Description
This is one of a series of tourism development manuals commissioned by the Tourism Division, Department of Tourism, Culture and Heritage to assist Nova Scotians in the establishment of tourism businesses and in planning for the delivery of tourism services in the province.
A Guide to Starting and
Operating a Receptive Tour
Operator Business in
Nova Scotia
Prepared by:
THE ECONOMIC PLANNING GROUP of Canada
Halifax, Nova Scotia
COPYRIGHT
©
2005 by Her Majesty the Queen in right of the Province of Nova
Scotia
All rights reserved. No part of this publication may be reproduced without the prior
written consent of The Province of Nova Scotia.
The publisher is not engaged in rendering legal, accounting or other professional advice.
If legal advice or expert assistance is required, the services of a competent professional
should be sought. The information and analysis contained herein is intended to be
general and represents the research of the authors and should in no way be construed as
being definitive or as being official or unofficial policy of any government body. Any
reliance on the Guide shall be at the reader’s own risk.
Table of Contents
SECTION 1: INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purpose of the Manual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 The Business of the Receptive Tour Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Contents of the Manual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
.
SECTION 2: THE MARKET FOR RECEPTIVE TOUR OPERATORS IN NOVA SCOTIA . . 4
2.1 Industry Trends Supporting the Development and Growth of Receptive Tour Operatorss . . . . . 4
2.2 Market and Product Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Target Marketss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Nova Scotia’s Tourism Industry Today . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Nova Scotia’s Tourism Partnership Council . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Nova Scotia’s Vision for Tourism - Challenging Ourselves . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3: REQUIREMENTS FOR SUCCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 The Marketing Approach to Designing Your Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Strategic Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Market Niche . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 Experiential Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 Travel Trade Expectations of Receptive Operators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6 Quality Website and Internet Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.7 Customer Relationship Marketing and Loyalty Management . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.8 Product and Market Intelligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.9 A Marketing Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.10 Strong Relationships with Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.11 Multi-Season Potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.12 Entrepreneurship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.13 Flexibility to Adapt and Grow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.14 Management Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.15 Computer Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.16 Staff Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.17 Pricing for Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.18 Sufficient Capital and Affordable Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.19 Quality Program Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.20 Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.21 Minimize Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.22 Membership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.23 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4: PREPARING A BUSINESS CONCEPT AND STRATEGIC PLAN . . . . . . . . . . . 18
4.1 Opportunity Search and Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Short Listing Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3 Travel Trade and Supplier Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.4 Retail Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.5 Market Positioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Table of Contents cont’d
SECTION 4: PREPARING A BUSINESS CONCEPT AND STRATEGIC PLAN continued
4.6 Business Concept Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.7 The Strategic Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 Retail Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.5 Market Positioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.6 Business Concept Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.7 The Strategic Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5: FEASIBILITY ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1 How to Do A Feasibility Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Capital Investment Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Market Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Competitive Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Conclusion of the Market Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.2 Projection of Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.3 Projections of Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Cost of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Direct Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Overhead Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Operating Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Net Income, Cash Flow and Return on Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.4 Is it Worth it? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Where to Get Help . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.5 Preparing a Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6: PACKAGE DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.1 Marketing Power of Packages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.2 Types of Packages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Group Tour Packages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Individual Touring/Travel Packages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.3 Principles of Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.4 Developing the Package . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.5 Pricing Your Package . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.6 Product Management and Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Product Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Contingency Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Your Management Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Customer Communications/Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Refund and Credit Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Tracking Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
6.7 Phasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7: NEGOTIATING TRAVEL TRADE PARTNERSHIPS . . . . . . . . . . . . . . . . . . . . . 58
7.1 Coordination and Liaison/Quality Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Table of Contents cont’d
SECTION 8: SUPPLIER PARTNERSHIPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.1 Potential Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Suppliers You Can Work with . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.2 Price Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.3 Sales Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.4 Coordination and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9: LEGAL, REGULATORY, AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.1 Vehicle Permits and Licensing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.2 Other Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
License to Sell Travel Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
License to Sell Airline Tickets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Nova Scota Department of Environment and Labour . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Competition Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
9.3 Personal Information Protection and Electronic Document Act . . . . . . . . . . . . . . . . . . . . . . . . . 72
9.4 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Vehicle Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
General Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Professional Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Travel Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Harmonized Sales Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Employment Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Nova Scotia Workers’ Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Corporate Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Business Occupancy Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.6 Registration of Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Provincial Business Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Federal Business Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Business Number Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 10: OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.1 Organization and Staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Selecting Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Benefits of Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Hiring Tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.2 emerit Standards and Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
10.3 Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Staff Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Management Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Table of Contents cont’d
SECTION 10: PLANNING FOR OPERATIONS continued
10.4 Reservations and Sales Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.5 Product Development and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.6 Marketing Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.7 Financial Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.8 Program Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.9 Customer Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Customer Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Travel Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10.10 Business Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10.11 Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 11: THE MARKETING PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
11.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Developing a Marketing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
11.2 Marketing to the Travel Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Distribution Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Potential Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Methods and Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Collateral Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Internet Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 12: THE FUTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
ACKNOWLEDGEMENTS
APPENDIX I: MARKET DATA
APPENDIX II: FINANCING
APPENDIX III: CALCULATION OF NET INCOME, CASH FLOW AND RETURN ON
INVESTMENT
APPENDIX IV: BUSINESS STRUCTURES
APPENDIX V: LIST OF CONTACTS
APPENDIX VI: STANDARDS AND CERTIFICATION
SECTION 1
INTRODUCTION
Page 1 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 1
INTRODUCTION
1.1 Purpose of the Manual
This is one of a series of tourism development manuals commissioned by the Tourism Division,
Department of Tourism, Culture and Heritage to assist Nova Scotians in the establishment of
tourism businesses and in planning for the delivery of tourism services in the province. This
manual deals with establishing a receptive tour operator business. There are other manuals that
deal with establishing different kinds of tourism businesses such as a roofed accommodation, a
campground, local sightseeing tour operator, restaurant, tourism retail business, and an adventure
tourism operation. There are also manuals on how to plan for, develop and market tourism in
your community, on the operation and establishment of a local visitor information centre, on
establishing an attraction and on marketing for tourism businesses. The manuals were originally
prepared in 1996 and 1999 and were updated in 2005. A new manual on community festivals and
events was prepared in 2005.
The purpose of this manual is to provide you with some of the information necessary in
establishing, improving and operating a Receptive Tour Operator business in Nova Scotia. It
should be noted that this information is a guide only.
It is strongly suggested that the reader undertake efforts to verify any information on which their
business plan is based and not rely solely on the information in this manual. There are areas
where you may want to consider retaining the appropriate professional expertise to assist you.
While the information contained in this manual is believed to be accurate, as of the Winter of
2005, it is not so warranted. The reader should note that federal, provincial and municipal
regulations, taxes, etc. change frequently and it is recommended that you check with the
appropriate authorities, listed in the Appendix, including representatives of the Tourism Division,
Department of Tourism, Culture and Heritage and your local Business Service Centre (on-line at
www.gov.ns.ca/snsmr/ ) or at numerous Access Nova Scotia centres around the province, to
obtain up-to-date information on these matters.
1.2 The Business of the Receptive Tour Operator
A tour operator is a business that develops, manages, and operates tours and other packaged
tourism products. There are essentially three types; outbound, inbound and receptive:
• The outbound operator focusses on its target markets, developing tour products that will sell
to those markets and then taking their clients to different destinations throughout the world.
Page 2 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• The inbound tour operator focusses on the destination in which they are based, developing
and marketing tours and packages at the destination. It positions itself as being a specialist on
that destination.
• The receptive operator is a sub-contractor to the outbound tour operator, providing various
services in support of the outbound tour operator’s program at the destination.
Inbound operators typically also provide receptive services to other operators and receptive
operators typically will develop and sell their own packages as well. In other words, those
operators specializing in the destination in which they are based usually do both things. Given
this, in discussing the receptive tour operator in this manual, we will assume that the business
does both.
As indicated, the receptive operator provides tour arrangements at their destination to outbound
operators operating tours in the area. For example, a tour operator in the USA plans and markets
a tour involving several days in Nova Scotia. A receptive tour operator in Nova Scotia negotiates
rates with suppliers, books the accommodation and other arrangements, and generally handles the
delivery of some or all of the tour services for the Nova Scotia portion of the itinerary, or for
Atlantic Canada as a whole.
There are no fixed formulas as to the relative jurisdictions or roles of the two operators. Each
arrangement is a customized one, appropriate to the situation and each operator’s preferred
manner of operation. Having said that, generally the outbound operator handles the marketing
and inter-city transportation, while the receptive handles the arrangements at the destination for
some or all of the tour.
The business of a receptive tour operator can be varied, and each operation is likely to have a
somewhat different mix of activities and services. The types of services typically provided to
outbound tour operators include:
• Negotiating rates with suppliers;
• Booking accommodation and other arrangements;
• Helping with itinerary planning;
• Providing meet and greet services
• Providing ground transportation
• Providing local tours
• Providing local, step-on guides;
• Coordinating and administrating local arrangements and services, or subcontracting these
services in some instances;
• On-site problem solving.
Receptive operators may provide similar services for other types of clients as well: for example,
companies that plan and market incentive travel services.
Organizations that plan and manage conventions and meetings also sometimes use receptive
operators to handle local tours and hospitality services. (More typically, however, these services
are provided by "destination management companies", or "DMCs", at least in major centres
where DMC services are available.)
Page 3 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
This manual deals with establishing a receptive tour operator business dealing in each of these
types of services, except for DMC services and retail sales.
We make constant references in the manual to ‘the travel trade’. These are businesses in the
tourism industry who act as intermediaries between the end consumer and the product suppliers.
They include:
• Tour operators - outbound, inbound and receptive;
• Travel agencies;
• City/regional destination marketing organizations (DMOs)
• Provincial government tourism marketing departments (PMOs);
• Travel wholesalers and brokers.
This manual is designed for those starting a small-to medium-size business, and is limited to the
elements of the business common to them.
1.3 Contents of the Manual
This manual provides information and advice on a variety of topics which will be important in
understanding the requirements for success: assessing opportunities, planning and development,
and starting operations. The following topics will be covered:
The market for receptive tour operators in Nova Scotia;
Requirements for success;
Preparing a business concept and strategic plan;
Feasibility analysis;
Package development;
Negotiating travel trade partnerships;
Supplier partnerships;
Legal, regulatory, and tax matters;
Planning for operations;
The marketing plan;
The future.
Appendices at the back of the manual cover the following:
Market data;
• Financing;
• Calculation of net income, cash flow and return on investment;
• Business structures;
• List of contacts;
• Standards and Certification.
SECTION 2
The Market for Receptive Tour Operators
in Nova Scotia
Page 4 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 2
THE MARKET FOR RECEPTIVE TOUR
OPERATORS IN NOVA SCOTIA
2.1 Industry Trends Supporting the Development and
Growth of Receptive Tour Operators
The North American tour business has undergone substantial changes in the past 20 years, among
them the growth in the role of the receptive tour operator. This has been supported by the
following marketplace changes:
• Deregulation of the motorcoach industry in the US has spurred an increasing number of
smaller tour operators.
• The growth in ‘loyalty’ programs of various kinds offered by companies, in the travel sector
and in a diversity of other industries as well, has spawned the growth of a major new market
sector for tour operators, that of customized tours and FIT packages for corporate clients who
use them as client redemption products.
• The diversity of itineraries offered by tour operators has expanded substantially.
• There has been growth in small group tours that are oriented to special interest activities such
as learning, culture and heritage or outdoor adventure.
• There has been growth in independent travel packages, commonly referred to as ‘FIT’ (Fully
Independent Travel/Tour) packages.
• Shorter, regional tours are increasing in popularity.
In each case, these trends have created a challenge in trip planning for the tour operator, making it
more appealing and cost-effective in many cases for the tour operator to use a receptive operator at
the destination to assist with product planning and delivery. The growth in the use of receptive
operators can also be attributed to their superior destination product knowledge, their established
relationships with suppliers at the destination, their ability to get the best local guides, and the
added credibility and authenticity the use of local tour operators and guides contributes to the tour.
Page 5 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
2.2 Market and Product Trends
Consumer tastes and expectations change over time and consumers are becoming more demanding
in a number of respects. Some of the marketplace changes seen in recent years with direct
relevance to tours are presented below:
• The rapid growth in the role of the Internet has had profound effects on how people seek out,
plan and book travel products. This is having a number of effects on the tour industry; for
example, more people buying direct from the tour operator rather than through a travel agency.
It also is allowing smaller, niche tour operators with specialty products to reach the consumer
much more effectively. It is also allowing consumers to customize FIT packages to their
liking and booking them online. It has also spawned the growth in Internet ‘travel portals’,
such as www.expedia.ca and www.travelocity.ca.
• Selling tours and packages by direct marketing methods to consumers is a growing marketing
trend. This has been facilitated by modern ‘customer relationship management’ (CRM)
systems designed to build loyalty among past clients.
• The modern traveller is seeking a high level of ‘experiential’ value today. Just having a
getaway and a rest is not good enough; they are looking for experiences that are unique,
exciting, fulfilling and personally enriching, and that will be memorable.
• The modern traveller also prefers products that allow flexibility and customization.
• Today’s educated and well-travelled consumers strongly prefer authenticity. People want
experiences that are genuine, not contrived, and they are more discriminating in this respect
than in the past.
• There has been growth in interest among consumers in culture and heritage products, and in
outdoor products and experiences.
• Well-travelled consumers have high expectations about the standards of hospitality and service
they expect to receive.
• Consumers expect a high standard of cleanliness and repair in all facilities.
• They want food that has a local character, even with fast food items.
• They are concerned about the environment. They expect the operator to observe high
standards of environmental practice and they want to learn about environmental features of the
tour.
• Consumers today expect good value; they are prepared to pay for value but expect to receive
it. Low cost is not the main concern. They will pay more if it is worth it.
• Consumers, more than in the past, like an adventure but they want adventure that is safe. They
still like sightseeing but many of them want to participate in activities as well.
Page 6 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
These trends have resulted in changes in tour products and the way tour operators do business,
such as the following:
• Tour operators are developing group tours with more flexibility in an effort to respond to the
desire among many customers for some customization in their itineraries. They are using a
‘hub and spoke’ approach to itinerary design, involving two or more night stays in different
communities, providing individual tour clients with different optional activities on the non-
travel day.
• The desire for flexibility and customization is a major factor in the growth in FIT packaged
travel. FIT offerings have therefore grown beyond the ‘fly-drive’ package to fly-drive-plus-a-
menu-of-optional-add-ons.
• Packages are being redesigned to add more authenticity and more experiences. Meeting real
people, visiting seniors homes, grain elevators, and fish packing plants are examples.
Basically, packagers are adding features which genuinely represent the culture and lifestyle of
the community and region. Tour operators call these life seeing tours, as opposed to
sightseeing tours.
• Value-added features are playing a larger role in tour design, to appeal to the mid-range
market prepared to pay more if the value is there.
Basically, tour programming is becoming more participatory, enriching and flexible, in response to
demands for more meaningful, experiential vacations that are both educational and fun, as well as
providing the opportunity for customization by individual clients.
2.3 Target Markets
The main markets available to a Nova Scotia receptive operator include:
• Outbound motorcoach tour operators located outside of the province who operate coach tours
to and within Nova Scotia;
• Outbound tour operators who develop and market other Nova Scotia tourism packages such as
independent tours, destination packages, and special interest/special activity packages;
• Travel agencies, group leaders, and others who develop and market custom tours;
• Destination management companies and others who plan and manage conventions and
meetings at your destination;
• Companies providing incentive travel products and services.
• Corporations seeking a customized tour/package program for their staff or their clients.
Appendix I provides data on the volume of travel in Nova Scotia by the number of visitors to the
province and by their origin.
Page 7 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
2.4 Nova Scotia’s Tourism Industry Today
As a member of Nova Scotia’s tourism sector, you need to be aware of the Nova Scotia Tourism
Partnership Council (TPC) and Nova Scotia’s Vision for Tourism.
Nova Scotia Tourism Partnership Council
The Nova Scotia Tourism Partnership Council (TPC) is an industry and government partnership
that shares in planning and decision making for tourism marketing, research and product
development in Nova Scotia. The TPC works with industry stakeholders to realize Nova Scotia's
potential as a world class four season destination. It was established following a 1996 Tourism
Strategy for Nova Scotia that, among other things, called for a true partnership between the
tourism industry and government in everything from marketing to research and tourism
development.
The Council consists of 16 members, 14 of whom are tourism industry leaders, managers and
business owners. Members of the TPC are selected through an industry call for applications. They
must be owners, operators or senior managers of tourism related businesses, and consideration is
given to various other criteria, in the selection of members.
The TPC oversees the development of the Tourism Plan annually which is presented to the
industry at the TIANS fall tourism conference. The Council is also involved in a wide variety of
other programs and initiatives. Visit their website at www.nstpc.com for up-to-date information.
The TPC has three core committees - an Executive Committee, a Long-Term Integrated Planning
Committee and a Short-Term Integrated Planning Committee.
Nova Scotia's Vison for Tourism - Challenging Ourselves
“100% Tourism Revenue Growth by 2012"
The Tourism Partnership Council's Vision Committee spent two years (2000-2002) developing a
process to create a Vision for Nova Scotia's Tourism industry. The Committee looked at issues
that the tourism sector could influence or change that would help to create growth and improve
industry performance. After a process that included industry workshops and consultations, 11
Vision recommendations were identified for implementation.
These recommendations cover product development, environment, the administration of tourism,
marketing, technology, quality, human resources, transportation and research. Responsibility for
leading the implementation of the recommendations has been divided between the Tourism
Partnership Council, TIANS and the Department of Tourism, Culture and Heritage. For up-to-date
information on the implementation of Nova Scotia's Vision for Tourism, check the Tourism Vision
section of the TPC's website ( www.nstpc.com and select Tourism Vision from the menu bar).
Page 8 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
The Tourism Vision is a catalyst to assist Nova Scotia's tourism industry to evolve and grow. It is
not cast in stone and is an “unfolding process”. Achieving the Vision will require change - by all
tourism stakeholders including individual businesses - in how tourism is managed and delivered
in Nova Scotia so as to improve quality and generate increased tourism revenues.
Success will be measured “not only by growth in revenues but our ability to work together,
maintain our culture and authentic character, develop new markets and products, attract new
visitors and improve the recognition of our sector's contributions to our province and various
levels of government”.
For more information on how you can be involved in the Vision for Tourism visit www.nstpc.com.
SECTION 3
Requirements for Success
3 The Economic Planning Group, Tourism is Your Business: Marketing
Management, prepared for Tourism Canada, 1986
Page 9 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 3
REQUIREMENTS FOR SUCCESS
The receptive tour business is a challenging one, and success is dependent on a variety of things.
Trusting to good luck is not recommended. The way you design and develop your business, how
you operate it, how you build business partnerships and how you market it will all play major roles
in determining how well you do. Rather than leave it to chance, the smart operator is sensitive to
the success variables in the business. We will consider the key variables.
While the receptive tour business is challenging, and requires real expertise to be successful, it can
also be a very exciting and enjoyable occupation. You get to be part of an exclusive community of
travel trade professionals, most of whom are motivated, enthusiastic and customer/service oriented
people. Also, if you do a good job, your happy customers will give you a lot of personal
satisfaction.
Each of these are principles of what it takes to succeed. They should be read as an overview of
what you need to accomplish. How you accomplish them is the subject of the rest of the manual.
3.1 The Marketing Concept Approach to Designing Your
Business
To be successful today, owners and managers of tourism businesses have to have a marketing
orientation – a customer focus. That means everyone in the business must make decisions by
asking the question, "How can I best meet the needs of the market and the individual customer?"
Marketing orientation can be defined as follows:
"Marketing orientation is a way of thinking - a frame of mind. It is, if you like, a business
philosophy. If you adopt a marketing orientation, it means that whenever you think about
your business, you do so from your customers' point of view, not from your own. It means
accepting the idea that the purpose of your business is to serve the wants and needs of your
customers, and to meet or exceed their expectations.
In other words, it means putting your customers first. For this reason, it is sometimes also
called a customer orientation.
1
Why is this so important? Why can't we just do what we think is best? Because satisfying a
customer's expectations involves doing a lot of things right, and that doesn't happen easily.
Page 10 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Some tourism businesses think it is good enough to have a decent sign in front of their property
and buy an ad in the Nova Scotia Travel Guide ("Doers and Dreamers" Guide) and then wait for
customers to come. Others - those taking a marketing orientation to their business - make an effort
to identify their best market prospects, modify their product to best serve the needs and demands
of the different groups they are targeting, and then design their marketing activities to focus on
these groups. While having a good sign and an ad in the "Doers and Dreamers" Guide will very
likely be part of this approach, these should not be relied on, by themselves, to bring the business
in the door.
In the receptive tour operator business, like many businesses, the fundamental key to success is to
design and operate your business in response to the customer’s needs and demands. The premise is
that you need to focus on the needs and wants of your customers in all aspects of managing your
business, and that all management actions should link back to providing the customer with what he
or she needs or wants. It forces the manager to look beyond the day to day demands of the
business and focus on the customer in decision-making - on how the decision will benefit the
customer.
The marketing concept is in contrast to the production concept, in which the business is managed
in response to the demands of the facilities and the staff. Too many managers in the tourism
industry do this, and it is understandable, because these day to day demands are real and have to be
dealt with. But the effective manager has to be looking beyond these demands, at the customers,
and at how the customer is going to benefit from the decision being contemplated.
Another common management approach is the sales concept in which the customer is seen to be
central to the success formula, not in terms of what the customer needs or wants but in terms of
what you have to sell. The challenge is to get the customer to buy what you have to offer, by
whatever means possible.
The problem with the latter two management concepts is that they have little to do with the things
that are going to build customer loyalty for your business. They have to do with your needs, of
course, but not the needs of the person that is really key to the business, the customer. Customer
loyalty comes from providing what the customer is looking for. With customer loyalty comes
repeat business, word of mouth referrals, and a willingness to pay the price for the product. If
enough customers do this, your business will be a success.
3.2 The Strategic Plan
Developing your business in the context of the marketing concept requires a strategic plan for the
business, one that identifies the best market opportunities along with all the key business features
necessary to successfully and profitably pursue those opportunities. The strategic plan is an
overall, long term plan for the business, setting out the following:
1. The long term vision and goals, and the measurable objectives for the business
2. The markets to be pursued and the marketing strategies and networks to be employed
3. The markets and services to be developed and delivered that will have the features necessary
for them to succeed in the competitive marketplace
4. The resources that will be bought to bear in achieving success and profitability
5. The tracking tools to measure progress
Page 11 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
The specifics of what is required for success are set out below.
3.3 Market Niche
You need to offer services for a product type where there is a shortage of services, basically a
market niche you can make your own for your destination. The elements you want to define
include:
• The geographic area you are specializing in;
• The types of products and experiences in which you are specializing in;
• The services you are prepared to offer.
The ideal situation is to find a niche that is under-serviced and has a large and growing market.
3.4 Experiential Products
The successful receptive tour operator knows that they are in the experience business that it is the
quality of the experience received by the consumer and the value perceived that is key to
marketability and long-term success. Product development must always focus on this as the
central issue. Equally important are the unique appeals of a product: what makes it special in the
eyes of the consumer, what differentiates it from the products of competitors. This makes product
development a key issue which must be managed carefully throughout the start-up phase and
ongoing life of the company.
3.5 Travel Trade Expectations of Receptive Operators
Outbound tour operators look for a number of things from a receptive tour operator:
• Knowledge of and adherence to industry practices;
• Skill in designing the right products for their market - getting it right the first time;
• Detailed communication of information, arrangements, etc.;
• Timely (next day) turnaround in response to requests;
• Quality planned itinerary proposals;
• Detailed knowledge of the destination and its suppliers.
This last issue is why an outbound operator uses a receptive operator. Without detailed product
knowledge, the receptive has little to offer. With it, they are invaluable.
This is very much a personal-relationship business. It’s a small community of professionals who
nurture personal relationships of trust and then rely on them. It’s hard to break in and earn their
confidence, but once you do, you can rely on their continued support for as long as you continue to
deliver.
You need to learn about the business of tour operators and of the various players in the travel
trade, in general.
Page 12 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
3.6 Quality Website and Internet Strategy
The Internet has rapidly become a vital tool for every tourism business. It provides ready access to
all kinds of information of value to the business. It also makes possible the website, which
companies are increasingly finding to be their primary marketing tool today. Having a good
website is a vital part of every tourism business; not having one, or a reasonably good one, is a dis-
qualifier in many markets.
Having a website is not the only issue associated with the Internet, as discussed below. It also
makes possible email, and modern e-marketing techniques. And working in conjunction with a
company’s website, a website visitor registration program and a database system, it provides the
basis for direct, one-on-one, highly targeting direct marketing to prospects.
3.7 Customer Relationship Marketing and Loyalty
Management
Following from the modern direct marketing methods and internal customer databases available
today is the concept of customer relationship management, or CRM, which has become a key
strategic focus of many businesses today, including tourism businesses. If you plan to operate as a
tour operator as well as as a receptive tour operator, CRM will be critically important to your
business.
The idea here is that once you have a good prospective customer through your marketing efforts,
or a prospective repeat customer, along with some information on the purchase preferences of that
prospect, you have an opportunity to actually build a relationship with that individual, such that
they buy from you; ideally, again and again. They become a loyal customer. Company ‘loyalty’
programs have further built upon this concept; AIR MILES and Aeroplan are examples.
3.8 Product and Market Intelligence
As mentioned above, it’s product knowledge that gives the receptive operator its value in the
marketplace. You should have detailed files on products that you can recommend and that you
use, you should have visited the properties, met the management, experienced the service,
inspected the facilities.
You need to know about the different types of packaged tourism products and their markets.
At the same time, knowledge of the consumer and the markets for packaged tourism products is a
key as well. You have to be able to see how a particular product or experience might fit into a
package and for which markets and operators.
3.9 A Marketing Network
It is vital to develop credibility in the travel trade and to build a network of relationships with
complementary businesses in the marketing of packages and travel products. In this case, we are
not just talking about outbound tour operators, we include others as well. The idea is to piggyback
on the marketing program and resources of others that are targeting the same markets as you and
that are willing to work with you, thereby extending your marketing reach and effectiveness.
Page 13 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Examples include:
• Nova Scotia Tourism Partnership Council/Tourism Division, Department of Tourism,
Culture & Heritage
• Your regional or city destination marketing organization, such as Destination Halifax or
the South Shore Tourism Association
• Destination management companies
• Airline or hotel chain marketing departments
• Suppliers of ground arrangements and packages
Developing and maintaining such relationships and networks can be very valuable for your
business. Also, everyone at the destination is part of the ‘destination sell’ and needs to work
together to that end.
We will discuss the "how to’s" of this later in Section 7.
3.10 Strong Relationships with Suppliers
It is essential that you establish a relationship of mutual confidence and support with the
businesses that will be your suppliers: the local hotels, attractions, sightseeing businesses, etc.
You are going to be asking them to give you the very best prices they can and to transfer blocks of
their product into your control. They have to believe in your ability to produce.
3.11 Multi-Season Potential
One of the challenges confronting Nova Scotia's tourism industry is its seasonality. The province
is more fortunate than many regions of Canada in that it enjoys a long tourism season which
extends well into the fall and it is lengthening each year. However, it is still a challenge to
maintain sufficient business volumes and high enough rates throughout a major portion of the
year.
It is important that the business be able to cater to a combination of markets which, together, have
significant potential to sustain the business throughout more than one season, and preferably for
several seasons. These should be markets which don't require heavily discounted rates.
3.12 Entrepreneurship
Entrepreneurship is the art of being an entrepreneur. An entrepreneur is a business person who, in
operating their business, is constantly responding to market opportunities and challenges. In other
words, an entrepreneur sees his or her business as a mix of assets and people which can respond to
unfulfilled market opportunities that may arise, rather than as a fixed, unchanging product. The
entrepreneur operates on the assumption that markets are changing constantly, that competitive
advantage is a temporary thing, that customer loyalty is fickle, and that opportunities come and go.
Page 14 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
This is in contrast to the business owner who, once they have opened their business, waits for the
business to come in and never seeks to modify their product. The business assumption of such an
operator is that the market changes little over time and that their customers will keep coming. Too
often accommodation operators adopt this latter attitude, while, in reality, the marketplace is much
closer to that perceived by the entrepreneur.
Taking an entrepreneurial approach to planning and designing your business is vital; but it is also
important to continue this management approach in ongoing programming, packaging, and
marketing.
In fact, entrepreneurship is more than just an approach; it is really a state of mind, a perception of
how the world works, an attitude about what is the real role of owners and managers. An
entrepreneur believes that the role of the owner or manager is to be creative, constantly on the
lookout for information and ideas on how to change and improve.
3.13 Flexibility to Adapt and Grow
Part of successful planning for a receptive tour business is anticipating the need to adapt and grow.
Attention should be given to being able to make changes in the business. Perhaps it will be
necessary to shift the market “mix” of the business if one or more markets are disappointing, if
others prove to be better, and if some circumstance opens up entirely new market opportunities.
3.14 Management Skills
The tourism business is a difficult business at which to excel and requires concerted effort and
professional skills in many areas. This particularly applies to receptive tour operations. Success
in this business requires real expertise in the operations of the travel trade and in tourism product
development and marketing. Don’t underestimate the complexities involved and enter the
business ill-prepared in terms of expertise and skills.
In addition to creative skills, the successful receptive tour operator must develop basic
understanding in the areas described in Exhibit 1.
3.15 Computer Skills
The computer has become an indispensable tool for every business today, so having computer
skills is now a virtual necessity for most business people. Managers and staff need to be able to
use word processing to record information and communicate by mail, to send and receive email, to
do research on the Internet, to maintain a decent website and to use a spread sheet for budgeting.
The computer is a also a vital part of virtually all modern internal business systems, including
revenue management systems.
3.16 Staff Skills
Staff skills in many areas are also important, particularly in reservations, guiding tours, and
dealing with the customer. These are addressed in more detail in Section 10.
Staff skills are equally important, if not more important, than the product itself. How well your
staff performs their tasks and relates to your customers is a make-or-break issue in the tour
business.
Page 15 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 1
BASIC SKILLS REQUIRED FOR A RECEPTIVE TOUR OPERATOR
ENTREPRENEURSHIP
• understanding and acceptance of the marketing concept
• understanding of what the customer is looking for
• knowledge about how to reach the customer and what will appeal
MARKETING
• Internet marketing
• advertising media • ad design
• brochure design and distribution • direct selling
• direct mail • market research
• developing packages
• cooperative promotions with tourism partners
• travel trade requirements (tour operators, travel agents)
• group sales
• pricing, commissions, and discounting
• marketing effectiveness measurement
PRODUCT AND PLANNING
• tourism product features at the destination
• services available
• standards of quality
• standards of service
• coordination and quality control
• contingency planning
HUMAN RESOURCES
• hiring and training guides, reservations staff, and product personnel
• staff supervision
• staff motivation
• performance measurement
• organizational structure
OPERATIONS
• tourism product features and variables
• supplier agreements
• reservations systems
• sales administration, including group sales
• tour and package operations and quality control
ADMINISTRATION
• accounting and financial control
• use of computers & business software
• payroll
• business regulations
• finance
• business planning and budgeting
Suggestions on how to acquire these skills are considered in Section 10.
Page 16 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
3.16 Pricing for Profit
Knowledge of package pricing techniques is critical.
An understanding of the process of commissions, net prices, and overrides that are practised in
the tourism industry as well as an understanding of the retail pricing of packaged products is a
prerequisite.
