain. At full intensity this allowing a glimpse into local life. In expressing process will result in outcomes that radically the local character of place, entrepreneurs infuse and energize economies, society and could be more committed than, for example, industries, creating long-term and sustainable a corporate group, to sustaining the natural benefits for society as a whole. However, this environment for a range of moral, lifestyle and proposition needs to be treated carefully as it commercial motivations. Furthermore, there is contains an implicit bias towards an idealist evidence that some family business entrepre- vision of entrepreneurship, which may assume neurs act as cultural and/or heritage custodians that all intentions are morally sound and driven by their commitment to preserving and socially responsible. As has been observed, perpetuating traditions for the next generations entrepreneurship by its very nature is con- of their family. This corresponds with the social cerned with the initiation of change that may entrepreneur guise identified in Table 2.2. Thus, challenge, and perhaps destroy, the established small family businesses have the potential to order and the complacency of traditional social

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36 Chapter 2

Fig. 2.3. Entrepreneurial process.

and economic systems. Consequently, it would entrepreneurs, while others are out of their be delusory to accept that all outcomes from control. the process of entrepreneurship will be positive, • Evaluation of what constitutes entre- even if it is hoped that any, in Schumpeterian preneurship will vary dependent on the (1934) terms, ‘destruction’ will be creative. socio-economic reference frame used Figure 2.4 consolidates the key findings by various stakeholders including entre- relative to the tourism and hospitality industry preneurs, policy-makers and academics. setting, organizational structure, behaviour and • For many entrepreneurs the commercial resources, and industry-specific entrepreneurial pursuit of enterprise is a necessary suste- outcomes. Here it is clearly apparent that the nance for, but subordinated to, the pursuit intensity of the entrepreneurial process has been of socially driven lifestyle aspirations. significantly diluted by the time it has flowed • The tourism and hospitality industry is through all three levels of filters (Fig. 2.1). The characterized by relatively low profes- nexus between industry setting and family- sional, skill and financial barriers to entry, business organizational modifiers results in an that readily accommodate a family/lifestyle interaction to produce entrepreneurial outcomes business model, and as such it is perceived of small family entrepreneurial businesses that as an attractive mode for those individuals may lack the energetic intensity depicted in seeking life change. Fig. 2.3. It is concluded that ‘entrepreneurship’ From the content of this chapter explana- represents an extremely broad concept that tions can be drawn that reflect the complex and masks the wide range of variants and degrees humanistic dimensions associated with family of intensity that hide under its umbrella term. entrepreneurship in the tourism and hospitality Within the tourism and hospitality industry, industry, such as: in their own distinct way, small entrepreneurial • Certain impediments to the entrepre- families do act as catalysts, stimulating rural neurial process may be self-inflicted, con- and peripheral social communities and local sciously accepted and maintained by the economies. In doing so, they often engender

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Entrepreneurship and Family Business 37

Fig. 2.4. Tourism and hospitality family entrepreneurship.

new life that enables the sustenance and peripheral areas would be well advised to adopt perpetuation of environments, crafts, heritage policies deliberately designed to attract and hold and traditions that might otherwise disappear. families to conducive tourism activity zones. Fur- However, the existence and creation of mainly thermore, systems are necessary to encourage micro businesses is unlikely to transform industry the active engagement of all stakeholders in the sectors and societies in the same way as the tourism destination infrastructure to connect and examples given of Walt Disney, Conrad Hilton work in partnership regardless of size, or public and Thomas Cook. Nevertheless, small family or private sector origins. For as Middleton and tourism and hospitality businesses can provide Clarke (2001: 463) emphasize: ‘Ultimately and a valuable contribution in embodying an entre- ironically, the long-run future of big businesses preneurial spirit and vitality that has the potential in mature markets is heavily dependent on the to contribute significantly to the vitality of place service delivery capabilities of small hospitality and authenticity of tourism experience. businesses over which they have no control’. Thus, it should follow that regional develop- This signifies the potential for a healthy symbi- ment agencies concerned with the stabilization, otic relationship between small and large tourism regeneration and sustainability of rural and and hospitality businesses.

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Scase, R. and Goffee, R. (1989) The Real World of the Storey, D. (1994) Understanding the Small Business Small Business Owner. Routledge, London. Sector. Routledge, London. Schumpeter, J. (1934) The Theory of Economic Tayeb, M. (1988) Organisations and National Culture. Development. Harvard University Press, Sage, London. Cambridge, Massachusetts. Thompson, J., Alvy, G. and Lees, A. (2000) Social Shaw, E., Shaw, J. and Wilson, M. (2002) Unsung entrepreneurship: a new look at the people Entrepreneurs: Entrepreneurship for Social and the potential. Management Decision 38(5), Gain. University of Durham Business School, 328–338. Durham, UK. Timmons, J. (1994) New Venture Creation: Smallbone, D., Evans, M., Ekanem, I. and Butters, S. Entrepreneurship for the 21st Century. Irwin, (2001) Researching Social Enterprise. Small Boston, Massachusetts. Business Service, Department of Trade and Van der Horst, H. (1996) The Low Sky: Understanding Industry, London. the Dutch. Scriptum, The Hague. Smith, C. (2000) Managing work and family in small Yu, T.F.-L. (2001) The Chinese family business as ‘copreneurial’ business: an Australian study. a strategic system: an evolutionary perspective. Women in Management Review 15(5/6), International Journal of Entrepreneurial 283–289. Behaviour and Research 7(1), 22–40.

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3 Starting the Family Business

Introduction in a family business, might motivate some people to establish their own business. Culture Start-up is the most critical stage in the family and economic conditions are also antecedents to business – not growth, and not succession. This be considered. is because many founders have little interest in Business planning is then considered. The growing, and succession or inheritance is not an careful preparation and execution of a business issue. The future of the business will always be plan is considered to be a major indicator of in doubt, with many strategic options available, potential business success, and is certainly but the course of most family businesses is set associated with achieving growth. Yet a majority as soon as the founders make the decision to of family business founders appear deliberately purchase or create an enterprise. In tourism to neglect the business plan, either out of and hospitality the vast majority, from intent or ignorance or as a reflection of their predominant necessity, will always remain small, hands-on lifestyle and autonomy motives. Included in this operations. section is an outline of what the plan should In this chapter the critical issues of motiva- include, with emphasis on several family-related tion and goals are examined first, particularly the issues. contrasts inherent in growth and profit-oriented Ownership, organization and governance entrepreneurship versus the more prevalent are covered last in this chapter. Ownership forms lifestyle and autonomy motivations. Research and business structure are usually set at the data from Australia, Canada and Denmark are time of business start-up, or absorbed through analysed to examine start-up motives and goals purchase. Many families prefer uncomplicated in depth. Later in the book (see Chapter 5), forms including single and joint ownership, while data from these same research projects are various forms of partnership are preferred by used to examine family-related and business- others. The profit- and growth-oriented entre- development goals, succession plans and related preneur is more likely to purchase or establish issues. a company because of its greater potential to The third section of this chapter discusses acquire external funds from lenders or investors, important antecedents to family business, and to restrict owners’ liability in the case of fail- including the influences of education, experi- ure. Of particular interest to the family business is ence and training. Tourism and hospitality the option of including professionals in manag- businesses are often easy to enter and many ing the business, or at least in a board of direc- owners lack directly relevant training or experi- tors. Parallel to business governance should be ence. On the other hand, previous work in the policies and procedures for family management, industry, or exposure through one’s upbringing including a family council and charter.

©D. Getz et al. 2004. The Family Business in Tourism and Hospitality (D. Getz, J. Carlsen and A. Morrison) 41

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42 Chapter 3

Motivations and Goals analysis are examined from Australia, Canada and Denmark. Sharma et al. (1996: 9) observed that family business goals ‘are likely to be quite different from the firm-value maximization goal assumed Research Evidence from the Tourism for the publicly traded and professionally man- and Hospitality Industry aged firms’, but there have been few attempts to identify the imputed differences. At the heart of this issue is whether family business owners will Quite a lot of evidence comes from research place family concerns over business success conducted in the UK, where the tradition of or growth, and what impact this has on the family business in tourism and hospitality is very business (and by implication, the industry and well established. Shaw and Williams (1987), destination). from a study of owners in Cornwall, determined Singer and Donahu (1992) touched on that motivations for leaving their previous job or this issue by identifying two distinct types: the position were quite diverse. The most frequent family-centred business, where the business is a (23%) was to be self-employed. Personal or way of life, and the business-centred family, in family reasons were given by 19%, while 14% which business is a means of livelihood. File et al. were dissatisfied with previous employment and (1994) also categorized family businesses, distin- 10% mentioned the push factor of having been guishing between those which were uninvolved made redundant. An additional 10% wanted to in issues of family dynamics, those balancing move to Cornwall, while 3.3% were fleeing ‘the family and business needs, some which had rat race’. The remainder wanted to make more family concerns as their primary goal, and others money (3%) or enhance their career (6%). which were most concerned with adapting to Asked specifically why they established a busi- changing conditions. ness in a particular location (all in Cornwall), As noted by Westhead (1997), economic the main answers were: the environment, or theory postulates that the decision to establish a to move to Cornwall (25%); were in Cornwall business should be based on an assessment of anyway (25%); economic reasons (18%); the the best alternative use of the entrepreneur’s markets for their business (10%), and luck or time, but family business owners are distin- chance (14%). guished by providing employment for family The National Survey of Small Tourism and members of the management team and by Hospitality Firms in the UK (Thomas et al., 1997) ensuring independent ownership of the questioned owners on their motives. Fully 90% business. Dunn (1995) found that it was not of owners gave non-economic reasons for being uncommon for family businesses to accept lower in business. Few were motivated by the antici- returns or longer paybacks on their investments, pation of greater financial rewards than could or to sustain a lifestyle, rather than to maximize be expected from paid employment. The most profits or personal revenue. Gersick et al. (1997) common reasons given for business ownership concluded that businesses in the start-up stage were to do what they enjoyed (45%) and the were characterized by informal organizational desire for independence (30%). Only 4% con- structure, owner-manager control and having a sidered ownership of their small business to be a single product. When it is also a family business form of semi-retirement, while 10% believed they are more likely to be associated with they had been driven to self-employment. personal, family or lifestyle dreams than with objective business projections. Enough evidence has been published Rural and farm-related regarding motives and goals in the tourism and hospitality industry to conclude that there Frequently, small farm-based family businesses exist a multiplicity of economic, social and (e.g. farm-stays, caravan and campsites, B&B personal reasons. In the following section operations) are established to support the main evidence from a number of diverse sources farm business (Pearce, 1990; World Tourism is presented, then more detailed data and Organisation, 1997), but are also set up as a

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sideline or hobby, often by females (Kousis, lifestyle, and long-term financial gain (account- 1989; Lynch, 1996; Oppermann, 1997). Other ing for 18–24% each), but lifestyle goals were rural tourism researchers have pointed to the twice as frequent in rural areas. A study of goals or rewards of improved social lives tourism businesses in the Northland region (Frater, 1982; Pearce, 1990), and social of New Zealand by Page et al. (1999) secured standing (Pearce, 1990). data from about 300 operators. Fifty-four per A study of farm and ranch tourism in cent of respondents indicated their principal Montana by Nickerson et al. (2001) determined motive for owning a tourism business was that 61% of owners had diversified for economic enjoyment of their particular line of work, and reasons, while 23% had reasons external to their 20% wanted to be their own boss. operations and 16% had social, economic and Peters and Weirmair commented on the external reasons combined. Specific economic explosion of tourism in Austria in the mass- reasons included: variable and uncertain farm tourism-oriented 1970s: income; providing jobs for family, or helping . . . in Austria those who took over hotels and keep them on the farm; earning extra income; related businesses from their parents or who loss of government funding; making better use of entered tourism from agriculture/forestry and assets, and taking advantage of tax incentives. who obtained most of their external financing Non-economic reasons included: a desire for through land collateral frequently fall into companionship; meeting existing demand; edu- the category of ‘life style’ and/or ‘part-time’ cating the consumer, and pursuing an interest or entrepreneur. hobby. Apparently imitation of other enterprises (Peters and Weirmair, 2001) was a factor in many of these diversification Many of those who survived are now facing ventures. serious financial problems because of high debt loads. In Finland, Komppula (2000) found only lifestyle entrepreneurs in his interviews with rural Third World factors tourism operators. Growth of the business was not an objective in these enterprises. Smith (1998) specifically evaluated small, Third World tourism enterprises, noting that powerful incentives existed for their establishment. These Rural Western Australia included: taking local control over develop- ment; acquiring status; gaining access to clubs In this research, first published by Getz and and business networks; building equity for a Carlsen (2000), the sample consisted of a com- family legacy or retirement assets; hiring family bination of two, mutually exclusive subsets: members who might otherwise be unemploy- (i) a general sample of rural tourism/hospitality able, and being one’s own boss. Smith con- businesses in Western Australia; and (ii) a more cluded that in the Third World employees of focused sample from one well-known tourist hotels and resorts were often better off than region. their self-employed neighbours, owing to easier The state-wide sample was partially derived work and higher pay. Accordingly, it can be from a list provided by Farm and Country expected that family business motivations and Holidays Association Inc., and augmented by goals differ greatly between wealthy and poor selections from the Royal Automobile Club’s countries. Western Australia Touring and Accommodation Guide. Metropolitan Perth and other cities were excluded from the sampling frame. The result Lifestyle motives was a non-random sampling covering all types of tourism and hospitality businesses. Western In a study of small tourism businesses in Australia is a very large, predominately rural Victoria, Australia, Bransgrove and King (1996) state. Outside the main metropolitan centre of found that the top goals of owners/managers Perth, tourism opportunities abound in small- were challenge/stimulus, business opportunity, town, beach, farm, and wilderness settings.

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The entire membership of the Augusta- received a college diploma, 13.9% a university Margaret River Tourist Association was also degree, 11.2% an advanced degree, and surveyed, which yielded a few types of business another 12.8% a trade qualification. that might not appear to be tourism-oriented, yet The dominant age category of respondents membership in the organization suggests that was 45–54 (41.4%), followed by 35–44 the owners believed they at least benefit from (24.1%). Only two respondents (1%) were tourism. This tourist region is located south of under the age of 25, and only 11 (5.8%) were Perth, approximately a 3-hour drive by car, and aged 25–34. The 55–64 category accounted for includes very popular beaches, wineries, natural 19.4% of the sample, and the 65-plus category areas and small towns. It is more intensively was 8.4%. Children (ages not defined) of the developed for tourism than the majority of the respondents worked in only 23% of the busi- state, and enjoys a reputation for good climate, nesses, although it is likely that parents will not attractive landscapes and a lifestyle associated count young children as employees, regardless with fine dining and wine. Consequently, it has a of any involvement in the business operations. different character and appeal than most of the There were 21 respondents with one child in the rural regions of the state. business, 12 with two, nine with three, and four The mail-out survey, and a subsequent with four involved children. reminder card, went to 357 businesses in the Based on the respondents’ own des- Margaret River area and to another 455 busi- criptions of their business, 75% of the sample nesses in the remainder of the state. The were accommodation operators, with the largest response rate was 33% in Margaret River and block running guest ranches or farm-stays (47 = 20% in the remainder of the state. The total 25.1%). ‘Campground/resort/self-catering’ opera- number of useable responses was 210 (for an tions was the next largest group (42 = 22.6%), overall response rate of approximately 26%), and B&B operations accounted for 40 (21.4%). but included only 198 family or owner-operated Only 7, or 3.7% of the businesses were hotels businesses, which have been used in the ensuing or motels. Other types of operations included: analysis. ‘food or retail’ (13 = 7%); ‘tour operation’ (12 = 6.4%); ‘winery’ (12 = 6.4%); ‘’ (7 = 3.7%); ‘other services’ (6 = Respondents and characteristics of 3.2%) and ‘manufacturing’ (1 = 0.5%). This their businesses breakdown cannot be interpreted as an accurate reflection of the rural tourism and hospitality All 198 respondents used in the analysis indi- sectors overall, owing to limitations of the two cated that they had a ‘family-owned’ business, sampling frames and response rates. that is, ‘owner-operated, or one family owns Eighty-three per cent of the respondents controlling interest.’ They were dominated had started up the business, with only 4.2% (66.2%), by businesses owned by a married having inherited it. Also, most of the businesses couple, and 82.2% of respondents were were recently started, with 65.1% commenced in married. Sole proprietors accounted for 14.4%, the 1990s, 24.6% in the 1980s, and 5% in the a partnership of two or more family members 1970s. Seven respondents (3.5%) indicated 9.7%, limited company 5.6%, a partnership the business had started up in the 1800s. Fully including family members 1.6%, and others 44.4% of businesses had been started within 5 2.5%. Fully 96.4% of respondents reported years of the survey. In response to the question: they were an owner, and it is likely that the ‘how many years have you been involved in others, who said they were ‘managers’, were the business?’, the modal category was 1–5 family members. (54.6%). Only 16.5% had been involved longer Females were the largest group, accounting than 10 years (with 5.7% under 1 year and for 59% of respondents. This imbalance possibly 23.2% between 5 and 10). reflects the dominance of women in B&B Most were small and micro businesses. and farm-stay operations. In terms of education, Ninety-five per cent employed 10 or fewer per- the largest group (42.2%) of respondents had sons, with 4% reporting between 10 and 50 and high school qualifications, although 19.8% had one (0.5%) reporting over 100 persons. As well,

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Starting the Family Business 45

80% of the tourism and hospitality businesses category concerned business opportunities and in this sample reported an annual revenue of investments (27.6%). Business-related answers under Aus$100,000, while 14% had revenues were the most frequent. of between Aus$100,000 and Aus$500,000 and Table 3.2 presents responses to the ques- 2.6% over Aus$1 million. Sixty-nine per cent tion: ‘How important were the following goals reported fewer than 1000 customers per year. to you when getting started in this business?’ The Margaret River sample was somewhat The goal statements were all carefully derived different from the overall state sample, although from the family business literature as well as from differences on goals were not evaluated because 12 pre-survey interviews with family business of the quite different sampling frames. Com- owners covering their motivations and goals. pared to the state-wide sample, Margaret River Respondents were asked to tick one box of respondents were less dominated by accommo- five beside each of the 12 statements, with the dation and had fewer female respondents. anchors being ‘not at all important’ and ‘very These data portray a population of mainly important’. middle-aged business operators. They might The researchers first sought to determine have had rural roots or connections, but they the relative importance of the start-up goals. were mostly not young rural natives taking over The most striking results were that living in the family businesses or starting first careers. right environment (mean = 4.51, out of 5) and enjoying a good lifestyle (4.37) were the stron- gest goals by far, with hardly any respondents Start-up goals not ranking them as ‘important’ or ‘very impor- tant’. Other very important goals for these Respondents were first asked an open question: respondents were ‘to permit me to become ‘Please describe why you got started in this financially independent’ (mean = 3.97) and ‘to business.’ Answers were grouped for coding be my own boss’ (3.94), both of which express purposes, with results displayed in Table 3.1. a desire for autonomy. ‘To provide me with a The largest single category (34.1%) concerned challenge’ (3.93) and ‘to meet interesting peo- lifestyle decisions, and the second main ple’ (3.96) demonstrate that social and personal reasons were important to many respondents. The lowest-ranked goals were ‘to gain prestige’ Table 3.1. Start-up goals of rural family (mean = 2.16) and ‘to make lots of money’ businesses in Western Australia. (mean = 2.88). A second objective of the analysis was to Valid % of total reveal any underlying structure in the 12 goal Categories responses statements – specifically, which goals go together Appealing lifestyle 34.1 in defining a lifestyle orientation versus a profit- Business opportunity/investment 27.6 maximizing orientation? Accordingly, a factor Worked in related business/ 9.7 analysis (principal components analysis) was to diversify conducted on the 12 goals. The factors were To preserve the home 6.5 then rotated using Varimax rotation with Kaiser Retirement project 6.5 Normalization. This resulted in four factors that Meeting people 3.8 Recover debt on acquired land 2.7 explained 60.4% of the variance in respondents’ Assistant to husband 2.7 scores; this level of explanation is good, but low Build business then sell for 2.2 enough to suggest that the four factors do not retirement explain all the underlying patterns of responses. Thought it would be fun/good 1.6 The order of statements in Table 3.2 has idea been altered from the original questionnaire so Saw a market need for the 1.6 that statements comprising the four factors could business be grouped together. Each factor was named Categorized from an open-ended question: according to the researcher’s interpretation of ‘Please describe why you got started in this underlying meaning. The five ‘Lifestyle’ vari- business?’; source: Getz and Carlsen, 2000. ables grouped very well together in statistical

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46 Chapter 3

Table 3.2. Importance of start-up goals among rural family business owners in Western Australia (n = 198).

1 Not at all important 5 (valid % of Very Goals responses) 2 3 4 important Means Factors

Lifestyle To keep my family together 11.7 6.9 22.3 16.5 42.6 3.71 F1 To keep this property in the family 22.7 4.3 16.2 18.9 37.8 3.45 F1 To live in the right environment 2.1 1.1 8.5 20.7 67.6 4.51 F1 To support my/our leisure interests 11.5 11.0 23.6 17.3 36.6 3.57 F1 To enjoy a good lifestyle 2.1 1.1 12.1 26.8 57.9 4.37 F1 Money To make lots of money 17.9 18.4 32.1 20.5 11.1 2.88 F2 To permit me to become financially 7.8 5.2 15.1 26.0 45.8 3.97 F2 independent To provide a retirement income 11.0 9.9 25.7 18.8 34.6 3.56 F2 Stimulation To meet interesting people 5.7 5.7 13.5 36.5 38.5 3.96 F3 To provide me with a challenge 5.8 6.8 16.2 31.4 39.8 3.93 F3 Independence To be my own boss 7.4 8.4 12.6 26.3 45.3 3.94 F4 To gain prestige by operating a 45.8 16.1 19.8 13.0 5.2 2.16 F4 business

Source: Getz and Carlsen, 2000.

terms (they are shown as F1 in Table 3.2), and high mean values. While it can be concluded were by far the most important in light of the that lifestyle was, overall, the most important, mean scores and high factor loadings. Note that the findings also reveal that multiple goals F1 explains 21.3% of total variance and includes were involved in the start-up decisions of these the two highest means (4.51 and 4.37). respondents in rural Western Australia. Three goal statements constituted the To determine if there were identifiable ‘Money’ factor (F2; explaining 14.2% of vari- differences in the types of respondents according ance), including the second-lowest mean of all to the way they rated the goal statements, the – ‘to make lots of money’ (2.88). The other two researchers employed several statistical tests on goals on this factor were, however, important to the individual goal statements. This technique the respondents. Factor 3 was called ‘Stimula- found no statistically significant differences by tion’ (12.7% of variance) and contained two reference to demographic, business and owner- fairly important statements. Factor 4 was called ship variables. But what of the four factors – ‘Independence’ (12.2% of variance), assuming should the groupings of statements reflect that prestige is one of the appeals of being one’s some underlying differences in respondents? To own boss. In hindsight, especially given the answer this important question, demographic, results of the analysis from Bornholm and ownership and business-type variables were Canmore which follows, Factor 4 should have tested against four new variables consisting of been called ‘Autonomy’. This is because ‘being the summed means from statements in each one’s own boss’ was shown to be an important factor. Either analysis of variance (ANOVA) or goal for entrepreneurs and family business own- an independent means t-test was employed. The ers in its own right. sample size imposed some limitations on this It was interesting to find that at least analysis. A much larger sample might have been one goal in each of the four factors was very able to identify more statistically significant important to many respondents, judging by the differences.

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Starting the Family Business 47

Business type made a difference (after re- comparisons. In some traditional communities, grouping to combine the manufacturing, food/ for example, it might be expected that most retail and ‘other services’ categories) with regard family businesses are inherited rather than new to the ‘Money’ factor. Tour operators, compared businesses set up by in-migrants. Even within to the hotel and owners, were much Western Australia differences were noted, as the less oriented toward making money. Hotel and Margaret River subsample had a different mix of motel operators probably have invested consid- business types. It can be hypothesized that more erable financial resources in their businesses and developed rural tourism destinations attract and expect a good return on investment. Although sustain different types of businesses and quite other inter-group differences were not statisti- likely different types of investors. Developed des- cally significant, a plausible hypothesis emerges: tinations can count on higher levels of publicity the more money one invests in the business, the and demand, less seasonality, and a broader more likely that financial goals dominate. That is range of attractions and services. not to say, however, that the reason for investing The Western Australian sample strongly in a rural business was not in part related to envi- suggests that tourism and hospitality sectors are ronment and lifestyle considerations. In some attracting many middle-aged couples and fami- of the cases, existing farm operations were lies to live and invest, for predominantly lifestyle probably converted in whole or part to tourism and family reasons. In addition, there is a group operations (e.g. B&B or caravan park), so the of sole proprietors (who might have informal level of investment was less than if a new family involvement in the business) who appear enterprise was started from scratch. to be motivated more by normal profit-making Another variable found to be significant goals, but who also prefer the rural environment. is that of ownership type. Married couples and Overall, the analysis tends to confirm the sole proprietors displayed statistically significant presence of both family-oriented businesses and differences in their responses to the variable that business-oriented families (or sole proprietors) comprises the ‘Independence’ factor. Sole pro- as suggested by Singer and Donahu (1992), but prietors (i.e. one person owning and operating in these rural tourism and hospitality sectors, the business, not a couple or family) were much living in the rural environment, plus family more likely to agree that being one’s own boss and lifestyle considerations, were significant for and gaining prestige were important start-up almost everyone. goals. The age of respondents was also important, specifically with regard to the ‘lifestyle’ factor. Those aged 35–44 had significantly different Canada and Denmark responses from the 45–54 cohort, with the youn- ger owners displaying much higher agreement This comparative research (by Getz and with the five statements in this factor. This is pre- Petersen, 2002) of somewhat different resort sumably linked to the prime family-formation settings (Canmore, Alberta in Canada and the stage, with those aged 35–44 being more likely island of Bornholm, Denmark) in two countries to have children at home. was built on the earlier Australian work, but As well, both the 25–34 and 35–44 age added several dimensions. The same start-up groups were significantly different from the goals were tested again, and a number of 65+ group regarding the ‘Independence’ factor. interviews conducted in Denmark to obtain Younger respondents were much higher in additional insights. Detailed analysis has been their agreement with the two statements in performed on these comparative data to search this component. Apparently the 65+ category, for and characterize profit- and growth-oriented which coincides with normal retirement ages, entrepreneurs. is less likely to be interested in prestige or These specific areas were chosen for mostly self-employment. Younger, sole proprietors practical reasons, being immediately accessible favoured these two reasons. to the collaborating researchers. As discussed Whether or not this population is similar later, they are similar enough to enable effective to that in other rural areas is open to future comparison of family business owners, yet

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48 Chapter 3

different enough to yield some significant enterprises’ (Gyimothy 2000: 56). The climate variations in results. is temperate and often sunny, but winters are harsh and not attractive for visitors. The main The resorts attractions are unspoiled rural and coastal scen- ery, quaint fishing villages, recreational activities Canmore is a rapidly-growing (, fishing, yachting, windsurfing, golfing, situated just outside the boundary of Banff shopping, bird watching, dining, bicycling, National Park, a 1-hour drive west of Calgary, bathing), a number of sandy beaches, historic Alberta. Its very recent transition from coal- churches, arts and crafts (especially glass blow- mining village to tourist destination is attribut- ing and ceramics), and visiting small museums. able to several major factors: staging of part of The summer season is typically only 2 months in the in Canmore, which length. generated publicity and a world-class facility Bornholm is similar to two other Baltic for cross-country ; a development freeze islands, Åland and Gotland. All three islands within the national park, resulting in over-spill possess high levels of local ownership and con- development in Canmore; and mounting trol; Twining-Ward and Baum (1998) concluded demand for second homes in the mountains. that all three had entered a period of decline and Consequently, since 1988, tourism has become were suffering from the ill-effects of seasonally the town’s major industry. Numerous accom- low demand. The problems are augmented by a modation, retail, tour and other services have dominance of small, family enterprises ‘. . . opened there. which in many cases lack the professional train- Canmore’s Business Registry, with interpre- ing required to secure a high quality of service’ tation by local economic development officials, (Twining-Ward and Baum, 1998: 135). revealed 1034 businesses of which 61% were considered to be ‘family owned’, that is owned Method by identifiable persons, not corporations. A total of 198 tourism-related businesses were identi- Research was undertaken in 2001 by Getz fied and it was estimated that 78% of these were and Petersen, and the Bornholm portion was ‘family owned’. Almost all the ‘family-owned’ conducted with co-operation from the Centre businesses are owner-managed with resident for Regional and Tourism Research (CRT) in owners, although a very small proportion of Bornholm. The main instrument was a self- owners resided outside the community. A total completion, mail-back questionnaire written in of 100 respondents completed the survey. English, then translated into Danish by staff at A breakdown of accommodation busi- the CRT, then back-translated into English to nesses in Canmore reveals that it is heavily ensure consistency. In addition, interviews were weighted to B&B houses (79 out of 106), conducted in Danish with a sub-sample on and 36 of these B&B owners replied to the Bornholm, but these were not attempted in questionnaire. All B&B operations were family Canmore. businesses. In addition there were 27 other The sampling frame in both cases was accommodation businesses (hotels and motels, a census of businesses, with owner-managers plus one campground) of which 16 (59%) were selected for study. In Canmore the researchers believed to be family owned. The survey yielded were assisted in this selection by the local nine respondents from these other accommoda- economic development agency which possesses tion types. In analysing the data it was therefore intimate knowledge of the community. In desirable to isolate B&B for a number of Bornholm the researchers relied on detailed comparisons to other business types. personal knowledge and input from local busi- The Island of Bornholm (in the Baltic Sea) ness owners to determine the sample. A few is one of the most renowned destinations in errors might have occurred in this process, but Denmark, having been popular since the late they would be insufficient to bias the results 19th century. It has been described as ‘. . . significantly . Sampling also resulted in a few a mature seaside resort with an established duplications (i.e. owners of multiple businesses), tourism infrastructure dominated by small and also a small number of omissions owing to a

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lack of information. On Bornholm, an unknown (63% compared with 46%), and they were, number of individual owners of ‘summer on average, older. This reflects the older houses’ for rent were not included. age of the businesses covered by the sample Privately-owned attractions and recreation (65% of the Canmore owners had owned their suppliers were included. Tourist-oriented manu- business for 5 years or less, compared with 32% facturing and retailing was included, specifically in Bornholm), and in turn the much longer arts and crafts producers, antique dealers, gift history of tourism development on the island. shops and candy manufacturers. Grocery, cloth- Bornholm respondents might appear to ing, furniture and other stores were excluded be better educated, but a higher proportion of even though in resorts a portion of their trade Canmore respondents had university degrees, would definitely come from non-residents. compared to vocational education in Bornholm. Private taxi and bus companies were covered. Data on business types are not directly compara- Consequently, the samples can be said to ble as the industry is somewhat different in these represent all the major elements of the tourism resorts. The largest group in both cases were and hospitality sectors within a resort, but not of accommodation operators, but in Canmore the industry as a whole, as they exclude major there was a high proportion of B&B owners transport companies, chains and corporate while the Bornholm sample are mostly operators investments. The surveys were close to being a of small hotels and ‘pensions’ (pensions are typi- census but did not capture 100% of business cally smaller than hotels, but often indistinguish- owners, and under-represent the retailing sector. able). The Bornholm sample also contained a An estimate was made by local researchers group of 21 arts and craft producers/retailers, but of the total number of tourism and hospitality there were none of these in the Canmore sample businesses in the Bornholm study area, using (one operates in the town). municipal directories, and the proportion that Ownership was largely in the hands of was family owned (based on detailed local know- married couples and sole proprietors. Quite a ledge). As in Canmore, the principal criterion for few families had formed companies, but partner- determining if a business was ‘family owned’ ships were a small minority. There was a higher was the presence of resident, owner-managers. proportion of sole proprietors in Bornholm and a There were 317 identifiable tourism/hospitality higher proportion of married couples as owners businesses in the two Bornholm municipalities in Canmore. Exact percentages are not possible covered by the research, of which fully 95.3% because multiple answers were permitted on the were deemed to be family businesses. The main ownership question. foothold of corporate ownership is that of larger In both resorts the businesses were very accommodation establishments. small, with mostly just the owner(s) being The questionnaire sample of 84 owners on employed. In Bornholm less than half had non- Bornholm is not directly comparable to the busi- family, full-time, paid employees; only 11 invol- ness categories used in Canmore, because each ved children and seven others involved other respondent was asked to indicate all the different family members besides spouses. Companies activities of their business and a small number of (as opposed to other ownership forms) and non- them ran multiple businesses or multi-activity accommodation businesses had more paid, full- businesses (such as hotel plus restaurant). Of the time, non-family employees. In Canmore, less 120 activities listed by respondents, accommo- than half had employees and only 17 involved dation was the largest category (31), followed by children or other family besides a spouse. Those restaurants/cafes (22), and then arts and crafts Canmore businesses owned by companies producers (21), (most of which are combined had more employees, and these were primarily production and retail operations). hotels, restaurants, and to a lesser extent tour companies. None of the B&B establishments Profile of respondents and their businesses had non-family, full-time paid employees. In Canmore, a relatively new resort, In both resorts (see Table 3.3) the respondents 74.5% of the businesses were started by the were predominantly married (88–89%), but respondents, compared to 56.3% in Bornholm. there were more males in the Bornholm group There were no inherited businesses in Canmore,

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Table 3.3. Profiles of the respondents from a survey of family business owners in Denmark (Bornholm) and Canada (Canmore).

Bornholm Canmore n = 84 (responses to individual n = 100 (responses to Individual Profile variables questions vary) questions vary)

Gender Male: 63.3% Male: 45.8% Female: 36.7% Female: 54.2% Marital status Married: 88.8% Married: 87.8% Other: 11.3% Other: 12.2% Age Under 25: 1.3% Under 25: 0.0% 25–34 5.0% 25–34 10%.0 35–44 27.5% 35–44 40.0% 45–54 31.3% 45–54 28.0% 55–64 30.0% 55–64 15.0% 65+ 5.0% 65+ 7.0% Included in the business Accommodation: 31.0% Accommodation: 45.0% (respondents were Restaurant/cafe: 22.0% Restaurant/cafe: 19.0% asked to indicate the Attraction: 5.0% Attraction: 2.0% activities included in Art/craft: 21.0% Recreation: 3.0% their business, yielding Retail: 8.0% Retail: 20.0% multiple answers) Tour service: 4.0% Tour service: 12.0% Other: 23.0% Other: 26.0% Year business started 2000: 2.6% 2000: 10%.0 1990s: 33.3% 1990s: 67%.0 1980s: 14.1% 1980s: 14%.0 1970s: 12.8% 1970s: 3%.0 1960s: 15.4% 1960s: 1%.0 1950s: 7.7% 1950s: 2%.0 older: 14.1% older: 3%.0 (oldest: 1887) Number of years in • 1 or less: 7.3% • 1 or less: 13%.0 this business • 5 or less: 31.7% • 5 or less: 65.0% (cumulative %) • 10 or less: 53.7% • 10 or less: 88.0% • 20 or less: 79.3% • 20 or less: 96.7% • 30 or less: 91.5% • 30 or less: 98.9% Purchased or started? • Purchased: 38.1% • Purchased: 74.5% • Started myself: 56.3% • Started myself: 25.5% • Inherited: 2.5% • Renting: 1.3% Ownership • Husband/wife: 21.0% • Husband/wife: 50.0% (multiple responses • Ltd. company: 14.0% • Ltd. company: 29.0% were permitted) • Sole proprietor: 38.0% • Sole proprietor: 26.0% • Partnership no family: 2.0% • Partnership no family: 5.0% • Partnership with family: 4.0% • Partnership with family: 1.0% • Other: 4.0% • Other: 2.0% Family involvement Only me: 30.0% Only me: 25.0% (multiple answers With spouse: 41.0% With spouse: 64.0% were permitted) Child(ren): 11.0% Child(ren): 12.0% Other family: 7.0% Other family: 5.0% Paid employees None: 53% None: 62.5% (non-family, full-time) 1: 12.0% 1: 6.3 % 2–10: 28.9% 2–10: 21.9% over 10: 6.0% over 10: 9.4% Range: 0–35 Range: 0–35

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Table 3.3. Continued.

Bornholm Canmore n = 84 (responses to individual n = 100 (responses to Individual Profile variables questions vary) questions vary)

Education Post-secondary: 76.3% Post-secondary: 66%.0 Previous business Yes: 31.2% Yes: 43.4% ownership No: 68.8% No: 56.6%

Source: Getz and Petersen, 2002.

but several in Bornholm (2.5%). Previous busi- provide a retirement income’ (3.40 compared ness ownership was high (31% of respondents to 2.72). None of the three extra items for the in Bornholm and 43% in Canmore), but it is Danish sample attracted high means, although unknown what kinds of businesses they were. ‘to move to Bornholm’ was apparently a motivator for some of the respondents. Start-up goals Based on the means, it appears that the family business owners in both resort settings The 12 goal statements developed for the Getz were motivated equally by lifestyle and and Carlsen (2000) research were used again, locational preferences, just as in the rural and three new goals were provided to the Western Australian sample. Autonomy goals Bornholm data in consideration of local condi- were also very important to both groups. The tions. Table 3.4 displays the mean scores (out Canmore resort setting, however, appears to of 5), and overall, there was a high degree of have attracted more entrepreneurs interested congruence between the two countries’ samples in making lots of money and supporting their on their start-up goals. retirement, and more owners with specific recre- In terms of means, the highest six are the ational interests. It might be that the mountains same for each sample, although the ranking have a stronger recreational appeal than the sea- is different. Several goals generated differences side! Danish owners, on the other hand, appear between the resorts that were statistically to be more motivated by the need for challenge. significant, as indicated in the table. The highest mean among the Bornholm B&B owners in Canmore respondents was 4.36 for ‘to provide me with a challenge’, but this was significantly lower In Canmore, B&B owners (36 in the sample) in Canmore, at 3.75. The highest mean for were the most substantial sub-group and were Canmore respondents was 4.23 for ‘to enjoy a significantly different from the others. Twenty- good lifestyle’, but it was also important to the seven B&Bs are owned jointly by married Danes at 3.90 (not a statistically significant couples and nine were owned by sole propri- difference). ‘To be my own boss’ was second- etors, (although 28 of the B&B respondents highest in Canmore (4.20), compared to 3.99 in were female). Significantly (Chi square = Denmark (not significantly different). Amazingly, 0.005) none of the B&B owners had children ‘to live in the right environment’ attracted almost working in their businesses, and none had identical and very high means in both samples non-family, full-time paid employees. None (4.03 and 4.02). The other very high mean in the were under the ownership of a company Danish group was ‘to permit me to become limited, but 29 of 64 other businesses were. financially independent’ at 4.03, compared with Fully 82% of responding B&B owners reported 3.95 in Canmore (not significantly different). they started the business themselves. Looking at the other statistically different B&B owners in Canmore were much less responses, ‘to make lots of money’ appealed concerned with the goal ‘To permit me to more to the Canadians (mean = 3.18) than the become financially independent’. Only 39% of Danes (2.76), as did ‘to support my/our leisure them ranked it as important or very important, interests’ (3.73 compared with 3.16), and ‘to compared with 82% of the other business

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Table 3.4. Level of agreement with ‘goals when starting this business’.

Bornholm: means Canmore: means (out of 5) (out of 5) Goals when starting this business (n = 71–74) Factor (n = 92–97) Factor

(1) To be my own boss 3.99a F2 4.20a F1 (2) To keep my family together 2.99a F4/F5 3.18a F3 (3) To keep this property in the family 2.29a F4 2.12a F2 (4) To live in the right environment 4.03a F1 4.02a F3 (5) To support my/our leisure interests 3.16a F1 3.73a F1 Sig. = 0.016 F2 (6) To enjoy a good lifestyle 3.90a F3 4.23a F1 (7) To make lots of money 2.76a F3 3.18a F2 Sig. = 0.030 (8) To gain prestige by operating a business 2.06a F3 2.19a F4 (9) To meet interesting people. 3.74a F4 3.84a F4 (10) To provide a retirement income 2.72a F3 3.40a F2 Sig. = 0.002 (11) To provide me with a challenge 4.36a F2 3.75a F4 Sig. = 0.000 (12) To permit me to become financially 4.03a F6 3.95a F2 independent (13) To supplement my income (from other 2.10a F5 Not asked sources) (14) To avoid unemployment 2.63a F5 N/A (15) To move to Bornholm 2.83a F2 N/A

aIndicates significant differences; source: Getz and Petersen, 2002. N/A, not applicable.

owners. The B&B owners were also significantly (described below) for each resort have been less in agreement with the statements ‘It is crucial indicated with F1–F6. Each factor was given a to keep the business profitable’ and ‘I want to name based on the researchers’ interpretation of keep the business growing’. For this group, underlying meanings. Usually this is indicated, ‘To meet interesting people’ was a significantly and named after the goal statement with the higher motive. highest factor loading. When examining these results, particular attention should be given to the congruence of the two goal statements defining lifestyle in both samples, namely ‘to Factor analysis of start-up goals enjoy a good lifestyle’ and ‘to support my/our leisure interests’. Similar to the analysis of data from Australia, For Bornholm, six factors were derived with factor analysis using varimax rotation was per- a cumulative 72.2% of variance explained. Fac- formed on both sets of start-up goals. It would tor 1 (explaining 24.5% of variance) consists of be expected that the three samples from dif- three goals all clearly linked to ‘Lifestyle’ consid- ferent countries would display different results, erations, demonstrating the synergistic allure of and they do in some specific ways, but the an island location (‘To live in the right environ- similarities turned out to be more important. In ment’), leisure interests and enjoying a good life- particular, the lifestyle factor turns out to be style. Although two of the three are the same in paramount in all three samples. Canmore’s Lifestyle factor, the goal ‘to live in the Table 3.5 shows results of the factor right environment’ is more closely associated analysis for both Canmore and Bornholm. with family-first concerns among the Canadians. The statements have been kept in their original Factor 2, called ‘Challenge’ (12.2% of vari- questionnaire order, and the factor groupings ance), encompasses the top-ranked goal ‘To

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Table 3.5. Attitudes and future-oriented goals.

Bornholm Canmore (n = 77–82) (n = 96–100) Means Means Statements about this business (out of 5) Factors (out of 5) Factors

(1) It is crucial to keep this business profitable 4.73a F3 4.48a F1 Sig. = 0.033 (2) I want to keep the business growing 3.54a F3 4.10a F1 Sig. = 0.002 (3) Enjoying the job is more important than making lots 3.88a F4 3.96a F3 of money (4) In this business customers cannot be separated from 2.91a 2.95a personal life (5) This business currently meets my performance targets 3.73a 3.40a (6) It should be run on purely business principles 3.11a F3 2.92a F4 (7) I would rather keep the business modest and under 3.99a F1 3.78a F3 control than have it grow too big (8) My personal/family interests take priority over running 3.28a F4 3.70a F3 the business Sig. = 0.018 (9) Eventually the business will be sold for the best 3.46a F3 3.57a F1 possible price (10) This business is highly seasonal 4.23a 4.23a (11) I come into daily contact with my customers 4.46a 4.24a (12) It is hard to separate work and family/personal life in 3.71a 3.69a a tourism business (13) I enjoy taking risks 3.81a F2 3.46a F2 (14) After making this business a success I want to start 1.79a F2 2.84a another Sig. = 0.000 (15) The business is a legacy for my children 2.01a F2 1.90a F2 (16) I am always trying something new 3.53a F2 3.55a F2 (17) I believe in hands-on management 4.67a F1 4.43a F1 Sig. = 0.049 (18) It is best to avoid debt as much as possible 4.65a F1 4.15a F4 Sig. = 0.001

aIndicates significant differences.

provide me with a challenge’ and the highly- Factor 4, ‘Family First’ (9.3% of variance), rated ‘To be my own boss’. There is definitely includes ‘To keep this property in the family’ and a high degree of autonomy orientation in ‘To keep my family together’, both of which were this grouping, but it also includes moving to lowly rated. It is unclear why ‘To meet interesting Bornholm, which appealed only to a few. people’ loads on to this factor, as it was a Factor 3 has been called ‘Money Matters’ fairly highly rated goal. Also, keeping the family (10.1% of variance) as the highest loading together was almost equally associated with was ‘To make lots of money’, but it also includes Factor 5. ‘To avoid unemployment’ is the the prestige and retirement-income goals. It is important goal in Factor 5 (8.2% of variance), important to note that the means for these three although ‘To keep my family together’ loads items are all low, indicating that money and equally here and in Factor 4. Together they prestige were a minor set of goals among the have been labelled ‘Security’. Factor 6 (7.8% of Danish owners. However, it is also possible that variance) contains only one item, ‘To permit me in Denmark there is a social/cultural stigma to become financially independent’. It yielded attached to admitting to these goals. a high mean in the sample and is therefore

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important, but conceptually it seems to fit better Bornholm). Although ‘Money matters’ emerges with ‘Security’ or ‘Money Matters’. as a distinct factor in both samples, it is not very Turning to the Canmore sample, a four- important to a majority of respondents. factor solution was derived that cumulatively Could any differences be detected among explains 63% of variance among the responses. respondents favouring lifestyle or money As with the Danish sample, Factor 1 is labelled matters? Analysis began with creation of a new ‘Lifestyle’ (explaining 26.9% of variance). It con- variable comprising the summed means of the tains two of the same goals (lifestyle and leisure), three goals in the Lifestyle factor. Two of the but is associated more with ‘To be my own boss’, three Lifestyle goals are identical, but one is whereas among Danish respondents the third different between the two resort samples. Within goal in the Lifestyle Factor was ‘To live in the each sample independent means t-tests were right environment’. Nevertheless, all five of these employed to detect significant correlations goals were important or very important to both between the new lifestyle variable and a number samples. of business and ownership-related variables. Factor 2 is called ‘Money Matters’ (13.8% of In Bornholm, it was determined that sole variance) as it contains ‘To make lots of money’ proprietors (n = 38) were significantly more and ‘To permit me to become financially inde- lifestyle-oriented than others. Although gender pendent’. Making lots of money was significantly was not a significantly different variable, it more important to the Canmore owners (means: is noteworthy that more females than males 3.18 versus 2.76) whereas financial independ- were sole proprietors (20 females and 17 males). ence was important in both samples (Bornholm Owners of arts and crafts establishments were far 4.03; Canmore 3.75). more lifestyle-oriented than other types (means: Factor 3 (11.4% of variance) has been 4.36 vs. 3.42). Of the 19 arts and crafts owners, called ‘Family First’. It includes keeping the 11 were female. Among Canmore owners, life- family together, keeping the property in the style start-up goals were so predominant that no family, and living in the right environment. Of significant correlations could be found. these three goals, keeping the property in the Next, a new variable was created for family was unimportant, while living in the right each sample by summing the means in the environment was very important. ‘Money Matters’ factors. The goal ‘To make lots Factor 4 (10.9% of variance) is termed ‘Pres- of money’ was included in both Canmore and tige’, but the two goals it contains are a strange Bornholm. However, in Bornholm the other mix. ‘To gain prestige by operating a business’ goals in this factor concerned prestige and achieved a very low mean of 2.19 among retirement income, while in Canmore it was the Canmore respondents, whereas ‘To meet financial independence and retirement income. interesting people’ was a much higher 3.84. Accommodation owners in Canmore had significantly lower means on the ‘Money Matters’ Characteristics of lifestyle- and goals, no doubt reflecting the dominance of B&B money-oriented respondents establishments, while restaurant and café own- ers were significantly more money-oriented than Several facts stand out in making a comparison others. Businesses owned by married couples between the Bornholm and Canmore samples. were significantly less money-oriented as were Most important is that ‘Lifestyle’ is the dominant female respondents. Among the Bornholm sam- factor in both, and that the autonomy-related ple only gender made a difference, with male goals (especially the highly-ranked ‘To be my respondents being significantly less money- own boss’ and ‘To permit me to become finan- oriented. But the very low scores assigned to cially independent’) were also very important. these goals show that the entire Danish sample In Canmore financial independence correlated was less money-oriented than the Canadian. more closely with making lots of money whereas in Bornholm it stood alone. In some Attitudes and future-oriented goals owners’ minds, being one’s own boss might be a lifestyle consideration (as in Canmore) and It is possible that motives and goals change to others it is more linked to challenge (as in after starting the family business. In particular,

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owners should be able to articulate goals for the business’), with both samples agreeing moder- future of the business and the way they want to ately but Canmore respondents significantly operate it. more so. Also, both samples were not very Accordingly, respondents in Bornholm and receptive to the notion of starting another busi- Canmore were also asked to indicate their level ness (‘After making this business a success I want of agreement (on a five-point Likert scale) with to start another’), but the Canmore respondents 18 ‘statements about this business’ (see Table were significantly less interested. 3.5). The scales were identical in both samples. The statements were of three types: attitudes that Factor analysis of future-oriented are likely to shape strategy; explicit goals for the business goals future, and some factual statements about the nature of the business. The factual questions Factor analysis was conducted to reveal under- (numbers 4, 5, 10, 11, and 12) are not included lying dimensions in the future-oriented goals in the analysis here, but are relevant in (the five factual statements not being included subsequent chapters. in this analysis), and to permit identification As with the start-up goals, the statements of respondents associated with each factor, if pertaining to attitudes and future-oriented goals possible. A four-factor solution was derived for were based on family business and entrepre- each sample, as shown on Table 3.5. Note that neurship literature plus the interviews that pre- the researchers have to assign items to each ceded research in rural Western Australia. They factor on the basis of their ‘factor loadings’ and were intended to reflect a range of possible sometimes there are problems because factor orientations, and in particular analysis was loadings can be negative (as with item 14 for directed at identifying and profiling those owners Canmore) or are too low to be statistically who were growth-oriented. significant. Some interpretation is therefore Table 3.5 displays the means achieved required. for each statement in both samples, indicates For Bornholm, the total variance explained statistically significant differences between the by the four factors is 55.9%, which is not particu- two samples, and shows the factors described larly strong. Factor one, ‘Control’, explains the below. The statement ‘It is crucial to keep this most – at 19.5% of total variance. It joins three business profitable’ was highly rated in both items related to keeping the business modest, samples, but significantly more so in Bornholm. and favouring hands-on management and debt This was a surprise, given that the start-up goals avoidance. All three display high means in suggested a higher level of profit orientation in the Bornholm sample, demonstrating that a Canmore. A likely explanation is that almost majority were autonomy-oriented. all business owners recognize the need for ‘Innovation’ describes Factor 2 in Born- profitable management, and so this statement holm (14.5% of variance explained). This factor cannot be used to differentiate respondents. includes two significant loadings (‘I am always The best single item for differentiating growth- trying something new’ and ‘I enjoy taking risks’. oriented entrepreneurs is the obvious one: ‘I The means for these statements were 3.53 and want to keep the business growing’. Canmore 3.81, much less than those for the ‘Control’ respondents were much more growth-oriented items. Given the overall lifestyle and autonomy- (with a mean of 4.10, compared to 3.54 for orientation of the Bornholm sample, it is proba- Bornholm), and the difference was statistically ble that most of the innovation occurs within the significant. business, especially in arts and crafts, rather than Looking at the other high mean values, in the form of new ventures and growth. Two both autonomy (i.e. ‘I believe in hands-on other items were associated with this factor, but management’) and debt avoidance were highly the loadings were too low to be statistically valued in both samples, but significantly more significant: starting a new business and the so in Bornholm. There were two other signifi- business as a legacy for children. As well, both cant differences of note. The first pertained to those statements yielded very low means. family versus business orientation (‘My personal/ Factor 3 (12.4% of variance) contains three family interests take priority over running the statements which are interpreted as defining

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the profit-oriented entrepreneur, and while the Who are the profit- and growth-oriented goal ‘I want to keep the business growing’ is entrepreneurs? loaded in this factor, it was too low to be statisti- cally significant. What this appears to reflect To identify characteristics of the profit- and among the Bornholm sample is the majority’s growth-oriented entrepreneurs the starting desire for a successful business, but one that is point was to create a new variable by summing under control and does not grow very much – if the means of the items that formed the ‘Profit’ at all. The fourth factor for Bornholm is ‘Enjoy- factors (in Canmore these are statements 1, ment’ (9.4% of variance) and the two statements 2, and 9, whereas in Bornholm they are in it suggest an orientation opposite to that of statements 1, 6 and 9). profit-making. Next, a set of independent means t-tests In Canmore the four-factor solution was applied to search for significant correlations. explains 55% of variance. ‘Profit’ is Factor 1, In light of the preceding analysis, it was expected explaining 20.8% of variance. Means for that the Canmore sample would contain the three statements in this factor are high more, and clearly identifiable, growth-oriented (‘It is crucial to keep the business profitable’, respondents. 4.48; ‘I want to keep the business growing’, 4.10; In both Bornholm and Canmore, owners ‘Eventually the business will be sold for the who had purchased their business were sig- best possible price’, 3.57). This factor appears nificantly correlated with the ‘Profit’ factor. In to define the growth-oriented entrepreneur in Canmore the combined means on the three terms of attitudes and future goals, so for some ‘Profit’ factor items were 4.47 for purchasers owners – in Canmore at least – profit and growth (n = 25) and 3.92 for starters (n = 73). In are closely linked. ‘I believe in hands-on Bornholm the means were 4.17 for purchasers management’ also loads here (although not (n = 32) and 3.55 for starters (n = 42). Pur- significantly), thereby suggesting a link chasers are apparently more inclined to seek between autonomy, profit and growth – unlike out the right opportunity, whereas lifestyle- and Bornholm. autonomy-oriented entrepreneurs are more Factor 2 for Canmore has been called likely to start up a small business. ‘Innovation’ (12.7% of variance). The three In Canmore, the one type of business statements are identical to those in the significantly correlated with the profit factor is same-named Bornholm factor, and again the ‘restaurant and cafe’, whereas B&B owners are ‘legacy’ goal is loaded here but is not statistically definitely associated with lifestyle and auton- significant. Very few respondents in either omy. In Bornholm, accommodation overall is sample had a legacy in mind. correlated with the profit factor, while arts Factor 3, ‘Enjoyment’ (10.2% of variance), and crafts owners are definitely lifestyle- and contains two statements identical to the enjoy- autonomy-oriented. In Bornholm, copreneurial ment factor in Bornholm. The difference is that owners (married couples) were more profit- and in Canmore keeping the business modest and growth-oriented than sole proprietors without under control is more associated with enjoyment family involvement in their businesses. In (although the loading here is not statistically Canmore, owners with children working in their significant). business were significantly correlated with profit Factor 4 contains one significant loading and growth. These facts show that family and has been called ‘Debt Avoidance’. The business and profit/growth are in no way mean for this item in the Canmore sample incompatible. Indeed, many sole proprietors are was a high 4.15, but significantly lower more lifestyle- and autonomy-oriented. than in the Bornholm sample. The statement Surprisingly, previous ownership of a busi- ‘It should be run on purely business principles’ ness is not significantly correlated with profit- loads here, but not significantly. The statement and growth-orientation in either sample. Gender ‘After making this business a success I want of respondents did not matter in Bornholm, but to start another’ is negatively loaded here, in Canmore males were significantly correlated indicating it is viewed as being opposite to with profit and growth. Female respondents in debt avoidance. Canmore were mostly in the B&B business (28 F

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and 6 M), retailing (10 F, 8 M) and tour services preference for being one’s own boss is common (6 each), while males were more prominent in to both samples, but this in itself is not hotels (6 M, 3 F) and restaurants (14 M, 5 F). Age correlated with a growth-orientation. Self- was not a significant discriminator on the ‘profit employment can be a facilitator of lifestyle and growth factor’. choices, particularly leisure pursuits associated with tourism, or can be a reaction against paid Examples of growth orientation employment. Several paraphrased quotes translated from the Bornholm interviews are Most of the respondents in both samples did not illustrative of these orientations: display a growth-orientation. Many small and family businesses add value to their product in We are in the business because we like it, and we try to make a living. We are pleased about order to ensure profitability, but very few in our work. We stay open from April to October tourism and hospitality actually want to grow inclusive; the rest of the year we paint and keep their businesses substantially. Those that plan the buildings and make bookings for the next for growth, or are best able to deliver it, are season. Maybe we take some too. clearly in the minority. These are the owners (Owner of a small hotel) that can make a big difference in their commu- nities and tourist destinations. Some examples I have only a small business, which I founded as my health did not allow me to continue in from the interviews in Bornholm (translated my (previous occupation). I therefore do not from Danish and paraphrased) illustrate a intend to enlarge my business, as I am pleased growth orientation: the way it is running today. Our business has been a success, as we sell all (Owner of a small hotel) that we can produce. We are now establishing My work with horses is my hobby, and it a solid platform . . . to generate a growing sale gives us an additional income to the farm. over the coming years. We sell our products The income does not guarantee a big profit outside Bornholm . . . We have increased the but allows me to combine hobby and work. number of employees. We continue to develop (Owner of a recreation business) our products to improve our competitiveness. We find ourselves in a position to increase ‘Growth entrepreneurs’, as they were labelled business considerably in the future. by Katz (1995), exist as a minority among own- (Producer/retailer/exporter of a ers of small and family businesses in the tourism speciality food product) and hospitality industry. They exhibit certain The export (of our craft product) is still growing characteristics such as a preference for purchas- all over Europe and Scandinavia, and the ing rather than starting up their business, and sale to tourists during the season is of great they can be self-defined by reference to personal importance to the firm. To be able to meet goals and attitudes. These profit- and growth- the growing demand we have set up a new oriented entrepreneurs prefer certain types of production facility. We foresee considerable businesses that they undoubtedly perceive to possibilities for more export in the future. present better opportunities for profit and growth. (Producer/retailer/exporter with over 30 employees) What is of great interest is that the profit- and growth-oriented entrepreneurs are also moti- The owner enjoys seeing a business grow. vated by lifestyle and autonomy preferences. Therefore he found it very challenging to buy They are most likely not to be home-based busi- the hotel and make it into a profitable business. nesses such as B&B operators (as in Canmore) He has succeeded, and today the hotel is in a or small hotels and pensions in which owners very fine condition and generating a reasonable profit and with a still growing turnover. live. They are unlikely to be arts and crafts (Family member who manages the hotel) producers/retailers, as witnessed in Bornholm. ‘Lifestyle’ entrepreneurs are also easily Examples of lifestyle- and autonomy-orientation identified in this industry, and they are the majority. Many of them fit the classic ‘craftsman’ It is apparent that most of the owners in these label (Smith, 1967), especially the arts and crafts two samples are in these categories. A strong producers/retailers of Bornholm and the B&B

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owners in Canmore. In these businesses there settings in Denmark and, Canada, it was found are many more females than males. While B&B that inheritance of the family business was a businesses in Canmore created no jobs for very minor precondition. The inherited compo- non-owners, and none for children, a few arts nent was 4.2% of respondents in Australia, and crafts firms in Bornholm did pursue and 2.5% in Bornholm and none in Canmore. achieve growth. Accordingly, it is generally not While the samples appeared to be well possible to predict growth by reference only to educated, there were no questions asked on type of business. qualifications pertinent to operating a tourism ‘Autonomy’, being the desire for self- or hospitality business. Previous business expe- employment and control, accompanied both the rience was queried in Denmark and Canada, lifestyle- and profit/growth-oriented entrepre- and it was determined that 31.2% of the Danish neurs. Almost all respondents wanted business and 43.4% of the Canadian sample had such profitability and preferred hands-on manage- experience. There were no data collected on ment, so these are not good differentiating the relevance of that experience to their current factors. Innovation was not found to be linked operations. to profit- and growth-orientation in this study. Williams et al. (1989) said that most entre- Owners believe they are innovative, but this preneurs in tourism and hospitality (based on does not necessarily mean they create new ven- research in the UK) fell in to one of four catego- tures or grow their business. Much of it is likely ries: (i) ex-entrepreneurs with relevant job or to be in the form of value-adding for greater educational experience, plus access to capital; efficiency and profit, or artistic innovation. (ii) ex-entrepreneurs with access to capital; (iii) Regarding Gartner’s (1990) definition of ex-employees with relevant job or educational entrepreneurship as new venture creation, it is experience, and access to capital; and (iv) ex- argued that this view is somewhat irrelevant. New employees with capital. For example, the Shaw businesses in themselves might be of little value to and Williams (1987) study of 411 Cornwall the community, destination or industry, and might businesses found that 70% were owned by sole even generate over-capacity leading to lowered proprietors. The extent of the owner’s previous profitability, less investment, and failure. The experience in the tourism/hospitality industry profit- and growth-oriented entrepreneurs in was very low. Only 4.4% were ex-employers, Canmore and Bornholm were actually more while 8.3% were ex-employees in the industry likely to purchase their businesses, and therefore and fully 54.9% were ex-employees from other conform to Smith’s (1967) characterization of sectors. For most owners, it was their first busi- the entrepreneur as being ‘opportunistic’. ness venture. Shaw and Williams also revealed the importance of migration from cities to the country, at least partially fuelled by the higher Antecedents: Where do Family Business costs of urban housing. A similar situation occurs Owners Come From? with regard to richer, developed regions/nations and the economic periphery wherein economic and lifestyle migrants can ‘cash in’ and buy much Having examined motives and goals in detail, it cheaper property and businesses where they is useful to focus on the antecedents: where do want to live. these family business owners come from, what McKercher and Robbins (1998: 173), based factors influence them, and are they prepared on data from nature tour operators in Australia, for business? First we look more closely at edu- concluded that most ‘. . . are run by owner/oper- cational and experiential background, followed ators who have no formal business or marketing by family, economic, and cultural influences. background and no prior experience in the tour- ism industry.’ A study of 232 small tourism busi- nesses (all possessing fewer than ten employees) Experience and pertinent education or training in New Zealand by Deloitte Touche Tomatsu (1994, reported in Page et al.,1999) revealed In the rural Western Australian sample dis- that almost half had provided 100% of the cussed earlier, as well as the samples from resort start-up capital from personal sources, and only

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53% had completed a feasibility study. Some respondents had come from a family where 70% had no previous experience in tourism. there had been a tradition of self-employment’. Szivas (2001) studied work patterns prior to An interesting variation, revealed when entrance into small business ownership in the conducting interviews for this book, was the fam- tourism industry in two parts of England (inland ily in which two sons both wanted to emulate Somerset and the City of Coventry). She found their father’s entrepreneurship, but by starting that 106 ‘entrepreneurs’ (as distinct from paid their own businesses – not seeking work in the workers), were relatively highly educated, but father’s. This raises the question of legacies and only 11% had any formal qualification in tourism inheritance, which is addressed in detail in or hospitality. Although mostly not trained for Chapter 5. tourism-related business ventures, this sample had accepted the mis-match in order to gain more control over their work, increased job satis- The influence of economic conditions faction, a better physical environment and a higher standard of living. In the Szivas study, The changing nature of work and society in 20% had owned a business outside tourism and many countries has resulted in large-scale another 16% had previous self-employment redundancies that have led many professionals experience, so about one-third were at least from government and business, as well as work- experienced in business. Fully 35% had worked ers, into business. In many cases these reluctant solely in tourism as managers or staff over a entrepreneurs have skills, savings and credit to 10-year period prior to the research. The respon- assist them. In other situations, social disadvan- dents did have viable alternatives, so they were tage forces people into business. For example not unwilling entrepreneurs. Family tradition Ram and Jones (1998) found that one of the was not instrumental in their choices. main reasons that South Asians living in the UK go into business is ‘blocked upward mobility’. Especially in rural areas, unemployment and The influence of family under-employment are factors contributing to business ventures. The influence of family values and experiences In tourist-receiving societies in less- of entrepreneurship is somewhat controversial. developed nations, according to Harrison What kinds of role models do parents make, (1992), structures inherited from the colonial especially if they run a family business? Kets de period might act against entrepreneurial activity Vries (1996) considered that family influences by residents, or restrict them to specific sectors. on entrepreneurs were largely negative, leading In-migrants (often retiring in a new location) or to a ‘deviant personality’. Such people seek returning migrants often dominate the entre- autonomy or prestige as a backlash to their preneurial class. Local elites are often favoured upbringing. in developing business links with international On the other hand, many people believe tourism firms, and these elites might stem from that family influences encourage entrepre- racial or ethnic differences. neurship. Quinn et al. (1992) surveyed 124 The influence of return migration on entre- small tourism/hospitality businesses in Northern preneurship in tourism and hospitality was stud- Ireland, all owner-managed, and found that ied by King (1995). He observed that returning 83% were married. There was both a high migrants, typically from more- to less-developed percentage of female entrepreneurs and economies, could bring back capital, skills and copreneurs. When questioned on their attitudes favouring business investment. These motivations for starting a business, the three small business owners do not want to return to most common themes were: fulfilling a life- farming or other poorly perceived jobs. The time ambition; frustration with previous jobs, south of Europe and west of Ireland were given and inheritance of a business. Other economic as examples of regions where this phenomenon choices for women with children were perceived had been observed. An earlier study in Nazare, to be low. Of particular interest was the research- Portugal, by Mendonsa (1983) clearly illustrated ers’ conclusion (p. 13) that ‘The vast majority of this pattern.

