New Business Venture Proposal

Abstract

Tourists enjoy visiting Lesotho for its unique mountains, scenic views and culture and thecountry has attracted many tourists internationally. Tourism in Lesotho has been studiedfor years by many stakeholders as far back as 1980 by Lesotho government, UnitedNations and World Tourism Organisation (UNWTO) and others. The studies advisedgovernment to use tourism development as way to alleviate poverty and create jobs. Thestate of tourism in Lesotho is still in early development and various opportunities areavailable for new entrants to offer unique offering and experiences.The study is a New Venture Proposal i.e. startup with focus to explore recreational andaccommodation facilities in the sector. In this study tourists’ needs are studied andanalysed to identify customer needs prior. Demographics of Lesotho tourism is studied toidentify market segment and what inspires the needs and demands for travelling. Althoughlack of customer services & market-ready tourism & accommodation facilities is found tobe a challenge for the sector, in this proposal it is taken as a unique opportunity for newventure.The theoretical models by Cohen and Plog were used to identify the type of tourists basedon their needs and motivations for travelling. The Plog model shows that undevelopedtourist market (like Lesotho) attracts more of allocentric tourists i.e. the wanderers, andthese are those of high-income brackets. However, the income bracket may not be a goodmeasure as the Mid-Centric tourists are high in numbers, meeting the volumes for highsales with higher profit margins. This venture proposal is targeting Mid-Centric tourists,psychographic as well as allocentric as per Plog’s model since the market has high demandand untapped supply.The qualitative research methodology was used as this is exploratory type of research viainterviews to study tourists and their needs/behaviours. The research participants includedamongst others, entrepreneurs in the sector, industry leaders and general tourists toLesotho. The data collected was structured via thematic analysis including demographics,travel patterns (length of stay in stay), motivations, interest, and customer satisfaction toidentify market segment and marketing strategy for target customer.Hotel Development with recreational amenities was found to be a suitable offering for theventure within the accommodation & recreational facilities and amenities sector. There isiii | P a g eonly one hotel that offers a 5-star rating in the whole country, many are 3 and 4 stars. Asuitable offering will comprise a mixture of 3, 4 and 5 stars depending on the level ofservice, amenity types and customers willingness to pay.The development will be financed via a mix of both equity and debt financing to reduce highdebt financing costs, while not losing ownership and powers of the business. Sensitivityanalysis was done for 50 rooms with occupancy rate of 50% and 60% at room rate of R5000and R4500 respectively. An average annual return on investment (ROI) of 12 % wascalculated for 60% occupancy rate and 10 % for 50 % occupancy rate respectively. Thecash-on-cash return was calculated to be at 20 % for 50 % occupancy rate, and 24% for60 % occupancy rate respectively. 100 rooms were also used in the sensitivity analysis for60 % occupancy rate, although the occupancy rate is favourable, the ROI remainedunchanged at 12 %.