Several objectives have to be achieved through pricing at the retail level: market
competitiveness, prices for each target market and each season, yield maximization (balancing
price against volume potential to achieve the greatest revenue), variances for children, seniors,
groups, and families - each directed to achieving profitability and return on investment.
You will need to understand about break points, the levels of business at which costs are covered.
The topic of pricing will be addressed further in Section 6.
3.18 Sufficient Capital and Affordable Debt
You have to have enough investment capital available to establish and develop the business: and
it is vital that your debt burden not be so high that it drains away all your future profits.
The receptive tour business is not expensive to establish in terms of capital assets; you can start
with a phone line and answering machine, a micro computer, and an office in your home. At the
same time, you’re going to have to spend time and money on marketing, market development,
and product development, and it’s going to be some time before the income will flow. You will
definitely need working capital to carry you through an extended period of time before your
revenues will catch up to your expenses and personal income needs.
Too many businesses are established without an adequate provision for working capital, and often
initial capital cost overruns take up some or all of the intended operating capital. A business
operating with inadequate working capital cuts back on marketing, staffing, and maintenance - all
of which will weaken it in the future. In addition, it will be slow in paying its bills and suffer
difficulties with its bank and creditors. It won’t last long.
You will also face the need for capital investment in office facilities and systems as the business
grows. And if it grows, the need for working capital will increase.
3.19 Quality Program Management
The delivery of trouble free, quality programs is central to your success as a receptive operator.
Planning carefully, checking out the product, paying attention to detail, fixing problems quickly,
communicating, and coordinating: all need to be practised diligently and relentlessly.
You need to have suppliers who will guarantee a quality product and provide the same level of
diligence that you impose on your own operations.
Page 17 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
3.20 Efficiency
The tour and packaging business works on thin margins, so you will need to keep your overheads
low. Lean and mean is the way to make it.
3.21 Minimize Risk
Particularly in the early stages of your business, you must minimize costs by out sourcing
(subcontracting) services rather than establishing your own, until you have enough business to
justify the investment and overhead expenses.
3.22 Membership
It is highly recommended that you join and participate in professional development activities of
appropriate professional trade organizations, those specific to the tour operators’ sector as well as
local and regional tourism associations. These associations can be a good way to make contact
with other people in the industry and seek out partners. In your business, they can also provide
essential contacts for business development. In particular, you should join the National Tour
Association (NTA) which is the US association of tour operators.
3.23 Conclusion
The inescapable conclusion is that the establishment of a receptive tour business requires careful
planning as well as a mix of knowledge and skills in the tourism business. All of the foregoing
success-related issues have to be adequately addressed before any commitment is made to
proceed.
We will now turn to the "how to’s" of developing a business plan for a receptive tour operation.
SECTION 4
Preparing a Business Concept
and Strategic Plan
Page 18 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 4
PREPARING A BUSINESS CONCEPT AND
STRATEGIC PLAN
4.1 Opportunity Search and Assessment
What type of receptive tour business should you establish? Where should it be based? Is there
likely to be an adequate market for it?
You first need to build some models of possible business concepts on paper, identifying the kinds
of products and services you believe might be appropriate. You want to focus particularly on the
unique selling propositions (USPs) and competitive advantages you might be able to offer
potential client tour operators and the consumer. You have to draw on your entrepreneurial skills
to craft one or more business concepts which have a high likelihood of working.
If you’ve been in the tour or packaging business before, you’ll have an advantage, since your
experience will have taught you valuable lessons. If not, you will have to work harder to find the
information you need to make good decisions.
To help in identifying product and service ideas, we suggest you look into what has worked well
for receptive tour companies elsewhere and give consideration to whether the same things might
work in your Nova Scotia market.
A more detailed assessment can be made later. At this point you are looking for general
information which will help you piece together a concept for the business.
Find out where there are successful examples. Visit them; talk to the owners; find out what makes
them successful. What are their USPs? What are the major challenges they face and how do they
deal with them? What are their markets? How are they marketing? How are their markets
changing? What product features appeal to what types of markets? What are the major do’s and
don’ts of the business? Tell them what you have in mind and ask for their constructive criticism.
As long as these businesses are not going to be directly competing with you in your Nova Scotia
market, they are likely to be cooperative. Call them in advance and get them to agree to talk to
you.
Who is the competition in Nova Scotia? What are their products and services? Are they covering
all of the product and market segments, or are there gaps?
Page 19 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Try out the packages of your future competitors. What are they doing right and doing wrong?
Are they including all of the unique attractions of the area in their packages? How can you
develop competitive advantages over them? How busy are they, in each season? Do they seem
to be making money? (Good signals include: Are they maintaining the calibre of their products
and services? Are they paying their bills?)
Talk to the outbound tour operators who are operating tours and packages in Nova Scotia in the
region you intend to provide services for. Do they have all the services they need? Are they
open to a new receptive service for the destination? What services do they require?
You should also talk to the companies in the marketplace who wholesale incentive products,
since they may have an interest in Nova Scotia incentive packages.
Talk to the tourism organizations in the destination area you are considering about how they see
the opportunity and whether they think there is room for a new receptive operator in the market.
What do they think about your ideas? Other people to talk to include:
• The local/regional tourism association (Where are the gaps in the delivery of packages and
tours in the region? Is tourism activity growing or declining? What type of growth is it?);
• Hotel marketing staff (What are their customers looking for in terms of tours and packages?
Where are the gaps in the availability of products? Will they partner with you in packaging?
in marketing?);
• Meeting and convention companies (Are their customers looking for new tours and
packages? Would they sell your product? How satisfied are they with the receptive
operators presently available? How much business could they provide?).
It will be important to consider trends in the product and service mix you are considering and in
the markets you are going to be targeting. These areas of enquiry will provide you with ideas on
how to establish some competitive advantages for yourself. New product concepts can do this for
you, and you can also take advantage in your planning of trends in customer demands and
expectations.
A valuable resource is the Canadian Tourism Commission’s (CTC) business website
(www.canadatourism.com ). You can subscribe to this site for free and get regular email news as
well as access to a wide range of reports, statistics and publications prepared by the CTC. You
can also read ‘Tourism Online’ which features articles about different aspects of Canada’s
tourism industry.
There are many other sources of trends information worth mentioning, including the Tourism
Division of the Department of Tourism, Culture and Heritage which publishes various tourism
reports and information. These can be found online at www.nstpc.com/research.html . Check out
Tourism Insights (www.gov.ns.ca/dtc/pubs/insights ) for up-to-date statistics on tourism activity
in the province. You may also want to contact your regional tourism industry association to see if
they have collected any research or articles which may be of interest to you. The National Tour
Association website (www.ntaonline.com) or their monthly publication, Courier, are good
sources of information on what is happening in the tour operator business, and in travel generally.
Page 20 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
You can also search the Internet using relevant key words to find research articles, books, news
groups, and discussion groups.
Talk to staff working with the travel trade from the Tourism Division of the Department of
Tourism, Culture and Heritage. They can give you market information, suggest contacts, etc.
Ask them to lend you any market studies they might have available containing relevant
information for planning a receptive tour business, such as data on market trends, tourism product
trends, etc.
You would be well advised to consider retaining some professional help at this point from
consultants who have expertise in the travel trade and know Nova Scotia’s tourism markets and
products. They can expedite a lot of this work for you and they have access to research
information which will be useful. The receptive tour business is a specialized one, so make sure
that you retain a consultant who really knows this business.
4.2 Shortlist Options
The products and services you put on the shortlist for your business concept should be selected
because a market opportunity is available. The criteria to use in qualifying each of the products
and services for the shortlist are suggested as follows:
• Is there a gap between supply and demand?
• If not an actual gap, is the current receptive doing/not doing the job?
• What is the potential volume? Is there enough to justify the effort?
• What are the margins available? Is this enough to cover my costs?
• What capabilities are required to do the job? Will I have them? Can I get them?
• How open are the clients to dealing with a new receptive operator for this product/service?
• Can we really deliver the product? Is it available in Nova Scotia? Can I guarantee
availability and quality?
• Can I work with the Nova Scotia suppliers? Will they give me net rates, block space, etc.?
• Is this product/service complementary to the others I am considering?
You are going to have to do some research on some of these questions and conduct interviews for
others. We will discuss the means of doing these tasks in the next section. For now, we suggest
that you rely on the information and understandings you will have gained in your enquiries so far.
While your judgments remain to be proven right, they will give you a concept for further
evaluation.
If most of the answers to the foregoing questions are favourable, the product or service should be
on your short list for further evaluation.
4.3 Travel Trade and Supplier Partnerships
As important as the market related issues are the questions associated with establishing the travel
trade partnerships you are going to need to operate your business. Tour operators need to be open
to the possibility of dealing with you, willing to give you a try. Destination management
companies, the companies that handle meetings and convention arrangements, should be open to
working with you. The tourism associations in your region need to be willing to support you by
referring enquiries to you.
Page 21 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
You will also need to have the cooperation of suppliers in Nova Scotia; hotels, sightseeing
companies, outdoor adventure operators, etc. You will need their very best net rates, block
bookings, workable administrative arrangements - including help from their staff in planning
local itineraries - and perhaps cooperative marketing support as well. They have to be
professional in their commitment to customer service and available by phone all year. Generally,
they have to understand your needs and how the intermediary business works. They have to have
a travel-trade culture.
The way to find out about these things is to interview the people involved in the travel trade as
well as a good sample of the suppliers you intend to work with. Present your plan to them and
solicit their support. Determine what the conditions are for them to be willing to work with you.
What will their cooperation entail?
4.4 Retail Option
Most receptive tour operators also operate as inbound tour operators with their own packaged
products, selling them directly to consumers and perhaps offering them to outbound tour
operators as well.
Developing a retail market can be a very expensive undertaking. It requires extensive consumer
marketing, sustained over a lengthy period of time, in a very competitive marketplace.
On the other hand, developing a retail business can increase your buying power with suppliers,
and you may simply be forced to move into retail if the wholesale business is too small on its own
for you to survive. We do not deal in this manual with the retail aspect of the industry.
4.5 Market Positioning
Another key strategic issue is how you are going to position your business in the marketplace; in
other words, what role do you stake out for yourself in the marketplace and what do you claim
makes you special?
Market positioning needs to be defined in some combination of the following terms if you are
going to define your niche properly:
• The price/quality level - economy, mid-range, deluxe;
• The types of experiences/products - sightseeing, special interest, outdoor adventure, etc.;
• The types of packages - group escorted tours, independent tours, destination packages;
• The geographic area of specialization - all of Canada, Atlantic Canada, Nova Scotia, Halifax
area, Cape Breton.
4.6 Business Concept Development
The foregoing deliberations will help you focus your business concept and its likely mix of
products and services. The concept should consist of the following elements:
• Initial products and services to be offered;
• Key target markets/client prospects for each;
Page 22 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Initial facilities, staff, etc.;
• Sequence of activities in starting up;
• Marketing activities required;
• Pricing formula;
• Key suppliers and the arrangements with them.
You will need to define some sort of phasing plan. What are you going to do in year one? Year
two? Year five?
The initial phases should focus on what you expect to be the core products and markets of the
business. Other markets and products should be streamed in later in digestible stages. Some
should be market-tested first, if there is any serious question about their potential or their value to
the core business.
It will be important that you design and implement periodic management reports on progress,
supported by some customer research and product reviews.
4.7 The Strategic Plan
You should document these planning activities in a written summary, which will form your initial
business plan.
SECTION 5
Feasibility Analysis
Page 23 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 5
FEASIBILITY ANALYSIS
Will your plan work? Can you get the volume of business you need? Will revenues suffice to
cover operating costs? Will the business make a profit - enough to pay you a living?
These are vital questions you need to address, in order to reduce uncertainty and risk to a
minimum. The cost of making major mistakes can bankrupt you, while the information coming
out of a feasibility assessment can help make the business a success. Why risk everything
without making your best effort to reduce your risks?
While you may be reluctant to spend the time and money on this step, or may think you don’t
need to, your banker or other financiers may very likely insist on it.
So, a proper feasibility study should be undertaken. You can do much or all of it yourself,
following the process outlined in this manual.
If your project is a large, more complex one, or if your banker or other sources of financing
request it, you may have to have a professional feasibility study undertaken. There are ways of
keeping the costs of a professional feasibility study reasonable, and you may be able to get some
financial help for the study from prospective investors or a government agency. If you’ve done
the homework described earlier in preparing your business concept and strategic plan, the
feasibility study can be done a lot more quickly and economically.
A proper feasibility study, assuming a basic business concept and strategic plan has been
developed, consists of the following steps:
• Projections of initial investment costs and financing;
• Research into and analysis of target markets;
• Competitive analysis;
• Projections of revenues, operating costs, debt service, and profits;
• Return-on-investment and break-even analysis.
5.1 How to Do A Feasibility Study
While your feasibility study is likely, in part at least, to be done as part of your early efforts to
establish your business, there are still things you should do before you make any effort to start up.
Below, we present suggestions for the process to follow.
Page 24 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Capital Investment Requirements
We suggest that the first step in preparing a feasibility study should be the development an
estimate of the capital investment required to establish the business, since this can give you an
idea of what kind of financing you will need, and this in turn will give you the basis for
estimating various numbers you will need in your projections of operating costs.
You don’t need a detailed capital-cost schedule or financing plan at this point. You are trying to
assess the feasibility of establishing the proposed receptive tour business, not actually planning
the business. What you need is an estimate of the realm of magnitude of your capital costs and
financing needs.
Exhibit 2 provides a template or worksheet you may find useful.
There are various sources of information you can pursue to help you develop this initial capital
budget. Suggestions are presented below.
As mentioned earlier, it is advisable that you avoid as many capital costs as possible in the initial
stages of the business, until it proves itself. In the meantime, you can subcontract things that you
can’t handle yourself.
The kinds of capital investment items you should consider for start-up, or in the early stages of
growth of the business include:
• A business telephone with an answering service designed to handle calls 24 hours a day and
a toll free number.
• Computers with basic business software as well as specialized software designed for tour and
package operations. The other business software should include E-mail, fax, word
processing, database management, spreadsheet, and basic accounting.
• An office, desk, and filing cabinet.
• A website
• Soft costs: Soft costs are operating-type costs required to start the business that are
capitalized, since they occur prior to the operational phase of the businesses. They include
such things as operating costs incurred prior to opening - management salaries, office
operation, website development. initial marketing, company registration etc. They also
include one-time costs such as initial training costs, consultant’s fees, etc. You should try to
do a work-up of estimates for each relevant item. Where this is not possible, provide for an
allowance to cover the item.
There will probably be a fairly significant level of travel and marketing costs involved in
soliciting travel trade relationships and surveying suppliers. Don’t stint on your investment
in these most-crucial-of-all activities for launching a successful operation.
You will need a quality brochure or catalogue, with photographs. Print enough copies to
support the enquiries you will receive. You will also need to develop a quality website.
Page 25 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 2
CAPITAL REQUIREMENTS WORKSHEET
CAPITAL ASSETS: $
Computer Hardware & Software
Office Furnishings
Office Systems & Equipment
Other
Subtotal A
STARTUP SOFT COSTS:
(Costs prior to revenue being earned)
Salaries
Staff Training Wages & Costs
Initial Marketing & Travel Costs
Brochure/Catalogue/Website
Research and Consulting Costs
Other Professional Fees
Incorporation/Registration/Licensing Costs
Other
Subtotal B
WORKING CAPITAL:
Prepaid Expenses
Other Current Assets
Cash Reserve
Subtotal C
Less: Bank Loan
Subtotal
Net Working Capital Required (C)
TOTAL CAPITAL ASSETS REQUIREMENTS (A)
TOTAL SOFT COSTS (B)
NET WORKING CAPITAL REQUIREMENTS (C)
CONTINGENCY
TOTAL STARTUP FINANCING REQUIRED
Page 26 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Working capital: Your financing is going to have to cover not only your capital costs and
soft costs, but it also has to provide for enough working capital to sustain the operation of the
business. It’s the cash available to run the business and deal with short term contingencies.
With a receptive tour business, you may very likely need enough working capital to support
yourself and the business for many months before you start seeing much in the way of
revenue. It could very well be a year or two before your revenues reach the break-even point.
We suggest that you provide enough cash to cover at least six months of no income for
yourself. Ideally you would have another job with flexible time requirements during this
start-up process. It will probably be at least two years before you can draw a full living from
the business.
• Contingencies: A contingency allowance should be allowed for unanticipated cost increases,
overlooked items, unanticipated additional costs. The allowance should be between 20% and
30%, depending on how refined your costing has been and how confident you are in the
numbers.
Financing
The total of the foregoing represents the amount of financing you are going to require in starting
the business. You will now need to prepare a plan as to how the financing is to be structured,
since the feasibility assessment requires a determination of interest and principal payments on the
money borrowed and the amount of equity to be invested. Further comments on financing can be
found in Appendix II.
Market Analysis
The next stage of a feasibility analysis involves the assessment of markets and determination of
market potential.
In Section 4, we presented a discussion of the method for developing your concept for your
receptive business by interviewing outbound tour operators, destination management companies,
incentive companies, and others. The information you collected and the insights you gained will
be invaluable in helping you assess the market potential for your concept. In fact, your work in
this step was a market assessment.
It should already be clear whether there is enough business to be had through the travel trade to
make it feasible for you to go ahead. However, now that you have defined your business concept,
you should go back to the travel trade and conduct a second round of interviews to market test the
concept further and get a better reading on the likelihood of getting business. You may also be
able to get a better idea of the volume of business potentially available to you.
Talk with the Department of Tourism, Culture and Heritage and get their help in identifying the
companies operating tours and packages to Nova Scotia. This will help with expanding your list
for interviews, but it also will help you build a picture of the total market, the number of travel
trade prospects out there who might be your customers some day.
Page 27 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
The results of the analysis should be a written summary of prospective clients in the travel trade,
accompanied by a brief description of their business, the kinds of products and services they
require, the services you intend to provide them and for which they have an interest, and where
possible, a guesstimate of the number of customers per year.
One of the advantages of the receptive tour business is that you can actually launch the initial
stages of the business without a lot of investment, so the only real risk you have lies in not getting
paid for your time and effort in launching the business. As a result, you are probably not going to
have to do the kind of detailed market study we would recommend for other types of tourism
businesses, and the likelihood of a market study being needed for financing purposes is probably
not as great. (This is fortunate, since it would be very difficult and expensive to do such a study
for a receptive tour operation. The market data is simply not available.)
You can, in fact, assess the market potential of the business by actually starting it. If you are able
to get a few clients, keep going; if not, then your concept is not right or there is some other
combination of reasons for not continuing. If you are getting the business, and there is pressure
on you to grow and make a larger investment commitment to the business, you can do some
market research then.
Competitive Analysis
Part of your research should include a further assessment of your competition - their strengths and
weaknesses, how much business they are doing, what gaps in services/products they have left
open. Talk to the outbound tour operators who are using them. Also talk to your local tourism
organizations about them.
The types of businesses who will compete with you include operators offering:
• Comparable products for comparable destinations;
• Alternative destinations and alternative experiences;
• Alternative discretionary spending options.
You want to give particular attention to the first type of competitor.
By trying out their products and asking around, you can fit together a good picture of their
operation.
Here are some tricks to piecing together a picture of the competition’s business:
• Talk to the tourism organizations in the market as well as the hotel and attraction operators.
Some of them will have information on how the operation is doing.
• Visit their websites or get their brochures, count their departures, and using an estimated load
per departure, estimate their inventory of passenger capacity
• Engage in casual conversation with the staff on the tour and with their suppliers. Ask them
about the operation.
When you’ve done your detective work, make up a form which allows you to summarize your
findings. Use a simple scoring system to rate the competition against how your proposed
receptive business would rate. Exhibit 3 presents a sample worksheet for assessing the
competition.
Page 28 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 3
ASSESSMENT OF THE COMPETITION
Competitor’s Name
Business Description/
Years in Operation
Itineraries
& Schedules Prices/Value Reputation
Quality of
Service
Quality of
Advertising &
Promotion
Relationships
with Suppliers
Conclusions as to
your Competitive
Advantages/
Disadvantages Over
Them
Page 29 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Conclusion of the Market Analysis
The results of the market assessment and the competitive analysis should provide you with some
sense of the future potential for your proposed receptive tour business.
To complete your work on this, you need to develop a supporting analysis for a projection of
revenues. This will involve estimating what business you might get each year in the future,
particularly for the early start-up years. It will also involve estimating the demand for different
products you intend to offer, and from different markets. This will be our next subject.
5.2 Projection of Revenues
You need to project revenues for the types of receptive business you are going to operate. To
project potential revenues for the initial stages of the business, we suggest the following steps:
• Estimate your initial customer numbers for each of your products or for each different type of
product you intend to offer (e.g. hiking packages or escorted motorcoach tours). If you have that
information, develop your estimates for each market.
Exhibit 4 presents a worksheet to assist with this step.
• Estimate the likely prices and your margins for each product (or each type of product). At this
stage you will not have all the information necessary to develop your actual prices, so you have
to rely on the prices charged by comparable operations in other markets and by competing
operations in your own market, to estimate what you might reasonably charge. All you are after
now is an estimate that you can use in preparing a revenue projection to determine the probable
feasibility of the operation. The premise is that if you can’t make the numbers work at
competitive prices, the project isn’t likely to be feasible. If the numbers do work on this basis,
you will still be facing the challenge of actually covering your operating costs and overhead
costs at competitive prices, but we’ll face that challenge later. (In Section 6 we will deal with
the how to’s of actually setting your prices.)
• Calculate net revenues for each year. This involves use of a worksheet, such as that presented in
Exhibit 5, in which the demand for each product, or group of products, is estimated. As well,
retail and net prices, and margins for each market are calculated, and total revenues are derived.
You may want first to project your likely volume of business in a mature year and then estimate
the likely volumes for Year one and subsequent years leading up to the mature year.
5.3 Projections of Operating Expenses
You need to prepare projections of four kinds of expenses: costs of sales, direct operating expenses,
overhead costs, and capital-related charges.
Exhibit 6 presents a worksheet for preparing expense projections. The numbers can be derived either
from a detailed work-up based on analysis of each item, or by using industry norms to provide
realm-of-magnitude estimates. The latter method is simple; however, it is unlikely that you will be
able to find industry norms for your particular business concept. Thus, you will probably have to
work up each cost item from the bottom up, using quotations received from suppliers, insights you
can gain from other operators in the business, and your own estimates of costs.
Page 30 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
PRODUCT A
PRODUCT B
PRODUCT C
EXHIBIT 4
ESTIMATE OF DEMAND FOR EACH PRODUCT AND SERVICE
WHOLESALE DEMAND NUMBER OF NUMBER OF TOTAL
DEPARTURES PEOPLE/TOUR CUSTOMERS
Tour Operator #1 ______________ _______________ _____________
Tour Operator #2 ______________ _______________ _____________
Tour Operator #3 ______________ _______________ _____________
Tour Operator #1 ______________ _______________ _____________
Tour Operator #2 ______________ _______________ _____________
Tour Operator #3 ______________ _______________ _____________
Tour Operator #1 ______________ _______________ _____________
Tour Operator #2 ______________ _______________ _____________
Tour Operator #3 ______________ _______________ _____________
TOTAL ______________ _______________ _____________
Page 31 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 5
PROJECTION OF REVENUE
PRODUCT
YEAR
Mature Year 1 2 3 4 5
Projected # of Customers
Weighted Average Retail
Price*
Your Weighted Average
Margin
Projected Revenue
* See the worksheet in Section 6 for developing the weighted average retail prices of your products.
Page 32 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Cost of Sales
Cost of Sales involves the costs of items resold to customers. For a receptive business, this is
uncommon, but could include such things as specialized clothing sold to customers.
Costs will vary depending on the types of things involved.
Direct Operating Expenses
These costs are also referred to as variable operating expenses. Essentially, they include the costs
that are directly involved in providing your products and services to your customers and they
vary with the frequency your services are offered. These are the costs directly associated with the
packages and tours themselves. In the case of a receptive operation, these will involve such
things as:
• Wages - guides, escorts, drivers;
• Supplies - documents, fuel for owned transportation vehicles;
• Charges of suppliers for services provided for each tour or customer.
Some or all of these costs may be paid directly by the outbound operator, in which case they
should not be included in your analysis. Include only the operating expenses you must pay out of
your margin or the package price.
Overhead Expenses
Overhead expenses, sometimes call fixed expenses, do not vary very much with changes in the
volume of business, as do direct expenses. These are the supporting costs of providing the
products and services and, in general, running the business. They include the following types of
costs.
• Management and administration salaries - reservations, sales administration, operations and
administration;
• Fringe benefits;
• Marketing;
• Repairs and maintenance to owned vehicles;
• Utilities;
• Office supplies;
• Telephone;
• Rent;
• Equipment leasing;
• Insurance;
• Business taxes;
• Bank charges and interest (on operating capital only);
• Professional services;
• Travel;
• Training;
• Miscellaneous.
Page 33 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 6
PROJECTION OF OPERATING EXPENSES ($)
YEAR
BASIS FOR
CALCULATION
Mature
Year 1 2 3 4 5
COST OF SALES:
Retail % of Retail Sales
Total
DIRECT OPERATING EXPENSES:
Wages
Supplies
Charges from Suppliers
Worksheet
Worksheet
Worksheet
Total
OVERHEAD EXPENSES:
Salaries
Fringe Benefits
Marketing
Repair & Maintenance
Utilities
Office Supplies
Telephone
Rent
Equipment Leases
Insurance
Property & Business Taxes
Bank Charges
Professional Services
Travel
Miscellaneous
Worksheet
% of Wages and
Salaries
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Total
TOTAL OPERATING EXPENSES
Note: Worksheet means you will have to develop a worksheet to derive what these costs will be for your business.
Page 34 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Operating Profit
The total of the foregoing costs represents the cost of operating the business for the year, and the
difference between total revenues and operating costs in a year represents the operating profit or
operating income (or loss) for the business. Other costs, including depreciation and interest costs
on financing are discussed in Appendix III, Net Income, Cash Flow and Return on Investment
Analysis. You should reference this Appendix to calculate the projected net income of the
business.
Net Income, Cash Flow and Return on Investment
Having calculated operating profits, it is now possible for you to determine whether or not the
venture will be feasible. Simply put, you need to decide whether the projected profit from
operations is sufficient to repay any debt and to justify the effort and the risks. This is a
judgement call you and your investors (if you have any) have to make.
Appendix III describes the calculations that you have to undertake to determine the net income
and cash flow of the business, and to calculate return on investment.
5.4 Is it Worth it?
The requirements of completing a credible feasibility assessment for your business proposal are
clearly complex and onerous, but it is vital that a proper feasibility assessment be done before any
major commitments are made to establishing your business.
Not all business people make the effort to undertake an assessment of their business plan.
Without an assessment, they proceed to stake their capital and their livelihood on instinct, on gut
feelings, and on the opinions of others who have nothing at stake. With so much at stake, it is
worth a little time, effort, and investment.
The techniques of feasibility assessment are not generally understood, and some people believe
that it isn’t possible to predict the future accurately. These are poor excuses. It is possible to get
some guidance on preparing a feasibility assessment (this manual is one source, of course) and it
is possible to get help to carry it out. And while it may not be possible to predict the future
accurately, predicting the future is not really what’s involved here.
What is involved here is risk reduction, moving a business proposal from the pure seat-of-the-
pants, "gut-feel" stage, a different stage that is almost certain to prove more accurate than gut
feelings. There is a myriad of valuable information out there, some of which are easily obtained
others not, which can help take the unknowns out of a business judgement. In addition, a
feasibility assessment allows you to make a series of small judgements and specific estimates
rather than one huge one, and the sum of a series of small judgements and estimates have proven
again and again to lead to a more accurate prediction of future performance.
In fact, when the estimating is broken down into pieces, there will, more often than not, be
sources of information to help you make an estimate with a high likelihood of accuracy. For
example, you may not have any way of guessing what the total operating costs of your receptive
tour business are likely to be, since your business will not be exactly like anyone else’s.
Page 35 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
However, your wage cost for guides is likely to be similar to that of other operations, your
insurance rates for a twelve-passenger van will be similar, and your utility costs are likely to be
similar to those of other businesses in the community for similar spaces.
Finally, the process of preparing a feasibility study will indicate a whole series of ideas,
opportunities, challenges, and problems for you to consider. As a result, you will be able to
actually improve your business plan as a result of doing a feasibility study, as well as develop
important insights about what it is going to take to be successful in the future.
The best, and perhaps most important, investment you will make in establishing your business is
the preparation of a feasibility assessment.
Where to Get Help
Help in preparing your feasibility study can be found in a variety of possible sources:
• Your accountant.
• Other operators of receptive tour operations. You may be able to talk a noncompeting
operator into coaching you and helping you with projections. You may have to pay them a
fee, but, if you’re lucky, they might do it for the fun of it.
• Someone who’s sold a tour business or has retired from the business.
• An official of a financial agency, such as ACOA and/or the Regional Development Authority
office.
• A private consultant.
Addresses for many of these sources of help can be found in the Appendices to this manual.
Most of these sources will be free or low in cost.
As mentioned earlier, you may decide that the complexities or scale of your project require you to
retain some professional expertise to prepare your feasibility study. You may not, in fact, have a
lot of choice in the matter, since some lenders and investors will insist on a feasibility study
prepared by a professional management consultant.
5.5 Preparing a Business Plan
Once you have completed the feasibility analysis, you need to prepare a business plan. The
business plan is built on the material you have accumulated to date, and includes, as well, a plan
of all the steps and processes you need to go through to get the project up and running, and then
continue running it successfully in the future. This document should be updated periodically to
reflect changes that occur as your plans unfold and should include both strategic issues and
normal operating processes. While lenders will almost always ask to review a copy of your
business plan, you should not look on it as just a means of obtaining financing. The business plan
is critical to the ongoing operation and success of your business, and you should refer to it often.
Page 36 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
The plan itself should contain all of the items outlined in Exhibit II-1 of this manual (the
suggested table of contents for presentation for financing, found in Appendix II), as well as
sufficient additional information to illustrate the steps you will go through to achieve your goal.
You will need to include a marketing plan as well.
The overall plan will identify who will be responsible for each task, when it is expected to be
done, what the anticipated outcome of the effort will be, and what the effort will cost.
Some suggestions for the types of things to include in the marketing part of the plan can be found
in Section 11.
The overall business plan will include similar action plans for all the other key areas of the
company’s operations, including organization and staffing, operating policies, internal controls,
information systems, etc.
There is no definitive table of contents for a business plan; some suggestions are provided in
Exhibit II-1 in Appendix II. Knowledgeable operators all agree that these plans are essential for
strategizing the direction they wish to take and detailing the step-by-step actions necessary for
reaching their goals. In general terms, the more you put into the plan and the more you refer to it,
the more likely you are to reach the targets and objectives you have set for yourself. Furthermore,
the business plan should always be considered an evolving document, being changed as external
conditions dictate and your own decisions require. Other aspects of your business plan will be
considered further in Section 10, Operations.
SECTION 6
Package Development
2
The material in this section has been adapted from several sources, all of which were originally
prepared by The Economic Planning Group. These sources include:
• Nova Scotia HUB and SPOKE Tourism Marketing Seminar Manual, prepared for the Nova
Scotia Tourism RITC, 1989/90
• Tourism is Your Business: Marketing Management, Published by Canadian Hotel &
Restaurant, MacLean Hunter Limited in co-operation with Tourism Canada and the Canadian
Government Publishing Centre, 1986
• Packaging for and Selling in the United States Leisure Market, Published by Tourism Canada,
1995
Page 37 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 6
PACKAGE DEVELOPMENT
2
Developing and marketing successful packages will be crucial to the success of your receptive
tour operator business. As such, we have dedicated an entire section of the manual to developing
and managing packages.