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The influence of culture completed alongside the strategic plan or in anticipation of an expansion. Once formulated, Culture influences entrepreneurship in general it becomes a working tool and should be and family business specifically. Some cultures updated periodically. are more open to personal and family business The main elements of a standard business initiatives, while among others the establish- plan include: ment or inheritance of a family business is • Business concept, goals and objectives either shunned or encouraged. Morrison (1998) (perhaps emphasizing innovation or any explored cultural influences on entrepreneur- competitive advantages). ship and suggested that the ‘entrepreneurial • Profiles of the owners/purchasers and their culture’ featured power distance, individuation qualifications including past performance and masculinity, uncertainty avoidance, and a in this or other businesses. long-term versus short-term orientation. • Personal or family equity to be invested. • Other capital (loans or investments) required for start-up/purchase, and for Business Planning for New Family development. Businesses • Security or collateral offered against loans (the family land or house?). A handbook prepared by the Queensland • Market appraisal (target market segments, (Australia) Tourist and Travel Corporation market share calculations, marketing strat- (1993: 11) for people setting up tourism busi- egy, the marketing mix – especially price). ness noted that ‘one-third of all new businesses • Development plan (staffing, value-adding, fail in the first year, and two-thirds fail by the growth, diversification). fifth year.’ Tourism Victoria (no date), in its • Marketing plan and demand forecasts for handbook Starting Up in Tourism, asks readers target market segments. why they want to get into tourism and if they • Operations plan (suppliers, equipment, are the right type of person for the task. Poten- facilities, maintenance). tial entrepreneurs are advised that it often takes • Earnings and cash-flow projections and years to generate a profit, it will probably take profit/loss calculations by year (5–10 years more hours of work than any office job, guests in advance). can be very demanding, and privacy will be • Pay-back plan for debt; return on scarce. Readers of the Tourism Victoria docu- investment to investors (if any). ment are asked (p. 4): ‘Have you considered • An operating budget. how your tourism business will affect your fam- • Conclusions as to feasibility and ily?’ These, and other advisory documents pre- desirability. pared by tourism agencies around the world, seek to instil a sense of realism, and hopefully prevent future business disasters. A family-business perspective Failure has been linked to the absence of business planning. Given that a majority of fam- A business plan must reflect the family vision ily businesses in this industry are lifestyle- and and the owners’ values. For many family busi- autonomy-oriented, it is no wonder that a minor- ness owners, plans will not be shaped around ity actually undertake formal business planning. borrowing money and its repayment, as debt is to be avoided, but around realistic financial forecasts and an operating budget. In more Elements of the business plan complex situations involving investors or sub- stantial debt, the repayment and/or dividends A ‘business plan’ should ideally be formulated schedule – based again on realistic financial before deciding on a business purchase or forecasts – can be the crucial element. start-up, both to test its feasibility and (if A good business plan contains a feasibility desired) to help raise capital. It can also be study, and for many family business owners this

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entails a cost-benefit evaluation encompassing of failure are often borne directly by the owners many intangibles, rather than a straightforward and their families. As well, the desire or need determination of profitability. In other words, the to raise money externally always has to be final decision to proceed with the investment or balanced against the risks of losing control purchase requires a conscious decision about of the business or worse – losing the family how much lifestyle, autonomy and location are legacy of land or house. worth. There are generally a number of options available to any investor or entrepreneur. Per- sonal and family savings or loans from relatives Cash-flow forecast no doubt are at the root of many small business start-ups. Borrowing from institutions is often This financial tool is pivotal in feasibility studies necessary, and usually some form of collateral and should be included in business plans of all (e.g. the family house or farm) is required. Get- kinds. It shows a multi-year period for which ting business loans without collateral could be revenues, costs and net income are forecast. difficult, so personal, unsecured loans and over- Assuming that costs can be forecast accurately drafts might be the only option. Venture capital for each operating unit (e.g. rooms, marketing, markets are a possible source, but not likely for administration, food and other supplies), the most of the small family businesses in tourism most likely source of inaccuracy and hence and hospitality. Venture capitalists look for com- business failure is that of projecting demand panies promising rapid growth in profits and and revenue. It cannot be done realistically invest directly in their ownership. without careful analysis of the markets, present Once a business is operating there are addi- and future competition, and profit margins. tional options. Retained earnings are often the Consultants can be asked to provide their preferred source of capital, but many small busi- objective assessments, and they typically rely nesses never generate enough cash-flow or cor- on a combination of published industry porate profits for re-investment or new ventures. performance standards in combination with Finally, some family businesses take the form of their experience and original research. partnerships with equity brought in from out- Cash-flow forecasting is also useful on a siders, or with growth they might obtain a public yearly and monthly basis, especially to indicate listing and sell shares on the stock exchange. exactly when any shortfalls will occur. This form Several researchers have discovered that will resemble the business’ ledgers and bank the bulk of family-business capital in tourism and accounts in tracing all movements of money. hospitality comes from personal sources, includ- In tourism and hospitality, the seasonality ing savings and the resources of other family of demand, and other short- and long-term members. Hankinson’s (1989) report on small demand cycles, make it difficult to sustain good hotel owners in England documented an almost cash flow over the entire year (see the section equal combination of personal funds and bank on seasonality-related strategies in Chapter 4). loans for financing their investments, but owners Families can be particularly hurt when cash reported being reluctant to incur debt. They also runs out, thereby necessitating good overdraft had no system for appraising investments, such arrangements with a local banker. They also as a discounted cash flow calculation. have to exercise restraint when cash pours in The study of tourism and hospitality busi- during the busy periods, as much of it has to nesses in Cornwall by Williams et al. (1989) deter- be put aside for future payments or planned mined that personal and family savings were the reinvestment. main source of capital used, and the only source for 50% of the entrepreneurs sampled. The major Capital (financing the family business) study of small tourism and hospitality businesses in the UK (Thomas et al., 1997) clearly revealed Where do family business owners get the that personal funds, bank loans and bank over- money to start and, if desired, grow their busi- drafts were the most common sources, whereas nesses? Capitalization clearly sets family owner- venture capital, partnerships, equity issues and ship apart from corporations because the risks other sources were used by a small minority. It

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was also found that 56% of the small business • Entrepreneurship owners relied on personal capital for the funding • Owner-managed of business development initiatives. • Family partnership Ozar and Yamak (1997) reported on a • Sibling partnership study of small hotel owners in Istanbul, Turkey. • Cousins’ collaboration They were largely (80%) self-owned in terms of • Family syndicate both buildings and land, and their initial capital- The cases studied in this book, and the various ization was mostly through personal sources research findings, show that in tourism and and ‘informal arrangements’. Institutional debt hospitality few family businesses will progress was rarely used, and ongoing operations were into the more complex configurations involving financed mostly by cash-flow from the hotels. different branches of the family. The O’Reilly Margerison (1998) concluded that more case, however, illustrates one that has advanced research was needed to determine if formal busi- to a more complex stage involving multiple ness planning really was necessary, or could be generations. linked to improved performance, in small tour- ism and hospitality businesses. It is possible that many owners do not adopt formal methods because they do not have to report to anyone, Observed ownership forms in tourism not because they are incompetent or disorga- and hospitality nized. It is also possible that owners need advice and technical help, but do not get it because Basic ownership choices for family business they are completely wrapped up in operating start-ups in tourism and hospitality include their businesses. Growth-oriented entrepreneurs a number revealed during the Australian, might be more inclined to engage in formal Canadian and Danish research and in case business planning, if only because they need study preparation: external sources of capital to fuel their ambitions. • The business is entirely secondary to the home, farm or other enterprise (i.e. no separate ownership). Ownership, Organization and • Governance Sole proprietorship (one owner, but family are often involved in operations). • Copreneurial (joint ownership by couples). Ownership forms and enterprise organization • Partnerships (among family members or are closely linked to capitalization. When mostly involving outsiders). personal resources are used, which is typical • Companies with shareholders (to limit the of lifestyle- and autonomy-seekers, it is likely individual liability of owners, and to help that the start-up business will be small, owner- generate investment). operated and informally organized. The owner • Family trusts (a legal corporation with or copreneurs will do most of the work. On the shares owned by family members). other hand, profit- and growth-oriented entre- preneurs are more likely to purchase a larger Ownership and control should not be business, are not afraid of debt, and will employ confused. As the family business grows it often professionals as needed. The larger the firm, the becomes desirable or even necessary to employ more it requires formal management systems professional managers, establish a board of including human resources and financial directors, and rely increasingly on non-family controls. Older, larger family firms might elect to expertise. The founders might eventually turn appoint boards of directors incorporating non- over day-to-day control (as opposed to gover- family experts (see the O’Reilly’s Guesthouse nance) to the professionals. If family businesses Case Study in Chapter 8). get large enough to form publicly-traded Carlock and Ward (2001: 119) identified six corporations, retaining family control becomes possible ownership configurations for the family a major issue because of the risk of a take-over. business. These are linked to the life cycle but not Over time, ownership shares can get smaller necessarily in a linear manner: and smaller if each family owner passes on

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shares equally to all descendants. This could stock? Can shares be sold, transferred or inher- make control difficult, especially if all family ited? What rights accompany various forms of shareholders are supposed to vote. An alterna- ownership and employment (e.g. voting, board tive is to make ownership and/or voting rights membership, dividends)? conditional upon employment within the com- Liquidity can become a serious issue, as in pany, with an ownership agreement stipulating the case where family shareholders suddenly that all shares be redeemed upon death or need cash but their shares cannot be sold outside retirement. the family or family trust. Terms and conditions Geeraerts (1984) found that family-owned have to be established for internal sales or and -managed businesses in The Netherlands buy-backs. tended to be less horizontally differentiated (i.e. fewer divisions), less formal and with Boards of directors less specialization. Daily and Dollinger (1992) studied manufacturing firms and determined Many authors have recommended the that family-owned businesses were smaller, less establishment of a board of directors and growth-oriented, relied less on internal control use of non-family, professional directors to help mechanisms, and achieved lower levels of resolve conflicts and instil greater professional- performance. Organization and management ism. But Sharma et al. (1996) believed there systems in family-owned tourism and hospitality was insufficient research evidence to confirm businesses have not been studied in any system- the imputed benefits. atic comparison, but it is suggested from avail- The supposed advantages, summarized in able research that the majority are micro and Sharma et al. (1996: 12), include: small in size, owner-operated, informal and do • Fresh perspectives and new directions; not employ professional staff. A study focusing catalysts for change. on larger family-owned firms in this industry is • Objectivity and fairness. therefore warranted, especially when it has been • Arbitration of disputes. noted elsewhere that more children are involved • Support for new leaders/successors. in the larger businesses. • Moral support and sounding-boards for owners. Others have argued that non-family direc- Governance tors might have little knowledge of the family firm and are only available at meeting times. They In the early stages, and for most businesses might also be beholden to the owners who studied in this book, ownership, governance appointed them, and if they do not have a direct and management are all in the hands of the stake in the business their commitment to it founders. But while a person or family can own might be low. a business and elect not to be involved in its Boards will consist generally of key family management, they are always involved in its members and senior professional managers, and governance. often external experts. They are to be elected In the Carlock and Ward (2001) scheme of by shareholders and therefore responsible to parallel family and business planning, a board owners. Carlock and Ward (2001) said that the of directors oversees management actions, ‘ideal’ board of directors for a family business allocates capital and participates in strategy has a majority of independent, non-family mem- formulation. On the family side a ‘family council’ bers and appoints its own chairperson, but that is provides the governance structure, leadership, likely to be controversial for many families. and coordination of family actions. Alternatives to the board of directors An ‘ownership agreement’ can be formu- include the use of professional advisers on a lated to shape the ownership and governance of topical, as-needed basis (e.g. accounting, tax the business in accordance with the family vision planning, succession), and creation of a formal and circumstances. Who can hold shares or advisory committee.

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The family council Apparently the incidence of business inheritance in these settings has declined to the level of In small, informal family businesses, regular insignificance, and migration is the dominant meetings or even casual conversations are the force. Most of the family business founders are basis of coordination and planning. As it grows individuals or mature couples, often getting into and develops, formal meetings are likely to be a second career, although there are still cases necessary, complete with minute-taking and of farmers starting tourism and hospitality agendas. To coincide with governance each businesses as a secondary income source. member of the council would have to be a We have also been able to identify ‘profit- shareholder, but the participation of children and growth-oriented entrepreneurs’ in our and others without shares might be advanta- research and case studies – owners who are geous in discussing strategic planning and easily differentiated in their response to the work–family issues. simple statement ‘I want to keep this business growing’. They are more likely to seek out The family trust opportunities and purchase larger businesses (typically hotels and restaurants, not arts or crafts Depending on laws of the land, many families and not B&B establishments), often employing have created family trusts. The case study of borrowed money and setting up formal compa- O’Reilly’s in Chapter 8 illustrates some of the nies or corporations. They are also motivated by pros and cons of trusts. On the one hand they the same lifestyle and locational preferences, but preserve family ownership and control, prevent- they are the ones who can be expected to grow ing family members from cashing-in their the business and generate new jobs. Although shares. As a consequence, despite increasing many family businesses claim to be innovative, numbers of generations and descendants, we found that much of this was in terms of everyone knows that O’Reilly’s will endure and value-adding and improving the quality of the individuals can elect to work in the firm or business. not. On the other hand, there might arise some Antecedents to establishing a family busi- opposition, or even resentment, where family ness in this industry were also examined. There members cannot benefit from their inheritance is good evidence in the literature and our except by taking employment in the company. research data that a majority do not have previ- ous, directly relevant ownership experience, but that many do have some experience working in Chapter Summary the industry or running other types of business. Because capital is required, or credit worthiness, Start-up is the most critical stage in the family there is a direct connection to land ownership business life cycle, because most will not grow (farmers in particular), and migration – either substantially and the level of inheritance is mini- moving from high-cost to low-cost areas, espe- mal. The motivations and goals of founders are cially from large cities, or returning international critical in setting the future of the family busi- migrants with savings. ness, with the majority being established for Numerous assistance programmes have lifestyle rather than traditional entrepreneurial been directed at the tourism and hospitality reasons. sectors, especially in peripheral areas and devel- Our in-depth research into motivations and oping nations, and towards small businesses goals in several countries revealed the predomi- in general. But is there a case to be made for nance of lifestyle and locational motivations, as specific support for the family business in tourism well as the strong desire for autonomy (i.e. ‘to be and hospitality? We return to this policy issue my own boss’). Across the industrialized world in the final chapters. The final section of this numerous individuals and couples are moving chapter provided advice on business planning, into rural and resort areas to establish small and and a number of related family business issues micro businesses, with ‘living in the right envi- are discussed under the headings of ownership, ronment’ high on their list of locational criteria. organization and governance.

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References King, R. (1995) Tourism, labour and international migration. In: Montanari, A. and Williams, A. Bransgrove, C. and King, B. (1996) Strategic market- (eds) European Tourism: Regions, Spaces and ing practice amongst small tourism and hospi- Restructuring. John Wiley & Sons, Chichester, tality businesses. In: Thomas, R. (ed.) Spring UK,. pp. 177–190. Symposium Proceedings of International Associ- Komppula, R. (2000) Definitions of growth and ation of Hotel Management Schools. Leeds success – case studies in Finnish rural tourism Metropolitan University, Leeds, UK, pp. 29–38. industry. Paper presented at the 12th Nordic Carlock, R. and Ward, J. (2001) Strategic Planning for Conference on Small Business Research, the Family Business. Palgrave, Basingstoke, UK. Kuopia, Finland. University of Kuopia Dailey, C. and Dollinger, M. (1992) An empirical Department of Business Management. examination of ownership structure in family and Kousis, M. (1989) Tourism and the family in a rural professionally managed firms. Family Business Cretan community. Annals of Tourism Research Review 5, 117–136. 16(3), 318–332. Dunn, B. (1995) Success themes in Scottish family Lynch, P. (1996) Microenterprises and micro-firms in enterprises: Philosophies and practices through the hospitality industry: the case of bed and the generations. Family Business Review 8(1), breakfast enterprises. In: Thomas, R. (ed.) Spring 17–28. Symposium Proceedings of International File, K., Prince, R. and Rankin, M. (1994) Organisa- Association of Hotel Management Schools. tional buying behaviour of the family firm. Family Leeds Metropolitan University, Leeds, UK, Business Review 7(3), 263–272. pp. 231–236. Frater, J. (1982) Farming Tourism in England and Margerison, J. (1998) Business planning. In: Thomas, Overseas. Research Memorandum 93. Centre R. (ed.) The Management of Small Tourism and for Urban and Regional Studies, Birmingham, Hospitality Firms. Cassell, London, pp. 101–117. UK. McKercher, B. and Robbins, B. (1998) Business Gartner, W. (1990) What are we talking about when development issues affecting nature-based we talk about entrepreneurship? Journal of tourism operators in Australia. Journal of Business Venturing 5(1), 15–28. Sustainable Tourism 6 (2), 173–188. Geeraerts, G. (1984) The effect of ownership on Mendonsa, E. (1983) Tourism and income strategies in the organization structure in small firms. Nazare, Portugal. Annals of Tourism Research Administrative Science Quarterly 29, 232–237. 10(2), 213–238. Gersick, K., Davis, J., Hampton, M. and Lansberg, I. Morrison, A. (1998) Small firm cooperative marketing (1997) Generation to Generation. Harvard in a peripheral tourism region. International Business School Press, Boston, Massachusetts. Journal of Contemporary Hospitality Getz, D. and Carlsen, J. (2000) Characteristics and Management 10(5), 191–197. goals of family and owner-operated businesses in Nickerson, N., Black, R. and McCool, S. (2001) the rural tourism and hospitality sectors. Tourism : motivations behind farm/ranch Management 21, 547–560. business diversification. Journal of Travel Getz, D. and Petersen, T. (2002) Growth-oriented Research 40, 19–26. entrepreneurs and destination competitiveness. Opperman, M. (1997) Rural tourism in Germany – Paper presented at the Re-inventing the farm and rural tourism operators. In: Page, S. and Destination Conference, Dubrovnik, Croatia. Getz, D. (eds.) The Business of Rural Tourism: Gyimothy, S. (2000) The Quality of Visitor Experience: International Perspectives. International a Case Study in Peripheral Areas of Europe. Thomson Business Press, London, pp. 108–119. Research Centre of Bornholm, Report 17/2000, Ozar, B. and Yamak, S. (1997) Financing of small Bornholm, Denmark. hospitality establishments. Paper presented Hankinson, A. (1989) Small hotels in Britain: at the Eurochrie Conference on Hospitality investment and survival. The Cornell HRA Business Development, Sheffield, UK. Quarterly 30(3), 80–82. Page, S., Forer, P. and Lawton, G. (1999) Small busi- Harrison, D. (1992) The social consequences. In: Har- ness development and tourism: Terra incognita? rison, D. (ed.) Tourism and the Less Developed Tourism Management 20(4), 435–459. Countries. Belhaven Press, London, pp. 19–34. Pearce, P. (1990) Farm tourism in New Zealand: Katz, J. (1995). Which track are you on? Inc. 17, a social situation analysis. Annals of Tourism 27–28. Research 17(3), 117–125. Kets de Vries, M. (1996) Family Business: Human Peters, M. and Weirmair, K. (2001) Theoretical con- Dilemmas in the Family Firm. Thomson structs and empirical evidence of entrepreneurial International Business Press, London. growth modes in the hospitality industry. Paper

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presented at the conference Entrepreneurship Smith, V. (1998) Privatization in the third world: on Tourism and the Contexts of Experience small-scale tourism enterprises. In: Theobald, W. Economy, University of Lapland, Finland. (ed.) Global Tourism, 2nd edn. Butterworth- Queensland Tourist and Travel Corporation (1993) Heinemann, Oxford, UK, pp. 205–215. Tourism – Taking the First Steps: Getting Started Szivas, E. (2001) Entrance into tourism entrepreneur- Series. Brisbane, Australia. ship: a UK case study. Tourism and Hospitality Quinn, U., Larmour, R. and McQuillan, N. (1992) Research 3(2), 163–172. The small firm in the hospitality industry. Inter- Thomas, R., Friel, M., Jameson, S. and Parsons, D. national Journal of Hospitality Management (1997) The National Survey of Small Tourism 1, 11–14. and Hospitality Firms, Annual Report Ram, M. and Jones, T. (1998) Ethnic Minorities in 1996–1997. Centre for the Study of Small Business. Small Business Research Trust, Milton Tourism and Hospitality Firms, Leeds Keynes, UK. Metropolitan University, Leeds, UK. Schein, E. (1994) Commentary: what is an entrepre- Twining-Ward, L. and Baum, T. (1998) Dilemmas neur? Entrepreneurship Theory and Practice 19, facing mature island destinations: cases from 87–88. the Baltic. Progress in Tourism and Hospitality Schumpeter, J. (1934) The Theory of Economic Research 4, 131–140. Development. Harvard University Press, Westhead, P. (1997) Ambitions, ‘external’ Cambridge, Massachusetts. environment and strategic factor differences Sharma, P., Chrisman, J. and Chua, J. (1996) between family and non-family companies. A Review and Annotated Bibliography of Entrepreneurship and Regional Development Family Business Studies. Kluwer, Boston, 9(2), 127–157. Massachusetts. Westhead, P. and Cowling, M. (1998) Family firm Shaw, G. and Williams, A. (1987) Firm formation research: the need for a methodological rethink. and operating characteristics in the Cornish Entrepreneurship Theory and Practice, Autumn, tourist industry – the case of Looe. Tourism 31–56. Management 8, 344–348. Williams, A., Shaw, G. and Greenwood, J. (1989) Singer, J. and Donahu, C. (1992) Strategic manage- From tourist to tourism entrepreneur, from ment planning for the successful family business. consumption to production: evidence from Journal of Business and Entrepreneurship 4(3), Cornwall, England. Environment and Planning A 39–51. 21, pp. 1639–1653. Smith, R. (1967) The Entrepreneur and the Firm. World Tourism Organisation (1997) Rural Tourism: a Bureau of Business and Economic Research, Solution For Employment, Local Development MSU, East Lansing, Michigan. and Environment. WTO, Madrid.

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Introduction successful, one-third will struggle (and could go either way) and the other third should not be in Growth is not the preoccupation of most family business in the first place! According to Boer business owners. Simply sustaining the business (1998), several studies in the UK confirm that is challenging enough and while growth is not newer firms fail at a higher rate, but there was necessary, some kind of development is inevita- no compelling evidence regarding tourism and ble – all businesses change. The change process hospitality firms in particular. can be managed to add value to the business In one early study, Shaw and Williams and improve the family’s lifestyle, or it can be (1987) determined that 60% of hotels and guest imposed by external factors. houses in Looe, Cornwall, had new owners The first section examines the meaning of within the last 2 years, and 28% had been in success and failure for a family business, then operation for 2 years or less, so turnover of focuses on specific challenges and causes of ownership was very high. Shaw and Williams failure. Next, arguments for growing a business (1990), in their study of Cornwall, observed are addressed, then preconditions and barriers many tourism/hospitality businesses with little to growth. This is followed by analysis of generic capital and weak management that were resis- and industry-specific strategies, a section on stra- tant to change or taking advice. These research- tegic planning, and separate treatment of strate- ers also concluded that many owner-operators gic marketing and family branding. Research lacked experience, and used mostly personal findings are then presented on how seasonality and family savings as their capital. Remaining affects family businesses and various strategic small and often unprofitable was a chronic responses from a sample of owners in Denmark. condition in the small-hotel sector. Market fluctuations gave rise to many outright failures. In a Swedish study, Klenell and Steen (1999) correlated lifestyle and the desire not to Failure and Success grow with insolvency. On the other hand, Brown (1987) suggested that owner-operators have an The rate of failure among small and family emotional attachment to their businesses that businesses in general is high. Dunkelberg makes them reluctant to abandon the enterprise (1995) said that 67% of new, small businesses in difficult times. Because many tourism and in the USA had failed within the first four years. hospitality businesses are not the primary or only Nilsson et al. (2004) noted that a high rate of source of family income, poor performance business failure is typical of small and medium- is perhaps a more typical occurrence than sized enterprises. They referred to a ‘rule of outright failure. Studies of B&B operations in the thumb’ that indicates only one-third will be American Midwest (Dawson and Brown 1988; ©D. Getz et al. 2004. The Family Business in Tourism and Hospitality (D. Getz, J. Carlsen and A. Morrison) 67

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Gruidl et al., 1990; Boger and Buchanan 1991) control, stewardship of wealth and employees’ revealed widespread low occupancy rates and well-being, work guaranteed for family poor gross revenue. This can be tolerated by members, and preserving the family name many families, but only if they do not depend on and reputation. Family dynamics included the tourism income. good quality work and home relationships In purely commercial terms, failure is easy (consensus-building), and responsiveness to to define: the business does not realize sufficient change covered cautious containment of growth profit to reward its owner(s) adequately and is and a long-term perspective on payback. therefore closed or sold – or faces outright bank- The matter of a ‘legacy’ arises here, as in ruptcy. Success is generally defined in terms of some cultures and families it is considered very making a profit, growth (in market share, size of important to pass on the family land and/or the firm, or share value – if publicly traded), and business to future generations. Other founders even its ultimate sale price. But these measures might hope that their efforts will be of value and are not always appropriate in family businesses. interest to their descendents, so that a family legacy can be created where none previously existed. But most children probably do not share their parents’ dreams and have little interest in What is failure and success? taking over a family business – especially one that promises hard work and small returns. Success and failure in family businesses can A further complication is that family busi- best be evaluated against the owners’ needs ness goals often extend beyond their personal and goals. In terms of expressed goals of family family and business circumstances. Ateljevic and business owners, obtaining or sustaining profit- Doorne (2000), from a review of research find- ability is generally ranked highest (Davis, 1996), ings in New Zealand, concluded that a number followed by increasing the value of the business. of pioneering, lifestyle-oriented entrepreneurs A study by Tagiuri and Davis (1992) found that possessed social and cultural values that shaped the top goals were to make profits now and their business. For example, in parts of New (equally) to achieve excellence. Zealand operators of adventure or ecological For some small hoteliers in England, the activities and tours had moved to areas for owners’ measure of success was ‘survival’ their own lifestyle reasons but had established (Hankinson, 1989). If the business at least businesses that could be described as possessing supports the family, it can be considered a a strong community and ecological ethic. success. If it never grows, but meets all goals of Furthermore, these pioneers had proved that the owners, it can also be considered a success. niche markets were viable, thereby attracting Failure, on the other hand, is not necessarily copy-cat businesses. implied by low profitability, nor by selling or Again taking a community or destination even terminating the enterprise. perspective, it has to be asked if the niche Dunn (1995) examined ‘success themes markets occupied by family businesses are in in Scottish family enterprises’, finding that fact restricted to them because of their small definitions of success provided by owners incor- size, hands-on family service, lifestyle orientation porated both objective and subjective criteria. (profits and growth not being paramount) and Their definitions centred on achieving quality, concern for social and environmental sustain- the creation of jobs and wealth for family and ability. If so, the family business might be the non-family, sustaining and building the family’s only way to foster tourism and economic devel- reputation within the industry and community, opment, especially in rural and peripheral and keeping the business healthy and profitable. regions. In these circumstances, the success What created success? Dunn’s respondents of family businesses has to be at least partially identified family values, family dynamics and evaluated in the context of how they collectively responsiveness to change as the main success contribute to creating tourist attractiveness, or to themes. Family values included caring and its gradual growth and diversification. In other loyalty to staff and customers, quality enhance- words, each small family business has a part ments, maintenance of family ownership and to play in establishing and sustaining the

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destination. For the community or destination, The UK National Survey of Small Tourism a high turnover of family businesses (most and Hospitality Firms (Thomas et al., 1997) are purchased by other owner-operators) can questioned respondents on ‘obstacles to result in the absence of stability, innovation and improved business performance’. This gives growth, and this might be viewed as a negative some insight into problems facing the industry in phenomenon. general, but no specific information about family When a family business fails, both the businesses. The survey found that intense local business and the family are in jeopardy. There competition and direct costs (rent, labour and has been little said about this problem in the taxes) were the greatest causes of concern. literature, and in fact generic business failure Government regulations were another general in tourism and hospitality has not been well area of worry. researched (Leiper, 1997). It could be argued Under-capitalization is commonly viewed that as much can be learned from case studies of as a major reason for business failure, and this failed businesses as from successful ones. would appear to be particularly relevant to the family businesses sector where personal funds underpin many business ventures. A related Causes of failure problem is the lack of working capital to keep a business going. Seasonal variations in demand result in periodic cash-flow shortages. Small Small business failure is an under-researched businesses are highly vulnerable to deferred problem, according to Boer (1998). ‘Failure’ payments by customers, yet might be required to might take the form of bankruptcy, under- pay cash, or prefer paying cash, for their own performance or voluntary termination. Reasons supplies. Inflation, increasing interest rates and for failure can be exogenous (e.g. environmen- economic recession can all have a strong impact tal forces) or endogenous (poor management). on the small firm. Pizam and Upchurch (2002) Boer discussed possible sources of failure for pointed to low levels of profits in the B&B and small tourism and hospitality business in farm-based accommodation sectors as being general. Poor management might be blamed responsible for inadequate working capital. on the owner/entrepreneur in most cases, Boer (1998) distinguished between hotels owing to the high incidence of owner-operated and catering firms in their vulnerability to poten- ventures. This is especially pertinent in tourism tial causes of failure. Hotels, he argued, have and hospitality where so many entrants are not a tendency to be more capital intensive, with experienced in running a business or in the higher initial investments, longer-term loans, industry itself. Owners themselves are likely to and a longer payback period. They will have be biased in their assessment of problems, and higher fixed assets (more are owned, as opposed might tend to blame external forces beyond to leased premises) and higher fixed costs. They their control. might be more susceptible to cash-flow problems Pizam and Upchurch (2002: 136) com- because they extend credit to customers. mented on failure in the rural tourism sector: Seasonality might also affect accommodation ‘Clearly, the combination of financial, market- establishments more than those in the catering ing, human resources, rules and regulatory business. This means that hotels might have knowledge, service management, and manage- inadequate working capital, even where prop- ment is rare combination for the small rural erty assets are substantial. Another factor is that entrepreneur to possess.’ They went on to the banking sector holds considerable sway over catalogue specific failure causes: hotels’ financial health, so a credit crunch hurts • Lack of proper capitalization. them more. • Poor identification of a specific target Boer also addressed owners’ views (from market. Dorset, UK) on what led to long-term success, • Insufficient advertising and sales separating the hotel and catering sub-samples. promotions. Most factors were endogenous, that is, within • Lack of understanding of service dynamics. their own realm of control. Reputation and • Inability to compete in a trading area. giving value for money were important to both

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groups of owners. The hotel sample placed lower fundamental assets. Indeed, the prevailing emphasis on cash needs and cost control, wisdom of management experts is that owners perhaps because of the catering sector’s need and managers make their own success or bring for constant inventory replenishment. Other failure upon themselves. Popular competitive- common success factors were location, skills, ness models such as that of Porter (1980, and luck. The hoteliers also attributed success to 1985) encourage this belief. Entrepreneurs are good customer communications, low borrowing encouraged to develop competitive advantages needs, access to other finance, and limiting the and take control of their future. This is good firm’s growth. Caterers also attributed success to advice, but does it ensure success? having good suppliers and staff. ‘Population ecology’ (see, for example Taylor et al. (1998: 59), in discussing the Hannan and Freeman 1977, 1984) suggests that financing of small tourism and hospitality individual businesses are at the mercy of broad businesses, concluded that ‘debt finance should environmental forces, and that competition for be used cautiously by these firms.’ Apparently resources guarantees that only some will survive. many owners understand the need for caution This is small comfort to the owner or investor, but because they tend to be very debt-averse, from a community, industry or destination taking it on only when absolutely necessary. perspective it makes a lot of sense. The fact Consciously or unconsciously they are sacrific- that some small businesses are failing is in itself ing growth potential and increased quality for a normal and to be expected. The result could be less risky strategy. This might be a reasoned busi- increased quality and competitiveness. Indeed, ness decision, given the certainty of economic some authors have gone so far as to suggest that cycles, or merely an innate conservativeness. weak businesses be denied support. What researchers have not been able to discern When a family’s livelihood is at stake, is whether this aversion to debt is in itself a cause failure should not be taken lightly. More research of failure in this industry. As discussed elsewhere, has to be directed at determining failure and many small businesses are inherently too small success factors for the family business in tourism to be successful. and hospitality, because it is not currently Research from Ireland (Hegerty and possible to make predictions about these Ruddy, 2002: 19) correlated success and failure matters or even to weigh all the consequences. in small tourism/hospitality businesses with levels of support provided to them. From a large- scale survey they calculated a failure rate of one Growing the Family Business in six for sole-proprietor businesses, compared to one in seven for copreneurial businesses and A 1997 study of high-growth, family businesses one in ten for businesses involving more family in Australia (Smyrnios et al., 1997) character- members. Although the study did not explicitly ized this sub-set as being younger in age, having cover previously failed businesses that could younger owners, possessing more formalized not be reached, this intriguing finding raises the management structures, involving proportion- hypothesis that having a family in business is a ately fewer family members in management, positive factor in ensuring success. and showing less family control. One is left with Another complication is the family’s willing- a distinct impression from that research – that ness and ability to withstand tough economic growth-oriented owners must make their busi- times in order to sustain their business and life- ness less family-oriented and more professional. style. When more profit-oriented entrepreneurs Indeed, the principal objectives of family would fold their tents and try again another time business owners in Australia, and especially or place, is the family more likely to stick it out? those of first-generation owners, were to accumulate wealth, increase the value of their business, then sell it at an appropriate time. Theoretical perspectives on failure While their sample was much broader than the tourism and hospitality industry, these conclu- Many authors clearly believe that most failures sions might very well hold true across all family are due to managerial incompetence or lack of businesses.

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Most family businesses in tourism and of family and lifestyle goals, and the desire to hospitality remain small, primarily for lifestyle retain hands-on control. and autonomy reasons, but also in many cases The B&B business is a clear example. because they lack the capacity to grow. Nor Dawson and Brown (1988) concluded from do most of them professionalize by hiring staff – research that B&B operators in the American the owners prefer to remain hands-on. Most Midwest had to spend money on promotion, owner-operators do want to increase their profit- remain committed to the business, add more ability, and this usually leads to a value-adding rooms and offer private bath facilities in order to strategy, carefully balancing the desire to remain increase gross revenue. Pizam and Upchurch small and controllable with the need to increase (2002) concluded that B&B establishments had ‘return on effort’. Only a small minority of to have more than eight rooms to generate a entrepreneurs in tourism and hospitality do profit. Unfortunately, most operators never have want to grow their businesses, and this requires this potential space nor the capital to grow their strategic planning for financing, ownership, modest accommodation business. organization and management. It should also be noted that legislation Owners with children or other family in many areas limits the B&B and other rural members who want to be involved in the accommodation establishments to unprofitably business have additional challenges: of getting small sizes. Examination of regulations applica- them involved; balancing the needs and goals of ble to small businesses is therefore essential as an potential future owners with the original motives industry priority. The second basic reason for and goals of the founders, and preparing for growing the family firm is to create opportunities possible succession. Along the way, numerous for children or other family members, particu- family issues will have to be resolved, not the larly if inheritance is a real prospect. Small busi- least of which is deciding how much money to nesses generally lack either the income potential take out of the business for family needs, versus or challenge necessary to attract and maintain reinvestment. the interest of children and especially heirs. As well, the business assets in tourism and hospital- ity are often tied up with the family home or farm, making separation difficult or impossible. Why grow the family business? Children might want to inherit the property, but not continue the business. Research on growth-oriented family firms was thought to be almost non-existent by Sharma et al. (1996), yet Ward (1987) and Poza (1988) argued that growth is necessary for family firms Growth and innovation in order to ensure their survival. The US Small Business Administration (cited in Tagliuri and Upton et al. (2001) defined fast-growth family Davis, 1992) noted that growing companies firms as ‘. . . those that are willing to take risks, had a lower percentage of failure than to be innovative, and to initiate aggressive com- non-growing ones. petitive actions.’ But what exactly does it mean There are two basic arguments for growing for a family business to be innovative? Litz and a family business. The first is economics, namely Kleyson (2002) argued that intergenerational the need to have sufficient revenue and cash- dynamics must be examined, as innovation flow to remain viable and generate profits. Many can die out with the family firm’s founder, micro and small businesses in the tourism and or start again with the children. They asked hospitality industry are too small ever to be if innovation is a product of family interaction profitable or even to survive. They start out too or individual effort. Is it intentional (i.e. do small and remain that way until the owners innovators set out purposefully to be creative realize it is fruitless to continue. Factors that and change things) or is it serendipitous (i.e. the contribute to this common ‘size challenge’ have product of one-time inspiration)? already been discussed; primarily a lack of Little innovation is evident in the pur- sufficient start-up capital, the pre-eminence chasing of established businesses in existing

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destinations, nor is innovation evident in most of also limit innovation if external influences are the lifestyle-oriented businesses where growth neglected. is not pursued. Russell (1996: 116), based on tourism-industry research in Ireland, concluded that ‘the pursuit of innovation was not an integral Preconditions and Barriers to Growth part of most enterprises surveyed and where innovations were claimed these happened to be For most businesses the main precondition for essential business investment’. In other words, growth is resource availability, either those of Russell found that the owners were only doing internal origin (e.g. savings, other assets such as what had to be done, not creating new products land) or external (e.g. investors, loans, grants). or markets. Nor was the business climate at that For the family firm, the foundation is a desire to time supportive of innovation in the tourism grow and the commitment to make it happen. industry. A truly innovative culture, according In a family business one of the common dilem- to Russell, would see higher professionalism mas faced is that of reinvestment in the business among business owners/managers (especially versus taking resources out for immediate fam- in preparing business plans, adopting a ily use and personal wealth creation. Families marketing orientation and deliberately foster- often do make sacrifices in order to ensure their ing innovative ideas), better educational business becomes and remains successful, but if opportunities and market information, more there is no long-term vision for the business, sharing of ideas through international contacts what is the incentive to reinvest in it? and travel, and better support from government The ‘resource-based theory of the firm’ (e.g. agencies. Barney, 1991) holds that a business is comprised of its resource bundle, and these are uniquely shaped by ownership and management inten- tions. The resources held by a family firm can Innovation and networking consist of the ‘tangible’ (i.e. financial capital, information systems, products) and the ‘intangi- Networking is especially important for small, ble’ (i.e. knowledge, skills, brand assets). Atten- family businesses, both in terms of extending tion must be given to the resources owners can their marketing capabilities and in fostering control, and to how they are actually deployed. innovation – or at least in encouraging the Many family businesses are founded on personal diffusion of innovations (Morrison, 1996, sources of capital that are often inseparable from 1998). Networking of a formal, business-to- family assets such as the house or land. Others business type can be facilitated through the have little in the way of tangible assets and rely efforts of industry associations and destination on personal knowledge. marketing organizations. Beyond that, owners A related theory, the ‘knowledge-based’ will be able to develop their own social view of the firm (e.g. Nonaka, 1994), holds that networks. The family business has a unique businesses are a collection of ‘tacit’ knowledge potential advantage in this respect, although (firm-specific) and ‘explicit’ knowledge (avail- many family firm owners do not exploit it. able to all). In family businesses it must be asked They might have deliberately chosen to break what ‘tacit’ knowledge is held by the owners and off family ties, or their locational preferences their families, and to what extent does it provide might have made it difficult to sustain them. As a competitive advantage? Does it increase a family gets established in an area it might or diminish over time, especially through become possible to rely more and more on the the succession process? Many tourism and extended family for support and ideas. hospitality-related entrepreneurs rely heavily Ethnicity can play an important role in and sometimes exclusively on personal skills to family business networking. Saker (1992) noted ensure business success. They might be nature- that it is family and community that lie at tour guides who possess intimate knowledge of the heart of the ethnic firm’s social network. A a natural area and its wildlife, or arts and crafts strong social, particularly ethnic network can producers with creative talents. But all these provide financial and moral support, but it can personal sources of knowledge are potentially

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shared by many, or can become general knowl- Finances edge over time, thereby eroding competitive advantages. Having large overheads and poor cash-flow From either theoretical perspective – prevents many owners from saving money for resource- or knowledge-based views of the firm re-investment or growth. Are there ways to – many family businesses in tourism and grow a family business without incurring a risky hospitality are essentially weak. They have debt-load or giving up family control? Again, neither the resources, the desire nor the these options have to be placed before the knowledge to innovate or grow. owners and their families for consideration Storey (1994) identified a clear association and weighing of the costs and benefits. At a between ‘limited company’ status and fast minimum, practical ‘value-adding’ investments growth, but it was not clear which came first. Do must be demonstrated, especially where new growth-oriented entrepreneurs seek company technology is involved. Indeed, financial assis- status in order to raise capital and protect their tance offered to establish or grow family busi- own assets? He also identified common barriers nesses in tourism and hospitality is often going to growth, specifically lack of motivation, limited to miss the mark, whereas concrete help with financial resources, lack of skilled labour, and technology and other value-adding systems government controls. These, and other barriers (such as yield management, relationship noted by Poza (1988) are now discussed. marketing or inter-business networking) could have tremendous results.

Lack of motivation or vision Family impasse The family vision, placing personal or family needs ahead of growth, or placing autonomy Families might not be able to resolve their and hands-on management above growth internal needs and goals, thereby falling into a potential, results in a very widespread lack of non-growth option by default. This is the exact ambition to grow family businesses. But there is place and time for outside advisers to make an another kind of vision problem, rooted in the impact. It might be a simple matter of getting inability to see real opportunities that might be family members to share their ambitions and realized even within the scope of the family fears, or it might involve strategic and financial vision. Owners can be educated or at least planning in depth. encouraged to ‘think beyond the box’, par- ticularly by examining other family-business success stories. This is where many entre- preneurship and small business programmes Market area fail, because they need first to recognize the dominance of the family vision and how it Most small and family businesses rely on local constrains innovation and growth. The best or regional customers, as they lack the means people to undertake the training might be to reach farther afield with effective marketing. successful family business owners, backed by The only solution to this universal problem is to ‘best practice’ case studies. form marketing alliances. Destination marketing organizations should examine how they can specifically cater to the needs of small and Failure to communicate family businesses, whether it be for a collective website, special promotions, or ‘piggybacking’ Poza (1988) argued that maintaining distance on major advertising campaigns. On the other from customers, employees, the competition, or hand, owners have to realize that the destina- family could impede growth. This is not just tion has to be competitive first, then individual a matter of information flow or market intelli- businesses can draw on increased tourist gence, but also a behavioural and cultural issue. demand.

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Laws or regulations sell their investment without damaging other family members’ interests). Often for good reasons, laws and regulations • Conflict (addressing conflicts arising from artificially limit the size or scope of small and work and personal lives intersecting). family businesses, thereby preventing many • Culture (using family values to guide plans from prospering. Why allow B&B establish- and actions). ments, for example, but limit them to so few These are all important elements in balanc- rooms that they can never be more than a ing business and family life and are discussed sideline or hobby? Every jurisdiction desiring again in the next chapter. In tourism and growth in the small and family business sector hospitality, a number of unique considerations should conduct an audit on its own laws and enter the strategic planning process: regulations to reveal problems, even if they are only paperwork issues. Beyond that, economic • The business might be a secondary or development agencies need to examine the seasonal source of income, with little best ways to help this sector given the known growth potential. limitations. • It might be more of a hobby than a serious way of earning a living. • Its profit-making potential might be too Strategic Planning limited to support paid staff or the formal involvement and inheritance by children. Research by Rue and Ibrahim (1996) found that • The nature of the work might very well families that set goals for growth planned to be unattractive to children, and parents grow first through equipment purchases, then might prefer their children to live or work marketing efforts, followed by hiring key staff, elsewhere. and finally by developing new products or • Only larger businesses, such as hotels or physical expansion. But if the business is never restaurants, have the potential to generate going to grow or change in any fundamental substantial cash flow and ultimately profits way, there is little need for a strategic plan. upon its sale. Indeed, Ward (1987) described strategic To Ward (1987), the really big strategic planning as ‘. . . the process of developing issues were threefold: to keep or sell the business; a business strategy for profitable growth’. The to grow it or not; and to determine the extent of original business plan should suffice to see the family involvement, including the potential for owners through enterprise start-up or purchase inheritance. Ward also argued that family issues and related financial and management issues. must be incorporated into the strategic plan, and But owners with a longer-term perspective on he recommended a formal, open process for growth and development need to think and plan developing the plan. strategically.

Getting professional advice Key planning issues

Most experts agree that getting professional Carlock and Ward (2001) argued that five advice is essential for family businesses. The pivotal variables demanded policies and plans case studies presented in this book also high- in the family business: light the importance of advice as divergent as • Control (management, ownership and banking, accounting, marketing, business and decision-making). strategic planning, estate and tax planning. • Careers (the family pursuing careers or Other areas of available family business advice other roles in the business, with advance- concern group dynamics, health care and ment and rewards based on performance). related costs, and raising capital. • Capital (systems and agreements so that Many firms specialize in family business family members can reinvest, harvest or advice, and they can be found through a simple

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internet search of the term ‘family business development of effective owners, encompassing consultants’. Astrachan (1993) suggested that consideration of the family and business life family business consultants act as facilitators to cycle and related organizational and governance help the family develop appropriate skills, and options. such advisers should be generalists with exper- The ‘business strategy plan’, according to tise in many areas. Once a trusting relationship Carlock and Ward (2001), has three groups of has been established, it might pay the family goals. The first set covers ‘assessing strategic to keep their advisers for as long as possible. potential’, based on environmental scanning, Another source is the family business institutes auditing, and market appraisal. Next is a set that exist in universities, typically attached to of goals relating to ‘exploring possible business business schools. And there are a number of strategies’. Basic strategic options include family business associations that owners can join renewal, reformulation or regeneration of the for mutual support and learning. family business, but using unique strengths of Why would owners not use external family businesses should permeate the evalua- advisers? It could be a simple matter of the cost, tions. Finally, the third set of goals pertains to but in many instances it is likely to stem from the finalization of ‘strategic and reinvestment deci- founders’ values and attitudes. A reasonable sions’. An assessment of the business’s health hypothesis is that the more autonomy-oriented through a SWOT analysis (i.e. its Strengths, the owners, the less likely they are to ask for or Weaknesses, Opportunities and Threats) is often accept external advice. a useful tool in strategic planning. Alternatives must be considered, including those relating to capital, markets, staff, organiza- tion and ownership. For the family firm, usually Process and elements of strategic planning a long-term perspective can be taken on these for the family business strategic issues. Then goals, both personal and family, must be factored into the strategy, and Carlock and Ward (2001) advocated a ‘parallel finally specific business strategies selected. planning process’ for integrating and balancing family and business concerns. The family side of the model contains ‘core values’, ‘family commitment’, ‘family vision’ and the pro- Mission statements duction of a ‘family enterprise continuity plan’. These interact with strategic business planning, These are statements of why the business exists. so that values affect the ‘management philo- Is its purpose to perpetuate a family legacy, or sophy’, family commitment corresponds with to make the family rich? Herremans and Welsh ‘strategic commitment’, a shared future vision (1999) developed a case study of an leads to identification of a ‘business vision’, and business ‘mission statement’ that is highly the result is a ‘business strategy plan’. instructional. ‘Treadsoftly’, an ‘Environmental The ‘family enterprise continuity plan’ Education Company’ (see: www. (Carlock and Ward, 2001: 16) addresses a series treadsoftlycanada.com) is a family business of goals, the first group of which pertain to located in the Crowsnest Pass area of Alberta, securing family commitment. Does the family Canada. It began in 1997, and built into its ini- vision include a desire to perpetuate the busi- tial business plan the increasing involvement of ness? How committed are all family members to family members. What is unique is that the this vision, and is it based on strong core values founders wanted to establish the business with or philosophy? The second set of goals relates to an ideology reflecting sustainable development family participation, in which fairness and con- and community responsibility. It is committed flict resolution is considered. This might entail to respect for the environment, co-operative family meetings and formal agreements. The efforts within the community, use of an third group of goals deals with the special case of environmental management system to link preparing the next generation of leaders and strategic planning to environmental issues, and owners, and the fourth cluster of goals covers the to proactive environmental conservation efforts

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including cumulative effects monitoring. The Goals mission statement reads as follows: To delight our guests. We promote environ- General goal statements are derived from mentally and socially responsible travel that the mission and vision. They are normally respects our natural and cultural resources, expressed in terms of things to attain, such as and educates our participants during a first increased profitability, finding more leisure time hand nature experience. for the family to be together, or developing the skills of children to eventually take over the firm. By stating core values in this unambiguous way, Goals can also be expressed in terms of things the family business provides direction and to avoid, such a high debt load, overwork, or stability through its evolution. loss of control. Many owners are reluctant to develop or express their goals, according to Tagiuri and Vision statements Davis (1992), for several reasons. Some fear that stating goals might lead to missed opportunities The importance of the ‘family vision’ (Chua or inflexibility. Goal-setting could cause conflict et al., 1999) has already been emphasized. This over strategy, and if goals are not met, blame is the vision to employ the business for the might be assigned. In other cases, a multiplicity benefit of the family, and potentially across the of family- and business-related goals might make generations through inheritance. Visioning can it difficult to balance or prioritize them. be conducted informally by the owners and ‘Goal incongruence’ (or disharmony) can family, or formally with the help of advisers. occur within families, such as when children According to Carlock and Ward (2001: 38), the and parents cannot agree on the future of the vision should cover five dimensions: business (Peiser and Wooten, 1983). This is a ‘life cycle’ problem that is likely to occur at • Desired business accomplishments (inno- a particular point in the evolution of the vation, growth, service). family business. Possible consequences include • Possible family legacies (ownership, social the professionalization of the business, in order responsibility). to avoid family indecisiveness, or a loss of • Benefits for the family (wealth, recognition, strategic orientation because of stalemate. meaningful careers). In contrast, Poza (1988) described ‘intrapre- • Responsibilities to the business (investment, neuring’ as a revitalization process that occurs governance, philanthropy). just prior to or during the tenure of the ‘next • Responsibilities to other stakeholders (em- generation’ (i.e. the inheritors). In these cases ployees, customers, suppliers, communities). the children or other inheritors, with or without A good ‘business vision’ statement provides the support of the founders, adopt innovations a clear picture of the business at some point in or make radical changes to company finances, the future, say 5 or 10 years forward. It is impor- organizational structure or family-related tant to base the vision on core values, or a formal systems. mission statement. For example, because most family businesses in tourism and hospitality are not profit- and growth-oriented, it is the rare vision that will be expressed in terms of profit Implementation, monitoring, maximization or continuous growth. Rather, the evaluation and revision vision might relate to future profitability, family and business being in balance, and desired What management systems must be established value-adding. For the profit- and growth- or refined to achieve the goals? Owners oriented entrepreneur, the vision might must anticipate the practicality and costs of relate more to a desired company size, target implementing their strategies, together with market share, growth in sales and profitability, the necessity of monitoring progress, conduct- professionalization through staff hiring, or ing specific research or analyses to evaluate development of family skills. outcomes, and refining the plans as necessary.

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Strategic Options • family sacrifice; • networks within family and the Strategies are the courses of action necessary to community; achieve major goals. There are no optimal or • loyalty and dedication to family, staff and correct strategies to follow, only choices. We business; start this section with some generic business • unified management under the owners; strategies that could apply, in theory, to any • social responsibility; venture. We then examine family-specific strat- • continuity and tradition, including family egies and related issues. myths and legends; • integrity; • special knowledge; • ability to capture niche markets; and Generic business strategies • long-term orientation. Weaknesses: Miles and Snow (1978) developed a typology of • business strategies that has also been used in conflicts between family interests and the study of family businesses (e.g. Daily and business interests (e.g. taking money Dollinger, 1992; McCann et al., 2001). The from the business versus reinvesting in its development or growth); ‘Defender’ strategy is sticking to what the firm • knows best. An ‘Innovator/prospector’ strategy lack of discipline over profits and perfor- mance (e.g. lack of firm cost controls); embodies taking risks in order to provide new • products or services, and applies to the growth- failure to adapt or react quickly to chal- oriented entrepreneur. Following closely on the lenges or opportunities (similar to inherent conservatism: Ward, 1998); and heels of innovators, the ‘Analyser’ strategy seeks • competitive advantage by adopting proven nepotism versus performance (employing strategies. The ‘Reactor’ strategy is one of or advancing family members without adapting only when change makes it necessary. regard to ability). However, these classic strategies look more To Donnelley, most successful family like attitudes than concrete courses of action a businesses place institutional restraints on business might take. Lifestyle and autonomy- family prerogatives and these are backed by oriented owners are generally conservative and rigid tradition. therefore can be expected to be ‘Defenders’ Carlock and Ward (2001: 192) suggested rather than ‘Innovators’. The tourism and hospi- that additional competitive advantages can be tality industry in general displays a great deal of gained in family businesses. Long-term payoffs the ‘Analyser’ strategy in that successful products can be pursued, even to the point of experiment- and services get widely copied, often to the point ing with options. But while this is possible for of standardization. What is poignant about the successful family businesses seeking perma- ‘Reactor’ strategy is the likelihood that many nence, it is not for those struggling to survive. tourism and hospitality business cannot adapt in Furthermore, some family members might a timely or adequate manner and therefore are be inclined to oppose anything that limits constantly at risk. their immediate gratification. In tourism and hospitality, families can sometimes afford to sit on their real-property assets waiting for eventual Building strategy upon the unique payback even while cash-flow and profits are advantages of family business weak. Flexible organization is another potential advantage. Assuming a shared vision and Donnelley (1964) suggested that family busi- unified control, the family business can avoid nesses contain several inherent strengths and bureaucratic infighting, react quickly to seize weaknesses: opportunities, change direction fast, and be Strengths: innovative. One of the secrets of successful • available family resources; entrepreneurs is to move before their

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competitors, even when the decision involves a Renewal degree of risk. This principle seems to apply when individuals with insider knowledge and Capitalizing on existing strategy is the renewal specialist skill are the first to offer touring or guid- option (Carlock and Ward, 2001: 180). It does ing services, are quick to exploit a new target not imply a total absence of change, but focuses market segment, or terminate a product when it the owner’s attention on getting more out fails to meet expectations. of current capabilities and markets. It can A strong commitment to quality, based on be thought of as value-adding if the current family pride and social responsibility, can result strategy is to avoid debt and growth. in loyal customers and strong family-branding, as in the O’Reilly case. Who is better to deal Reformulation with unhappy or demanding customers than Improving the strategy is the essence of an owner-operator? Who, other than family reformulation. Owners can examine how to business owners, is a tangible part of the prod- strengthen their capabilities and develop new uct? As a strategy, creating a family brand will markets. Are there assets to be harnessed? require patience, commitment to quality and clever marketing. It does not hurt to have strong Regeneration personalities and colourful characters in the business. The position of many family companies in Niche market positioning is a mainstay of tourism and hospitality, upon reflection, is likely small, family businesses. In tourism and hospital- to be weak. A new owner, having purchased a ity the limitations of being restricted to local and business, or an inheritor, might be confronted regional markets make it essential to develop with these weaknesses all of a sudden and have strong relationships with one or more niches. little choice but to come up with a new strategy These might be affinity groups and local com- or a radical reformulation of the old one. New panies, other family businesses, or well-known investment might be required. repeat visitors. To find real advantage in these Given the research evidence and the case small markets, the family business has to have studies in this book, many owners in the tourism cost, product quality or service advantages over and hospitality industry will be looking to sustain larger competitors. their business, that is to keep it profitable but not Investment in people is also a hallmark of to grow it. Others will want to add value in order the family business, both for family members to increase profitability, and only a few will desire and staff. Having trustworthy employees is a substantial growth or diversification. Other fun- plus, especially when they can be relied upon to damental choices are to sell the business, take in adhere to the family values and vision. When external investment, or to hand over control to employees become ‘part of the family’ addi- professionals. tional benefits accrue. In a tactical sense, this These options are now looked at in greater might permit the family business to save on detail. recruitment and training, and in terms of strategy it might permit investment in developments that require a very high service component, such as Sustainability option catering or five-star accommodation.

Owners of family businesses can, and usually do, elect to remain small and controllable. Strategic options: renew, reformulate Because that option is predominant, and or regenerate probably always will be, it cannot be dismissed as being unimportant to the industry or to desti- Given an existing course of direction or nations. Effort must be directed at understand- strategy, any strategic thinking will first face the ing this choice and helping the owner-operator question of whether to continue or depart from ensure that the business remains viable enough the current direction. to support the family. This will be termed the

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‘sustainability’ option. Beyond this basic model, • Superb service quality (customers rave options include value-adding, growth measured about the service, the food, the hosts). in terms of diversification or physical expansion, • Cost advantage (competitors cannot keep and the plan-to-sell option. Planning for inheri- their costs as low). tance (the ‘succession option’) is considered in • Price advantage (better expressed as detail in Chapter 5. perceived value for price – i.e. customers An old adage applies to owners who elect to think they are getting more than they pay keep their family business unchanging: ‘if you do for, relative to competitors). not grow, you will inevitably fall behind’. The What should be clear, however, is that few essential problem with staying the same is that family businesses actually possess or can retain nothing else remains constant! How can a small these enduring competitive advantages without business compete in such an evolving environ- changing. Often the owners merely think they ment – one in which innovation brings on new have advantages, but they are not informed choices for consumers all the time and the num- about what is happening around them. If they ber of competitors increases? And if the business do learn about competitive threats, they are fails to improve at all, will it not simply decline? often unwilling or unable to adapt. This can easily result in a downward spiral which, as stressed by Shaw and Williams (1997) can seriously harm the entire tourist destination and render it uncompetitive. Value-adding option To remain viable (i.e. competitive and prof- itable for the owners) in the absence of growth Improvements in management systems and requires several strategic responses. The first is marketing can achieve higher profitability reinvestment to ensure that the physical plant without necessarily requiring physical growth. remains modern and attractive. An inherent In several of our case studies the owners difficulty is with owners who purchase old explicitly realized the need for value adding, properties because they are affordable or in and devised ways to achieve it within their goals the right location, without considering the framework and operational constraints; some- investment that will be required to maintain times this led to modest growth. The following and upgrade the property. Another problem is are generic value-adding options. with cash-flow, in that owners of small family businesses might have to take out too much of Using technology the profit for their own subsistence. Attention to changing market characteristics Much attention has been given to the use of and consumer preferences is important. It computers in enabling sophisticated manage- is always a mistake to assume that what is ment systems for small businesses, and of the now desired or even popular will remain so. internet in improving small-business marketing. Several authors have documented how funda- Employing readily-available accounting soft- mental changes in tourism have resulted in a ware should result in better cost control, quicker revolution from mass markets to custom markets billing of customers, and improved cash flow. (Poon, 1993), and how this change has led to Internet marketing, particularly when imple- many business failures (Peters and Weirmair, mented in partnership with destinations or 2001). business allies, should result in an extended A small, static business in the tourism and customer base. hospitality industry can potentially retain its competitive advantage indefinitely if it meets Efficiency gains one or more of the following conditions: The ‘learning curve’, or how owners apply what • Uniqueness (there are few options to this they learn over time, should result in reduced product or service; it is one-of-a-kind). costs and higher outputs. Applying ‘yield man- • Ideal location (the business has the best agement’ formally (with the help of sophisti- location). cated software) or informally, based on specific

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knowledge of the business and markets, should extreme seasonality of demand concentrated in generate higher profits. two summer months.

Adding new services and products New products and services

This is likely to be the most viable value-adding A common response to seasonality of demand strategy for family businesses in tourism and is to use business infrastructure for different hospitality. Owners can follow the leaders by purposes, such as hosting private functions and watching what products and services appeal to producing special events. This can be simple their target markets, or they can try out their value adding, but might very well require own new ideas. growth in staff, investment in specialized equipment, and modification of infrastructure. Moving up-market New ventures Improvements to the physical plant, adding new products and services, and constantly Tourism provides the opportunity for entrepre- improving service quality can enable the owner neurs to own or even manage more than one to charge higher prices and attract higher-yield business simultaneously, such as a hotelier who customers. For example, taking a modest B&B adds a restaurant or tour service. This ‘vertical establishment, the reduction of rooms in favour integration’ generates value by bringing more of room upgrading (e.g. adding en-suite sources of revenue from tourists into the same bathrooms and antique décor) could enable company. Knowledge of the ‘tourism value the owner to charge more. chain’ is essential for this strategy to work, so owners familiar with different aspects of tourism will have the advantage. Rarely, an owner buys Diversification option or develops counter-cyclical businesses – that is, operating in different parts of the world with opposite or complementary seasons. An exam- One of the characteristics of small, family ple would be for a family in Bornholm to run businesses is that most of their trade is local or their business for several months, then move to regional in nature. This applies in tourism, as it a warmer climate to operate a different business is difficult to compete with chains and major the rest of the year. players in attracting tourists from afar, and in Webster (in Thomas, 1998a) cautioned that hospitality firms that must rely on residents diversification can present problems for the small for steady business. This makes diversification business operator. It might be better to stick to difficult. the core business if diversification stretches one’s The Bornholm (Denmark) research, financial resources, time and skills. Poza (1988) reported later in this chapter, revealed that went further, arguing that ‘Most diversification a small proportion of owners were engaging outside the products, manufacturing processes, in diversification strategies. Some fall into this and markets that firms know well fails.’ naturally, while for others it might only come about through careful research or trial and error. There are several patterns to diversification, and what differentiates these from ‘value adding’ is Physical expansion option the related growth of the business. Adding to the size of the establishment might New markets have the effect of increasing the need for paid staff or professional managers. The owner- On Bornholm, several owners were able to operator and family must carefully consider commence export of their products off the how much they can manage in terms of island to other parts of Denmark or globally. physical space (e.g. number of rooms to Others decided to pursue both the resident clean in a motel), time commitment (hours per and the tourist markets, mainly because of the day and week), resources available (equipment,

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computers, vehicles) and variable costs. This As family firms grow and become more pro- issue of fixed versus variable costs is crucial in fessional in their management, does innovation terms of yield management. and entrepreneurship decrease? Mintzberg and Waters (1990) suggested that planning and procedures might replace vision and entre- Taking external investment in the business preneurial activity, but there is an absence of evidence on this matter that applies to tourism How much investment can be handled without and hospitality, probably because so few family losing family control is an important issue. The businesses in this industry get big or make the additional capital might make the difference transition. between remaining too small and growing to the optimum level, or in having an adequate reserve to weather low cash-flow periods. Strategic Marketing and Family Branding

Marketing is inherently challenging for small Plan-to-sell option businesses (Friel, 1999), and typically the owner takes a short-term (less than 1 year) Many, perhaps even most, owners in tourism perspective. Other weaknesses include: and hospitality, plan to sell their business and • narrow scope and range of marketing hope to get the ‘sweat equity’ out of their activities; efforts. In other words, the business might not • simplistic and haphazard efforts; be profitable in strict accounting terms, but it • reactionary, not innovative; supports the owner or family until such time as • informal; and a major capital gain can be generated through • opportunistic rather than systematic. sell-off. This might even be the only retirement plan available to owners, but it is assuming a lot All marketing efforts should be based on about the future value of land or other assets market intelligence, yet the UK national survey and is therefore risky. of small tourism and hospitality businesses (Thomas et al., 1997) found that only 50% did market research. Of those that completed Professionalization option some research, the focus was on customer needs and service, while the business environment was If the family business gets too big, complex least researched. or demanding, or if the owners want to try These weaknesses stem from a combina- something else, they might opt to hand over tion of limited resources, lack of training and operations and even control to professional skills, and the inherent difficulty of small busi- managers. Owners might also consider the nesses in having any kind of impact on the mar- absence of potential heirs to be an adequate ketplace. Consequently, a number of strategies reason for bringing in paid professionals. suited to small businesses should be contem- According to Goffee and Scase (1985), plated, namely niche marketing, relationship a ‘quasi-organic’ management structure often and cooperative marketing, plus the family occurs where owners retain the right to intervene branding option. Marketing strategies also must at any time, but management is nominally in be considered in light of the broader options the hands of professionals. As a transition stage, discussed under strategic planning. this structure entails some risk of inefficient inter- ference by owners and owner-manager conflict, so a board of directors might be necessary to Niche marketing make it function smoothly. The family business literature is not firm on just how much conflict Many owners rely on the popularity of the desti- arises in such transition periods (Sharma et al., nation to bring in customers year after year, and 1996). fail to consider what their own specific appeal

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might be. They offer completely undifferen- however, wineries let people come and go tiated products (typically accommodation without even attempting to engage them in and dining), but without differentiation, every conversation, learn their preferences, get their business is completely substitutable. Morrison name, or add them to a mailing list. (1998: 194), commenting specifically on hotels Relationships require effort, and the in peripheral areas, argued that ‘. . . product customer will only make that effort if rewarded differentiation and extension, market diversifi- by quality service, great experiences and specific cation and flexible specialization’ are necessary bonuses. A computer database and mailing list strategies. are the basic elements, but the customer does The aim of niche marketing is to focus on not want to be bothered with a lot of useless one or several market segments that desire, and contacts. Specific requests for feedback from will pay, a premium for the kind of customized customers are important. product, personal service and unique experi- ences that a family business can provide. Differentiation for niche markets can be based Pricing and packaging on several advantages. The first is geography, including the always-wise strategy of building Competing on price is a potential trap. As strong community ties. Or the owner might have a strategy, it is usually better to find ways to personal knowledge about, or contacts in, a cut costs (leaving a higher profit margin) and more distant marketplace that can be exploited. improve perceived value than to cut prices. Providing a unique service or experience is Dependence on a single can bring advantageous. Historic accommodation estab- in volume, for example, but they might require lishments with antique décor stand out from the an accommodation operator to cut prices to ordinary. Tour operators with detailed knowl- the bone in order to maximize tour-company edge and access to special places are likely to be revenues. more appealing than large tour companies. Hankinson (1989: 82) observed from Families that are part of the product offer some- research that ‘Most of the hotels followed a thing extra. The secret is to think about the total policy of rigid target-return pricing which exem- visitor experience and the specific benefits plifies a behaviour pattern closely approximating customers derive. survival’. Similarly, simplistic cost-plus and follow-the-leader pricing are tempting for unsophisticated owners and managers, but Relationship marketing pricing should follow from a broader strategy and incorporate both packaging and yield Being customer-focused should result in the management. establishment of excellent relationships with Packaging is a way of expanding the market loyal customers. While it is desirable always to appeal of many small businesses. Customers can have new customers (who then spread positive be sold a standard package at a given price, or word-of-mouth recommendations to others), they can be given the option of assembling their repeat business is of tremendous value. own from a menu. The allure of packaging to the The underpinning philosophy of relationship customer is a combination of perceived value marketing for the family business is that (they think it costs less than all the elements the owner and guest connect on a personal would cost individually, but this is not always the level, and the business and guest engage in a case), convenience (someone else has done the permanent dialogue. hard work for them) and uniqueness (getting a When an inquiry is made, a potential complete experience that is otherwise difficult or customer approached, or a real person buys impossible to arrange on their own). the service on offer, the opportunity exists for The basic approach to packaging is for an relationship building. In wineries, for example, operator to pull together elements of the travel every person who shows up to taste the product or leisure experience, focused on the specific is a potential long-term customer. All too often, business. For example, an accommodation

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operator makes a stay at their establishment the Raising prices when it is anticipated centrepiece for a package, encompassing room, that demand will be high is less appealing to recreation and meals. The recreation compo- many owners, but generates substantial profit nent can be sub-contracted or a simple matter enhancements to the businesses that employ of booking a tee time for the customer and it. Based on historical demand patterns, which including the price of golf in the package. are often highly predictable, the business takes More complex packages require business- advantage of the fact that many customers to-business relationships or the intermediary (particularly travellers) cannot or will not change power of a marketing alliance. The idea is to offer their plans. It works best for hotels and transport potential visitors a destination package allowing companies that can continuously revise their a choice from many accommodations, attrac- schedule of fares for specific dates. Others tions and services offered by small and will have to make do with seasonal or family businesses in the area. This approach weekday–weekend price changes. might have to be developed in conjunction Yield management has to be integrated with a business accreditation system to ensure with policies on reservations, advance payments quality, and a booking system that allows and refunds, over-booking and length of stay. customization. For example, many accommodation providers want two-night minimum stays for weekends. Companies practising yield management also have to be concerned about customer reactions, Yield management as variable pricing inevitably produces situations where customers have paid different prices Even the smallest of businesses can benefit from for the same experience. The principle benefit the practice of yield management. A number of they received for higher prices is a guaranteed special considerations apply to small and family reservation exactly when they wanted it. businesses. Yield management begins with The very basic decisions that have to be realization that unused capacity represents a made about growth or value adding are linked to major loss of potential revenue for the business. yield management. What is the sense of building For example, accommodation units that are new accommodation units, for example, if it is unused and empty seats on a bus can never be easier and cheaper to fill up available capacity replaced – they are ‘perishable’ commodities. through more aggressive marketing including Other businesses with high fixed costs, including discounts, packaged prices and other incentives? restaurants that are fully staffed but sometimes Owners have to examine their operations to devoid of customers, can also benefit from yield see if the forecast benefits of expansion are management. With this in mind, owners and worthwhile and necessary in order to add value managers often seek ways to reduce opera- and profit to the enterprise. tional costs, such as by cutting back on the Accounting for family labour enters the hours of operation or keeping staff levels to a yield management picture as well. All too often minimum. Cyclical closure of the business is family labour is devalued (relative to wage and often practiced, but in most cases these strate- benefit levels for employees), or not accounted gies are a form of capitulation and it would be for at all. This makes it difficult to determine the preferable, financially, to attract more paying true costs of various operations, and therefore customers. makes it hard to implement yield management. The simplest form of yield management For example, additional accommodation units occurs through price reductions in off-peak would potentially generate more revenue, demand periods, such as winter-season specials but are all labour costs being calculated? Is it at resorts and mid-week lunch discounts in res- assumed that family members will simply work taurants. Combined with attractive packaging, harder? The same applies to determining the new business can be generated within market potential benefits of price reductions to fill segments that are sensitive to price and respon- surplus capacity – each additional room filled sive to ‘specials’. will also have a marginal labour cost.

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Co-operative marketing Family branding

Clarke (1995) observed that farm accommoda- The most prominent family-dependent issue in tion operators tend to be isolated, engage in marketing is that of exploiting the family-firm rivalry and exchange little information, but this status, or the family name, for competitive might be typical of small and family businesses advantage. The term ‘family branding’ can be in tourism and hospitality. To overcome many used to describe a family of brands, such that inherent limitations of being small and isolated, the same brand name is used on every product the business owner has to engage in co- the company makes or on every service it operative marketing and consider other forms offers. If the overall brand name has value in of strategic alliance. terms of acceptance by customers, then all the Co-operative marketing can take several products and services using that name should forms, from simple to complex. Informally, many be well received. On the other hand, if a brand business operators agree to a mutual referral associated with quality is later applied to a system in which potential customers are given low-price product, the consumer might begin specific referrals to other businesses. This works to think that the entire family of brands has well during peak-demand periods, or when lowered its standards. customers want advice on what else to see or Dunn (1995: 21), based on analysis of do in an area. successful Scottish family businesses, concluded More formal arrangements are usually that some of them used their family status for organized by tourist boards, chambers of com- marketing purposes to imply quality, care, and merce and the like. Normally it is the destination special attention to customers. Because the that is promoted through these mechanisms, ‘brand’ is often the family name, it should ideally with individual members being a secondary communicate all the following brand attributes: consideration. Such member-based alliances • Quality and value (service; good value allow the pooling of resources for additional for money; reliability) based on past marketing reach, plus the sharing of market performance and the assumption that a intelligence or formal training. family takes pride in all it does. Evans and Ilbery (1992) described pro- • Tradition (we have a long history; we are ducer cooperatives among farm-based accom- rooted in the community and we care modations that have arisen on order to produce about you). or purchase more cost-effective advertising. • Personality (we are a family, different These are also called ‘product clubs’ or ‘market- from corporations, with our own way ing consortia’, where the same types of business of doing things; we offer all our clients jointly promote their services (e.g. a marketing customized experiences and a personal consortium of ecotour operators). touch; we are always ethical in our Advantages of a co-operative marketing business dealings). effort were listed by Morrison (1998: 194): • In some cases the attributes can also • networking; signify culture or tradition, as in an ethnic • achieving greater economic scale; business. Whatever the name, customers • obtaining professional advice; should be made to feel they personally • access to better technology; know and understand the family behind it. • support for training and education; and There are potential negatives associated • pooling of resources. with exploiting one’s name and family-business, For the larger business, buying into a fran- status, including the fact that some people chise gets both a name brand and its marketing associate family business with a lack of strength, while joining an exclusive association professionalism and nepotism. As well, there (e.g. luxury or historic country restaurants) might be a fear of attracting unwanted provides marketing power and a form of attention to the family and thereby of including branding. some risks.

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Networking It results in fluctuations in tourism volumes over the calendar year, and must be differentiated Families should have advantages in dealing from longer-term business cycles and short-term with other families, especially when based changes related to weekly and daily travel pat- on blood and marriage relationships, but terns. Seasonality of demand is typically caused also when there are solid roots in a community. by institutional and/or natural factors, with the Networking works at two levels, both social pattern usually remaining stable over many and business-to-business. It can be formal, years. This predictability of seasonality makes it as through membership in marketing organiza- possible for businesses, lenders and investors to tions, or informal. Network theory has been anticipate many of its impacts. applied to the study of both social and business Baum and Hagan (1997: 2) listed the main connections. Dodd (1997) examined formal causal factors: social networks in the UK and concluded that • climate or weather; business success might be linked to membership • social customs, especially holidays; in social organizations. Business owners tended • business customs, such as meetings and to be more active this way than employees events; et al or the self-employed. Littlejohn . (1996) • calendar effects, including important dates; found that small business owners placed more • supply side constraints such as labour value on social or informal networks than on availability; and structured consortia. • alternative uses of facilities. Birley and Cromie (1988) suggested that the early stage of enterprise development is Butler (1994) added ‘inertia’ to the list of characterized by heavy reliance on an informal causes, and later (2001) separated ‘demand network of friends, family and local social factors’ from ‘supply attributes’. A set of ‘modify- contacts, with increasing reliance over time ing factors’ such as pricing can be employed on professional links. Ram (1994) determined by destinations and businesses. All these inter- that ethnic or minority networking provides actions necessitate differentiating between both strengths and weaknesses to the business, demand (customer) and supply (business) fluc- with a real risk being the exclusion of external tuations when discussing seasonality in a given assistance and contacts. area. BarOn (1975) examined arrivals data from 16 countries over a 17-year time frame and The Seasonality Challenge and Strategic concluded that some areas have a ‘. . . very Responses in Bornholm strong high season with negligible tourist activity during the rest of the year’ (p. 2). ‘Extreme months’ (p. 16) were said to be those deviating Because cyclical demand fluctuations are such a from random irregularities by more than 1.5 global concern for the tourism and hospitality standard deviations. Jeffrey and Barden (2001: industry, how businesses and families react 123) in their analysis of seasonality in hotel occu- is of utmost importance. In this section the pancy rates in England observed that ‘Seaside seasonality problem is explored in detail, and and remote or peripheral hotels generally have results presented from research in Denmark to . . . pronounced or extreme seasonality.’ illustrate strategies being employed by family ‘Extreme seasonality’ remains a somewhat businesses. subjective and elusive concept. While it can be approached as a statistical problem, using various measures such as those of demand Seasonality and its causes amplitude or inequality (see, for example: BarOn, 1975; Wanhill, 1980; Yacoumis, 1980; Seasonality in tourism demand is a universally Lundtorp, 2001), the numbers do not necessar- recognized phenomenon (BarOn, 1975; Baum ily shed light on the implications for various and Hagan, 1997; Baum and Lundtorp, 2001). businesses or the destination.

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The challenges of seasonality appreciably since 1970, although shoulder- season volume had increased. In Ireland, Seasonality of demand is often referred to as Kennedy and Deegan (2001: 51) observed that a problem (Allcock, 1989), and destinations ‘Many businesses in Irish tourism experience generally work hard to reduce it. For individual long periods of low usage and short periods of businesses the negative impacts or costs can high usage’, although there were some signs of include: improvement. The common lack of success in defeating • peak-period crowding and high work seasonality suggests that destinations should loads; look more carefully at other strategies. The most • cash-flow problems; profound change in common practice would • unused capacity and lower profitability come from a focus on yield, rather than volume. during low demand periods; For example, Kennedy and Deegan (2001: 68) • difficulty in attracting and keeping skilled suggested that Ireland should preferentially employees; attract markets with a ‘high propensity to travel • need for seasonal workers and part-time out of the peak season, spend the most money staff; per capita, stay the longest and travel throughout • difficulty in attracting investors and the country.’ lenders. Another possibility is to carefully examine An overview of seasonality in Europe supply with a view to eliminating old, surplus (McEeniff, 1992) discussed patterns (e.g. capacity (Lundtorp et al., 1999), thereby is much more peaked than improving occupancy rates for all remaining international arrivals), trends (greater spread of businesses. Flognfeldt (2001: 110) suggested demand was occurring over time) and potential that some destinations must learn ‘how to live solutions (such as all-weather resort facilities). with strong seasonality’, and his basic idea is to Coopers and Lybrand Consulting (1996: 1), ‘fit different types of tourism production into the in a report for the Canadian Tourism seasonal patterns of other production activities, Commission, described seasonal variations in including an adjustment of some public tourism demand as ‘. . . one of the biggest services.’ He also noted a number of business challenges currently faced by the Canadian strategies in place in rural Norway, including travel industry.’ mixed employment (e.g. tourism and agriculture A major analysis of seasonality in occu- or tourism and teaching), use of student and pancy rates among English hotels was reported migrant workers, developing new products to by Jeffrey and Barden (2001). Some hotels expand the season, taking long holidays, getting did better than others, depending principally into export markets, and moving away to work on their target markets. Those oriented toward or study in the off-season. business travellers and conventions, or group tours, displayed significantly less seasonality. Practising yield management definitely helped, Seasonality and the family business but deep price discounts did not. They con- cluded (p. 123) that ‘. . . most hoteliers could For family businesses seasonality can mean extend their seasons’ through better marketing, severe personal and financial stress, an impedi- but some would find seasonal closures to be ment to having children take over the business, the most cost-effective solution to pronounced and a disrupted leisure and social life. Families seasonality. face a heightened risk from extreme seasonality, Unfortunately, many attempts to reduce in light of the following considerations: seasonality fail. Butler (1994) observed that growth in demand often occurs in the peak • The family house and property are often season, dwarfing attempts to improve seasonal an integral part of the business (e.g. small balance. In the northwest of Scotland he found hotels, farmstays, B&B or guest houses, that the pattern of seasonality had not changed campgrounds on family land).

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• Families often depend completely on a non-response). Twenty-three per cent of larger single business venture for their income. hotels were seasonal and owned by limited liabil- • Family businesses tend to minimize labour ity companies. Almost all the campsites and costs by maximizing their own inputs, youth were closed off-season, plus 88% resulting in long hours of hard work. of holiday centres, 65% of large hotels, 84% of • Many parents want to leave a tangible medium hotels, and 65% of small hotels. Some legacy for their children in the form of a restaurants and other catering businesses were viable business or other real property. also seasonal. Most owners were residents, and most businesses were small in size. Cooper et al. (1993) said that in order to Bornholm is similar to two other Baltic justify remaining open, a business must at least islands, Åland and Gotland, in both its history cover the variable costs associated with staying and current seasonality. All three islands possess open. These could be heating, labour and high levels of local ownership and control. Twin- insurance. In the case of family businesses, this ing-Ward and Baum (1998) concluded that all rule does not fully apply. Families that provide three had entered a period of decline and were all the necessary labour can avoid payroll costs suffering from the ill-effects of seasonally low altogether. When they live in the accommoda- demand. The problems are augmented by a tion, as many do, at least some of the costs dominance of small, family enterprises ‘. . . of staying open can be considered as family which in many cases lack the professional subsistence costs. Families can employ strategies training required to secure a high quality of used by other companies, but there are also service’ (p. 135). some unique options available to them. These Lundtorp (2001) summarized the extreme will be explored through assessment of the seasonality problem on Bornholm by noting that Bornholm example. for 9, slow months of the year the island attracts only 33% of total demand, and over 10 months the figure is only 50%. Bornholm and other Seasonality in Bornholm parts of Denmark, he suggested, display ‘high seasonal amplitude’ (p. 31). Lundtorp (2001) Bornholm (population 45,000), like many also concluded from his analysis of tourist resorts, and particularly islands, experiences trends that there had been no substantial pattern greater seasonality than other types of destina- change in seasonality for Denmark or Bornholm tion (Butler 1994). Peripheral regions at higher in the 1989–1998 period. Lundtorp et al. (1999) latitudes also find it more difficult to influence concluded from their analysis that seasonality seasonality in demand (Lundtorp et al., 1999). could not realistically be eliminated, and not Furthermore, islands frequently rely on natural even substantially reduced. A major reason was attractions, particularly the beach and water the uniformity of visitors and their behaviour – sports, which in temperate and high-latitude Bornholm’s shoulder seasons attracted the same climates experience huge temperature swings. types of loyal visitor as the peak season, for the Bornholm is one of the most renowned same reasons and length of stay. Most recently, destinations in Denmark, popular since the late increases in volume have occurred, but this has 19th century. It has been described as ‘. . . not altered the extremeness of seasonality. It a mature seaside resort with an established remains to be seen if a volume increase in itself tourism infrastructure dominated by small enter- can alter the seasonal responses of local prises’ (Gyimothy, 2000: 56). Sixty-four per cent businesses. of all visitors come for holiday reasons, and this figure rises to 90% in the summer. The key markets are regional, namely Danes, Swedes and Germans. The seasonality ‘problem’ A hotel survey on Bornholm by Sundgaard et al. (1998) found that 43% of hotels were small, Over half (46 or 57.5%) of respondents in family owned, and opened in the peak-season Bornholm indicated their business closed for only (the actual percentage is higher, owing to part of the year. For seasonal operations, the

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most typical ‘width’ of the open season was Responses to seasonality 7 months (14 indicated April–October), with 6 months (May–October: seven respondents) or Respondents staying open all year were asked 5 months (May–September: ten respondents) how they dealt with the low season economi- also being common. The typical seasonal cally. Four choices were provided, and respon- business on Bornholm therefore experienced dents could select more than one, plus a space a 2-month peak tourist season, from 3 to 6 was provided to write in ‘other’ actions. The shoulder months and 4 to 7 closed months. main response was dismissal of staff (25 Respondents were asked if their business responses), followed by 22 who supplemented was ‘highly seasonal’ (as one item in a set of their income from other sources. Fourteen drew statements about the business), and 68.3% on savings and six took out loans to survive the selected ‘fully agree’ on a scale of five low season. ‘Other’ actions mentioned: arrange (mean = 4.23) while only 10% checked ‘fully parties (three respondents); and (one response disagree’. In a separate question, respondents each) take a vacation; have personal guests; were asked if highly seasonal demand was a rely on social security, use private financing, problem for the business, and only 18.3% and work alone. It is clear that being open all checked ‘a serious problem’ while 53% year is not the same as being active or profitable indicated it was ‘somewhat of a problem’ and all year. 34% said it was ‘not a problem’. From these two The remainder answered the question of responses it can be concluded that for many what they did when their business closed part owners extreme seasonality was not a serious of the year, with five categories provided and problem because they closed and did not worry space allowed to write in ‘other’ actions. There about it. In other words, they were coping. were 76 responses from the 57.5% of the sample A selection of quotations from the inter- who closed part of the year. The main activity views helps to understand the nature of the was maintaining or improving the property seasonality problem for family business owners, (21 mentions). Eighteen respondents owned and especially its impact on profitability. Of another business and nine took another paying course, some of these problems also relate job. Only 16 said they enjoyed the leisure time. to small size and competition: No-one selected ‘unemployed’. ‘Other’ activities We have to be very careful about our business, were: produce stock (five mentions); take as the profit of our activities is low. It puts a courses (one mention). limit for what we would like to do. We have to take small steps forward. (Campground; sole proprietor; closed part year; married but children work elsewhere) Coping strategies We keep an eye with our expenses, as it is not Selected quotations from the interviews possible to increase our prices because of the competition . . . illustrate a variety of ‘coping strategies’, being (Campground; sole proprietor; no children; defined herein as closure of the business plus open April to November) the absence of attempts to expand. These owners accept extreme seasonality and try to It is not possible to extend the opening season cope with its impacts: because of the climate but we could use more of our capacity in shoulder seasons. We close when season is over and use the rest (Married couple; and tour operators) of the year to keep up the facilities of the site. (Campground) The problems on Bornholm are the same as in the rest of the country. Eighty per cent of Our open season is from 1 May to 1 October. the business should be closed. The earnings The rest of the year I plan for the next season, are too low, and the amount of risk-willing renovate, do some marketing and make capital also too low. The companies are so bookings and reservations. I also have another weak that it is impossible to develop new occupation out of season. products. (Sole proprietor; hotel and restaurant; (Hotel/restaurant owner and former banker) no children)

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Opening season is 1 April to 1 November. The asking for a place to eat . . . Our business is rest of the year we keep up the facilities – take running well, and we have a lot to do in high some vacation as we have long working hours season, where the capacity is fully used. We during the summer. could use more guests in the shoulder season, (Married couple; hostel and tour operators). which we would like to be extended by 1–2 months. We rent our flats in high season for about 13 (Restaurant owner; open all year; one weeks. Outside tourist season we paint and daughter works in the business) repair the flats and make them ready for the next season. Then we also use our time for our Our firm is very solid with a fine yearly net primary income: the farm. profit . . . This (fish smokehouse) is very (Married couple; three flats on farm) popular with tourists and our sale for tourists is substantial but not as big as our export. We ‘Coping’ is not just for micro businesses, as also export a lot to private people in Denmark. witnessed by the example of two brothers who Who order by phone or e-mail . . . We find own and operate an inherited hotel with restau- ourselves in a good position on the market and rant. The wife of one of the brothers also works expect a good profit in the future. Our business full-time in the business. The hotel and restau- gives us a satisfactory income, and we do not rant are ‘closed for the winter’ but they do open intend to enlarge our volume. for conferences or functions, on demand. In the (Married couple; children live off-island; slow season the family runs the business without open all year) regular paid staff and occupy themselves with The export (i.e. products) of the firm is still maintenance, planning the next season and tak- growing all over Europe and Scandinavia, and ing bookings. High-season requires employment the sale to tourists during the season is of great of three more staff plus six or seven students importance to the firm. The demand for our during their holidays. Their strategy seems to be production is still increasing year by year. To be mostly ‘coping’, with a little ‘combating’. able to meet the demand we have set up a new production (factory) . . . We foresee consider- able possibilities for more export in the future. (Owner of a craft production and retail company; open all year for production, Combating sales and marketing)

Many business owners try to defeat seasonality, Our business has been a success, as we can sell all that we are able to produce. We sell or at least expand the shoulder seasons for our products outside Bornholm, but of course enhanced profitability, although they might still we also have a considerable sale to tourists be forced to close for part of the year. The main visiting the area. We therefore see us as both criteria for inclusion in the ‘combating’ category a sales business but also as an attraction in the are attitude and action, as the following quota- area . . . We continue to develop our products tions reveal: to improve our competitiveness. (Family-run producer/retailer of a luxury food We continue to develop our concept . . . product; open 11 months a year) We would like to have more guests in the shoulder seasons. In the high season we have a full house. (Sole proprietor; campground; closed part year) Capitulating I would like to be able to make more invest- ments and enlarge my business. It is my Shrinking, terminating or selling a family busi- intention to establish ten more beds in the ness in response to extreme seasonality can be next year and also a hall for conferences. called ‘capitulating’, but it might also stem from (Married couple; farm-based accommodation; personal preferences or the absence of heirs. closed part year) For example, the C. family business is very Our concept is very popular among locals as unusual in Bornholm, having been developed well as tourists. In winter we have many and expanded successfully from a farm base, arrangements for the locals, and in high season and passed on to the third generation. How- many of the locals recommend us to tourists ever, the older married couple who own and

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operate this attraction are selling out and their more profitable tourism season, and many children – who have already moved off-island – stayed open all year despite the severe downturn do not want to take over. It is seasonal, opening in tourism demand. May–September. Resident demand is insuffi- In terms of impacts on the family, this cient to warrant a longer season as staff and research revealed that strategies for ‘coping operating costs are quite high. They employ six with’, or ‘combating’ extreme seasonality have permanent, all-year staff and 50 seasonal work- profound implications for the owners and ers. Repairs, maintenance and improvements their families. Many family business owners are made over the whole year, and the owners were apparently successfully ‘coping’ by way have always tried to add something new before of seasonal closure and alternative revenue each season. The business is neither big nor generation, but in some cases business viability small enough to allow the owners the luxury was at risk. Most respondents would prefer to of relinquishing all-year management. Would expand the peak tourist season, as this would a longer season and higher profits make a undoubtedly improve their financial positions a difference? It is impossible to say. great deal. In the following example, the owners are One other possible consequence of extreme undecided about their business viability and its seasonality on the family business was revealed future. The H. family opened their own craft by the very low number of children involved in manufacturing and retail business on the island, these businesses and by the high level of expec- following a period of paid employment by the tation that the businesses would not be passed husband at a (now) competing business. The on within the family. This deserves further study, premises are rented, and both capital and as continuity in family businesses should have operating costs in this line of work are high. positive consequences for the community and Unfortunately, the tourism season is very short, the industry. as their market is primarily that of longer-staying What remains are the following options, German visitors who come mostly in the warm, directly aimed at the small and family business short summer. Competition is high and increas- sector: ing, as Bornholm seems to attract many arts and • Focus on building demand in the shoulder crafts entrepreneurs. Almost all the businesses in seasons with the hope of generating suffi- their little seaside community are locally owned cient revenues to sustain the business and and have to close for a lengthy part of the year, the family. and while some owners can afford to go away • Develop niche markets that can keep some on vacations over the closed season the H. businesses open all year (i.e. residents, family do not generate sufficient revenue. The sport tourists, business travellers). husband spends part of the winter off-island • Create export products. to earn additional income, and they both • Generate counter-seasonal income from manufacture crafts for later sale. In the summer, non-tourism ventures. students are employed in the shop. Their child is still at school and not employed. Although they love living in this area, increasingly they see that they might have to move away to earn a decent Chapter Summary living. Quite a few respondents were micro busi- Owing to the widespread preference to keep the nesses with no option of staying open all year, family business small and under control, yet and many were always intended to be secondary profitable, owners face many challenges. This sources of income. Although some family busi- chapter started by discussing the notions of fail- ness owners undoubtedly prefer to close for ure and success in the family-business context, the season, because they are lifestyle oriented noting that both should be viewed in the light of or place the family first, the evidence from owners’ goals and needs. It is readily observable Bornholm strongly suggests that most prefer that small businesses in tourism and hospitality otherwise. The majority of business owners frequently turn over their ownership or fail surveyed and interviewed wanted a longer, outright, but it is less certain if the family vision

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is responsible – failure can often be attributed Barney, J. (1991) Firm resources and sustained to generic factors affecting all small businesses, competitive advantage. Journal of Management and to the often-harsh business environment. 17(1), 99–120. There are good reasons for growing a family BarOn, R. (1975) Seasonality in tourism: a guide to the analysis of seasonality and trends for policy business, including the additional revenues that making. Economist Intelligence Unit, Technical come from increased business volumes and the Series No. 2, London. enabling of increased family involvement in the Baum, T. and Hagan, L. (1997) Responses to season- business – including potential inheritors. Various ality in tourism: the experience of peripheral barriers and preconditions for growth were dis- destinations. Conference paper, International cussed, starting with resource availability and Tourism Research Conference on Peripheral encompassing the lack of related vision or goals. Area Tourism. Research Centre of Bornholm, Family-business owners are in need of Denmark, pp. 8–12. strategic planning, even if they want to avoid Baum, T. and Lundtorp, S. (eds) (2001) Seasonality in growth. After presenting a basic strategic plan- Tourism. Pergamon, Amsterdam. Birley, S. and Cromie, S. (1988) Social networks and ning process for family firms, including the need entreprensurship in Northern Ireland. Paper pre- for parallel family and business visions, this sented at the Enterprise in Action Conference, chapter outlined a number of generic strategies Belfast, UK. as well as options specific to the family enter- Boer, A. (1998) An assessment of small business prise. A number of unique advantages are held failure. In: Thomas, R. (ed.) The Management of by the family business that can be exploited, Small Tourism and Hospitality Firms. Cassell, such as the ability to take a longer-term perspec- London, pp. 39–57. tive on return on investment, and the special Boger, C. and Buchanan, R. (1991) A Study of Bed resources families and their networks can bring and Breakfast Facilities in Indiana. Indiana to the business. Strategic marketing was then University, The Indiana Extension Service, Indianapolis, Indiana. discussed, highlighting the need for most family Brown, B. (1987) Recent tourism research in South businesses to develop profitable niche markets East Dorset. In: Shaw, G. and Williams, A. (eds) and to forge marketing partnerships. The pros Tourism and Development: Overviews and Case and cons of family branding were noted. Studies of the UK and the South West Region. The final portion of this chapter was Working Paper 4, Department of Geography, devoted to an examination of strategic responses University of Exeter, UK. by family businesses in Denmark to extreme sea- Butler, R. (1994) Seasonality in tourism: issues and sonality of demand. It was revealed that some problems. In: Seaton, A., Jenkins, C., Wood, R., owners merely coped with seasonality, including Dieke, P., Bennett, M. and MacLelian, L. (eds) shutting down for part of the year, while others Tourism: the state and the art. John Wiley & Sons, Chichester, UK. pp. 332–339. endeavoured to combat it through diversifica- Butler, R.W. ( 2001) Seasonality in tourism: issues and tion of products and markets. This research implications. In: Baum, T. and Lundtorp, S. (eds) identified a number of specific strategies that Seasonality in tourism. Pergamon, Amsterdam, were working for family businesses in Bornholm. pp. 5–22. Carlock, R. and Ward, J. (2001) Strategic Planning for the Family Business. Palgrave, Basingstoke, UK. References Chua, J., Chrisman, J. and Sharma, P. (1999) Defining the family business by behavior. Entrepreneur- Allcock, J. (1989) Seasonality. In: Witt, S. and ship Theory and Practice 23(4), 19–37. Moutinho, L. (eds) Tourism Marketing and Clarke, J. (1995) Sustainable tourism: marketing Management Handbook. Prentice Hall, London, of farm tourist accommodation. PhD thesis, pp. 387–392. School of Hotel and Catering Management, Astrachan, J. (1993) Preparing the next generation Oxford Brookes University, UK. for wealth: a conversation with Howard H. Cooper, C., Fletcher, J., Gilbert, D. and Wanhill, S. Stevenson. Family Business Review 6(1), 75–83. (1993) Tourism: Principles and Practice. Pitman, Ateljevic. I. and Doorne, S. (2000) Staying within London. the fence: lifestyle entrepreneurship in tourism. Coopers and Lybrand Consulting (1996) Special Journal of Sustainable Tourism 8(5), 378–392. report on off and shoulder season marketing.

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Canadian Tourism Commission, Ottawa, Hegarty, C. and Ruddy, J. (2002) The role of family Canada. in entrepreneurial development in Irish rural Dailey, C. and Dollinger, M. (1992) An empirical tourism. Paper presented at the conference: examination of ownership structure in family and Re-Inventing the Destination, Dubrovnik, professionally managed firms. Family Business Croatia. Review 5(2), 117–136. Herremans I. and Welsh, C. (1999) Developing and Davis, J. (1996) Values and mission statements. In: implementing a company’s ecotourism mission The Family Business Management Handbook. statement. Journal of Sustainable Tourism 7(1), From the editors of Family Business Magazine. 48–76. Family Business Publishing Co, Philadelphia, Jeffrey, D. and Barden, R. (2001) An analysis of the Pennsylvania, pp. 20–23. nature, causes and marketing implications of Dawson, C. and Brown, T. (1988) B&Bs: a matter seasonality in the occupancy performance of of choice. Cornell Hotel and Restaurant English hotels. In: Baum, T. and Lundtorp, S. Administration Quarterly 29(1), 17–21. (eds) Seasonality in Tourism. Pergamon, Dodd, S. (1997) Social network memberships and Amsterdam, pp. 119–140. activity rates: some comparative data. Inter- Kennedy, E. and Deegan, J. (2001) Seasonality in national Small Business Journal 15(4), 80–87. Irish tourism, 1973–1995. In: Baum, T. and Donnelley, R. (1964) The family business. Harvard Lundtorp, S. (eds) Seasonality in tourism. Business Review 42(2), 93–105. Pergamon, Amsterdam, pp. 51–74. Dunkelberg, W. (1995) Presidential address: Small Klenell, P. and Steen, M. (1999) I am in charge – small business and the US. Business Economics 30, business problems and insolvency in Jamtland. 13–18. Cited in: Public Support for Tourism SMEs in Dunn, B. (1995) Success themes in Scottish family Peripheral Areas: the Arjeplog Project, Northern enterprises: philosophies and practices through Sweden. the generations. Family Business Review 8(1), Leiper, N. (1997) Tourism Management. TAFE 17–28. Publishing, Melbourne, Australia. Evans, N. and Ilbery, W. (1992) Advertising and Littlejohn, D., Foley, M. and Lemmon, J. (1996) farm-based accommodation: a British case The potential of accommodation consortia in the study. Tourism Management 13 (4), 415–422. Highlands and Islands of Scotland. Proceedings Flognfeldt, T. (2001) Long-term positive adjustments of the IAHMS Spring Symposium, Leeds to seasonality: consequences of summer tourism Metropolitan University, Leeds, UK, pp. 55–66. in the Jotunheimen area, Norway. In: Baum, T. Litz, R. and Kleysen, R. (2002) Old men will dream and Lundtorp, S. (eds) Seasonality in Tourism. dreams, your young men will see visions: a Pergamon, Amsterdam, pp. 109–117. conceptualization of innovation in family firms. Friel, M. (1999) Marketing practice in small tourism In: Chrisman, J., Holbrook, J. and Chua, J. (eds) and hospitality firms. International Journal of Innovation and Entrepreneurship in Western Tourism Research 1, 97–109. Canada: from Family Businesses to Multi- Goffee, R. and Scase, R. (1985) Women in Charge: the nationals. University of Calgary Press: Calgary, Experiences of Female Entrepreneurs. George Canada, pp. 269–298. Allen and Unwin, London. Lundtorp, S. (2001) Measuring tourism seasonality. Gruidl, N., Cooper, R. and Silva, D. (1990) Structure, In: Baum, T. and Lundtorp, S. (eds) Seasonality Conduct, and Performance of the Bed and Break- in Tourism. Pergamon, Amsterdam, pp. 23–48. fast Industry in Wisconsin. Recreation Resource Lundtorp, S., Rassing, C. and Wanhill, S. (1999)The Center, University of Wisconsin- Extension. off-season is ‘no season’: the case of the Danish Gyimothy, S. (2000) The Quality of Visitor Experience: island of Bornholm. Tourism Economics 5(1), a Case Study in Peripheral Areas of Europe. 49–68. Research Centre of Bornholm, Report 17/2000, McCann, J., Leon-Guerrero, A. and Haley, J. (2001) Bornholm, Denmark. Strategic goals and practices of innovative Hankinson, A. (1989) Small hotels in Britain: family businesses. Journal of Small Business investment and survival. The Cornell HRA Management 39(1), 50–59. Quarterly 30(3), 80–82. McEeniff, J. (1992) Seasonality of tourism demand Hannan, M. and Freeman, J. (1977) The population in the European Community. Economist ecology of organizations. American Journal of Intelligence Unit, Travel and Tourism Analyst Sociology 82, 929–964. No. 3, 67–88. Hannan, M. and Freeman, J. (1984) Structural Miles, R. and Snow, C. (1978) Organizational inertia and organizational change. American Strategy, Structure, and Process. McGraw-Hill, Sociological Review 49(2), 149–164. New York.

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Mintzberg, H. and Waters, J. (1990) Tracking strategy Russell, B. (1996) Innovation in small Irish tourism in an entrepreneurial firm. Family Business businesses. In: Thomas, R. and Shacklock, R. Review 3(3), 285–315. (eds) Spring Symposium Proceedings of Morrison, A. (1996) Small firm cooperative marketing International Association of Hotel Manage- in a peripheral tourism region. International ment Schools. Leeds Metropolitan University, Journal of Contemporary Hospitality Manage- Leeds, UK, pp. 116–120. ment 10(5), 191–197. Saker, J. (1992) cited in Ram, N. Network in small Morrison, A. (1998a) Small firm statistics: a hotel firms. International Small Business Journal sector focus. The Service Industries Journal 12(3), 42–53. 18(1), 132–142. Santarelli, E. and Pesciarelli, E. (1990) The emergence Morrison, A. (ed.) (1998b) Entrepreneurship: an Inter- of a vision: the development of Schumpeter’s national Perspective. Butterworth-Heinemann, theory of entrepreneurship. History of Political Oxford, UK. Economy 22(4), 677–696. Morrison, A. (2000a) Entrepreneurship: what triggers Sharma, P., Chrisman, J. and Chua, J. (1996) it? International Journal of Entrepreneurial A Review and Annotated Bibliography of Behaviour and Research 6(2), 59–71. Family Business Studies. Kluwer, Boston, Morrison, A. (2000b) Initiating Entrepreneurship in Massachusetts. Enterprise and Small Business. In: Carter, S. Shaw, G. and Williams, A. (1987) Firm formation and Jones-Evans, D. (eds) Pearson Education, and operating characteristics in the Cornish London, pp. 97–114. tourist industry – the case of Looe. Tourism Nilsson, P., Petersen, T. and Wanhill, S. (2004) Public Management 8, 344–348. support for tourism SMEs in peripheral areas: the Shaw, G. and Williams, A. (1990) Tourism, economic Arjeplog project, Northern Sweden. The Service development, and the role of entrepreneurial Industries Journal (in press). activity. In: Cooper, C. (ed.) Progress in Tourism, Nonaka, I. (1994) A dynamic theory of organizational Recreation and Hospitality Management, Vol. 2. knowledge creation. Organization Science 5(1), Belhaven Press, London, pp. 67–81. 14–37. Shaw, G. and Williams, A. (eds) (1997) The Rise Peiser, R. and Wooten, L. (1983) Life cycle changes and Fall of British Coastal Resorts: Cultural and in small family businesses. Business Horizons Economic Perspectives. Pinter, London. 26(3), 58–65. Shaw, G. and Williams, A. (1998) Entrepreneurship, Peters, M. and Weirmair, K. (2001) Theoretical con- small business, culture and tourism develop- structs and empirical evidence of entrepreneurial ment. In: Ioannides, D. and Debbage, K. (eds) growth modes in the hospitality industry. Paper The Economic Geography of the Tourist presented at the conference Entrepreneurship Industry: a supply-side analysis. Routledge, on Tourism and the Contexts of Experience London, pp. 235–255. Economy, University of Lapland, Finland. Sherwood, A.-M., Parrott, N., Jenkins, T., Gillmor, D., Pizam, A. and Upchurch, R. (2002) The training Gaffey, S. and Cawley, M. (2000) Craft Pro- needs of small rural tourism operators in frontier ducers on the Celtic Fringe: Marginal Lifestyles regions. In: Krakover, S. and Gradus, Y. (eds) in Marginal Regions? paper presented at 15th Tourism in Frontier Areas. Lexington Books, International Society for the Study of Marginal Lanham, Maryland, pp. 117–140. Regions Seminar, Newfoundland, Canada. Poon, A. (1993) Tourism, Technology and Competi- Smyrnios, K., Romano, C. and Tanewski, G. (1997a) tive Strategies. CAB International, Wallingford, The Australian Family and Private Business UK. Survey. Monash University, Melbourne, Porter, M. (1980) Competitive Strategy. The Free Australia. Press, New York. Smyrnios, K., Romano, C. and Tanewski, G. (1997b) Porter, M. (1985) Competitive Advantage. The Free Distinguishing Factors of High- and Low-Growth Press, New York. family Firms. Working Paper Series, AXA Poza, E. (1988) Managerial practices that support Australia Family Business Research Unit, interpreneurship and continued growth. Family Monash University, Melbourne, Australia. Business Review 1(4), 339–359. Storey, D. (1994) Understanding the Small Business Ram, M. (1994) Unravelling social networks in ethnic Sector. Routledge, London. minority firms. International Small Business Sundgaard, E., Rosenburg, L. and Johns, N. (1998) A Journal 12(3), 42–53. typology of hotels as individual players: The case Rue, L. and Ibrahim, N. (1996) The status of planning of Bornholm, Denmark. International Journal of in smaller family owned businesses. Family Contemporary Hospitality Management 10(5), Business Review 9(1), 29–43. 180–183.

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Tagiuri, R. and Davis, J. (1992) On the goals of and Hospitality Firms, Annual Report 1996–97. successful family companies. Family Business Leeds: Centre for the Study of Small Tourism and Review 5(1), 263–281. Hospitality Firms, Leeds Metropolitan University, Taylor, S., Simpson, J. and Howie, H. (1998) Leeds, UK. Financing small businesses. In: Thomas, R. Twining-Ward, L. and Baum, T. (1998) Dilemmas (ed.) The Management of Small Tourism and facing mature island destinations: Cases from Hospitality Firms. Cassell, London, pp. 58–77. the Baltic. Progress in Tourism and Hospitality Thomas, R. (ed.) (1998a) The Management of Research 4, 131–140. Small Tourism and Hospitality Firms, Cassell, Upton, N., Teal, E. and Felan, J. (2001) Strategic and London. business planning practices of fast growth family Thomas, R. (1998b) An introduction to the firms. Journal of Small Business Management study of small tourism and hospitality firms. 39(1), 60–72. In: Thomas, R. (ed.) The Management of Small Wanhill, S. (1980) Tackling seasonality: a technical Tourism and Hospitality Firms. Cassell, London, note. Tourism Management 1(4), 243–245. pp. 1–17. Ward, J. (1987) Keeping the Family Business Thomas, R. (1998c) Small firms and the state. In: Healthy: How to Plan for Continuing Thomas, R. (ed.) The Management of Small Growth, Profitability, and Family Leadership. Tourism and Hospitality Firms. Cassell, London, Josey-Bass, San Francisco, California. pp. 78–98. Yacoumis, J. (1980) Tackling seasonality: the Thomas, R., Friel, M., Jameson, S. and Parsons, D. case of Sri Lanka. Tourism Management 1(2), (1997) The National Survey of Small Tourism 84–98.

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5 Balancing Family and Business through the Life Cycle

Introduction • The ‘Family Rules Group’ wanted children to be involved in the business at an early Numerous challenges and issues face the family age, and believed successors should be business, and finding the right balance between chosen from the family. family and business throughout the life cycle is • The ‘Family Out Group’ held opposite critical for success. This chapter examines key attitudes towards family involvement. challenges and issues together with strategies • The ‘Family-Business Jugglers’ did not and actions that are actually employed, or are have strong views but were seeking a bal- recommended by experts, to achieve a healthy ance between family and business issues. balance. It starts with a discussion of generic In part, this threefold typology reflects dif- challenges and issues for family business, ferent values and visions for the business. Some plus some that are specific to tourism and owners simply do not want, or feel it important, hospitality. Different stages of the life cycle to involve children. For many others it is irrele- are addressed, including the sole proprietor, vant because there are no available children. copreneurial arrangements, the young business However it must also be asked if those owners family with children, and family working who do not formally involve any other family together. There are special sections on the members in ownership or management can still family and the environment, and gender remain free of family influences on the business. issues. Some research findings are presented to Carlock and Ward (2001) specifically dis- demonstrate real concerns from respondents in cussed the generic problems of balancing family Australia, Canada and Denmark. needs and wants with business requirements Later in this chapter attention is focused on and opportunities. They identified five pivotal issues relating to involvement of children in the variables requiring plans and policies: control, business, leading to a detailed look at inheritance careers, capital, conflict and culture. and succession planning. The concept of a family ‘legacy’ is discussed in this context. Control

In many family businesses a single founder/ Generic Challenges and Issues owner makes all the decisions, which is neat and simple. Add one person to the equation, A study of family businesses in the UK by Birley either a spouse or child, and complications set et al. (1999) found three distinct attitudinal in. How will families working and living together clusters related to the balancing of family and make decisions to control the business? One business: idea is the family council, discussed later.