While, in some cases, you will simply be handling arrangements on behalf of outbound tour
operators who have planned their packages themselves, in many instances you will be designing
packages yourself and offering them to outbound tour operators. This section deals with the how
to’s of packaging.
First of all, what is a package?
Packaging can be defined as ‘the presentation of a number of products and services that would
normally be purchased separately, but which, in a package, are offered as a single product at a
single price’ (preferably a lower price than the individual could obtain on their own). Basically,
the concept is to provide a comprehensive experience for customers, accompanied by the various
services they require.
Each package is unique because it is designed for specific market segments. Each is, in fact, a
special product created for a specific market, employing the best mix of features and services
available to appeal to the market being targeted.
6.1 Marketing Power of Packages
Packaging has become a mainstay of the travel industry essentially because:
• It creates a new product which did not exist before, one having appeal to specific markets.
• It usually offers better value then do-it-yourself travel.
Page 38 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• It makes it more convenient for the customer to buy the tourism product - one-stop shopping.
• It improves the appeal of the overall travel experience, since the trip-planning homework is
done by others who presumably know the product well.
• It provides a degree of quality assurance and security to its customers.
Successful packages are ones which offer unique, appealing experiences for purchasers and good
value. Tourism today is very much an experiential business, and a well-designed package has the
marketing advantage of being built around outstanding experiences. Today’s customer is seeking
an experience: one that may be entertaining, exciting, educational, or just fun. The key thing to
remember is that this is an experience business!
Too often owners and managers lose sight of this essential principle, becoming preoccupied with
the day-to-day demands of the business: dealing with staff, paying bills, and handling problems.
But all of these things are being done for a more important purpose - to provide appealing
experiences for customers.
As a consequence, the first priority in planning a package is to design an experience that will
appeal to the consumer (or several different experiences, as the case may be) better than the
alternatives available.
6.2 Types of Packages
There are generally two types of packages provided by professional tour companies, such as the
business you are considering. (There are also single destination packages, such as those offered
by resorts, however, they are not a big factor with Nova Scotia receptive operators, except
perhaps as an add-on to group or FIT packages)
Group Tour Packages
Group tour packages are usually escorted motorcoach tours, although we are now seeing some
interesting hybrids, such as combination air/motorcoach, rail/motorcoach, and cruise
ship/motorcoach combinations. Basically, these are packages in which individuals are booked
into pre-set departure dates and become part of a group tour. Affinity groups (clubs, associations,
and the like) can be a market for these tours, and often the tours are customized for them.
Motorcoach tours typically include transportation (by coach throughout or by air to the
destination area and coach from there), accommodation for each night, some meals, attraction
admissions, and the services of an escort and guides. The appeal of such tours is typically:
• Savings on travel costs;
• Assurance of a quality experience;
• Security of having the escort and driver look after the driving and the headaches;
• Safety;
• Companionship.
Page 39 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
The market for these products has traditionally been retired, mature travellers. While some of the
more successful motorcoach tours have been of the deluxe variety, more of them have been of the
economy or value vacation variety. In the past, most people purchased motorcoach tours because
they offered the cheapest way to travel, and arrangements were looked after for them.
While the economy tour will still be important in the future, we expect to see the greatest growth
in the quality and good value type of product at the middle or upper end of the market, in special
interest and theme tours, and in tours that offer some soft adventure experiences (walking, whale
watching, etc.).
Individual Touring/Travel Packages
These packages are designed for couples and individuals and do not usually involve groups at any
stage of the trip. A typical example is the fly-drive package, offering a saving in booking air, car
rental, and perhaps some additional services on a packaged basis. They may also include
accommodation for some or all nights, and/or some meals and/or attractions. In the travel
industry these packages are called FITs, which used to stand for foreign independent tour, but
which now has come to refer to any ‘fully independent travel’ package.
The FIT package caters to all types of travellers. It is preferred by individuals who like to be free
of the constraints of group packages and are not intimidated by independent travel.
As today’s consumers are more travelled than previous generations and, therefore, less concerned
about being on their own, we are seeing strong growth in FIT packages.
6.3 Principles of Packaging
There are a number of important principles to follow in developing your packages:
• Include demand-generators
The key to successful packaging is to include attractions, activities and other experiential
features, - all the features which give the package its appeal. Demand generators are what give
the consumer a reason to buy the package. As discussed earlier, these features should have a
quality experiential character: unique, exciting, one-of-a-kind experiences of appeal to the target
market. Today's customer wants to participate, not just observe; to meet the people, not just be
told about them; to ride the river, not just look at the waterfall.
But it has to be safe – thrilling but not frightening.
• Careful planning and sufficient lead time
Your package will require careful planning and sufficient lead time for implementation and
marketing. The amount of time required will depend on the type of package and whether you are
selling wholesale or retail.
If you are selling to outbound tour operators, your package program should be planned at least 12
to 18 months in advance.
Page 40 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Take your time; do it right. Go in person to check out the proposed package elements. If you are
doing a special, one-time package for a custom group or a package associated with a special
product, you can probably develop it in two to three months.
• Ensure that the package is complete
Do not leave out components that the customer is sure to require: e.g. if the customer is coming
by air, make sure you include ground transportation to the hotel or to pick up the rental car, if it is
not at the airport. Leaving out any of these essential elements will cause resentment from your
customers.
• Schedule activities at a comfortable but appropriate pace
The old descriptor for packaged holidays, "If this is Tuesday, it must be Belgium" is no longer
applicable to the successful modern package. People want to experience the highlights but at a
comfortable pace, with leisure time for optional activities, shopping, or just taking it easy. But
don't leave big gaps that may make people restless. Careful balance is the key. If there are delays
between activities, give suggestions for other things to do.
Arrivals for multi-day packages should be scheduled for late afternoon or early evening, so the
first full day of the package comes after an overnight rest. Departures should be in the morning
or midday to allow for a restful return. Getting home in a state of collapse is not conducive to
fond memories or helpful word-of-mouth recommendations.
• Innovate over time
It is important to give the market a reason to come again in subsequent years or seasons. New
programming, different special events, and special shows can achieve this. The absence of new
programming leads to early market burnout.
While this is particularly important for destination packages, which should be enhanced
frequently, it is also important for group tours, which should be freshened up with new attractions
and appeals periodically. Destinations like Branson, Missouri and Myrtle Beach, South Carolina
have successfully accomplished this, and as a result; they both enjoy high repeats and have
become two of the most successful package destinations in the US
• Offer a benefit or a bonus
Potential purchasers should be offered a benefit in the package that they would not receive if they
purchased each component separately. Examples of such benefits include a price reduction or a
free gift.
Off-peak and off-season periods require extra value in the offering: either a better price or added
features at no extra cost.
• Price the package competitively
A package should be priced competitively in order to make it affordable and provide good value
to the customer. It should also be priced under the total cost of purchasing the components
separately.
Page 41 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Ensure that individual package components are compatible
It is important that the elements of a package are compatible with each other and suitable for the
target market. For instance, a package oriented toward retired, mature travellers should probably
not include vigorous recreational components.
• Consistent quality
Make sure that each component of the package is of similar quality. If you are offering a deluxe
package, don't use cheap motels!
• Attention to detail
Good coordination of packages generally requires that much attention be paid to details. It’s in
the details that things usually go wrong.
• Provide customers with maximum flexibility
One of the weaknesses of packaging is the inflexibility inherent in preselected itineraries. It is
important that you minimize this weakness as much as possible. Provide your customers with as
many suitable choices in the package as possible and inform them of the various options
available.
In addition, people prefer to buy options at the destination rather then being locked in ahead of
time.
• Arrange packages and booking systems to ensure there is some customer compatibility
There are certain mixes of market segments that are not compatible. It would be unwise, for
example, to combine church groups and hockey teams or partying singles with families.
• Keep customers fully informed
Purchasers should be provided with complete information about such matters as clothing, weather
conditions, and extra costs that might be incurred and are not included in the package price.
It is particularly important to notify customers in advance of any changes to be made to an
itinerary.
• Establish a fair refund and credit policy
A set of realistic and fair policies should be established with respect to refunds and credits in the
events of situations such as the unavailability of package components, bad weather, illness, etc.
A generous policy for refunds in the event of cancellation by the customer is also recommended.
You want to retain their goodwill and encourage them to re-book.
Page 42 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Make sure that the package is profitable
In pricing and selling the package, make sure that you can earn an acceptable profit. More on
pricing later.
6.4 Developing the Package
As a receptive tour operator, there are six steps to go through in developing your package.
1. Assessing the tourist attractions and tourist services at your destination;
2. Undertaking market research;
3. Developing your package;
4. Negotiating with suppliers and partners;
5. Pricing the package;
6. Establishing marketing, management and quality control plans.
Negotiating with suppliers and partners is dealt with in separate sections of this manual; the other
topics are discussed in the rest of this section.
1. Assess your destination’s attractions, products, and tourist services
A key element of planning is building an inventory of the appealing experiences and
attractions at your destination that might be included in your packages. Remember that it's
appealing and exciting experiences that sell packages!
You will need to undertake different types of product research. How to do this is discussed in
more detail later in this section of the manual.
You will also need to identify the support services available in those areas of the province
that you will be including in your packages.
2. Undertake Market Research
Sections 4 and 5 of the manual addressed the type of market research you would undertake
for your business as whole. Here, we are concerned with the type of market research you
should complete for your package program.
An understanding of your existing market and the additional markets you might target for the
package is a key element in the development and planning of the package and will help to
ensure that the proposed package is market driven. The opportunities can be identified
through market research.
Relatively basic market research can be accomplished in a number of ways:
• Examine sources of market information, particularly articles and studies dealing with
market demand, growing/emerging markets, trends in travel preferences, and successful
new tourism products and concepts. Such information is available from libraries
maintained by the federal and provincial governments, and often by local community
tourism organizations as well. Both data and strategic tourism studies are generally
Page 43 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
available and they can be used to gain broader insights. Sources of research information
were identified earlier in Sections 4 and 5.
• Gather information from websites or brochures on other successful packages offered in
your market area to obtain ideas.
• Study the package products of successfully competing destinations for ideas.
If you have already been in business for a while and are expanding your program, then you can
undertake these additional types of research:
• Do your own customer research by evaluating past group and tour bookings and enquiries
to determine where your market is coming from, as well as conducting informal
discussions with existing clients to get feedback on your current product and solicit ideas
for potential packages in association with your product.
• Administer your own visitor/guest surveys to obtain specific market information.
3. Develop the Package
First and foremost, it is important to develop a concept for each of your packages that will
meet the needs of the travel market segments you wish to pursue. For each package, we
suggest the following approach:
Develop a long-list of ideas
The basis for this list will come from your product research and your inventory of
packageable features in the province.
For each package, your ideas should centre around the basic experiences you want to offer,
based on the USPs of the attractions and activities available at your destination.
You also want to consider the target markets of the tour operators you will be targeting.
What kinds of experiences do they prefer? What services and standards do they need?
Selection of the Package Theme
Having a theme for a package, based on the central experience to be offered, will increase its
marketability by focussing its appeal to those markets for which the theme is of interest.
Furthermore, having themed activities in the package will serve to enhance the quality of the
experience for purchasers.
When selecting the theme/experience to be packaged, you should remember that the
consumer’s motivation to travel has been shifting from escapism to experience and
enrichment. Tourists want to experience something different and memorable. In future years,
there may well be changes in what the market is looking for and these changes could change
the character and appeal of different types of products. It is important, therefore, to pay
attention to these types of trends.
Page 44 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Determine the Most Appropriate Market Position for the Package
It is important to position your package in the marketplace in an appropriate fashion.
We mean by this that thought in planning should be given to the following:
• Economy versus deluxe: economy typically suggests motels versus downtown quality
hotels, fewer meals, and only the very basic and necessary ingredients;
• The unique selling proposition offered to prospects: basically, the unique appeals and
experiences to be offered, which will be relied upon to sell the package;
• The differentiation of the package against other options in the market;
• The value-added features of the package which will add to its appeal.
Determine what to Include in the Package
With a full list of potential package elements and themes in hand and a perspective on the
best market positioning strategies, it is now time to select those experiences and services to
include in the package. It is very important when going through this selection process to
avoid choosing package elements based on your own likes and dislikes. Elements of the
package should be chosen according to what fits the target market best. Elements should
meet some or all of the following standards:
• Be consistent with the market positioning strategy;
• Be appropriate to the expectations of the market being targeted;
• Contribute to the unique selling proposition;
• Be differentiated from competing packages in the marketplace;
• Offer good value to the customer;
• Add to a quality experience.
Some of the components that you may want to include in your package are as follows;
• Attractions/events and activities
Include these if they are important demand-generators or are central to the theme of your
package. Offer them as options, if they are not. Some possibilities include:
- Boat cruises, train rides;
- Popular dinner theatres;
- Historic sites;
- National/provincial parks;
- Unique museums;
Page 45 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
- Musical shows;
- Local fairs and festivals;
- Visits to such things as farms and features indigenous to the local culture.
Generally, in planning a group tour, the focus should be on obtaining a mix of each of the
following:
- Established, well-known attractions;
- Some lesser known, out of the way places;
- Unique, special experiences indigenous to the local culture or area.
With respect to this last point, you should include experiences of a non-tourist character,
so that your customers can meet the locals, see how they live, and generally do unique
things that the locals take for granted.
Experienced travellers are not as interested today in managed experiences; they want
genuine, real experiences.
• Inter-city transportation
Include this if you are offering a group package or if one particular mode of transport -
the one you would offer - gives your customers a price or time advantage.
• Local transportation
Local transfers are usually included if the package also includes inter-city transportation,
that is if the customer doesn’t have their own car.
• Accommodation
Accommodation is a basic component for most packages, so it should be included,
unless, of course, the package is intended to be a day package.
Cleanliness and state of repair are the key issues with package customers, followed by
value and convenience.
Don't forget to arrange for baggage handling.
• Meals
It is generally a good idea to include at least one meal a day, especially if it enhances the
package. But beyond that, meals should probably be left out of the package to give your
customers more flexibility. Even on all-inclusive packages that include meals, customers
still prefer some free meal times.
For groups, the best times for included meals are at the beginning of the tour or package,
as part of a getting-to-know-you/welcome opportunity, and at the end of the package as
part of a farewell experience. Special themed meals, such as cookouts, are usually
included.
Page 46 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
With group meals, it is preferable to have open menu dining. In this system, you use
vouchers rather than a preselected group meal. This gives customers a choice of menu
items at the restaurant, a choice of dining times, and potentially the choice of restaurants
as well.
Customers on open menu programs are treated as individuals, they get to meet people
other than those on the package or tour, and they generally have a lot more flexibility.
Customers get to act like they would on their own.
With group packages, it is important to make reservations in advance and time the arrival
carefully to ensure the restaurant can handle the group. If possible, customers should
have a choice of menu rather than be forced to order from the tour menu.
• Drinks
Alcoholic beverages should not be included unless they are part of a special event (for
example, a welcome cocktail party). Non-drinkers will resent paying for free drinks.
• Taxes
Taxes should always be included; otherwise, customers will feel there are hidden extras,
which will not be appreciated.
• Gratuities
Generally, for group tours, it is a good idea to include gratuities on included package
items, since customers will not be paying directly and will rarely tip in these
circumstances. You want to ensure that your customers get quality service. On optional
and non-included items, gratuity suggestions should be provided to your customers.
It is important to think through all of the likely needs of the tourist purchasing the package and
make sure that the key services they require are included. Things that are not essential but may
be of interest should be offered as options or listed as suggestions to the customer.
Basically, you need first to identify the types of products, experiences, and services you or your
client would like to have included in the package, and then seek out a quality supplier of that
product in the province. Your research should concentrate first on the demand-generating
experiences you want to include in each package, since these will form the backbone of the
package. Once you are comfortable with these elements, then you can research the other services
that you will need, such as accommodations, places for meals, etc.
Some good sources of information on Nova Scotia’s tourism products include:
• Nova Scotia’s tourism website - www.novascotia.com and the Nova Scotia Travel Guide
(Doer’s and Dreamers Guide to Nova Scotia) - which include a listing of many of the
products and services available in the province;
• Other publications prepared by the provincial Department of Tourism, Culture and Heritage,
available through provincial information centres or by calling the Check In Information
Service;
Page 47 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Regional websites and travel publications and individual supplier websites and brochures;
brochures and other printed collateral are available through local and regional visitor
information centres;
• Nova Scotia Museum, particularly if you are looking for detailed information on special
products such as culture or heritage experiences, birdwatching.
You should start files on each of the products you research. Include all the printed information
on the product as well as your notes and comments on your experiences and your dealings with
the supplier. Add any comments you receive from your customers to help you identify where
changes may need to be made in your arrangements with this supplier. Keep product files even
on products you don’t plan to include in your packages. You never know when you will get a
call to put together a custom tour incorporating some special interest or activity.
6.5 Pricing Your Package
In general, package pricing can be undertaken using the following steps:
1. Calculate Total Variable Costs Per Person
Add up the per person costs of all package components at the rates quoted by your suppliers,
net of all commissions and discounts. These costs could cover meals, accommodation
(usually one-half the double occupancy rate, if the rate is based upon two people per room),
attraction admission fees, and other costs normally charged on a per person basis. Varying
rates for children, retired mature travellers, singles, third persons per room, etc. should be
noted, as should seasonal variations. Don't forget details like taxes, baggage handling, and
maid gratuities.
It is helpful to use a multi-column worksheet where you can record the variations for each
cost item. An example of a package pricing worksheet is found in Exhibit 7. A separate page
is used for each day.
2. Calculate Fixed Costs Per Person for a Specific Departure/Date
Add together the fixed costs for a specific departure or package date. i.e. the costs that will
not change no matter how many customers buy the package. These costs could include a
motor coach charter, the services of a guide, guest speaker, and so on.
Then divide the total fixed costs by, say, 70% of the number of people targeted to buy the
package. By using a percentage less than 100%, you reduce the risk of loss caused by lower-
than-expected package sales and you increase the chances for extra profit if the package is a
greater success.
If there is significant uncertainty as to the numbers of customers on given departures, it may
perhaps be necessary to use a lower percentage. Remember, however, that using a lower
percentage will increase the price of the package and weaken its appeal and competitiveness.
Again, a separate page is used for each day
Page 48 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 7
PRICING WORKSHEET PAGE 1 - VARIABLE COSTS
PACKAGE: ____________________________________________________ DAY: PAGE: 1
PACKAGE
COSTS
Retail Value
Per Unit Net Cost Per
Unit
Net Cost Per
Person
6 Seasonal Discounts 7 6 Discount/Supplements Per Person 7
Shoulder (2)
Off
Season (2) Other (2) Seniors(2) Children(2)
3rd
Person
(2)
Single
Supplement
(2)
Group
VARIABLE COSTS
1. Accommodations (1)
2. (a) Breakfast
(b) Lunch
(c) Dinner
3. Attraction/Activity
4. Attraction/Activity
5. Ground Transfer
6. Baggage Handling
7. Gratuities
8. Other
9. Other
10. Other
TOTAL VARIABLE COSTS
1 Divide the Room Cost by the Number of People per Room.
2 Enter the dollar value in savings per person - discounts as a minus number, supplements as a positive number
Page 49 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 7 continued
PRICING WORKSHEET PAGE 2 — FIXED COSTS (GROUP FEATURES OF PACKAGE ONLY)
PACKAGE: __________________________________________________ DAY: PAGE: 2
Capacity (# of people)____________________________
Estimated Average Load Factor:___________________
PACKAGE
COSTS
Total
Cost Cost Per Day
Allocated Cost
Per Person
(Based on
capacity)
Estimated Load
Factor
(Average
Percentage)
Grossed Up
Cost Per Person
6 Seasonal Discounts 7
Shoulder Off Season Other
FIXED COSTS PER DAY
Motorcoach/Van
Driver
Guide
Step-On Guide/Expert
Other
Other
Other
Other
Other
TOTAL FIXED COSTS
Page 50 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 7 continued
PRICING WORKSHEET PAGE 3 - OVERHEAD COSTS AND GROSS-UP
PACKAGE: OVERHEAD, MARKETING, & MARKUPS PAGE: 3
Cost Allocation
Per
Package
Net Cost per
Person (Pg 1)
Plus Allocated
Cost Per Person
(Page 2)
Load Factor
Gross Up
Grossed Up
Cost Per
Person
6 Seasonal Discounts 7 6 Discount/Supplement Per Person 7
Shoulder
Off Season
Other
Seniors Child 3
rd
Peron
Single
Suppl.*
Total Variable Costs (sum from Page 1
for each day)
Total Fixed Costs (from Page 2 for
each day)
Subtotal
OVERHEAD ALLOCATION
Marketing
Other Overhead
Subtotal Overhead Costs
TOTAL VARIABLE, FIXED &
OVERHEAD COSTS (ALL DAYS)
Gross Up Factor for Profit
Gross Up Factor for
Commissions/Discounts (Page 4)
Calculated Retail Price (Before taxes)
ADOPTED RETAIL PRICE FOR THE
PACKAGE
* Single Supplement, Not Sharing
Page 51 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 7 continued
PRICING WORKSHEET PAGE 4 - CALCULATION OF GROSS UP FACTOR FOR COMMISSIONS AND DISCOUNTS
Calculation of Gross Up Factor for Commissions and Discounts
Source of Business Percentage of Total
(Column 2)
Average Commission/Discount
(Column 3)
Allowance on Total
(Column 4)
Direct Consumer Sales
Travel Agents
Tour Operators
TOTAL
Notes:
Column 2 times Column 3= Column 4
Add Column 4 vertically to determine total allowance for commissions and discounts
Page 52 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
3. Calculate the Package's Marketing and Share-of-Overhead Costs on a Per Person Basis, for
the Program as a Whole
Calculate the package's marketing and share-of-overhead costs, and then (as in Step 2) divide
by +/- 70% of the total number of customers expected. In this case, the worksheet is only
used for the package as a whole, not for each day.
As a receptive operator, you will first have to allocate all of your marketing and overhead
costs to each package program and then, once you have done this, to each departure. Thus
these costs are amortized over all of the dates/departures for each package, as well as over
each of your packaging programs.
4. Calculate Total Package Cost on a Per Person Basis
Add together the per person costs calculated in Steps 1, 2, and 3, to arrive at a total package
cost per person.
5. Mark Up Total Package Costs to Cover Commissions and Provide a Profit
Mark up the total per person costs to cover travel agent commissions and tour operator
margins and, of course, your profit.
This topic is explored more fully in Section 8 - Negotiating Supplier Partnerships.
If a mix of commissionable bookings, or a mix of commissionable and non-commissionable
business, is expected, you will have to calculate a weighted average commissions allowance,
based on the expected proportions of sales.
If the package is being offered for off-season periods, then a lower percentage might be
appropriate than that for high season, where you want to maintain a healthy profit margin.
The total package price per person is therefore:
Total Variable Costs Per Person
Z
Total Fixed Costs Per Person
Z
Share of Marketing and Overhead Costs Per Person
Z
Commissions and Your Profit Per Person
Page 53 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
6. Calculate Selling Prices for a Full Range of Customers
To calculate your selling prices for the full range of your customers, you have to adjust your total
package price per person, so that you can offer rates for singles, third and fourth persons sharing
one room, children, people travelling off-season, retired mature travellers, groups, and so on.
Appropriate reductions and extra charges may have to be negotiated with all the component
suppliers and these should be taken into account when calculating your range of selling prices.
It is important to establish a range of prices which, on average, based on your expected mix of
business, provides you with the average profit targeted in Step 5.
The acid test of package pricing is whether the customer can buy the package for less than the
aggregate retail value of the included elements plus a reasonable fee for your escorts and the other
services you provide. This is what consumers expect; they expect to save by buying a
package. This means that you have to cover all the marketing and overhead costs, as well as the
commissions and your profit margin, with the discounts obtained from the various suppliers
involved, and still have a saving to pass on. This is a significant challenge, and will require a
dedicated effort if you are to accomplish it.
6.6 Product Management and Administration
Quality control when planning and managing your package program is vitally important. Your
best intentions and a well-conceived package program concept are not in themselves enough to
ensure a satisfactory customer experience. Many things can go wrong. What is required,
therefore, is a quality management program consisting of six elements:
• Careful and thorough planning and negotiation with suppliers, directed at coordination,
management, and problem solving processes;
• Contingency arrangements where there is a risk of cancellation, weather problems, and the
like;
• A management process within your company to coordinate arrangements and deal with
problems;
• Communication with the customer;
• A generous policy for refunds and credits;
• A system to track results.
It is important to recognize that each of your packages is a tourism product in its own right, with
its own needs for management systems and procedures to ensure a quality experience for
customers. This is a complex and a sophisticated business and management and administration
must be a top priority. This is not intended to intimidate you, it simply means that you have to
pay attention to details when planning and coordinating your packages.
Page 54 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
We will deal with each of the six elements of a Quality Management Program in turn.
Product Planning
In planning the product, there are a number of quality control initiatives which can help ensure its
quality. The following suggestions are offered:
• Visit each property/service included in each package. This allows you to check out the
physical quality of facilities and determine whether they are really suitable. If parts of the
facility are substandard, you can arrange for your customers to receive only those that are
satisfactory. You can also meet with the management and staff who will be serving your
customers and impress on them your expectations, review policies and procedures, and
discuss any areas of concern.
• Commit all details of the arrangements to writing and have each property/service confirm in
writing. This should cover basics such as dates, prices, and services to be provided. It should
also cover quality standards, special services, and the like.
• Ask each supplier to appoint a liaison/coordination person to be your point of contact. This
person should be in management and have the authority to make decisions regarding
arrangements, problem solving, etc. This person should also be given the responsibility of
overseeing the services being provided to the customer, and should be on call if any problems
arise. (A backup liaison person would be a good idea too.)
• For each supplier, establish a problem-solving procedure agreeable to both parties and agree
on procedures and standards of personalized hospitality to be provided to your customers.
Where possible, little extras should be arranged to provide a pleasant surprise for your mutual
guests.
• Agree on a program to brief/train your own staff and those of your partner on the package
features, services to be provided, problem solving procedures, and expected standards of
hospitality.
Contingency Arrangements
If it is possible that the services in the package may not be available for a particular customer,
there should be a contingency plan, made during the planning stage, for substituting an equivalent
product. (The possibility should be mentioned in your brochure in this respect.)
Your Management Process
Beyond the planning process, a management process is needed within your company for the
delivery of the package itself. This consists of the following elements:
• Appoint a member of your staff to act as the coordinator for the package and to be the contact
person for both customers and suppliers. There should also be one or two backup people
appointed to cover periods when the main coordinator is unavailable.
Page 55 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Use a confirmation form to communicate with suppliers, informing them of
dates/names/special requirements/etc. of bookings received.
• For major package elements, make phone calls to participating suppliers a couple of days
ahead of each departure to reconfirm.
• Confirm the availability of your participating supplier’s liaison person for the package. You
should confirm their ability to meet the customer on the date in question and solve any
problems, etc. or make sure they have a backup person appointed and briefed for this task.
• Ask participating properties to have their liaison person meet the customer(s) upon arrival, if
possible, and offer their services should the customer require any assistance. Encourage
helpful suggestions and offers to make any special arrangements desired by the customer.
Generally, a high standard of personalized service should be the objective.
Customer Communications/Documents
The customer should be sent a package of information well in advance of the package date. The
package should include the following:
• Copies of confirmations for key package services;
• Appropriate vouchers/tickets;
• Maps and other general information on the destination area, its attractions, etc.;
• Detailed instructions regarding the package and such things as customs and immigration,
currency, etc.;
• Suggestions on what to bring, other things to do, etc.;
• Policies and rules governing the package;
• The name and phone number of your coordinator (and your backup people);
• Names of contact people at the participating properties;
• Established procedures for obtaining information or help, solving problems, making
complaints, etc.;
• Other materials appropriate to the particular package.
The kit should also make clear whether any substitutions have been made to the original package
description and the reasons for those changes. If the change is a major one, it is better to call the
customer in advance to discuss the matter and reassure them, and to give them the option to
change their date or cancel.
You will have to negotiate an arrangement with the outbound tour operator on who develops each
of the above.
Page 56 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Refund and Credit Policy
Some tour operators have the attitude that once a customer is booked, the operator is entitled to
aggressive policies to hold on to them or at least their money. They apply cancellation penalties,
non-refundable deposits, and forced substitutions of package elements. Few of these practices
make for a quality customer experience!
We recognize that some policies along these lines are appropriate, particularly for last minute
cancellations without good cause. However, as a general rule, we believe it is a better investment
in long-term customer satisfaction, referrals, repeat business, etc. to have a generous policy,
within reason of course. Customers should be given the maximum, reasonable amount of
flexibility.
Your policies on cancellations, refunds and the like should be carefully designed and developed
in consultation with your tour operator partners, with consideration for the realities of their
business as well as your own. They should also be based upon the real needs of your business.
In cases where you have to make changes to the package, the customer should be given the full
right of cancellation. The likelihood of cancellation can be minimized if a call is made, an
explanation given, and reassurances provided. However, if the customer is not satisfied, give
them the freedom to book something else or to cancel and receive a full refund.
Tracking Results
Finally, it is important to monitor results, as this provides vital feedback to assist you in
improving your packages. Suggested techniques include:
• Customer questionnaires, including questions designed to identify problems, complaints, and
areas for improvement. (Positive experiences should also be sought out and the appropriate
staff commended.)
• Phone interviews of a sample of customers after they return home. This will permit deeper
probing about the customer’s experience.
• Meetings with management and staff at participating properties to review problems and
successes.
• A system to log any complaints received, and a procedure to follow up on complaints
promptly - with both the offending party and the customer.
• Have your product staff provide a report on the results of all the foregoing initiatives, along
with recommendations for package improvements.
In addition to monitoring the package itself, it is important to track the results of your marketing
efforts; specifically, which market segments produced the best results and which promotional
techniques were most effective. If you are marketing directly to consumers, some suggestions
include:
Page 57 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Putting questions on the customer questionnaire about customer demographics and other
relevant market information and about how they learned about the package, what appealed to
them, for example.
• Coding your advertisements, by using coupons and/or department numbers, so that enquiries
can be traced.
• Asking people making reservations where they learned of the package.
• Cross-checking reservations against enquiries to determine conversion rates. Conversion rates
refer to the percentage of enquiries which are converted into actual bookings.
6.7 Phasing
It is important that you don’t try to introduce too many packages at one time. Start with only a
few, carefully plan and debug them and make sure they are working well before introducing any
more. This is one of those situations where less is more. Having two or three successful
packages initially is much better than having eight or ten that are full of problems.
SECTION 7
Negotiating Travel Trade Partnerships
3
The material in this section has been adapted from several sources, all of which were originally
prepared by The Economic Planning Group. These sources include:
• Nova Scotia HUB and SPOKE Tourism Marketing Seminar Manual, prepared for the Nova
Scotia Tourism RITC, 1989/90
• Tourism is Your Business: Marketing Management, Published by Canadian Hotel &
Restaurant, MacLean Hunter Limited in co-operation with Tourism Canada and the Canadian
Government Publishing Centre, 1986
• Packaging for and Selling in the United States Leisure Market, Published by Tourism Canada,
1995
Page 58 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 7
NEGOTIATING TRAVEL TRADE
PARTNERSHIPS
3
We have been referring to the relationship between your receptive business and the travel trade as
a partnership, which it most assuredly is. Your relationship with your suppliers is also a
partnership, with some differences.
In working with the travel trade, the outbound tour operator is the marketer; you are the product
coordinator; your suppliers are the product providers. The elements of the partnership with the
tour operator is as follows:
In consumer marketing, the outbound tour operator is responsible for promotion, reservations and
ticketing. They will look to you to provide copy and photos for the brochure, and material for
inclusion in the customer’s information kit.
In marketing to travel agencies, the outbound operator will look to you to assist with
arrangements for FAM trips.
In providing the product, your role can vary. Generally, the outbound operator will be
responsible for getting the customer to your destination, and you will be responsible for greeting
them and generally coordinating arrangements for them. You may be required to issue vouchers
and other documents to them on arrival.
In administration, your role may be to issue confirmations to suppliers, receive and approve
billings from suppliers and handle payments to suppliers.
Each situation will differ, depending on the respective preferences of the outbound operator and
the receptive operator, and the particular requirements of the package. You will need to establish
the details of the modus operandi of the program with each tour operator and for each program.
Page 59 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
7.1 Coordination, Liaison and Quality Control
Needless to say, managing your relationship with your travel trade partners requires the same
kind of attention as does the management of your own business. Here are some tips:
• Take the time to work out the details of your arrangements, then confirm them in writing.
Where there is the risk of changes, agree on the kinds of contingency arrangements or
substitutions that can be made, and the procedure for making them.
• Put on an initial product orientation/training session for their reservations staff, product staff
and supervisors. Arrange to provide the staff with brochures on your product and other
information on your destination. Where possible, their key staff should participate in a FAM
trip.
• Establish a regular reporting program by the tour operator, so you can track the progress of
their bookings. The reports can be used as the basis for appropriate adjustments in block
space allocations with your suppliers.
• Establish liaison people at both ends, with backups. These people should have decision-
making authority with respect to contracting arrangements.
• Communicate with the tour operator with respect to any changes to arrangements. This
should be in writing, by email or by fax, with follow-up to confirm the communication if the
change is of major significance. Substitutions should be of equal or greater value.
• Be reasonable! The basis for your relationship is one of partnership. Don't stick to firm
policies if circumstances warrant a custom arrangement, or a custom change. Negotiate in
good faith. Also, be reasonable with cancellations, deposits, etc.
• Solve problems quickly and thoroughly. Tour operators will drop you if there are too many
headaches in the relationship.
• Log sales results, problems, customer letters, etc. for review with your partner at the end of
the program and to provide the basis for product enhancements for next year. To the same
end, collaborate with your partner in a program of on-tour or follow-up research to determine
guest satisfaction, suggestions for improvements, etc.
Some other guidelines for working with the travel trade are discussed in Section 6 on Packaging
and in Section 11 on Marketing.
SECTION 8
Supplier Partnerships
4
The material in this section has been adapted from several sources, all of which were originally
prepared by The Economic Planning Group. These sources include:
• Nova Scotia HUB and SPOKE Tourism Marketing Seminar Manual, prepared for the Nova
Scotia Tourism RITC, 1989/90
• Tourism is Your Business: Marketing Management, Published by Canadian Hotel &
Restaurant, MacLean Hunter Limited in co-operation with Tourism Canada and the Canadian
Government Publishing Centre, 1986
• Packaging for and Selling in the United States Leisure Market, Published by Tourism Canada,
1995
Page 60 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 8
SUPPLIER PARTNERSHIPS
4
8.1 Potential Suppliers
Potential suppliers for your tours and packages will include a wide range of businesses. Major
suppliers will be:
• Airlines, particularly if you are doing FIT business and selling your own tours direct to
consumers (airlines are both travel trade partners and suppliers);
• Ferries
• Accommodations;
• Attractions;
• Restaurants;
• In-province transportation companies;
• Outdoor adventure operators;
• Local sightseeing operators;
• Car rental companies;
• Performance theatres;
• Festivals.
Basically, all of the providers of services required by customers on the package are potential
supplier partners.
Suppliers You Can Work with
Seek out suppliers who are prepared to cooperate with you in ways you prefer. What you need
are suppliers who generally meet the following criteria:
• Willing to provide net rates you can work with (We expand on this below.);
• Willing to meet other normal terms of trade for travel trade businesses, such as block space,
no deposit required, post-travel payment, etc.;
Page 61 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Make a commitment to deliver what they promise;
• Have a professional approach to business (e.g. having a phone number where they can be
reached in the off-season!).
For the partnership to have any real chances of success, your suppliers have to see themselves as
professionals and be prepared to operate their business in a professional manner. They have to be
willing to make an effort to understand how the travel trade works - to participate in the big
picture of how the tourism industry itself works. Tour operators refer to a’ travel trade culture’,
meaning an understanding and willingness of suppliers to operate their businesses in ways which
allow travel trade partnerships to be successful.
8.2 Price Negotiation
You have the responsibility to negotiate the costs of all the package elements provided by your
suppliers, as well as control the other administrative arrangements involved.
Most suppliers will have an existing schedule of discounts and commissions. These may be good
enough for your purposes. However, your responsibility to your tour operator partner, to the
price competitiveness of the package, and to your own bottom-line profitability is to negotiate the
best possible price for each element of the package. Also, as you are going to have a tour
operator and probably a travel agent involved in marketing the product, the discounts have to be
sufficient to cover their margins as well.
The discounted price negotiated with the supplier is known in the trade as the ‘net rate’.
A summary of the kinds of supplier discounts and commissions considered normal by the travel
trade is presented below.
GUIDELINES ON SUPPLIER COMMISSIONS AND DISCOUNTS
Travel Agent Commission on Individual Bookings 10%
Travel Trade Wholesaler Discounts (Reductions from Retail)
For A Tour Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For A Receptive Tour Operator . . . . . . . . . . . . . . . . . . . . . . . . .
For Group Leaders, Affinity Groups . . . . . . . . . . . . . . . . . . . . .
20% - 25%
25% - 35%
5% - 10%
Consumer Discounts
Off-season . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Children . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10% - 50%
30% - 60%
As you increase your business from year to year, your suppliers should be more receptive to
lower prices and larger tour operator discounts.
Page 62 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Remember in your negotiations that your package promises many appealing things to your
suppliers, and these should be taken into account in the kind of deal you strike. The supplier is
going to benefit in the following ways, which make it more feasible for them to sharpen their
pencil:
• Marketing and overhead costs are being carried by you and the tour operator and are removed
from the supplier.
• Business is booked well in advance, an advantage to the supplier in terms of planning and
scheduling.
• The package may very well be providing business in slow periods.
• If the booking is a group tour, the property can realize a variety of efficiencies; in front desk
operations and housekeeping in particular, and there are rarely any disciplinary problems.
One of the challenges you will face is getting suppliers who have not worked with the travel trade
much in the past to understand and accept the need for, and appropriateness of, the kinds of
discounts from their retail prices that you are going to need. For many suppliers, the prospect of
cutting their prices by 20% to 35% will be daunting. However, there are several powerful
rationales in support of the concept, and many suppliers have discovered the cost effectiveness of
doing business with wholesalers on the basis of deep discounts. The cost effectiveness is based
on the following premises:
• The first is the principle of marginal cost pricing, which can be applied to most tourism
businesses. This principle focuses on the incremental cost of servicing an additional
customer. Given the presence of substantial fixed costs in most tourism businesses, there are
usually substantial economies of scale in adding one more customer, or adding an additional
group of customers.
During periods when your supplier’s business is not expected to operate at capacity, as long as
the revenue from an additional customer covers more than the incremental costs of servicing
the customer, it is profitable to take the booking. A classic example of this is the renting of a
hotel room. The incremental cost of renting one more room on a given date, when otherwise
the room would be vacant (or an additional block of rooms for that matter that otherwise
would be vacant), is only a small fraction of the cost of the normal room rate, probably only
$10 or so. The incremental costs for a hotel to service an additional customer are probably
limited to an additional half-hour of a room attendant’s time, some room supplies, and perhaps
some additional heating cost; but that's about it. All the other costs - for marketing,
overheads, debt service, etc. - will not increase.
The concept of marginal cost pricing is important for rationalizing the discount structure
involved in doing business with wholesalers. To make it work, the program must, on balance,
generate a significant portion of package-related demand for the supplier in periods when
there would normally be surplus capacity: in other words, during periods of the week or the
year that can normally be predicted to be slow. The cost of the discounts can then be weighed
against the incremental profitability of the additional business in these periods.
Page 63 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
It is not, however, reasonable for a supplier just to do business with wholesalers in slow
periods. You are definitely going to want to do business in their busy season as well. It will,
therefore, be important to convince the supplier to weigh the cost-benefit of the discounted
business not only against the incremental profitability involved in off-peak periods, but also
against the lost margin on wholesale business in periods when they might have been able to
sell the product at full rates.
• The second issue is that of cost displacement. The wholesaler assumes various costs in
developing, marketing, and managing the packaging program, and, to some degree at least,
this can represent a cost saving to the product supplier. The most obvious example is
marketing costs. If a property budgets 5% of revenue for marketing, there is a relative cost
saving equal to 5% of the net sales price of the product on business brought in the door from a
wholesale packager who handles their own marketing. There are similar savings on sales
administration, accounting, supervision, and management. It is quite reasonable for an
accommodation property, for example, to realize overall savings of 15% to 20% on its costs in
servicing the customers of travel trade wholesalers.
• A third consideration is that of market diversity and risk reduction for the product supplier.
For example, an accommodation property or an attraction suffering ups and downs in business
because of cyclical swings, poor weather, local price competition, the entry of a new supplier,
or other short term situations can benefit from the longer term stability of wholesaler block
bookings. These bookings are not as likely to be affected by short-term or local conditions,
resulting in a more predictable and stable base of business from completely separate markets,
over a period of time.
In conclusion, for the vast majority of suppliers, it will be worthwhile for them to work with the
wholesale travel trade by offering the expected discounts and commissions. A careful evaluation
of the supplier’s cost and pricing structure and of the incremental costs and revenues associated
with increases in business is necessary to demonstrate the basis for such discounts.
Unfortunately, too few tourism operators understand the foregoing aspects of their business.
Airlines and others such as chain accommodations who practice revenue/yield management in
their businesses do recognize these principles and operate their entire business in accordance with
them. They are in the minority. You will have a job selling the idea to many of your potential
suppliers.
Other things to remember in negotiations with suppliers:
• You will need complimentary services for tour guides, drivers, and FAM trip guests.
• Baggage handling, gratuities, and other details have to be arranged and the costs included in
the package.
• It is reasonable for a supplier to want deposits the first time you do business together, but
deposits should not be necessary on an ongoing basis. Deposits should only be paid on the
basis of deposit receipts from customers.
• Arrangements need to be made with respect to regular booking reviews, with corresponding
adjustments to space being held for the program.
Page 64 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
A receptive tour operator uses the net prices as the base cost of the package and then adds
markups on the net cost to cover additional services to be provided (tour guide, step-on guide,
etc.), as well as overhead and profit, and also the margins required for the outbound tour operator
and a travel agency.
8.3 Sales Administration
The administration of your business relationship with your suppliers will have a number of
elements. Some you will be responsible for, others may be handled directly between the
outbound tour operator and the supplier. In any event, in addition to the net rates, the various
elements to be addressed in the arrangement with the supplier include the following:
• Block booking procedures, including arrangements for sales reports, space release dates, etc.;
• Billing and payment procedures, including deposits, if required;
• Confirmations, including notification of special customer requirements;
• Use of vouchers, coupons;
• Special requirements, if any, for the tour operator’s clientele.
8.4 Coordination and Management
Issues related to the coordination and management of packages with your suppliers were dealt
with in detail in Section 6.
SECTION 9
Legal, Regulatory and Tax Matters
Page 65 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
This section addresses legal, regulatory and tax matters concerned with the establishment
of your receptive tour operator business. There are a multitude of laws and regulations
that affect business and readers should note that the information contained herein is a
guide only.
It is strongly suggested that the reader undertake efforts to verify any information on
which their business plan is based and not rely solely on the information in this manual.
There are areas where you may want to consider retaining the appropriate professional
expertise to assist you.
While the information contained in this manual is believed to be accurate, as of the winter
of 2005, it is not so warranted. The reader should note that federal, provincial and
municipal laws and regulations change frequently and it is recommended that you check
with the appropriate authorities, listed in the Appendix, including representatives of the
Nova Scotia Department of Tourism, Culture and Heritage and your local Business
Service Centre (on line at www.gov.ns.ca/snsmr or at Access Nova Scotia centres around
the province), to obtain up-to-date information on laws that may affect your business.
SECTION 9
Legal, Regulatory, and Tax Matters
9.1 Vehicle Permits and Licensing
As discussed earlier, you can either charter any vans or motorcoaches that you require to operate
your receptive tour business or you can purchase your own vehicles. In the early years of your
business, you are most likely going to charter, in which case you do not have to be concerned
with vehicle permits and licensing. However, if you decide at some point to acquire your own
vehicles, prior to doing so, acquire your various permits and licenses. In any event, it is helpful if
you have an understanding of this issue.
All vehicles used in your operation must have valid permits and licenses issued by Service Nova
Scotia and Municipal Relations Registry of Motor Vehicles. In addition, drivers must have the
appropriate class of drivers’ licenses for the type and size of vehicle they will be operating.
Contact Service Nova Scotia and Municipal Relations’ Registry of Motor Vehicles for additional
information.
You will require a Motor Carrier License to operate a vehicle that holds nine passengers or more
(excluding the driver); or a Commercial Van License for vehicles that carry 8 passengers or less
(excluding the driver)and provide a daily, weekly, or other regular service, or a charter or tour
service that enters or departs any municipality. These are available by contacting the Nova Scotia
Utility and Review Board, Motor Carrier Division (website: www.nsuarb.ca ).
Page 66 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
If you intend to use a limousine or taxi cab to transport passengers, you must obtain a
taxi/limousine operator’s license from your local municipality. Your municipality may have
specific regulations regarding the number of taxis/ limos it will license, as well as fare limits. In
addition, your municipality will likely require an annual inspection of the vehicle for its operating
license renewal. It should be noted that a taxicab is considered to be a vehicle that has a seating
capacity of 8 passengers or less (excluding the driver) and is operated within a municipality, or
under hire on single contracts within the province (one way or return) and is not operated as a
regular service or a charter service.
As previously indicated, a Commercial Van License is required if your vehicles accommodate
eight people or less, excluding the driver, and provide a daily, weekly, or other regular service, or
a charter or tour service that enters or departs any municipality. Under this type of license the
owner/operator of a vehicle is subject to regulations, including those relating to hours of work,
vehicle inspections and maintenance records documentation; as well as the following required
safety features:
• Portable fire extinguisher
• Unitized first-aid kit
• No less than 3 triangular reflectors
As a receptive tour operator utilizing a Commercial Van License, you should pay particular
attention to the hours of work allowed under the Motor Carrier Act Regulations. If you or an
employee will be driving, in addition to performing other duties relating to your business, you
will be subject to regulations relating to the number of hours you are permitted to operate a
vehicle during a given time period.
For larger vehicles - those carrying nine or more persons, excluding the driver, a Motor Carrier
License is required. If you are chartering the vehicles from another company, then the Motor
Carrier License is the responsibility of that company and you only need to worry about whether
your supplier has the necessary operating authorities.
There are two types of Motor Carrier Licenses which are relevant to this type of business:
• A Charter License, which permits you to hire/charter your vehicle for a lump sum price for
the purposes of chartering for groups, tours, and adventure travel;
• A Sightseeing License, which permits you to sell individual tickets for tours using the
vehicle.
You can have both types of license but you can only offer the type of products and services that
are spelled out in the license. Your license will indicate:
• The type and size of the equipment you are using;
• The prices you will be charging, including regular rates, discounted rates for the travel trade,
etc;
• Your itinerary, routes, and where you pick up and drop off passengers (this could cover a
large or a very small geographic area). (Note that this is a key requirement for
5
Many operators in Nova Scotia set up a separate charter company to serve this purpose,
with the fluctuating elements of the tour business handled by the main tour company. In
this way, you may charter your vehicles to your tour company without having to make
license amendments as required for a Sightseeing License.
Page 67 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Sightseeing Licenses. For Charter Licenses, the restriction only pertains to the geographic
area in which you may operate.)
For receptive tour businesses, the Board recommends that you apply for a Charter License which
will permit you to hire out your vehicles for the purposes of group charters, tours, and sightseeing
excursions.
5
If you wish to apply for a Sightseeing License, you should be aware that this license will be much
more restrictive than the Charter License and will set out fixed routes, fares, schedules, etc. This
may not be the preferred licensing method for tour operators, since any changes to your tour
itineraries, fares, etc., will require amendments tothe aforementioned schedules to be approved by
the Board prior to their implementation.
The Nova Scotia Utility and Review Board will assist you in applying for the correct license and
completing the application forms.
For all license categories, the Utility and Review Board will expect to see a comprehensive
business plan identifying your markets and where your business will come from, as well as the
financial basis for your operation. In providing Motor Carrier Licenses, the Board attempts to
ensure that there is a sufficient market available so that existing operations can continue to
operate on a reasonable financial basis, while you also operate a financially viable business.
The process of obtaining a permanent Motor Carrier License takes about six to eight weeks,
assuming there are no major objections. Once your application is completed and submitted to the
Board, they place an advertisement in the Royal Gazette (two issues), and anyone (existing
businesses, the general public) has 21 days to enter an objection. If there are no objections, the
application will proceed to the Board for consideration.
If there are objections, they will be reviewed by the Board and the Board may convene a hearing
to listen to the concerns of the parties objecting. Parties can object to any element of your
application, e.g. rates, route, size and type of coach, etc. If there are objections, the process
lengthens, usually by about another 30 days but possibly much longer, depending on the scale
and nature of the objections.
If you are starting a new business, you may want to consider applying for a Temporary Authority
under the Motor Carrier Act. This license costs a bit more but can be granted by the Board
without going through the process of advertising for objections. The Temporary Authority is
valid for 90 days, can be extended for an additional 90 days and can be granted within a two to
three-week period, provided the applicant can establish an immediate and/or special need which
might permit the Board to issue this Temporary Authority. Note, however, that being issued a
Temporary Authority does not necessarily guarantee that you will be awarded a permanent Motor
Carrier License when you apply for one. You may, therefore, want to consider seriously the level
of investment you want to make in your business, based only on a Temporary License.
Page 68 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
If you already have a Motor Carrier License and want to make changes to any of the items
identified above, you will need to apply for an amendment to your license, and this will have to
go through the same process as the permanent license. If you are just replacing one vehicle with
another of the same size, then you do not need an amendment but if you want to add vehicles,
change your prices, or pick up passengers from a different location than is incorporated in your
permanent license, then you will need an amendment.
Whether you are applying for a Motor Carrier License or a Commercial Van License, your
insurance company will have to complete a Motor Carrier Certificate of Insurance, indicating the
carrier of the insurance on your vehicles and the limit of coverage in accordance with the Act and
Regulations, and forward it to the Utility and Review Board in order for you to receive your
license. In early 2005, insurance requirements for vehicles transporting 20 passengers or less are
$1 million in third party liability coverage, as well as $2 million in passenger liability & property
damage; while vehicles carrying 21 passengers or more must have $1 million in third party
liability and $3 million passenger liability & property damage coverage. It is advised that you
contact the NS Utility and Review Board, or check their website, www.nsuarb.ca, as this
information is subject to change.
As well, your vehicles will have to be inspected prior to business start up and every six months
thereafter. The inspection covers mechanical and body issues, cleanliness (interior and exterior),
and the delivery of service. You will have to have the license renewed on an annual basis, but
this is routine (plate renewal) unless you want to make changes.
If you want to take a tour out of the province, you will need another license - an Extra Provincial
License - and you may also need approvals from the other provinces in which you intend to
operate. You also have to apply to abandon your license, should you decide to stop operating.
With the exception of Regularly Scheduled Service, this is a fairly routine matter.
Given the complexities of obtaining Motor Carrier and Commercial Van Licenses, you should not
make any financial commitments to your business (e.g. purchasing vehicles, buildings, etc.) until
you have obtained your required License and/or Extra-Provincial license.
Contact the Motor Carrier (Public Passenger) Division of the Nova Scotia Utility and Review
Board for further information pertaining to these licenses at (902) 424-3588, or visit them online
at www.nsuarb.ca.
9.2 Other Regulations
License to Sell Travel Insurance
Many tour operators provide an extra service to their passengers by offering travel insurance to
cover such things as trip cancellation or interruption for a medical reason, or baggage loss.
However, in order to sell travel insurance to your passengers, you are required by law to hold an
insurance license issued by the Licensing Section of the Nova Scotia Department of Environment
and Labour. For a tour operator, two licenses are required: one for the business itself (insurance
Agency License) and one for the agent in charge, usually the owner (Insurance Agent License).
The licenses are valid for 3 years and can be renewed. There are a number of requirements that
must be met, including a pre-licensing examination for the Insurance Agent License. Additional
Page 69 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
licenses are required for employees selling travel insurance. Contact the Financial Institutions
Division of the Department of Environment and Labour for application information, (902) 424-
5613 or online at www.gov.ns.ca/enla/fin/fininst.htm .
Note that your company must be registered with Joint Stocks before insurance licenses will be
issued.
License to Sell Airline Tickets
If you are going to sell airline tickets, you must be a Travel Agent with an accreditation from the
International Air Transport Association (IATA), the association of major airlines. To get an
appointment, you will need a minimum of two staff members (one of whom is designated as the
manager) who meet the IATA requirements for previous work experience. This work experience
must have been acquired through an IATA or Air Transport Association of Canada (ATAC)
member airline or travel agency. In addition, you will need to meet certain financial
requirements, including posting a bond to protect the funds owed to airlines in the event of your
business failing. COntact IATA through www.iata.org for details on their requirements.
Nova Scotia Department of Environment and Labour
The Department of Environment and Labour is responsible for occupational health and safety,
public safety, labour standards, as well as the Office of the Fire Marshal. The Department also
administers acts and regulations pertaining to elevators and amusement devices. Specific
regulations that would pertain to a receptive tour operator business include:
• Occupational Health and Safety Act that requires employers to adhere to operational and
employee safety standards. A brief overview of this Act and the implications for business
operations is provided below.
• Labour standards with respect to minimum wage, employee/employer rights, etc. A Fact
Sheet providing general information on the Labour Standards Code is published on the
Internet at www.gov.ns.ca/enla/labstand/lstcode/ or you can contact the Labour Standards
Division of the Department for more information.
• The Pay Equity Act is administered through the Labour Services Division of the Department
of Environment and Labour. Pay equity means equal pay for work of equal value and is a
concept that bases wages on the value of work performed, regardless of whether a man or
woman is doing the job.
• Indoor Air Quality Regulations;
• First Aid Regulations. There is a Guide to First Aid Regulations available at
www.gov.ns.ca/enla/ohs/FirstAidGuide.pdf
• Workplace Hazardous Materials Information [WHMIS] Regulations. A guide to these
regulations is available through the Environment and Labour website, Publications section,
under Public Safety and Occupational Health and Safety. Note that the Nova Scotia Tourism
Human Resource Council offers customized WHMIS training programs for the tourism
sector. Check their website at www.tourismhrc.com for details.
Page 70 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
The Nova Scotia Occupational Health and Safety Act
The current Occupational Health and Safety Act became law in 1997, with some significant
implications for businesses in Nova Scotia. The Act is comprised of some key elements as
described below. It is administered by the Occupational Health and Safety Division, Department
of Environment and Labour - information, including a "How to Guide" can be found at
www.gov.ns.ca/enla/ohs/
The Internal Responsibility System concept is the foundation of the Act and, simply stated,
places the responsibility of workplace safety on all workplace parties. Workplace parties are
defined as anyone connected with a particular workplace, including Employers, Contractors,
Constructors, Employees, the Self-Employed, as well as Owners, Suppliers, Architects,
Engineers, and Occupational Health and Safety Consultants. The Act states in some detail what
the responsibilities (i.e. duties and precautions) of all workplace parties are.
The Act also provides employees with three basic rights. These are:
• The Right to Know - each employee is entitled to information on issues that affect the health
and safety of the employee or that of another person in the workplace;
• The Right to Refuse - employees have the right to refuse unsafe or unhealthy work;
• The Right to Participate - employees can participate on health and safety committees or be
an Occupational Health and Safety Representative, report unsafe conditions, and voice their
concerns or opinions on any issue that affects their health and safety, or that of the
workplace.
The Act states that a business employing five or more people on a regular basis is required to
prepare a written Occupational Health and Safety Policy indicating that the employer is
committed to occupational health and safety, and that the employer will co-operate with
employees in striving to meet the goal of a safer and healthier workplace.
A business employing twenty or more people on a regular basis is required to establish and
maintain a written Occupational Health and Safety Program including provisions for:
• The training and supervision of employees;
• The preparation of written work procedures relative to health and safety;
• The establishment of a Joint Occupational Health and Safety Committee or selection of a
Health and Safety Representative, where one is required;
• The establishment of a hazard identification program and an accident/incident investigation
system;
• The maintenance of records and statistics;
• The monitoring of the implementation and effectiveness of the program.
It is recommended that you obtain a copy of the Occupational Health and Safety Act and any
other regulations that may pertain to you.
Page 71 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Competition Act
Under the Competition Act, it is a criminal offence to engage in certain kinds of deceptive
marketing practices, including inflating regular price, and conducting misleading or false
advertising. The act applies to all businesses in Canada and is enforced by the Competition
Bureau of Industry Canada.
9.3 Personal Information Protection and Electronic
Documents Act
In January 2004, the federal government implemented the Personal Information Protection and
Electronic Documents Act (PIPED). This piece of legislation is applicable to all organizations,
including all private sector businesses and outlines the responsibilities of an organization relating
to personal information collected and stored through the course of normal business activities.
The primary purpose of the Act is to ensure that the privacy of individual consumers is respected
in that any personal information, including that relating to age, name, income, social status and
credit records; is used for legitimate commercial purposes only and is stored or maintained in a
secure fashion.
Following is a basic overview of PIPED:
- If your business wants to collect, use or disclose personal information about people, you
need their consent, except in a few specific and limited circumstances.
- You can use or disclose people’s personal information only for the purpose for which
they gave consent.
- Even with consent, you have to limit collection, use and disclosure to purposes that a
reasonable person would consider appropriate under the circumstances.
- Individuals have the right to see the personal information that your business holds about
them, and to correct any inaccuracies.
- There’s oversight, through the Privacy Commissioner of Canada, to ensure that the law is
respected, and redress if people’s rights are violated.
It is recommended that organizations develop in-house policies and procedures relating to the
retention of personal information. Many businesses have now taken steps to include their privacy
policy in their company literature and have it prominently displayed on company brochures,
websites, etc.
The Office of the Privacy Commissioner has an online guide to PIPED and a number of fact
sheets for businesses available through their website, which can be viewed athttp://www.privcom.gc.ca; or by contacting the Office of the Privacy Commissioner of Canada at
1-800-282-1376.
Page 72 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
9.4 Insurance
The question of insurance is very important for the tour operator business. The various types of
insurance you should be aware of are discussed below.
Vehicle Insurance
Vehicle insurance covers you in the event of bodily injury and/or property damage resulting from
an accident. Normally, a vehicle’s insurance is based on the make and model of the vehicle and
the vehicle’s value.
If you own your own tour vehicles, such as motorcoaches, you are required by law to hold valid
vehicle insurance. This type of insurance is the same as that required for all types of automotive
vehicles and is enforced by the Registry of Motor Vehicles. If you don’t own your own
motorcoaches or other vehicles, but rather charter them, you are not responsible for the vehicle
insurance - the company from which you charter is.
General Liability Insurance
General Liability coverage is insurance for claims against your business for bodily injury and/or
property damage that may arise out of your tour operations and for which you are legally
obligated to pay.
Professional Liability Insurance
Also known as Errors & Omissions or Malpractice insurance, Professional Liability Insurance
protects your company from claims arising out of a negligent act or an error of omission in the
professional service given by your company and/or your employees.
While tour operators and receptive operators are not required to hold professional liability
insurance, it is strongly recommended in order to protect yourself and your company from
financial loss.
All types of tour operators should hold professional liability insurance, regardless of whether they
operate the tours themselves, charter coaches and other vehicles from carriers, or simply offer a
step-on guide service. Although your vendors may have their own insurance coverage, your
company could be held liable in the event of a claim.
For instance, if an accident occurs on a motorcoach tour, your company could be held liable for
failing to investigate the accident record of the motorcoach company. As well, you may be liable
for damages in excess of the motorcoach company’s liability if they are inadequately insured.
In addition, if you don’t have insurance, you would have to pay legal council to defend your
company’s position as well as sue the carrier for compensation. Liability insurance is, therefore,
considered a must in the industry. In fact, in order to be a member of the National Tour
Association (NTA), a travel industry membership organization for tour operators and suppliers,
tour operators are required to hold Professional Liability insurance. Insurance protection will
cover you for the liability of tour vehicles you own, as well as non-owned or hired vehicles you
charter, such as motorcoaches.
6
Dead-heading occurs when you send an empty vehicle ahead to the point where the tour
originates, or return it empty. While the vehicle is dead-headed, it does not carry any
passengers and insurance companies offer lower rates for these periods. Usually tour
operators that dead-head maintain daily log-books that are, in turn, submitted to the
insurance company for year-end adjustment.
Page 73 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
While your local insurance company may be able to offer general liability insurance, they are
not normally able to offer the comprehensive professional liability coverage that is needed by
tour operators. Look into joining a large trade organization, such as NTA, which can offer
group insurance packages more geared to your particular needs.
Generally, professional liability and general liability insurance are issued at a fixed premium per
year, based on a number of factors including the volume of business you conduct, the passenger
capacity of your vehicles, and other factors such as the number of trips run per day and the
mileage of trips where the vehicle is deadheaded
6
.
Travel Insurance
Offering travel insurance to passengers is an effective way to limit liability and deter small
nuisance suits. Passengers holding travel insurance are far less likely to sue the tour operator for
damages when they are already covered by their travel insurance. As well, offering your
customers travel insurance is a good way to strengthen your position in court should a liability
issue arise.
Disclaimer
Another method of limiting tour operator liability is to publish a disclaimer on your tour
brochures, invoices, and itineraries. A disclaimer, which should be fair and equitable to
consumers in order to be recognized by the courts, is a clause used to notify consumers that your
company is a travel intermediary involved in handling travel arrangements of other suppliers,
and is, therefore, not liable for the acts of suppliers (e.g. hotels, restaurants), which are out of its
control. If this disclaimer is not made, you may be made liable for the acts of your suppliers.
The clause cannot disclaim liability for your own company’s negligence. You should get legal
advice in preparing the disclaimer.
9.5 Taxes
Harmonized Sales Tax
The Harmonized Sales Tax (HST) is a 15% value-added tax which replaced the former retail
sales tax and GST in Nova Scotia. All receptive tour operators are required to register for and
collect the HST on tour products and services if their total sales revenues are in excess of
$30,000 in a 12 month period. The HST is in place in Nova Scotia, Newfoundland and Labrador
and New Brunswick; all other provinces have the GST.
Page 74 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
As a tour operator, you pay HST or GST when you buy individual travel services - airline seats,
hotel rooms, attractions - and charge HST or GST on the tour packages and services you sell to
consumers. The HST/GST you pay out is called an input tax credit; you can claim input tax
credits to recover the HST/GST you were charged on the cost of these individual travel services.
For example, when you purchase hotel accommodation to resell as part of a tour package, you can
recover the 15% HST or 7% GST you paid on the accommodation by claiming an input tax credit
on your HST/GST return.