©D. Getz et al. 2004. The Family Business in Tourism and Hospitality (D. Getz, J. Carlsen and A. Morrison) 95

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Careers thought of as ‘paternalism’, while Dean (1992) and Tsang (2002) talked about ‘autocracy’ as a Are both partners in the copreneurial firm common leadership style associated with the equal in their responsibilities and rewards? Do founder. The founding values tend to endure, children or other family members get involved but might eventually be challenged and replaced on a casual basis, or develop careers within by successors. Peiser and Wooten (1983) the business? Appointment, advancement and referred to this as the ‘life cycle crisis’ which is rewards should ideally be based on accomplish- precipitated when goals of the founding genera- ments, but in some families they tend to be tion and those of the second generation conflict. viewed as rights. Family values can be the foundation of Capital plans and actions, even if they are not articu- lated. In strategic planning, however, there is Although many families struggle to eke out a the opportunity to state the values, princi- living from their businesses, others prosper. ples and vision that drive the family and its Every family business has to face the trade-offs business. between reinvesting income in the business or ‘harvesting’ it for family use, and ultimately that of inheritance or selling the business. Will all Seasonality and other cycles family members benefit equally? Money issues This is an issue of particular importance to can easily lead to conflict. business families in the tourism and hospitality Conflict industry. As detailed in the preceding chapter, extreme cyclical demand poses a potentially Procedures are needed to identify potential fatal threat to the business and has profound sources of conflict and to deal with them. implications for the owners and their families. Because friction is a fact of family business life, Many families simply cope with the problem by there is no advantage in hiding conflicts nor in shutting down for part of the year or treating the putting off their resolution. business as part-time and/or secondary to other economic activities. Those that elect to combat Culture seasonality employ a variety of strategies that are more entrepreneurial and often innovative, A number of authors have observed the impor- including diversification of products and tance of family culture. For example, Carlock markets – even getting into the export market. and Ward (2001) described ‘collaborative’ To many families the off-peak periods of the families that work together, while ‘conflicted’ business year are welcomed, and even neces- families find it difficult to get along. Dyer (1988) sary, for maintaining their mental and physical identified four types of family business culture. well-being. McGibbon (2000), writing about a ‘Paternalistic’ families were hierarchical with resort community in Austria, observed that work power in the hands of leaders who are usually routines are less intense in the summer than in the founders. The laissez-faire culture is also the peak skiing season, for both genders. Moth- hierarchical, but while family members are ers enjoyed more time with their children, and given preferential treatment, employees are whole families could spend more time together. given scope to implement the family vision. In As noted by Twining-Ward and Twining-Ward ‘participative’ families, which are relatively rare (1996), destinations and residents might benefit according to Dyer, the family’s status is de- from low-demand seasons in several ways: emphasized in favour of group decision-making inclusive of employees. The fourth culture was • residents might need and welcome a termed ‘professional’ and denotes the turning period of rest; over of management to non-family profession- • environmental pressures are reduced, als. Dyer said that paternalistic owners often fail and recuperation is possible in damaged to prepare their successors for leadership. environments; The style of founders who keep all informa- • infrastructure can be repaired or improved; tion and make all important decisions can be and

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• traditional social and cultural activities can Family business owners, especially women be resumed. (see the gender section, following), have fre- Whole communities have to make the sea- quently complained to researchers of long hours, sonal adjustments. Those that become all-year minimal financial rewards, and disruptions to destinations gain in economic terms, but suffer family and community life. Stringer (1981), from the expansion of other problems. based on a study of B&B establishments, It might be a useful line of research to observed that the relationship between hosts compare all-season resort communities and and guests extended beyond remuneration and rural/peripheral areas with extreme seasonality included social elements. The ability to preserve on various economic and socio-cultural impact privacy is a major issue when the home environ- measures, with family issues clearly in focus. ment is offered to visitors (Stringer, 1981). Presumably many families in business are McGibbon (2000) found that women equally pressured by weekday–weekend running guest houses in St Anton, Austria, had fluctuations in demand. little free time and worked long hours in the peak winter tourism season, leading to sleep deprivation. They also suffered from a lack of Family business and home life private space, as guests failed to respect ‘private’ Numerous families operating tourism and hos- designations. pitality businesses share their home space with Kousis (1989) studied tourism development customers, and this impacts substantially on in rural Crete, revealing growth in family tourism their work and family life. As well, high-contact businesses by spouses, with children and parents services are provided by many family busi- helping out. Social activities of families were nesses, regardless of location. Consequently, affected, and parents helped newly-weds to host–guest relations have been identified as an set up businesses. Females ran most of these important issue in the tourism and hospitality family tourism businesses, with men working literature. elsewhere. Lynch and MacWhannell (2000) have The Western Australian research by Getz examined the relationships between ‘home and Carlsen (2000) documented areas of and commercialized hospitality’. They identified satisfaction and difficulty among rural family three types of home accommodation, namely: business owners. The positive features stemmed (i) within the family home and sharing public from working together as a couple or family, spaces (such as B&B establishments); (ii) the pride in the business, pleasing customers, owner lives on the premises but in separate and independence. Major perceived difficulties quarters (as in many hotels); and (iii) the owner included time pressures (e.g. lack of free time or provides self-catering rentals in accommodation time with partners), balancing family and work sometimes used as a second home. One could life, and the need to find space away from easily extend that typology to cover the customers. many owners who provide completely separate A study by Mendonsa (1983) of family accommodation units but are directly involved tourism businesses in Portugal concluded that in their operation and maintenance and running tourism businesses put considerable therefore contact guests regularly. strain on families, and especially on the women Several themes in the literature were who did most of the work. Mendonsa (1983: identified by Lynch and MacWhannell (2000), 235) found that ‘families have consciously including a feminist perspective on ‘women’s altered their patterns of behaviour in order to work’, female entrepreneurship, social relation- cope with and benefit from tourism.’ ships, and the home as ‘refuge’. Those authors (p. 111) suggested that researchers ‘. . . might wish to rethink traditional business strategy The family life cycle concepts when analysing and devising policies for small accommodation enterprises in order to Many of the balancing challenges and issues are reflect the importance of home and its influence specific to stages in the family life cycle, includ- on business strategies.’ ing the unique situation facing sole proprietors

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who might or might not involve family members they are gaining family-equivalent legal status or consider family implications. Although and many do have children. mentioned here, the crucial issue of involving For couples, the principle challenges are to potential heirs and the succession process is find ways to work together as partners, and this dealt with later in this chapter. might be the very attraction of establishing the business. It can be difficult to escape stereo- The sole proprietor typical gender roles in copreneurial businesses, particularly because the tourism and hospitality The sole proprietor might be a founder without industry is full of so-called ‘women’s work’. In the family, or an entrepreneur who keeps family Western Australian sample (Getz and Carlsen, and business as separate as possible. Never- 2000), a goal was for couples to be working theless, many do involve family members harmoniously together. Finding equal-value informally and others will eventually have to tasks for husbands and wives was also a major face the fact that their business and family consideration. affairs are overlapping. Hegarty and Ruddy (2002: 16) observed in Ireland that ‘Entrepre- The young business family neurs operating their enterprise single-handedly tend to rely on family support at a secondary When children are young the founder or couple support level through employment’. Some- running a business have special challenges. times, working for the owner was considered McGibbon (2000: 171) noted that ‘Running a to be a favour or an obligation. business at home is particularly stressful when children are young, which often coincides with Copreneurs when couples are building up their business.’ Unique problems facing the accommodation Numerous married couples operate businesses provider might include children being displaced together without the involvement of children. from bedrooms in order to accommodate Hegarty and Ruddy (2000: 16) found that 36% paying guests, an inability to keep guests of their Irish sample were spouses or couples and children physically apart, and exposure of working as partners, with one not being subser- children to unruly guest behaviour. In many vient to the other. Baines and Wheelock (1998) hospitality situations children will be exposed to reported that in half of their sample of micro- guests’ drinking and partying. businesses, both husbands and wives, were Marriages will be strained when women highly involved and that distinct gender roles have a disproportionate share of the burdens were observable. Women tended to provide of managing both family and business. Making formal administration, marketing and secretarial joint decisions about the balancing of work and services and men offered technical support. As family life is therefore a necessity. Sometimes evidenced from the literature cited, and the case working out relationships with the extended fam- studies contained in this book, gender roles can ily will become an issue, especially where more evolve naturally from roles performed before than one generation lives together. The presence the business, or can be a function of who starts of grandparents can, for example, provide the business and its nature. essential baby-sitting or cause additional stress. Couples might be in the pre-family stage, ‘empty-nesters’ engaging in a career switch to Family working together fulfil a life-long ambition, or older adults in the retirement or pre-retirement stage of life. A Massachusetts Mutual Life Assurance (1993) special case encountered by the authors is the found that in 81% of family businesses in homosexual couple running a business. These the USA some family member(s) worked on a arrangements are more widespread and numer- day-to-day basis, with spouses and sons most ous than might be thought, mainly because the often involved. Working with family members literature has ignored this phenomenon. Indeed, poses a number of challenges, typically related many researchers would not even consider to couples sharing the responsibilities and par- single-sex couples to be a family, yet increasingly ents working with children. As noted by Cromie

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et al. (2001), family members are simulta- occur. This imposes a serious obligation, neously members of a family system with however, because someone always has relationships based on affection and other to be on call for emergencies. Will guests family bonds, and a work system organized on know where to turn for help? the basis of ‘threat and exchange’. This can • Employees. Hands-on owners enjoy their cause role conflicts, and they cannot be ‘left craft, but frequently need relief that only behind at the office’. paid staff can provide. It is both a matter of Children growing up within a family busi- money (can we afford employees?) and ness environment might be exposed to guests trust. Family business owners trust other and the services provided by their parents at a family members the most. Small hotel very early age. Our case studies show that in owners in England were found to employ a some families it is considered normal and appro- minimum of paid staff from outside their priate that very young children have the run of immediate family, and as a result family the establishment, meet and even entertain members at most operations reported very guests, and do odd jobs suitable to their ages. If long working hours – at least 50 hours a the children are interested they might eventually week (Hankinson, 1989). receive remuneration for their contributions, but A common worry about family firms is that the parents we interviewed were very concerned family members not only receive preferential about the differences between casual (helping treatment, but that each family member can act out) and formal (paid) involvement. like a boss over staff. However, Cromie et al. (2001) surveyed family firms in the Scottish Highlands and Islands and found that, contrary Strategies for balancing family and business to the literature, roles were generally allocated clearly to family members and to staff, thereby A number of strategies or actions are suggested minimizing disagreements. in the literature and in our case studies for Dunn (1995) reported that many family balancing family and business life. business owners not only felt a strong sense of responsibility for their families but also for their employees and their families. This community- Boundaries minded spirit might be expected to be particu- For many families in tourism and hospitality larly important in rural or small-town areas businesses it is difficult (some feel it is where families are deeply rooted and everyone impossible) to separate work and family life. knows everyone. Yet boundaries might have to be established to sustain a healthy family–businesses balance. Time management The literature and case studies suggest some options: Certain times of the day, week and year have to be reserved for privacy and family affairs. There • Fences. The old adage that good fences will always be the temptation to keep working, make good neighbours probably also always to be on call, or never to delegate applies to hosts and guests. Physically responsibilities, yet private time has to be separating home from the visitors’ found. Employees hired to free up time might in environment will at least discourage over- fact become a burden if they require training familiarity and possibly result in a psycho- and supervision. Technology should be used to logical differentiation as well. If home is not save time, but learning how to use it is often a refuge from one’s guests, it will cease to very time consuming. be comfortable. • Locks on the door. B&B operators, and Attitude others who share their living space with paying guests, have to lock out their guests A business owner can be both professional and from private quarters. Signs have to be friendly and at the same time communicate to posted saying ‘private’, or intrusions will customers the need to preserve private time and

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personal space. This is a skill that presumably Carlsen et al. (2001) examined data from a can be learned, but is also a reflection of survey of Western Australian family businesses personality. from the perspective of sustainable tourism. The basic premise to be tested was that families and Formal mechanisms owner-operators would be inclined to protect the resource base upon which their (rural) Carlock and Ward (2001) describe the Family businesses were founded; some support was Enterprise Continuity Plan, and it has been found for that hypothesis. Researchers in Spain described in the strategic planning section. (Garcia-Ramon et al., 1995) concluded that Family meetings are suitable for small families, women in farm tourism businesses developed while formal Family Councils might be required new attitudes in support of preserving the for larger enterprises or where more than one physical and cultural landscape. On the other family branch is involved. Conflict–resolution hand, McKercher’s (1998) evaluation of nature measures might be needed, including the role tour operators in Australia, all of whom were of an external arbitrator. Family businesses owner-operators or family businesses, revealed with boards of directors might have this function a disturbing practice. Some of these small busi- built into the board’s responsibilities. In other nesses willingly accepted fines for disobeying words, directors will be trusted to help resolve park regulations on visitor numbers in order to family disputes. profit from higher volumes of customers. Formal Family Agreements are another Lynch (1996: 233) argued that ‘B&B tool. They establish principles, rules and establishments fit squarely into the concept procedures based on family consensus, and can of sustainable tourism.’ They preserve old thereby carry the weight of a constitution. Ideally buildings, may help improve the housing stock they are understood and adhered to by all family and have low environmental impact. Genuine members. Changes are made only after due host–guest interaction is facilitated, and they are deliberation and input from all the stakeholders. very flexible forms of accommodation. This logic A specific example is the rules governing family should extend to almost all small, family-owned employment, remuneration, advancement and accommodations. ownership. This is only likely to become Twining-Ward and Baum (1998) observed controversial when more than one child is high degrees of local ownership of tourism and involved, and could be an issue when many hospitality businesses on three Baltic Sea islands family members are potentially employable in and concluded that this was advantageous in the business. reducing leakages. They argued that local own- A code of conduct might be desirable, either ership also gives the islands more control over within or separate from the family agreement. cultural and environmental protection. While What are the expectations for behaviour, both not specifically addressed by those authors, it is among family members and between the family clear that local ownership and control stems from and customers or other stakeholders? The code owner-operator and family businesses. is a good tool for fostering a positive working Herreman and Welsh (1999) prepared a environment, a strong customer orientation, and case study of a family-operated ecotourism busi- avoiding many potential conflicts. ness in which the founders’ values and goals led to a high degree of environmental sustainability. Family business and the environment The family in question has ties to the area in Alberta, Canada extending back five genera- Another balancing act occurs between the tions. Other evidence concerning the impor- family business and the environment. This issue tance of personal or family values has been of environmental responsibility could also be provided by Ateljevic and Doorne (2000) based considered under the heading of family culture, on research in New Zealand. They concluded or strategic planning: do family businesses that some entrepreneurs, whom they call ‘life- make better stewards of natural resources and style entrepreneurs’, consciously limit the scale the environment because they are owned and and scope of their businesses in order to balance operated by families? economic performance and sustainability in

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sociocultural and environmental terms. In partic- family-owned business (such as retail or taxi ular, they want to be close to nature (e.g. cave services). For these business-women, the distinc- rafting) and involved in community life. To sur- tions between public and private space, employ- vive requires capturing a viable niche market, ment and housework, work and leisure were and re-conceptualization of ‘success’ to encom- unclear. The Baurenhof figures prominently in pass non-economic measures. The researchers this environment, being the large combined also observed that while innovators were home and commercial accommodation that lifestyle-oriented, later imitators were more supports the extended family and is intended to focused on profit maximization. be passed down through the generations. Values underlying this system are deeply rooted in the Tyrolean culture. In addition to Gender Challenges and Issues the long hours of hard work and interference with motherhood and family duties, the female Several books and a special issue of the journal accommodation-operators of St Anton some- Annals of Tourism Research have been devoted times faced a more serious problem. According to ‘gender issues’ in tourism. Major themes to McGibbon (2000), husbands tend to ignore include the predominance of females in certain the daily operation of the hotels and pensions, occupations and enterprises, motives of women but do insist on controlling the finances and establishing a business, costs and benefits, holding ownership. Many women who operate impacts on the family, barriers to female these businesses are legally considered to be entrepreneurship and a feminist perspective on employees. Over time, however, young people power, exploitation and development. in St Anton are deciding not to take over Many researchers have noted the pre- such businesses but to pursue education or ponderance of women operating small tourism employment elsewhere. and hospitality businesses, typically accommo- Jennings and Stehlik (1999) interviewed dation, and the evidence comes from many women involved in farm tourism in Queensland, countries and regions (e.g. Walton, 1978; Australia, and determined they all wanted to Stringer, 1981; Whatmore, 1991; Cukier et al., earn extra income for families under financial 1996; Lynch, 1996). For example, Armstrong stress. As well, some enjoyed the work and (1978) determined that the B&B accommoda- especially the resultant socializing, while others tion sector in the Scottish Highlands was reported feeling more worthwhile. A number of primarily associated with women because of problems or challenges were also generated. the supposed domestic nature of the service. These often stemmed from the increased work- Armstrong also noted that these women had load, including interference with farm work and difficulty being heard in the public domain family time. They also reported a loss of privacy and so had to establish their own voluntary and the intrusion of other priorities into their organization in order to lobby. lifestyle. Female entrepreneurs were not always Danes (1998) concluded that farm tourism, supported by their partners, giving rise to poten- as well as off-farm work, can be motivated by tial stress or conflict. As well, some of them women’s desire for increased status. Quinn et al. needed information or training with regard to (1992), studying female entrepreneurs in their new business ventures. hospitality in Northern Ireland, determined Researchers have written about female that self-employment offered a better choice entrepreneurs in farm-based tourism in Spain for wives and mothers, perhaps related to (Garcia-Ramon et al., 1995; Caballe, 1999; frustration with a previous job, but for many the Velasco, 1999). The studies revealed that all business was a realization of a lifelong ambition. such businesses were initiated and operated by A detailed study of family-operated hotels women who tended to be married, with children and pensions in St Anton, Austria by McGibbon at home. Some were residents trying to supple- (2000) found most to be run by women, while ment farm incomes and some were in-migrants the men of the household sought employment from cities who prefer to live in the country and outside the home in tourism (e.g. ski instructors have taken up farm-tourism as their primary or mountain guides), other sectors, or even other source of income. Many Spanish women in

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these entrepreneurial positions had limited job the establishments, and males and females opportunities and often poor accessibility, so tended to hold other jobs. they preferred working at home where flexibility Breathnach et al. (1994) sampled female was permitted. B&B operators in Ireland whose greatest dislikes Several family-related issues were were long hours and being tied down by the job. observed, including potential opposition to the Meeting people was a benefit, and the work business, the need to consult with husbands suited their lifestyle. Leontidou (1994) examined on all economic decisions, and the delegation the impacts of seasonality on Greek women of certain tasks to other family members. in business, many of whom had to dismantle Husbands, mothers and children contributed in their homes seasonally in order to let them out to various ways, although it was the women who tourists. Dernoi’s (1991) study of farm tourism in started and took responsibility for the tourism Austria revealed that 81% of the women invol- enterprise. Perception of increased economic ved in tourism also had to participate in farm independence and self esteem were recorded. work, and almost all of them had housework. Caballe (1999) concluded that gender roles were Walker et al. (2001) determined that modified and that women can take on new eco- trekking in Nepal resulted in numerous nomic and social roles through involvement in lodges and teashops being created, with women farm-tourism. managing a majority and owning some of them, Velasco’s research on ten women entrepre- but females do not have control over family neurs in Andalusia, Spain (1999), found that income, so they are limited in starting a business farm-tourism businesses were initiated to earn independently. Out-migration of males had extra money and to refurbish the home. The created a niche for women to fill, plus capital sample were all married or in relationships, with could sometimes be obtained from men who children. Most (six out of ten) did not participate had migrated for their families to start the in farm activities, and their characteristics and business. One consequence is that women’s behaviour were thought to be unorthodox in status has improved in both the family and the cultural terms. Rural tourism took place mostly community. Another benefit is that women were on the weekends, and seasonality also greatly freed from farm work and felt an increase in free affected their lives. Despite hard work, and time, especially in low demand periods. resentment at being tied to the farmhouse while Much of the gender-specific research has other family members enjoyed leisure time, res- focused on small-scale accommodation estab- pondents were usually quite positive about their lishments where women are the predominant work and displayed a high level of satisfaction. entrepreneurs. In these businesses sometimes Long and Kindon (1997) assessed Balinese only the females of families participate, because village tourism and found that all but one of the in many cultures hospitality is perceived to be an 25 homestay establishments they surveyed were extension of housework (i.e. so-called ‘women’s owned by resident couples. Half were staffed by work’). There is ample evidence to conclude that family members alone, seven by hired labour, these female entrepreneurs have different issues and three by a combination, but women in the to face, but on the matter of motives and goals it household did the hospitality work even though is not clear that they differ from males. On this males and females co-managed the businesses. point, the Western Australia (Getz and Carlsen, Males were mostly employed elsewhere. Gener- 2000) survey found no significant differences ally, tourism did not alter existing gender-related between males and females in their motives social and family patterns. for start-up, growth and ultimate disposition of Scott (1996) studied a number of family the business. However, that research included accommodation businesses in northern Cyprus, mostly copreneurial couples, so it is possible that a culture in which there was no tradition women working alone to establish or operate a of female entrepreneurship. She found that business will have different goals. the accommodation places families operated While it is helpful to look at female-specific were separate from their personal homes, and issues, especially in the context of fostering that pluriactivity (multiple employment) was entrepreneurship and potential benefits for common. Only a few women actively managed development in general, family business studies

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are more about family relationships. Conse- business. A total of 62 were listed, from which quently, more research has to be devoted to several groupings seem to be important. The couples as business partners, and to issues facing largest (14 mentions) was related to the enjoy- sons and daughters within family businesses. ment of working together or allowing time to enjoy the family. Eleven pertained to having children growing up working in the business. Research Evidence from Western Sharing the financial reward with family was Australia mentioned by eight respondents, as was having work that suited one’s lifestyle. Another seven specified the ability to shape children’s education. Results of this research by Getz and Carlsen (2000) shed light on a number of family-related issues. The methodology and other results have been presented elsewhere in this book. Satisfaction and problems

A great deal of insight into the nature of the Family-related goals business can be gained by examining what aspects of the business generated the greatest satisfaction or difficulties. Responses on satisfac- Respondents were asked, ‘How important were tion can be grouped into three main themes: the following family-related goals for you?, working as a family (time spent working using a five-point scale from not at all important together and team work); pride in the business to very important. The most important family (of ownership, developing the business and goal was the sharing of key decisions, which satisfying customers); and independence, or 82% of respondents (the majority of whom are making one’s own decisions. co-owning spouses) indicated was somewhat Expressed difficulties of family businesses important or very important (mean = 4.34). can also be grouped into several themes. The This relates closely to the goal of preventing most important are time-related: the number of disharmony among family members (73% rated hours worked; lack of free time, and time lost it as somewhat or highly important; mean = with partners. Related to this problem is the 3.86). Earning enough money to support the difficulty in balancing work and family life, and family was rated fairly highly, as 68% rated it the need to find space away from customers. as somewhat or very important (3.86). Another theme is that of internal family conflicts, Least important was ‘elevating our family specifically over goals and agreement on solving position in society’ (mean = 1.18), although a problems, plus the issue of finding equal worth small percentage did find it important. Creating within the family business or within the family in employment for family members and training general. Specific business problems were also a children for future ownership of the business theme, including doing the administrative and were also of minor importance overall. The financial tasks, marketing and promotion, and largest neutral or uncertain response was for the providing good service at all times. goal ‘ensure the family has lots of free time together’. It was somewhat or very important to only half the respondents, so either a lot of respondents were uncertain whether they were Nature of the business going to be able to have a lot of free time together, or it was not a major concern. To some Two important elements relating to the nature extent time spent working together might obvi- of tourism businesses were examined. Season- ate the need or desire for families to spend leisure ality of demand is a typical rural tourism time together, and a complete break from the problem, and in this sample 61% agreed or family unit might be more appropriate for some strongly agreed that their business was highly of the respondents. seasonal. Another 17% were uncertain, which Respondents were also asked to include possibly reflects the newness of many of these other important family-related goals for the businesses. The main problems presented by

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seasonality relate to cash flow and overall Inheritance is not necessarily a good or bad profitability, but it does offer families a lull thing. It might be expected in some cultures that during which pursuit of family and lifestyle land and business assets are to be passed on to goals can dominate. the next generation, while in others the emphasis Close contact with customers is central to will be placed on enabling children to pursue small hospitality and tour companies, and is their own interests. Inheritance can enable almost inescapable in B&B operations. Some- families to build a strong company over time, but times this causes trouble for owners, resulting in also might result in stagnation if no changes are stress and a desire to separate themselves from made, or in intra-family conflict regarding own- their guests, whilst others crave meeting new ership and wealth. The low level of succession people and engaging them in conversation. Of within family businesses is important for a this sample, 37.5% disagreed or strongly dis- number of reasons. First, it is uncertain if this agreed that ‘In this business customers cannot fact reflects a failure on the part of owners, or is be separated from personal life’ (mean = 2.97), not important to parents or children, or even that while 36% agreed or strongly agreed. This mixed parents do not want children involved. If it is a result could indicate real differences in business failure, reasons must be identified and strategies or merely of perception. It can be interpreted put in place by the owners to combat barriers. better by looking at responses to the statement ‘I come into daily contact with customers’, to which fully 80% agreed or strongly agreed The legacy (mean = 3.92). ‘Legacy’ means that which is bequeathed in a will, typically real property or money, but it can Involving the Next Generation and also refer to something more intangible, such as Succession a ‘family legacy’ of values, or of knowledge and contacts that can assist subsequent generations It seems ironic that the core of family business in running the business. Many people focus on literature concerns the succession issue the legacy of land, and those with close ties to (Sharma et al., 1996) when, in fact, so few the land – such as farmers – often have a strong businesses are inherited (Ward, 1987; West- desire to ensure it is inherited. head and Cowling, 1998). Beckhard and Dyer The number of family businesses that (1983) said that 90% of all businesses in the get inherited is most likely on the decline in USA are family businesses, and research shows developed nations. For example, evidence from only 30% survive past the first generation. In Ireland (Hegarty and Ruddy, 2002) suggests that Sweden, only 15% of businesses are expected family take-overs are rare, with rural tourism and to be inherited, while in Germany the figure is hospitality businesses started by women who 37% (Bjuggren and Sund, 2001). For the UK, marry and then migrate, or owners following Handler (1994) and Stoy Hayward Consulting lifestyle and locational preferences. Another (1999) claimed that only 24% of family busi- likely reason is that young people in many nesses transfer to the second generation and countries are better educated than ever before, 14% reach the third. and have more choices available to them. Also, What are the reasons for this low level of most family businesses are not started out of inheritance? There is a large body of literature necessity, but out of choice. People are less tied on the succession process, and generic barriers to the land or their home community than ever to inheritance have been identified. However, before, and mobility for education, work and it is probable that barriers vary in nature or pleasure continues to increase. importance by industry, type of business and the Yet in certain families, the idea of building business environment. In tourism and hospitality a ‘legacy’ or of continuing the family business a number of unique business opportunities exist tradition remains strong. Why is that? Carlock and peculiar environmental forces make it both and Ward (2001: 19) reported on a survey attractive to family businesses yet difficult for of 75 family-business owners and spouses success and inheritance. who were specifically working to ensure family

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perpetuation of their businesses. These people Barriers to Inheritance believed that ownership benefits the family, and might keep it together. Their children could A number of generic barriers to inheritance are enjoy the same opportunity for wealth, freedom discussed in this section, with industry-specific and growth that they experienced. Inheritance research evidence following. would also perpetuate the family’s tradition and business heritage. The business owners’ pride appears to Absence of heirs be important, although pride is not something everyone will admit to. Assuming the business Inheritance presupposes potential heirs within is a success and wealth has been created, the the family, but sometimes they do not exist or owners can certainly be forgiven for feeling that cannot be considered. In cases where there are this accomplishment should not be lost or squan- no children owners can look for heirs in their dered away. This might explain some aspect of wider family, but many will simply not even the desire for children to take over the business, consider the possibility of succession. and might lead to problems when the parents What has not been addressed in the litera- expect more than the children wish to give. Obli- ture is the question of whether or not certain gation might motivate some children to assume types of business or business environments the family business. It can be a negative thing, as facilitate a greater or lesser degree of family where parents drill their children to feel obli- involvement and potential inheritance. gated, or a positive thing arising from a belief that other family members are dependent on them. A related concept, or ideal, is that of ‘stew- Life-stage factors ardship’. Carlock and Ward (2001: 145) des- cribed this philosophy as the values and vision The absence of viable heirs might relate to that each generation should pass on the business life-stage factors. Demographics play a part in in a healthier and more valuable condition. Thus, determining the probability and nature of inher- owners become stewards who think about all itance or joining a family firm. Davis (1968) subsequent generations. For example, the family considered life-stage and succession, noting council would explicitly consider the impact of that sons aged between 17 and 25 preferred to decisions not only on short-term business perfor- break away from family businesses in order mance but on the assets (tangible and intangible) to create their own identity. Davis and Tagiuri available for all future generations. This is akin to (1989) suggested that children in their 20s strive the goal of ensuring ‘inter-generational equity’ for independence and success in the profes- that underlies ‘sustainable development’, and it sional world, while fathers in their 40s may be encourages very long-term thinking. confronting mid-life anxieties and doubts about In Christian doctrine, individuals are their achievements, leading to intergenerational encouraged to be ‘good stewards’ of the earth. In conflicts. the case of farmland and other rural holdings, Through examination of student intentions, children might very well grow up with a strong Birley (1986) found that older students had a attachment to the land, or to nature in general. higher interest in joining their family firm. Firm This can motivate them in later life to protect and size did not affect intentions, nor did gender or sustain the resources. The notion that family birth order. Cory (1990) believed that offspring businesses might be more environmentally made up their minds about joining the family conscious is explored elsewhere. business by the time they reached teenage years. Is the desire for creating or perpetuating a Ward (1987) identified the ideal transition family legacy based on race, ethnicity or culture? period for a family firm, namely the time when Will it become increasingly rare in a globalized parents are in their 50s and children are 27–33 economy? Can it be fostered through education years of age. However, it is quite possible that the or indoctrination by parents? These questions children have already made major commitments have not been adequately addressed by by the time they turn 27, thereby precluding researchers. (re)involvement in the parents’ business.

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Many businesses are created by older entre- Founders’ reluctance to let go or to preneurs, perhaps as a second career or even plan for succession with retirement in mind. In these cases there might never be an opportunity for children to get Davis and Harveston (1998) conducted a involved, or the potential heirs might already be large-scale study of succession planning committed to other careers and locations. processes among family businesses, especially the influence of the family on the process across generations. Some potential barriers to The dream dies succession were identified, including: • Conflicts arise when family and business Lansberg (1999) highlighted the importance of roles have not been clearly defined. a ‘shared dream’ in shaping succession within • Generational envy. family businesses. This dream is a ‘. . . collective • Family politics spill over into business, vision of the future that inspires family members resulting in conflicts that impede sound to engage in the hard work of planning and business decisions. to do whatever is necessary to maintain their collaboration and achieve their goals’ (p. 75). They suggested that owners wanting a While the ‘dream’ is clearly a powerful force in smooth succession should employ more close leading to inheritance, it is not a given constant family members in positions of responsibility, as in all family businesses. they become the main voice of the family. The Attention has also been paid to the ‘next corollary might be that owners operating the generation’s perspective’, such as A. Patrick’s business without family involvement at a high (unpublished, The Fielding Institute, 1985) study level will find it more difficult to pass on the of children’s satisfaction and working relation- enterprise. ships with their owner-fathers. Blotnick (1984) In a major review of the literature on concluded that there is high resistance on the succession, Handler (1994) examined different part of children to being in the parent’s business. research approaches and theoretical perspec- Handler (1994: 141) argued that ‘positive suc- tives on the succession process and concluded: cession experiences’ for children flow from ful- ‘The ongoing health of the firm, quality of life, filment of three needs (career interests, psycho- and family dynamics are critical to the success logical needs and life-stage needs) and from of the succession process.’ (p. 134). The role relational influences (between generations and of the founder, and underlying psychological siblings, commitment to family business perpetu- factors, is also critical to the process. Founders ation, and separation strains owing to family might be reluctant to let go of power or involvement). to prepare potential successors and heirs An international survey of university adequately (Lansberg, 1999). students by Stavrou and Winslow (1996) dis- Handler and Kram (1988) presented a covered that they had a low degree of willingness model of resistance to succession in family to participate in their family firms, and most businesses, juxtaposing ‘factors promoting wanted to start their own. Males were more will- resistance’ with ‘factors reducing resistance’. At ing to consider the option of joining the family its core is ‘succession planning’, and pertinent business than were females. Stavrou (1999) later resistance factors were categorized as following: surveyed 153 college students in the USA con- • individual level (owners and children); cerning voluntary intentions of joining the family • interpersonal group level (trust, communi- firm. The majority had no intention to join cation, power); (except among Asian respondents), and the • organizational level (culture, stability, main reasons were as follows: preference for structures); and other opportunities; desire to create their own • environmental level (influences on the business; need to discover their interests or business). prove their capabilities; pursue education; and develop their own identity. It is noteworthy that Heirs ‘actively and capably involved in these reasons are based on preferences. the business’, and ‘one child as potential

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heir’ were identified as factors reducing potential heirs perceive the business as lacking resistance. potential to support successors. Bjuggren and Sund (2001) argued that both taxes and legal matters were barriers to inheritance in Swedish firms. Negative perceptions of the business or the work environment

Alcorn (1982) said that negative impressions of Research Findings from Australia, the business while growing up discouraged Canada and Denmark many children from joining a family business. Negativity might stem from observations of The research methods and profiles of these parents’ working hours and conditions, or the three samples of family businesses have already absence of money. There is also debate in the been described. In this section the data pertain- literature about the influence of entrepreneurs ing to involvement of children and succession on their childrens’ values and goals: do such plans are examined. parents provide good role models or does the experience of working in a family business turn children off the prospect of taking over? Western Australia Birley (2002) concluded from research on potential heirs that the top reason for not joining the family firm was a lack of interest in that Almost half (46.5%) of the respondents were particular business, followed by perceptions that uncertain about the ultimate disposition of their the business would not allow the children to use family business. One-fifth had no plans to keep their talents or training. it within the family, while one-quarter planned to will it to children or family members upon their death. A small portion (1%) had already involved children in ownership of the business, Gender and culture while another 7% planned to do so by means other than a will. In total, only 33% were Gender is sometimes an impediment, with planning to involve, or had already involved, daughters being treated prejudicially (Dumas, children or other family members in ownership. 1992; C. Iannarelli, unpublished, University Children worked in only 23% of these of Pittsburg, 1992). Some researchers have businesses. concluded that first-born children, particularly males, are more likely to join and inherit a family business (Goldberg and Wooldridge, Canmore and Bornholm 1993). Daughters in many cultures apparently are less likely to get involved or be assigned important duties in family businesses. Family-related goals are shown in Table 5.1. Training children for future ownership of the business was considered to be important (combining the number who indicated four and The business is not viable five on the five-point importance scale) to only about 21% of the Danish respondents and 15% Involvement and inheritance by other family of the Canadians. Providing jobs for family members might be precluded by the business members was also more important in Denmark, itself. Many small and micro businesses are with about 37% rating it highly compared to likely to suffer from low turnover and profits, or 15% in Canmore. On the inheritance question, periodic cash-flow problems. This barrier could just over 21% of those in Bornholm and 17% of be absolute, as in the case where a great debt the Canmore respondents thought it important load or tax burden makes inheritance of a going to ‘pass on the family business to children/ concern impossible, or a matter of degree – family’.

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Extent of family involvement (Table 5.2) the most likely to create a viable inheritance scenario. In both resort areas the businesses were very small, with mostly just the owner(s) being employed. In Bornholm less than half had non-family, full-time, paid employees; only 11 Problems regarding inheritance, and involved children, and seven others involved succession plans (Table 5.3) other family members beside spouses. Compa- nies (as opposed to other ownership forms) Among the Danish respondents taxes were and non-accommodation businesses had thought to be a serious problem by 50% of more paid, full-time, non-family employees. In those answering a question about barriers to Canmore, less than half had employees, only inheritance (there were 18–20 respondents). 12 involved children and five involved other About one-quarter of the respondents thought it family members beyond a spouse. Those serious that the children either did not want to Canmore businesses owned by companies live there or did not want to own the business. have more employees, and these are primarily There was also a suggestion that the business hotels, restaurants, and to a lesser extent tour could not support children financially, as 42% companies. None of the B&B establishments determined it was ‘somewhat of a problem’. In had non-family, full-time paid employees. Canmore the highest-ranked item was taxes, Only a very small number of respondents which attracted 48% of the respondents in the indicated that keeping the family together or ‘somewhat of a problem’ category. preserving family property was an important start-up goal. Those that planned for growth, Disposition plans (Table 5.4) or were best able to deliver it, were clearly in the minority. However, because of their desire Disposition plans were explicitly examined for to grow the business they might very well be all respondents. Most were uncertain about the

Table 5.1. Family-related goals, Bornholm and Canmore.

Bornholm Canmore (% rating the goal (% rating the goal important) important) Goals (n = 28–31) (n = 46–49)

Prevent disharmony among family members 73.3% 81.3% Share all key decisions with the spouse or family 74.2% 71.4% Train the children for future ownership of the business 20.7% 15.2% Provide family members with jobs 36.7a 14.9a Share the work equally with my spouse 46.7% 37.2% Pass on the family business to children/family 21.4% 17.0% Earn enough to support the family 67.7% 75.0% Elevate our family position in society 16.7% 12.5% Ensure the family has lots of free time together 27.6a 75.5a

aSignificant differences between the samples.

Table 5.2. Family involvement, Bornholm and Canmore.

Bornholm Canmore Extent of family involvement (n = 84) (n = 99)

No other family members work in the business besides me 30 (35.7%) 25 (25.3%) A husband and wife work together in the business 41 (48.8)% 64 (64.6)% One or more of the owners’ children work in the business 7 (8.3) % 5 (5.1) % Other family members beside spouse or children work in the business 7 (8.3) % 5 (5.1) %

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Table 5.3. Problems regarding inheritance. Q: If you wanted your children to inherit your business, would any of these factors be a problem? (multiple answers permitted).

Bornholm Canmore (n = 18–20; valid percentages) (n = 26–27; valid percentages)

Problems 1 2 3 1 2 3

Taxes 4.00 10.0 50.0 37.0 48.1 14.8 Children do not want to live here 63.2 10.5 26.3 61.5 26.9 11.5 Children do not want to own the business 66.7 11.1 22.2 56.0 32.0 12.0 Children do not have the necessary skills 78.9 15.8 5.3 58.3 33.3 8.3 It is not able to support them financially 57.9 42.1 – 69.2 19.2 11.5 There is too much debt 78.9 21.1 – 66.7 25.9 7.4

1 = Not serious 2 = Somewhat serious 3 = Serious

Table 5.4. Disposition plans (multiple responses).

Bornholm Canmore Disposition plans (n = 84) (n = 99)

Part ownership of the business has already been transferred/sold to 2a 0a one or more children or family members Ownership will be transferred/sold in the future to one or more children 8a 0a The business will be sold, but not to children/family 22a 31a Ownership is to be willed to children/family 5a 4a Uncertain 50a 62a

aSignificant difference.

future of their business, but it can be concluded Bornholm than in Canmore. Most of the owners that this uncertain group (50 of 84 in Bornholm did not have children in the business or living and 62 of 99 in Canmore) do not include many with them. The fact that many respondents were viable inheritance scenarios. In fact, the biggest older and in second careers suggests that life- response category was that the business will stage is a real barrier in this industry. Specifically, be sold, but not to children or family. The one many get into the tourism and hospitality busi- significant difference in this comparison was ness too late to involve their children. The small that eight respondents in Bornholm definitely size of many of the businesses is also a real planned a sale or transference of ownership impediment. to family or children, compared to none in Canmore. In addition, there were five in Born- holm and four in Canmore who were planning Evidence from interviews to will the business to children or family. By totalling the three responses related to A separate but overlapping sample of 33 inheritance it can be seen that it was occurring or owners was interviewed in Bornholm. Some planned in 15 of 84 in Bornholm (18%) and only respondents completed both an interview and four of 99 in Canmore (4%). Both proportions a questionnaire. Selected quotations from the are minor, but the higher rate of inheritance in interviews illustrate a number of key points on Bornholm can probably be attributed to culture the involvement of children and barriers to and the longer history of tourism. inheritance, in response to a question on By way of summarizing the data, it is clear succession plans. that inheritance was a minor concern among the Three main scenarios emerged: inheritance two samples, although more of a prospect in is not possible; it is possible but not planned or

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desired; or it is desired and/or planned. In Our children are not interested in this business addition, a summary follows of the specific because of the long working hours in high barriers mentioned by respondents. The follow- season. ing quotations are translated and paraphrased (Hostel owners) from the Danish. During the summer only we have children working in the business. But they have their Scenario A: Inheritance is not possible own careers and will not take over from us. (Hotel owners) My wife and I run the business seasonally. I have to work at another job in the quiet Scenario C: Inheritance is possible, and season to make enough money. We like living desired or planned and working here and it is a good environment for our young daughter, but we think about Perhaps we will pass on the business to the moving because it is so difficult to make a daughter, who has some interest and is in the decent living. Our daughter has no interest area. in the business. I have other children from a (Owners, farm-based accommodation) previous marriage but they live in Copenhagen I have no children in the business, but my and abroad. son-in-law is my right hand and is running the (Producer and retailer of a craft product) daily business. The plan is that he is going to The farm is too small to generate a living for take over the business. the next generation. (Hotel and restaurant owner) (Owner, farm-based accommodation) The children are grown up now and work None of my children are working in my (elsewhere in Denmark). They do not want to business. They do not want to. They have high take over the operations of the business – but educations and jobs outside Bornholm. They maybe the ownership on basis of stocks in the do not want to go back to Bornholm either. company. (Hotel owner) (Owner of a recreation attraction) Our children do not live in Bornholm and have My son and daughter are working in the busi- their income elsewhere. ness today. They are interested in a takeover, (Campground owner) when I want to retire in some years. They know all about it, so they are fit for takeover. My father turned his father’s hobby (on the (Attraction owner) farm) into a business. I took over the tourism business and my brother the farm. Our own Scenario A consists of businesses that children have moved away and are not cannot viably be inherited (no heirs, too small, interested in the business. My wife and I no real or separable assets, too much debt) are definitely selling it and will retire. and those that must be sold (parents need the (Farm-based, seasonal tourist attraction) proceeds). In Bornholm, many of the owners had children who were gone and could not Scenario B: Inheritance is possible but not realistically be considered for taking over the desired or planned business. Bornholm, like many remote and rural areas, sees most of its children leave the island My wife and I are from Bornholm. We built this for education and jobs, and most do not want to business from the profits of our first restaurant. come back or cannot financially make it work. My wife runs it seasonally, and we both run this one the rest of the year. In my family it is A related barrier is linked to life-stages in that a tradition to be business men, and my father parents start or purchase the business later in and brother are also entrepreneurs in different life, perhaps with retirement in mind, and the firms. I wanted to create my own, not follow children are already long gone. In the case of in my father’s. We have no plan for our own farms, tourism businesses are usually created children to take over. for supplementary income and so are not (Owners of two restaurants, one seasonal) inheritable as separate entities. We are unlikely to still own the business when Scenario B consists of many businesses in our children grow up. which inheritance is at least possible, specifically (Owners of an accommodation business) because of the involvement or presence of

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children, but it is unlikely to occur. The nature of many instances, external advisers or interven- the business is a barrier, because of hard work, tion might be necessary to ensure that all parties seasonality and low levels of income. This results in the process engage in rational planning, rather in a negative perception of the business by than putting off the necessary decisions. But who children. Many micro businesses never have is to initiate such an intervention? the potential to support a growing family or sub- According to C. Iannarelli (unpublished, sequent generations as they are created in the University of Pittsburgh, 1992), there are a first place to supplement farm or other income number of factors critical to developing the sources. Yet some do foresee inheritance by interest of children in running the family firm: children, and determining what ultimately • makes this happen should be a research priority. spending time with the parents in the business; In scenario C, inheritance is desired and/or • planned. Even so, there is uncertainty about exposure to various aspects of the business; its feasibility. One interesting case reflected the • separation of ownership and owner-operation parental encouragement and positive attitudes; (children might want to assume ownership of a • profitable business, but do not want to operate making an individual contribution to the team; and it). In such cases many of the potential benefits of • family businesses for the community are lost. the time at which the opportunity to join the firm is presented.

Iannarelli also found that young girls are Planning for Involvement and Succession often treated differently from their brothers during this business socialization process, result- The topic of preparing for succession is one of ing in less time being spent in the business and the hallmarks of family-business literature, and lesser skill development. Parents wanting their so there is no shortage of advice on how owners daughters to get involved will therefore have to should handle it. What is evident in much of offer more encouragement to daughters, while this advice is that attention must first be paid daughters wanting to get involved might have to to the involvement of children or other family make a special effort to be taken seriously. members in the business so that they can be Ambrose (1983) and Astrachan (1993) are prepared for succession. among those authors who have advocated early Ward (1990) and Handler (1994) described involvement in the firm by heirs in order to succession as a process, rather than as an event, develop their interest and their likelihood of and Handler conceived this process in terms of joining the firm. transition theory. At each stage in the process, Lansberg (1988) identified the basic tasks in the actors (typically parents and their children; succession planning as follows: often fathers and sons) play roles that must evolve if the succession is to take place. The 1. Formulating and sharing a viable vision for founders and potential successors must engage succession. in mutual role adjustment whereby founders In many tourism/hospitality businesses the vision decrease their level of control while successors must take into account a separation of home/ increase their involvement to the eventual farm from the business. What exactly is to be point of taking over. In particular, there must be inherited, especially when one child is interested a transfer of leadership experience, authority, and another is not? In many cases the small size decision-making power and equity. or low profitability of the business will make The most basic and common reasons for a inheritance a non-starter. failure in the succession process relate to the 2. Selecting and training the successor(s) and inability of founders to give up control, and the the top management team. lack of willingness or ability of children to take How do children get involved and trained if they over. A variety of strategies can be employed go away for education? At what age is it wise to by founders to decrease deliberately their start children working in a service-oriented envi- involvement, notably taking on new ventures. In ronment? Can work and home be separated?

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3. Designing a process to transfer power. • Recognize that you (the owners and heirs) This could be done informally, between the are not alone. generations, but often will require impartial and • Have family meetings. expert advice. • Have a business plan, estate plan and 4. Developing an estate plan for asset and succession plan all together. ownership inheritance. • Establish an advisory board. External advice will undoubtedly be needed • Set a retirement date. regarding the legal and tax implications of trans- • Let go! fer. A special consideration is that of family Handler (1994) identified a number of ‘brands’ whereby the family name has value in research needs concerning the succession pro- itself. cess, including study of cultural or ethnic differ- 5. Designing structures to manage the changes, ences, the role of family dynamics and gender, such as a family council, task force or board of and resistance factors to succession effective- directors. ness. To this list must be added the industry and The majority of tourism and hospitality firms setting-specific factors discussed previously, as it will be too small to permit or require elaborate is clear that tourism and hospitality enterprises mechanisms or boards of directors, but it is present some special challenges. possible that those most suitable for inheritance will be large enough to warrant these methods. 6. Educating the family regarding the rights Estate planning and responsibilities that come with new roles in the business. Founders have the obligation to inform and All family businesses must consider the ultimate consult with children about all family and busi- disposition of their assets, and when inheritance ness matters, and especially about succession is contemplated, estate planning is required. A options. As discussed elsewhere, one major issue workable form of ownership has to be created facing families is the trade-off between reinvest- for the heir(s), with options ranging from one ment in the business and taking out funds for heir as total owner to distribution of shares immediate use. Regarding inheritance, there is among many family members. It might even sometimes a fear in the minds of parents that be desirable to transfer voting and non-voting their inheritors will pillage or sell the business to stock or to create a family trust. Gifting of assets realize a quick income boost. over a period of time, well in advance of the legal change on ownership, might save taxes. Additional relevant advice comes from One of the most serious issues facing Ward (1990) who recommended 15 key founders and all subsequent owners is creation guidelines to help with the transition process: of their personal retirement fund, separate from • Present a balanced perspective on business transferred assets. For example, how much are to children. the parents going to need to live independently • Present the business as an option, not an through retirement, and will there be enough obligation. earnings potential left in the business to support • Successors should get outside experience. the next generation? Many businesses in tourism • Successors should be hired into an existing and hospitality do not have the potential to job in the family business. support two generations at once, leaving the • Encourage the development of comple- owners with no option but to sell the firm as their mentary skills in the successor. retirement fund. • Teach successors the foundations of the business. • Start the successor with mentors. A framework for investigating • Designate an area of responsibility for the industry-specific barriers to inheritance successor. • Develop a rationale why all the effort is A number of generic and industry-specific worth it. barriers to inheritance have been identified, but

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research on other industries, settings and a family business if it is located in a resort or city. business types is bound to reveal more. In more general terms, different industries and How are they to be explored and evaluated? business types should be compared. Use of the A framework is provided in Table 5.5. suggested framework will permit systematic data The model developed by Shapero and collection on key points affecting succession and Sokol (1982) for examining entrepreneurial inheritance. events (i.e. firm creation) is useful here. Those authors hypothesized that both negative dis- placements (such as forced migration or job loss) Chapter Summary and pull factors led to new firm creation, but per- ceptions of desirability and feasibility intervened. The life cycle model provided the framework for This type of thought process is also likely to be assessing challenges associated with balancing crucial for the inheritance/succession process: family and business. A number of these chal- the situation of the potential heir must be consid- lenges are generic, and several industry-specific ered (such as age, gender, work experience), ones were presented – especially seasonality then perceptions of desirability (is it an attractive of demand and combining home-life with career option?) and – perhaps simultaneously – guests. Specific issues facing the sole proprietor, viability and perceptions of feasibility (can the copreneurs, young business families and older family business support me?). business families that involve children were A number of research needs are suggested then examined. by the research findings and the framework. One Strategies for managing or balancing family line of research would be to examine the experi- and business were detailed, including very ences, attitudes and plans of tourism and hospi- specific advice on how to separate guests from tality students towards that industry and family private spaces and private times, and formal businesses in particular. Studying how children mechanisms such as establishing family agree- are brought up in service-oriented businesses, ments, family councils and codes of conduct. especially where home and work are combined, The special case of gender issues has been dis- would be very revealing. Selecting a sample cussed in detail, along with the family and the of multi-generational businesses will enable environment. Research evidence from Australia, analysis of barriers and success factors. Why do Denmark and Canada was presented to illustrate some hotel businesses in Europe, for example, many of the challenges and strategies for coping. survive many generations in the same family? We then turned to the challenges of Is it due to culture, succession planning, or involving the next generation, and ultimately a favourable business environment? Different succession of the business. In this context the settings should be compared. idea of a family ‘legacy’ was addressed. A num- Tourism and hospitality businesses in ber of generic and industry-specific barriers to remote islands and small towns might differ inheritance were presented, ranging from the considerably from those in large cities or resorts. obvious (no heirs; the business cannot support It is possible that children are more likely to enter inheritance) to life-stage factors, such as couples

Table 5.5. A framework for examining industry-specific barriers to inheritance.

Situation of potential heir(s) Perceptions of desirability Perceptions of feasibility

• Being brought up in the • Desirability of the • Current and potential family business potential lifestyle earnings from the business • Work experience (within • Desirability of the • The legacy (real property; family brand) and outside the family firm) location/setting • Potential to grow or diversify the • Education specific to the • Desirability of the business industry nature of the work • The business environment • Ability to work in and/or • Desirability of the (competition, long-term viability) control the business business as a career • Practicality of inheritance (taxes, legal • Education and career goals problems)

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establishing businesses when children have Birley, S. (2002) Attitudes of owner-managers’ already moved away for their own careers and children towards family and business issues. families. Founders might be reluctant to let go of Entrepreneurship Theory and Practice 26(3), their business, but equally the children might 5–19. Birley, S., Ng, D. and Godfrey, A. (1999) The family simply not share the dream of autonomy and and the business. Long Range Planning 32(6), lifestyle through operating a family business. 598–608. Research findings confirmed a low rate of Bjuggren, P. and Sund, L. (2001) Strategic decision- succession planning and potential inheritance making in intergenerational successions of small- of the businesses examined in Australia, Canada and medium-sized family-owned businesses. and Denmark. Specifically drawing on the Family Business Review 14(1), 11–23. Bornholm, Denmark, sample, several scenarios Blotnick, S. (1984) The case of reluctant heirs. Forbes were developed: inheritance is not possible; it is July, 134, 180. possible but not desired or planned; it is possible Breathnach, P., Henry, M., Drea, S. and O’Flaherty, M. and desired or planned. The latter scenario is (1994) Gender in Irish tourism employment. In: Kinnaird, V. and Hall, D. (eds) Tourism: observed infrequently. a Gender Analysis. John Wiley & Sons, After discussing how owners can plan Chichester, UK, pp. 52–73. for involvement of their children and eventual Caballe, A. (1999) Farm tourism in Spain: a gender succession, this chapter concludes by presenting perspective. Geojournal 48(3), 245–252. a conceptual framework for investigating Carlock, R. and Ward, J. (2001) Strategic Planning for industry-specific barriers to inheritance. The the Family Business. Palgrave, Basingstoke, UK. three main factors to consider are: situation of Carlsen, J., Getz, D. and Ali-Knight, J. (2001) Environ- the potential heir(s); perceptions of desirability mental attitudes and practices of family busi- of inheriting or taking over the business, and nesses in the rural tourism and hospitality sectors. perceptions of the feasibility of inheriting or Journal of Sustainable Tourism 9(4), 281–297. Cory, J. (1990) Preparing your success: family taking over the business. ownership. Hardware Age July, 74. Cromie, S., Dunn, B., Sproull, A. and Chalmers, D. (2001) Small firms with a family focus in the References Scottish Highlands and Islands. Irish Journal of Management 22(2), 45–66. Alcorn, P. (1982) Success and Survival in the Family- Cukier, J., Norris, J. and Wall, G. (1996) The Owned Business. McGraw Hill, New York. involvement of women in the tourism industry of Ambrose, D. (1983) Transfer of the family-owned busi- Bali, Indonesia. The Journal of Development ness. Journal of Small Business Management Studies, 33(2): 248–270. 21(1), 49–56. Danes, S. (1998) Farm Family Business. University of Armstrong, K. (1978) Rural Scottish women: Politics Minnesota Extension Service, Minnesota. without power. Ethnos 43(1/2), 51–72. Davis, J. and Tagiuri, R. (1989) The influence of life- Astrachan, J. (1989) Family firm and community stage on father–son work relationships in family culture. Family Business Review 1(2) 165–189. companies. Family Business Review 2(1), 47–74. Astachan, J. (1993) Preparing the next generation Davis, P. and Harveston, P. (1998) The influence of for wealth: a conversation with Howard H. family on the family business succession process: Stevenson. Family Business Review 6, 75–83. a multi-generational perspective. Entrepreneur- Ateljevic. I. and Doorne, S. (2000) Staying within ship Theory and Practice 22(3), 31–53. the fence: lifestyle entrepreneurship in tourism. Davis, S. (1968) Entrepreneurial succession. Adminis- Journal of Sustainable Tourism 8(5), 378–392. trative Science Quarterly 13, 402–416. Baines, S. and Wheelock, J. (1998) Working for each Dean, S. (1992) Characteristics of African American other: gender, the household and micro-business family-owned businesses in Los Angeles. Family survival and growth. International Small Business Review 5(4), 373–395. Business Journal 17, 11–16. Dernoi, L. (1991a) About rural and farm tourism. Beckhard, R. and Dyer, W. (1983) Managing change Tourism Recreation Research 16(1), 3–6. in the family firm – issues and strategies. Sloan Dumas, C. (1992) Integrating the daughter into Management Review 24(3), 59–65. family business management. Entrepreneurship: Birley, S. (1986) Succession in the family firm: Theory and Practice June, 41–55. the inheritor’s view. Journal of Small Business Dunn, B. (1995) Success themes in Scottish family Management 24, 36–43. enterprises: philosophies and practices through

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the generations. Family Business Review 8(1), and breakfast enterprises. In: Thomas, R. (ed.) 17–28. Spring Symposium Proceedings of International Dyer, W. (1988) Culture and continuity in family firms. Association of Hotel Management Schools. Family Business Review 1(1), 37–50. Leeds Metropolitan University, Leeds, UK, Garcia-Ramon, D., Canoves, G. and Valdovinos, N. pp. 231–236. (1995) Farm tourism, gender and the environ- Lynch, P. and MacWhannell, D. (2000) Home ment in Spain. Annals of Tourism Research and commercialized hospitality. In: Lashley, C. 22(2), 267–282. and Morrison, A. (eds) In Search of Hospitality: Getz, D. and Carlsen, J. (2000) Characteristics and Theoretical Perspectives and Debates. goals of family and owner-operated businesses in Butterworth-Heinemann, Oxford, UK, the rural tourism and hospitality sectors. Tourism pp. 100–117. Management 21, 547–560. Massachusetts Mutual Life Assurance (1993) Major Goldberg, S. and Wooldridge, B. (1993) Self- Findings of the Family Business Survey. confidence and managerial autonomy: successor Springfield, Massachusetts. characteristics critical to succession in family McGibbon, J. (2000) Family business: commercial firms. Family Business Journal July, 60–65. hospitality in the domestic realm. In: Robinson, Handler, W. (1994) Succession in family businesses: a M. et al. (eds) Reflections on International review of the research. Family Business Review Tourism: Expressions of Culture Identity and 7(2), 133–157. Meaning in Tourism. Business Education Handler, W. and Kram, K. (1988) Succession in family Publications, Sunderland, UK. firms: the problem of resistance. Family Business McKercher, B. (1998) The Business of Nature-based Review 1(4), 361–381. Tourism. Hospitality Press, Melbourne, Hankinson, A. (1989) Small hotels in Britain: Australia. investment and survival. The Cornell HRA Mendonsa, E. (1983) Tourism and income strategies in Quarterly 30(3), 80–82. Nazare, Portugal. Annals of Tourism Research Hegarty, C. and Ruddy, J. (2002) The role of family 10(2), 213–238. in entrepreneurial development in Irish rural Peiser, R. and Wooten, L. (1983) Life cycle changes tourism. Paper presented at the conference: in small family businesses. Business Horizons Re-Inventing the Destination. Dubrovnik, 26(3), 58–65. Croatia. Quinn, U., Larmour, R. and McQuillan, N. (1992) The Herremans, I. and Welsh, C. (1999) Developing and small firm in the hospitality industry. International implementing a company’s ecotourism mission Journal of Hospitality Management 1, 11–14. statement. Journal of Sustainable Tourism 7(1), Scott, J. (1996) Chances and choices: women and 48–76. tourism in Northern Cyprus. In: Sinclair, T. (ed.) Jennings, G. and Stehlik, D. (1999) The innovators are Gender, Work and Tourism. Routledge, London, women: the development of farm tourism in pp. 60–90. central Queensland, Australia. Proceedings of Shapero, A. and Sokol, L. (1982) The social the International Society of Travel and Tourism dimensions of entrepreneurship. In: Kent, C., Educators Annual Conference, Vancouver, Sexton, D. and Vesper, K. (eds) Encyclopedia Canada. of Entrepreneurship. Prentice-Hall, Englewood Kousis, M. (1989) Tourism and the family in a rural Cliffs, New Jersey, pp. 72–88. Cretan community. Annals of Tourism Research Sharma, P., Chrisman, J. and Chua, J. (1996) 16 (3), 318–332. A Review and Annotated Bibliography of Lansberg, I. (1999) Succeeding Generations: Realiz- Family Business Studies. Kluwer, Boston, ing the Dream of Families in Business. Harvard Massachusetts. Business School Press, Boston, Massachusetts. Stavrou, E. (1999) Succession in family businesses: Leontidou, L. (1994) Gender dimensions of tourism exploring the effects of demographic factors on in Greece: employment, subcultures and restruc- offspring intentions to join and take over the busi- turing. In: Kinnaird, V. and Hall, D. (eds) ness. Journal of Small Business Management Tourism: a Gender Analysis. John Wiley & 37(3), 43–61. Sons, Chichester, UK, pp. 74–105. Stavrou, E. and Winslow, E. (1996) Succession Long, V. and Kindon, S. (1997) Gender and tourism in entrepreneurial family business in the US, development in Balinese villages. In: Sinclair, T. Europe and Asia: a cross-cultural comparison (ed.) Gender, Work and Tourism. Routledge, on offspring intentions to join and take over London, pp. 91–119. the business. Proceedings of the International Lynch, P. (1996) Microenterprises and micro-firms Council for Small Businesses World Conference in the hospitality industry: the case of bed 1996, Vol. 1. ICSB, Stockholm, pp. 253–273.

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Stoy Hayward Consulting (1999) Staying the Course: redefining the boundaries of policy and Survival Characteristics of the Family Owned practice. In: Apostolopoulos, Y., Sonmez, S. Business. Vantage point, London. and Timothy, D. (eds) Women as Producers Stringer, P. (1981) Hosts and guests: the bed and and Consumers of Tourism in Developing breakfast phenomenon. Annals of Tourism Regions. Praeger, Westport, Connecticut, Research 8(3), 357–376. pp. 211–234. Tsang, E. (2002) Learning from overseas venturing Walton, J. (1978) The Blackpool Landlady – experience: the case of Chinese family busines- a Social History. Manchester University Press, ses. Journal of Business Venturing 17(1), 21–40. Manchester, UK. Twining-Ward, L. and Baum, T. (1998) Dilemmas Ward, J. (1987) Keeping the Family Business Healthy: facing mature island destinations: cases from How To Plan For Continuing Growth, Profitabil- the Baltic. Progress in Tourism and Hospitality ity, and Family Leadership. Josey-Bass, San Research 4, 131–140. Francisco, California. Twining-Ward, L. and Twining-Ward, T. (1996) Ward, J. (1990) The succession process: 15 guidelines. Tourist destination development: the case Small Business Forum 8, 57–62. of Bornholm and Gotland. Research Centre of Westhead, P. and Cowling, M. (1998) Family firm Bornholm, Report 7/1996, Bornholm, Denmark. research: the need for a methodological rethink. Velasco, M. (1999) Andalusian women and their Entrepreneurship Theory and Practice Autumn, participation in rural tourist trade. Geojournal 31–56. 48(3), 253–258. Whatmore, S. (1991) Farming Women: Gender, Walker, S., Valaoras, G., Gurung, D. and Godde, P. Work and Family Enterprise. MacMillan, (2001) Women and mountain tourism: Basingstoke, UK.

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6 Farm-based Family Businesses

Introduction a 2222 square-yard (1856 m2) indoor heated arena with 38 boarding stalls; two tack rooms, This chapter introduces three case studies of washrooms and shower, offices, rider’s lounge, farm-based family businesses in Canada and and bedrooms and kitchen for staff (on a sec- Australia. Alborak Stables Inc. is a family-first ond level). The Stables also offers an outdoor business with lifestyle motivations, located in sand ring, round pen, paddocks, pastures and the foothills of the Rocky Mountains of Alberta, trails over the 800-acre farm. As discussed later, Canada. Taunton Farm in the south-west of farm and Stables are legally separate entities. Western Australia is also a business that builds Alborak is situated in a fairly isolated on family farmlands, with the aim of keeping location along an unpaved private road leading ownership of the land as paramount. The final to the main Trans-Canada Highway. Its regular case of Old MacDonald’s is a campground on a clients are attracted from the city, surrounding family farm in Alberta, which was also started as rural areas, and Banff and Canmore to the west. a complement to rural living. In all three cases, The operation can be described as a rural and family farming is the common ground and the agricultural land use, but from the customer’s decision to start a family business in tourism perspective it is primarily recreational, entailing a was a pragmatic response to the needs of the high degree of direct customer service. There farm and the family. is potential for tourism development, but it remains uncertain if the Donnelly family will move in that direction. The farm consists largely of forest with some Case 6.1 Alborak Stables improved pasture. The traditional agricultural business of cattle grazing and horse breeding Background remains part of the family’s economic activity. Currently they run 50 cow–calf pairs, but Alborak Stables Inc. is a family-owned and the land does not have additional agricultural -operated business located 35 km west of the potential. Calgary, Canada city limits, in the foothills Sandra and Mary work full-time at the sta- of the Rocky Mountains. The Donnelly family bles, with Sandra being in charge of the horse- established this business to be devoted to the related operations and Mary handling most of ‘Olympic’ disciplines, or English horse riding the office responsibilities. She recently received (i.e. dressage, show jumping and eventing), permission to run a B&B establishment, which and they offer training, lessons, clinics, horse would be restricted to two bedrooms in the stabling and management, and commission sale family house. The demand comes from clients horses. The main facility, completed in 1998, is who would like occasionally to stay overnight. ©D. Getz et al. 2004. The Family Business in Tourism and Hospitality (D. Getz, J. Carlsen and A. Morrison) 117

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John works from the family home as a private and rider coaching for both recreation and sport, consultant, and provides financial advice to and horse management. It was not conceived as the Stables. Karen’s involvement has also been a tourism-related business, but the possibility of part-time and related to marketing the business. adding tourism attractions and services has been In addition to family, the stables have recognized all along. two full-time employees, one full-time working Start-up financing involved bank loans student, and two to four part-time working with the farmland as collateral, and the selling students, depending on the season. of some acres of logs for cash. For a variety of reasons, including financial risk, Alborak Stables was created as a separate, incorporated business that leases the land and facility from John Family dimensions and Mary Donnelly. If the worst-case scenario occurred in terms of the stables, land could be The Donnelly family consists of John and Mary, sold to pay off debt. who own the land and facilities, daughter However, for the parents the land, and now Sandra who is President of Alborak Stables Inc. the stables, is a family legacy that will some day (and leases the facility from her parents), and be inherited by their daughters. With this goal younger daughter Karen who lives and works in in mind, why not develop the business there? Calgary. The family has agricultural roots in Mary initiated the idea, knowing that Sandra was Alberta dating back to 1886, and the farmland looking to lease a stable to begin a business on has been in the extended family since the her own. 1940s. Mary Donnelly inherited it. The private Sandra had been doing teaching and access road, owned by a natural gas company, horse training in different locations, and she was built only in the 1970s, and the current had definite ideas about design and operations. family house was built in 1981. Living on the farm and near to her parents is a Horses have always been an interest nice bonus, but her main motivation was to start to family members and a focus of family up a successful business and live on a farm. activities. Their love of horses logically led John did not see a big role for himself in to the establishment of the Stables, but more running the business, although he anticipated it specifically it occurred because of Sandra’s would involve some of his time as business ambition to run her own operation and her adviser and general handyman. parents’ desire to see that happen. Karen was more oriented toward com- The decision to proceed was made inter- pleting her graduate degree in planning and nally and by consensus. They are obviously a commencing a professional career in the city, ‘hands-on’ family that has both set and imple- where she lives. She enjoys working with family mented an ambitious vision. Having made the and helping in the business on a part-time basis, decision to develop the stables, the Donnellys but was not motivated to develop or run the obtained legal advice, especially regarding business. equine law, and prepared a business plan. The decision to develop the stables was Detailed cost estimates were received and made by the parents, who had to provide the projected along with pro-forma financial land and secure financing, in consultation with statements. A full feasibility study including the two daughters. Sandra, naturally, was party marketing evaluation was not completed, and to the detailed planning process. Karen was the family realized there were risks associated interested and supportive, but was not intending with the venture. to be part of the business full-time. Everyone They did understand the competition, agreed it would be fun, and they all looked however, which consists of 12–15 other English- forward to some degree of participation. style stables in the region. This led them to Having made a family decision, the Don- decide to build a top-quality facility in order to nellys had to develop their individual roles stand out immediately. Three target markets in the business and work out a number of were clearly identified, related to services family-business inter-relationships. At one level, offered: horse breeding, training and sales; horse ‘everyone helps with everything’, in order to get

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things done. However, there are some clear John would like a slower lifestyle and less separations of duties and responsibilities, and a need for financing the company. Ultimately it belief that everyone needs something significant should repay the initial investment and operate to do. self-sufficiently. More horse sales and training Sandra, as President, has overall responsi- fees, and not physical expansion, would bility for stable operations. She has a full-time generate the desired profits. employee who acts more like a partner in day-to- Possible developments have been articu- day operations. Sandra also shares accommo- lated, and relate to both the Stables and the dation with staff on the upper level of the stable, property in general. The stables could benefit so staff must fit into the family atmosphere. She from a cross-country course, more sheds, often works long hours, including evenings and pastures and shelters, and perhaps a retail weekends, so that work and personal life tend to shop. Other possibilities include a country or merge. She takes Mondays off and gets 2 or 3 retreat, restaurant, and more diverse recreation weeks of holiday each year. activities. More development would require John and Mary currently handle most of the municipal planning permission and would business operations. Mary feels she will stay probably not be feasible as long as the access involved for some time in the same capacity, road is private. Developing the road to municipal doing general office work like invoicing, and standards seems prohibitively expensive, and even tractor operations. John provides financial might encounter opposition from area residents. advice, and Karen has contributed to promo- Already the Alborak sign at the entrance to the tions and plans to construct a website. Karen private road has gone missing. might consider more involvement in the man- Decision-making involves the whole family, agement of the business in the future, but views which can be a unifying force, although within a the horse-related activities more as leisure than family opinions are likely to be expressed frankly ideal work. and with emotion. Formal Alborak Stables meet- ings are scheduled, at which goals are set and measured. Keeping family relationships good is an Business dimensions important concern for all family members. ‘Family life has merged with business life’, The Stables are running at near physical according to one member of the Donnelly capacity already, although there is considerable family, but in many ways the effort has drawn the scope for revenue enhancement. First-year family much closer together. There is a clear targets were exceeded, but generating a sharing of goals and considerable pride in surplus is a multi-year effort. the family’s accomplishments with the business. There seems to be a family consensus Most family interaction now takes place ‘either regarding the short-term in not making the at the workplace or in discussions about the business much bigger than at present, but to workplace’. Other get-togethers became rare. make it profitable. A number of years have Recruiting and keeping a good workforce is gone by in which costs have exceeded revenues. an issue, especially ‘to internalize the goals and Sandra has not been able to take a pay cheque aspirations of the family.’ As well, there is con- out of the business, but does earn some personal stant pressure from clients, many of whom like to commissions stemming from horse breeding and socialize with the family. For the most part this is consulting to horse owners. Profitability is linked an enjoyable aspect of the hospitality business, to developing a good reputation and developing but finding privacy can be a challenge. Also, a loyal client base. Raising young horses for sale ‘social demands of patrons at times make it diffi- should become profitable. cult for family and staff to complete their chores.’ A paid stable manager might be feasible An attachment to the land is a driving force in the future, thereby leaving family members in this family business. The stables provide freer to enjoy the horse- and customer-related added value that could not otherwise be activities. Sandra might also consider taking on a attained, given the low agricultural potential of formal business partner. the farm. Keeping the land and business within

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the family, and through the next generation, is • Commitment by the entire family. an important value base. • A strong knowledge base in the (horse) This type of business is not particularly industry. seasonal in that the horses have to be boarded • Relatively strong business knowledge. all year round, as do training and lessons. • Strong financial resources (within the Remoteness has its advantages and disadvan- family). tages. A horse-based business could not work • Top quality facilities. well with lots of neighbours, and a large acreage • Access and closeness to population is necessary for grazing. Customers are prepared centres. to drive a reasonably long distance for the special services offered, and there is little direct com- petition in this area west of Calgary. Being in Case 6.2 Taunton Farm Holiday Park the forested foothills allows unique trail-riding opportunities. It is a customer-service business, so that good relations with clients are essential. Background It is a 7-days-a-week business, so someone with responsibility always has to be on site. It is a Taunton Farm is a caravan and cabin park on long way to get supplies and services, so some the Bussell highway, near the town of Cowara- costs are higher. The initial investment was mup in the south-west corner of Western Aus- probably higher to compensate for extra driving tralia. It offers powered and unpowered sites, time on the part of clients – it had to be of high caravan and limited cabin accommodation and value right from the beginning. is located on a working farm in the heart of the Neighbours, although few and far between, Margaret River district. It has excellent facilities can be problematic when setting up a business for guests, including a rustic shed and barbecue that attracts new traffic into a quiet, rural area. facility complete with ovens, refrigerators and Signage for the stables, posted at the main road, modern conveniences. The park is run with has disappeared, although clients are provided great enthusiasm by the farmer Rob Saunders with maps to help find the stables. and his wife Julie, although they do employ a couple to manage the park reception area.

Ownership dimensions Family dimensions

As evidenced by this case, compared to public Rob Saunders’ personal reasons for establishing companies private businesses can more easily Taunton Farm Holiday Park were based on sur- do long-term planning without the pressure vival of the family farm, which he inherited from of generating short-term profits for the sake his parents. As farming sheep and cattle had of shareholders. Furthermore, planned inheri- become less and less viable due to increasing tance of the business by children ensures competition and lower prices for primary pro- continuity. duce, alternative sources of income were needed Ultimate disposition of the farm and the to service loans and cover the running costs of stables has not been formally planned. It is the farm. Rob has a strong desire to continue to assumed that the two daughters will share the work in agriculture and clearly has a strong farm and land inheritance, and the family all affinity with the land. Rob’s wife Julie shares the agree that this is important. Given that the land same goals as Rob, with a strong desire to raise is separate from the stables in terms of owner- their family (ages 20, 18 and 13) on the farm. ship, a number of options exist. Coming to an Interestingly, growth of the business was not agreement on this sensitive issue is difficult in an initial goal as Rob decided to take a cautious most families, and the Donnellys do not view it approach to business development and ‘play it as a current priority. by ear’. Rob’s family would continue to ‘live off The Donnelly family identified several the farm’ in terms of their food, accommodation critical success factors for this business: and transport requirements. Any profit from

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the Holiday Park would be re-invested into take over the business if they so desire. So far, improving the park and ‘adding value’ through the eldest child (a 20-year-old boy studying provision of additional facilities (to be discussed architecture at university) has not shown any later). Thus expansion was never a goal for the interest in taking over either the business or the business, but improvement of existing facilities farm. It is possible that the next eldest child (an was always pursued. 18-year-old girl) may be interested, in the future. In 1991, when Rob was considering The youngest child (a 13-year-old girl) shows whether to build a holiday park on the road front- some interest in farming. Thus there is no clear age of his 330 hectares (825 acres) estate he con- disposition plan, but the business disposition sulted widely with tourism and farming people in will be determined according to the needs and the south-west region of Western Australia. Local aspirations of each family member. Rob is ada- and regional government departments were con- mant that he will not sell the farm or the business, tacted to provide information on the feasibility of but would consider a lease arrangement, as long caravan parks. However, only one proved to be as the lessees were suitable. Rob considers that beneficial, the South West Regional Office of the any lease arrangement would have to be Western Australian Tourism Commission. They regulated to avoid any problems developing provided a computer model which could be used between the owners and the lessees. A third to predict the optimal number of caravan berths option is the appointment of full-time managers to build (which was 60) and the cost and revenue and the reversion of Rob and Julie’s role to flows associated with that scenario. owners, with no involvement in the day-to-day Rob found that business advisers and ‘how running of the business. Whatever the disposi- to’ feasibility seminars were mostly a waste of tion plans are, Rob is keen to leave an inheri- time and involved individuals who were seeking tance for his children in the form of the farmland to ‘sell’ their services and products rather than and the business. deal with specific business issues. A critical decision faced by Rob was whether to build chalet-style accommodation and target wealthy tourists or to provide a Business dimensions value-for-money holiday park for travellers on a budget. He discussed this problem in detail Rob chose to participate in a franchise arrange- with his neighbours, who were keen caravan- ment with Big 4 Holiday Parks, the largest chain ners, and they agreed that a caravan park of caravan parks in Australia. Big 4 is an affilia- would be attractive to the many holidaymakers tion of some 160 parks in Australia, offering travelling through the region. units, cabins, villas, caravan and camping Based on his discussions with as many sites to suit a range of tastes and budgets people as possible, combined with his own (http://www.big4.com. au/). Big 4 charges a ‘gut feeling’, Rob decided to build the caravan franchise fee based on a percentage of turn- park. In hindsight this was the correct decision, over, which for Taunton amounts to Aus$2000 as there has been an explosion in chalet-style to Aus$3000 per annum. Holidaymakers are accommodation in the south-west region and invited to join the Big 4 Club for Aus$30 for approximately 300 new establishments opened 24 months’ membership and qualify for a 10% in the 1990s. However, Taunton Farm Holiday discount on tariffs in Australian Big 4 parks as Park remains one of the few caravan parks in well as in affiliated parks in the UK (The Best of the region which targets the lower-income end British), New Zealand (Top 10 Holiday Parks) of the market. Rob believes ‘it is better to be and Italy (Network Camping). Based on the different than it is to be better’. In other words, discount rate revenue that Taunton receives, he has resisted participating in the rush to build Rob estimates that this franchise generates ‘up-market’ accommodation and has chosen to approximately Aus$20,000 worth of business be unique. per annum so revenue from the franchise The decision as to whether the children will arrangements is far in excess of the costs. take over the business will be made in consulta- There are also consumer loyalty benefits tion with the whole family. The children will only associated with the Big 4 franchise, as franchise

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parks refer their visitors to other Big 4 parks knowledge and infrastructure needed. In any around Australia, thereby keeping people case, other farm operators in the region are ‘within the chain’. Big 4 offers a free reservation providing these services. and book-ahead service which guarantees Another unique aspect and an underlying accommodation at the next Big 4 park, as long business philosophy is the emphasis on personal as the booking is made as you leave a Big 4 contact with customers and staff. Rob and Julie park and pay a deposit. Big 4 also provides are always prepared to talk and socialize with a money-back guarantee if guests are not their visitors, and encourage their staff to be satisfied with the facilities or service. All friendly towards visitors at all times. Personal franchisee parks have to apply to Big 4 and are contact takes precedence over any operational inspected a number of times before they can matters. For example, Rob does not mind if ‘it affiliate with Big 4. takes one and a half hours to empty the rubbish Being part of a larger chain initially bins’ if he is engaged in conversation with visi- helped Taunton to counter competition from tors. This creates an issue of how to complete the other parks. A Western Australian company, daily tasks of running the park without being Fleetwood Corporation, has been expanding caught up in conversations all day. Rob jokingly into ownership of caravan parks in order to suggested he needs lessons in how to get away obtain sites for the setting up of their park homes from people. (mobile homes placed on longer-stay and per- Coupled with the emphasis on personal manent sites). Fleetwood Corporation is a major contact is the high level of pride in Rob promoter of caravanning and camping in WA and Julie’s achievements at Taunton Farm. and operated over 1600 caravan sites in eight Their success as an affordable, friendly and holiday parks in 1999. They are one of the comfortable holiday park was recognized in largest wholesalers and retailers of caravans the 1997, 1999 and 2000 Western Australian and caravan accessories in WA, and the largest Tourism Awards when they won in the category manufacturer and supplier of park homes to of Camping and Caravan Parks. In 2001, the WA market. However, Fleetwood recently Taunton Farm was the first caravan park affiliated with Big 4 and no longer poses a direct in Western Australia to be inducted into threat to his clientèle. the Tourism Hall of Fame after winning their Rob continues to nurture customer loyalty category three times. through personal contacts (by telephone) and an Rob has many development plans, but the annual Christmas card mail-out. As many as cautious approach to expansion is still prevalent. 50% of his ‘local’ clientèle (from within WA) are Any future development will be based on the repeat visitors, and word-of-mouth, although financial aspects of the business – turnover and slow to take effect, remains his most effective occupancy rates. As a general rule, Rob believes communication channel. Rob estimates that it that once an average 60% occupancy rate has took about four years for the reputation of been reached it is time to expand, or run the risk Taunton Farm to spread, but this latter channel is of turning away business. This principle applies now very effective not only within WA but also specifically to the cottages within the park, which across Australia. This may reflect the nature of generate the most revenue for the business. Rob the camping and caravanning holiday market, commenced with two cottages (cabins) in 1992, where the park’s visitors spread its reputation as but has since increased to ten. Next year more they travel to other parks of Australia and talk cottages will be built on land overlooking the with other caravanners and campers. park and the pond/recreation area. Interestingly, Rob considers that there are some unique the cottages cover their costs at just 20% occu- aspects of their Park and farming activities. pancy rate and make a profit at 40% occupancy Principally, the unique mix of having a working rate. farm and a holiday park on one site creates Other plans for the park include a swim- opportunities for specialized tours such as horse ming pool and more caravan berths with their riding, dairy and shearing operations and farm- own en suite bathrooms attached. Rob is also yard animal viewing. However, Rob is reluctant considering extending the park office to include to expand into these areas without the specialist a tearoom or licensed restaurant, which will

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overlook the pond and pool area. Another plan Case 6.3 Ol’ MacDonald’s involves production of bottled rainwater, which will be produced and sold in the park. While Background these plans involve expansion and diversifica- tion of the business, Rob views these develop- Ol’ MacDonald’s Resort is located on Buffalo ments as adding value to the park, rather than Lake, Alberta, about a 2-hour drive from either deliberate growth. or Calgary. It is very rural, not on a main highway, and therefore can be considered to be a destination resort based on the attrac- tion of the large lake and peaceful environment. Ownership dimensions The owners can boast of a full house in sum- mer, and that 80% of their customers are repeat For Rob’s family the decision to borrow money visitors or referrals from customers. to invest in the park was relatively low risk. Rob The resort started as a 25-site campground was well aware that the improved value of the on forested family land and has been land after building the park would be far in ambitiously developed by the MacDonalds to excess of his borrowings, which were approxi- become a family holiday destination. The resort mately Aus$300,000 in 1992. In other words, if offers many attractions and services: the park was not viable, Rob could recoup all of • 270 serviced and unserviced pitches for his investment (and probably make a profit) by recreational vehicles and tents; selling the park as an established business. The • group camping areas; value of the land was higher than the capital • cabins; cost of the holiday park and land values in the • motel; region have continued to escalate during the • rental recreation vehicles; 1990s. However, there is always some risk, and • washroom and laundry buildings; for Rob it was the threat of losing the land, • cafe (‘home cooking’) and store, combined which he viewed as a part of his heritage, which with the office; should be passed on to his children in the same • combined with indoor mini-golf way that his parents bequeathed him the farm. and museum, pool tables and arcade; Rob would always be reluctant to sell any of his • large tents for group use; land, as he believes that ‘once it is gone – it is • catering on- and off-site; gone’. Again, his links with the land provide the • sandy beach, boat rentals and boat launch; main underlying philosophy of the family and beach concession; the business. The park land remains a part of • playgrounds and ball diamond, horseshoe the farm holding and the mortgage is secured pits, volleyball net, obstacle course, crafts over the farm. for kids; Rob will continue as owner/manager • farm animals; with his wife Julie well into the future. They • fire pits and firewood; are both young (around 40 years of age) and • hay-wagon rides and horse riding; will continue to be involved as owners. How- • special events; and ever, they have reached a point where they • church services. must now appoint a paid manager of the park as Rob is keen to devote more time to farming. The general area offers a golf course, He has decided that the business justifies a full- hunting and fishing, bird watching, and time paid manager, a considerable departure abundant wildlife. from the casual arrangements he has had in The most recent development was the place. He currently employs a young couple purchase of a large nearby house that is rented as paid managers for five days per week and to groups for functions or as deluxe, all-year only works at the park during their days off or accommodation. The family also possesses when it gets busy. All decisions regarding the janitorial and maintenance contracts for three management of the park are still made by Rob nearby provincial parks. They have also sold and Julie. residential lots nearby, where a small subdivision

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has been developed. The actual resort site is Sam was originally reluctant to set up a 50 acres in size. resort business, as he was farming 2000 acres The resort business is highly seasonal in (800 hectares) and had little time to spare. For Alberta, with winters being unsuitable for camp- the first 2 years he had no direct involvement in ing and lakeside recreation. The MacDonalds the resort operations, but supported the idea of have no ambition to run any of the resort during its development because it looked like it would the off-season (from October to April) but hope work. He subsidized the resort’s development to develop off-site catering and the new house as from the farm income, and although the farm all-year revenue sources. operations have been greatly diminished he still does some outside consulting work for additional income. Now they own 1400 acres Family dimensions and continue to raise 120 cattle. The resort now commands all his efforts during the peak season. Jean MacDonald came up with the idea of Sam admits he is a farmer at heart and could developing a campsite, partly as a reflection never live in the city. of her own mother’s unfulfilled dream to start The resources, consisting of ample forested a business. She admits this was largely an land, and attractive waterfront with beach, emotional motive, and also believed that farm were part of the original farm and presented a income was not enough, and wanted to make natural opportunity for some kind of recreational her children’s lives better. She could develop a and/or residential development. There was no legacy that could be handed down to them in specific plan for ultimate development of the the future, all within the context of remaining a land, and the concept evolved over time. Sam farm family with strong ties to the land. never believed it would get to its current size and With her earlier experience working as complexity, and it grew very fast. secretary–treasurer of a county recreation Joanne was excited about her parents’ deci- board, and financial experience in running a sion to develop the resort, and had confidence in park, Jean felt she could run a campsite business. its success. She was involved from the beginning There was also the need for a challenge, and she on a part-time basis, and set up the registration was motivated even more by being told her idea process. Recently she quit her full-time job at a would not work. Banks would not lend money high school in a nearby town to commence for a rural tourism business, especially when full-time at the resort. The other daughter, provincial parks on the same lake provided free Roxanne was living and working in Red Deer camping. Why would anyone pay? when the start-up decision was made. She was Daughter, Joanne MacDonald shared their not involved in the initiation of the resort, but mother’s original goals, but some of the others saw the potential for extra income. She visited did not. There was no real opposition, however, frequently and helped out a little, then moved and Sam was simply too busy to contribute. back to Buffalo Lake in 1994 with her two The decisive factor in getting started was the children. It was her goal to raise children in the availability of a federal grant programme. Jean country, and she built a house on the nearby applied and received money in 1984, which subdivision being sold off the family farmland. In made it possible to hire workers and clear bush 1995 she started to work three-quarters of her land for roads and 270 camping pitches. If the time at the resort. She did not know how much grant had not been available Jean feels she the business really entailed and never seems to would have eventually got it done, but the site get finished with work and responsibility. would have been much smaller, and it would The land and resort business is owned have been completed at a much slower pace. by Sam and Jean MacDonald as a limited com- Jean describes the family as ‘conservative’, pany. Two daughters are employed, and three thrifty, and always saving. Hence they retained of their children have worked in the business her grandparents’ possessions, which now con- seasonally, so it is supporting three generations. stitute the on-site museum. The ideal of leaving a Previously, their son Murray, along with Joanne, physical legacy of value for future generations was being groomed to take over management of runs deep in the MacDonald family. the resort, but in 1998 he and two staff members

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were killed in a car accident. This tragic incident conviction. Not all differences of opinion have delayed the retirement plans of Sam and Jean, been easy to resolve, but in a family context and required a major re-assessment of where there is the knowledge that they must and will be the business was heading and who would run it. resolved eventually. Emotion is a key element in A 2-year period ensued that has been described this family business, and it has its positive side as a ‘plateau’, and a time of healing and in generating commitment. Working with loved introspection. and respected family members makes for a good environment and the family’s accomplishments foster pride. Even disagreements can be lived with, but Business dimensions at least one family member would like to see more formal and effective organization, with Sam has to be jack-of-all-trades around the regular meetings and better communications. farm and the resort, all year round. He is For example, sometimes staff receive different the only one familiar enough with the resort instructions from various family members, so the infrastructure (e.g. where do the water lines question of who is in charge needs sorting out. run?) to handle much of the maintenance. The workload is high and can be very demanding, especially because the family’s strategy has been to improve the resort continuously, with Ownership dimensions frequent expansions made to the physical plant. Jean functions as office manager. She To the parents, this family business provided handles the financial and marketing side of the the opportunity to work with family and to see business, but also works in the cafe and catering children grow in age and ability. It provides areas. personal happiness to have children at home or Joanne is the reservations manager and nearby. Long hours and hard work are inherent deals with 90% of their customers through the in the family business. The owner–parents are front office. She has done some staff manage- never free of responsibility and getting a day off ment and payroll work, but registration is really a is always difficult. Children have to decide if full-time job. Dealing with people can be difficult, that is the lifestyle they want. but it is the part she enjoys most. Eventually she would like to take over more of the general management and relieve her mother of her Chapter Summary workload. Her eldest daughter is 16 and has been working on site; she would like to study One common characteristic for all farm-based tourism and enter the family business full-time. family businesses is strong ties to the land. Roxanne runs the gift shop, museum, These are not only based on farming traditions arcade, mini-golf and petting animals. The or love of the land, but also financial ties that indoor facilities are all in one building and compel farming families continually to work the constitute a vital profit centre for the resort. land to make it viable and support the family. Three grandchildren (two daughters and This situation had driven the families into one son of Joanne and Roxanne) work diversification into tourism perhaps as ‘reluctant seasonally at the resort; one has been employed entrepreneurs’. This is a very difficult transition full-time and the other part-time over the to make from an industrial perspective – from summer. They work in the store and reception being a primary producer to being a service areas. Kevin, another son of Sam and Jean, has sector operator. From a business perspective not been involved in the resort. farming and tourism are complete opposites – This case illustrates how the family business farming is supply-driven, tourism is market-led; keeps a family together, especially through farmers are cost-cutters, tourism businesses are adversity. Family members agree that ability to revenue-maximizers; farmers produce single work through problems together is a must, and standardized products at a given price, tourism the crisis following Murray’s death reinforced this businesses diversify into many products and

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offer a range of prices. Perhaps the only thing family businesses have negotiated the difficult that farming and tourism have in common transition from farming to tourism based on is seasonality, although tourism operators careful decision-making, family commitment can adopt strategies to cope with seasonality. and most importantly, appropriate use of the These three cases illustrate how farm-based farm land.

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7 Family-owned and -operated Small Hotels

Introduction family business, yet to face some of the challenges of balancing family and business Running a small hotel places families at the dimensions, and one in which ownership and centre of the tourism experience and as such, succession is not yet an issue. places extra demands on both family members and the business. Working hours are long and guests demanding, and the rewards can be Case 7.1 Gunnar and Maude Bergstedt, insufficient for family members working in the Åre, Sweden business. The three cases in this chapter dem- onstrate that family-owned hotels represent Background the quintessential family businesses in tourism and hospitality, in that the true character and Located in the mountains of central Sweden, strength of the family is reflected in the fortunes the resort town of Åre is primarily devoted to of the business. Case 7.1 demonstrates that the winter sports of downhill and cross-country hard work and commitment are needed to skiing. In the surrounding rural area are several maintain a family business that provides accom- smaller ski facilities and a range of accommoda- modation, and owners must in some cases be tion, including the self-catering cabins owned willing to work in all aspects of the business, by the Bergstedt family. including construction, maintenance and clean- Gunnar and Maude Bergstedt operate five ing, for a limited financial return. The lifestyle cabins containing ten units, and three of the rewards identified earlier in the book are clearly cabins are considered to be at the executive level sufficient to offset any lack of remuneration for of quality for the purpose of advertising to the the founders of the business, but the next gener- German market. They are all situated in a ation are not always willing to make such a wooded subdivision of 20–25 lots that lies trade-off. Case 7.2 also demonstrates that hard adjacent to a small resort operated by friends work and imagination can transform a heritage of the Bergstedts (it is also a family business) building into a hotel and restaurant and prove that contains a restaurant. Nearby is a ski hill to be a financial success. However, even when and hotel complex, and the area contains many opportunities are realized by family businesses, groomed cross-country ski trails. Gunnar helps rewards are not always distributed equitably, his neighbours maintain and groom the ski trails generating some level of resentment amongst through the winter season, as they are the main family members. Case 7.3 illustrates a young attraction.

©D. Getz et al. 2004. The Family Business in Tourism and Hospitality (D. Getz, J. Carlsen and A. Morrison) 127

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Family dimensions and say that labour costs in Sweden are far too high and therefore paid staff are unaffordable. Gunnar’s grandfather’s grandfather established This means all the physical work (cleaning and the family farm, and when the railway came to maintenance of cabins) must be done by Maude Åre in 1882 he recognized the potential for and Gunnar. tourism development. He built a shop and a Lack of marketing is an admitted weakness. hotel, which have not continued in the family, The Bergstedts rely on repeat business, which is but this initiative certainly imbued a family a strength, and on word-of-mouth recommen- interest in tourism. What has been passed on dations. Some clients return year after year to the through the generations is the farm, and the same cabin. As well, the nearby some- separate landholding on the mountain. times books cabins for them, for a commission. In 1963 Gunnar’s own father started the Their only advertising is through a German subdivision that today contains the cabins, some network, and this consists of a 20–25 in total. Gunnar is not alone in this line small profile with one photograph placed in a of business, as both his brothers have also catalogue that contains many competing accom- developed cabins and homes on the family land. modations throughout Scandinavia. They do When Gunnar was about 20 years old he not have a brochure for distribution. had a vision of this development. He expected When their son, Jon, was studying at that building and renting ten cabins would make university his personal website was utilized to him financially comfortable, and that he could generate some business for the cabins, and now be his own boss with flexible time. Of course it the family wants to develop a separate website proved rather more difficult! He entered a career for the cabins. Gunnar believes this will be as a schoolteacher and is now retired after successful and acknowledges the need to almost 30 years in that profession. Maude also generate more business. worked locally, and both incomes were needed to support the family and development of the cabins. Over the decades he and his brothers built Ownership dimensions their separately owned cabins one at a time, using wood from their own forest, cut at their Jon has been educated in computer program- own small sawmill. The two brothers and ming and does not want to enter the business, their families live on the mountain in houses and a daughter who lives in Stockholm is not they built, while Gunnar and Maude live on the involved. Another son, Jacob, was killed in a farm during summer, and spend winters on the car accident several years ago and that tragedy mountain – to be close to their rental cabins and permanently changed the family. Jacob was ski trails. a champion snowboarder who wanted to live in the area and take over the family business. Now there is no apparent successor within the immediate family. Business dimensions Most of the cabins have been financed personally, with some bank loans. Ten years It is a highly seasonal business, with the peak ago, after their tenth and last cabin was con- months being January–April. Summer demand structed, the property market was in crisis owing is slight, and in the autumn there is hunting for to over-supply and bankruptcy sales. Gunnar moose and birds in the surrounding forest. The believes he only avoided bankruptcy because his Bergstedts’ neighbour operates over 20 snow- debts were small. His father had instilled in the mobiles for tourists, but they are considered to sons a philosophy of self-reliance, and this value be incompatible with the ski trails and require a seems to explain why the Bergstedts have not separate system. applied for available European Community Maude and Gunnar operate the cabins grants to subsidize their development – that, and themselves, and he admits it is a lot of work for the fact that Gunnar has not got around to the little financial return. They have no employees necessary paperwork!

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The entire Bergstedt family, including the Case 7.2 Cricklewood Hotel three brothers, have a long and deep attachment to the land. In part this is attributable to being Background successors to many generations of inheritance, and in part to the rural culture and lifestyle Cricklewood Hotel, originally built in 1885 in central Sweden. This involves annual hunt- as a coachhouse, is a popular restaurant and ing parties for birds and moose, resulting accommodation establishment in the village of in supplies of meat for the entire year. Skiing Bothwell, Scotland. It offers a relaxed family- is an essential ingredient, and more recently oriented restaurant, a conservatory and a beer snowmobiling, and for the younger generation, garden. An extensive menu is available and snowboarding. Living and working in the food is served from 11 a.m. to 11 p.m. each forest, including tree cutting and sawing, fits day. the preferred lifestyle. Cricklewood is an attractive Victorian Very recently the three brothers, Gunnar’s property, set off the main Hamilton to Glasgow son Jon, and two nephews, together purchased road, with parking and a garden area that was 1000 acres adjacent to their mountain land- originally built for the manager of a local colliery holding. They will cut lumber for a pulp in 1890. In 2002 one of the leading hospitality and paper mill in Norway, thereby generating and leisure companies in the UK bought the revenue. This might also facilitate future prop- six-bedroom Cricklewood Hotel. It is located in erty developments, and will definitely ensure the conservation village of Bothwell, Scotland, continued hunting privileges for the family. which is 15 miles from Glasgow and 40 miles Farming is no longer a subsistence activity from Edinburgh, and has a population of 6000, in this region, but rural traditions associated with mainly composed of professionals. Plans are farming and forestry endure. Gunnar recognizes afoot to transform it into a leading-edge enter- that his family cabin business is related to a tainment venue, the likes of which the region has lifestyle preference, and wants this to continue never previously experienced. This is a far cry through his retirement. However, the future of from 1979 when its lease was put on the market the business is not certain. at the price of £15,000. At that time it was being Would Gunnar recommend this type of run as a B&B with a turnover of £11,000 per business to another family? He is doubtful, citing year, which was mainly derived from a contract hard work, minimal financial returns and the with British Gas to accommodate long-term normal challenges of working with close family unemployed men who were being retrained. members. He thinks his arrangement, with the brothers and other family members, is somewhat unique and definitely not typical of family businesses in this region. Family dimensions With the loss of their son and intended business heir, the Bergstedts are uncertain Still with little in the way of adequate finance about continuing this tourist-cabin business. as a young couple, Alison and Colin, then in For 2 years the family business was essentially their early 20s, were supported by Colin’s frozen, because of the tragedy. Now it is time to grandfather who stood as guarantor to secure get it back on track and plan for the future. funds from the Bank of Scotland. Business However, Gunnar does not want to build advisers were drawn from the circle surround- more cabins, given the costs and work involved. ing their parents and were of the same older The Bergstedts’ goals remain lifestyle-related generation of family lawyers and accountants and Gunnar would ideally like to maintain his not up to date with modern-day commerce. traditional farming life in the mountains of mid- Although business entry had been made Sweden. There is the possibility of selling cabins, financially easier through the lease arrangement, but once they are gone the potential earnings it had been drawn up and approved by the from the remainder might be inadequate for family lawyer who would have been duped their needs. Another option is to sell the whole into agreeing to certain clauses by the landlord operation as their retirement fund. – including responsibility for all internal and

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external repairs to Cricklewood. The building buy the property outright for £300,000 and sold was old, sick and had not been designed it on to a Plc. in 1992 for £1 million. On reflec- to withstand commercial usage; understandably tion, Alison in particular feels bitter about how repair and maintenance costs were extensive. things worked out, and often agonizes on what As Colin and Alison worked harder and the turn- might have been in wealth terms if she and Colin over increased, so did the rental. By 1981 they had persevered, and resents Nigel’s success had two sons under the age of 2 who they rarely based on what in effect was intellectually their spent time with due to the hours, demands and property. complexity of the ever-growing business. The work/life balance was becoming increasingly problematic and stressful. Alison tried a partial Case 7.3 Millestgården withdrawal from the business to care for the children in the recently purchased family home, Background but felt excluded from the ‘partnership’. The couple were faced with a real dilemma: they Johan and Malin Antman own and operate have created a thriving and ever-flourishing a small hotel called Millestgården outside the business that is stretching their capabilities to village of Duved near the Swedish resort town effectively manage it, and at the same time to of Åre. Their 1 ha property lies close to the main maintain harmonious marital and family highway to Norway and overlooks a beautiful relationships. river valley, with ski hills only a short drive away, and ski trails within 200 m. It is also adja- cent to a historic site with a monument that is Business dimensions well marked on the highway and which attracts visitors to drive right by the hotel. Local competition was negligible. Into this virgin Millestgården has 23 rooms with 60 beds, a market Colin and Alison imported a Canadian restaurant and small conference room. At peak coffee shop concept and incorporated it into the times there are around 50 guests on average. It is bar and restaurant area of the hotel, quickly a pensionnat, normally providing room plus two creating a popular meeting and socializing place meals per day. Showers and toilets are shared for local residents. By 1984 turnover had (not en suite), so the hotel caters to more budget- reached £250,000 – the concept was a signifi- conscious families and groups, including busi- cant success . . . but life was not without its ness meetings. There is also a sauna, billiards challenges. and table tennis for guests. An inn was located on this site in 1880, serv- ing passing highway trade, while the current Ownership dimensions hotel was built in 1945 and expanded in 1965. The previous owner went bankrupt after having In 1984 they reached the difficult decision to invested heavily in the property, particularly by sell to Colin’s younger brother Nigel, who had completely renovating the restaurant. Johan, worked with the couple for 5 years since he was who was then living on an adjacent farm, saw 17 years old. The selling price for the lease was the opportunity and purchased the business for set through the emotional criteria of: wanting to much less than it would otherwise have cost. He give the brother a good start in business at a and his wife have owned it for 3 years. young age; his view of the hotel as his ‘home’; and a desire to get out of the business deal without the hassle of putting the lease on the Family dimensions open market. The lease was handed over to Nigel for a ‘family gift’ price of £25,000. Johan came to the Åre resort area in 1991 as a Turnover at Cricklewood Hotel continued ski instructor and decided to stay. It was his idea on an upward trajectory with little or no alter- to own a business and take root. He previously ation to Colin and Alison’s original concept. managed the Backpacker’s Inn, located in the Nigel managed to negotiate with the landlord to centre of Åre, and continued to run it for the first

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year after purchasing the hotel. Neither he nor perhaps 15, the parents might employ them in Malin had formal training in hotel management, paid work in a part-time capacity, thereby reduc- but Malin is now completing chef courses since ing the need for other staff. Johan says these she does the restaurant cooking. Johan is learn- would be ‘real jobs’. ing the business as he goes, drawing on friends Johan could not think of any other families and even the previous owner for advice. He still in the area, with children, who were running does some work in winter for the ski school, and tourism businesses. He is currently the chairman in summer they take bookings by telephone for of the Duved industry group and so he person- a local adventure company. When possible, ally knows most of the operators nearby. He feels he uses this service to attract additional hotel parents might be afraid of taking the big step, business. whereas brothers and sisters might find it easier The primary motivation for purchasing to get into business together. the business was to provide the family with the opportunity to stay permanently in the area. The Antmans have three young children, aged 2, 3 and 6, and this presents them with a challenge. Business dimensions Usually the children go to a day-care facility, plus babysitters are brought to their private quarters The winter season is dominant, owing to the at busy times when both Johan and Malin are popularity of skiing and other winter sports. working. Occasionally there are difficulties in The Antmans more or less close the hotel in balancing work and family life, but Johan feels the quiet months of May, June, September and he is able to spend more time with the youngest December, but as they live on the premises they than he did with the two older children, because open it for functions or groups if there is they are nearby. On the other hand, the work demand. They employ no full-time staff and do means they do not always get the free time with most of the work themselves. When demand is the children that they want. high they use local, part-time workers to help out Johan and Malin were at first apprehensive – usually in the evenings including dinner time. about working together on a daily basis, after The winter season is busy and financial holding separate jobs, but they say it has worked performance so far has been good, but as with out perfectly. Johan tends to get up early and many businesses in this area cash flow becomes make breakfast for the family, while Malin works a problem late in the year (autumn). That is more in the evenings. This ‘shift work’ was not when banks extend credit to small operators to planned but developed naturally. see them into the winter peak season. If summer During winter the days are very long and demand could be improved, this family could sometimes stressful as they are constantly on hire one or two permanent staff to lift the heavy call. Contacts with friendly customers can some- workload burden. times interfere with work, while at other times the Marketing is mostly done through Åre’s children might get in the way of guests. This year main promotion and booking company (www. they took a holiday for two weeks in mid January areresort.se), and because this service is owned when demand was low, and this is only possible by the dominant ski-lift and hotel company, by completely shutting the hotel. The children small operators worry that they are not necessar- went to stay with grandparents while Johan and ily getting equal attention. On the other hand, Malin went skiing on the continent. this company has considerable resources for The best aspect of running a family busi- promotion and development of the resort. ness, at least for Johan, is the ability to manage In the main Åre promotional booklet Millest- his own time. Some jobs are dirty and undesir- garden has a small photo and profile within the able, but there is a lot of variety. Guests are Duved section (the company promotes ‘One ski friendly, and so work can be very enjoyable. ‘If it resort, five villages’) It is described as an ‘authen- wasn’t fun, I would not do it’ comments Johan. tic regional in a natural and quiet The children like to help with little things in environment at the Carolean soldier’s monu- the hotel, but of course are too young to stick to ment 2.5 km west of Duved.’ Packages including any task for very long. When they get older, skiing and accommodation are offered.

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They also have their own Internet site Ownership dimensions (www.millestgarden.se), but it is not set up to take direct bookings. Their own 1-page flyer Succession or disposal of the property is not describes the hotel as a ‘genuine Jämtlandish currently an issue, as the Antmans are still in guesthouse in scenic and quiet surroundings the developmental stage. The children are too located 2 km west of central Duved in western young to participate in the business, but the Jämtland. Our speciality is traditional cooking parents would like them to be able to continue from Jämtland. This includes fresh fish from the to live in this attractive rural area. lakes and rivers of Jämtland, reindeer, moose and many more locally grown products.’ It promotes local recreational activities, including Chapter Summary fishing in the river, mountain biking, sightseeing, golf, Sami cultural attractions (the region’s native There is much to be learned from these three people), rafting, caving, climbing and boogie cases in terms of family, business and owner- surfing on the river. ship dimensions of small hotels. Commitment Duved needs to be marketed better as of family members is paramount in the hotel a destination distinct from Åre, according to business, as the demands are high and the work Johan. Their tourism industry group, of which hours long. Some businesses can call on the he is chairman, finance a tourist information extended family to assist with the business bureau, but more cooperation is needed to build (as does case 7.1), or use the business to give demand during the 2.5 months of summer that extended family members a start in business life is currently a low period. (case 7.2). This is especially useful when it is Expansion of activities and decreased recognized that not all family businesses have seasonality are desired, rather than any expan- the cash-flow to employ non-family members sion in bed capacity. In fact, the Antmans are (case 7.1). In fact if revenue did improve, these contemplating the elimination of ten beds in businesses would employ more casual or per- order to allow the addition of small meeting manent staff to ease the work load of family rooms to help develop the business meetings members (case 7.3). In case 7.3, work arrange- segment. ments evolved naturally among the family, with The property includes an old, unoccupied a shift-work approach to running the business house, and a barn, which both figure in the being the most agreeable arrangement between Antmans’ expansion plans. In the house could the husband-and-wife team. Their children are be developed a small cafe, shop and too young to work in the business and if they information centre to take advantage of the ever do so it will be as paid employees. Business adjacent historical site. There is a Carolean trail lessons are evident in these three cases, in terms concept along the highway linking Sweden and of having a vision or recognizing a business Norway, recounting a failed invasion hundreds opportunity, establishing the business and of years ago. Some European Community funds developing it successfully. Perhaps the most might be available to help develop the house as tangible lessons in this chapter are in terms of part of this tourism concept, specifically for the ownership, which must be handled carefully to audio-visual component, and the Åre Kommun avoid financial or family problems. In case 7.1, government might also contribute to refurbish- borrowings were kept to a minimum and that ment of the house to help develop tourism prudent approach enabled the family to retain infrastructure. the business, in spite of a family tragedy and The barn can be incorporated, but turned business problems of seasonality, property price into a venue for historically themed (1700s) deflation and bankruptcy. Retention of owner- functions. This would also be aimed squarely at ship would, in retrospect, have been a better the conference market, including those staying option in case 7.2 for the family concerned, on site or elsewhere. The family plans to do all and any family business disposition will always the work, and is looking 5 or 6 years into the involve some agonizing on the part of the future for completion. founders.

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8 Family-owned Nature-based Resorts

Introduction property adjoining the World Heritage listed Numinbah nature reserve in northern New These case studies cover a number of topics South Wales (NSW). The facilities include relevant to all family businesses as well as some luxury accommodation, walking trails, fine specific issues related to family businesses in or cuisine and a functions centre. In keeping with adjacent to natural areas such as national parks the theme of peace and tranquillity, accommo- and waterways. The motivations for establish- dation is limited to seven couples at any one ing resorts adjacent to natural areas are usually time, and each bungalow provides total privacy lifestyle-related, but in two cases the families amidst the rainforest. Bungalows all have have held a long-standing attachment to the modern facilities and guests can order fine area over several generations. These two cases cuisine prepared on the property by Judy and are O’Reilly’s Guesthouse in Queensland and served by Ralph. The CCRR has won several River Valley Ventures on the Rangitiki River on regional and state tourism awards since 1994, the North Island of New Zealand. The rise in and in 1999 won a national tourism award in popularity of nature-based tourism experiences the category of Unique Accommodation. in countries like Australia and New Zealand The CCRR attracts mainly couples from the also provides a compelling reason for family nearest capital city, Brisbane, seeking to enjoy business start-up in areas that offer ecotourists, the rest and relaxation in the rainforest. The backpackers and the pleasure/holiday visitors a retreat also holds workshops for birdwatchers, unique holiday resort experience in a natural botanists, natural healers and artists during area. Crystal Creek Rainforest Retreat is a the year. It also offers a small function centre unique rainforest lodge that accommodates that can cater for small weddings and corporate a range of visitors from Australia and overseas. groups.

Case 8.1 Crystal Creek Rainforest Family dimensions Retreat (CCRR) Ralph and Judy were both seeking a career Background change and change of environment, from the industrial city of Newcastle in NSW. Ralph had Owners Ralph and Judy Kramer established a long-held interest in nature and wildlife and CCRR in 1992 after retiring from their was active in the conservation movement. Judy respective careers. CCRR is described as a had involvement in the arts and ran her own 140-hectare (360-acre) sub-tropical rainforest art gallery in Victoria. Together they shared a

©D. Getz et al. 2004. The Family Business in Tourism and Hospitality (D. Getz, J. Carlsen and A. Morrison) 133

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desire to live and work in the rainforest of college, acquiring such skills as basic book- Northern NSW where they could combine their keeping, business planning and business interests. Having the concept of a rainforest negotiation skills. retreat in mind, they then sought the right Other family members have worked at location and engaged a number of professionals CCRR in the past but are currently pursuing their (architects, engineers and business planners) to own careers. Christine (aged 26) is living in guide the project. Brisbane and studying for a degree in Psychol- After 6 years of running the business, Ralph ogy. Mandy (aged 32) lives with her husband and Judy are seeking less ‘hands-on’ running of and child in London and works with her husband the business and would like to employ more staff. managing a small hotel. Another daughter, Currently they employ four part-time cleaners Sharon (aged 25) works as a Human Resource and one full-time maintenance person, although manager in Sydney, for the Furama Hotel. She is two part-timers also assist with maintenance of also completing a degree in Industrial Relations. the extensive gardens that surround the retreat. There are also two daughters currently working in the business (Fiona and Jude) on a part-time Business dimensions basis; they are acquiring the skills and experi- ence to work in tourism and hospitality. Jude In order to support more full-time staff (such as is completing a business degree in tourism a full-time chef to replace Judy), their revised management and should graduate in the next business plan indicates that 15 bungalows 2 years. Rather than moving straight from there would be required to accommodate additional in to a management position at CCRR, Ralph guests who would make use of the fine dining would prefer that she worked for a larger tourism service. This would need a significant capital enterprise for a while in order to broaden her investment and borrowing would have to work experience. Ralph and Judy agree that increase substantially, an option that Ralph training the children to take over running of and Judy do not wish to pursue at this time. the business is a difficult task, because, in Ralph’s Currently, seven bungalows achieve 80% aver- opinion . . . ’you can’t treat your children like age occupancy, with long weekends booked employees’. He has observed that the children well in advance. There is a concern that addi- do not appear to be as committed to the business tional bungalows and guests on site would com- as both he and Judy are, which makes the issue promise the peace and tranquillity of the retreat. of disposition and succession a difficult one. Consequently, there is a level of capacity that Fiona also works part-time in the business has to be achieved in order to be financially and has gained some previous experience in viable, whilst avoiding the destruction of the tourism management as an employee of the theme and ambience of the retreat. local tourism industry association. Her main Ralph and Judy received requests for bun- interest is in the horseracing industry, and she galows with spas (an almost universal require- maintains that interest through her partner’s ment in the luxury accommodation category), horseracing enterprise in the neighbouring town, despite the fact that a natural spring-fed creek where she works 3 days per week. Fiona has meanders through the property. All bungalows a very business-like approach to CCRR and have been fitted with spas, requiring an addi- considers that running at a profit is the most tional investment of Aus$35,000 per bungalow. important business issue. She has ideas for dev- Even at the current tariffs of Aus$245 per eloping greater efficiencies in the business, such night, the payback period for this investment is as installation of a computerized reservation considerable. Ralph also has plans for a day-spa system to replace the manual system currently for guests, requiring an additional Aus$50,000 in use. She finds guests of the retreat demanding, investment, but this could be financed out of the as they require the full service of bungalows business funds. (daily cleaning and meals). Fiona’s preferred Finance and investment are major issues option would be to run the administration and for CCRR in an environment of uncertainty with office of the business. She is currently completing regard to the internal and external factors that a small business management course at the local can impact on business profitability. While the

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owners are confident in the current internal busi- needed to support future plans for business ness operations, they also recognize that there expansion. are a number of external factors (such as interest • Succession – what succession or disposi- rates and economic conditions) which can affect tion arrangements should be put in place their business plans and operations. While the over the next few years as Ralph and Judy constraint may be financial, the opportunities approach retirement age? are unlimited for value-adding through new Within the two issues are a number of products and services to cater for new markets, related factors in terms of finance, investment, such as corporate retreats and natural health. training, protection of the rainforest and main- There is also extensive land available to accom- taining the uniqueness of CCRR. These issues modate new value-adding ventures with only remain ‘on the table’ and are openly discussed about 5 ha currently used for accommodation. with staff and other family members. Ralph and Ralph and Judy have imprinted their per- Judy are unsure about their plans for disposition sonalties and vision on the business and the of the business. They have enjoyed living and uniqueness of the experiences and personal working in the rainforest environment and interactions that they offer. They have strived for would find it difficult to move away. The nature recognition in the region as an authentic eco- of the CCRR business is such that it would tourism business and are sensitive to any sugges- require a unique set of skills to take over running tions and feedback from their guests and the of the business successfully, and both Ralph wider rural community. As previously discussed, and Judy feel that they have not yet found any- recognition has been achieved in the form of one who possesses those skills. There is also a awards at the regional and national level, which deep commitment to maintaining the environ- has provided for a positive marketing and pro- mental integrity of the rainforest, which would motional image for CCRR. They have also have to be considered in any disposition deci- sought constant improvement in the standard of sion. Ironically, the very peace and tranquillity accommodation, the level of services and the that motivated Ralph and Judy to live in the presentation and interpretation of the rainforest rainforest (and has been the basis for their experience. business success) have been compromised in Guest feedback (from in-house surveys) the face of the growing demands of running indicates a very high level of satisfaction with the CCRR. CCRR accommodation and services, although Ralph and Judy feel that Mandy and her requests for more extensive walking tracks are husband (who is an Italian chef) could take over not uncommon. The construction and mainte- running of the business as they have the neces- nance of extensive walk-track systems is an sary skills to meet the customers’ requirements. expensive exercise that can be undertaken in However it is unlikely that they will move from national parks, but it is unreasonable, in Ralph’s London at this time, so succession plans remain view, to expect this of private operators. uncertain. In the meantime CCRR continues to enjoy success in business and a growing reputation for excellence at the national and Ownership dimensions international level.

The future of CCRR as a unique business offering a luxury rainforest experience is bright. Case 8.2 O’Reilly’s Rainforest Bookings are made 12 months in advance for Guesthouse peak periods and there is a growing interest in new markets for corporate retreats and natural Background healing workshops and programmes. The important decisions that the owners are con- O’Reilly’s Rainforest Guesthouse is an interna- fronted with are: tionally acclaimed ecolodge situated in Laming- • Expansion of accommodation – currently ton National Park (a World Heritage reserve), seven bungalows, but prospectively 15 Queensland, Australia. It is also a unique family

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business now into its fourth generation of to walks and beauty spots. There are daily buses ownership. from Brisbane and the Gold Coast, operated The Guesthouse is located a 2-hour drive by other companies. A ‘meet-and-greet’ service south of Brisbane, capital city of Queensland, is available for Gold Coast Airport. Australia, and about 1.5 hours west of the Guided activities are included in room famous Gold Coast resorts. It is surrounded by tariffs, including bird walks, bush dances, the Lamington National Park, a World Heritage 4-wheel drive bus trips, guided night walks, a reserve. The Guesthouse lies at 930 m altitude ‘flying fox’ ride across a canyon, history and and is reached by a twisty, narrow, but sealed nature presentations. Special interest weeks mountain road. The national park service has a and weekends are promoted, including Bird campsite and information centre very close to Week in November when all other guest the guesthouse. Day visitors use a large car park activities are suspended in order to host ‘birders’. next to the Guesthouse. In 2000, 22% of their Outdoor team-building activities are offered to visitors were from overseas. groups. The Scrub Club provides activities for The Guesthouse business started in 1926 children. but stems from a pioneering settlement on the land in 1911. It has been kept in the family through four generations. Many family members currently work in the business, and it is expand- Family dimensions ing in new directions. The O’Reilly family name is so legendary in Australia that it has become a Pioneering origins and development of valuable brand. the Guesthouse have been documented The year 2001 marked 75 years of by the O’Reilly family in a publication entitled continuous operation of O’Reilly’s Rainforest The O’Reilly Story (to order it, see their Guesthouse. It remains a successful, growing, website: www.oreillys.com.au). It is a story of family business with a number of unique owner- four generations, beginning in 1911, with no ship and management features. The modern, less than eight O’Reilly boys from two related tourism-award-winning enterprise bears little families securing 100 acres each of mountain- resemblance to the original bark-clad guest- ous land for dairy farming and sheep grazing in house that provided the original shelter for the far hinterland of the state capital, Brisbane. visitors to Lamington National Park. The McPherson Range was at that time wilderness, with loggers not far away, and the Accommodation: state government had the foresight to establish • three canopy suites (luxury level); a national park. This new park was designed • 61 view rooms; and to surround the O’Reilly lands. In 1914 the • communal guesthouse: six rooms. Stockyard Creek Track was carved up the Facilities: mountains to provide access to the new park • spa, sauna and massage; (proclaimed in 1915), leading to 20 years • plunge pool; of daily horse-trains carrying cream and • games room; wool 15 km to the valley below, and increasing • dining room; tourist traffic up the mountain to experience • bar; the remaining rugged wilderness. • bistro; Early park visitors had little choice but to • lounge; stay in O’Reilly huts (‘humpies’ made from • guest laundry; tree bark), and the boys acted as guides into the • theatre for 120 persons; rainforest. Trails were cut to scenic spots for • conference, wedding and function horseback guests. Herb, Luke and Bernard facilities; were appointed as honorary park rangers, while • retail shop (Gran’ O’Reilly’s Store); and Mick became overseer and accordingly the • library and historical Stinson display. state’s first ‘national park ranger’. Mick and his Bus Service: Five buses are owned and new wife, Annie, left in 1930 to establish their operated by the Guesthouse to transport guests own farm.