When you register for the HST/GST you are given a reporting schedule to follow for your
HST/GST returns, depending on the volume of your tour business. When you complete your
return, you deduct all your input tax credits from the HST or GST you charged on your tour sales.
You are required to remit the difference if the HST or GST you collect is more than your credits;
if your credits exceed your payables, you claim a HST/GST refund.
For tour operators, goods and services that are HST/GST taxable include:
• Travel agents’ commissions;
• Domestic tour packages;
• Domestic transportation by bus, train, ship, or aircraft;
• Hotel and other accommodation;
• Car rentals;
• Ticket cancellation fees;
• Restaurant meals;
• Admissions to attractions.
The type of tax that applies (i.e., HST or GST) to these elements depends upon the province in
which the goods and services were purchased in.
Goods and services that are zero-rated for tour operators (things that are subject to the HST/GST
but at a rate of zero or in effect no tax) include international travel (e.g. air travel from Europe to
Nova Scotia).
Goods and services that are completely exempt from the HST/GST include:
• Municipal transit services;
• Ferries transporting passengers and motor vehicles;
• Highway/bridge tolls;
• Most health, medical, banking, and insurance services;
• Commissions paid by insurance companies.
If you operate a small tour business which earns annual sales revenues under $30,000, you are not
required to charge HST/GST. However, you may wish to voluntarily register for and collect the
HST/GST. The advantage of doing this is that you can claim a credit (called an input tax credit)
to recover the HST/GST you paid for expenses and purchases used for the business.
If you need to collect HST/GST, you must first register for the HST/HST with Revenue Canada.
Contact the Business Window at your local Tax Services Office of Revenue Canada for further
information including the Tour Operator Guide and a GST/HST registration form.
Page 75 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Contact Canada Revenue Agency either in person, via phone (1-800-959-5525), by mail or
through the on-line business registry at www. bsa.cbsc.org/gol/bsa/site.nsf/en/index.html and
follow the appropriate links for an HST Registration Form and a copy of the Tour Operator
Guide.
HST Rebates for Nonresident Visitors
HST/GST may be rebated to nonresident (i.e., non-Canadian) visitors and tour operators with
nonresident tour passengers purchasing your tour services. Nonresidents are only eligible for
rebates on 50% of the HST/GST paid on the total price of the tour package.
Employment Taxes
As an employer, you are responsible for deducting income tax, Canada Pension Plan (CPP)
contributions, and Employment Insurance (EI) premiums from the wages and salaries you pay
your employees. You are also responsible for remitting these amounts on a monthly basis to the
Receiver General for Canada, along with your share of CPP contributions and EI premiums that
you pay throughout the year on your employees’ behalf. You are also required to report these
amounts on an annual information return and prepare annual T4 information slips for your
employees.
The Canada Revenue Agency is responsible for ensuring these requirements are met. The
department handles enforcement and some collection activities related to payroll deductions,
prepares the Payroll Deduction Tables used by employers for calculating deductions, and
determines employee insurable earnings for Employment Insurance and pensionable
employment for the Canada Pension Plan.
Contact your local Canada Revenue Agency office for more information and a New Employer
kit.
Nova Scotia Workers’ Compensation
Under the Nova Scotia Workers’ Compensation Act, various industries are mandated to pay for
compensation coverage to protect employees from income loss and medical expenses resulting
from job-related injuries. Under the Act, you are required to pay a premium based on the dollar
value of wages you pay your employees, unless you employ fewer than three employees. (If you
employ three employees or less, you are exempt from this regulation.)
Contact the Nova Scotia Workers’ Compensation Board (www.wcb.ns.ca )for additional
information regarding the regulations, specific premiums applicable to you and a copy of the
registration form.
Corporate Income Tax
Corporations
If your business is federally or provincially incorporated, you must file a corporate income tax
return. This requirement also applies to incorporated not-for-profit organizations; the only
exception is a Registered Charity.
Page 76 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Be sure to file your corporate income tax return within six months of the end of the taxation year.
The taxation year of a corporation coincides with its fiscal year. The services of an accountant
are recommended in completing your income tax return as financial statements are required to be
attached to the T-2 Corporate Return. You can obtain a copy of the T2 Corporation Income Tax
Guide and schedules from the Canada Revenue Agency (CRA).
Corporations are required to pay monthly installments to cover Corporation Income Tax in the 2
nd
year of operation and all following years if their federal taxes exceed $1,000.
Sole Proprietorships and Partnerships
The income from a sole proprietorship or partnership is accounted for on the personal income tax
of the individual proprietor or partner. Your taxable income is essentially your business income
minus any eligible business deductions. A separate Partnership return is required if there are
more than five partners in the partnership.
For additional information or Income Tax forms, check the Business Section of CRA’s website
(www.cra-arc.gc.ca ) or contact them by phone at 1-800-595-5525.
Business Occupancy Tax
Occupancy tax is an annual municipal tax that is administered and collected by your local
municipality. The tax is charged on nearly all commercial buildings in Nova Scotia, and is
applied at a fixed percentage based on the assessed value of a building, taking into consideration
the commercial value of the building (based on the value of the building and its rent per square
foot), and the assessment rate which applies to a particular type of business. The provincial
Assessment Division (Service Nova Scotia and Municipal Relations) is responsible for
determining the assessment value of your property for occupancy tax purposes.
There are plans to introduce legislation in the Spring of 2005 to eliminate the Business
Occupancy Tax in Nova Scotia.
Contact your municipal tax office or the Assessment Division of Service Nova Scotia and
Municipal Relations with enquiries regarding occupancy tax.
9.6 Registration of Companies
Provincial Business Registration
All business owners are required to register the name of their business, although the manner of
doing this varies depending on the type of business structure established. Appendix IV provides
comments on the different types of business structures and the advantages and disadvantages of
each. The Nova Scotia Business Registry is now available on line at www.gov.ns.ca/snsmr/nsbr/
Partnerships and Sole Proprietorships
The Partnership and Business Names Registration Act, administered by the Nova Scotia Registry
of Joint Stock Companies, requires the registration of sole proprietorships and partnerships in the
province.
Page 77 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
If a partnership has two or more partners, the partnership must appoint a recognized agent who is
a resident of Nova Scotia. One of the partners may be the agent.
An annual registration fee is charged. The registration year runs from April 1 to the following
March 31. In addition, there is a charge for conducting a NUANS (Newly Updated Automated
Name Search) to verify that your business name is not already being used by another business in
Atlantic Canada. A NUANS search may be ordered through the Registry of Joint Stock
Companies, Access Nova Scotia, or a private research house.
The registered name of the partnership or sole proprietorship will be protected and no identical or
similar name will be permitted in Nova Scotia.
For further information, contact the Registry of Joint Stock Companies at
www.gov.ns.ca/snsmr/rjsc .
Corporations
Corporations are required to be registered in Nova Scotia under the Corporations Registration
Act. If you wish to establish a Nova Scotia corporation, the first step is to request a NUANS of
your corporate name to verify that it is not already being used in Atlantic Canada. A fee is
required for each NUANS request. Incorporated companies are required to include the corporate
designation Limited or Incorporated as the last word in the business name.
Once your business name and incorporation has been approved, you are required to pay an annual
fee to register the business in Nova Scotia. The registered name of your corporation will be
protected and no identical or similar name will be permitted in Nova Scotia. Every incorporated
business must appoint a recognized agent who is the person that receives official correspondence.
This Agent does not have to be a lawyer but he/she must reside in Nova Scotia.
All business registrations can be completed on line through the Nova Scotia Business Registry
(www.gov.ns.ca/snsmr/nsbr ), via phone (1-800-225-8227) or in person at any Access Nova
Scotia location.
You would be well advised to also register your business in any other provinces in which you are
doing business, particularly if you are not a federally incorporated company. In so doing, you
will register your business name in these provinces and thereby prevent some other business from
using the same name.
Federal Business Registration
Partnerships and Sole Proprietorships
There is no registration for partnerships or sole proprietorships at the federal level. Businesses
wishing to operate in more than one province must be provincially registered in each province in
which they wish to conduct business.
Page 78 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Canada Corporations
If you are considering incorporation, you have the option of being incorporated at the Federal
level under the Canada Business Corporations Act (CBCA). This replaces the need for provincial
incorporation.
Federal incorporation is often chosen for the heightened name protection it provides and may be
particularly useful to you if you plan to carry on business in more than one province. Location
flexibility is another advantage of federal incorporation. For example, the CBCA does not set
restrictions regarding the province where your head office is located. However, you may still be
required to register with provinces where extra-provincial operations will be carried out. For
Nova Scotia, this can be done at the same time as your Federal incorporation is completed on-
line.
As with provincial corporate registration, you are required to have a name search conducted
(NUANS) and pay an annual corporate registration fee. Your business must be registered to do
business in Nova Scotia, even if it is a federal corporation.
Contact Corporations Canada (www.corporationscanada.ic.gc.ca ), or the Canada/Nova Scotia
Business Service Centre for incorporation and registration information.
Business Number Registration
The federal government business numbering system, or BN, is a numbering system designed to
simplify the way businesses deal with government. When you start a business and open one or
more Canada Revenue Agency (CRA) business accounts (e.g. corporate income tax account,
payroll deductions account, or harmonized sales tax /goods and services tax (HST/GST) account),
you will automatically be assigned a unique Business Number which identifies you and the
various accounts you have. This streamlined system allots you one number only with which to
deal with the federal government, replacing the multiple numbers that businesses required in the
past. You can register for a BN on line at www.cra-rc.gc.ca/business .
Businesses that register for the BN will obtain one-stop business services from the Canada
Revenue Agency, including new business registration, adding new accounts, updating account
information, and account enquiries.
In most cases, new corporations will automatically receive a BN from CRA within 45 days of
incorporating at the federal or provincial level. Contact Revenue Canada if you need to have a
Business Number issued to you before this time.
Contact the Canada Revenue Agency for a copy of the registration application form and guide or
register on line. You may also register by phone, in person, by mail, or by fax.. (If you are a
corporation, your company must be registered and you must also provide a copy of your
Certificate of Incorporation to be registered for a Business Number.)
SECTION 10
Operations
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SECTION 10
OPERATIONS
You have so far developed a concept and a strategic plan for the business, assessed its feasibility,
planned the product - based on a full appreciation of the marketplace and the competition - and
established the business entity. This section presents suggestions and guidelines for starting and
operating the business.
10.1 Organization and Staffing
You need to figure out your management and staffing requirements. Keep the management team
small initially, you can always add more people if you really need them, but it is much harder to
downsize if you have too many. The areas of operation that will have to be covered include:
• General management: banking, planning, budgeting, overall supervision of each area of
operation below;
• Product development: package development, supplier negotiations;
• Marketing: web site, advertising, sales, group sales, promotions, co-op and contra activities,
market research;
• Sales administration: liaison with tour and group clients, reservations, issuing documents,
billings;
• Financial control and accounting: bookkeeping, management reports, tax remittances, payroll,
collections, purchasing;
• Personnel: staff hiring, training;
• Tour operations: staff scheduling, supervision, quality control, problem solving, liaison with
facilities and services involved in tour services, equipment cleaning, and maintenance.
Larger operations may have departments for each of these activities. Small ones will combine
them. For example, the general manager/owner and an assistant might supervise all areas
directly, with individual employees hired for sales and handling group client liaison, office
administration and bookkeeping, tour operations, and personnel.
Other than administrative functions, the main requirements for operations staff in a tour operation
are for a tour director/tour escort/tour guide (choose the name you prefer), and for reservations
staff. In addition, you may employ step-on guides for group tours, meet-and-greet staff to
supervise arrivals and departures of guests, and special guides or experts to guide or assist with
specialized activities and topics.
The skills and knowledge of these front line staff people, as well as their ability to provide quality
service to your guests, will have a large impact on your company's credibility and reputation in
general. Because guests have high expectations about the knowledge tour guides have, it is
essential that your staff are seen to be knowledgeable and skilled professionals with a strong
service orientation.
Page 80 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Selecting Staff
The staff you place in positions that deal directly with customers need to have the following
qualifications:
• An outgoing, friendly personality;
• Good manners and interpersonal skills;
• Good grooming;
• An enthusiastic attitude;
• A good (diligent) work ethic;
• A high level of education;
• A commitment to customer service;
• Travel experience and knowledge;
• Tour destination product knowledge.
The last three can be enhanced through training, but the other aptitudes have to be in place
already. Good customer service employees can make your business’s reputation; poor ones will
ruin it.
Benefits of Training
It is important to recognize the benefits of staff training and to consider training, like marketing,
as an investment. Ensuring that your staff are quality service providers who are capable of
delivering both the procedural and personal sides of service will enhance repeat business and
promote word-of-mouth advertising. The benefits of training in a tour operation are as follows:
• Increases productivity;
• Reduces staff turnover;
• Improves staff morale;
• Improves quality of performance;
• Enhances clients' experiences;
• Provides competitive edge.
Occupational standards for Local Tour Guides, Tour Operator, Tour Guide/Director and
Reservation Sales Agent are now available in Nova Scotia and across Canada. The standards
outline the skills, knowledge, and attitudinal requirements for these staff members. A
professional certification process based on these standards of competency is available through the
provincial tourism association office. For more information on standards and certification, contact
the Nova Scotia Tourism Human Resource Council at www.tourismhrc.com
Having certified employees will boost the image of your receptive tour company.
Hiring Tips
The following is a list of hiring tips that can be applied to staffing at the start-up phase or in
hiring seasonal or replacement staff:
• Develop job descriptions that meet the needs of your operation, based on the occupational
standards for each occupation.
Page 81 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Advertise in local media for staff; check out the Nova Scotia Tourism Human Resource
Council on-line job board (www.novascotiatourismtalent.com ), contact the nearest Human
Resources Centre of Canada; contact placement offices of public or private training
institutions offering programs in tourism or hospitality; post notices on local community
bulletin boards. To the extent possible, look for applicants who are Certified under the emerit
Standards and Certification program described in the next section.
• Screen applications and develop a short list of qualified candidates for interviewing.
• Interview applicants. It is recommended that the same questions be asked to all applicants
and that consistent criteria be used in your evaluation. This will help you make sound hiring
decisions.
• Select final candidates for the positions required. Ask for and always check references. The
middle of the season is no time to discover that an earlier employer has already noticed that
one of your staff members is a poor performer.
• Make the job offer. At this time clarify roles and responsibilities, training opportunities for
staff, performance expectations, remuneration and benefits, terms of employment for the
season, etc.
10.2 emerit Standards and Certification
Nova Scotia’s Tourism Human Resource Council is a partner with the Canadian Tourism Human
Resource Council in the development of National Occupational Standards and manages the
process for Nova Scotia. Standards and Certification are being developed for occupations in all
sectors of the tourism industry, and standards currently exist for 49 occupations. Certification is
available for 25 of these occupations.
Standards are statements outlining the attitude, knowledge and skills required of an individual in
order to be considered competent in an occupation. Standards clarify expectations and can be
used to design consistent training, education and professional development programs. The
Standards development process involves the sharing of expertise from industry professionals who
perform the job, as well as their supervisors who are recruited to develop the content of the
Standards.
Certification is the recognition of an individual’s competency in his or her occupation. National
Certification is a three-step process involving a written examination, performance review and
industry evaluation. It is voluntary, candidate driven and designed to be completed on the job.
Professionals who achieve National Certification will be recognized across the country for
meeting industry requirements in their selected occupation. The candidate must be employed in
the occupation and must have achieved a minimum number of hours of work experience (the
number of hours varies depending on the occupation), prior to completing Certification.
Flexible learning options for the industry now allow new entrants to gain a solid foundation while
experienced and knowledgeable candidates can challenge the option that best suits their needs.
What each candidate learns is credited towards future learning - creating recognition of prior
learning and allowing candidates to move towards the pinnacle - emerit National Certification - at
their own pace.
Page 82 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Learners can select the best option for them:
• Standards/Workbook study
• Online Learning
• Study selected modules to enhance performance of specific skills
• Challenge full certification
The development of Standards and the implementation of Certification is having various positive
impacts on the tourism industry, as follows:
• Enhancing the image of tourism occupations;
• Enhancing human resource management skills in the tourism industry;
• Providing practical, realistic training programs for tourism occupations;
• Raising the overall level of professionalism in the industry.
More details on Standards and Certification, and a listing of the occupations for which standards
have been developed can be found at www.emerit.ca and in Appendix VI. Additional
information on human resource tools and certification can be obtained from the Nova Scotia
Tourism Human Resource Council.
10.3 Training
In any guest-oriented operation, there are two sides to service: procedural, requiring technical
skills and training, and personal, requiring human relations skills. Training should be based on
the occupational performance standards and Certification should be a goal for all employees.
Research on the tourism industry in Nova Scotia has shown that hospitality management and staff
place a high value on training in areas related to interpersonal skills, guest service and
communications.
It is important to recognize the benefits of training so that staff will be able to meet your
standards of service. The specific benefits of staff training are:
• Increased skills and knowledge;
• Increased success in performing job functions;
• Improved attitude, self-esteem and morale;
• Better service, higher productivity, and lower turnover;
• Increased guest satisfaction.
Staff Training
Your primary staffing requirements as an inbound/receptive operator will be for tour guides and
reservations agents.
Seasonal staff training can take the form of on-the-job training or job shadowing, or formal
training on or off site. You may wish to combine the two. Experienced staff will benefit from
spring training, and a good orientation is a priority for all staff at the beginning of the season.
Page 83 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Staff meetings can be difficult to organize in the height of the season, but even short
communications meetings with staff at the beginning and throughout the season are conducive to
a smooth running tour operation.
Guest service programs (one or two day) have been shown to be beneficial to staff; and holding a
pre-season seminar on guest service will help motivate staff as they prepare for the busy season.
SuperHost Atlantic - Expect Excellence! is a frontline program offered throughout the province.
SuperHost Atlantic - Expect Excellence! is an internationally recognized Quality Customer
Service Training Program that focuses on communication and customer service. This seven hour
interactive workshop examines attitudes to service and interactions with customers. The program
is suitable for any business that deals with customers and is an inspiration for commitment to
service excellence. Information on SuperHost can be accessed through the Nova Scotia Tourism
Human Resource Council (www.tourismhrc.com ). The NSTHRC also offers a number of other
customer service training programs including Service 1
st
- Making the Connection!, Team
Excellence, Stress Management, Workplace Etiquette, Sales Powered by Service and Managing
Service Excellence, as well as a host of other programs.
You can also develop and deliver your own training sessions or hire an outside person or
organization to do it for you. Training resource materials can be found through your regional
tourism association or the Tourism Human Resource Council.
Most training for new personnel in a tour operation is carried out on the job, starting with an
orientation. The orientation should include the following components:
• Provide information about the company, e.g. mission statement, organizational structure,
policies and procedures;
• Tour office facilities, working areas;
• Introduce new staff to co-workers;
• Complete employment documentation.
The Local Tour Guide, Tour Guide/Director and Reservation Sales Agent standards that have
been validated outline the skill and knowledge areas for achieving competency in the occupation.
In-house training can be developed using the standards as guidelines. The standards can also be
used to develop job descriptions and policies specific to your tour operation.
Training Tips
• During training exercises, your staff should be made aware of the necessity for providing
accurate information and always improving their presentation skills.
• Job shadowing with an experienced tour guide is an effective way for new staff to understand
the requirements of the job as well as your expectations, e.g. the company approach to
guiding.
• Familiarization or product-knowledge tours focusing on the areas covered by your tours can
be done in groups prior to the season's start up. All staff should participate in this type of
exercise so that they will all be familiar with new tourism products and services.
Page 84 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Encourage staff to use humour and local anecdotes during tour presentations. Guests want to
experience the culture and flavour of the province, region or local area. Tasteful jokes,
history, and legends add variety to a guide's commentary.
Product Expertise
Both your tour guides and your reservations agents need detailed product expertise, with tour
guides needing much more in-depth knowledge.
Product expertise means the ability to access accurate information for use during the tour or in
answering enquiries from potential customers and tour guests. The commentary used during a
tour includes the presentation of facts and information pertinent to the tour itself. The Personal
File of each staff member should include a variety of data that will enable them to answer
pertinent questions on local people and culture, local events, and other points of interest.
The basics of the personal file can be developed by you, the tour operator, and provided to each
of your guides. This ensures that consistent information is provided to guests from all company
representatives.
There is no way of being prepared for every enquiry that guests may have, but there are a number
of types of information that are required for any type of tour. They include:
• Company information, company history, services provided;
• Location, hours of operation, access and applicable costs of community services, events and
attractions;
• Natural environment information;
• Government structure;
• Housing;
• Consumer taxes;
• Health benefits;
• Lottery/gambling information;
• Metric conversion, e.g temperatures (Celsius to Fahrenheit), distance (kilometres to miles),
gas prices ( litres to gallons);
• Population;
• Foreign exchange rates;
• Local industry and economy;
• Local legislation and regulations, e.g. liquor, traffic, customs;
• Cultural/ethnic influences, for example: aboriginal, European, African-background, current
make up;
• Past and contemporary distinctive local people, colourful characters;
• Architecture;
• Mythology, legends, folklore;
• Transportation modes and their history;
• History and events of significance.
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Management Training
The success of your business will be related directly to your skills, not only the specific skills you
need to develop and operate your business, but also your skill at servicing your customers and
managing your staff. Exhibit 1 in Section 3 identified some of the basic management skills
required for a successful receptive/inbound tour operator. Since it is quite likely that you will be
the primary, if not the only, manager for the first year or so, you will need to have and/or develop
these skills. Training programs to assist you in developing these skills can be found through the
various locations of the Nova Scotia Community College and programs available at the
universities in the province. Mount St. Vincent University in Halifax and Cape Breton offer
programs in hospitality management.
Standards are also available for a Tourism Small Business Operator and you should consult these
in determining the types of skills and training that are required to operate a small tourism
business.
10.4 Reservations and Sales Administration
A reservations system is an essential element of an inbound/receptive tour operator’s business.
There are affordable software systems for all sizes of businesses that do this and link the
reservations system into your group billings system, which is very helpful. Ideally, you should
have this type of an integrated management system that includes customer information, market
tracking data, and financial information on transactions. With today’s reasonably priced
computers and affordable software systems, it is essential that you acquire a system for this.
Systems for one user can be obtained for as low as $2,500, but you could pay $25,000 or more for
a system from one of the more established providers, so you will want to research this carefully
when establishing your business.
Sales administration activities include the following activities:
• Answering enquiries, sending out literature on request;
• Reservations;
• Custom arrangements;
• Billings - deposits, payment of final balances;
• Group sales administration;
• Issuing documents to customers;
• Issuing confirmations to suppliers;
• Collections.
Your system should be designed to handle all of these activities and they should all be interactive.
In other words, a reservation should automatically trigger a billing for deposit and final payment;
a final payment should trigger the issuance of documents, etc.
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10.5 Product Development and Management
Section 6.7 presented suggestions on the how to’s of product development and management.
10.6 Marketing Management
Section 11 presents information on marketing planning and management.
10.7 Financial Administration
A unique feature of the tour business is that a tour company receives advance payments from its
customers but pays suppliers after the package operates. As a result, substantial sums of cash
from prepayments will be on hand for short periods of time. It can be very worthwhile to invest
these sums in short-term securities and earn interest income. In fact, some tour operators make a
significant part of their income on short-term deposits.
Get some advice on short-term investment techniques and have a senior person in your operation
administer the investment program. It should receive attention daily.
10.8 Program Review
In any business, it is important to monitor and review your product periodically, but in the tour
business it is vital.
We have already talked about having periodic de-briefing sessions with your travel trade partners
and your supplier partners, and in the material to follow we discuss means of getting feedback
from your customers, as well as additional means of getting feedback from the travel trade.
Equally, if not more important, is your internal review process. It should consist of the following
types of initiatives:
• Reports from tour guides on the results of each package departure: detailing problems,
solutions employed, suggestions for improvements, etc.;
• Management reports on administrative problems with tour operators and suppliers;
• Financial reports on each package program: detailing revenues, costs, and margins earned.
10.9 Customer Research
It is important for you to continually monitor your customers’ satisfaction with the products and
services you are providing them. This is true both if you are selling direct to the consumer and
also if you are selling your services to the travel trade. Some suggestions for customer research
are outlined below.
Page 87 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Customer Surveys
You can survey your customers while they are on your tour or after they have left. Options
include:
• Informal interviews by tour guides with customers while they are on tour;
• Questionnaires can be completed by guests before they leave or they can be given to guests to
be mailed back (it is a good idea to give them pre-stamped envelopes so they can mail them
back without the tour guide seeing them), or emailed or mailed out later;
• Comment cards can be used in the same way as questionnaires but are only useful if you are
looking for a minimal amount of information;
• Telephone interviews are useful if you have phone numbers for your guests, you can call
them up and complete a telephone interview afterwards;
• Focus groups are short discussions with small groups of your customers.; this type of
research requires a professional moderator or discussion leader.
You should also talk to the travel agents selling the product about the comments they are getting
back from the consumers.
Travel Trade
You should be in regular contact with your travel trade partners to ensure they are satisfied with
the product and the services you are providing. They will be surveying their customers on a
regular basis as well, so they will also be able to provide you with feedback from their research.
Particular topics to address with your travel trade partners, on an annual basis at least, should
include:
• Any problems they encounter on your tours (in fact, you should be monitoring this on a
regular basis, see the discussion in Section 7);
• Suggestions they have for improvements/additions to the tour;
• Their expectations about the volumes of business they will generate for your tours in the next
year or two (this will help in negotiations with your suppliers).
10.10 Business Systems
Other than sales administration, the administrative requirements of a receptive tour business are
much like those of any other business. They involve bookkeeping, accounting, payroll, HST
administration, payables, receivables, etc.
Your accountant can help get you started in each of these areas. Software programs are available
for each of these requirements.
Page 88 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
10.11 Banking
Talk to several different banks in order to find one that is supportive of your efforts. Some
managers take a helpful approach to small business people, while others treat them like
impending bankrupts. Pick one that understands your business concept and is supportive of it.
You can greatly facilitate your banking relationship by meeting with the manager once a year to
keep him or her informed about your business and your plans for the future. A good time is when
you have your new annual financial statement ready. Walk them through the results and explain
what has changed and why. While they may not necessarily care about the specifics of what
you’re saying, it is very important that they see that you’re on top of the business, committed to
its future, etc. The psychology is just as important as the substance. Bankers to feel that you’re
taking care of their investment for them.
If cash flow problems arise from time to time, go and meet with the bank to keep them informed
about what’s happening and what you’re doing about it. Nothing makes a banker more nervous
than a silent client whose bank account is constantly at its credit limit. On the other hand, if they
believe you’re making an effort to keep them informed, they will be much more cooperative in
helping you through tricky periods.
SECTION 11
The Marketing Plan
7
The material in this section has been adapted from several sources, all of which were originally
prepared by The Economic Planning Group. These sources include:
• Nova Scotia HUB and SPOKE Tourism Marketing Seminar Manual, prepared for the Nova
Scotia Tourism RITC, 1989/90
• Tourism is Your Business: Marketing Management, Published by Canadian Hotel &
Restaurant, MacLean Hunter Limited in co-operation with Tourism Canada and the Canadian
Government Publishing Centre, 1986
Page 89 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 11
THE MARKETING PLAN
7
11.1 Introduction
Your marketing plan is a guide for directing your marketing efforts and a tool for monitoring the
progress you are achieving. It is generally written annually. Traditionally, the marketing plan is
prepared in conjunction with your overall financial planning and budgeting.
When you are starting up your business, the marketing plan is a crucial element in your overall
planning process - without marketing, you will have no customers. Frequently in small
businesses, marketing tends to get overlooked or to be given a lower priority when there are
other, apparently more vital, demands for available start-up funds. However, marketing must be
given a high priority; and developing a good marketing plan is an essential first step.
This section discusses the basics of how to develop your marketing plan and introduces some of
the key marketing methods and tools. It also suggests how to use these techniques, when dealing
with consumer markets and the travel trade. We will deal only with marketing to tour operators.
Promoting packages to travel agents and consumers, the job of the outbound tour operator, is not
dealt with.
Developing a Marketing Plan
Your marketing plan should contain several elements, as described below.
Business Assessment
An assessment of your situation - the current status of the market, the competitive environment,
trends - including all of the things discussed earlier in sections on preparing a strategic plan and
feasibility assessment.
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Marketing Objectives
With the business assessment completed, develop a clear statement of objectives - sales volume
(number of customers, etc.), total revenues, and profit for which you are striving.
Marketing Strategy
This is your overall approach to achieving your marketing objectives. It should include a
Positioning Statement - what is the service/product, who is it for, and how is it different?
It should also include a definition of your target markets - each of the market segments you wish
to attract.
11.2 Marketing to the Travel Trade
Distribution Network
The network of linkages between you, as an inbound/receptive operator, the travel trade, and the
consumer is illustrated in Exhibit 8. Basically, you sell your products and/or services to the
outbound tour operator in selected markets, who in turn sells them to the consumer, either
directly through a travel agent or through a group leader/affinity club. You can also sell your
services directly to group leaders/affinity clubs, as well as to corporations or associations
needing the services of a receptive operator (to organize an incentive trip, for example).
Potential Partners
There are several potential travel trade partners for the inbound/receptive operator, as follows:
Tour Operators
Tour operators develop, market, and operate packages as their primary business. There are a
number of types of tour operator, the most common types being the escorted group motorcoach
tour operator, the independent package (FIT) operator, the special interest/activity
packager/operator, and the holiday destination packager.
Sometimes tour operators are referred to as outbound operators to distinguish them from the
inbound, or receptive, tour operators.
Some tour operators develop, market and operate all of their own packages whereas others retain
an inbound/receptive operator to develop and/or operate their packages. It is this segment of the
tour operator market that you are interested in as potential partners.
Travel Agencies
Travel agencies are retailers of travel products who book travel arrangements on behalf of
individuals and businesses, earning a commission from the travel-product supplier in the
process. They retail all types of travel trade packages and often develop and sell their own
packages as well.
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EXHIBIT 8
THE TRAVEL TRADE NETWORK
Consumer
Travel Agency
Tour Operator
Receptive Operator
DMO
Tourism Product Supplier
Consumer
Travel Agency
Tour Operator
Receptive Operator
DMO
Tourism Product Supplier
Page 92 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Often their own packages are one-offs, developed on behalf of a particular client or group, but
some travel agents also develop packages for sale to the general public. Common types of the
latter packages include: a package developed for local consumers to attend a special event in
another city, a package in connection with a cruise or rail trip, or a package of services to
supplement a tour operator's package. (For example, the travel agency will add air travel to a tour
package to transport their local clients to the departure point for the tour.)
Incentive Travel Wholesalers
This is a distinctive sector of the market which specializes in premium and incentive travel
reward programs that it develops and manages on behalf of its clients, both on a group and
individual basis. Like tour operators, incentive travel wholesalers sometimes retain an
inbound/receptive operator to make and coordinate all the ground arrangements for their group at
a particular destination.
Convention/Meeting Planners (Destination Management Companies or DMCs)
This is another specialized sector of the market which arranges and coordinates meetings,
conferences, and conventions. Convention/meeting planners sometimes hire a receptive operator
to put together a special program for them or a tour for spouses.
Group Leaders
Group leaders are individuals who organize group trips on behalf of an organization to which
they belong. They act as an intermediary between the group and the travel agent and/or tour
operator, usually receiving free or discounted travel for themselves. Group leaders are most
commonly found planning group travel for seniors.
Sometimes the group leaders themselves organize the trip; in other cases, they may contract with
a tour operator or a receptive operator to make the arrangements.