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The government had required each settler As the business expanded and increased in to construct a hut on their specific acreage, but complexity, family members have had to adapt. the boys preferred to share one house and that If they cannot cope with their responsibilities, made two others available for visitors. A hospi- family membership is no guarantee of a job. tality business started to develop, and it looked On the other hand, the board of directors will pay rather attractive compared to the alternatives. So for a complete university education for family in 1926 the first purpose-built ‘guesthouse’ was members wanting to enter the business in a established, and three O’Reilly sisters moved in professional capacity. to help run the business, although it was seen as Full-time family members of staff share a temporary measure to boost cashflow until the marketing responsibilities when it comes improved road access would make the farm to geographic areas. Shane handles Europe, more profitable. Peter has North America, Greg is responsible for A major part of the O’Reilly legend stems Singapore and Catherine looks after Australia. from a famous air crash in 1937. A Stinson air- Under Peter, there are regular marketing liner, just taken off from Brisbane and heading meetings, and a lot of travel is undertaken. south to Sydney, disappeared in the McPherson Range. Almost a week went by before the O’Reillys heard of the tragedy, so it was an unexpected triumph when Bernard O’Reilly Business dimensions trekked into the forest and saved two survivors after a full 10 days of isolation. This story of cour- A major building project occurred in 1977 to age and skill was very big news, making Bernard expand the Guesthouse, and its first bar was into a celebrity. He later published a book enti- constructed in 1984. The popular Tree Top tled Green Mountains to meet the public interest. Walk was constructed in the rainforest near the A statue of Bernard and the rescued survivors Guesthouse in 1987. Major physical improve- has been erected at the Guesthouse site. ments occurred in 1991, the same year in which In 1944 Mick and Annie returned to the the approach road was finally sealed over its mountain with two sons, Vince and Peter, and entire length. In 1997 the kiosk (called ‘Gran’s’) these boys later became the second generation was expanded to handle the growing volume of to run the guesthouse. Mick was Manager of the day-trip visitors, providing both a retail shop operation, beginning in 1946, while Annie ran and restaurant. the little store that was established in 1951. Both A major expansion was brought to fruition of them passed away in 1979. in 1999 with the opening of Canungra Valley The two sons of Mick and Annie were Vineyards. This tourist-oriented facility lies along both married in 1961 and together they estab- the approach road to the national park in an lished the third generation. Vince married Lona attractive valley-floor setting. It is 90% owned by Murphy and they had ten children, while Peter the O’Reillys, although the venture originally married Karma England and they had five had another partner who has been bought out. children. The biggest expansion ever to the Guest- In 1947 the first road was built to the house was realized in 2000, adding 21 guest Guesthouse, finally allowing motor vehicles to rooms, a relaxation centre and new staff bring in tourists and supplies. By 1960 bus tours accommodation. were snaking their way up the oft-muddy O’Reillys sought and was awarded road, but the greater connection with the outside advanced ecotourism accreditation from the world came in 1967 when the electricity line was Ecotourism Association of Australia. Although extended to the guesthouse, replacing the old they do not use the term ‘ecolodge’, it does fit generator and wood-fired hot water system. A their operation in a number of ways. Perhaps the year later Land Rovers were purchased to cater biggest difference is that the Guesthouse has to the needs of older guests who could not do continued to move up-market into the luxury vigorous backcountry hiking, and in 1975 these accommodation category. were replaced when O’Reilly’s acquired its own Capitalizing on the family brand is on- four-wheel-drive bus. going. Gran O’Reilly’s Store, at the Guesthouse,

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includes a bistro, gift shop and other provisions. determined by the trustees. This arrange- It is very popular with day-visitors to the park. ment is being questioned by some of the third- There is now an O’Reilly’s line of clothing, generation O’Reillys who find they have almost gifts, nature videos, and wine from the Canungra no rights to manage the company or inherit Valley Vineyards. shares. In effect, the tangible assets of the com- pany are locked away forever. One potential problem raised by the family trusts is that of pressuring family members to Ownership dimensions work in the company when they would rather not. If they could be issued shares or provided In the early days all eight O’Reilly boys owned with a cash settlement, they might be happy to separate properties, but built and operated the leave ownership and control to others. The risk, Guesthouse collectively. A public company was as recognized long ago by Mick, is that family formed in 1931, but this action threatened control might gradually, or even rapidly, slip family ownership. In 1948 Mick, then manager away. of the Guesthouse, organized a share buy-back The company is managed by a Board and de-listed the company, returning it to family of Directors including family members (two ownership. This covered the guesthouse and from each of the two trusts) and two non- combined properties. Mick’s sons, Vince and family directors. This board makes operational Peter, became directors of the company in decisions under guidance of the chairperson 1957. and executive director (who are non-family). In 1994, two family trusts were established, Structured, monthly board meetings are held. reflecting the fact that brothers Peter and Vince The non-family trustees are vital, both owned 90% of the shares, with Lona and Karma in helping to avoid in-family management holding the remaining 10%. Joe, the longest problems and in counselling individual family surviving of the original O’Reilly generation on members. They were sought by the family after the mountain, died in 1989. In the next decade a process of setting out desirable attributes. the third generation started to take charge. Personal relations already existed with the two Shane, the current Managing Director, was external directors before they were asked to sit appointed director of the company in 1995; on the board. a year later his uncle Vince retired, then in 1998 The board, however, has made important his father Peter retired. strategic decisions that did not conform to the Today, with ownership under two family non-family directors’ advice, as in the case of trusts, O’Reilly’s remains a flourishing family taking dominant ownership in Canungra Valley business. Fifteen third- and fourth-generation Vineyards. Family businesses tend to take a family members work in it. However, there might long-term perspective on everything, whereas be a problem looming in maintaining harmony traditional company directors often focus on and sustaining family control. short-term returns. Regular family meetings The family trusts work this way: all are held (every six months) to keep everyone descendants of the two brothers, Vince and informed and to get their input. Peter Sr, automatically become beneficiaries. The O’Reillys believe in professionalism, to However, it is totally up to the two trustees of the point of bringing in non-family trustees, a each trust as to who gets annual dividends and , and other professionals. Jobs how much. The first dividends were paid only are advertised by the human resources manager four years ago, with Aus$20,000 paid from each and both family and outsiders can apply. A trust in equal allocations. Shane believed this to written ‘family employment policy’ covers this be a perfect model when it was introduced, but issue. now he has some doubts. The dilemma of the family trusts will have The family trusts serve to keep ownership to be resolved. At issue is the means to extract and operational control within the family, value for family members while maintaining but they also ensure that no one can realize a family control. Dissolving the trusts and issuing direct benefit other than wages or dividends as shares, which could include retention of majority

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control, might still have a serious cultural impact rafting business and Lodge to their daughter on the company through dilution of family Nicola and her husband Brian Megaw. influence on the board of directors. Brian and Nicola are shareholders in River Going completely public could eventually Valley Ventures Ltd and Brian is Managing result in the O’Reilly name remaining only as Director. A number of shares have been placed a brand, a commodity to be bought and sold. in a family trust, and the Megaws want to move A number of expansions are contemplated, all their tangible assets into this device to afford primarily to increase accommodation for protection to the family against business failure both guests (two-bedroom, spa villas) and staff and to facilitate inheritance. When the transfer (self-contained units), and to continue moving has been completed, River Valley will lease back up-market. Approval has been obtained to the physical assets from the trust. construct up to 50 cabins 1 km from the The Megaws have three daughters, one of Guesthouse, but the recent improvements took whom, Jane, aged 22, is currently working in priority. Now an equity partner is being sought the business. Kate (aged 19) works part-time for the cabins, but approval will lapse in 2002. in the Lodge, but concentrates on her school The company also plans to sell 50% of Canungra studies. Melissa, 20, is a cook in the Lodge. River Valley Vineyards. Valley is a second-generation family business in which extended family ties are an important ele- ment. Nicola’s father, Brian Sage, continues to Case 8.3 River Valley Ventures, be involved in the business through contractual New Zealand provision of vans to carry rafters to the drop-off zone up-river. Mr and Mrs Sage live in a new house on the cliff overlooking the Lodge and Background river. Nicola’s role has not changed as much, but River Valley Ventures Ltd is situated along the computerization of their business systems has Rangitikei River on the North Island of New eliminated the need for manual bookkeeping. Zealand. It is a remote setting some 32 kilo- Nicola’s brother, Richard, is an expert kayaker metres from the nearest town, Taihape, which is and uses this vehicle to take action photographs located on State Highway 1. To the north is of rafters and other kayakers. This is a profitable, Auckland, the main tourist gateway to the coun- sub-contracted element of the business. Richard try, and to the north-west lies Lake Taupo and also develops and sells kayaks. Rotorua, both major tourist destinations. Most The horse trekking operation is contracted highway traffic passes through the Rangitikei. to Brian’s sister, Shona. River Valley makes the bookings and takes a commission. The treks are a very popular feature and can be purchased Family dimensions with other activities in a package. The Megaws have never lived at the Lodge, River Valley Ventures was founded in 1982 as a but own a house 2 km away. This provides a registered company by Brian and Robin Sage to necessary escape from the constant demands of provide white-water rafting. It was a sideline staff and guests and keeps family life somewhat to their farming operation, made possible by separate from business life. In the early years ownership of 1.5 km of river frontage and they both worked at all jobs, all the time, and control over the best landing zone. Other rafting dreamed of employing a manager to relieve operators had used the road to the river (which their personal burden. They first took a family had been constructed by the Sages) on an ad vacation from the business in 1995, for a couple hoc basis. Initially the Sages provided meals of days and a trip to America to visit their and refreshments to these operators and daughter. collected a toll. Their rafting company began Brian originally micro-managed the busi- with the purchase of two rafts. However, by ness and took parties rafting five days a week. He 1990 Brian and Robin Sage sold their farm has reduced rafting to 1 day a week and now to cover the most pressing debts and sold the finds himself doing mostly macro-management.

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Staff are able to do more, and do not require the accommodations plus four double/twin rooms level of supervision they once did, although he and a large open area for meals and relaxation. finds delegating authority difficult. Showers, toilets and changing facilities for raf- Brian elaborated on the vision: ‘First ters were provided outside. A diesel generator and foremost, River Valley needs to keep being was first used to provide electricity. fun! Not only for people who visit, but also for Unfortunately the budgets that formed the staff.’ A ‘hands-on involvement by management basis of the expansion bore little relationship leads to an in-depth understanding of the to the reality of the situation. By 1990, despite business, its opportunities and threats. With this turnover of NZ$350,000, the annual operating understanding we can provide the leadership loss had also grown to NZ$40,000 and the com- required to strive for ongoing improvement, and pany was unable to service its debt. The family excellence.’ went through difficult times as creditors sought The Megaws’ extended family is an impor- repayment of loans. Finally, Brian and Robin tant feature of this case study. Who better to get Sage sold their farm to cover the most pressing involved, and to trust, than family members? debts and sold the rafting business and Lodge to This network might be a somewhat unique their daughter Nicola and her husband Brian. feature related to their isolated location, but After taking over from Nicola’s parents the it suggests that family connections could be immediate objective was a financial turnaround. important both in start-up and development of Now, sustainable growth and profitability are the family business. pursued. The owners want to position River Brian Megaw was wishing he was back Valley ‘firmly at the top of our industry segment, on the river, guiding a white-water rafting tour both in profitability and in quality of product.’ down the raging Rangitiki, but he was managing This means River Valley has had to create and director of a successful family business owned continuously promote itself as a destination in its with his wife Nicola, and his rafting days had long own right. since been reduced to once a week, if he was Once the company became financially lucky. A major decision weighed on his mind, as sound, improvements and expansions were it involved a NZ$250,000 loan to construct new undertaken. Electricity was brought to the chalets at River Valley Lodge. The chalets had Lodge, thereby relegating the diesel generator to the potential to generate substantial profit and stand-by status. Tree planting was accelerated to reduce his dependency on a single market for aesthetic reasons, to screen working areas segment. However, the history of this family and improve the views. The original Lodge, business included one major financial disaster, originally used mostly by schools and groups for and although it had been followed by a complete outdoor management courses, was upgraded. recovery, taking on such a large debt involved The plan had been to convert dormitories into another great family risk. Was the timing right? meeting rooms to accommodate management Is there ever a good time to borrow so heavily team-building groups, but that plan is now for a family tourism business? These are some of obsolete. the questions that emerge from this case study Outdoor management training for groups when establishing and expanding a family has been discontinued, although it once business in tourism. accounted for about 20% of the business. Multi-day rafting trips have also been discontin- ued, leaving the focus on shorter, white-water adventures. These changes have been made in Business dimensions response to the partnership with Kiwi Experience (discussed later). At first the rafting business went well, but Other recent additions have been the golf in 1987 the Sages decided to expand, and course, an expanded tenting area and a river- constructed a loan-financed lodge by the river. side stage for events. Major growth is not being River Valley Lodge has a beautiful site in a contemplated, nor is it desired. A plan to build deep valley, with views of a waterfall and native three chalet units is the only physical develop- forests rising above. It still offers dormitory-style ment on the horizon, and the emphasis is now on

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improved yield. To meet the needs of older, backpackers to River Valley so that the overseas more quality-conscious tourists, River Valley is segment (mostly from Europe) has grown planning to borrow NZ$250,000 to construct quickly to account for 80% of customers. three chalet-style units on a view-site separated This new, guaranteed backpacker market from the Lodge. Brian calculates that they will has substantially increased River Valley income, become profitable above 20% annual occu- but has also required substantial adjustments. pancy and will therefore add substantially to A new accommodation block featuring simple revenue whilst broadening their market appeal. bunk-house arrangements had to be built to The Megaws have been approached with accommodate the increased numbers, and the the idea of franchising their successful formula product was changed. elsewhere in New Zealand, but they declined. The partnership contracted with Kiwi Opportunities for new challenges might exist for Experience in 1995 changed the marketing Brian elsewhere in the tourism sector. A single, picture completely by focusing attention on the contractual partnership with Kiwi Experience in growing backpacker market and their needs, and 1995 dramatically changed the fortunes and by causing the Megaws to get concerned about plans of River Valley. Brian had known the potential over-dependency on this one source of potential of this market segment, but it took a customers. Marketing expenditure as a percent- visit from Kiwi Experience, and a subsequent age of sales has been falling, from approximately offer, to cement a deal. 10% in 1997, to 6% in 2000. This reflects Kiwi Experience is one of several coach/bus greater success in attracting customers and more companies that cater to the rapidly growing effective communication techniques, especially backpacker market in New Zealand. Visitors, through their website. mostly young and foreign, can use the bus Brian has determined that only 55% of service (7 days-a-week in summer, 5 in winter) guests are purchasing an activity, so clearly to access a range of destinations and accommo- many backpackers view their visit as purely for dations all over New Zealand. accommodation or sightseeing. He realizes that River Valley is featured as an overnight and daily expenditure has to be increased, given the adventure destination exclusive to Kiwi Experi- one-night average length of stay. This led to ence (see their website: www.kiwiexperience. development of the pitch and putt golf to provide com). The southbound bus (from Auckland to guests with a relatively inexpensive (NZ$10) Wellington) stops automatically at River Valley, activity. Food packages, Internet access and and Kiwi Experience promotes the adventure merchandise for sale are other examples of value activities in its own marketing, so there is a adding. strong likelihood that travellers will spend a night There is also a joint marketing arrangement there. In fact, the average length of stay at River that provides visitors with an additional adven- Valley is now one night. Occupancy rates are ture activity, similar to the popular two- and growing at 4% a year, on a 10,000 person-night three-activity packages found in Queenstown in base. the South Island (New Zealand’s self-proclaimed Surveys of Kiwi Experience users consis- adventure capital). tently show River Valley to be ‘recommended’ Rangitikei River Ventures, by agreement accommodation. White-water rafting and horse with River Valley, runs scenic and camp-out trekking are two of the most popular and highly rafting trips but not white-water experiences. recommended activities by this same travel The two companies refer customers to each segment. other for commissions. Farmstay accommoda- River Valley’s market segments changed tion had been obtained through partnering with dramatically with initiation of this partnership. the Powell family. The house is situated close to Previously, independent overseas tourists River Valley Lodge on the Powells’ working accounted for about 10% of the customer sheep farm and guests had the option of either mix, tour groups were 20%, schools 30%, and participating in farm activities or simply enjoy- the remainder came from social groups, ing the rural tranquillity. However, the farmstay clubs, family outings and the like. Kiwi Experi- is now used for seasonal staff accommodation ence, however, brings mostly young, foreign only.

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In the early years, marketing occurred by website address and the slogan ‘what are you word of mouth, limited advertising, partnering waiting for?’ River Valley phone cards and the with tour companies, and ‘serendipity’. For occasional production of CDs complement the example, River Valley worked with one marketing effort. Australian tour operator who brought skiers to River Valley’s website (www.rivervalley.co. the volcanic slopes of Mount Ruapehu 2 hours to nz) is viewed as their primary offer of informa- the north. A director of the company arrived tion, replacing brochures. The number of unique at River Valley as a client and was so thrilled users of their website has grown to over 300 with the product that he incorporated the rafting per week (March 2000). The website is used experience into his own package. However, raft- mostly for information-gathering, and like many ing was secondary to the skiing, and therefore other tourism operators River Valley has found business from this source was dependent on ski resistance to on-line bookings. conditions. When the skiing was bad, rafting Did the Megaws seek to create opportuni- demand increased. An added complication was ties for personal fulfilment through economic that bad weather required extra transport costs activity? (see for example: Morrison et al., 1999). to get customers to suitable river areas. What role does the founder play in operating the Monitoring of advertising in magazines business, and does that change over time? Is revealed that only 8% of demand was generated entrepreneurship an inherited personality trait? this way, yet it accounted for 80% of River Above all else, consider the nature of risk-taking Valley’s promotional expenditure. That had to in establishment and growth of a business, and change, so in 1996 they cut back on magazine the possible pitfall of over-confidence in one’s ads, increased their production of brochures own capability. from 20,000 to 30,000, and employed targeted This case is rather unique in that it provides brochure mail-outs using their customer and a longitudinal examination of the company’s contact database. More careful targeting of development and of a family business success- intermediaries who could bring their customers fully inherited and developed by the children. to the Lodge was also attempted. Joint market- Furthermore, this case presents a clear success ing through the Rangitikei Tourism Association story from a purely business perspective, while at at trade shows was initiated, including participa- the same time generating questions regarding tion in New Zealand’s annual Tourism Rendez- small business strategy and the future of the vous (TRENZ) where inbound tour operators company and its family owners. It provides and suppliers meet. many insights into the nature and challenges of Another marketing initiative was the famil- developing a rural tourism/hospitality business. iarization tour, wherein River Valley brought The case illustrates how an easy-to-enter, in car rental staff, tourist information centre sideline rafting business quickly took over the personnel and others to visit the site. ‘Farm’ Sages’ lives and resulted in a financial disaster. tours are now offered to accommodation The absence of a business plan, lack of cost con- providers who see the Kiwi Experience back- trols, excessive personal debt and inexperience packers earlier in their New Zealand tour, so in operating and marketing a growing tourism that recommendations can be made concerning business were all contributing factors. High reve- accommodation and activity options. nues at first hid the problem, leading to develop- Branding has become important to River ment without sufficient cash reserves to ride out a Valley, now that they are a success. Their brand- lengthy period of asset building. The farm and ing effort is built on the constructs of quality, the house were sacrificed, although sufficient land river, excitement, and an outdoor adventuring and the Lodge were retained to permit a fresh New Zealand experience that is at once safe and start. fun. In 2000 a new logo captured the essence What is amazing is that the business was sal- of this brand; it has an authentic New Zealand vaged by the children who grew it into a financial feel to it, reminiscent of Maori designs. Their success. Inheritance of family businesses in the new posters, website, and merchandise push a rural tourism and hospitality sectors is believed consistent message. A new poster features their to be rare (see Getz and Carlsen, 2000), for

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several possible reasons. Many such businesses they juggled debts, paid cash for everything, are based on high levels of debt and/or ‘sweat introduced proper accounting procedures, equity’, and while they can sustain a family saved and scrimped, argued and survived. By they do not often present an attractive or viable 1994 a small net profit (after tax) of NZ$30,000 option for the next generation. Furthermore, was realized on turnover of NZ$230,000. This many rural tourism and hospitality businesses represented a decrease in total revenue, but are rooted in lifestyle choices that might not owing to retrenchment, a firm profit on which to be shared by younger adults, or in the need to build. generate some additional income for farmers – Since then it has grown into a profitable inheritance of a farm does not necessarily entail business and has become a destination for continuation of the sideline business. adventure activities and , attracting over 10,000 visitors annually. River Valley oper- ations in the year 2000 generated for the first Ownership dimensions time NZ$1 million in annual sales. Brian is not yet ready to contemplate The decision of the children to take over the retirement, and in fact has ambitions to improve business was not made lightly. Brian had met the business in other ways. He has thought about Nicola while both were students at university in succession and thinks that at least one of their Auckland, but when married they returned to daughters might have the vision and drive to their rural roots. By 1982 Brian was managing a take over some day. A real question is whether sheep-shearing gang, and had little relationship the children will have the necessary manage- with the rafting business. Brian and Nicola had ment skills to run such a business, with more contemplated starting their own sea-kayaking and more technological skills being required. business in the Bay of Islands and had already Creation of the family trust will ultimately followed their leisure interest by exploring that facilitate inheritance of all the tangible assets, area and its potential. They had even drawn while in the meantime it pays allowances to the up budgets. With the financial crisis at hand, children. Whether or not any of the daughters however, Nicola’s parents were threatened with take over the business, Brian feels that the losing both the farm and their home. Given that experience of growing up with it has broadened the rafting operation had made money, it was their horizons considerably. decided to try to save the business. In the Megaws’ case family loyalty, ties to the land, and personal leisure interests com- Chapter Summary bined to make the salvage attempt attractive. Much hard work and worry followed, but the These three cases illustrate that establishing and family was able to capitalize successfully on their running a family business specializing in tourism effort, talent, and vision of what the business in the natural environmental is a very attractive could become. option. All of these businesses offer unique Brian persuaded the creditors to keep opportunities for guests to immerse themselves the business going, arguing that its assets were in nature at the same time enjoying a insufficient to pay the debt. The only way out high standard of accommodation and service. was to turn it into a profitable business, and it It is apparent that the natural environment is had certainly shown its potential to generate the basis of these business activities and the revenue. Most of the problems, according traditional family connections with the environ- to Brian Megaw, were created by poor cost ment (in cases 8.2 and 8.3) and personal controls, accounting and management practices. values (in case 8.1) are the prime motivators It was a case of good ideas on the part of the for the family businesses. Ironically, the success Sages, but inexperience in the practicalities of of these businesses acts to limit the amount of operating a tourism business. time the families can actually spend enjoying Brian and Nicola sold their own house the natural area, which attracted them in the and its 5-acre plot to raise capital, and for a year first place.

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References Morrison, A., Rimmington, M. and Williams, C. (1999) Entrepreneurship in the Hospitality, Tourism Getz, D. and Carlsen, J. (2000) Characteristics and and Leisure Industries. Butterworth-Heinemann, goals of family and owner-operated businesses in Oxford, UK. the rural tourism and hospitality sectors. Tourism Management 21, 547–560.

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9 Family-owned and -operated Tour Companies

Introduction departs at 10 a.m. every day from the town jetty in Walpole and returns at about 1.00 p.m. The These three case studies cover a number of current costs are Aus$20 for adults, Aus$10 for topics relevant to all family businesses as well as children under 14 and free for children under some specific issues related to family-owned/ 5 years old. The 3.5 hour Sunday River Cruise -operated tour companies. The reasons for operates in the summer and costs Aus$25 for establishing a tour business in these three cases adults, Aus$15 for under-14s and free for seem to be in response to an opportunity that is under-fives. Both tours include a detailed inter- recognized and pursued by the founders and pretation of the natural, social and historical their families. It may be that design and delivery aspects of the area and guided walks at selected of land, marine and adventure tours attracts sites. Active participation is encouraged in all more creative and entrepreneurial family busi- aspects of the tour and interaction and discus- nesses. The capital-intensive nature of these sion over tea and homemade cake is a feature businesses introduces particular issues for of the tour. Current capacity is 18 passengers funding the establishment of the business. In on the smaller vessel The Naughty Lass and 48 most cases, founders have had a working life passengers on the larger vessel Rainbow Lady. before going in to business that provides them with the capital, skills and motivation (in the form of a desired career change) to commence Family dimensions in business. Once in business the challenges of further expansion, marketing, staffing, season- WOW is a family-operated boat tour company ality and customer interaction are confronted owned by Ross and Marion Muir, who started with the same degree of enthusiasm and com- the firm, together with their son Gary as a mitment that was evident at business start-up. partner. There have been seven generations of Muirs in the area as farmers and WOW is the first tourism-oriented venture. Marion is finan- Case 9.1 Wild Over Walpole (WOW) cial manager while Ross and Gary handle the cruises, but roles are not fixed and do overlap. Background Gary has considerable professional experience working with the Department of Conservation WOW Wilderness operates cruises with two tour and Land Management (CALM), the state land vessels on waterways of the Walpole-Nornalup management authority. He also does outside National Park on the south coast of Western consulting, computer-assisted design, environ- Australia. The 2.5 hour Wilderness Cruise mental science and guiding, all under the Wild

©D. Getz et al. 2004. The Family Business in Tourism and Hospitality (D. Getz, J. Carlsen and A. Morrison) 145

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Over Walpole Wilderness Services business family continue to operate the family farm on a name. He is poised to take over the tour full-time basis. Ross had tried other forms of business when his parents retire and hopes to employment after leaving the farm, including expand it by diversifying the products offered a stint as a commercial fisherman, during under the WOW umbrella. His vision is to which time he renewed his interest in the expand the business his parents created, ocean and inlets surrounding Walpole. When possibly in partnership with his cousin, Rob, the opportunity to purchase their first tour boat, whose family currently operates a houseboat The Naughty Lass, presented itself in 1994, and B&B business in Walpole. Ross and Marion embraced the idea. Within Ross has a farming and fishing background one week of that purchase, a second con- and brings a wealth of historical knowledge to siderably larger tour vessel became available the WOW cruises, which he takes when Gary is and Gary, who was working as a land manager not available. Since starting WOW, Ross has with the Department of Conservation and Land been active in the local business community and Management, was included in the decision to was president of the Walpole Tourist Association acquire it. Gary had considerable experience for 2 years. Ross has also managed a number of and training in environmental management and land management projects in the area, including interpretation; combined with Ross’s extensive a tourist boardwalk project in the Tingle forest. knowledge of the social history of the region Marion manages the finances of WOW and and Marion’s skills in financial management the has developed considerable skills in managing WOW business was formed. farm finances, which are now applied to the The first few years of operation were on business. She is also becoming proficient in the a limited basis and tours were conducted mainly use of computers and account-keeping software, in the smaller of the two boats. Gary had which she enjoys. Gary conducts most of the committed to a major project in the region and daily tours and works with local land manage- had limited time to devote to the business. Con- ment agencies on projects that support the sequently Ross conducted the tours and kept the mission of WOW. He has initiated a range of business operational. Upon completion of the projects that will enhance the WOW experience project in 1996 and the gaining of a coxswain’s and will develop new products and services certificate, Gary was ready to make a full-time including accommodation, foods (based on local commitment to the business. The project that he bush tucker), outdoor adventure and scientific managed, the construction of a major nature- research expeditions into the wilderness. based tourism attraction in the Valley of the Giants near Walpole, provided a significant boost for tourism in the region. This is indicated by the increase in visitation to the Walpole Business dimensions Tourist Bureau after September when the Tree Top Walk opened in 1996 (see Table 9.1) and Ross and Marion Muir set up the business as an provided direct benefits for the WOW business. opportunity to generate income in their retire- After 1997 interest and awareness of WOW grew ment and as a self-employment opportunity for through favourable word of mouth, television themselves and their son Gary. The Muir Fam- programmes featuring the Tree Tops Walk and ily has had a long association with the region WOW, and some advertising through tourism around Walpole, commencing with farming and promotional magazines and brochures. later in retail. The goal of living and working The initial capital investment in the business in the region that their family pioneered was drawn from Ross and Marion’s retirement and helped to establish was important and the funds so it is essential that the business generates historical and personal links with the region are sufficient retirement income for Ross and Marion themes that run through the Muirs’ family and as well as an income for Gary. This financing business life. Traditional cattle farming in the arrangement, whilst avoiding the need for region was becoming less viable in the 1990s investment loans from financial institutions, does and although the family retained ownership of not mean that the investment decision is less extensive farm lands, only the eldest son and his risky. On the contrary, as Ross and Marion reach

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Table 9.1. Visitation numbers for the Walpole Tourist Bureau, January 1994–April 2000.

1994 1995 1996 1997 1998 1999 2000 2001 2002

January 2,427 2,149 2,560 6,503 7,679 8,438 9,594 11,656 11,887 February 1,872 1,720 1,892 3,111 3,327 4,264 4,616 5,526 6,294 March 1,611 1,602 1,511 4,758 4,008 4,453 5,503 6,796 7,812 April 1,761 2,176 2,819 4,718 6,620 7,249 7,459 7,822 7,302 May 1,002 972 2,500 2,486 3,387 3,549 3,890 4,396 4,475 June 912 847 1,087 1,667 2,027 3,007 2,952 3,350 3,358 July 600 622 981 2,465 3,100 3,958 3,006 4,304 3,792 August 467 1,109 1,317 2,013 2,750 3,279 2,957 3,968 3,539 September 1,127 1,271 3,109 4,621 5,811 6,923 6,407 6,773 7,125 October 2,721 2,911 4,017 5,516 5,978 7,313 7,062 8,830 8,643 November 970 1,159 4,610 3,,461 4,132 4,848 5,257 6,236 6,897 December 1,921 2,071 5,418 4,629 5,320 5,952 6,926 7,977 7,705 Total 17,391 18,609 31,821 45,948 54,139 63,233 65,629 77,634 78,829

Note: Bold type denotes Tree Top Walk opening. Source: Derrin Foster, Manager, Walpole Tourist Bureau.

retirement age there is added impetus to ensure Bureau and also through accommodation that the business is profitable into the future. providers in Walpole and other towns within the Periodic injections of funds are required for region. running the boats and new motors have had to Supporting the attainment of this long-term be purchased for both vessels in the last 2 years. goal is a detailed set of goals and objectives for In the near future the larger of the two vessels is the product and the business. WOW’s mission marked for a re-fit, with major modifications to statement is . . . ‘To be leaders in sustainable the hulls and to the waste water storage tank held nature-based environmental tourism offering within the hull. The vessel should have a larger our clients a blend of ecological, cultural and capacity after re-fit and should also generate adventure opportunities.’ WOW’s objectives are higher revenue. At present WOW turnover is to provide visitors with high quality experiences about Aus$125,000 per annum based on about based on the natural environment, to implement 8000 passengers. Fortunately, the major re-fit best practice in environmental management and can be funded through ‘plough-back profit’ or to expand, protect and restore the land and wild- reinvestment, rather than through any new life. A number of projects are already in place financial injection. that will result in the restoration of biodiversity The long-term goal for the business is con- of the wilderness areas visited on the cruise as tinued growth. This will be based on the larger well as research aimed at increasing scientific capacity of the Rainbow Lady that will allow it knowledge of wilderness. Gary has a vision for comfortably to handle coach-loads of patrons WOW that encompasses a team of specialists on a daily basis in addition to the current fully that will each contribute to a greater understand- independent traveller/tourist market. Presently, ing of the biological, cultural and traditional sig- the majority of visitors are from within Western nificance of the wilderness. This knowledge will Australia (WA) and are mostly self-drive tourists then be imparted to visitors thereby encouraging from Perth (Perth is the capital city of Western deeper appreciation of the historical impacts Australia), a five-hour drive from Walpole. of European settlement on the environment and WOW has had some success in attracting coach aboriginal inhabitants of the area. Gary’s tours from provincial centres within WA and interpretation of the natural and cultural plans to continue to grow this market. Older history of the area carries a very powerful persons predominate WOW’s visitors. The tours message that promotes friendship, tolerance and are promoted through the local Walpole Tourist understanding between cultures and people.

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Ownership dimensions economic and environmental fabric of the Walpole region. An Australian songwriter, Paul All family business members agree that Gary Kelly, once penned a song titled ‘From Little will eventually take full control of the running of Things, Big Things Grow’ and this truism could the business. Gary has a high level of commit- equally be applied to the WOW business. Many ment to the mission and objectives of WOW lives and many more miles of wilderness have and will pursue his plans for expansion and been touched by WOW’s activities in a positive growth under the WOW ‘umbrella’ name. He way, and maintaining that positive interaction has spent 5 years developing and recruiting and contribution to the wilderness remains a a group of friends who have specialist skills unique vision shared by Gary Muir and his in interpretation, scientific research, traditional family and friends. use of natural flora and fauna for foods and medicines (called ‘bush tucker’) and outdoor adventure. He is also keen to include his cousin Rob in the future business structure, but he Case 9.2 Minnewanka Tours alone will retain ownership of the WOW busi- ness name, and hence it will remain a family Background business. He has made a substantial emotional investment in the business, as well as a financial Minnewanka Tours is a family-owned, seasonal investment in the expansion of WOW. On the business within , Alberta, other hand, Ross and Marion have a purely Canada. The Mackie family, consisting of business approach and would mainly like to see husband and wife Ian and Brenda, and niece a financial return at the end of the day. That is Diane, have an exclusive lease from the park not to say that they are completely detached authority to operate a marina and boat tours on from the business. Indeed, all three family the park’s largest lake (and the only lake in the members hold a great deal of pride in WOW as park where motor-boating is permitted). They well as a deep love of the Walpole region and handle 40,000–50,000 customers a year. all that it holds. This theme runs right through The business consists of the following: the business. Ross and Marion will continue to • three tour boats; operate a small B&B as part of their private resi- • 21 rental motorboats; dence in Walpole, which they can comfortably • marine gas sales; and maintain in retirement. The succession and • snack/retail shop (tackle and ). structure of WOW has yet to be finalized and it may be the case that Ross and Marion draw an In addition, the family owns a chartered annuity from the business. fishing company with six boats, operating out Should Ross and Marion bequeath to Gary of the same lakeside facility and utilizing the a business that is unencumbered with debt, it same staff. The Mackies lease office space in would provide an ideal platform upon which the nearby town of Banff, and also have office Gary can realize his vision for WOW and the space in their home in Banff. In addition they Walpole wilderness area. Ross and Marion have a leased house at the lake where up to eight realize that Gary has a great deal to offer, as well seasonal staff stay. Operations are permitted as to learn, and are keen to see him succeed. for only 5 months of the year, but actual business However, their enthusiasm is balanced with the at the lake occurs for only about 4 months pragmatism that they have inherited from gener- (May–September) owing to prohibitively ations of Muirs who farmed and ran businesses freezing conditions. in the region. In many ways it was farming and Lake Minnewanka is the subject of a book business that was the genesis of WOW, and the by R. Sandford, who describes the history of Muir family farm remains an important link with recreational use of this beautiful body of water. the past as well as a key to the future of WOW. It was prepared with the co-operation of the WOW is much more than a family-owned Mackies and includes a number of photos of and -operated tour boat operation, as it repre- theirs and previous tour boats. The book’s sents a substantial component of the social, introduction by Ian and Brenda states:

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For more than a hundred years, visitors to Diane started to work during summers at Banff have been enjoying boat tours on Lake the lake in 1987 and she in particular became Minnewanka. The same stunning scenery that much like a family member. Nevertheless, in enticed passengers off the train to visit the lake 1998 she was surprised to be contacted in Van- in 1889 still attracts people to the Lake of the couver, where she worked, and asked by Ian to Water Spirits. We are proud and fortunate to be the stewards of the lake and its boating become manager of Minnewanka Tours. Her tradition today. university education had been in economics, and she had gained experience in almost all aspects of the business, so she felt confident but challenged. The idea of living in a small town Family dimensions appealed to her a great deal, and she had always enjoyed her summers spent in the mountains. The Minnewanka Tours Co Ltd was formed Bank financing has been used to purchase in 1977 when Ian and Brenda purchased the and develop the business. At first their personal operation from an acquaintance. Originally guarantees were required, but later the business there was another married couple involved, became successful enough to secure loans with- but that partnership did not work well and the out them. Possibly a planned new tour boat will Mackies bought them out after the first year. be leased, rather than purchased outright. Since Following a career with a major company there is no land ownership in the national park, involving a variety of engineering and manage- the company’s assets consist of boats, goodwill, rial experiences (in tourism and recreation), and the value of a long-term lease. Ian was looking for self-employment. He The three Mackies are the only permanent wanted a ‘hands-on’, challenging venture, workers, but the summer season requires about which he describes as being ‘vital’ to his life. 20 additional employees. Some are all-year He explained: ‘If I put the same energy and residents of Banff who work at ski resorts in the time into my own business as I gave to the winter, and others are summer-help only. Up to company, I knew it would be successful.’ eight of these staff stay in the lakeside house. Also, he wanted it to be a family business A key seasonal employee is the operations in which both he and Brenda would work manager. He is a vital part of the business and together. might eventually become a partner, with Diane, Ian was not particular about the type of in its ownership. business or location, but Banff was a natural Ian is President of Minnewanka Tours and choice since he had grown up there and had makes the major decisions. He had to work over most recently been manager of the Banff Springs a period of years to secure the latest lease from golf course. The opportunity arose at a personal Parks Canada, and was greatly relieved to get it level when the former operator of the boat tours in place. made it known to the Mackies that he was Brenda does the company books, and while interested in selling the business. she used to run the snack bar she now only Brenda had also been working in Banff and assists Diane in that task. Together with Ian was not particular about whether or not Ian they have an annual schedule of trade shows to was self-employed, but was supportive of the attend for marketing purposes. business idea and of staying in Banff. In a family Diane, as Manager, is taking an ever- business, she says, ‘you are a master of your own increasing role in the business with a view to destiny.’ becoming senior partner when Ian and Brenda Over the years a number of nieces and retire. Although already familiar with most of the nephews have worked seasonally for the operations at the lake, she is now learning all Mackies at the lake and stayed with Ian and the other aspects of the business. Brenda in Banff. Without children of their own, They have been very lucky with staff. In the Mackies had to look to other relatives addition to employing nieces and nephews, they if they wanted the business to stay in the get a lot of repeat seasonal workers. Being out of family. A nephew was considered for full-time town actually helps, as it attracts a different kind employment, but that did not work out. of employee. They tend to be young (20s and

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30s for the more responsible positions like boat docks at the lake, replacement of several fishing operation) or local school children. boats they had sold (to get back to the comple- The early years of running Minnewanka ment of 21), and possibly purchasing a brand Tours were difficult for Ian and Brenda, requiring new, fourth tour boat to expand the capacity of a great deal of work but with inadequate finan- that popular service. cial returns. Brenda recalls that the summer In 1999 the Mackies also leased additional workdays were very long, but did not seem office space above their current location in tough. Both of them worked elsewhere in Banff Banff, in preparation for hiring new staff. Their in the off-season to generate sufficient income. main need is for a full-time marketing and sales For all three Mackies work is seldom if professional. That person could replace Ian and ever left behind. Having an office at home is Brenda in some ways, thereby easing their work convenient, but also further cements the home– (for example attending off-season trade shows), work union: ‘It’s an integral part of everything plus do a better marketing job then is currently you do’. Although specific roles are played possible. A part-time accountant is also being by each of the three Mackies, flexibility is considered. also important. For example, Brenda and Absolute seasonality marks this business, as Diane work together to operate the snack shop. it cannot run in the cold months nor outside the They have informal business meetings and 5-month lease period. During the off-season a work together on a daily basis to get things lot of marketing and paper-work has to be done. done; sometimes they go to lunch together and Ian and Brenda have travelled a lot to trade discuss business. Within this family opinions get shows and this allows the combining of work expressed freely as issues are discussed and with pleasure. However, the travel can also be resolved. wearying. There is a great deal of customer contact in Although an all-year operation would this business, with a high level of personal service have its benefits, the option of adding a winter required, but much of this is enjoyable. As well, operation has been rejected. Opportunities for this business does not bring customers to the acquisitions in other locations have also been owners’ home, even if work responsibilities are rejected over the years, as they would have always present. generated a lot of additional travel and responsi- bility. Ian feels that adding a winter business would have been ‘overpowering’. He preferred to stay focused and ‘do things right’. Business dimensions

Rather than undertaking physical expansion, the company has been active in improving the Ownership dimensions quality of its equipment and service. Boats get refitted and replaced, and all equipment is kept Brenda and Ian will not retire in the immediate up-to-date. Increasing numbers of tourists, in future, but are grooming Diane to assume more line with growing visitation to Banff National responsibility and eventually become senior Park in general, has put pressure on the partner in owning and operating the business provision of service, but has also generated along with the operations manager. This is a more revenue. type of family inheritance, and although the For the 4 years prior to 2000 the Mackies legal and financial details have not been worked had been without a lease, owing mainly to delays out, it appears to be a practical solution. Diane by Parks Canada. While the parks people were will get support from the senior Mackies for a not worried about renewal, this gap meant that number of years to come and will ultimately the business could not be developed without have an experienced operations manager and undue risk, and banks would not lend them new permanent staff. money for developments. Following signing of a The option of selling the business was new, long-term lease, a certain amount of work considered, but the Mackies wanted a family can now be done. This includes completely new connection with Minnewanka Tours to continue.

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Selling would generate more cash immediately, As owner and manager of the business, but the process of transferring ownership to his personal life became integrated with the the new partnership will also generate income business; work was always being brought home for them, albeit spread out over time. Their with him. In this past year Ole has drawn a firm ambition has never been to get rich. line between work and home, particularly to ensure that he spent weekends with family. If he worked all the time, which was his normal Case 9.3 Åreguiderna operating procedure, his staff would also feel obliged to do so. Background

‘Founder’ Ole (pronounced Ow-la) Kristianson Business dimensions was trained as a car mechanic and ended up working on the ski lifts while at school. He got For the first two years Åreguiderna provided into guiding as a sideline, hardly charging guide services to private clients for hiking and to anything for his services. He has also worked in bus tours for sightseeing. They could not afford the local hospital and at the campsite in Åre to pay any staff, and Ole’s father kept remind- (pronounced Or-a). Over the past 15 years, ing him to ‘get a real job’. A hotel came to them since 1985, Ole Kristianson has developed the and asked if they could produce camps and leading guide service in Sweden’s mountain meals for a canoe trip, and this became their resort of Åre. His motto is ‘adventure and first function (‘arrangement’). The range of harmony’, but now he is planning to sell out activities they guided expanded (see their and move on to another, more personally website, in Swedish only: www.areguiderna.se) harmonious, line of work. He is a self-described and in particular they added snowmobile entrepreneur, now a professional, but once part – using purchased vehicles initially, but later of a group of three young, ‘naive guys’ who with 20 leased vehicles. set up a ‘fun business’. What changed? Is this a A few years ago Åreguiderna arranged and success story? sold tourist packages to the area, but this service was made redundant when the major ski-lift and hotel company in the resort began its own pack- Family dimensions aging and booking business. Now Åreguiderna mostly serves groups tied to meetings and Åreguiderna is a ‘sole proprietor company’, but conventions, both as guides and producers of there has been family involvement. Ole’s father, functions. They can mobilize up to 200 local now aged 86 and retired, has been a permanent people when necessary to serve a large event. but unpaid fixture at their camps and is Outdoor adventure is a seasonal business, much loved by the clients. He is a ‘character’ but there are opportunities all year round. who seems to provide cultural authenticity Winter predominates, with guided ski and to the experiences, while performing necessary snowmobile safaris, and the summer season services. Ole’s mother has provided baking for has actually been in decline. the camps. Ole is not married, but his partner, His customers are mostly Swedes, who as a a graduate student, likes to contribute to the nation prefer to go fishing and hunting on their business. He does not want her to sacrifice her own, but will gladly employ a guide service for studies for this paid, part-time work. winter mountain adventures aimed at corpora- On family involvement, Ole has several tions and other groups. Other clients include opinions. His family has had a big involvement English, Russians and some Norwegians. Indi- in the growth of the business, always discussing vidual clients come to Åre first, and then look for things and helping out. Gradually his father activities, while group business is generally tied came to see it as a legitimate and successful to pre-arranged meetings and conventions. business. On the negative side, Ole proclaims The company does not employ full-time that it is difficult to be a boss to family members. staff, but there are regulars who guide on a

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part-time basis. They are all males bar one, he bought back all the shares to take complete as physical strength has been a major criterion ownership and managerial control. for driving snowmobiles. The snowmobile Ole maintains he always had an exit plan. mechanic and office administrators work Currently he is negotiating with two potential the longest season, from September to May. buyers who would acquire very little in the way Numerous occasional workers are employed of tangible assets. They can buy the company when needed at functions. name, three wilderness camps, some equip- Åreguiderna is the dominant guide service, ment, goodwill with many contacts, and Ole’s but there is competition. Ole says that ‘fun advice. He would stay on as a paid consultant for businesses’ like this attract people for the a year or more. lifestyle, but they tend to burn out or fail after a A new company is in place and ready for few years. Why has he been successful? The his commitment. He will remain in Åre and run number one reason has to be hard work and a one-man firm, with emphasis on harmony increasing professionalism, evolving from fun to through team building. Perhaps his work can sound business practices. become international, but Ole is tired of manag- Ole says that relationship-building has been ing employees and has slowed from a ‘run to a critical success factor, particularly as in a small a walk’. He makes it sound like burnout, but resort town everyone gets to know everyone perhaps what this entrepreneur really craves is else. His office is located in a hotel and he shares a new challenge. space with several crucial contact bodies, includ- ing the on-hill restaurant management, apart- ment leasing agency and conference booking. Chapter Summary He works closely with hotels, the main reserva- tion system and ski-lift company. These cases studies demonstrate that an For marketing, Åreguiderna relies on the additional dimension of creativity, enterprise many contacts that generate group business and and enthusiasm is evident in family-owned/ referrals, and on their own website. A network of -operated tour companies. The focus on provid- people sell his product on commission. They ing the customer with a unique and enjoyable once had a sales office in Stockholm, but it was experience is also a common desire in these not as effective as it should have been to justify businesses and there is a high level of interac- the cost. tion between customers and family members. In two of the cases (9.1 and 9.3) the strength of character of the tour leader becomes a feature of the business, which is also one of the busi- Ownership dimensions nesses’ major assets and points of difference from other non-family firms in tourism. All The original three-way partnership was built three businesses case-studied have plans for out of friendship, not contracts. Over the years expansion in their programmes and (in Ole became the one to spend the most time case 9.2) for the people they employ, which and effort on the business. It evolved into a again differentiates them from so many other shareholding company with a board of directors tourism businesses that are locked in to existing and a hired managing director, and eventually infrastructure and capacity.

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10 Family-owned Tourist Attractions and Wineries

Introduction the Niagara Bench, Ontario, Canada. Owned and operated by the Speck family since The three businesses in this chapter occupy 1988, the land now planted with grapevines an important position in the tourism industry – was first deeded to their great-, great-, that of attractions. Like many tourist attractions great-grandfather in 1794. With the pre- though, they began operations not as tourist mise that fine wine is grown and not made, attractions, but in another industry altogether. they take low yields and tend the 225-acre These businesses would be what Leiper (1997) estate vineyards with meticulous care. Their referred to as ‘on the fringe’ of the tourism dedication to high quality in viticulture and industry. Case 10.1, Pelham Family Estate oenology has been rewarded with over 50 Winery was established to produce quality wine international awards (www.henryofpelham. but eventually became a tourist attraction as com). The winery offers a tasting bar and the appeal of wine and the Niagara region of cellar store and in 2002 the Coach House Ontario grew, especially in the populace cities Café adjacent to the cellar door sales room. of south-eastern Canada and north-eastern Winery tours, picnic areas, art exhibitions and USA. Case 10.2, Rivendell Gardens was origi- events are part of the winery experience and nally intended as a working farm and market an annual Shakespearean performance is garden providing fresh produce to local buyers, popular amongst visitors from Toronto. They and pickling and preserving any surplus. Case also opened two historic walking trails around 10.3, Billabong Sanctuary took many years to the property close to the Short Hills Park and establish as much for conservation of Australia’s the Bruce trail which run along the Niagara unique and endangered wildlife as for tourism. bench. These three cases illustrate how the owners The early association of Henry Smith have made the transformation from the fringe (who used the pseudonym ‘Henry of Pelham’ of tourism to become ‘industrialized’ tourism after the English Lord) is a unique and his- attractions (Leiper, 1997). torical point of difference for this business. The real story of the family history is played out in the branding of the wines and on all of Case 10.1 Pelham Family Estate Winery the marketing collateral including the web site (www.henryofpelham. com). The message is Background that the land and business is owned by the family, the wine is made and delivered Henry of Pelham Family Estate Winery is by the family and that it is a true family a small premium estate winery located on business.

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Family dimensions area of 6 million Canadians. The wine tourism season begins in June and runs through to It was the founder, Mr Paul Speck Senior’s December of each year. Even though the winery decision to establish the vineyard as a family is less than an hour’s drive from the US border, business, after initially buying back the land they do not draw a lot of US visitors, although once owned by his forefathers. His vision was to there has been significant new interest. create a small winery prior to retirement from a career that predominantly involved the running of a private school in Toronto, Ontario. Part- way into the project Mr Speck became ill, and it Business dimensions fell upon the eldest son, Paul to take over the running of the vineyard, while the middle son, Paul believes that all family businesses are Matthew took on the role of maintaining the entrepreneurial by nature, and take risks to original 55 acres of vines that the family had achieve their goals. This is true for start-up busi- planted. Paul was going to attend Law School nesses, when growth is important, but depends but then took a year off to help establish the on the generation of business owners; more vineyard. Eventually the youngest son, Daniel, established (second and third generation) busi- became involved in the business as well, at a nesses might not need to take as many risks time when wine in Ontario was just beginning as start-up businesses. It may also be true that to make a name for itself within Canada. The risk-taking becomes less necessary over the life decision to establish the business then was a of the business. unilateral one by Mr Speck and the circum- For example, it was necessary to borrow stances dictated that the rest of the family would from merchant banks in the earliest stages of become involved. Out of this crisis of the loss of the business during development, but as the the founder came a closer association between business became more established more con- the brothers, who rallied together to make the ventional forms of business financing were put business turn the corner and break-even. in place. This had the effect of returning more Having made the commitment to the busi- financial control to the owners, and providing a ness, the reputation and quality of the wines con- greater degree of freedom over the operation tinued to grow, as did Paul’s level of involvement of the business. When asked about his entre- in the industry. In May 1999, Paul was named preneurial skills, Paul suggested it came from his chairman of the Wine Council of Ontario. Henry father, who ran a private school and invested of Pelham is a founding member (Paul is Vice in Toronto real estate before taking on the Chair) of the Vintners Quality Alliance (VQA), a challenge of making fine wine. Unfortunately government-sanctioned regulatory system that Mr Speck passed away in 1993, but his ensures the quality of Canadian wines that carry entrepreneurial spirit lives on through his sons. the distinctive VQA label. Following the difficulties and uncertainty There are three brothers in the business – of the early establishment years, Paul decided Paul, Daniel and Mathew Speck. Paul (aged 36) to place the business on a more formal footing. is President, Mathew (aged 33) is Vice President The roles and responsibilities of the family mem- and Viticulturist and Daniel (aged 28) is Vice bers were clearly defined and quarterly board President and Director of Sales. All three are meetings were used to monitor business perfor- university educated (Philosophy Major) and all mance. Formalized structures for employees on are married. Paul has children aged 5 and 2 and employment contracts and job structures were Mathew has a baby boy. The business employs also put in place during the early 1990s. an estimated 30 full-time staff and ten part-time Paul also worked hard on developing good staff in its vineyard and tasting room and they are relationships with his financiers and accountants opening a small kitchen and takeaway facility and set up a business plan and cash flow in the near future. Currently the tasting room statements that turned ‘turmoil to profit’ for the receives about 50,000 visitors per year, mostly business. While there was no formal marketing from the ‘Golden Horseshoe’ area around Lake plan, a series of specific drives to target the high- Ontario and the Greater Toronto Area, a market quality end of the wine market were developed,

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and continue to develop with each vintage The business has grown with the region and and new planting of Vinifera planted. Currently benefited from the decision to set the structure in Pelham offers a wide range of wines and styles, place as soon as possible after Paul took over. It including white wines (Chardonnay, Riesling, remains a medium-sized player in the Niagara Sauvignon Blanc and Gewürztraminer); sweet wine region, but a miniscule player in the global wines (Vidal Late Harvest, Riesling Late Harvest, wine trade, with exports limited to other Cana- Riesling Botrytis and Riesling Ice wine); red dian provinces, the USA and Asia. The business wines (Baco Noir, Gamay, Gamay-Zweigelt, will continue to overcome the challenges and Cabernet-Baco, Cabernet Merlot, Merlot and uncertainty that have characterized its establish- Pinot Noir); rosé (Pinot-Zweigelt) and sparkling ment and growth period, in the same way that wines (made from Chardonnay and Pinot Noir). the vines overcome the winter assault and sum- Growth is very customer-driven, with mer heat in order to produce simply fine wines. plantings matching what the owners anticipate that the wine market will demand, not what the industry chooses to supply. The Baco variety is Case 10.2 Rivendell Gardens a perfect example of a wine that is in demand, but for some reason is in limited supply in the Background Niagara region as growers give preference to other red varietals. The diverse range of wines Established by Lu and Peter Standish in 1983 also reflects that inchoate nature of the Canadian and first opened to the public in 1985, Rivendell wine markets, with tastes and preferences Gardens in the Margaret River wine region of continuing to develop over time. Western Australia was originally a vegetable In fact, Paul indicated that the customer growing operation, turning any surplus into focus enabled the business to overcome the lack preserves for sale locally. Now Rivendell Wines of experience in the wine industry. An interesting offers a range of services for tourists, including feature of this business is that none of the owners accommodation, winery, bistro, gallery, attrac- have had any formal training in the positions that tive gardens and a wide range of preserves they hold – in management, marketing and sales made from local produce. or viticulture. Rivendell produced its first wine in 1990 and now offers a range of whites (made from varietals and blends of Semillon and Sauvignon Blanc) and reds (made from Shiraz, Cabernets, Ownership dimensions Merlot and some specialized Portuguese variet- ies). Fruit is sourced from the farm and local Like many family businesses, especially those vineyards with Lu and Peter’s son Mark over- with young owners, there is no succession or seeing the fruit production. The local theme disposition plan, nor do any of the owners extends to the use of local pottery in the bistro have plans for retirement as they are still enjoy- as well as a range of paintings and ceramics ing the business and family life in Niagara. by local artists. Brandywine Lodge, a two-storey, None of the spouses are involved in the bushpole, jarrah-clad house set in the bushland business, thereby avoiding any potential overlooking the vineyard, offers a unique style conflicts between family and business concerns. of accommodation catering with ease for Ideally, Paul would like to see the business large family groups for special celebrations or continue as a fully independent operational reunions. Many craft groups, mixed-generation winery, which is viable, profitable and ongoing. holiday makers and stressed executives have The independence to make decisions about the taken advantage of its tranquil setting. future directions of the winery is most impor- Rivendell has evolved into a well- tant, so selling or taking an equity partner is established and diversified family business not an option. As long as the family enjoys the incorporating a bistro (currently leased to a local challenges, takes pride in their success and family), wine tastings, wine sales and home- receives a reasonable return it will remain a made preserves, wine-making consulting ser- family-owned and -operated winery. vice, extensive cottage gardens, and a unique

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accommodation facility. Tourism is an important the South West, but Lu was always a ‘people part of the business activities with cellar door person’ and recognized that tourism would be sales (wines and preserves), accommodation an opportunity to live on the property while revenue and the bistro lease contributing more generating extra income. After considering the than 80% of business turnover. The tourism establishment of various forms of accommoda- market is mainly individual families, but smaller tion (including a caravan park, chalets and/or coach groups are also welcomed. horse riding camps), they eventually went into partnership with another family who began to build the Lodge as their private residence. Family dimensions Meanwhile, Peter had established a successful market garden and sold produce directly from the farm to local buyers. Any surplus was made Lu and Peter Standish named the business into chutneys, sauces and jams. This was the Rivendell (after the haven for weary travellers in start of the home-made preserve business that J.R.R. Tolkien’s epic The Lord of the Rings) and carries the Rivendell label today. As production began to develop a business based on sales of increased, a packing shed and farm stall were local produce to tourists in the rapidly expand- built on the property and visitors and tourists ing South West region of WA. The vineyard was were welcomed to buy the range of produce started in the late 1980s, in conjunction with an and view the gardens. In 1990 their business investment syndicate. It was small in size (30 partners assumed the role of making all of the hectares), with the land being provided by Lu preserves while Peter tended the garden and Lu and Peter and the development capital pro- managed the farm produce sales. Lateral think- vided by the investors. Unfortunately, financial ing led to the garden produce diversifying into problems led to several of the investors choos- ‘gourmet’ vegetables, which were sold through ing not to continue, so the vineyard was sold a growers’ market in an affluent suburb of only 3 years later. Mark had been studying Perth. Eventually, in 1995, the partners moved at agricultural college and had begun to take away to a property of their own, and their home an interest in the vineyard. Mark leased the was renovated to become Brandywine Lodge. vineyard back from the new owners for several Lu and Peter have always sought to avoid years and was able to develop his skills to such high borrowings, although their first vineyard an extent that he could offer wine-making was funded that way. Retaining equity and con- services to nearby small vineyards. trol of Rivendell’s assets is an objective of the Their daughter-in-law, Wendy has gained business. Other capital-raising options, such as hands-on knowledge, firstly as an employee and sub-dividing and selling off some of the land, then (after marriage to Mark and the formation have occurred, but Shire restrictions prevent any of the new family company) as Company Secre- further option to do this. Plans for growing the tary since 1999 of Rivendell Wines Pty Ltd. business required considerable input of capital, Another son, Tony, is a shareholder in the com- as the business had been undercapitalized pany, but is a ‘sleeping partner’ as he pursues during the first few years of operation. Instead of his teaching career, whilst their eldest son and raising funds from the public, Lu and Peter university professor, Russell, lives in Sydney approached other family members to invest their with his family but visits Rivendell on holidays time and funds into the business. whenever possible.

Business dimensions Ownership dimensions

Lu and Peter had some common goals in estab- In establishing a vineyard, a considerable lishing Rivendell and used their accumulated amount of capital was required and in this knowledge and interests to start up the business. case it was raised through equity financing. Peter had originally intended to run sheep on This financial arrangement was tax effective the property that they had just purchased in for investors, who controlled about 50% of the

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vineyard operation. The vineyard was not region, Rivendell also shares some of the com- expected to realize a profit for the first 7 years of mon issues that face all family businesses in rural operation, and losses could be offset against the areas. Principal among these is the fact that other income of investors. However, the sharing much of the capital value of the business is of financial control of the vineyard operation locked up in the land, and it is this capital that proved to be problematic and, after a few years, provides the key to growing the business. The the vineyard was sold to appease the investors. high value of the land is also a source of some Rivendell has been Lu and Peter’s vision family tension and it seems that each family and they have pursued it with a passion since the member holds his or her own view as to how best early 1980s. During that time there have been a to manage that asset. Their involvement raises number of partnerships, with family members the second issue that confronts all family busi- and non-family partners, lease arrangements nesses, that is, how to grow the business to a level and equity funding that provided the much- where it will support a growing family while needed capital. However, this also limited the not surrendering family control. Lu and Peter control that Lu and Peter had to protect the are now semi-retired and have reduced their integrity of the business and the quality of involvement in the day-to-day running of the the food, wine and preserves, which is associ- business. The bistro has been leased out to a ated with the name Rivendell. Retaining control local family, and Lu is fulfilling a long-held dream within the family has come at a high cost (both in of completing a university degree by external financial and emotional terms) and problems studies. have emerged with trying to mix business with Finally, Mark and Wendy have indicated both friends and family. that they would like to be released from their When they were building the family busi- commitment to the business to be in a position to ness, there were not a lot of family meetings or spend more time with their children, as well involvement in decision making. In this regard, as run a business in their own right. As all of the the business was perhaps ‘not very business- capital is tied up in the land, there are no cash like’. When Mark and Wendy began their own reserves to buy out Mark and Wendy’s share in family, it became necessary for the business to the business. On top of this, Lu and Peter feel expand in order to support two families – Lu and that they no longer have the energy to run the Peter (in semi-retirement) and Mark and Wendy business by themselves. Thus, the decision has (plus their children). This raised the problem of been made to sell the property and the business. capitalization and how best to fund the on-going After payment of all outstanding liabilities, Mark operations and expansion. Past experiences in and Wendy should be able to walk away with a raising funds through equity had left the families modest amount to enable them to start their wary of this form of borrowing. Most of the own business and Tony will have his original existing capital in the business was tied up in the investment returned. Lu and Peter will then land values, but further subdivision and land invest their capital in a variety of options, so that sales were not an option due to local government they may hopefully retire on the interest, with the zoning restrictions. three boys inheriting equally in their estate when This issue is further complicated by the the time comes. expectation that all family members will ulti- mately inherit a proportion of the proceeds from the sale of the land. Wendy and Mark may con- sider that they are entitled to a larger share of the Case 10.3 Billabong Sanctuary proceeds, due to the work and capital they have put in, compared with the other two sons Tony Background and Russell. Tony has had a financial involve- ment in the business, while Russell has had no Billabong Sanctuary (Billabong) near Towns- involvement at all. Lu and Peter desire to keep ville, Queensland, was established in 1981 the business in the family for as long as possible. and opened to the public in 1983. Like Despite being a well-established tourism Rivendell Wines Pty Ltd, the business started business in the thriving Margaret River wine as a partnership with another couple but the

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owners Bob and Adel Flemming assumed full packages ‘all 4 fun’, which provide for savings ownership of the business in 1995. Their son on entry to four tourist attractions in Townsville, Brett has recently joined the business and it also including Billabong. Bob also offers educational employs two indigenous people (descendants programmes, such as the ‘people to people’ of traditional owners of the land where programme that brings students out from the Billabong is located) and four non-aboriginal USA each year. Bob places high value in visitor employees. education and believes that this is the key to Visitors to this Australian native animal offering a positive ecotourism experience. sanctuary average 130 per day or about 300,000 a year. As an outdoor tourist facility, visitor flows are weather dependent. Visitor origins are approximately 60% from overseas, Family dimensions 20% from Queensland and 20% from other Australian states. For example, a breakdown of Bob’s personal goals were set during his visitor surveys conducted in August–September teaching career, when after 15 years he reached 2000 provides an indication of visitor origins Deputy Principal at a school in Newport, (Table 10.1). Sydney. However, Bob wanted a career change Note that the year 2000 was a low visitor and made the decision to go independent and number year due to global economic conditions leave Newport. His wife, Adel was willing to ‘go in international markets. The domestic Austra- with the flow.’ During his teaching career, Bob lian tourism flows are somewhat seasonal with developed a strong commitment to the environ- the busiest times being school holidays in the ment and conservation and incorporated these months of July, August, September and Octo- themes into his teaching. ber. Visitor flows from Europe are constant all Originally, Bob and Adel were looking at year round and the German and other European established business and considered a business markets are very important to Billabong. Other in , now running as Wildworld. After the important markets include school groups, which real estate deal did not go ahead, they decided to provide about 4000 students per year. More establish a business in Townsville, the regional recently Billabong has developed packages for centre of North Queensland. They took 6 months the conference market such as breakfasts at the to find land (25 acres/10 ha) with good water billabong or evening cocktails with a crocodile, and correct zoning, approximately 20 km south which can cater for an average of 100, but can of Townsville. The business took 2 years to estab- accommodate up to 500 guests, and can include lish and Bob wrote environmental educational aboriginal dancing and night tours. units for the Queensland Education Department Other packages available include Club on a consultancy basis to generate an income Billabong, a membership scheme that provides during that period. Bob continues in this educa- for free entry to Billabong annually, and tional role and offers tourism training through the Queensland Department of State Development aimed at increasing profitability of tourism busi- Table 10.1. Billabong Sanctuary visitor origins. nesses. Bob runs training sessions on the use of information technology and website develop- Proportion of all visits in ment, and the Billabong website provides a good Visitor origin August/September 2000 (%) example of the educational theme of Billabong Other Australia 24 (www.billabongsanctuary.com.au). Other QLD 10 After opening in 1983 the first years were Townsville 8 tough, with low cash flow. However, they were Germany 17 lucky with acquiring animals for the sanctuary Other Europe 17 because they could take all of those illegally UK 12 collected animals that Queensland National New Zealand 7 Parks did not want. Bob has now established USA and Canada 5 an extensive sanctuary with displays of many Source: James Cook University tourism students. of Australia’s wild fauna, including feeding of

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crocodiles and a breeding programme of the are offered a career path to management or endangered bird, the southern cassowary. True curator level within the business. to the name of the business, it does provide a Bob has plans to increase awareness of the sanctuary and habitat for free-ranging water- region and has applied for a regional tourism birds and reptiles. Bob manages the business grant to entice visitors to explore the region part-time and Adel manages the accounts and around Townsville. Within Billabong, Bob plans finances, also on a part-time basis (2 days/week). to establish a new rainforest display and wants They employ a manager full-time, which allows to keep growing the business and introducing them time away from the business together. something new for tourists to enjoy and to keep Their son Brett commenced working at locals interested. Bob has excellent relations with Billabong in November 2002 as Sales and the local media, which often contact him for Marketing Manager. stories about new developments. Bob taps into the ‘visiting friends and relatives’ market through a Billabong Privilege card provided to locals, which provides one free local entry for every two Business dimensions visitors they bring to Billabong. Bob wants to continue to target the After almost 20 years, Bob and Adel still enjoy European market, mostly high-spending back- the business and will stay in business until they packers and the self-drive market. Bob markets are aged 70 years plus (Bob is now 55 and Adel Billabong as ‘Australia’s best interactive wildlife is 53). Bob has a strong focus on recruiting park’ and recognizes the value of favourable and training the right staff and has appointed a word-of-mouth promotion. The main source of Manager, Chris, who runs the business when information about Billabong is friends, relatives, Bob and Adel take time off. Unlike many family residents of Townsville and other word-of- businesses this enables Bob and Adel to take an mouth, which was cited by 35% of the visitors annual holiday – 1 month a year – and Bob in the 2000 survey. Another indication of the cites this as the main reason for being able to favourable reputation of Billabong is the propor- stay in business for so long. In terms of recruit- tion of repeat visitors, which was the second ment of staff, Bob and Adel are highly selective largest group in the 2000 survey. and only appoint outstanding applicants. In Bob also owns land on Magnetic Island their view, it is the staff at Billabong Sanctuary (offshore from Townsville) and plans to establish that make the business successful. The regional an ecotourism business with accommodation at university, James Cook University (JCU), is a some time in the future. He may target wealthy good source of staff and all staff at Billabong European backpackers who have the money from there have a degree in zoology. Bob does to spend on up-market accommodation in a not employ unqualified ‘animal people’ and unique location. prefers staff to have a higher level of education. In terms of retaining staff in the very competitive wildlife business where workers are mostly nomadic, Bob has introduced a number of Ownership dimensions innovations. Firstly, a 4-day week for staff has been in place for a number of years, making As previously stated, Bob and Adel intend to employment at Billabong more attractive. Sec- stay on running Billabong for another 20 years ondly, Bob is inclusive of all staff in all aspects of (at least) and Bob holds the view that ‘if you running the business and especially values their retire you die.’ They do have a son aged 22 input when establishing new displays. The staff who grew up at Billabong (a fascinating child- at Billabong are very ‘hands-on’ and seem to hood if ever there was one). He holds a degree enjoy imparting their knowledge of Australia’s in Hotel Management and was employed as a wild animals to visitors through interactive Purser on the Coral Princess, a 40-passenger sessions programmed throughout the day (see cruise ship operating between Townsville and the website for feeding and other interactive Cairns. Having shown no previous interest programmes). Highly skilled and motivated staff in joining the business, Brett is now involved

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in building the conventions market for the Privilege cards and keeping the local business as well as increasing the European media informed of new developments and segment and special interest-group market. achievements. However, there are no plans for him to take Bob and Adel have no plans for disposition over the business at the moment. and in any case their son is now interested in A key theme of this business is education – working in the business. They plan to continue probably as a result of Bob’s background and running the business for another 20 years and experience in teaching, Bob believes that visitor have put the management and staff in place to education must be entertaining but must also enable this to occur. involve interaction with the wildlife. Bob encour- ages hand-feeding of animals by visitors and does not charge for having photos taken with Chapter Summary animals such as koalas (other Australia wildlife attractions charge for this facility). Bob has no These three cases all faced different challenges problem balancing conservation with increasing in very different environments in making the tourism numbers and says that the site copes well transition from their primary or ‘core’ business with as many as 350 visitors on site at any one to a point where they are now achieving success time. in more than one field of endeavour. In cases In terms of personal goals, independence 10.1 and 10.2, success in wine and food pro- and the desire to leave teaching were the duction has underpinned the development of main reasons that Bob and Adel established tourism products and services. In case 10.3, the Billabong. Bob’s personal conservation and founder’s primary concern for conserving the environmental interests were also important. No habitat of Australian fauna and flora has been specific business goals were identified; however, achieved and that has enabled them to deliver Billabong appears to be a successful business environmental education in an authentic and and has won numerous local, regional and state meaningful setting for tourists. In all cases, tour- tourism awards. Bob’s goals for developing the ism was always considered as a strategic direc- business are shared with his partner Adel and tion for the business, if only in the minds of the staff, who are a valuable part of the business. founders, but their ability to devise a means of Visitor education is also an important part strategically targeting and attracting tourists to of the business and this occurs through the their businesses has eventually paid dividends skills and efforts of the staff, who are all qualified (after a decade or more) and now generates zoologists. Billabong has a well-established repu- a substantial proportion of business turnover. tation as a wildlife attraction and has targeted The investment decisions and ownership the European market (mainly Germans) on issues confronted were difficult and the lessons self-drive tours. Billabong produces a German learned from partnerships and equity financing version of the brochure and the latest promo- are salient for any family business, particularly tional brochure features mainly European- wineries that intend to move into the tourism looking people interacting with wildlife. industry. Billabong has excellent road signage on the main highways from the north and south, and highway billboards were the second largest single source of information about Billabong in Reference the 2000 survey (16%). Billabong also values the local market and encourages local visitation Leiper, N. (1997) Tourism Management. TAFE through Club Billabong membership, Billabong Publishing, Melbourne, Australia.

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11 Cross-case Analysis

Introduction thematic approach to cross-case analysis provided the optimum means of grouping Cross-case analysis is a means of grouping together common issues for the family together common responses to interviews businesses studied. as well as analysing different perspectives on Interviews leading to the preparation of central issues (Patton, 1990; Carlsen and Getz, case studies were conducted between 1999 and 2001). Cross-case analysis begins with writing a 2002. Questions covered basic business infor- case for each unit studied (each family business) mation including ownership, the roles of family then grouping responses together according to members involved in the business, number of questions, themes or central issues. In this staff, business operations, when the business way the issues that emerge in the case studies was established or acquired, financial turnover, are integrated within the descriptive analytical and the education level and previous business framework that provides the basis for compari- experience of owners. The interviews focused on son and contrast. The themes for this cross-case broad issues, but specifically addressed these analysis are those that have been used in the questions: theoretical and case study sections of this book based on Gersick et al. (1997) – family, business • What were your personal motives or goals and ownership. Previous chapters illustrate when starting up (or purchasing) this how these three themes or dimensions of family business? business research not only represent the most • Did all family members share these goals? important aspects but also fit well with the • Were there other reasons for commencing structure and approach used in the 15 cases in business? presented in Chapters 6–10. There are other • How was the decision to commence the approaches to conducting cross-case analysis business made? based on the historical development of the • What was your role in the business? business – the chronological approach. That • What is your personal involvement in is, case studies present the issues over time, the business? describing the family business from conception • Have you any plans to develop the through establishment and development and business? ultimate plans for disposition. Other strategies • What do you want to see happen to the for analysing case studies focus on key events business? or decision points, business settings and envi- • Will you sell the business or will it stay in ronment, social/psychological processes or the family? business strategies. While all of these have • What do you prefer to do with the business some relevance to the current cases studied, the in the future? ©D. Getz et al. 2004. The Family Business in Tourism and Hospitality (D. Getz, J. Carlsen and A. Morrison) 161

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Interviews were conducted with individual literature it is possible to identify a set of issues family members at a time and location conve- that are salient to all family businesses in tourism nient for respondents, mostly at the place of and hospitality. These issues relate to the family, business or family home. While every effort the business and the ownership dimensions pre- was made to involve as many family members viously discussed. Within each dimension there as possible in the case study interviews, the are a number of issues that are common to fam- cross-case analysis pertains mainly to issues for ily businesses as well as issues where businesses founders and owners, not those of other family digress. It is important to note that whilst most members working in the business. issues are found to be common, they cannot be The businesses selected for study are considered as generic to all family businesses in not necessarily representative of all family tourism and hospitality. Nor are they presented businesses in tourism, but are based on a conve- in order of importance in the following sections nience sample from the geographical region of of family, business and ownership issues. the researchers. They were selected on the basis of personal contacts, and in some cases with a minimum of advance knowledge about the Family Issues nature of ownership and family involvement. It was intended to interview only businesses Family issues that emerge in the cross-case with children or other family members directly analysis are as follows: involved in order that they fit the definition of a family business. The cases selected for this analysis consisted of accommodation providers, A degree of family consensus in tourist attractions and tour operators. Some of decision making these businesses incorporate more than one type of revenue source, with the simplest being cabins for rent and the most complex consisting of The decision to establish or purchase a family a campsite, cabins, motel, café, rental house, business is fundamental as it affects the future of catering, and recreational activities. Direct com- the family in almost every way possible. This parison of identical types of businesses was not decision then should rarely be taken unilaterally possible with such limited coverage. To facilitate (as was the case in 10.1) and all family mem- comparisons and demonstrate examples of bers should be involved in the decision process. cases based on the issues identified, a coding Many factors are taken into consideration when system which is cross-referenced to the case establishing or developing a family business, studies in Chapters 6–10 is used as follows: and in most cases family members agree that lifestyle and location are the most important Case 6.1 Alborak Stables factors (cases 6.1, 6.2, 6.3, 7.1, 9.1, 9.3 and Case 6.2 Taunton Farm Holiday Park 10.2). Whilst consensus is desirable, it is not Case 6.3 Ol’ MacDonald’s essential to have agreement between all family Case 7.1 The Bergstedt’s members when setting up or expanding a Case 7.2 Cricklewood Hotel business, as case 6.3 demonstrates. Case 7.3 Millestgården Case 8.1 Crystal Creek Rainforest Retreat Case 8.2 O’Reilly’s Rainforest Guesthouse Shared hobbies, leisure interests and values Case 8.3 River Valley Ventures within the family Case 9.1 Wild Over Walpole Case 9.2 Minnewanka Tours Many tourism businesses were established in Case 9.3 Åreguiderna order that the owners could pursue their own Case 10.1 Pelham Family Estate Winery leisure interests and hobbies whilst making a Case 10.2 Rivendell Gardens living for the family – an idyllic mix of business Case 10.3 Billabong Sanctuary and pleasure. However, in order for that ideal Based on the 15 cases cross-analysed as well to be realized, all family members must have as other research findings in the family business common leisure interests. These interests were

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many and varied between cases, including life of the business can be just as effective in nature and conservation (8.1, 9.1 and 10.3), ensuring good business practices, albeit with a snow skiing (9.3), horse riding (6.1) or garden- ‘steeper learning curve’ for family members not ing and viticulture (10.2). These interests and involved from the start (10.1). values have informed the vision of family busi- nesses, for example in case 6.1, Sandra desired to run her own horse stables and her parents Involvement of all siblings in the business shared in that vision and realized that ambition. For rural-based family business, living in and Involvement of brothers and sisters in the family raising children in the rural environment was business is an issue during all stages of the busi- important in many cases (for example, 6.3). It is ness and has implications for all aspects of the also important that family leisure and business business, particularly succession. In one case interests coincide because family holidays are (8.3) the siblings all became involved in the rare, so the business takes the place of family business, fulfilling important roles. In case 7.1, leisure pursuits, especially in the first years of three brothers have all developed cabins on establishment (for example, 8.3). adjacent parcels of land and are jointly acquir- ing more land to support their business and maintain their traditional lifestyle in the moun- Some level of support and involvement tains of mid-Sweden. Siblings in business are of all family members also evident in cases 8.2 and 10.1 and all have complementary skills that support the business. This is an interesting family issue that illustrates In all cases, the involvement of spouses in the that support of the family is desirable but business is an issue that is carefully considered, not essential to successful family businesses. In particularly when children are also involved. some cases, involvement of the whole family When one sibling is involved extensively in the in the business was limited due to the other business, and others have little or nothing to do commitments of some family members to activi- with the day-to-day running of it, issues arise as ties such as farming (6.1, 6.3), education (6.1, to the succession plans and inheritance. Are all 8.1, 10.1) or full-time employment elsewhere siblings entitled to an equal share of the busi- (7.2. 8.1 and 10.3). In other cases, the ness? What if the business is located on a family copreneurs and the extended family, including farming property? These are pertinent issues in-laws and children (8.2 and 8.3), committed that arise among family members when consid- to the business. Yet a third type of support was ering equity and ownership of family businesses shown after the business had been established (for example, 10.2). for a while, when family members chose either to become more actively involved in some aspect of the business (8.2 and 10.1) or support A family tradition of the family business in a financial sense whilst business/entrepreneurship maintaining a separate occupation, effectively involved as a ‘silent partner’ (10.2) or financial A family business tradition in running a business adviser (6.1). or enterprise is more evident in the case of accommodation, such as hotels (7.1) or guest houses (8.2) and is more of an ‘old world’ con- Family involvement in the business cept. None the less, tradition can embedded in from an early stage the psyche of the family and form a path that can be followed as in case 10.1. Tradition also This issue relates more to the benefits of instill- implies some stock of knowledge, and perhaps ing a sense of responsibility and involvement of capital that can be drawn upon in running a family members in the business, as was the case family business. The source of the entrepre- in 8.2. However, it could equally be argued neurial spirit in the family is usually the founder that involvement of family members later in the (10.1) but in one case the desire to start a

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business was engendered in the founder by her a risk that some family members will be allo- mother (6.3) and the desire to fulfil the mother’s cated less important and challenging tasks in the dream of a better life for her family was a pow- business and will consequently lose interest, so erful and emotional reason for Jean venturing to counter this everyone should be allocated a into the tourism business. significant role, or responsibilities should be rotated around family members. One family business was adamant that if they did employ their children it would be in ‘real jobs’ in a paid A commitment to keeping the property under capacity (7.3). family ownership in farm-based or family home-based businesses

Similar to the previous issue, a commitment to Good relations between siblings and living ‘on the land’ or maintaining ownership of within the family traditional family property is desirable for farm/ estate-based business, especially as farming Open and honest relations between family activities can ‘cross-subsidize’ the establishment members were evident in many of the cases, of tourism activities on-farm (6.1). In many farm- both between parents and children in the busi- based family businesses, most family members ness (6.1, 8.1, 8.3 and 9.1) as well as between felt that keeping the farm ‘in the family’ and siblings (8.2 and 10.1). That is not to say that recognizing that diversification into tourism was family disharmony does not occur, but that one means of achieving this was evident (6.1, relationships are such that any conflict can be 6.2, 6.3). Likewise, keeping the family property, resolved through family meetings or informally in this case an historical guesthouse, was also through negotiation and understanding. important (8.3) to all family members involved in the business. In case 7.1, the family interest in tourism extends back over four generations, Family adversity issues and the desire to cater for tourists to mid- Sweden has remained in the family even Again, mutual respect and intimacy in a family though the original shop and hotel have not. setting is a useful precursor for overcoming the difficult periods that confront every business from time to time. Some families respond very Flexibility for family members to self-define well to business pressures by making decisions roles and responsibilities together as a family, thereby sharing the burden of family pressures. Other families are deeply Family conflict can arise when roles and respon- impacted by family tragedy (6.3 and 7.1), but sibilities overlap or workloads are not clearly somehow have the strength and ability to sup- defined of shared equally. In all of the case stud- port each other while maintaining the business. ies for this book there is no evidence that this occurred. However, there is also little evidence that roles and responsibilities were clearly Business Issues defined. Instead, family members were encour- aged to self-define their roles in the business Business planning and management skills based on their particular skills, interests and experience (for example, 10.1). This is perhaps Family members that have formal training one luxury afforded to family business owners, in management, including business planning the flexibility to self-define roles and involve- and management, are a good asset for family ment may be important to prevent family dis- businesses. In many cases it will be the children, harmony. Most family members were comfort- not the founders of the business, who have able with the shared roles in the business for received formal business management training, example; in case 6.1 ‘everyone helps with either through tertiary education programmes everything in order to get things done’. There is (8.1, 10.2) or informal training through work

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experience (10.3) and voluntary roles (6.3). those that are externally financed. Some level of The business networks developed by the training in computerized financial management children of founders often bring benefits to the is desirable, or at the very least a level of skill in family business and lead to more formal busi- bookkeeping and accounting practices. Invari- ness structures and operations that reflect good ably it is the female family members that man- business practice. In one case (10.3) the family age the finances of family businesses (9.1 and business can play a mentoring role for other 10.3) but in other cases it is a shared responsi- small businesses. bility. It is also important that family members gain experience in financial management by ‘learning the lessons’ from other business Entrepreneurial issues or professional employment, as case 8.3 demonstrates. The debate about the level of entrepreneurial- ism in family businesses is ongoing, with exam- ples of businesses that have succeeded without Sound decision-making processes the founders engaging overtly in entrepreneur- ial ventures, but acting in an entrepreneur Most businesses seemed to be able to work guise (6.1, 6.3, 7.3, 8.1, 8.3). Other family under a mixture of formal and informal meet- businesses claim that everything they do is ings, as they were largely comprised of family entrepreneurial (10.1) and case 9.3 is another members who knew each other well, so that example of an entrepreneurial individual decisions made were comparable to what the starting a tourism business. family as a whole wanted. Case 6.1 demon- The case studies indicate that family busi- strates how the parents made the decision to nesses in tourism are mostly non-entrepreneurial develop the stables as a business, but the and are averse to risk. After all, if the business daughter Sandra was ‘party to the detailed venture fails, the family unit is also exposed to planning process.’ Successful businesses under- failure so the degree of risk is much greater than stood that there must be a clear definition of for non-family businesses ventures. However, at roles and tasks; however, the family as a whole some point in the life of the family businesses, had to be happy with major/relevant decisions some are compelled to back their business for them to go ahead. judgement and take risks in order to succeed. An example of an ad hoc decision-making It may be that the entrepreneurial family busi- was case 10.2, where there were very little nesses must have at least one entrepreneur in family meetings, which led simply to working the family, someone who desires a challenge and harder (not smarter!). Finally case 10.1 shows feels that they have the skills to succeed (for that a key decision to commence a family example, see case 6.3). The level of experience business venture can be made unilaterally in and knowledge of the family business entrepre- the hope that other family members will neur can be critical to the success of the start-up follow in the footsteps of the founder/decision family business, and also comes into play when maker. businesses pursue their expansion plans. It is important to note that many of the family busi- nesses case-studied do have expansion ideas Computer/information technology issues (6.3, 8.1, 8.2, 8.3, 9.1 and 10.1) involving either an increase in capacity or an augmentation of These skills were helpful in cases related to their existing products and services. marketing the business, such as by using the Internet to generate business (7.1) or by being on a collective website through a booking com- Financial management pany (7.3). In other cases, technology was an issue for the businesses for accounting (9.1), A family member with financial management computerized reservation systems (8.1) and skills is invaluable for a business, especially the design of a website for the business (6.1,

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6.3, 7.1). One business case in particular (10.3) Human resource management demonstrated the excellent information tech- nology skills of the owner, Bob Flemming, in The ability to manage staff effectively was both their website and the fact that Bob delivers common to all family businesses that employed training programmes in information technology non-family staff members. In most cases, the and website development for the Queensland majority of the staff members were in fact Department of State Development. family members such as husbands, wives, sons, daughters and even a niece; managing staff effectively came down to understanding the Business networking/marketing desires and skills of family members in order to allocate roles within the business. Indeed, the accepted approach to human resource The importance of good networking and management does not apply within family busi- marketing cannot be overstated for small, nesses because it is not always possible to treat family businesses. Networking with other family children or parents as employees (see case 8.1). tourism businesses, tourism associations, con- Similarly any non-family members employed in vention and visitor bureaux and coach tour the business must fit in with the family as well as operators is a characteristic of most successful fulfilling their role within the business (see case tourism businesses. Only one family business 6.1). Problems came from the fact that the own- (6.2) was formally affiliated with a national ers tended to have to work long hours and mix marketing group through a franchise arrange- business and personal life in order to complete ment, which produced benefits for the business necessary tasks, because they were the only through bookings and customer loyalty. people who knew the business and its opera- Another (8.3) was approached to franchise their tions sufficiently to do them (6.1, 8.1). Titles business formula in New Zealand, but decided and job specifications were used, however there against it. is still the issue of how many tasks each person There is an over-reliance on favourable should be allocated to effectively run the busi- word-of-mouth and repeat business (for exam- ness. Another issue was managing higher levels ple, 7.1) which reflects the limited funds of part-time/casual staff, both from within the available for other conventional forms of family and outside (6.1, 6.3). Seasonality affects marketing. Others realized the need for a more human resource management as workers are professional approach, such as hiring a full-time only employed at certain times of the year due sales and marketing professional (9.2) and being to peaks and troughs in tourist demand. a part of a booking company (7.3) in addition to the ubiquitous promotional brochures. All businesses case-studied, except 7.1, had pro- motional brochures. Other techniques include Business planning and strategic management family brand extension/product diversification (8.2, 9.1); familiarization tours (8.1) and trade This refers to the need to plan in the short- and show promotion (9.2). Benefits from television long-term for the survival and success of a tour- specials focusing on the relevant areas (9.1) ism business. Most expressed long-term goals and tourism promotional magazines were also for the business, but few had a sound plan as to used (8.1). Sales commissions are also used by how to strategically achieve those goals. In one one business (9.3), and other techniques include case (8.3) the founders failed in business due clear market segmentation (6.1, 8.2) with strate- to a lack of planning, financial controls and gies in place (8.2) as well as marketing meetings business experience. (8.2). The use of industry awards as a promo- Long-term success involves partly being tional tool has not been embraced by many able to separate themselves from the business family businesses in this set of case studies, but and work ‘on it’ rather than ‘in it’ (8.1, 10.3) those that have entered and won national through employing more staff, and also by hav- tourism awards always advertise their success ing interested/qualified family members taking (see case 8.1). over the business in the future (9.2). In case 8.2

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the business was in the third generation, with such as farming or viticulture (6.1, 10.1) during family members competing against non-family the low season for tourism. Another business applicants for positions, and only appointed if (6.3) considered seasonality as a double-edged they were suitably qualified. sword, with the positive aspect being the With regards to business planning and free time for owners in the low season and the growth, some businesses were more concerned negative being the costs associated with start-up with trying to make their businesses profitable and shutdown for the brief high season. Indeed, before considering expansion (6.1). Other busi- the expansion plans in case 6.3 are designed nesses extended both their services as well as specifically to create an all-year accommoda- their business name to external activities, such as tion facility and employ staff on a full-time case 9.1, where Gary was involved in consulting, basis, in order to ‘combat’ seasonality (see computer-assisted design, environmental sci- Chapter 5). ence and guiding, and case 10.3 where Bob was It was also evident that many businesses did involved in education and training. Other busi- not realize the 24 hours-a-day, 7-days-a-week nesses extended themselves into related areas nature of the tourism business when commenc- such as case 8.2, with the opening of a winery. ing in business. Fortunately, family members It was also evident that family businesses made themselves available during the busy peri- conduct very little research to support strategic ods to assist with running the business on a planning or marketing. Business, financial, mar- part-time basis (6.1, 6.3, 8.1, 8.3) while others keting and site feasibility studies were not under- did not have this support option (10.3). The taken in the family businesses case-studied, but demanding nature of the tourism business is a basic cost estimates were made (6.1). Some critical issue for all family businesses; especially sought useful advice from business and manage- those that either cannot afford to employ staff ment planning seminars, but in one case found (7.1) or don’t have the option of employing fam- them of limited use (6.2). At the same time, some ily members on a part-time or full-time basis government departments did prove beneficial in (8.1). In many cases, family business owners the feasibility stage in providing models and pre- find themselves ‘tied’ to the business and are dictions for the proposed tourist development unable to take a break from the demands of their (6.2). However, it is judgement supported by guests, unable to afford to employ support staff hard work and commitment that appears to be or a manager and unable to find the right people the fundamental planning approach of family to run the business for them in their absence businesses. Most businesses however had no (8.1). Clearly, the desirable lifestyle that often real plan for continuing the business, being motivates family business start-ups in tourism caught between trusting in their successors regions is not always realized due to the highly to take over, finding external ownership/ seasonal and demanding nature of the tourism management or disposing of the business for the business. best possible price.

Good customer service Seasonality and demand issues Customer service is vital to the success of all Seasonality is a key issue that influenced both these businesses, especially considering that the opening hours/dates of the business as well good customer service results in favourable as the service offered. In the example of 6.3, word of mouth which is important for most seasonality serves both effectively to limit reve- businesses. If customer service is not satisfac- nues by cutting off services at certain times of tory, word of mouth may be negative and the the year, as well as to act as a forced holiday business may suffer, especially in niche markets for employees to have a hiatus from work. such as in case 8.1. In most cases, good cus- Depending on the environment and setting, tomer service is enjoyable for business owners most businesses operated year-round whilst and may even form part of the lifestyle benefits others focused on other aspects of the business they chose when commencing in business (6.1).

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Good customer services in areas such as reser- dissolution of the partnership is inevitable, espe- vations and bookings can be demanding but cially when both families seek to place their own can also be considered as an enjoyable part of interests first. This termination can be acrimoni- running a family business (7.3). Targeting the ous, given that both families have claim to the top end of the market by providing quality intellectual property, goodwill and equity in tourism experiences is a strategy employed by the business. In other cases, family businesses a number of family businesses (8.1, 8.3) can work co-operatively to cross-promote However, most businesses case-studied did their independent businesses (7.1 and 8.3 for not have a focus on customer service even example), in provision of accommodation. though it was implicit in all of their business activ- ities, and in one case improving customer service was stated as a business goal (6.3). Personal ser- Formation of a family trust vice is sometimes promoted as a unique selling point of family businesses, where the customer Formation of family trusts is an effective means knows that they are dealing with the people that of setting up legal ownership of a family busi- both own and operate the business. There can ness in most cases, depending upon the corpo- also be a market perception that family busi- ration and taxation regimes in the countries nesses are unique and offer a different product or involved. For example in Australia, case 8.2 is service to non-family businesses. This belief that owned by two family trusts, being established in it is better to be unique than to try and compete 1994 especially to ensure effectively that owner- with existing businesses was apparent in case ship arrangements are acceptable to all family 6.2, with Rob claiming ‘it is better to be different members concerned. Family trusts can assist in than it is to be better’. When there is a high maintaining harmony and retaining family con- degree of social interaction with visitors, the trol of the business and preserving the assets of privacy of family members is lost and it can also the business for the benefit of future generations make it difficult to complete the daily tasks of of family members. running the business (6.1). However, one busi- However, trusts also have the effect of lock- ness does give priority to social interaction and ing away all family assets and placing them customer service (6.2) ahead of the other tasks in under the control of a single trustee, thereby the running the business and Rob doesn’t mind unbalancing ownership and control of the busi- if it ‘takes one and a half hours to empty the ness. This becomes an issue when siblings seek rubbish bins’ if he is socializing with visitors to obtain a greater level of control in the business around the caravan park. or when one needs to liquidate some of the Few businesses case-studied used a cus- assets of the family as their personal share. The tomer feedback form to monitor the satisfaction other effect of a trust arrangement is to obligate and suggestions of guests (see case 8.1), despite family members to work in the family business in this being an effective means of improving order to contribute to the asset value growth. customer service.

Ownership Issues Functional ownership structure

Family partnerships In more than one case, the original ownership structure proved to be unsuitable and did not A number of family businesses case-studied allow the business founders to pursue their commenced in business in conjunction with goals independently. This was the case in another family (10.2, 10.3) but in both cases the capital-intensive businesses such as tourist partnership was terminated after a few years. attractions, hotels and wineries that were origi- The issues associated with two-family businesses nally owned or developed in joint partnership were not explored, but the outcomes in both with another family (10.3) or with non-family cases were evident. Where two families have investors (10.2). In other cases, ownership of different views and interests in the business, the business changed to enable the business to

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survive (8.3). In all cases, any change in owner- businesses in most cases, with the possible ship structure is an issue that must be handled exception of farm-based and family home- extremely carefully if problems such as that based businesses. Land and property purchases arising in case 7.2 are to be avoided. The were financed with bank loans which meant reasons for diversifying or divesting ownership that interest expense was probably the highest of all or part of the business are often sound, monthly figure in the family business accounts especially as this can enable the workload and on the expenditure side of the ledger. The cases financial obligation to be shared. could not divulge the extent to which business expenses were met through revenue or the drawing down of the business profits or the owner’s savings, but for most family businesses Family equity in the business it is probably a combination of the two. At least one business (7.3) had banking arrangements In very few businesses are family members will- where credit was extended prior to the peak ing to invest and share equity in the business season. with no expectation of a regular return, either in This is a significant ownership issue for the form of profit share (if available) or realizing all small businesses, but especially family on the value of capital growth. Likewise, it is not businesses, which must manage their debt and always acceptable for family members to invest equity more carefully than other types of busi- their time in the business without receiving nesses. In case 7.1, the limiting of borrowings regular wages or dividends, but gaining ‘sweat (instilled by the father of the owner) enabled the equity’ (8.3) in return for their efforts. In most family business to survive a decline in the value cases, profits or capital growth tend to be of their property during a period of over-supply re-invested in the business (8.1, for example). and bankruptcy sales. Lease arrangements are This raises the issue of family equity being an option for some family businesses but lease linked to land value and therefore expansion arrangements must only be entered into after plans of business (e.g. 10.2). The extent to which professional and competent legal advice, if family members take equity in the business can problems are to be avoided – as in case 7.2. In have a direct influence on the business decisions, case 8.1 the resort was developed over time and especially the development and disposition of this allowed the owners to avoid over-borrowing the business. Increasing returns on the business as well as ensuring that the theme and ambience may be needed to support a growing number of of the site was maintained. family members (8.2) or provide an income to founding members of the family business when they retire (9.1, 10.2). Indeed, the business may represent the founder’s retirement fund (7.1) Access to sufficient capital or have been purchased with the proceeds of superannuation or redundancy payouts (8.1). Most family businesses case-studied appeared The issuing of shares in the business to all family to be under-capitalized, particularly where their members can also be considered, but has the expansion plans were concerned. In the exam- effect of diluting the control of the business (see ple of 10.2 there was a need to raise capital out- case 8.2). In case 8.3 a number of shares have side the family in order to expand, but raising been placed in a family trust, thereby affording funds through equity proved to be unsatisfac- the family members some protection in case of tory for the owners. Most family businesses face business failure. the dilemma of having capital ‘tied up’ in land or in the value of the business, but are reluctant to sell any part of their land or business as a means of raising funds. In only one case (6.1) Manageable financial structures was a family member willing to raise funds through land sales in order for the family busi- Debt, rather than equity, was the main source ness to pay off loans if required. In another case of capital for establishing or acquiring family (6.3), access to a government grant accelerated

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the development of the rural business and plans and many confront barriers to the smooth business development was cross-subsidized by transition of business ownership. Barriers to non-business income (6.3, 10.3). Yet another inheritance can be related to the financial viabil- response to this issue (7.3) was to consider ity of the business and the willingness of the sec- closing down part of the business (accommo- ond generation to take on the responsibilities dation) in order to expand another part of (and liabilities) of the business owners. When the business (conference and meeting venue). the children of family business owners do not A well-established business has more options share the same level of commitment to the for raising capital and may have subsidiary business, the issue of succession becomes more businesses (such as in case 8.2 with Canungra difficult (10.2). Valley Vineyards) for full or partial sale. Family businesses access a range of sources for operat- ing funds include income from teaching and Cultural issues primary production (10.2, 10.3) and private consultancy (9.1). In some cultures it may not be considered appropriate to have children working in a family business with parents (as was the case in the Separation of family and business assets Swedish businesses case-studied – 7.1, 7.3 and 9.3), whilst in other cases the continued It is important that major family assets, such involvement of children and even grand- as the family home, be owned separately from children of the founders was the family tradition the business in case business problems arise. In and accepted cultural norm (6.2, 6.3, 8.2). A some cases family-owned farmland, but not the limitation of the cases included for analysis was family home, may be offered as collateral for that they did not include businesses owned by a business loan. Again the asset arrangements people with different ethnic backgrounds, and of the family businesses case-studied have not most were of Anglo-Saxon ethnicity. Inclusion been included for reasons of privacy, but in all of Asian ethnic businesses might have revealed cases family homes have been separated from other ownership issues such as the preference the fortunes of the business. In cases where the for male successors in Chinese family busi- family resides in the business location (6.1, 6.2, nesses (see Chapter 5). Indeed, primogeniture 6.3, 7.1, 8.2, 8.3, 10.2) deeds and titles for the may be a characteristic of many family busi- land that the home is on should be separate nesses (regardless of ethnic background) and from the land on which the business is based, this raises gender and equity issues in terms of and in one case (6.1) this structure was put in ownership and succession. place very early in the life of the business.

Gender and generational issues Disposition/succession planning issues Again, ownership can also be a function of Untimely disposition of the family business is gender with some owners having concerns that seldom planned, although there is usually some females may not be sufficiently skilled or inter- agreement as to how family business ownership ested in carrying out some of the infrastructure will change in case of the death of the owners, and maintenance aspects of the business divorce or family break-up. This is not surpris- (6.3), or it may be that male members of the ing, as few families want to contemplate these business possess the technical knowledge to matters. However, it is a reality that all family maintain the infrastructure but have not yet businesses must ultimately face and it is desir- passed on that knowledge to the children or able that agreed succession or disposition plans grandchildren (especially daughters). Given the are in place. The succession and ownership predominance of females employed, it would issues identified in previous chapters and the be appropriate to have equivalent proportions case studies indicate that few have disposition in ownership and management of family

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businesses in tourism. In some cases (8.3 and of communication are most commonly used 9.2) it is the female family member that has the to resolve family business ownership issues?). best potential to take over the role of manage- There is also an opportunity to prioritize the ment and ownership of the family business. issues identified in this cross-case analysis, to provide a quantitative basis for identifying and progressing important areas of family business Chapter Summary research. The second implication of the cross-case This chapter has identified commonalities analysis is that the common issues identified between case study findings of the 15 family may be representative of the issues confronting businesses as detailed in Chapters 6–10 inclu- the multitude of family businesses in tourism and sive. Even though the cases were selected on hospitality around the world. Whilst there is no the basis of convenience, the core activities of statistical test of the representativeness of the tourism – accommodation, attractions and tours cross-case analysis findings, the range of busi- – are all represented in the cases. Two impor- nesses and the geographic and temporal scope tant implications of the cross-case analysis are of the case studies would mitigate against the worth noting here, although the wider implica- myopia and bias that is inherent in single-case or tions will be discussed in the final two chapters. single-country case studies. It would be very The first point is that there is a remarkable interesting to develop new case studies of family degree of commonality between the family businesses in other countries and cultures businesses case-studied, despite the differences around the world to test the extent to which these in their business environment, business culture, commonalities can be found in other tourism services offered, markets, location, destination destinations. and business characteristics. The fact that some 30 areas of common concern were identified in this cross-case analysis has implications for References future family business research in tourism and hospitality. The issues have been presented Carlsen, J. and Getz, D. (2001) Cross-case analysis of under the headings of family, business and own- family businesses in rural tourism. In: Pforr, C. ership, but there are many that cut across these and Janeczko, B. (eds) Proceedings of the three dimensions and could be studied in much Capitalising on Research Conference. University more detail. Communication for example, can of Canberra, Canberra, Australia. Gersick, K., Davis, J., Hampton, M. and Lansberg, I. be investigated from the family perspective (1997) Generation to Generation: Life Cycles of (i.e. how do the family members communicate Family Business. Harvard Business School Press, effectively?); from the business perspective Boston, Massachusetts. (what are the most appropriate forms of busi- Patton, M.Q. (1990) Qualitative Evaluation and ness communication for family businesses?); Research Methods. Sage Publications, Fresno, from the ownership perspective (which forms California.

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12 Implications for Family Businesses and Tourism Destinations

Introduction those aimed at creating employment – must take the family business into account to be effective. Until very recently the family business dimen- sions within tourism and hospitality were only occasionally acknowledged, and not subjected Practical Implications for the Family to systematic analysis. Yet, as this book demon- Business in Tourism and Hospitality strates, the family vision and goals are the foundation of small business management and entrepreneurship. One cannot understand the This section aims to provide practical advice dominant small-business component of tourism to those running or contemplating investment and hospitality without understanding the indi- in a family business. The advice is not all- vidual and family dimensions. Consequently, encompassing, as it is derived from this book’s the policy, planning and marketing of desti- focus on identifying unique and salient issues nations, and economic development based on facing family businesses in the tourism and tourism or hospitality, are also dependent on hospitality industry. better appreciation of the family perspective We start with the issues raised in Chapter 1, on business. including the most fundamental – are you a In the first part of this chapter we examine family business? If so, what are the general practical implications for family businesses in implications for ownership, business and family tourism and hospitality, based on our evaluation evolution? We then attempt to draw on all of their needs and the family-dependent sections of the book, including the case studies, dimensions of business enterprise. It is organized to provide a great deal of advice – some of which roughly in the same sequence in which major consists merely of asking the reader to contem- issues were covered in the preceding chapters, plate potential implications for their own busi- although a certain amount of cross-referencing ness or business plans. Answers are not always and integration has been incorporated. available! The second part covers general implications for tourism and destination management. Fam- ily businesses are often the dominant business Are you a family business? form in destinations, especially in resorts, rural and peripheral areas, and an understanding of Surprisingly, many owners do not think of their how they affect competitiveness is essential to enterprise as a ‘family business’. In some cul- destination management. As well, economic and tures it is not a differentiated form of business, community development policies – especially while in others the term might be considered to

©D. Getz et al. 2004. The Family Business in Tourism and Hospitality (D. Getz, J. Carlsen and A. Morrison) 173

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174 Chapter 12

have negative connotations such as ‘it’s only and responsible work. Case studies and cross- a mom-and-pop operation’. Sole proprietors case analysis provide examples where the might not consider theirs to be a family business involvement and support of all family members because their partners, children or other is not always possible nor desirable, due to the relatives are not formally involved as owners challenges this entails. Figure 1.2 presents a or employees. Couples working together (i.e. summary of challenges through the life cycle. ‘copreneurs’) might feel that only the involve- On the other hand, this book makes it clear ment or potential inheritance by children would that many tourism and hospitality businesses qualify theirs as a ‘family business.’ – probably a large majority – never progress We have taken a broad, inclusive inter- beyond the foundation stage. Owners continue pretation of what constitutes a family business, to control the business, keeping it small, and chil- including all those who consider theirs to be dren either do not get involved or the potential such, plus all sole proprietors, copreneurial for them to take control or inherit the venture is businesses, and others with some degree of not realistic. Even in these family businesses, family involvement. Our inclusiveness is based owners should understand the basic principle on the desire not to focus overly on technical that all families and their businesses evolve to points of ownership and control, but rather to some extent, and that the ultimate disposition of concentrate on family-related issues. The most the business is a critical issue. Strategic thinking, important differentiating aspect of family busi- if not formal planning, is clearly necessary. How- ness, as argued by Chua et al. (1999), lies in ever, the research and case studies provide little the vision of its dominant family members. The evidence of business planning, let alone strategic vision must be to use the business for the better- planning, by family businesses in tourism and ment of the family – potentially across more than hospitality. one generation. In terms of practical implications, owners should ask themselves to what degree family The business environment and members are involved, if family takes priority in industry-specific modifiers any aspect of the business, and if they hold a family vision of using the business for betterment The business environment for tourism and of their family. If family is important, then there hospitality is an important consideration for are many implications contained in this book. As owners, and in some ways it is unique. The well, owners must ask themselves what are their case studies elucidate business opportunities primary motives and goals for being in business. that allow people to pursue their leisure interests We look at implications of that key question later. or live in attractive surroundings such as resorts, small towns and out-of-the-way places. Many ventures in this industry fulfil basic needs to Interdependencies in the evolution of family, socialize, meet interesting people, be self- business and ownership employed and even to earn extra money (beyond the primary economic activity) to The evolutionary perspective contained in the support a farm or a family. model developed by Gersick et al. (1997) has It is also a service industry in which people many important implications for the family busi- skills are often paramount, host–guest contacts ness. Ownership, business and family evolve are frequent and often in the home environment, together, in many interdependent ways. It is the and long hours are the norm – especially in the essence of a family business that shifts in one peak seasons. There is fulfilment in pleasing component will impact on others. For example, other people, and this is a powerful motivator, getting children involved in the business as they yet burn-out is a real risk. Owners and families in get older will potentially lead to control and these service businesses must develop effective ownership issues including inheritance, while strategies for preserving some degree of privacy business operations are also impacted by the and quiet time, for balancing family and business need to find each family member challenging life.

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The business environment is also risky and resources and the nature of the work that lies challenging. Numerous tourism and hospitality ahead. Many are disillusioned and give up or businesses are highly substitutable and do not fail. Turnover rates in many areas are high, with possess competitive advantages. Others are too one family or sole proprietor taking over from small to make much revenue, or are subject to others. Potential investors should realize that if it extreme seasonality of demand, thereby gener- is easy to get into this line of enterprise, it might ating cash-flow problems. Locating in a rural or equally be easy to fail. remote area is appealing to many owners, but A strong interest in the type of work might predictable costs and problems accompany such be sufficient to assure business success, such as decisions. Family businesses in remote areas where lifestyle and leisure interests are at the face higher costs, greater seasonality of demand, heart of the business. As with many of the cases less opportunity for networking and marketing in this book, having generic management skills collaboration, and greater difficulty in securing and experience will prove to be adequate, suitable employees. On the other hand, there assuming the owner can adapt to different might be government grants and technical settings and environmental challenges. On the assistance available, as was identified in some other hand, having worked in the industry does of the case studies. not necessarily prepare one for ownership. Owners must also be aware of the implica- The bottom line is that owners and potential tions of the ‘destination life cycle’. When operat- investors should seek training and professional ing in a tourism environment, as opposed to advice, while destinations and government catering exclusively to local-area residents, it can agencies should take these services to the family be expected that opportunities and challenges businesses that need them. will vary over time as the destination matures. The fate of the individual business might depend to a greater or lesser degree on the success of the Are you an entrepreneur? destination in achieving sustainable competi- tiveness and occasionally re-positioning itself. Chapter two examined in detail the nature Conversely, the competitiveness and profitabil- and application of entrepreneurship to family ity of numerous small and family businesses can businesses in tourism and hospitality. Whether certainly affect the destination’s success chances. or not one believes in the personality-trait The business environment also includes approach to defining entrepreneurship, every- culture and level of economic development. one in business should examine their motives, Some cultures are very supportive of entrepre- goals, attitudes and practices with the purpose neurship and especially family businesses, while of identifying their fundamental driving forces. in others these actions are not well-established or Many owners will be quite comfortable valued. It will certainly be more challenging to with their autonomy and lifestyle-oriented develop a successful family business in lesser- businesses, but a minority will not. developed economies that lack physical infra- Understanding the entrepreneurial process structure or marketing support. In the special should help every owner and manager do a case of business initiatives by indigenous people, better job. Being able to objectively assess risk a number of additional challenges might occur, is a necessity in the business world, but so such as communal ownership of resources or to is knowing ones’ own acceptable degree of the need to share all decision-making at the risk-taking. Innovation is inherent in entrepre- community level. neurship, but it can be manifested in many ways. In some of our case studies, this means a com- pletely new venture or way of doing business, Easy in – easy out! while to others it is an element in providing better customer service or more creative packaging or Too many owners in the tourism and hospitality programming industry create or purchase their business Mobilizing resources is an essential element without proper thought about their skills and in the entrepreneurial process. How well do

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family-business owners secure, invest and that have applicability to family businesses, achieve acceptable returns from available especially at the point of succession. A ‘renewal’ resources – including a return on their own strategy focuses the owner’s attention on getting effort? Many small family businesses are too more out of current capabilities and markets, small ever to become profitable or support such as through value-adding investments. a family – does that matter? Taking on debt ‘Reformulation’ implies improvement of the exposes one to increased risk, but is essential for business strategy, such as by developing new growth – is it an unacceptable risk in the context markets. ‘Regeneration’ applies when a new of the family’s security, or protection of its leg- owner or inheritor has to make fundamental acy? What is necessary to create and sustain a changes or investments to ensure viability of the business capable of being inherited by the next business. generation? Some businesses are built up to a More importantly, family-business owners point where they can be sold for the best price, should look to the specific competitive advan- while others (especially farm-based businesses) tages that a family business entails, such as would rarely be sold. This book contains exam- sacrifice, use of family resources, family ples of both highly entrepreneurial and highly networks, unified management and strategy, risk-averse family businesses. integrity, loyalty and dedication, tradition, special knowledge, continuity and a long- term orientation to achieving results (Donnelly, 1964). Inherent weaknesses must also be Business and strategic planning avoided. These can include conflicts between business and family interests, lack of discipline Formal planning is associated with business over resources, failure to adapt – or quickly success, although it is sometimes unclear if respond to – opportunities, and nepotism. talent leads to planning efforts or planning leads to improved performance. Advice has been given in Chapter 4 about preparing a busi- ness plan, with a number of key planning issues Niche marketing being identified. These include control of the business, careers for family members, capital Small businesses almost inevitably pursue niche and reinvestment, conflict resolution, and deal- markets, not mass markets, and the trick is to ing with a family culture (Carlock and Ward, find those customers willing to pay higher prices 2001). Those authors also recommended a par- for the services and atmosphere that only a allel system of planning for the business and the family business can provide. The case studies family, including a ‘family enterprise continuity and research found limited use of target market- plan’ which specifies the vision and strategies to ing, which implies that there is a potential achieve it. for family businesses to pursue this form of marketing strategy in the future.

Strategies and options Networking and collaboration Generic business strategies can be pursued by the family business. For example, the Being small and often isolated, family busi- ‘defender’ strategy involves sticking to what nesses in tourism and hospitality can benefit the firm knows best, the ‘innovator/prospector’ greatly from business-to-business networking strategy embodies taking risks and is therefore and the kind of family or social networking most suited to the growth-oriented entre- that provides support. Informal and formal preneur, and the ‘analyser’ strategy seeks com- marketing alliances or other collaborations petitive advantage through adoption of proven among businesses can be essential for market- strategies (Miles and Snow, 1978). Carlock and ing effectiveness and innovation, as the case Ward (2001) discussed three generic strategies studies have demonstrated.

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Other options in terms of cash-flow and work-load. ‘Combat- ing’ strategies were practised by owners who When the goal is to remain small and under sought to reduce demand fluctuations by control, but profitable, it can be called the expanding their season and/or broadening their ‘sustainability option’. Nevertheless, specific market base. Some developed export markets, strategies and investments may be required – it while others catered to residents in the off-peak does not imply doing nothing. Regardless of seasons. growth orientation, virtually every family busi- In extreme cases, ‘capitulation’ might be ness can benefit from a planned ‘value-adding’ forced on owners, such as selling the business, strategy. This might include investment in shrinking or terminating it. Most of the Bornholm technology or internet advertising, quality and respondents wanted a longer tourism season, efficiency improvements, and new services that realizing that would greatly enhance their generate money. Filling unused occupancy by profitability. tapping new markets is value adding, as is the practice of ‘yield management’ to maximize revenues. Financial management ‘Family Branding’ is an option only available to family businesses. It features the A major issue facing many families is that of family behind the services offered and makes taking money out of the business for personal it part of the product. The family name can uses versus having a plan that requires savings become a trade-mark (for example, O’Reilly’s and re-investment. Those not seeking growth Guesthouse), and family members can develop might think that there is no need for accrual reputations and even legends. Family branding of working capital, but they will probably find stresses ‘relationship marketing’ with specific it necessary, sooner or later, for maintenance, segments, and features the intangible ‘brand improvements and value-adding investments. attributes’ of quality, value, tradition and Case studies and cross-case analysis personality. Ethnicity might also be a factor. show that many family businesses are under- ‘Diversification’ into other types of business capitalized. This becomes an issue when they or other areas is sometimes tempting, but usually expand (or even disband) the business, and rejected by autonomy-seekers and those who access to capital is needed to fund further value small businesses, because of the costs and expansion or ‘buy-out’ the shares of exiting strains it can impose. Experts agree that going family members. outside one’s area of expertise and experience is highly risky, yet adding new markets (e.g. residents plus tourists) or developing products Ownership, organization and governance for export, was a viable strategy for a number of family-business owners in Bornholm (see Chapter 5). Simple forms of direct ownership are most common, but the growth- and profit-oriented entrepreneur generally seeks company status in order to protect family assets and help generate Responses to seasonality external capital. If the business develops into a multi-generational firm, ownership probably Evidence from Bornholm, Denmark, demon- has to evolve as well, with consideration given strated several strategic responses by family to a family trust or sibling/family partnerships. businesses to extreme seasonality of demand. It might be wise to separate ownership of the A majority of owners accepted the limitations tourism/hospitality business from other family imposed by seasonality and coped with it by assets including the land (as some of our case closing for part of the year. For small, part-time studies demonstrate), although lenders often businesses this might not be a problem, and for require these assets as collateral. some owners it could be a welcome respite. Because most family businesses in Families have to adjust to these changes, both this industry are small and operated by

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autonomy-seekers, their organizational structure Common causes of failure for small and remains very simple and top–down. Often the family businesses include a lack of business owners do everything! Growth, and the hiring of expertise, high costs (especially in isolated professional staff, may lead to more sophisti- areas), under-capitalization and small size cated and formal management systems. Retain- (which limit growth and profit potential), a harsh ing family ownership and control might become business environment (particularly extreme sea- an issue where professional managers have sonality of demand and unlimited competition) day-to-day oversight of the business. The estab- and the absence of marketing alliances or other lishment of a Board of Directors, including exter- forms of cooperation and support. There is little nal experts, is a recommended development for evidence to determine if avoidance of debt is a the larger and growth-oriented family firm. success or failure factor. Parallel to the Board, a formal Family Although innovation and growth might Council can be established to oversee the be desired, researchers and industry experts all ownership and long-term strategy. Also, a agree that owners should stick to what they know Family Agreement can be drafted to govern best. Diversification beyond one’s immediate ownership, such as a family-member’s rights to area of expertise and experience could prove acquire and/or dispose of shares. The Family fatal for the business. Trust, as exhibited in the O’Reilly’s case, is a specific form of ownership designed to sustain family ownership and control through the Preconditions and barriers to growth generations, but it might eventually give rise to problems when descendents cannot realize a Although growth is shunned by the majority, it cash value for their inheritance. is vigorously pursued by others. Every family- business owner should carefully consider the pros and cons of growth and alternative long- The meaning and causes of failure term strategies for their business. In particular, growth (and related innovations) might be Failure in a family business can have disastrous necessary to sustain a competitive position or consequences for the family, which helps to achieve an acceptable family income. explain the tendency of owners to be risk- Resources are the main determinant of averse. Given that the rate of outright failure growth potential. Revenue has to be saved in among small businesses in general is high, and the business (i.e. working capital), borrowed, or tourism/hospitality enterprises would appear to attracted from investors. Family sacrifices might fare no better than average, it is wise for owners be necessary, trading the desired immediate to consider reasons for failure and strategies for gains for longer-term income potential. The success. Even though our research showed that resource-based theory of the firm suggests that many respondents were not profit- and growth- families might possess unique bundles of tangi- oriented, in the entrepreneurial sense, almost ble resources (including family investments and all of them explicitly desired to make and keep land) that can be the basis of growth. As well, the the business profitable. The next-most common knowledge-based theory of the firm suggests goal among family-business owners in general that families might possess intangible resources, is to increase the firm’s value. Success and fail- especially specialized knowledge of markets or ure can best be evaluated against the owners’ products/services, which give them advantages. goals and needs. For some, mere survival will Specific barriers to growth for family firms in be a sufficient indicator of success, while for tourism and hospitality were discussed. They others leaving a sustainable family legacy will include the kind of family vision that results in a signify success. Getting children involved and lack of motivation; a family impasse over goals passing on the business to them is a very spe- or strategies; a lack of market intelligence; and cific and evidently rare definition of success, inability to be competitive within the market although some of our case studies indicate that area, laws or regulations. All these have to be this is possible. assessed when formulating strategy.