Destination Marketing Organizations (DMOs)
Another potential partner that can be very important to your business is the destination marketing
organization in your area. These are often referred to as DMOs. These organizations have a
stake in the success of the product or package and may be willing to participate in cooperative
marketing efforts with you.
Destination marketing organizations include Chambers of Commerce, visitor and convention
bureaus, government tourism departments, and other such organizations which undertake
marketing activities on behalf of a community or destination area. In Nova Scotia, the provincial
DMO (known in the industry as a PMO) is the Tourism Division of Department of Tourism,
Culture and Heritage. This Division invites members of the tourism industry to participate in
various cooperative marketing efforts, developed in partnership with the Nova Scotia Tourism
Partnership Council (TPC). It is important for you to maximize your involvement in these
efforts.
Page 93 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Methods and Tools
The key techniques for marketing your product to the travel trade are as follows:
• Collaboration with your PMOs and DMOs
• Personal Direct Sales;
• Marketplaces;
• Familiarization Tours (FAMs);
• Advertisements in Travel Trade Publications;
• Direct Mail;
• Co-op promotions with suppliers;
• Customized collateral materials
• Website
Working with PMOs and DMOs
One of the most important things you can do to market to the travel trade is work closely with the
provincial tourism marketing group. They are an excellent source of information and can provide
pre-screened lists of tour operators who have Nova Scotia product. They also establish
relationships with these tour operators and are a key source of itinerary planning information for
them.
The same is true with the city and regional DMOs, although perhaps not to the same degree as
their travel trade marketing efforts are generally more limited.
Direct Sales
Ultimately, the most effective way to develop a partnership with a tour operator is through direct,
personal selling opportunities, including calls. But this is also among the most expensive forms
of selling.
It is important, therefore, to qualify prospects carefully. You should select tour operators and
members of the travel trade who operate tours or packages to Nova Scotia. You can get this
information from scanning their websites and/or brochures and talking to other product suppliers
in your area who deal with them.
Determine the appropriate person to see (the person who plans new programs, not just the person
who handles the buying) and make an appointment. A personalized letter with some advance
information on your product might help convince the prospect to see you.
Study the operator's product mix, market positioning, and USPs (unique selling propositions)
before meeting them and focus your presentation on how your products and services might fit
into their program and what advantages you have to offer their tour program.
Make sure that your sales representative knows your products and destination intimately and that
they have the authority to negotiate and make decisions. If the prospect is a major one, it is better
to have a member of management accompany your representative or make the call themselves.
Page 94 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
In any event, your sales representative should have the following skills:
• Detailed product and destination knowledge;
• A full understanding of the market position and products of the targeted tour operator;
• A full understanding of the unique appeals and competitive advantages of your products and
services;
• Strong communications and negotiating skills;
• A high level of commitment to customer service.
Telemarketing is not an effective way to solicit business from tour operators. Your unsolicited
intrusion will be resented. Use the telephone to identify the person in the organization you
should see and to make an appointment, nothing more.
Marketplaces
The most effective way of making the initial direct contact with a tour operator is likely be at a
travel trade marketplace.
Membership in one or more trade associations and attendance at their marketplaces can provide
excellent networking and one-on-one selling opportunities. The major tour operator marketplaces
are;
• National Tour Association annual meeting and marketplace;
• The ABA (American Bus Association) annual meeting and marketplace;
• The Ontario Motorcoach Association (OMCA) marketplace;
• United States Tour Operators Association (USTOA) annual conference and marketplace;
• Rendez-vous Canada, which includes European tour operators as well as the US travel trade;
• Atlantic Canada Showcase, where Atlantic Canada suppliers exhibit their products to buyers
from outside the region.
Don't attend marketplaces unprepared. Make sure you have pre-identified the key prospects and
request appointments with them. And don’t forget to follow-up your contacts after the show.
It can take a couple of shows before you really get to know your way around, find out who the
players are, and determine who are the best prospects for your product.
It will be important to be part of ‘Team Nova Scotia’ at the marketplace by working with the
trade sales team from the Province and the RTAs as well. They might also sponsor a special
event, meal or promotion in which you can participate.
Familiarization Tours (FAM Trips)
The most effective way of motivating a wholesaler to add your tour program is to get them to try
it out. FAM trips are an effective means of achieving this, as it is a principle among serious and
successful operators that it is essential to check out a destination, an experience, or a property
first-hand before adding it to their product mix.
It is much better to provide a customized, personal FAM tour for a major tour operator prospect,
rather than put several of them together or add them to a travel agent's FAM. It is most important
that they have an opportunity to meet privately with the product suppliers to discuss negotiable
items.
Page 95 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Direct Mail/Email
Direct mail/email is only fully effective if mailings are undertaken in support of other, more
focussed marketing activities. Like travel agents, wholesalers receive a flood of literature daily,
and most of it is thrown out. Mailings should be customized for the specific operator and
personalized to a specific, pre-qualified person in the organization. Your mailing should include:
• A covering letter, customized to the individual involved - use a P.S. to attract attention to key
points;
• An information sheet containing the technical information required by the operator;
• A brochure;
• A response mechanism, such as a mailback card for more information (which can help in
qualifying prospects for follow-up efforts).
Make sure that you follow-up your mailing with a telephone call or email to see if there is any
interest in your services or if the tour operator requires more information.
Advertisements in Travel Trade Publications
It can be worthwhile to advertise your product in one or more targeted travel trade publications.
The travel trade is usually diligent in reading these publications to keep abreast of new product
opportunities and the activities of competitors. Relevant information from them is routinely
circulated within companies.
Suggestions include NTA's Courier, ABA's Destinations and the National Motorcoach Network's
Byways, as well as the leading travel trade weekly newsletter-style publications distributed to
travel agents.
You may find it more cost effective to work through your destination marketing organization, as
part of a program of joint destination awareness/travel product co-op advertising.
As well, you can advertise in the Nova Scotia Travel Guide or on the province’s website. Many
tour operators use these sources to identify potential new tours and inbound/receptive operators.
Collateral Material
Sales support materials are essential when selling to the travel trade, and your brochures could
vary considerably depending on what you are selling. For example, if you want a tour operator to
pick up one of your tour products, then you will need to provide sufficient information on the
tour program, facilities and services used, and booking information. If you are selling your
services as a receptive operator, then your brochure is going to focus on your specific abilities
and expertise and what you can do for the tour operator.
You should develop a Tour Planner to provide to potential tour operator clients. It should
include:
• Copies of your brochure;
• Descriptions of the different types of programs you offer;
• For each package, a concise description of the package elements, the pricing, any extras,
departure dates, locations, etc.;
Page 96 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Slides of the products so that the tour operator can incorporate pictures in to their brochures;
• Your booking and cancellation policies and procedures.
With modern websites, this can most cost effectively be offered as a downloadable PDF file off
of your website.
Internet Marketing
The Internet has triggered a complete revolution in how companies market themselves, and this is
particularly the case with tourism companies. Even the smallest enterprise can reach out to the
world via the Internet. While marketing expertise and budgets still make a big difference in
marketing effectiveness, these are no longer the absolute determinants of how broadly and far a
company can reach in promoting itself. Even a simple website can be accessed worldwide. The
playing field has been considerably levelled for companies large and small.
The big differences today are not in having an Internet presence; rather they are in a) your ability
to attract prospects to your website and b) the quality of the website itself in terms of ease of
navigating within it and its effectiveness in generating sales.
Internet marketing refers to all forms of marketing associated with the Internet, including
websites, website links, database marketing, relationship marketing, web-based advertising and
web-based tour operators. We will introduce each you to each of them in this section.
Website
The use of a website along with Internet-based e-marketing have exploded onto the scene and
today have become a fundamental and central component of most tourism businesses marketing.
In fact, many businesses are using their other marketing to drive prospects to their website and
some are relying exclusively on their website to market their business.
Early websites were simply electronic brochures people could view on the Internet. Today, many
websites are much more sophisticated and provide a number of helpful functions for the user, all
of them designed to make it easier and more compelling to buy the products on offer. In the text
to follow we summarize the basics involved, and also describe the more sophisticated functions
possible today.
URL
This is the address of your website. (URL stands for ‘Uniform Resource Locator’, which is not
particularly helpful to know.) But having an easy-to-remember URL, or ‘domain name’, is
important. Here are a couple of other important points:
• Your website needs to be a ‘real’ website, not part of a ‘referred’ site, such as those offered
by Sympatico and other Internet ‘portals’, in which your web pages are embodied within their
website. Search engines will no longer recognize your content if it is part of a referred site.
(Problems with spam have forced the search engines to impose this limitation on referred
sites.)
• Use the name of your business in your URL to ensure it will be picked up by the search
engine when someone is searching for your website by business name.
• We recommend you use several different URLs having likely names for your product, all
connected to your website, again to optimize access.
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It is important to realize that you need to have your own Internet address which makes your web
pages into a ‘website’ accessible directly via the Internet through search engines. Just having
web pages on someone else’s site does not accomplish this. People won’t find your content
without going to the hosting portal website first, which is not what you want.
We are not suggesting you not list on a portal website, not at all, we are simply suggesting that
you also need your own separate website, and that any listing on a portal also include a direct
hyperlink to your website.
Website Design
The basic website is much like a traditional brochure but with more information available through
the use of user-selected topics from a sidebar menu on each page. Lure information is displayed
in text and pictures, while more detailed information is accessed via the menu bar. Common
topics include who we are, our history, our products and services and how to contact us.
We strongly suggest you also include lure information on your destination area; its attractions and
appeals, things to do and see. You first have to sell the destination, then your particular product.
More sophisticated websites offer more customized information based on different user-defined
variables, along with such things as a trip planning function, online booking capability and so on.
Here are the kinds of features that are becoming increasingly common with tourism websites:
• Downloadable brochure in PDF format
• Customized presentation of information by user-defined factors - their interests, where they
live, their language, demographic profile (age, income), the intended season of travel, their
previous trip/purchase.
• Different pages for different target audiences, such as tour operators, consumers, the media.
Separate URLs can also be used to facilitate people in these market segments being led
directly to the portion of the site of particular interest to them.
• User opt-in registration for more information - newsletters, contests, offers, promotions
• Trip planning functions, with suggested itineraries and packages, and also do-it-yourself
itineraries and packages. A print-ready mini guide of your itinerary/package can be
downloaded and/or printed out. In some cases the user can also register and use an ID to
revisit and revise his/her earlier itinerary.
• A booking/buying engine to enable website visitors to book directly online
• Inbound email capability for site visitors to use to send a query to the company
• Features to improve the ease of navigation within the website, including, in addition to a
basic sidebar menu, things like:
• ‘first page approach’ (no scrolling down required),
• different entry points to the site based on the user-defined factors, such as their country of
residence, language, etc.,
• site map
• search function
• A built-in content management module to facilitate updating information on the website. It
avoids the time and cost involved with having the site designer make all the changes to the
site, which should not be necessary.
• Statistical monitoring of website visits and pages viewed
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On this last point, an important consideration is getting your website designer to provide your
website with a complete analytical system, permitting you to directly download statistical data
from the host server.
We strongly recommend you avoid letting the website designer talk you into having a ‘splash
page’ at the front of the website. A splash page is a first page that provides pictures, video and
often a soundtrack that you have to click through to enter the website itself. While this may be an
aesthetically pleasing introduction to your business, it creates a barrier to search engine
maximization and it also is irritating to business people accessing the site, as well as other people
wishing to get to the information they want.
A couple of interesting websites that incorporate a number of these features include:
• www.gorp.com (outstanding adventures by destination and by type of experience; a very
successful website)
• www.novascotia.com
• www.explorenovascotia.com
• www.travelalberta.com (easy to navigate, good search engine maximization)
• www.colorado.com (good trip planning, customized by travel group composition,
interest, region)
Here are some good Nova Scotia websites:
• www.princegeorgehotel.com
• www.lordnelsonhotel.com
• www.halliburton.ns.ca
• www.capebretonresorts.com/inverary.asp
• www.pier21.ca
• www.upperclementspark.com
• www.museum.gov.ns.ca/mma
• www.coastaladventures.com
• www.scottwalking.com
Driving People to the Website
As mentioned, one of the big challenges today is attracting the right visitors to the website. This
is accomplished through a number of techniques:
• The use of traditional marketing techniques to attract attention and direct people to visit
the website. All your marketing materials should include reference to the website.
• An easy to remember URL.
• Search engine optimization, through the use of search engine registration, content tags,
meta tags, targeted key words and instruction codes to search engines to search all words
and all pages. (We suggest you get some help from knowledgeable Internet professionals
in this regard.)
• Inbound links (see discussion of this later below)
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Attracting People Back to the Website
This involves cookie-based user ID or getting site visitors to register and establish a user log-in
for a “remember me on this site” function. Next time they visit they are automatically taken to
their previously stored information, such as their customized itinerary.
This is not a feature that a small independent tourism operator will likely use, however, it can be a
very effective for larger chain operations, tour operators and destination marketing organizations.
Links
It is useful to develop a link strategy for both inbound (links from other websites) and outbound
links (links to other websites). Inbound links should be maximized to the extent possible.
Outbound links should be designed to open in a separate window so that the user is returned to
the original site once they close out of the linked site.
Partnerships are a key part of tourism market development. Similarly, website links are a critical
element of website development. They are merely on-line partnerships that share web visitors
between like-minded operators and those offering complementary products and services. As
such, a detailed link strategy should be developed and maintained to ensure as many visitors as
possible find links to your website.
This often requires a simple request to partner sites through email. Ideally, a graphic should
accompany the email in the event the host website would like to add an image or icon of the
province highlighting the link. In addition, the website should have a section in the site
encouraging links with a download-able image that can be added to other sites. This additional
promotion can be achieved at virtually zero cost; it simply requires time and attention on an
ongoing basis to increase the exposure in a wide variety of market segments.
If you are listed in the Nova Scotia Doers and Dreamers Guide, you are automatically listed on
the provincial tourism website (www.novascotia.com ) with a link to your website. You are
required to provide a reciprocal link back to www.novascotia.com from a primary page on your
website.
To check how well your site is positioned within the Internet, go to Google (www.google.ca) and
in the space where you enter the search instructions, type in ‘link(single space)
)(your domain
name). Here’s an illustration - ‘link :www.bobsmotel.com’. This will illustrate all the links to
your website. If you have more than 40, you are doing OK; if not, your site needs more search
engine optimization.
Web-Based Advertising
Another marketing option today is to advertise on frequently visited websites hosted by others.
Given its cost, it will only be of interest to major players.
Much effort has been spent in the last couple of years promoting and testing the effectiveness of
web-based advertising. Many advertisers have experienced poor performance and questionable
benefits by promoting their product through banner ads, pop-ups and other forms of web-based
advertising on some of the larger sites, such as news-based CNN, Globe & Mail, Canoe, Yahoo,
etc. However, a more targeted approach can be tested, based on a pay-for-performance
Page 100 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
agreement. Again, tracking can be quite specific, and websites can be very targeted, including
websites offering travel directions, such as Mapquest, or even online versions of the specialty
magazines such as National Geographic Traveler or National Geographic Adventure.
Web-Based Tour Operators
All tour operators are embracing the Internet as a marketing tool, of course; however, there are a
growing number of web-based tour operators; essentially companies that are functioning as
resellers and packagers and using the web as both their marketing medium and reservations
system. In other words, they are fully online marketers. Examples include Microsoft’s Expedia,
Sabre’s Travelocity and numerous others. The Canadian versions of these two websites are
www.expedia.ca and www.travelocity.ca. The USA versions are .com instead of .ca.
Another is a Canadian company, Travelinx, at www.canadatravel.ca. This company also builds
websites and hosts websites for destinations, industry organizations and businesses. They employ
their powerful booking engine to provide their clients with a state-of-the-art website with full
reservations and transaction capabilities. One of such clients, for example is the Canadian Golf
Tourism Alliance at www.canadagolf.com.
These are deserving of attention. In fact, this may offer an optional route to achieving a powerful
site at reasonable cost.
SECTION 12
The Future
Page 101 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 12
THE FUTURE
Consumers are continuing to become more demanding and their expectations respecting the
entertainment value of their tourism and recreation experiences will continue to increase. In the
receptive tour business, as for attractions and entertainment products, the competitive battle will
be fought in the future on uniqueness, entertainment value, genuineness, quality and service.
People will judge less on price and more on value.
The ways of doing business will change, particularly because of information technology, which
has radically changed the way people shop for products and provided new marketing techniques
for reaching the consumer.
General touring holidays will also lose ground to special interest tourism - people travelling to
particular destinations to do and experience things in accord with their special interests.
You will need to keep on top of market and product trends and what is happening in the tourism
industry in Nova Scotia. You should continually be reading magazines, attending trade shows,
and talking to your suppliers, your partners, the Tourism Partnership Council and the Tourism
Division of the Department of Tourism, Culture and Heritage to keep yourself up to date on what
is happening in the marketplace. You will have to make adjustments to your products and
services to respond to these changes.
The receptive tour business is an exciting, dynamic one, which is constantly changing as
consumer tastes change and as tour operators innovate by offering new types of products.
Success will be based upon offering something unique and upon providing good value and good
service. It is a business in which excellence and creativity are vital.
Nova Scotia has a lot to offer as a destination, and you can succeed in the receptive tour business
by providing the kinds of products and services that respond to growth markets.
Good Luck.
ACKNOWLEDGEMENTS
Page i A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
ACKNOWLEDGEMENTS
The Department of Tourism, Culture and Heritage and the Economic Planning Group are
grateful for the assistance of Michele Inglis of Eco Tour Atlantic/Brian Moore Tours
Canada in the preparation of the original manual, prepared in 1995.
APPENDIX I
Market Data
_________________________
Page i A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
APPENDIX I
MARKET DATA
EXHIBIT I-1
VOLUME OF VISITORS TO NOVA SCOTIA:
ANNUAL AND MAY TO OCTOBER
2000-2004
(000’s)
2,160
2,046
2,180
2,143
2,243
1,534
1,417
1,559
1,524
1,547
2000 2001 2002 2003 2004
0
500
1,000
1,500
2,000
2,500
Annual Visitors
May to October Visitors
_________________________
Page ii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT I-2
ORIGIN OF VISITORS TO NOVA SCOTIA
January to December 2004
Atlantic Canada
54.8%
Ontario
18.3%
Quebec
4.8%
Western Canada
5.5%
New England
4.6%
Mid Atlantic
2.3%
South America
2.5%
Other US
4.1%
Overseas
3%
_________________________
Page iii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT I-3
NOVA SCOTIA TOURISM RECEIPTS BY EXPENDITURE TYPE. 2003
Transportation
24%
Entertainment
4%
Shopping
10%
Restaurants
23%
Campgrounds
1%
Fixed-Roof Accommodation
22%
Taxi/Vehicle Rental
5%
Groceries/Liquor
4%
Vehicle Fuel
6%
Other
1%
APPENDIX II
Financing
Page i A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
APPENDIX II
FINANCING
Few people starting a business have enough personal capital to do it on their own. It is much
more common for entrepreneurs to need other investors and, usually, some loan capital as well.
This section deals with the "how to’s" of arranging financing for your tour business. As
discussed earlier, depending on the nature of the tour business you are establishing, your initial
financing requirements could be minimal.
Traditional lenders, such as banks, prefer to lend to businesses that have fixed assets having
stable or growing values over time such as real estate assets for example. Purely service
businesses, such as that of a receptive tour company, are less favourably considered, since their
value is usually limited to the income from the business and the skills of the owners. In financing
a tour operator, a bank will want a very credible business plan and solid credentials.
It is important that you learn the basics of business finance if you are going to be seen as credible
and competent by a banker or other lender. They don’t expect you to be an expert on financing
but they do expect you to know enough to be able to meet their needs and provide reassurance
about their major concerns. They also expect you to know enough about business finance to be
able to manage your business’ financial affairs over time.
Rule number one is that you must invest significantly in the business yourself. You have to have
your own neck on the line if others are going to risk their capital on your enterprise. Having
other equity investors will be helpful, but the lenders will look to the managing principals to have
a major, personal equity stake in the business.
Rule number two is that you have to have a credible business plan and preferably a feasibility
study too to provide evidence that the business is going to be able to succeed and pay back its
financing: first its loans and secondly its outside equity investors.
Bankers and lenders are not risk takers. They not only want the foregoing, they also want some
additional security in the form of assets pledged to protect the loan.
We will now briefly explore the different types of financing available and then consider the "how
to’s" of applying for a loan.
Page ii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Equity Capital
Your own investment in the business, be it cash, buildings, equipment, is the primary source of
equity. Additional equity capital will be invested by partners, limited partners, or other investors
who are willing to risk their capital on your idea and your abilities.
Venture Capital Companies
There are many venture capital companies in Canada who invest in small- to medium- size
businesses that have growth potential. Venture capital companies commonly invest between
$100,000 and $500,000.
These companies will put in risk capital but only in ventures that have the potential to grow
dramatically and pay large returns within four to five years. They will want to sell their
investment after four or five years and realize their gain.
Typically, venture capitalists invest in high tech and other high growth companies when they are
in their fledgling stages. While most tourism enterprises don’t have the same kind of growth
potential, some may, particularly if there is the opportunity to franchise a good concept.
Otherwise, this is not a very likely source of financing.
The key things venture capitalists are looking for are:
• Rapid growth potential;
• Strong, committed management;
• A seat on the Board of Directors and pre-emptive rights to replace management if they don’t
perform on target;
• Large returns over a limited number of years.
Debt Financing
Loans are the predominant form of financing for the tourism industry in Nova Scotia and
elsewhere in Canada.
A key lending principle is that long-term assets be financed with long-term loans and short-term
assets be financed with short-term loans. Working capital should be financed by a short-term line
of credit. In other words, the type of financing should fit the useful life of the asset in the
business.
Another key principle, often ignored, is that a business should never commit to loan obligations
that it can’t comfortably support from its earnings.
In addition, your loan financing, combined with your equity financing should be sufficient to
cover all your costs and provide for contingencies in the event of unexpected costs or overruns in
development costs. Otherwise, the working capital of the business will be absorbed by capital
commitments and the ability of the business to operate properly will be compromised, if not
threatened.
Page iii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Fixed Assets Financing
Fixed assets are assets fixed in one place, such as land and buildings. They are assets that
generally have a long life. Such assets are normally financed with long-term debt, either a
mortgage loan or a secured term loan. Mortgage loans extend for the longest period, while term
loans are normally for intermediate periods of five to fifteen years.
In the tour business being discussed in this manual, you are unlikely to have much need of fixed
asset financing since most of your investment will be in office equipment and marketing.
Lenders don’t like to finance more than 75% of the value of assets in this way; they want the rest
covered by equity. The lender looks to the projected earning power of the business to pay off the
loan, although they also want the security of a claim on the assets themselves in the event of
default. They will expect a business plan from you and may also want a feasibility study.
Long-term lenders also look at the overall financing of the business, not just the financing of their
secured assets. They look at the debt/equity ratio and don’t like to see a ratio of more than 1.5 or
2.0 at the most (1.5 or 2 times as much debt as equity).
Lenders may require other things from you. Typical requirements, in addition to the security for
the loan, include:
• Personal guarantees of the main principals for the amount of the loan plus accrued interest;
• A postponement of the repayment of shareholder loans until the loan is repaid;
• Limitation on the salaries and drawings of the principals;
• Restrictions on major capital purchases until the loan is repaid.
Major Equipment Financing
A tour business is also unlikely to have much in the way of major equipment, unless you get into
purchasing your own vehicles. Long-term mortgage loans are not normally used to finance major
equipment purchases. The techniques that are used most often include:
• Secured term loan;
• Conditional sales purchase;
• Equipment lease;
• Sale and leaseback.
Secured Term Loan
This is a standard term loan, generally of five to fifteen years, in which the equipment is taken as
security for the loan, usually in the form of a lien.
Page iv A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Conditional Sales Contract
This is a method wherein the manufacturer of the equipment finances the purchase. The
purchaser makes a down payment and monthly payments until the loan is paid off. The
ownership of the equipment remains with the manufacturer until the debt is paid.
Lease
Leasing is a very common way to finance transportation equipment. This is like the conditional
sales contract, but leases are provided by many different financial institutions, not just equipment
manufacturers. With a lease, the equipment is rented for a pre-set period of time at a fixed
monthly payment that covers the cost of interest as well as a portion of the original value of the
equipment. Depending on the type of lease, the equipment either reverts to the leasing company
at the end of the term (although the lessee usually has an option to buy it for a pre-set value) or
the lessee must buy it for a pre-set amount at the end of the lease term.
The ownership of the assets usually resides with the leasing company.
Leases are popular since they don’t require a large cash outlay at the beginning. They also
provide a means of replacing equipment on a regular basis, since it can be returned at the end of
the lease period and new equipment leased. It is also attractive for companies wanting to own the
equipment, since they can buy it at the end of the lease period, probably for a quarter to a third of
the original cost.
Sale and Leaseback
Companies wanting to reduce their existing debt so that they can borrow for new assets they
require can sell a fixed asset to a financial institution and then lease it back. They effectively
convert a long-term debt into a medium-term lease commitment.
Working Capital Financing
Working capital is going to be your major need in establishing your inbound/receptive tour
company. The financing of short-term working capital is generally done with some combination
of the following:
• Bank line of credit;
• Character loans;
• Commercial loans.
There are other methods, such as accounts receivable financing and factoring, but they are very
unlikely to be used by a tour business, which should have little in the way of receivables.
Bank Line of Credit
This is also called a demand loan since the bank can demand payment at any time. The line of
credit is really an overdraft privilege with a pre-set limit. It allows you to pay your bills with the
bank’s money when you’re short of cash. The amount of the loan is the amount used and interest
is only paid on the amount used.
Page v A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
The bank may require you to pledge your receivables as security for the line of credit and they
will probably want regular financial statements and frequent lists of payables and receivables.
They will also want personal guarantees.
A hybrid of this is the revolving loan, in which the bank automatically extends you small loans as
you draw on the credit available and automatically pays them off as you make deposits. While
you may pay interest on a slightly larger average loan, the interest rate is usually lower.
The bank will monitor your line of credit. They like to see it fluctuate and occasionally go to
zero. If it is constantly at the limit, they will get concerned. If this happens, you probably should
refinance the business to return the line of credit to a fluctuating loan.
Character Loans
These are unsecured loans, generally short-term, which are extended to companies or individuals
with excellent credit ratings. The funds can be used at the company’s discretion.
Commercial Loans
These are more formal loans intended for short-term uses. The bank generally wants them paid
off within a year.
Sources of Financing in Nova Scotia
There are a number of agencies which offer financial assistance for tourism related businesses in
Nova Scotia.
The Business Development Bank of Canada (BDB - formerly the Federal Business
Development Bank) is a federal crown corporation set up to provide financial assistance to small-
and medium-size businesses. Assistance is available in the form of loans, loan guarantees, and
venture capital. Contact the Business Development Bank of Canada for more specific program
details.
The Canada/Nova Scotia Business Service Centre (www.cbsc.org/ns/ ) provides a variety of
helpful information including potential sources for funding programs.
The Office of Economic Development might be able to offer funding assistance through various
programs. For more information, contact the nearest office of the Canada/Nova Scotia Business
Service Centre for details on their programs.
Another potential funding source is the Atlantic Canada Opportunities Agency (ACOA),
which has various assistance programs for business. The programs are designed to help you set
up, expand, or modernize your business and focus on small-and medium-size businesses. They
can provide tourism-related businesses with access to capital in the form of interest-free,
unsecured, repayable contributions. Contact ACOA (or Enterprise Cape Breton Corporation for
businesses in Cape Breton) for information on eligibility and program details.
Page vi A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Finally, the Canada Small Business Financing Act is a federal government program designed to
help new and existing small business enterprises obtain term loans from chartered banks and
other lenders for financing the purchase and improvement of fixed assets. Loan assistance is
available for the purchase of land, construction or renovation of premises, and purchase of new
equipment. The program is delivered through private-sector financial institutions. Further
information on the Small Business Financing Act is available from ACOA or your lender.
Your Presentation and Negotiations
The First Step
First of all, put together a short description of your business concept, in point form if possible,
and review it with your local economic development officer or a representative of the Regional
Development Authority or the Office of Economic Development. They will be able to help you
identify what you need if your application is to be considered favourably by a banker.
Next, make an appointment with the manager or loan officer and go to meet with them. (It will
help if you review this section before you go so you are able to discuss financing options with
some knowledge.)
Make it clear at the outset of your meeting that this is intended to be a preliminary meeting,
designed to help you prepare the specific information they are going to need to process your
application. It is vital that they understand that you aren’t applying for financing at this point,
only looking for information and advice regarding a possible later application. They are used to
people coming in to make actual applications for financing without having any idea of what’s
involved. Those people instantly have two strikes against them. Make sure they don’t cast you
into this lot!
By giving them an overview of the business concept, they will be able to focus in on the forms of
financing and types of conditions most appropriate for your business. You may, in fact, learn that
they are not the right kind of institution at all and save yourself later frustration.
There are several other advantages of having this initial meeting:
• You will be able to focus your subsequent presentation to them on the things that they
indicate will be most important and avoid wasting effort on things that aren’t important.
• You will get a sense of the aspects of your concept that make them most nervous and you will
be able to concentrate your later presentation on overcoming these concerns.
• It will impress them that you are taking a professional approach; that you recognize their need
for information and evidence of the merits of the proposal; and that you have sought their
advice. The psychology of this can be most valuable later: they will write in their file, “The
principal of this business is taking a professional approach to preparing his/her application”,
or some such supportive comment.
Page vii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
The Second Step - Preparing Your Presentation
In preparing your written presentation, you will need, directly and indirectly, to address a number
of specific concerns that the financial institution will inevitably have:
• The viability of the business concept - potential earnings, risk factors, competitive
advantages/disadvantages. With existing businesses, they will, of course be interested in past
growth, revenues, and earnings as well.
• The tourism industry and the tour operator sector in particular - viability, trends, growth (you
will probably need to do some education as to what the tour operator business entails since it
is not a widely understood sector of the tourism industry).
• The ability of projected earnings to service the financing.
• The opportunity for growth over time.
• The management abilities of the principals - their track records in past projects or jobs, their
experience in this kind of business, their formal training and education.
• The financial integrity of the principals - past credit history, reputation in the business
community for paying bills and fulfilling obligations.
• The amount of equity in the business, particularly from the main principals.
• The realizable value and marketability of the security that is available to secure the financing.
• The level of professionalism evident in the approach to securing financing - the
understanding of the needs of the lender, the use of outside professionals.
The actual presentation should address these issues in the context of the suggested table of
contents in Exhibit II-1. If you have already prepared a business plan and/or a feasibility study,
you can attach them to the submission and reference them where appropriate.
The presentation need not be exhaustive. It can be in a summary form and use bullets to make the
points concisely. The financial institution will come back to you for more information where
they need it.
You should submit the presentation in person, making an appointment, and then make another
appointment to come back and discuss the presentation once they’ve had a chance to read it.
Negotiations
Honesty and openness in negotiations are critical. It isn’t just because you don’t want to be
caught in deceit or concealment of information, it’s also because you are going to have to
establish a relationship of mutual trust and maintain it over a period of years. If the financier has
any reason to doubt your trustworthiness, honesty, or openness, you will find it very hard,
indeed, to get your loan approved.
Page viii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Discuss your own concerns openly: how you intend to deal with the risks and uncertainties, what
you expect to do about major problems that might arise. In general, have an open and full
discussion of how the business is going to overcome its challenges. Financiers know very well
what can go wrong with a business and they believe in Murphy’s Law. In fact, they tend to be
cynical about small business, unfair as that may seem. They want you to make them comfortable
and give them confidence in your ability to deal with problems and challenges.
Don’t be intimidated. If you don’t understand something, ask. If you don’t agree with
something, say so. If you think they are being unreasonable in their demands, ask them to
explain why the demands are necessary and debate the issue.
At all times be open-minded, non-judgmental, and cool.
This is a normal negotiation. You are free to go elsewhere to get the best deal for your business.
However, we recommend that you approach one lender at a time. When you find someone you
like and can deal with, stick with them. You should always deal with your banker in good faith.
If the manager doesn’t think you are serious, or thinks you are wasting his or her time, then you
will have difficulty obtaining the financing you require.
It will take some time and effort to accomplish, but you want to draw your financier into a
partnership-style relationship, where they will be more concerned with keeping your business
afloat and helping you out, rather than worrying about their loan and wishing you’d take your
business elsewhere.
Put yourself in their shoes and act accordingly. Keep them informed. Act like you are in a
partnership relationship and treat them like your partner. Hopefully they will respond in kind.
Page ix A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT II-1
SUGGESTED TABLE OF CONTENTS FOR A BUSINESS PLAN,
SUITABLE FOR A PRESENTATION FOR FINANCING
Executive Summary:
• Very brief description of the business, the concept proposed, and the capital budget
• Outline of proposed financing
• Summary of revenue and cash flow projections
Background:
• Industry/general tourism trends
• History of the company, date of commencement
• Form of business (partnership, etc.)
• Names of the principals, their involvement, and investment
Business Concept:
• The overall concept
• Its unique selling propositions and competitive advantages
• The product mix/product features
• Target markets
• Proposed assets and capital budget
• Project phasing
Proposed Financing:
• Equity
• Debt
• Working capital
• Security available
Management:
• Organizational structure
• Biographies of principals and key management
Page x A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT II-1 cont’d
SUGGESTED TABLE OF CONTENTS FOR A BUSINESS PLAN,
SUITABLE FOR A PRESENTATION FOR FINANCING
Markets and Projected Demand:
• Summary of results of market research and analysis
• Competitive analysis
• Market trends
• Demand projections
Marketing:
• Pre-opening activities/opening promotions
• Summary of the consumer marketing plan
• Summary of the travel trade and group marketing plan
• Marketing partnerships
• Pricing
• Planned market tracking and research
Operations Plan:
• Staffing and training plan
• Business systems
• Other operational issues
Three to Five Year Operating Projections:
• Revenues
• Operating Costs
• Profits
• Debt service
• Asset additions
• Net cash flow
Initial Balance Sheet:
• Assets
• Liabilities
• Equity
Page xi A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT II-1 cont’d
SUGGESTED TABLE OF CONTENTS FOR A BUSINESS PLAN,
SUITABLE FOR A PRESENTATION FOR FINANCING
Return on Investment:
• Internal rate of return or simple return on investment
• Present value of cash flow
• Times interest earned
• Break-even analysis
Summary of Key Risks and Contingencies:
• Key risks and management’s proposed responses to such threats
• Contingency plans to deal with above
References:
• Financial institutions
• Creditors
• Past business associates - customers, suppliers, partners, etc.
• Banker, lawyer, accountant
APPENDIX III
Calculation of Net Income, Cash Flow
and Return on Investment
Page i A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
APPENDIX III
CALCULATION OF NET INCOME, CASH FLOW
AND RETURN ON INVESTMENT
This appendix presents the calculation of net income and cash flow as well as methods of
calculating return on investment, based on professional, accepted standards of analysis.
The proper way to determine the real profitability of a business and its return on investment is to
first calculate net profit, in accordance with established accounting principles and in the way
Revenue Canada calculates business income taxes. By following this method, it is possible both
to determine your projected level of income taxes and determine the actual net cash return
accruing to you and your investors.
However, there is also a shortcut method which is simpler and will also render a cash flow
calculation, although the numbers will, in this case, be pre-tax. If it is your purpose to determine
the basic viability of the business proposal by measuring return on investment, pre-tax returns can
be just as useful as net returns. We will discuss this latter method first.
The short-cut way of calculating cash flow is simply to start with Operating Profit, deduct total
mortgage payments (both principal and interest), and deduct any capital Asset Replacement
allowance. This will give you the net cash flow, prior to business income taxes. It is simpler, by
far, than going through a detailed calculation (which is only required to derive income taxes), and
the pre-tax numbers can be just as readily used for return-on-investment analysis.
To complete a detailed analysis, we need to determine pre-tax profit, net profit and net cash flow.
Pre-tax Profit is the Operating Profit minus all other charges against income. These are the non-
operating costs of the business, and they include:
• Interest on long-term debt;
• Depreciation.
To calculate the interest on your proposed debt financing, we need to split the mortgage payments
between the interest and principal portions for each year. A mortgage program can do this for
you. Ask your accountant or your banker to run the numbers for you.
Page ii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Depreciation should be charged at the Capital Cost Allowance (CCA) rates set out by Revenue
Canada for each type of asset. Generally, these are calculated on a diminishing balance basis (a
constant percentage is applied each year against the un-depreciated balance in the asset account),
although some assets can be depreciated on a straight-line basis (an equal portion of the original
amount each year). Check with your accountant or Revenue Canada for the CCA rates applying
to the major asset items proposed for your operation.
Net Profit is Pre-tax Profit less corporate income taxes. Business income taxes are levied against
pre-tax profit. Ask your accountant which tax rates would apply to your business.
The resulting figure, Net Profit, is the accountant’s way of telling you what the real profit is in
your business. It is a figure which includes the profit that is available to you and your investors at
the end of the year as well as the principal portion of any debt that has been paid off, after
adjusting for the amortization of the original cost of the assets in the business (depreciation or
CCA). In other words, it’s the accrued change in the book value of the net worth of the business
(i.e. assets less liabilities).
However, this is not the same figure as the amount of real cash you have available from the
business, since it includes the principal portion of mortgage payments which have been made and
it also ignores any new capital expenditures which have been made over the year (expenditures
which would have been capitalized rather than expensed against that year’s income). Net Profit is
also net of capital cost allowance or depreciation. Indeed, as this is a book entry and not a real
cash flow charge, it only distorts the cash flow picture.
To calculate Net Cash Flow, which is the real cash figure, you need to start with Net Profit, add
back the depreciation or capital cost allowance, deduct the principal portion of mortgage
payments (the interest portion has already been deducted) and deduct an allowance for capital
purchases (Asset Replacement) for the year. This is the real cash return - the cash flowing out of
the business for the year and available for you and your investors to take out or re-invest.
The short-cut way of calculating cash flow is simply to start with Operating Profit, deduct total
mortgage payments (both principal and interest), and deduct any capital Asset Replacement
allowance. This will give you the net cash flow prior to business income taxes. It is simpler by
far than going through the detailed calculation above (which is only required to derive income
taxes), and the pre-tax numbers can be just as readily used for return-on-investment analysis. A
worksheet is provided in Exhibit III-1.
Return on Investment Methods
Return on Investment is generally referred to as ROI. Another measure of value is Return on
Equity (ROE).
These calculations give you a single measure of the income returned on the invested capital over
a period of future years selected by the analyst to represent the life of the investment. ROI is a
measure of the return on total capital, both debt and equity, while ROE is the return on equity
only. These measures are universally accepted by investors, bankers, and other lenders as means
of evaluating the income potential of a business investment.
Page iii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT III-1
CALCULATION OF PROFIT (LOSS)
Mature
Year 1 2 3 4 5
Revenue
Total Operating Expenses
Operating Profit
Less: Mortgage Payments
(P & I)
Less: Capital Replacement
Allowance
PRE-TAX CASH FLOW
Page iv A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
There are a number of ways to make these calculations, some more complex than others. The
more complex methods are, of course, the better methods. We will start with the simplest.
Simple Average Pre-Tax or Net ROI/ROE
For a particular year, ROI is the pre-tax cash flow plus the interest for the year on long-term debt,
as a percentage of the original total investment (equity plus long-term debt).
ROI = Pre-tax or Net Cash flow + Interest on Long-Term Debt
Original Equity + Original Long-Term Debt
ROE is the pre-tax or net cash flow as a percentage of the original equity investment.
ROE = Pre-tax or Net Cash Flow
Original Equity
These numbers can be averaged over a number of years, say ten years, to give an average pre-tax
ROI or ROE figure.
These are the simplest calculations. However, they are not well regarded by serious financial
analysts because they ignore the time value of money. What we mean is that they give the same
value to a dollar earned in the tenth year as they do to a dollar earned in the first year. In reality
the present value of a dollar earned in the tenth year is really only a portion of a dollar.
However, the simplicity of this method is its beauty and it is easy to understand. Most bankers
will accept such numbers for their purposes. If you are not pressed for a more sophisticated
calculation, leave it at this.
For a project to be commercially feasible, the ROI and ROE values have to be positive (i.e. the
business is making, not losing, money) and they should exceed the costs of alternative, no-risk
investments, such as bonds or guaranteed investment certificates. If they don’t exceed these
alternatives, why bother taking the risk? Just put your capital in guaranteed investments.
Another factor determining what is a satisfactory return is liquidity. Liquid investments, blue
chip stocks and bonds, for example, can be readily and quickly sold, at little cost. An equity
stake in a small retail business, however, may be difficult if not impossible to sell, and there may,
in fact, be an agreement among the investors restricting their rights in this respect.
The degree these rates of return exceed no-risk investments is primarily determined by the level
of risk inherent in the business proposal and, to a lesser degree, the level of liquidity.
Looking at a tourism retail business, its advantages are:
• It has inventory which can be sold or relocated to another site;
• The building can be converted to other types of uses, particularly retail ones.
Page v A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Disadvantages include:
• Highly sensitive to effective inventory and cash flow management;
• Vulnerable to competition;
• Can be difficult to get established, and the start-up period will extend two years or more.
Everyone has a different view on these matters, but we suggest the following guidelines:
ROI (assuming 50% debt and 50% equity):
• Double the interest rate on long-term debt is excellent (provides four-times coverage of
interest on debt) (NB: - For the ROI to be double the interest rate, the ROE has to be
three times the interest rate.);
• 150% of the interest rate is good (provides three-times interest coverage) ;
• 100% of the interest rate is poor from the investor’s standpoint - there is no premium for
risk but not bad from the banker’s perspective, he or she has two-times coverage on
interest;
• Less than 100% - is not a commercially feasible proposition and probably not bankable,
since the lender has little or no income protection.
Assuming the financing was 50/50 debt/equity and that the interest rate on long-term debt was
10% per annum, an ROI of 20% would produce an ROE of 30%.
ROE :
• Triple the interest rate on long term debt is excellent;
• Double is good;
• Equal to the interest rate is poor;
• Less than the interest rate is unfeasible.
Times Loan Payment Coverage
Bankers look at the income protection on their loan. Basically, they want to see operating profit
of at least double the level of annual loan payments. Thus, if there was a 50% deterioration in net
income, the business could still cover its loan payments. For higher risk businesses, they will
want to see triple or better coverage.
This judgement will also be affected by the amount and quality of security you have put up for
the loan. If they don’t have to rely on business income for loan repayment, they may be a little
less demanding on times coverage.
Detailed Return-on-Investment Methods
The more sophisticated methods of calculating return on investment are summarized below. Both
of them share the benefit of accounting for the time value of money in calculating return on
investment.
Page vi A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Internal Rate of Return (IRR):
This method calculates the percentage of rate of return generated from a stream of income over
time, relative to the amount of the original investment. Net cash flow is usually used to represent
income, although a pre-tax IRR can be calculated too, if you are using the simpler pre-tax cash
flow method of projecting earnings.
Essentially, this method determines the discount rate (rate of return) that, when applied to each
future year’s cash flow, will result in a total cash flow for all the years equal to the original
investment.
Ask your banker or your accountant to do this calculation for you. Most spreadsheet programs
today will perform this calculation. To do it manually, you have to be a mathematician!
Net Present Value (NPV):
Net present value (NPV), sometimes called warranted investment, is a very useful ROI measure.
Rather than determining the rate of return itself, it asks you to establish a target rate of return and
then discounts each year’s cash flow at this rate to calculate the level of investment warranted for
the project. In other words, it tells you how much you can afford to invest to produce the desired
rate of return from the projected cash flow. If the warranted investment is higher than the actual
investment required, the project will exceed the target rate of return and vice versa.
Again, the NPV calculation can be done by your accountant or banker.
Time Period for Projections
What time period should we use in measuring ROI?
A primary consideration in this respect is the expected useful life of the investment. The useful
life of an investment can be many years. Buildings, for example, can have an effective life of a
century or more. Other assets will have a much shorter useful life. Assuming, however, that you
will be spending enough annually to refurbish or replace items on a periodic basis, the useful life
of the assets in the business will be extended indefinitely into the future. On the other hand, new
competition could weaken your ability to maintain the business on this basis and its life would be
shortened as a consequence. As a result, the expected useful life of an investment is not a
sufficient consideration, on its own, for determining the time line for ROI analysis.
A second important consideration is the reliability period of future projections. Some experts
believe that any projections beyond five years are so speculative that they are useless. (Some
others believe one year is speculative!)
However, the key question is not really how accurate future projections can be but, rather, is it
reasonable for you to rely on future income from the investment you’re contemplating today and,
if so, for how many years can you reasonably expect to continue to earn this income?
We would suggest that a ten-year time line would probably be appropriate for a tourism retail
business. With reasonable management and investment in marketing, this should be readily
achievable. In addition, there’s not a lot of value in extending the time line significantly beyond
this, since, with the time-sensitive ROI methods, the impact of cash flow more than ten years in
Page vii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
the future is quite small.
With the simple ROI method, you should not include years beyond the tenth year in the
calculation, since to do so would distort the result by giving too much weight to cash flow in the
distant future.
Break-even Analysis
Another useful analysis is break-even analysis. Some financial institutions like it because it
paints a picture of the degree to which a projected level of business exceeds the minimum
necessary to survive and provides a measure of the down-side protection in the projected
numbers.
The break-even point is the volume of revenue at which all costs are covered and the business
breaks even on a revenue-to-cost basis.
There are several different break-even points, as illustrated in Exhibit IV-2. The first comes
when the intersection of volume of business and price produces enough revenue to cover variable
operating costs (costs of sales and direct operating expenses). The amount of revenue in excess
of variable costs is called Contribution to Overhead.
The second level happens when all operating costs, the variable costs as well as all overhead
costs, are covered. The surplus is the Contribution to Non-Operating Costs or Contribution to
Capital Related Costs.
The third level is when all costs of the business are covered. The surplus is Net Cash Flow or
Return on Equity.
Break-even analysis is also very useful to management for the purpose of evaluating feasibility
and also because it can be used in pricing and discounting strategies as part of a yield
management process.
_________________________
Page viii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT III-2
BREAKEVEN ANALYSIS
$
Revenue
A
B
C
Volume
(Number of Customers)
Financing & Asset
Replacement Costs
Overhead Expenses
Cost of Sales & Direct
Operating Expenses
Net Cash Flow
(ROE)
Contribution to
Overhead
Contribution to
Non-Operational Costs
A Break even on variable costs (direct costs)
B Break even on variable & fixed cost (overhead costs)
C Full Break even - covers all variable & fixed costs, as well as
financing & asset replacement costs
APPENDIX IV
Business Structures
Page i A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
APPENDIX IV
BUSINESS STRUCTURES
Alternative Forms of Business Structures
This section looks at alternative ways of setting up a business and deals with the major
considerations you will face.
The alternative forms of business organization include:
• Sole proprietorship;
• Partnership;
• Corporation - the Limited Company and the Public Corporation;
• Limited Partnership;
• Joint venture.
The features, advantages, and disadvantages of each organizational form are summarized below.
Sole Proprietorship
A sole proprietorship is just what it says. It involves one owner, and that owner and the business
are one entity. In other words, the person owns the assets personally, and the liabilities of the
business are the liabilities of that person. There is no legal form to a sole proprietorship, although
it still has to register itself as a business for the purposes of business licensing and sales tax
registration. The legal status of the business is the legal status of the owner as a citizen. The
income of the business is the personal income of the owner.
The advantages of this form of enterprise include:
• Simplicity;
• Freedom to make your own decisions.
The disadvantages include:
• No limitation of personal liability for the owner;
• Nobody to share the responsibilities of running the business;
• Limited access to equity other than what you have available personally.
Page ii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
This form of enterprise is only feasible where the business is owned solely by an individual, or
perhaps by a married couple, since the laws on marital property will govern the nature of the
relationship between the parties.
Partnership
A partnership is a business form intended for two or more owners. Like the sole proprietorship,
the owners of the business and the business itself are one and the same for legal purposes. The
business has no legal status separate from the individuals involved. The liabilities of the business
are the liabilities of the partners. In fact, each and every partner is liable for all of the liabilities of
the business. Partners are assumed under the law to have equal interests in the business, unless
their partnership agreement specifies differently.
The governing legal instrument is the partnership agreement drawn between the partners. It has
legal status as a contract. It normally covers the key arrangements among the partners, for
example:
• The proportions of partners’ interest, if other than equal;
• Cross indemnification of personal liability;
• Provision for dissolution, or transferring of interests in the partnership;
• The decisions to be made jointly by the partners;
• Prohibited activities;
• Provisions for life and disability insurance to assist surviving partners in acquiring the
interest of the deceased or disabled partner, and compulsions on the partner or his/her estate
to sell that interest to the surviving partners in the event of disability or death;
• The manner in which partners are to be compensated as well as distribution of the
partnership’s profits and losses;
• Procedures for amending or terminating the agreement.
The advantages of a partnership are:
• Basic simplicity;
• Provides for more than one owner.
Disadvantages include:
• Unlimited liability for each partner for all of the liabilities of the business. The partners can
have a mutual indemnification clause in their partnership agreement, which can partially
offset some of risk, but this only establishes a claim on the other partners in the event a
partner is called upon to cover a business liability.
Page iii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Many partnerships fail because the partners do not adequately deal with issues such as those
identified above as needing to be included in the partnership agreement.
Corporation
The corporation is a separate legal entity from its owners. It has the status of a person under law.
It is created when Articles of Incorporation are filed with the Registry of Joint Stock Companies
of the Nova Scotia government in the case of a provincial corporation, or the federal government
in the case of a federally incorporated company. You have the choice of provincial or federal
incorporation. (Since you are likely to be doing business outside of Nova Scotia, it may be of
benefit to establish a federally incorporated company - this means that your business will have
legal status, nationally rather than just within the province. While provincial companies can also
register in other provinces too, they may lack legal status there.)
A corporation issues shares to its owners and equity investors. The liability of the owners and
investors is limited to the amount of their investment. (However, if they provide personal pledges
or guarantees to the bank or other creditors on behalf of the company, their limited liability does
not protect them for the specific liability involved.) In other words, for the most part the
company’s creditors have only the assets of the company as protection for their credit, not the
assets of the owners. There are certain creditors and liabilities which do have a claim on the
owners of an incorporated company, including the Receiver General for Canada for employee
source deductions, the Workers’ Compensation Board, and employees for their back wages.
There are two forms of limited liability corporation, the private corporation and the public
corporation. The private corporation is the one used by the vast majority of small-and medium-
size businesses, where the investors are informally organized by the promoters of the business.
Private corporations are not permitted to promote the sale of their shares to the general public.
In a public corporation, on the other hand, promoters are permitted to solicit the sale of the
corporation’s shares to the general public through investment dealers and other financial
institutions. To do this, however, the promoters have to file detailed information on the business
proposal and on many other topics to the Nova Scotia Securities Commission and receive
approval to sell the share offering.
The cost of legal, consulting, and accounting fees in developing a prospectus can run to hundreds
of thousands of dollars, so this form of business structure is only used for very large businesses.
The advantages of a corporation are:
• Limitation of owners’ liability;
• Can have several owners/investors;
• The business can enter into contracts and conduct business in its own name, rather than the
names of the owners;
Page iv A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• There can be some tax benefits to the owners as compared with the sole proprietorship or
partnership.
Disadvantages include:
• More expensive and complex to establish;
• For very small businesses, much of the advantage of limited liability is usually lost, since
bank and lenders will insist on personal guarantees from the owners anyway.
Limited Partnership
The limited partnership is a form of business organization that was popular in the past decade. It
is like a partnership in some ways and a corporation in others. Basically, the general partner
organizes and runs the business, while the limited partners invest in it. All are partners for tax
purposes; in other words, the net income and losses of the partnership flow directly to them.
However, the liability of the limited partners is limited to the amount of their investment, as long
as they don’t engage in the business in any fashion, other than as passive investors. To remain a
limited partner, a person must not take part in the management of the firm and may not act on
behalf of the company.
Joint Venture
A joint venture is like a partnership but usually involves two or more corporations that enter into
an agreement to operate an enterprise under joint ownership. The respective companies usually
have some business relationship with the joint venture.
Business Registration
Whatever the form of business structure you choose, you need to register the business. This is
discussed in the section of the manual on Legal Matters.
Tax Considerations
There are a number of tax implications with each form of business organization. You are
strongly advised to obtain professional tax advice from a qualified accountant, preferably a tax
specialist.
Agreements Among Principals
Whatever the form of organization, it is vital that the principals in the business execute a formal
agreement among themselves. In the partnership, there is a partnership agreement, while in the
corporation it is a shareholders agreement.
The agreement should cover, at a minimum, the following kinds of issues:
• An understanding as to the purpose of the business, the roles of the principals in it, and any
other mutually agreed intentions;
• Decisions requiring approval of all the principals;
Page v A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Decisions requiring approval of a majority of the principals;
• Procedures for selling or transferring an interest in the business;
• Procedures for dissolution;
• Procedures for resolving conflicts when there is a stalemate;
• Methods of compensating the principals;
• Issues having to do with the rights of and prohibitions on the principals.
Which Form of Business Should I Use?
If you’re in this project on your own, a sole proprietorship is simplest and least expensive.
Incorporate a private company in which you hold all or most of the shares if you want some
limitation of liability protection and/or if your tax advisor indicates some tax advantages in
incorporation.
If there’s more than one owner, and they all want to have a say in the running of the business, you
might also form a partnership.
In partnerships, sometimes one partner may be silent, which means he or she will supply the
capital while the other supplies the know-how and the hands-on management. In most cases,
however, partners work together at the business. Ideally, in a working partnership, each partner
will have skills that are different but complementary to the other so that both can contribute to the
business in other ways besides supplying money. Whether silent or active, your partner will
usually insist on some share in management decisions.
A word of caution here: you should be very careful in choosing a business partner. Many
partnerships fail because the partners cannot get along. If you do choose to form a partnership,
you should have a detailed and comprehensive agreement drawn up to protect the interests of all
partners.
If you have several others who are prepared to invest in the business but are not going to be active
in it as partners, then the private corporation may be the best form. Your tax advisor may, on the
other hand, suggest a limited partnership since it gives some tax advantages to the non-active
partners.
You definitely need expert advice on this, however.
APPENDIX V
List of Contacts
Page i A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
APPENDIX V
LIST OF CONTACTS
Tourism Division - Tourism Development
Department of Tourism, Culture and Heritage
1800 Argyle Street, 6th floor
Halifax, NS
B3J 2R5
Tel: 424-5000
Fax: 424-0629
Website: www.gov.ns.ca/dtc
Tourism Division - Tourism Marketing
Department of Tourism, Culture and Heritage
1800 Argyle Street, 6
th
Floor
Halifax, NS
B3J 2R5
Tel 424-5000
Fax: 424-2668
Website: www.gov.ns.ca/dtc
The Nova Scotia Tourism Partnership
Council
World Trade and Convention Centre
Suite 603, 1800 Argyle Street
Halifax, Nova Scotia
B3J 3N8
Tel: 424-0048
Fax: 424-0723
Website: www.nstpc.com
Service Nova Scotia & Municipal
Relations
Access Nova Scotia
Toll free: Throughout Province:
1-800-670-4357
Website:https://www.gov.ns.ca/snsmr
One-stop shopping for government programs
and services. Maintain database of contacts
for government departments in each region
regarding appropriate permits, etc. Also
contact for new Nova Scotia Business Registry.
Regional Access Nova Scotia Offices:
Access Nova Scotia - Amherst
Superstore Mall
126 South Albion St.
Amherst, NS B4H 2X3
Access Nova Scotia - Antigonish
20 St. Andrew’s St.
Antigonish, NS B2G 2L4
Access Nova Scotia - Bridgewater
77 Dufferin Street
Bridgewater, NS B4V 2W8
Tel: 1-800-670-4357
Access Nova Scotia - Halifax
West End Mall
6960 Mumford Rd.
Halifax, NS B3L 4P1
Access Nova Scotia - Kentville
28 Aberdeen Street
Kentville, NS B4N 2N1
Tel:1-800-670-4357
Page ii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Regional Access Nova Scotia Offices
(Cont’d):
Access Nova Scotia - Port Hawkesbury
218 MacSween St., Ste. 22
Provincial Building
Port Hawkesbury, NS
Access Nova Scotia - Sydney
Moxham Centre
380 King’s Rd.
Sydney, NS B1S 1A8
Access Nova Scotia - Truro
35 Commercial Street, Suite 101
Truro, NS B2N 3H9
Access Nova Scotia - Halifax
West End Mall
6960 Mumford Road
Halifax, Nova Scotia
B3L 4P1
Access Nova Scotia - Dartmouth
Superstore Mall
650 Portland Street
Dartmouth, NS B2W 6A3
Access Nova Scotia - Yarmouth
Provincial Bldg.,
10 Starrs Rd., Ste. 127
Yarmouth, NS B5A 2T1
Canada/Nova Scotia
Business Service Centre
1575 Brunswick Street
Halifax, NS
B3J 2G1
Tel: 426-8604
Fax: 426-6530
Toll free: 1-800-668-1010
Information on federal and provincial
government programs and funding assistance
under the Community Business Loan
Program.
Nova Scotia House of Assembly- Office of
Legislative Council
Website: www.gov.ns.ca/legislature/legc/
Statutes of Nova Scotia
Government Departments
Federal Government
Atlantic Canada Opportunities Agency
(ACOA)
1801 Hollis St., Suite 600
P.O. Box 2284, Station M
Halifax, NS B3J 3C8
Tel: 426-6743
Fax: 426-2054
Toll free: 1-800-565-1228
Website: www.acoa-apeca.gc.ca
Business Development Bank of Canada
Cogswell Tower - Scotia Square, Suite 1400
Halifax, NS B3J 2Z7
Tel: (902) 426-7850
Fax: (902) 426-6783
Toll free: 1-888-463-6232
Website: www.bdc.ca
Canadian Tourism Commission (CTC)
55 Metcalfe Street, Suite 600
Ottawa, ON
K1P 6L5
Tel: 613-946-1000
Website: www.canadatourism.com
Canada Revenue Agency
Business Services
Website:http://www.cra-arc.gc.ca
Payroll, GST/HST
Business Account Registration
Corporations (taxation)
Sole Proprietorships/Partnerships
Canada Revenue Agency
Tax Services Offices:
Halifax
Ralston Building
1557 Hollis St.
P.O. Box 638
Halifax, NS B3J 2T5
Fax: (902) 426-7170
Page iii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Sydney
47 Dorchester St.
P.O. Box 1300
Sydney, NS B1P 6K3
Fax: (902) 564-3095
Enterprise Cape Breton Corporation
Commerce Tower, 3
rd
floor
15 Dorchester St.
Sydney, NS B1P 6T7
Tel: 564-3600
Fax: 564-3825
Toll free: 1-800-705-3926
Website: www.ecbc.ca
Fisheries and Oceans Canada (Maritimes)
P.O. Box 1035
Dartmouth, NS B2Y 4T3
Tel: (902) 426-3760
Fax: (902) 426-5995
Website: www.dfo-mpo.gc.ca
Industry Canada
Corporations Directorate
365 Laurier Avenue West, 9th floor
Jean Edmonds Tower South
Ottawa, ON
K1A 0C8
Tel: 1-866-333-5556
Fax: (613) 941-0601
Website: www.corporationscanada.ic.gc.ca
Industry Canada
Competition Bureau
50 Victoria St.
Gatineau, PQ
K1A OC9
Tel: 1-800-348-5358
Fax: (819) 997-4282
Website:http://cb-bc.gc.ca
Industry Canada
NUANS Search System
C/O NUANS Administrator
Hewlett-Packard Canada
P.O. Box 13000
100 Herberg Rd.
Kanata, ON
K2K 2A6
Website: www.nuans.com
Office of the Privacy Commissioner of Canada
112 Kent St.
Place de Ville, Tower B - 3
rd
floor
Ottawa, ON K1A 1H3
Toll free: 1-800-282-1376
Tel: (613) 995-8210
Fax: (613) 947-6850
Website: www.privcom.gc.ca
Personal Information & Protection of
Electronic Documents Act
Statistics Canada (Atlantic Office)
1741 Brunswick Street
Box 11, 2
nd
Floor
Halifax, NS B3J 3X8
Toll free: 1-800-263-1136
Website: www.statcan.ca
Population data, Canadian Travel Survey,
International Travel Survey.
Transport Canada, Marine Safety
Tower C, Place de Ville
330 Sparks St.
Ottawa, ON
K1A 0N8
Tel: (613) 990-2309
Website: www.tc.gc.ca/marinesafety
Navigable Waters Protection Program
Office of Boating Safety
Transport Canada (Atlantic Region)
Dartmouth:
P.O. Box 1013
45 Alderney Drive
Dartmouth, NS B2Y 4K2
Tel: 426-7795
Port Hawkesbury:
811 Reeves St.
Shediac Plaza
P.O. Box 2012
Port Hawkesbury, NS B0E 2V0
Tel: (902) 625-0803
Sydney:
196 George St.
Federal Arts Bldg., 2
nd
floor
Sydney, NS B1P 1J3
Tel: (902) 564-7002
Page iv A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Yarmouth:
248 Pleasant St.
P.O. Box 850
Yarmouth, NS B5A 4K5
Tel: (902) 742-6860
Website: www.tc.gc.ca/atl/
St. John Ambulance Training Offices
Headquarters for Nova Scotia Council
88 Slayter Street
Dartmouth, NS B3A 2A6
Tel: 463-5646
Fax: 469-9609
Website: www.stjohnambulance.ns.ca
Canadian Red Cross
1940 Gottingen Street
Halifax, NS B3J 3Y2
Tel: (902) 423-3680
Fax: (902) 422-6247
Website: www.redcross.ca
First Aid, Water Safety courses.