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Achieving growth and maximizing profits • They love the challenge of growing the business. Owners have the option of following a strategy • They are also motivated by lifestyle of sustaining the business, in the interest of benefits. preserving autonomy and maximizing lifestyle benefits, or risking more and striving for growth and higher profit. Anyone seeking this latter Involving the next generation and succession path should have sound knowledge of business management and strategy in general, and of Owners of family businesses who have children their tourism/hospitality business environment must decide at some point whether children are in detail. to be involved in the business, and if so is inher- Our research points to a number of factors itance a prospect? A related issue is that of the associated with successful growth and increased family ‘legacy’ – perhaps a farm or other real profitability among family business owners in estate – that is intended to be kept permanently this industry, namely: in the family. Apparently inheritance happens in only a • They respond strongly in the affirmative to small minority of family businesses in tourism the statement ‘I want to keep the business and hospitality, and there are a number of growing’. reasons. The absence of potential heirs is the • They are opportunists, and this includes most fundamental barrier, and is often created consciously seeking to purchase businesses or exacerbated by parents making a decision with higher profits and growth potential. to establish or purchase the tourism/hospitality • They are more likely to invest in hotels and business as a second career or even with retire- restaurants, or attractions, as opposed to ment in mind; by then, the children have usually small accommodation units (e.g. pensions gone elsewhere. Permanent out-migration by or B&B) or arts and crafts operations. youth for purposes of advanced education and • They are more likely to be copreneurs employment is typical of remote and economi- than sole proprietors without family cally disadvantaged regions. As well, children involvement in the business (as these latter exposed to the business from an early age might owners tend to be females either running a be turned off by the long hours, lack of privacy, secondary or micro business). nature of the work, or its low levels of income. • They are more likely to own a limited com- They might become interested in establishing pany, as this legal arrangement protects their own business, rather than taking over, as their family and allows easier acquisition of occurred in several of our case studies. capital from lenders and investors. Another barrier is the common practice of • They are more likely to involve children not separating the business from other assets, (although this might be a chicken-and- usually farmland. This inseparability reduces or egg situation – i.e. is growth necessary eliminates the chances for continuance of the for involvement of children or intended tourism/hospitality business. Gender can also to permit their involvement?). be a problem, as many females are not given • They are more likely to be male (although serious consideration as inheritors, or even to the exact causes of this difference are not becoming involved seriously in a family busi- known; there might be profound cultural ness. Where the business is run by females it is differences at work). often secondary to a farm or other economic • They adopt deliberate strategies that activity, and will not survive the founder. include market and product diversification, When parents want their children to be such as catering to both residents and tour- involved or to inherit, they have to plan it care- ists (owing to seasonality of demand) and fully – yet research continuously reveals a very developing export markets. low rate of succession planning in family busi- • They recognize the need for employees, nesses of all types. We provided expert opinion debt, and innovation. on how best to get children involved and to

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prepare for succession. According to Lansberg establish their tourism or hospitality business, (1988) there should be a shared vision within the or at least shapes their locational choice, and family, and this appears to be the fundamental having common family leisure pursuits could be pre-condition. Numerous tourism and hospital- a major balancing tool. ity businesses simply do not have what it takes to Roles in family businesses might be deter- inspire the next generation, and many owners in mined by gender or age, yet it is highly desirable fact would prefer their offspring to seek other to allow every participant to try new roles professional careers. and find the ones they are comfortable with. Getting children involved early is impor- The assumption that certain tasks are ‘women’s tant, then developing a responsible career path work’ runs deep, especially in the hospitality ser- for them. Knowing when to ‘pass the baton’, and vices, but this can be a source of tension as well bringing oneself to that critical point in life, is a as a limiting factor when it comes to ensuring crucial concern for business founders. Structures business success. have to be put in place, such as a family council or continuity plan, and estate planning practiced to ensure a smooth transition that benefits both Resolving conflicts and facing adversity generations. Mechanisms should be put in place to identify and resolve sources of potential conflict. They Balancing Family and Business might include informal meetings and more through the Life Cycle formal Family Councils or Codes of Conduct. Although unpredictable, adversity of some kind Although not all owners want their family to can be expected – for example, in two cases be involved or place family interests ahead of studied in this book, the eldest son and desig- the business, balancing family with business nated heir were tragically killed in accidents. through the life cycle is likely to be of impor- Having the ability to adapt will prove to be a tance to all owners, at least some of the time. valuable family asset. Facing adversity involves Indeed, the balancing challenge will vary testing the strength of family bonds during the through stages in the life cycle of the business difficult periods in the life cycle of the business. and the family as they evolve together. Existing family relationships also have Generic challenges identified by Carlock bearing on the ability of a family to prevent and Ward (2001) apply to most family-business disharmony – and indeed this rates highly as a owners. There is the matter of control and business goal for many family businesses we decision-making, and the related issue of family have studied. Cross-case analysis identified ‘culture’. Is it a collaborative family or patriar- ways that businesses avoid conflict by including chal? Developing meaningful and equal careers all family members in decision-making, attempt- for couples and for children is a challenge, and ing to achieve consensus, having siblings means for identifying and resolving conflicts involved in the business and having family have to be found. Finally, the matter of capital members involved from an early stage in and re-investment is a potential challenge, business development. especially when families want to take money out of the business for immediate use. Our cross-case analysis revealed the impor- Support mechanisms tance of achieving family consensus in decision- making, especially when couples work together. The level of family support for a business Finding work of equal value is a challenge. venture is a key success factor. Sole proprietors Getting children or other potential successors draw on other family members, often infor- involved in meaningful ways is a key to success- mally, while couples at least sometimes need ful transition. A strong interest in particular the help of children or other family members. leisure opportunities motivates some families to This principle might extend to larger family

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and friend networks, or ethnic communities, Gender and certainly applies to joint marketing and other forms of collaboration among small Gender has been a major issue in the tourism and family businesses. Private financing is one and hospitality literature, although the empha- hallmark of the family business. sis has not been on gender within a family Public-sector support is often directed at context, but on the unique challenges facing small and medium businesses, but seldom takes female entrepreneurs. Many family businesses into account the specific needs and preferences are started and operated by women, often with- of family business. The assumption that all out moral or financial support, and encompass- owners want to grow and maximize profits is ing the need to balance housework, mothering false, and probably hinders effective support for and business pressures. In many family busi- this sector. nesses, however, couples start and manage the business as equals. Another important issue is that of getting daughters involved in a family business and preparing them for inheritance, as Family business traditions in many cultures they are ignored. Most studies have focused on rural and Enterprise does run in some families, although specifically farm-related ventures, so the evi- there is no certainty that inheriting an entre- dence on gender issues is somewhat limited. preneurial orientation will lead children to However, McGibbon’s (2000) detailed study become involved or take over a family business of women and guest houses in the resort town – they might very well want to create their of St Anton, Austria, provides detailed insights own! Family continuity has its advantages, not in a different environment. From this and least of which is the knowledge gained over other research, it becomes clear that cultural many years or several generations, but parents differences directly affect the family and business might have to help their children use this knowl- roles of women and their entrepreneurial edge to go out on their own ventures. Where activities. tradition is a force for involving one or more One major implication of the available children in the business (often the eldest son is research is that there are clear incentives, pressured) it can have negative consequences, rewards, costs and challenges related to women such as rebellion by the child or a mismatch in business. Not the least of these is the issue between talents, interests and ownership of so-called ‘women’s work’ which is a cultural responsibilities. bias towards the kinds of work expected of and acceptable for women to perform. In developed economies, with plenty of alternatives for The legacy women, it is not such an issue. In those econo- mies, such as the ones studied in this book, The desire to create or perpetuate a family copreneurial activities are of equal or greater legacy can be a powerful motivator, especially importance. Our research showed that when it when farmland or other real estate is involved, comes to goals, male and female respondents such as ‘the family home’. Tourism might pro- showed no significant differences. vide one means to help preserve property in the family, or enable continuation of otherwise unsustainable farm operations. Certainly the Strategies for managing family and business case studies demonstrate that retaining owner- ship of family farms or homes is a powerful Because home and business often overlap in motivator for starting a tourism business. Leg- the tourism and hospitality industry, especially acy can also be something intangible, such in the provision of accommodation, ways must as maintaining a family tradition of service be found to ensure a degree of privacy and to to visitors which may have commenced in maximize family-time, without the intrusions of previous generations. guests. Physical or psychological barriers can be

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erected, including signs, fences, and locks on emerge. To articulate them requires a certain doors. Most owners we spoke to expressed a amount of repetition, but in a different light desire to find (and be able to afford) trustworthy from the implications drawn for specific family staff to help relieve the burden, yet human businesses and owners. The predominance of resource management can also become a major family businesses in many tourism destinations is headache as a company grows. Time manage- also justification for examining the implications ment has to be effectively practised, and this for tourism and destination management. goes with a positive attitude both towards the work and the need for relief from it.

Destination competitiveness and marketing

Family business and the environment Tourism scholars have traditionally paid much more attention to the destination than to indi- Our survey in Western Australia sought to vidual business units, while hospitality scholars determine if family business owners were have focused on management issues within the concerned about the environment and imple- firm rather than its ownership and governance mented practices specifically for conservation or by individuals and families. enhancement. There was some evidence that In a paper delivered at a conference with this was the case, but more research will be the theme ‘Reinventing the Destination’, Getz needed on that point. There is no doubt, how- and Petersen (2002) argued that the individual ever, that family businesses in tourism and business was not merely a factor in destination hospitality are often tied to the land (e.g. on competitiveness – as some models have sug- farms) or directly linked to natural and heritage gested – but that the purpose of destination resources. Accordingly owners should be management and marketing organizations was concerned about sustainability of the resource to make businesses competitive. Without base, and in rural and remote areas in particular profitable and sustainable family businesses, they are often in a position to have influence on and without growth-oriented entrepreneurs, policy and accepted business practices. Inter- destinations cannot develop or sustain a generational equity in terms of access to the competitive advantage. natural environment could also be expected The fact that most small, family businesses to come in to play in nature-based family are not growth-oriented, and many are competi- businesses. tively weak, presents a serious challenge to eco- nomic development agencies and to destination marketing organizations. Other authors have Implications for Tourism and cautioned that lifestyle-oriented owners might Destination Management not want to make a commitment to various business support schemes or even to seek out Very little recognition has been given in the information (e.g. Shaw and Williams, 1997). tourism and hospitality literature to the impor- Brownlee (1994) argued that the owners of small tance of the family or the individual entre- businesses must be engaged to assess their goals preneur in shaping community and economic and the help they need relative to their goals and development or destination competitiveness. resources. Attention has been paid to the entrepreneurs Hall and Jenkins (1997) identified 18 types and to issues applicable to small and medium- of instruments used by governments to promote sized enterprises, but as this book has demon- the development of rural tourism. These strated it is often the family vision that lies included regulations, monetary investment, behind the visible actions or inactivity. capital expenditures, training, advice, research We did not set out specifically to study and establishment of business incubators. Deter- implications for tourism, destinations, economic mining which actions or combinations work best or community development, but some did for family businesses should be a priority.

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Destination marketing Typical approaches to small-business nur- turing might have to be altered. For example, Is it logical to promote family businesses sepa- why assist in the establishment of businesses that rately, or as particular assets within the context have little or no prospect of growth because the of destination marketing? There might be a case owners do not want it? Assistance for entrepre- made for this strategy if the family-business neurs to both establish and purchase businesses sector is sufficiently well developed and pro- with a view to profit maximization and growth vides high-quality or unique services. However, makes a lot more sense. Destination Marketing Organizations (DMOs) As for the lifestyle-oriented owners who tend to pay little attention to the small and abound in this industry, is there any reasonable family businesses in their domain because they hope that some of them can be induced to grow lack funds for co-marketing efforts, or because their businesses? It is logical to assume that latent they are simply perceived to be irrelevant to the entrepreneurship exists in the industry – that bigger job of establishing a positive destination many are actually ‘constrained entrepreneurs’ as image and competitive attractions. Some atti- identified by Shaw and Williams (1997). If so, tudes in DMOs have to be changed, because in then identification of the very specific constraints many instances their marketing is useless if the holding them back, and ways to counter them, is small- and family-business sector cannot match a necessity. A number of those constraints have the promises being made. been highlighted in this book. Fostering and contributing to marketing The first major constraint is a fear of incur- consortia by small and family businesses should ring debt and the risks that implies for a family. be a standard operating procedure for DMOs. Can ways be found to reduce the risk or per- Particular attention should be given to net- ceived risk? One of our case studies illustrated working for purposes of learning, stimulating how borrowing to develop the business was justi- innovations and achieving economies of scale in fied financially because the value of underlying purchasing or advertising. A separate small- and assets (the farm land) exceeded the liability – is family-business marketing campaign might very this a model that can be refined and applied well be justified. through policy? Can loans be linked with training and advice to increase the likelihood of success? Taking the learning materials and expert advice directly to family-business owners is probably a Economic development necessity, as few of them will be able to leave their operations. The primary connection to economic develop- A second major constraint is the fact that ment is through the creation of jobs, and most many, if not most of the owners in this industry family businesses in tourism and hospitality are not particularly well qualified through experi- remain small and struggle to be able to afford ence and training. Not only do they require edu- to hire full-time staff. Can this be influenced? cational assistance, but they need models and a A two-pronged strategy will be required, with vision of what they can become. Benchmarking one focused on identifying and cultivating the against successful family businesses that have growth-oriented entrepreneur and the other grown will probably help to stimulate latent working with more conservative, autonomy- entrepreneurship, as will provision of detailed and lifestyle-oriented owners. growth models (i.e. the financial, strategic and Data from Canmore and Bornholm clearly operational steps needed). identified the existence of growth-oriented entre- Within the context of economic develop- preneurs and went some distance in characteriz- ment another priority should be to examine ing them, their businesses and their goals and how family businesses create and invest wealth strategies. This knowledge should be used to through tourism and hospitality services, how help identify, attract and cultivate those entre- their developments and legacies tangibly affect preneurs with the greatest potential to create regions and nations, and what can be done to employment and wealth. maximize wealth creation. Tax laws, particularly

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related to inheritance, should be evaluated in Achieving a balance between family and busi- view of the desirability of perpetuating and grow- ness commitments throughout the life cycle of ing family legacies, as opposed to diminishing or the business remains a major challenge which preventing them. has implications not only for the family business, but also for the tourism destinations, destination management organizations and the Community development community in which these businesses operate.

Family businesses can be important anywhere, but are often the cornerstone of community References development in small towns, rural and remote areas. The specific roles they can play relate to Brownlee, D. (1994) Market opportunity analysis: the provision of leadership (e.g. for economic a DIY approach for small tourism enterprises. and environmental policy), stability across the Tourism Management 15(1), 37–45. generations (which can perpetuate valuable Carlock, R. and Ward, J. (2001) Strategic Planning for local knowledge and traditions), self-confidence the Family Business. Palgrave, Basingstoke, UK. in the community’s ability to survive and pros- Chua, J., Chrisman, J. and Sharma, P. (1999) Defining the family business by behaviour. Entrepreneur- per (through the example of successful busi- ship Theory and Practice 24(4), 19–39. nesses), and support for other locally-owned Donnelley, R. (1964) The family business. Harvard businesses. As well, the mere fact that families Business Review 42(2), 93–105. are sustainable in some areas helps to ensure Gersick, K., Davis, J., Hampton, M. and Lansberg, I. the survival of schools and other social infra- (1997) Generation to Generation: Life Cycles of structure. If an area cannot attract and hold Family Business. Harvard Business School Press, families, its population will most probably Boston, Massachusetts. decline, beginning or reinforcing a downward Getz, D. and Petersen, T. (2002) Growth-oriented spiral. Entrepreneurs and Destination Competitive- ness. Paper presented at the Re-Inventing the Destination Conference, Dubrovnik, Croatia. Lansberg, I. (1988) The succession conspiracy. Family Chapter Summary Business Review 1(2), 119–144. McGibbon, J. (2000) Family business: commercial This first of two concluding chapters has hospitality in the domestic realm. In: Robinson, summarized important implications from the M., Long, P., Evans, N., Sharpley, R. and literature and research documented in this Swarbrooke, J. (eds) Reflections on International book specific to the individual family business. Tourism: Expressions of Culture Identity Secondly, it has drawn implications for the and Meaning in Tourism. Business Education Publications, Sunderland, UK. broader policy domains of tourism and desti- Miles, R. and Snow, C. (1978) Organizational nation competitiveness, economic and commu- Strategy, Structure, and Process. McGraw-Hill, nity development. In doing so it has raised a New York. number of issues to do with the structure, own- Shaw, G. and Williams, A. (eds) (1997) The Rise ership, location, education, management, ori- and Fall of British Coastal Resorts: Cultural and entation and continuation of family businesses. Economic Perspectives. Pinter, London.

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13 Implications for Research and Theory

Introduction Ownership

The first part of this final chapter returns to the Control is a generic family business theme beginning of the book in search of research that has been neglected in the tourism and gaps and to formulate a research agenda. Gaps hospitality literature. Related questions include are identified by assessing the extent and nature the problem of how to ensure that children of tourism and hospitality-specific literature (as receive benefits from the family business while presented throughout this book), compared to control remains within the family. There has the three-axes model of family business, and been no attention paid to unique forms of to the identified themes and topics found in ownership, nor their evolution, in these sectors, generic family-business literature. even though it is apparent that many such The second part addresses theory develop- businesses are tied to family property or lack ment. It has been argued that the nature of tangible assets. the tourism and hospitality industry, especially Because a majority are run by couples, the settings or business environments in which there is a need to examine how they arrange family businesses operate, modifies family ownership; at least one study (McGibbon, 2000) businesses in a number of ways. A model noted that women can be disenfranchised in was presented in Chapter 1, and we return to some cultures. Succession within a family and that framework to formulate a number of major between generations has barely been consid- propositions that can be used in building theory. ered in the tourism and hospitality literature, yet it is the dominant generic family business theme. The study by Getz and Carlsen (2000) con- Developing a Research Agenda cluded that a majority had no succession plan. Specific barriers to inheritance should The three-axis model of Gersick et al. (1997) be examined in different settings. provides the starting point. First, ownership is Longitudinal research is the best way to examined. What do we know about unique deal with many issues pertaining to the family forms of family business ownership within tour- business life cycle. Case studies of success and ism and hospitality, and how these forms might failure stories will be useful, but comparisons change as the business evolves? Ownership also over time will probably be more valuable covers control and governance. The second theoretically. For example, researchers could axis to be summarized is business evolution, examine family business start-ups and evolution and the third is family. within a specific area over many years.

©D. Getz et al. 2004. The Family Business in Tourism and Hospitality (D. Getz, J. Carlsen and A. Morrison) 185

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Business but no researchers have examined the minutiae of decision making in family businesses. How Motives and goals have been studied to some exactly do family vision or lifestyle preferences degree, enough at least to conclude that in interfere with business? Why can’t they be suc- tourism and hospitality enterprises, lifestyle and cessfully combined? How do family businesses locational preferences are extremely important. that grow differ from static enterprises in terms of Failure has been studied, but not specifically changing family attitudes, roles and challenges? linked to the core family vision. Does family business in these sectors perform worse than corporations? The involvement of professionals Generic family business themes and topics as managers, staff or directors in family busi- nesses has not been addressed. We re-visit Fig. 1.3 for a summary of generic Analysis of staff–family interaction is a family business themes and topics, as derived potential research topic. The lack of entrepre- from Sharma et al. (1996). Not all of these neurship has been identified, but not tested major themes and specific topics have been systematically. The notion of ‘constrained considered or adequately developed in the entrepreneurship’ should be explored more tourism and hospitality literature. fully, including determination of what mecha- nisms would best facilitate greater entre- preneurial activity among family businesses. Definitions Also, almost all the literature pertains to micro There is no need to invent new definitions and small businesses, even though some family on an industry-by-industry basis. However, it is businesses grow to a large size. important to realize that in tourism and hospital- There is a great need for systematic ity the vast majority of ‘family businesses’ are and comparative research of several topics: of not classic, multi-generation firms; most never settings (e.g. rural versus urban and resort envi- go beyond the foundation stage in terms of ronments); family versus non-family businesses; ownership, business or family evolution. Thus, sole-proprietor versus copreneurs and larger the most important point is for researchers family businesses; developed versus remote to recognize that it is the ‘family vision’ that rural areas with dispersed infrastructure; small defines and distinguishes these ventures from versus large businesses, and so on. To evaluate others. what is unique about tourism and hospitality Appropriate research questions: businesses will require comparisons within these sectors, and with other types of service • What is the extent (a definitional and businesses. measurement problem) and significance (requiring evaluation from multiple per- spectives) of ‘family business’ in various Family tourism and hospitality environments? • What are the unique components of the ‘family vision’ in tourism and Gender has received the most attention, partic- hospitality (e.g. related to leisure interests, ularly female entrepreneurs in home-based locational preferences, service orientation, tourism and hospitality businesses. Curiously, autonomy-seeking)? the couple as copreneurs has been neglected, even though this ownership form is probably In terms of types of family business, the most typical in family businesses. As well, chil- most common in tourism and hospitality are dren have been overlooked – their introduction the copreneurial venture in which husband to the business, involvement over time with its and wife (and sometimes other partners) work management and ownership, and whether or the business together and often equally. Those not they share the core family vision. involving children are special cases, and those It is known that family-first, or lifestyle entre- leading to inheritance are rare. preneurship, probably dominates these sectors, Appropriate research questions:

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• Are there unique forms of family business in the tourism and hospitality literature. The in tourism and hospitality? (i.e. Are copre- research from Bornholm reported in this book is neurial structures different because of the ground-breaking in this context. nature of the business environment or Appropriate research questions: the motives and goals of owners?) • Does the observed rarity of inheritance in family businesses in tourism and hospitality Uniqueness of family business vary by setting or particular features of the Generically, we have already defined the business environment (e.g. is it different in fundamental uniqueness of the family business developing economies or highly developed resorts and cities)? in terms of the family vision and how it shapes • the evolution of business, ownership and family How can the severe barriers to inheritance inter-dependencies over time. This should hold be mitigated (e.g. by tax policies, true regardless of the industry, although no-one assistance to grow the family business, has challenged that hypothesis. One topic of improvements to the work environment, particular interest, hitherto unexplored, is family education and training opportunities, etc.)? branding in tourism and hospitality businesses. Appropriate research questions: Governance • Are there unique aspects of tourism Because the whole subject of family business in and hospitality that influence the inherent tourism and hospitality has either been sub- strengths or weaknesses of family business? sumed under the broader topic of ‘small and • Are there unique opportunities and aspects medium-sized business’, or ignored because of of family branding in tourism and hospital- a pre-occupation with large, public companies, ity (e.g. because of the nature of the the topics of ownership, control and gover- services and the business environments)? nance in family businesses have largely been ignored. The unique opportunities and Life cycle implications of family trusts deserve further exploration, especially in light of the O’Reilly’s Most family businesses in tourism and hospital- case documented in this book. ity appear to remain frozen in the first stage Appropriate research questions: where founders dominate, the business is not • Do family businesses in tourism and grown, and succession is not even a possibility. hospitality invent or adopt unique forms More and comparative cases of multi- of ownership, control or governance? generational families are needed to make a • What are the implications and relative meaningful contribution to understanding degrees of effectiveness of various means evolutionary forces and to determine if they (such as family trusts) of preserving family are in any way unique to the industry or setting. control across generations? (This question Appropriate research questions: should also be linked to the one related to • How do family businesses in tourism family branding.) and hospitality evolve over time in terms of inter-dependencies among business, Strategic management ownership and family? • Is there anything unique about the evolution The theme of ‘family vision’ is problematic of family businesses in tourism and hospi- when most owners in this industry do not plan tality other than the observation that most for succession or inheritance, or it is simply not do not go beyond the foundation stage? practical for them. The family vision in these businesses has more to do with personal and Succession and inheritance copreneurial lifestyles, autonomy-seeking, and realizing a decent economic return on effort. This theme has dominated the generic family A special case exists when a ‘family legacy’ of business literature, but has seldom been raised real property is at stake.

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Business and strategic planning is weak or community policy-makers. By examining in across the industry, and the full range of business detail the motives and goals of family-business strategies available to the family-business owner owners we have been able to demonstrate why is often not evaluated. so few businesses in this industry pursue growth Appropriate research questions: and why so few are innovative or even com- petitive. This raises the matter of how policy • What are the variations on ‘family and planning might attract or generate vision’ found in tourism and hospitality higher levels of entrepreneurship, even among businesses? autonomy- and lifestyle-seekers. Can a formula • Why do some families give importance to be developed, for example, to encourage small, the concept of a ‘family legacy’? How does family-business owners to adopt growth- that influence the decisions of parents and oriented goals, re-invest in their businesses children? and become more competitive? • How can autonomy and lifestyle-oriented Appropriate research questions: owners be assisted to adopt business and strategic planning? • Do founders’ motives and goals vary according to setting or other environmental The founders factors? • How are business- and family-related We have explored founding motives and goals decisions actually made and enforced in in depth, finding that lifestyle and autonomy various types of family? Does the type of are predominant considerations, while profit- business make a difference? and growth-oriented entrepreneurs are in the • How might entrepreneurship be increased minority in this industry. Because succession is among the lifestyle- and autonomy-seekers generally not an issue, leadership is more a that dominate tourism and hospitality? question of how sole proprietors shape their business and how copreneurs work together Family influence and dynamics towards common goals. ‘Passing the baton’ is a rare issue, although there is no evidence for Family culture has not been systematically saying that founders in this industry are more or researched, especially with regard to values, the less reluctant than those in other types of family importance of a family legacy, or entrepreneur- business to let go of control. ship. Gender has been examined in some detail, More research on motives and goals in dif- but mainly in the context of female entrepre- ferent settings, and how they might change over neurs establishing tourism or hospitality ventures time, will be important. Also, goal incongruence – and primarily in farm or rural settings. The and divergence among family members should other topics under this theme (copreneurship, be examined in multi-generational businesses. sibling rivalry, intergenerational relationships, The details of how decisions are made have not nepotism) appear to be completely new for been examined, nor have the subtleties of family tourism and hospitality researchers. dynamics in tourism and hospitality businesses. Appropriate research questions: There are, a priori, reasons for suspecting that • Are there unique aspects of family culture the service orientation and other aspects of within and leading to family businesses in the tourism/hospitality business environment tourism and hospitality? will shape decision-making (e.g. related to • How does gender relate to family-business gender roles), the evolution of goals (e.g. getting formation and management in different burned-out), and the practical questions of settings (e.g. comparing rural with resort viable succession. and urban)? Entrepreneurship must become a major theme in tourism and hospitality studies. It Culture and ethnicity has been shown in many studies to be lacking, or at least limited, yet it is highly desired by Culture as a determinant of the business envi- tourism destination managers and economic ronment has yet to be examined in the context

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Implications for Research and Theory 189

of the family business in tourism and hospitality. Appropriate research questions: It seems reasonable that the family business in • Are family businesses in tourism and tourism and hospitality vary across cultures, hospitality inherently oriented toward both in terms of opportunities and business achieving environmental responsibility types. Ethnicity is known to be a factor in family and community viability? business generically, such as its close associa- • How can community and environmental tion with ethnic-immigrant communities and sustainability be increased within the networking among business owners of the same family-business sector? cultural background. Appropriate research questions: There are an endless number of potential research questions that could benefit this field. • Are some cultures more supportive of Those mentioned above should be viewed as family-business formation in tourism and examples, based on obvious gaps in the litera- hospitality? ture. In the ensuing section, propositions are • How does ethnicity (or other cultural used in theory-building, and while they are put factors) shape networking among family- forward with some degree of confidence, it is also business owners? recognized that they should be expressed as hypotheses and tested. Professionalism

Working with employees is a common issue for Theory-building owners in tourism and hospitality businesses, whereas transition to a professionally-managed Although a case has been made for taking firm is a rather rare occurrence. Although a an industry-specific approach to family business number of goals and challenges related to studies, which would have the affect of family–staff relationships have been identified broadening family-business studies, the main in this book, the research evidence is slim. theoretical concern in this book is to encourage Appropriate research questions: systematic application of a family-business • What are the benefits and costs or risks perspective within tourism and hospitality. for family-business owners who want or To accomplish this aim, a conceptual frame- need to hire and manage employees? (e.g. work has been developed to advance theory Does the home-based accommodation and shape research on family-business issues sector restrict the choices and increase within the tourism and hospitality fields. scope for owner–employee tension?) This framework (Fig. 1.4) places the family • What sizes and types of business in this at the core, suggesting that some or most busi- industry lend themselves to professional ness decisions are rooted in a family vision that management? makes the family firm unique. Understanding • How does professional management affect the family vision and how it shapes a business is the potential for involving children and the essential starting point of family-business ultimate inheritance of the business? studies. Mainstream entrepreneurship and small-business studies do apply to a point, but The family in society there is a great need to start with the premise that owner-operators will behave differently. We explored the environmental attitudes Family-business studies embody an evolu- and practices of family-business owners, but tionary perspective in which ownership, family that was a fairly superficial introduction to and the business change over time, inter- this broader theme. From a community- dependently. Family ownership has been development perspective, family businesses neglected in hospitality and tourism, and should be valued and nurtured. The ways considered mostly as a minor variant in which they network and do business are within small-business and entrepreneurship important for local politics and community themes. Inter-generational ownership issues and viability. succession are also neglected issues.

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A number of industry-specific modifiers The family vision, surprisingly, usually does have been identified, and certainly more can be not include the involvement of children, or expected to emerge from research. It is impor- passing the business on to the next generation. tant to explore these connections as they shape Involvement of children, and inheritance within the appeal of tourism and hospitality business the family, are very infrequent occurrences ventures as well as many of the family-related within the tourism and hospitality industry for a rewards and challenges. A new theme to variety of reasons, not the least of which are the emerge, not covered in generic family business facts that many such businesses cannot be sepa- studies, is that of families and development. It rated from the family home or farm, or are not has been highlighted in tourism and hospitality viable entities that can support children. As well, because the family business is often of critical many children do not share the family vision and importance in peripheral and rural areas – to the get away from the home as soon as possible. The community, economy and environment. This nature of the work itself probably discourages theme also introduces the importance of setting many from even considering tourism or modifiers, as family business is greatly impacted hospitality businesses. by location, culture and level of economic There are many issues to explore related to development. the family vision and its impact on tourism and Use of this framework will provide a more hospitality businesses, communities and destina- theoretically integrative base for exploring family tions. We will examine a number of propositions, business issues in tourism and hospitality. By below, that are derived from the literature way of focusing attention on the key research and the authors’ collective research efforts. The gaps and theoretical issues, a set of major propo- nature of propositions is that they are put for- sitions can be advanced for consideration. They ward as being true, based on available evidence, should be viewed as starting points for research- but should nevertheless be tested in a variety ers interested in developing theory in this field. of settings, using a range of methodologies. As The propositions stated in this section are the propositions become hypotheses for testing, quite different from the research questions sug- they directly assist in theory-building. gested above. Those were derived from an anal- ysis of gaps, whereas the propositions below are derived from the authors’ existing understanding Propositions of this field. Addressing the research questions mentioned above will advance theory in this P 1. The core family vision in most family busi- field, as will testing these propositions. nesses in tourism and hospitality is focused on the lifestyle, autonomy and locational preferences of the founders; it is therefore Family vision a barrier to business growth, profit maximization and new venture creation. At the core of family business studies is the fact There appears to be some degree of univer- that many owners put family interests ahead of sality in people seeking autonomy through purely business interests; they behave differ- business, but it is possible that the lifestyle vision ently from profit- and growth-oriented entrepre- is much more feasible in developed economies. neurs and corporations. Many owners have a Conversely, in lesser-developed economies it vision for what the business can do to help the might be expected that many family businesses owners and their families realize personal goals, are established because of a lack of choice. typically related to autonomy (being one’s own Many family businesses are known to be boss and hands-on work), living in the right established by immigrants in new countries as environment (especially in resorts, islands, small well as by returning migrants who have made towns and rural areas), and enjoying a desired money elsewhere. In these circumstances, do lifestyle (often specific to leisure interests). As a the owners and families behave differently? How result of the family vision, many family-business does business performance, including growth, owners are content to remain small and tend to vary according to the family vision or other avoid debt and risks. founding motives?

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Implications for Research and Theory 191

A key research question has to be: under environment – especially lower seasonality of what circumstances, or with what assistance, will demand – make the difference? Or was this a family businesses grow? It is likely that most cultural difference reflecting underlying values cannot grow because of structural limitations and attitudes in Denmark and Canada? (i.e. personal financing and hands-on manage- P 4. Goals of male and female owners in ment), even if the owners desire it. Will training copreneurial businesses (i.e. those oper- opportunities achieve more growth than finan- ated by couples) are likely to be identical. cial incentives? To what extent can partnerships and new technology assist the family-business P 5. Female entrepreneurs, specifically those owner in becoming more efficient and therefore involved in home-based businesses, more profitable? display a different set of motives and challenges from those exhibited by the P 2. The unique opportunities for tourism and copreneurial family business. In female-led hospitality businesses in rural and periph- family businesses there is greater scope for eral areas will result in a preponderance of dissention on goals and business roles. lifestyle-oriented, family-business owners. A great deal of research and discussion in No systematic comparison has been made the literature has focused on female entrepre- of motives and goals in different business set- neurs, and on the disadvantages or barriers they tings, but the research evidence strongly suggests typically face, but in businesses owned and oper- that in rural, island and resort settings there are ated by couples, the limited evidence suggests definitely unique opportunities within tourism that male and female goals are largely identical. and hospitality that do attract and sustain This observation deserves more detailed exami- lifestyle-oriented families. But what of large nation, including a comparison between females resorts and cities? Are they more likely to attract acting alone and those working with partners in the profit- and growth-oriented entrepreneur? running a business. Family business researchers Can family businesses compete with the big should, in fact, be more interested in family corporations and chains in these settings? dynamics, such as the interplay between family P 3. Following on from P1 and P2, most family- members by gender, age, and degree of interde- business owners in tourism and hospitality pendence. One focus for this line of research will display low levels of entrepreneurship, should be the examination of how families specifically in terms of risk-taking, identify and resolve issues pertaining to their innovation, growth and new ventures. business.

Research has demonstrated the existence P 6. Sole proprietors, although more likely of profit- and growth-oriented entrepreneurs to adhere to mainstream entrepreneurial as a small minority of tourism and hospitality business goals and practices, nevertheless family businesses. They tend to be attracted involve family in business operations and to businesses with greater potential for profit decisions. and growth, and to involve more children. But Sole proprietors might not consider their what comes first – family involvement or profit? business as a family business, yet they will find They also tend to purchase rather than set up it difficult to separate completely their business new businesses, so agencies seeking economic and family lives. Many do involve spouses or growth and new jobs might be wiser to fund other family members, formally or informally, these entrepreneurs rather than putting money although not in ownership. In couples, where into the creation of new, small businesses. one partner runs a business and the other has It is possible that innovation and growth separate employment (which is particularly might vary by setting, culture, and level of the case with many female-operated, small economic development. A comparison of a accommodation and retail operations), there is newer, mountain resort (Canmore, Alberta) ample scope for either informal assistance or for with an older, more traditional seaside resort conflict. (Bornholm, Denmark) revealed that the family- business owners in Canmore were in general P 7. Larger firms are more appealing for more profit- and growth-oriented. Did the purchase by growth- and profit-oriented

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192 Chapter 13

entrepreneurs; in turn, these will offer P 11. Family businesses in tourism and more scope for employing and challenging hospitality are most likely sold and family members. taken over by other family businesses. As mentioned earlier, does family involve- Research should be directed at examining ment come before or after business growth? It the life cycle of individual businesses within has been claimed that business founders do not different settings to see if purchase by different create family firms, and the ‘family business’ part families is a repeat phenomenon. And if the comes later. Certainly larger firms offer more vision does occur to children later in life, will they scope for employing and challenging family emulate their parents but in a different place or members, but is that in itself a motive for growing business? the business? P 12. Farm-based family businesses are more likely to involve a conscious attempt by the owners to create or pass on a legacy of land to the next generation. Propositions relating to ownership, family and business evolution Many people desire to create a legacy of land, money or a business for their inheritors. P 8. Most family businesses in tourism and The notion of ‘legacy’ deserves more attention hospitality will not be passed on within from researchers. To what extent is it rooted in the family. various cultures? Or has it more to do with strong P 9. A primary barrier to inheritance of family ties to the land? Certainly in the tourism and hos- businesses in this industry will be a lack pitality research cited in this book, the desire for of shared vision between the generations. creating a legacy appears to be linked to farming in particular. A related issue is that of separating This can be stated with a high degree of the tourism business from the farming operation. certainty, based on available research within the industry and family business data in general, but P 13. In remote and lesser-developed settings, does it hold true everywhere? The family vision returning migrants and in-migrants are does not seem to endure across generations. likely to be the predominant form of business ownership in tourism and It might be that living in resorts, islands, small hospitality. towns and rural areas is desirable only later in life, and by the time inheritance becomes Research in the Spey Valley of Scotland possible the children have left. (Getz, 1986) revealed that in-migrants were the dominant entrepreneurial group in tourism and P 10. Children in family businesses in this hospitality, although many B&B establishments industry are likely to consciously reject taking over the family business because were founded by natives of the area. Other of perceptions of hard work and low academics have noted that returning migrants profitability. have the money and expertise to establish busi- nesses. A number of issues are raised by these The very nature of tourism and hospitality phenomena, including cultural (is indigenous work discourages many people from entering culture threatened?), social (the politics of new- or continuing, either in employment or comers versus natives) and economic (control ownership. Data are needed from children over the industry). growing up in these businesses, or perhaps college students reflecting on their childhood P 14. Family business in tourism and hospital- experiences, to see what effect it has on their ity will display lower profitability and attitudes and careers. A logical sample would higher failure rates than other forms of business. be of tourism and hospitality students, with a specific hypothesis being: tourism and hospital- This is a more contentious proposition, not ity students from a family business background backed by systematic testing but only by direct are more likely to reject involvement in the observation of the industry. It is based on the fact family firm and potential ownership of a similar that the majority of tourism and hospitality busi- business. nesses studied to date, by multiple researchers,

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have been small and not growth-oriented, and inheritance and the marginal nature of many of the industry generally experiences a high turn- the businesses. over in ownership. Research should therefore P 17. Families adopt both personal and concentrate on comparing family businesses business strategies that are unavailable between industry sectors. to corporations to diminish or cope with seasonality. P 18. Some family-business owners prefer Propositions relating to industry-specific seasonal breaks from work, but these modifiers businesses will remain small in terms of employment and profit potential. P 15. The nature of tourism and hospitality These two propositions also get at the core services, often involving a high degree of family-business studies. For some, seasonality of host–guest interaction, is both a is not a crucial issue because their business is motivator for many family businesses and a source of family branding secondary to another activity, such as farming, (in which the family is the attraction). or even counter-cyclical to other activities like fishing or forestry. For these family-business This proposition reflects the positive side owners, seasonality is a fact of life and not a of running a tourism/hospitality business. Many threat. To others, the low-demand period (or family-business owners seek both autonomy ‘off-season’) comes as a relief, enabling rest, and hands-on work in this industry, obviously vacations, and time for necessary work around enjoying meeting and pleasing people. It can the house and business. These families simply grow tiring and intrusive, but certain personality cope with seasonal demand and will generally types relish the contacts. The desire for social remain small and lack high profitability. Others, contacts has been noted to be a motivator, however, combat it vigorously. To economic especially for females in remote and rural areas. development agencies and destination market- Family branding has not been given much ers, the ‘combaters’ are to be valued and encour- attention in the tourism and hospitality literature. aged. What sets them apart is both a theoretical The O’Reilly case study demonstrates its poten- and a practical question that cannot yet be fully tial power for ensuring a sustainable, profitable answered. family business, but what are the exact benefits and costs? If the success of a business is tied to a P 19. Families engage in value-adding to their family name, what happens when ownership business in order to generate sufficient income to hire staff, not for profit changes or a scandal occurs? maximization. P 16. Cyclical demand, especially seasonality, The majority of ‘development’ within fam- has a major negative impact on family business viability and inter-generational ily businesses in tourism and hospitality appears succession. to be of the ‘value-adding’ kind, and not devel- opment for the sake of growth or attainment of Tourism in most destinations experiences maximum profits. Owners realize the need for some degree of seasonality of demand, and greater profits, and can achieve this goal through in many rural, remote and resort settings the improved marketing, technology, cost controls, fluctuations are extreme. This causes major and possibly expansion. The case studies cited in problems for family businesses, and requires this book suggest that expansion is carefully specific coping strategies that directly effect thought out and usually linked to the desire family life. The Bornholm research clearly to obtain relief from the burdens of being demonstrated how most family businesses had owner-operators. to shut down for part of the year, but also pointed out strategies that can be successful in combating P 20. A high concentration of small, family or even overcoming seasonality. The exact businesses contributes to resort decline. link between seasonality and inheritance has not been tested, but this proposition follows This proposition is bound to be contro- logically from available data on the low levels of versial. It follows in part from the observations

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of Shaw and Williams (1997) concerning the Some families are motivated to develop a decline of British coastal resorts, and in part from tourism or hospitality business in order to stay on the other research cited in this book that points their land or in their family home, while others to the general absence of growth motivations consciously choose to re-locate to a preferred and entrepreneurship in family businesses. setting. Either way, the family in business in Researchers might find that it is not the concen- remote areas, small towns, islands and other tration of small, family businesses that leads to peripheral settings, is potentially an important decline, or as argued by Getz and Petersen asset to that fragile economy and community. (2002), prevents destination repositioning, but Even when the individual family business fails the low number of profit- and growth-oriented or is sold, other families are likely to take it entrepreneurs in a given economy. If that is over. No-one has documented this process or the case, special attention must be given to evaluated all its implications. Case studies would attracting and encouraging this type of family be a logical starting point. business. P 24. Networks of family businesses are P 21. There are more opportunities for family- essential for development in rural, business creation by residents in the remote and lesser-developed settings. early stages of destination development, Where there is a long tradition of family but more opportunities for in-migrant family-business creation and for family- business, it is likely that they have closer links business growth in the later stages. than with external or non-family businesses. Partly this will rest on extended family ties, and The destination life cycle (from Butler, partly on preference. Such networks can provide 1980) has been applied to many facets of tour- financial and moral support, increase the mar- ism and hospitality studies, but little attention has keting reach of small businesses, and even act to been given to the possible links between stages keep out competitors. But where does it work of the life cycle and family-business opportuni- this way in tourism and hospitality? How exactly ties. This proposition, therefore, is more tenuous do the networks work? than many of the others. P 25. Opportunities for profitable family busi- P 22. Family-business owners in tourism and ness are maximized in highly developed hospitality are willing to accept the many economies, cities and popular resorts. challenges and limitations imposed on them because of the compensating Presumably the more tourism and leisure benefits relating to lifestyle. demand there is, the more opportunities exist for family business. But are they crowded out by This contention follows from previous dis- large corporations and chains? Is there a position cussion, and it should be possible to put it to a in the life cycle of the destination that maximizes simple test in any given business environment. or minimizes opportunities for families? What it does not say, however, is that many owners do not accept the trade-off between work P 26. In lesser-developed economies, tourism conditions and lifestyle, or cannot sustain it over and hospitality sectors offer new oppor- time, and they leave the sector. To get a com- tunities for family-business creation, plete picture will require surveys of owners and but these will be constrained by culture, capital and economic dualism. past-owners of failed, lapsed and sold family businesses. Many developing countries and regions rely on tourism to attract foreign investment and cur- rency, to help build infrastructure and modernize Propositions relating to setting modifiers the economy. Aside from the potential negative implications of this process, such as economic P 23. Family businesses in remote and rural dualism, it does create opportunities for indige- settings have a substantial, positive nous and returning (i.e. re-patriated) investors. impact on community and economic The trouble is that in some cultures there are development as well as on cultural and severe barriers: cultural (e.g. gender bias, atti- environmental sustainability. tudes towards business owners); legal (taxation,

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Implications for Research and Theory 195

inheritance or monetary controls), or economic the Gersick et al. (1997) life cycle model (lack of capital or difficulty in borrowing). incorporating the three axes of business, family and ownership, as well as through reference to P 27. Family business in traditional and indige- the generic, family-business themes and topics nous cultures will be uniquely shaped by issues pertaining to communal owner- identified by Sharma et al. (1996). ship of resources and control of culture. What are the most important research gaps? As this is a new line of inquiry for tourism Dimensions of family business in indige- and hospitality scholars, there are certainly nous cultures have yet to be examined. Even many gaps, and more will be identified as though communal ownership applies, there are research advances. Without repeating all the still opportunities for individuals and families questions raised above, it has to be emphasized (sometimes extended to the tribal level) to oper- that the most important research projects are ate a tourism and hospitality business. It could be those that either help identify the unique or com- accommodation on communal land, or guiding mon aspects of family business in this industry services using personally owned equipment such (compared with other industries, preferably over as boats or snowmobiles, but the ownership time), and those that help formulate generic, of culture is another issue. How do personal or family-business theory (such as the nature of family business ambitions get reconciled with constrained or latent entrepreneurship within community decision-making? Does the commu- families). nity block innovations in the name of cultural In the second part of this chapter a series protection? of inter-related propositions were advanced as P 28. Female entrepreneurship is in many a step in theory-building. Propositions follow areas restricted by culture, yet in itself directly from the authors’ collective knowledge offers an opportunity to break tradition and research evidence and represent what we and realize women’s goals for greater believe to be the truth. They can and should be independence. tested in many settings and across industries, but they can be used as emergent theories. Quite a lot of attention has been given to the If this book has one over-riding benefit female entrepreneur in tourism and hospitality, to the field of tourism and hospitality studies, to particularly because so many micro and small the industry and its countless family-business businesses are established and operated by owners, we hope it is in elevating the profile women. Research is needed on incentives and of family-business issues. If successful in barriers specific to women, trade-offs between realizing that goal, it should result in more and family and business, conflict resolution, and better research, more effective policies, better- cultural implications. managed businesses, more competitive destina- tions, and more students inspired to study the family business in tourism and hospitality. Chapter Summary

There is a huge scope for theory-building in References the family-business sector in general, and for industry-specific developments in particular. Butler, R. (1980) The concept of the tourist area cycle We have argued from the book’s very begin- of evolution; implications for management of ning that an industry-specific approach will ben- resources. Canadian Geographer 24, 5–12. efit the generic field of family business studies, Gersick, K., Davis, J., Hampton, M. and Lansberg, I. and that it is important within the context of (1997) Generation to Generation: Life Cycles of understanding tourism and hospitality. Family Business. Harvard Business School Press, Boston, Massachusetts. This concluding chapter started with our Getz, D. (1986) Tourism and population change: assessment of gaps between what should be long term impacts of tourism in the Badenoch– known or studied, and what is known about Strathspey District of the Scottish Highlands. family business within tourism and hospitality. The Scottish Geographical Magazine 102(2), Gaps were identified specifically by reference to 113–126.

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Getz, D. and Carlsen, J. (2000) Characteristics and Swarbrooke, J. (eds) Reflections on International goals of family and owner-operated businesses in Tourism: Expressions of Culture Identity and the rural tourism and hospitality sectors. Tourism Meaning in Tourism. Business Education Management 21(6), 547–560. Publications, Sunderland, UK. Getz, D. and Petersen, T. (2002) Growth-oriented Sharma, P., Chrisman, J. and Chua, J. (1996) Entrepreneurs and Destination Competitiveness. A Review and Annotated Bibliography of Paper presented at the Re-inventing the Family Business Studies. Kluwer, Boston, Destination Conference, Dubrovnik, Croatia. Massachusetts. McGibbon, J. (2000) Family business: commercial Shaw, G. and Williams, A. (eds) (1997) The Rise and hospitality in the domestic realm. In: Robinson, Fall of British Coastal Resorts: Cultural and M., Long, P., Evans, N., Sharpley, R. and Economic Perspectives. Pinter, London.

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Index

Aboriginal/indigenous 17, 18 business 4 access(ability) 15, 16 axis 5–8, 10 accommodation 12–16, 43–45, 48, 49, 54, centred family 42, 47 97–99, 101, 102, 127 cycles 85 age 7, 44, 45, 47, 49, 50, 57, 99, 106 environment 12–15, 26, 175 Alberta 17, 47, 75, 100 idea 26 Alborak Stables 117–120 opportunities 14 alliance 8, 83, 84 planning 60–62, 164, 166–167, 176 analyser 77 antecedent 58–60 Åreguiderna 151–152 campground 13, 14, 42, 44, 47, 48, 88, 110, arts/crafts 13, 48, 49, 53, 54, 56–58, 90, 122, 123 110 Canada 2, 16, 17, 47, 58, 62, 86, 117, 123, 148 attitude 5, 6, 54, 55, 89, 95, 99, 110, 111 Canmore 16, 46–58, 108, 109 attractions 12, 44, 47, 49, 153–160 capital 8, 9, 13, 14, 35, 58, 60–62, 69, 71, 74, Australia 2, 4, 58, 62, 70, 100 96, 102, 169–170 Austria 43, 96, 97, 101, 102 capitulating 89, 90 autonomy 1, 2, 12, 42, 43, 45, 46, 47, 51–55, caravan park see campground 62, 73, 77 careers 74, 96 cash flow 3, 8, 14, 61, 62, 69, 71, 73, 79, 86, 107 balancing 71, 75, 76, 95–114 catering 12, 13, 15, 44, 69, 70 Bali 102 challenges 3, 8–10, 51, 52–57, 95 Baltic 100 change 67 barriers to inheritance 105–111 characteristics 44, 49, 50 (B&B) 4, 5, 7, 14–16, 42, children 3–8, 12, 44, 47, 49, 51, 58, 59, 63, 44, 47–49, 51, 52, 54, 56, 57, 69, 71, 71, 76, 87, 90, 95–99, 100–106, 74, 80, 86, 97, 99, 100–102, 104, 108, 107–108, 163, 164 117 closure 87–89 Billabong Sanctuary 157–160 combating 89 board(s) of directors 8, 62, 63, 81, 100, 112 communication 34, 73 Bornholm 14, 16, 46–58, 80, 85–90, community 3–4, 16–18, 33–34, 68, 97, 184 108–110 company 1, 44, 49, 51, 62, 108 boss (being one’s own) see autonomy competition 69 boundaries 99 competitiveness 3, 13, 15, 57, 70, 71 77–79

209

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210 Index

conflict 7, 74, 96, 100, 101, 106 economic influence 42, 43, 59 consultant 75 education 44, 49, 58, 164 control 7, 10, 12, 42, 62, 63, 74, 79, 81, 95, efficiency 79 102, 111 employment/employees 2, 4, 8, 12–14, coping 88–89 42–44, 49, 51, 57–59, 63, 78, 88–90, copreneurs 5, 7, 12, 27, 44, 47, 49, 54, 56, 59, 96, 99, 102, 103, 108 62, 70, 96, 98, 102, 103, 108, 186, 188 unwaged 34 Cornwall 42, 58, 61, 67 enduring and endangering factors 32 costs 69, 70, 83, 87 England 59, 61, 68, 85, 86, 99 couples see copreneurs entertainment 12 cousin consortium 5, 6, 9, 10, 62 entrepreneur(ial) 5–9, 12–17, 21, 34, 43, 46, Crete 97 47, 56, 57, 59, 60, 62, 68, 70, 98, Cricklewood Hotel 129–130 101, 102, 110, 142, 163, 165, 175, cross-case analysis 161 188 Crystal Creek Rainforest Retreat behaviour cues 25 (CCRR) 133–135 culture 23, 60 culture 7, 17, 23, 60, 72, 74, 96, 100–102, family 34, 163 107, 170, 175, 188–189, 194–195 female 7, 34, 101, 102, 181 customer 7–8, 44, 82, 84, 97, 99, 100, 103 founder 32, 165 service 167 growth 6, 9, 12, 47, 56, 58, 62, 68, 73, see also host–guest 77 cyclical demand see seasonality guises 27, 165 Cyprus 102 lifestyle 16, 30, 43, 57 necessity 30 opportunity 29 debt 8–9, 43, 55, 56, 60, 61, 62, 69, 70, 109, process 21 111 serial 29 decision (making) 7, 103, 162, 165, 186, 188 social 30 defender 77 socio-economic outcomes 35 definition of family business 4, 5, 22, 34, 186 spirit 37 demand 14, 43, 85, 86 entry and exit 8, 13, 34, 175 Denmark 15–16, 47–58, 80, 87, 107–108, 110 environment(al) 45, 47, 51–52, 58 depopulation 4 forces 70 destination 3, 12, 14, 47, 68, 85, 86, 173, responsibility 100 182–184 ethnic 28, 72, 84, 170 marketing organization 73 Europe 2, 10, 16, 42, 57, 59, 86, 89 development see economic development expansion 5, 6, 10, 80 differentiation 80, 82, 121 experience 13, 58, 67 disharmony see conflict export 57, 80, 89 disposition 5, 9, 81, 89, 170 plan 108, 109 see also succession factor analysis 45–47, 52–56 diversification 80 failure 3, 13, 60, 67–70, 192 see also differentiation family domestic economy 29 advantage 72 dream 106 agreement 100 axis 5–7, 10 branding 8, 13, 78, 81, 84, 112 easy entry 13 council 63, 64, 100 economic development 3, 4, 12, 13, 16, 17, enterprise continuity plan 100 73, 183 family centred business 42, 47

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Index 211

influence 59 human resource management 8, 166 involvement 4, 5, 8, 11, 119, 164 see also employment; jobs labour 83 roles and relationships 7, 99, 111, 119, 164 implementation 76 syndicate 62 income 8, 12, 15, 43, 44, 51, 53, 61, 71, 110, trust 8, 62, 64 111 familiness 34 see also cash flow; profit; revenue farm/farmstay 2, 6, 14–16, 42–44, 47, 57, 69, incorporation 73 84, 100–102, 104–105, 110, 111, industry 6, 12, 13, 16, 71 117–126, 164 see also tourism/hospitality feasibility 113 industry-specific modifiers 11, 12, 29, 112, females see gender 113, 193 financial 8, 9, 15, 73 inheritance 3, 6, 9, 44, 47, 57, 58, 59, 64, management 165, 177 71, 76, 79, 90, 104–106, 108, stress 86 111–113 Finland 15, 43 see also succession; heir formalization 5, 6, 10 innovation 3, 7, 55, 58, 71, 72, 73, 76, 77 founder 5–8 , 41, 63, 71, 98, 106, 107, 111, intergenerational dynamics 71 112 intrapreneuring 28, 76 franchise 5, 13, 84, 121–122, 141, 166 investment 3, 5, 12, 14, 42, 47, 61, 72, 79, 81 re-investment 71, 73, 79, 96, 112 gender 7–8, 17, 28, 44, 45, 49, 50, 51, 54, involvement 44, 163, 180 56–59, 96–98, 101–103, 107, 111, Ireland 59, 86, 98, 101 170, 181 island 16, 48, 87 Germany 104 Israel 17 goals 2, 5, 7, 34, 41–47, 51–56, 68, 75, 76, 96, 98, 102–104, 108 governance 62–64 jobs see employment Greece 102 growth/growth-oriented 2, 5, 6, 7, 8, 9, 12, 41, 51, 54–57, 62, 67, 68, 70–73, 76, Kenya 17 77, 108 knowledge 72, 73 see also entrepreneur, growth; expansion; value-adding guest see customer; host–guest land 6, 61, 105 see campground law 74 Gunnar and Maude Bergstedt 127–129 leader(ship) 4, 63, 96 legacy 6, 7, 68, 104–105 leisure heir(s) 7, 9, 71, 81, 105–107, 110–113 interests 6, 12, 51, 54, 162 see also inheritance; succession time 8, 97, 99, 102–104 hobby 42, 43, 57, 162 life cycle 5–7, 9, 14, 16, 62, 76, 96–99, 194 see also leisure life stage 109, 110 home life 97, 101 lifestyle 2, 6, 7, 12, 14, 15, 17, 28, 42, 43, homosexual 98 45–47, 51, 52, 54, 68, 77, 101–103, host–guest 13, 97, 99, 100 162, 191, 194 hotel/motel 6, 13, 15, 16, 43, 44, 47–49, 57, liquidity 63 61, 62, 69–70, 85–89, 99, 108, 110, local owners 100 127–132 location 6, 14–16, 51

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212 Index

males/men see gender packaging 82, 83 management 2, 70 parents 7, 44, 59, 68, 76, 97–99, 105, 111 Margaret River (Australia) 44, 45, 47, 155 partner(ship) 4–6, 8, 10, 37, 41, 44, 49, 61, market area 73, 80 62, 152, 168 marketing 8, 73, 81, 166, 176, 183 paternalism 96 co-operative 8, 84 Pelham Estate Family Winery 153–155 married couples see copreneurs pension 49 maturity 5, 6, 10 people skills 13 micro-business 28, 44, 111 perceptions 107, 111, 113 see also small business peripheral 2, 3, 16, 82, 87 migrant/migrate 6, 12, 14, 47, 58, 59, 101, personal characteristics 26 102 Perth 43, 44 Millestgården 130–132 planning issues 74 Minnewanka Tours 148–151 policy 3, 13, 37 mission statement 75 population ecology 70 money see income; profit portfolio 28 Montana 43 Portugal 59 motive/motivation 1, 2, 5, 6, 12, 14, 41–43, preconditions for growth 72 59, 73, 102 prestige 45, 47, 53, 54, 59 see also goals price 82, 83 pride 105 privacy 13, 60, 69, 97, 99, 101, 103 Nepal 102 professional(ism) 8, 41, 62, 63, 74, 81, 96, nepotism 77 189 Netherlands, The 63 profit(ability)/oriented 2, 4, 8, 12, 14, 41, 42, network(ing) 8, 72, 84, 166 45–47, 51, 53–56, 60, 62, 68, 70, 76, new 88, 192 market 80 property 53, 54 product 80 see also real estate venture 58, 80 purchase(r) 41, 56, 57, 69 New Zealand 43, 58, 68 niche market 13–16, 68, 78, 81, 82 non-economic factors 22 quality 3, 78, 80, 82, 83, 136, 157 Northern Ireland 59 Queensland 60, 101 Norway 86

reactor 77 O’Reilly’s Rainforest Guesthouse 62, 64, 78, real estate 8, 9, 14 135–143 recreation 15, 16, 48, 49, 51 Ol’ MacDonalds 123–125 reformulation 78 opportunity 58 regeneration 78 organizational regional development agencies 37 behaviour 32, 33 regulations 71, 73, 74 modifiers 32 relationship marketing 82 organization 62, 63 renewal 78 owner(ship) 1–6, 10, 41, 47–49, 50, 51, research 81, 186–189 62–64, 101, 168–171, 185, 192 resort 12, 14, 16, 43, 44, 48, 133–144 agreement 42, 63 resource 15,16, 34, 72, 73, 100 axis 8–10 responsibility 3, 4, 7, 100, 164

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Index 213

restaurant/cafe 6, 15, 49, 54, 56, 57, 83, 88, students 14, 106 89, 108, 110 success 67 retail(er) 13, 15, 44, 49, 57, 89, 90 succession 3, 4, 5, 9, 10, 12, 41, 81, 89, 170, retire(ment) 9, 42, 47, 51, 53, 54, 81, 98, 110, 179–180, 187 112 planning 104–109, 111–113 revenue 68, 71 see also disposition; heir; inheritance see also income; profit successor 9, 96 risk 15 see also heir Rivendell Gardens 155–157 supply 85 rural 1, 2, 3, 6, 12, 13, 15, 42, 43, 45, 47, 59, sustainability 68, 78–79, 100 99, 102, 104, 105, 110 sustainable development 15, 75, 105 Sweden 67, 104, 107, 127, 130 SWOT 75 sale/sell see disposition satisfaction 97, 102–104 scope of family business 1, 2 target markets 86, 87 Scotland 84, 86, 99, 101 Taunton Farm Holiday Park 120–123 seasonality 8, 14–16, 48, 53, 61, 69, 80, 83, taxes 43, 108 85–90, 96, 102, 104, 110, 167, 177, technology 79, 94, 165 193 themes in family business 9, 11 security 53–54 theory-building 189–195 self employment see employment Third World 43 serial 29 time management 99 service(s) 8, 13, 15, 44, 47 pressure 13 setting modifiers 11, 14–18, 31, 194 tour operations 12, 16, 44, 47, 49, 57, 82, 88, share(holder) 63 89, 104, 108, 145–152 sibling 5, 6, 8, 10 tourism/hospitality 3, 4, 12, 13, 14, 15, 16, significance of family business 1, 2 42–44, 48, 49, 68, 79, 85–90, 96, 100, small business 1, 2, 5, 9, 12, 13, 15, 16, 31, 102, 104, 105 41, 44, 48, 57, 58, 59, 62, 63, 67, 69, training 8, 33, 41, 48, 58, 73, 78, 81, 87, 99, 70, 71, 80, 81, 84, 85, 87, 100, 101, 101, 103, 107 107, 108, 111 transport 49 smallness 32 Turkey 62 see also micro-business social 29, 43, 45, 59 and business systems 32 UK 13, 14, 15, 42, 58, 59, 61, 67, 69, 81, 95, legitimacy 24 104 networking 85 uniqueness 79, 82 sole proprietor 4, 44, 47, 49, 51, 54, 56, 62, urban 14, 15 70, 191 USA 2, 67, 71, 98, 104, 106 Spain 100–102 staff see employment stakeholder 100 value-adding 8, 58, 73, 78, 79, 193 start (start-up) 5, 6, 10, 41–66, 118 values 4, 6, 58–60, 68, 73, 76, 95, 96, 100, stewardship 6, 100, 105 101, 105, 107, 162 stimulation 46 viability 14, 107 strategic planning 74, 75 Victoria (Australia) 43 strategy 6, 63, 77–85, 99, 100, 166, 187 vision 5, 10–12, 60, 63, 73, 75, 76, 95, 96, strengths of family business 77 106, 111, 190

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214 Index

weaknesses of family business 77 word of mouth 82 Western Australia 14, 43, 46, 47, 55, 58, 97, workload/work hours 14, 60 , 99, 102, 104, 100, 102–104, 108 110 Western Samoa 17 Wild Over Walpole (WOW) 145–148 winery 44, 82, 153–157 yield management 79, 80, 83, 86 women see gender young business family 5, 6, 10

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