Provincial Government
Nova Scotia Department of Agriculture &
Fisheries - Food Safety Section (Halifax)
PO Box 2223
Halifax, NS
B3J 3C4
Tel: (902) 424-1173
Fax: (902) 424-3948
Website: www.gov.ns.ca/nsaf
Nova Scotia Department of Agriculture &
Fisheries - Food Safety Section (Truro)
P.O. Box 550
Truro, NS
B2N 5E3
Tel: (902) 893-7473
Fax: (902) 893-6531
Website: www.gov.ns.ca/nsaf
Nova Scotia Department of Natural Resources
P.O. Box 698
Halifax, NS
B3J 2T9
Tel: 424-5935
Fax: 424-7735
Website: www.gov.ns.ca/natr
Service Nova Scotia & Municipal Relations
1505 Barrington St., 9
th
Floor, South
PO Box 2271
Halifax, NS
B3J 3C8
Tel: 424-5528
Fax: 424-1298
Website: www.gov.ns.ca/snsmr
Nova Scotia Department of Environment &
Labour
5151 Terminal Road
PO Box 2107
Halifax, NS
B3J 3B7
Tel: 424-5300
Fax: 424-0503
Website: www.gov.ns.ca/enla/
Public Safety Division
Occupational Health & Safety Division
Nova Scotia Office of Economic Development
P.O. Box 2311
14
th
floor South, Maritime Centre
1505 Barrington St.
Halifax, NS
B3J 3C8
Tel: (902) 424-0377
Fax: (902) 424-7008
Website: www.gov.ns.ca/econ
Nova Scotia Human Rights Commission
(Central Office):
1690 Hollis St., 6
th
floor
P.O. Box 2221
Halifax, NS B3J 3C4
Tel: 1-877-269-7699
TTY: (902) 424-3139
Fax: 424-0596
Website: www.gov.ns.ca/humanrights
Nova Scotia Labour Standards
5151 Terminal Road, 7th floor
P.O. Box 697
Halifax, NS
B3J 2T8
Tel: 1-888-315-0110
Fax: 424-0648
Website: www.gov.ns.ca/enla/labstand
Page v A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Nova Scotia Alcohol and Gaming Authority
40 Alderney Dr.
P.O. Box 545
Dartmouth, NS B2Y 3Y8
Tel: 424-6160
Fax: 424-4942
Website: www.gov.ns.ca/aga
Nova Scotia Utility and Review Board
Motor Carrier Division
1601 Lower Water Street, Suite 300
P.O. Box 1692
Halifax, NS
B3J 3P6
Tel: (902) 424-3588
Fax: (902) 424-3919
Website:http://www.nsuarb.ca
Nova Scotia Workers Compensation Board
Main Office (Halifax)
5668 South Street
P.O. Box 1150
Halifax, NS
B3J 2Y2
Tel: 1-800-870-3331 (Halifax)
Website: www.wcb.ns.ca
Nova Scotia Workers Compensation Board
Branch Office (Sydney)
336 Kings Rd., Suite 117
Sydney, NS
B1S 1A9
Tel: 1-800-880-0003
Website: www.wcb.ns.ca
Office of the Fire Marshal
Nova Scotia Environment & Labour
5151 Terminal Rd., 6
th
Floor
P.O. Box 697
Halifax, NS
B3J 2T8
Tel: 1-800-559-3473
Fax: (902) 424-3239
Website: www.gov.ns.ca/enla/ofm
Nova Scotia Transportation & Public Works
1672 Granville St.
PO Box 186
Halifax, NS B3J 2N2
Tel: 424-2297
Fax: 424-0532
Website: www.gov.ns.ca/tran
Provincial Tax Commission
P.O. Box 755
1505 Barrington St.,
8
th
floor, Maritime Centre
Halifax, NS B3J 2V4
Toll free: 1-800-565-2336
Tel: 424-6300
Fax: 424-0602
Web: www.gov.ns.ca/snsmr/taxcomm
Nova Scotia Registry of Joint Stock Companies
PO Box 1529
Halifax, NS
B3J 2Y4
Tel: 1-800-225-8227
Fax
902) 424-4633
Website: www.gov.ns.ca/snsmr/rjsc
Registration of company and NUANS search of
business name.
Nova Scotia Museum
Website: www. museum.gov.ns.ca
Page vi A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Educational/Training Resources
Cape Breton University
P.O. Box 5300
1250 Grand Lake Road
Sydney, NS B1P 6L2
Toll Free: 1-888-959-9995
Tel: 539-5300
Fax: 562-0119
Website: www.capebretonu.ca
Dalhousie University
Henry Hicks Academic Administration
Building
6299 South St.
Halifax, NS B3H 4H6
Tel: 494-2211
Registrar’s Office:
Tel: (902) 494-2450
Fax: (902) 494-1630
Website: www.dal.ca
Mount St. Vincent University (MSVU)
166 Bedford Highway
Halifax, NS B3M 2J6
Tel: (902) 457-6117
Fax: (902) 457-6498
Website: www.msvu.ca
Nova Scotia Community College (NSCC)
Admissions
P.O. Box 220
Halifax, NS B3J 2M4
Tel: (902) 491-4911
Toll Free: 1-866-679-6722
Fax: 424-0717
Toll Free:1-866-329-6722
Website: www.nscc.ns.ca
Saint Mary’s University
923 Robie Street
Halifax, NS B3H 3C3
Tel902) 420-5400
Website: www.stmarys.ca
Nova Scotia Tourism Human Resource Council
1099 Marginal Road, Suite 201
Halifax, NS B3H 4P7
Tel: (902) 423-4480
Fax: (902) 422-0184
Website: www.tourismhrc.com
INDUSTRY ORGANIZATIONS/
SECTOR ASSOCIATIONS
National & International
Organizations/
Associations
Canadian Association of Foodservice
Professionals
1644 Bayview Ave., Ste.1219
Toronto, ON M4G 3C2
Tel: (416) 422-3431
Fax: (416) 421-1598
Website: www.cfsea.com
Canadian Culinary Federation (CCF)
700-1281West Georgia St.
Vancouver, BC V6E 3J7
Tel: (604) 681-6087
Fax: (604) 688-5749
Website: www.ccfcc.ca
Canadian Restaurant and Foodservices
Association (CRFA) - Atlantic Office
5121 Sackville St., Ste. 201
Halifax, NS B3J 1K1
Tel: (902) 425-0061
Fax: (902) 422-1161
Website: www.crfa.ca
Tourism Industry Association of Canada
(TIAC)
803-130 Albert Street
Ottawa, ON
K1P 5G4
Tel: 613-238-3883
Fax: 613-238-3878
Website: www.tiac-aitc.ca/
Page vii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Provincial Sector Organizations/
Associations
Tourism Industry Association of Nova
Scotia (TIANS)
1099 Marginal Road, Suite 201
Halifax, NS
B3H 4P7
Tel: (902) 423-4480
Fax: (902) 422-0184
Website: www.tians.org
Affiliated Associations
(Same address, phone & fax as TIANS)
Campground Owners Association of Nova
Scotia (COANS)
Nova Scotia Adventure Tourism Association
Nova Scotia B&B Association
Other Industry Organizations/Associations
Canada Select (Nova Scotia)
1800 Argyle St., Ste. 603
Halifax, NS B3J 2R7
Tel: (902) 424-8929
Fax: (902) 424-0723
Website: www.canadaselect.com
Check In Nova Scotia
2695 Dutch Village Road, Suite 501
Halifax, NS B3L 4V2
Tel: 425-5781
Toll free: 1-800-565-0000
Website: www.checkinnovascotia.com
Nova Scotia Travel Information and
Reservations.
Federation of Nova Scotian Heritage
1113 Marginal Rd.
Halifax, NS B3H 4P7
Tel: (902) 423-4677
Toll free: 1-800-355-6873
Fax: 422-0881
Website: www.fnsh.ns.ca
Hotel Association of Nova Scotia (HANS)
P.O. Box 473, Station M
Halifax, NS B3J 2P8
Website: www.novascotiahotels.ca
Nova Scotia Association of Chefs & Cooks
Howe Hall, 6230 Coburg Road
Halifax, NS
Tel: 494-1262
Nova Scotia Restaurant Association
1161 Hollis Street
VIA Rail Station
Halifax, NS B3H 2P6
Tel: 429-5343
Fax: 429-0659
Taste of Nova Scotia
P.O. Box 368
29 Inglis Place, 2
nd
Floor
Truro, NS B2N 5L5
Tel: 895-3315
Fax 895-1011
Nova Scotia Association of Unique Country
Inns
Website: www.uniquecountryinns.com
Regional Tourism Industry
Associations
Antigonish/Eastern Shore Tourist Association
(AESTA)
RR #1 Musquodoboit Harbour, NS
B0J 2L0
Tel: 889-2362
Web: www.rewardyoursenses.com
Central Nova Tourist Association
P.O. Box 1761, 577 Prince Street
Truro, NS
B2N 5Z5
Tel: 893-8782
Fax: 893-2269
Website: www.centralnovascotia.com
Page viii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Destination Cape Breton
PO Box 1448
Sydney, NS
B1P 6R7
Tel: 563-4636
Fax: 564-5422
Website: www.cbisland.com
Destination Halifax
1800 Argyle Street, Suite 802
Halifax, NS
B3J 3N8
Tel: 422-9334
Fax: 492-3175
Website: www.destinationhalifax.com
Evangeline Trail Tourist Association (ETTA)
654 West Main St.
Kentville, NS B4N 1L7
Tel: (902) 678-1728
Fax: (902) 679-1396
Toll free: 1-866-260-3882
Website: www.evangelinetrail.com
Pictou County Tourist Association (PCTA)
40 Water St.
P.O. Box 1839
Pictou, NS B0K 1H0
Tel: (902) 485-6151
Fax: (902) 485-4415
Toll free: 1-877-81-OCEAN
Web: www.tourismpictoucounty.com
South Shore Tourist Association (SSTA)
Box1390
Lunenburg, NS
B0J 2C0
Tel: 634-8844
Fax: 634-8056
Website: www.sssta.com
Yarmouth County Tourist Association
(YCTA)
Tel: 742-5355
Toll free: 1-866-850-9900
Web: www.aboutyarmouth.com
Regional Development Authorities
Antigonish Regional Development Authority
Farmer’s Mutual Insurance Building,
Suite 2-1
188 Main St.
Antigonish, NS B2G 2B9
Tel: 863-3330 Fax: 863-4095
Website: www.antigonishrda.ns.ca
Cape Breton County Economic Development
Authority
338 Charlotte Street, 3
rd
Floor
Sydney, NS B1P 1C8
Tel: (902) 562-2201
Fax: (902) 562-2866
Website: www.cbceda.org
Colchester Regional Development Agency
P.O. Box 181, 966 Prince Street
Truro, NS B2N 5C1
Tel: 893-0140
Fax: 897-1157
Toll free: 1-866-227-6182
Website: www.corda.ca
Cumberland Regional Economic Development
Association
35 Church Street, Box 546
Amherst, NS B4H 4A1
Tel: (902) 667-3638
Fax: (902) 667-2270
Website: www.creda.net
Guysborough County Regional Development
Authority
P.O. Box 49, 46 Main Street
Guysborough, NS B0H 1N0
Tel: 533-3731
Fax: 533-2064
Toll free: 1-800-355-3731
Website: www.gcrda.ns.ca
Halifax Regional Development Agency
11 Glendale Drive, Unit 9
Lower Sackville, NS B4C 3P2
Tel: 869-4040
Fax: 869-4091 Toll Free 1-800-650-0039
Website: www.hrda.ns.ca
Page ix A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Hants Regional Development Authority
Box 2313
Windsor, NS B0N 2T0
Tel: (902) 798-2284
Enfield Office: (902) 883-3338http://www.hantscounty.com
Straits Highlands Regional Development
Authority
P.O. Box 2200
32 Paint St.
Port Hawkesbury, NS B0E 2V0
Tel: 625-3929
Fax: 625-1559
Website: www.strait-highlands.ns.ca
Kings Community Economic Development
Agency
28 Aberdeen Street, Ste. #5
Kentville, NS B4N 2N1
Tel: (902) 678-2298
Fax: (902) 678-2324
Website: www.kingsced.ns.ca
Pictou Regional Development Commission
Business Service Centre
980 East River Road
New Glasgow, NS B2H 3S5
Tel: (902) 752-6159
Toll Free: 1-888-412-0072
Fax: (902) 755-2722
Web: www.wearepictoucounty.com
South West Shore Development Authority
P.O. Box 131
Yarmouth, NS B5A 4B1
Tel: (902) 742-3210
Fax: (902) 742-3107
Website: www.swsda.com
Western Valley Development Authority
P.O. Box 278
86 Atlantic Ave.,
Cornwallis Park, NS B0S 1H0
Tel: (902) 638-8100
Fax: (902) 638-8101
website: www.wvda.com
Travel Trade Organizations
Canada
Association of Canadian Travel Agencies
(ACTA)
130 Albert Street, Suite 1705
Ottawa, ON K1P 5G4
Tel: 613-237-3657
Fax: 613-237-7052
Website: www.acta.ca
Canadian Bus Association (CBA)
451 Daly Avenue
Ottawa, ON K1N 6H6
Tel: 613-238-1800
Fax: 613-241-4936
Website: www.buscanada.ca
Ontario Motor Coach Association (OMCA)
4141 Yonge Street, Suite 306
Toronto, ON M2P 2A8
Tel: 416-229-6622
Fax: 416-229-6281
Website: www.omca.com
United States
American Bus Association (ABA)
700 13
TH
St., NW, Suite 575
Washington, DC
20005-5923
Tel: 202-842-1645
Toll free: 1-800-283-2877 (US and Canada)
Fax: 202-842-0850
Website: www.buses.org
American Society of Travel Agents (ASTA)
1101 King St., Suite 200
Alexandria, VA 22314
Tel: 703-739-2782
Fax: 703-684-8319
Website: www.astanet.com
Group Leaders of America, Inc. (GLAMER)
P.O. Box 129
Salem, OH 44460
Tel: 1-800-628-0993
Fax: 330-337-1118
Website: www.glamer.com
Page x A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
International Association of Convention &
Visitor Bureaus
2025 M Street, NW Suite 500
Washington, DC
20036
Tel: 202-296-7888
Fax: 202-296-7889
Website: www.iacvb.org
CrossSphere (formerly NTA)
546 E. Main Street
Lexington, KY
40508
Tel: 606-226-4444
Toll free: 1-800-682-8886
Fax: 606-226-4414
Website: www.crosssphere.com
Travel Industry Association
1100 New York Avenue, NW, Suite 450
Washington, DC
20005-3934
Tel: 202-408-8422
Fax: 202-408-1255
Website: www.tia.org
Travel and Tourism Research Association
(TTRA)
PO Box 2133
Boise, ID
83701-2133
Tel: 208-853-2320
Fax: 208-853-2369
Website: www.ttra.com
United States Tour Operators Association
(USTOA)
275 Madison Avenue, Suite 2014
New York, NY
10016
Tel: 212-599-6599
Fax: 212-599-6744
Website: www.ustoa.com
APPENDIX VI
emerit Standards and Certification
Page i A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
APPENDIX VI
emerit STANDARDS AND CERTIFICATION
The Nova Scotia Tourism Human Resource Council (http://www.tourismhrc.com ) is a national
partner of the Canadian Tourism Human Resource Council and has been actively involved in the
development of National Occupational Standards for various occupations in the tourism industry,
and is also the certifying body for non-apprenticeable trades in Nova Scotia. As well, the
NSTHRC is the local partner for emerit, "Canada's best tourism training tools". emerit offers
flexible learning options including on-line accessibility and traditional workbooks. This allows
for self-directed learning of specific skill based modules and also permits individuals to challenge
full certification.
Standards
Standards presently (2005) exist for 49 occupations. These are listed on the following page.
What are Standards?
Standards are statements outlining the attitude, knowledge, and skills required of an individual in
order to be considered competent in an occupation. Standards clarify expectations and can be
used to design consistent training, education, and professional development programs.
How are Standards Developed?
The Standard development process is based on the philosophy that the tourism industry must
determine its own direction. The individuals best suited to determine the content of the Standards
are those directly involved in the occupation. The mandate of the Nova Scotia Tourism Human
Resource Council is to bring together business, labour, education, and training, and other
stakeholders to define the standards and to ensure that they guide education and training.
Standards for a specific occupation become National once seven provinces or territories and one
national association validate and accept them.
Who Benefits from Standards?
Eventually, everyone in contact with the tourism industry will benefit from the evaluation of
performance in relation to industry Standards. As Standards gain recognition, industry
professionals will maintain or increase personal skills, resulting in direct benefits to local and
visiting consumers.
NATI ONAL WORKBOOKS
PRI CE ENG FRE
Bartender 75.00
Campground Operator 75.00
Entry Level Cook 75.00
Food and Bevarage Manger Set 275.00
Food and Beverage Server 75.00
Freshwater Angling Guide 75.00
Front Desk Agent 75.00
Guest Services Attendant 75.00
Heritage Interpreter 75.00
Housekeeping Room Attendant 75.00
Hunting Guide 75.00
Local Tour Guide 75.00
Reservations Sales Agent 75.00
Retail First Level Manager 75.00
Retail Sales Associate 100.00
Sales Manager 75.00
Special Events Coordinator 75.00
Special Events Manager 75.00
Supervisory Skills (set of 4) 275.00
Tour Director 75.00
Tourism Essentials 75.00
Tourism Visitor Information Counsellor 75.00
Travel Counsellor 75.00 N/A
TRAI NER’S GUI DES FOR WORKBOOKS
PRI CE ENG FRE
Bartender/ Food and Beverage Server 150.00
Food and Beverage Manager 150.00
Front Desk Agent 150.00
Guest Services Attendant 150.00
Heritage Interpreter 150.00
Housekeeping Room Attendant 150.00
Local Tour Guide/Tour Director 150.00
Reservations Sales Agent 150.00
Sales Manager 150.00
Tourism Visitor Information Counsellor 150.00
Tourism Essentials 150.00
CAREER PLANNI NG RESOURCES
PRI CE ENG FRE
Career Awareness Video 27.50
Career Expo Manual 45.00
Career Planning Guide (Updated) 35.00
The Student’s Travel Map: 2002 (Updated) 35.00
Tourism – A World of Opportunity (CD-Rom) 25.00
HUMAN RESOURCE BUSI NESS TOOLS
PRI CE ENG FRE
Aboriginal Tourism - A Business Guide 25.00
Performance First Series: 155.00
Great Performances 25.00
Less Talk, More Communication 25.00
Making Training Work 25.00
One-on-One Training 25.00
Predicting Performance 25.00
Setting the Stage 25.00
Winning Ways 25.00
Business Builders Series: 160.00
Developing an Operational Plan 20.00
Developing Your Business Profile 20.00
Getting Your Business Market Ready 30.00
Management and Labour Relations 30.00
Managing Your Business Finances 20.00
Marketing Essentials for Small Business 20.00
Sales Forecasting 20.00
Shaping Your Business Strategy 20.00
HR Tool Kit 195.00
Performance Paks (ELC,HRA, FDA, FBS, TVIC) 25.00
OCCUPATI ONAL STANDARDS
PRI CE ENG FRE
Bartender 40.00
Beverage Services Manager 40.00 N/A
Banquet Server 40.00
Banquet Manager 40.00
Campground Operator 40.00
Catering Manager 40.00
Casino Dealer 40.00
Casino Slot Attendant 40.00
Catering Manager 40.00 N/A
Director of Sales and Marketing 40.00 N/A
Door Staff 40.00
Food & Beverage Manager 40.00
Food & Beverage Server 40.00
Foodservice Counter Attendant 40.00 N/A
Freshwater Angling Guide 40.00
Front Desk Agent 40.00
Golf Club General Manager 40.00
Guest Services Attendant 40.00
Heritage Interpreter 40.00
Housekeeping Room Attendant 40.00
Hunting Guide 40.00
In-room Dining Server 40.00
Kitchen Helper 40.00
Line Cook 40.00 N/A
Local Tour Guide 40.00
Night Auditor 40.00
Outdoor Adventure Guide 40.00
Professional Cooking 80.00
Reservations Sales Agent 40.00
Retail First Level Manager 40.00 N/A
Retail Sales Associate 40.00 N/A
Sales Manager 40.00
Ski Area/Resort Occupational Guidelines 85.00
Small Business Owner/Operator 40.00
Snowmobile Operations 40.00
Special Events Coordinator 40.00
Special Events Manager 40.00
Supervisory Skills 40.00
Taxicab Driver 40.00
Ticket Agent 40.00
Tour Guide/Director 40.00
Tour Operator 40.00
Tourism Small Business Owner/Operator 40.00 N/A
Tourism Trainer 40.00
Tourism/Visitor Information Counsellor 40.00
Tourism/Visitor Information Supervisor 40.00
Travel Counsellor 40.00
Transferable Skills 40.00
Wine Service 40.00
ON-LI NE TRAI NI NG
PRI CE ENG FRE
Bartender (Bundle) 125.00
Modules 25.00
Food and Beverage Server (Bundle) 125.00
Modules 25.00
Front Desk Agent (Bundle) 125.00
Modules 25.00
To order please visit www.emerit.ca or contact 1.800.486.9158.
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Page iii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
For Service Professionals, Standards:
• Identify career paths;
• Identify the skill and knowledge needed
• Enhance the public image of occupations;
• Provide a basis for challenge, self-improvement, and advancement;
• Provide the basis for certification based on competent performance.
For Employers and Owners, Standards:
• Define area where employees must be proficient, which assists in recruiting, training, and
development of staff. It is important to understand that Standards are not a training program
or a training manual in themselves; they do not specify learning objectives, learning activities
or evaluation methods. To serve as a training tool, the Standards need to be translated into a
learning experience with detailed objectives, activities, and evaluations.
• They can be used to create job descriptions and conduct performance evaluations, as well as
to develop and enhance training programs
• Provide employers with a highly trained workforce, which can increase productivity and
decrease costs incurred by staff turnover.
For Educators, Standards:
• Provide the basis for curriculum and program development;
• Identify areas of industry where educational expertise is needed and applicable.
For Students, Standards:
• Promote the tourism/hospitality industry as a viable and fulfilling career choice;
• Identify career options within the industry.
For the General Public, Standards:
• Increase the level of professionalism of employees in the tourism/hospitality industry. This
results in a higher level of service to customers and a better image of the industry.
Many Standards are available in a Workbook that is a self-study guide including all the Standards
as well as exercises, performance reviews and self-tests. The Workbooks are available through
the Nova Scotia Tourism Human Resource Council and can be ordered on-line from their web
site.
National Certification
What is National Certification?
National Certification is a three step process. Professionals who achieve National Certification
will be recognized across Canada for meeting industry requirements in their selected occupation.
The candidate must be employed in the occupation and must have achieved a minimum number
of hours work experience (varies depending on the occupation) prior to completing certification.
Page iv A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Candidates may challenge the knowledge component (i.e. the written examination) of the process
at any time with no prerequisite. Study materials are recommended to assist in achieving optimal
results.
The Certification process is as follows:
Step 1: Written Examination
The examination tests the candidate’s familiarity with the knowledge component of the
Standards. If unsuccessful, re-testing may be arranged. Oral examinations are available in
special circumstances. Some certification exams are available on-line.
Step 2: Performance Review
The Performance Review is derived from the Standards and enables the candidate to practice
performance skills on-the-job. The candidate is encouraged to practice the skills outlined in the
Standards using the Performance Review as a guide. The review can be completed as it best suits
the candidate’s situation, but it is recommended that a candidate work together with his or her
supervisor or a certified peer to complete it. The supervisor/certified peer can provide feedback
for those skills which may need improvement.
When the candidate is ready to have his or her performance skills evaluated, the candidate
contacts the Certification Team and requests an Industry Evaluation. In addition, the candidate
must have a minimum number of hours experience (varies by occupation) before the Industry
Evaluation can be conducted.
Step 3: Industry Evaluation
A trained evaluator observes the candidate on-the-job to ensure the candidate possesses the
essential competencies of the occupation as established by the industry.
Certification
The Certification Team reviews the file to ensure that all requirements have been met. The
successful candidates receive a certificate, a pin, and the Industry Evaluation comments.
Unsuccessful candidates receive the Industry Evaluation comments and are encouraged to
reapply.
doc_545300561.pdf
This is one of a series of tourism development manuals commissioned by the Tourism Division, Department of Tourism, Culture and Heritage to assist Nova Scotians in the establishment of tourism businesses and in planning for the delivery of tourism services in the province.
A Guide to Starting and
Operating a Receptive Tour
Operator Business in
Nova Scotia
Prepared by:
THE ECONOMIC PLANNING GROUP of Canada
Halifax, Nova Scotia
COPYRIGHT
©
2005 by Her Majesty the Queen in right of the Province of Nova
Scotia
All rights reserved. No part of this publication may be reproduced without the prior
written consent of The Province of Nova Scotia.
The publisher is not engaged in rendering legal, accounting or other professional advice.
If legal advice or expert assistance is required, the services of a competent professional
should be sought. The information and analysis contained herein is intended to be
general and represents the research of the authors and should in no way be construed as
being definitive or as being official or unofficial policy of any government body. Any
reliance on the Guide shall be at the reader’s own risk.
Table of Contents
SECTION 1: INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purpose of the Manual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 The Business of the Receptive Tour Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Contents of the Manual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
.
SECTION 2: THE MARKET FOR RECEPTIVE TOUR OPERATORS IN NOVA SCOTIA . . 4
2.1 Industry Trends Supporting the Development and Growth of Receptive Tour Operatorss . . . . . 4
2.2 Market and Product Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Target Marketss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Nova Scotia’s Tourism Industry Today . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Nova Scotia’s Tourism Partnership Council . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Nova Scotia’s Vision for Tourism - Challenging Ourselves . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3: REQUIREMENTS FOR SUCCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 The Marketing Approach to Designing Your Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Strategic Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Market Niche . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 Experiential Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 Travel Trade Expectations of Receptive Operators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6 Quality Website and Internet Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.7 Customer Relationship Marketing and Loyalty Management . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.8 Product and Market Intelligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.9 A Marketing Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.10 Strong Relationships with Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.11 Multi-Season Potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.12 Entrepreneurship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.13 Flexibility to Adapt and Grow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.14 Management Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.15 Computer Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.16 Staff Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.17 Pricing for Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.18 Sufficient Capital and Affordable Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.19 Quality Program Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.20 Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.21 Minimize Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.22 Membership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.23 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4: PREPARING A BUSINESS CONCEPT AND STRATEGIC PLAN . . . . . . . . . . . 18
4.1 Opportunity Search and Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Short Listing Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3 Travel Trade and Supplier Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.4 Retail Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.5 Market Positioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Table of Contents cont’d
SECTION 4: PREPARING A BUSINESS CONCEPT AND STRATEGIC PLAN continued
4.6 Business Concept Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.7 The Strategic Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 Retail Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.5 Market Positioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.6 Business Concept Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.7 The Strategic Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5: FEASIBILITY ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1 How to Do A Feasibility Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Capital Investment Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Market Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Competitive Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Conclusion of the Market Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.2 Projection of Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.3 Projections of Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Cost of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Direct Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Overhead Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Operating Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Net Income, Cash Flow and Return on Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.4 Is it Worth it? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Where to Get Help . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.5 Preparing a Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6: PACKAGE DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.1 Marketing Power of Packages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.2 Types of Packages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Group Tour Packages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Individual Touring/Travel Packages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.3 Principles of Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.4 Developing the Package . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.5 Pricing Your Package . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.6 Product Management and Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Product Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Contingency Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Your Management Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Customer Communications/Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Refund and Credit Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Tracking Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
6.7 Phasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7: NEGOTIATING TRAVEL TRADE PARTNERSHIPS . . . . . . . . . . . . . . . . . . . . . 58
7.1 Coordination and Liaison/Quality Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Table of Contents cont’d
SECTION 8: SUPPLIER PARTNERSHIPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.1 Potential Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Suppliers You Can Work with . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.2 Price Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.3 Sales Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.4 Coordination and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9: LEGAL, REGULATORY, AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.1 Vehicle Permits and Licensing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.2 Other Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
License to Sell Travel Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
License to Sell Airline Tickets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Nova Scota Department of Environment and Labour . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Competition Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
9.3 Personal Information Protection and Electronic Document Act . . . . . . . . . . . . . . . . . . . . . . . . . 72
9.4 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Vehicle Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
General Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Professional Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Travel Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Harmonized Sales Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Employment Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Nova Scotia Workers’ Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Corporate Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Business Occupancy Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.6 Registration of Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Provincial Business Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Federal Business Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Business Number Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 10: OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.1 Organization and Staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Selecting Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Benefits of Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Hiring Tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.2 emerit Standards and Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
10.3 Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Staff Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Management Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Table of Contents cont’d
SECTION 10: PLANNING FOR OPERATIONS continued
10.4 Reservations and Sales Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.5 Product Development and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.6 Marketing Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.7 Financial Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.8 Program Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.9 Customer Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Customer Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Travel Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10.10 Business Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10.11 Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 11: THE MARKETING PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
11.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Developing a Marketing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
11.2 Marketing to the Travel Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Distribution Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Potential Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Methods and Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Collateral Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Internet Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 12: THE FUTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
ACKNOWLEDGEMENTS
APPENDIX I: MARKET DATA
APPENDIX II: FINANCING
APPENDIX III: CALCULATION OF NET INCOME, CASH FLOW AND RETURN ON
INVESTMENT
APPENDIX IV: BUSINESS STRUCTURES
APPENDIX V: LIST OF CONTACTS
APPENDIX VI: STANDARDS AND CERTIFICATION
SECTION 1
INTRODUCTION
Page 1 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 1
INTRODUCTION
1.1 Purpose of the Manual
This is one of a series of tourism development manuals commissioned by the Tourism Division,
Department of Tourism, Culture and Heritage to assist Nova Scotians in the establishment of
tourism businesses and in planning for the delivery of tourism services in the province. This
manual deals with establishing a receptive tour operator business. There are other manuals that
deal with establishing different kinds of tourism businesses such as a roofed accommodation, a
campground, local sightseeing tour operator, restaurant, tourism retail business, and an adventure
tourism operation. There are also manuals on how to plan for, develop and market tourism in
your community, on the operation and establishment of a local visitor information centre, on
establishing an attraction and on marketing for tourism businesses. The manuals were originally
prepared in 1996 and 1999 and were updated in 2005. A new manual on community festivals and
events was prepared in 2005.
The purpose of this manual is to provide you with some of the information necessary in
establishing, improving and operating a Receptive Tour Operator business in Nova Scotia. It
should be noted that this information is a guide only.
It is strongly suggested that the reader undertake efforts to verify any information on which their
business plan is based and not rely solely on the information in this manual. There are areas
where you may want to consider retaining the appropriate professional expertise to assist you.
While the information contained in this manual is believed to be accurate, as of the Winter of
2005, it is not so warranted. The reader should note that federal, provincial and municipal
regulations, taxes, etc. change frequently and it is recommended that you check with the
appropriate authorities, listed in the Appendix, including representatives of the Tourism Division,
Department of Tourism, Culture and Heritage and your local Business Service Centre (on-line at
www.gov.ns.ca/snsmr/ ) or at numerous Access Nova Scotia centres around the province, to
obtain up-to-date information on these matters.
1.2 The Business of the Receptive Tour Operator
A tour operator is a business that develops, manages, and operates tours and other packaged
tourism products. There are essentially three types; outbound, inbound and receptive:
• The outbound operator focusses on its target markets, developing tour products that will sell
to those markets and then taking their clients to different destinations throughout the world.
Page 2 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• The inbound tour operator focusses on the destination in which they are based, developing
and marketing tours and packages at the destination. It positions itself as being a specialist on
that destination.
• The receptive operator is a sub-contractor to the outbound tour operator, providing various
services in support of the outbound tour operator’s program at the destination.
Inbound operators typically also provide receptive services to other operators and receptive
operators typically will develop and sell their own packages as well. In other words, those
operators specializing in the destination in which they are based usually do both things. Given
this, in discussing the receptive tour operator in this manual, we will assume that the business
does both.
As indicated, the receptive operator provides tour arrangements at their destination to outbound
operators operating tours in the area. For example, a tour operator in the USA plans and markets
a tour involving several days in Nova Scotia. A receptive tour operator in Nova Scotia negotiates
rates with suppliers, books the accommodation and other arrangements, and generally handles the
delivery of some or all of the tour services for the Nova Scotia portion of the itinerary, or for
Atlantic Canada as a whole.
There are no fixed formulas as to the relative jurisdictions or roles of the two operators. Each
arrangement is a customized one, appropriate to the situation and each operator’s preferred
manner of operation. Having said that, generally the outbound operator handles the marketing
and inter-city transportation, while the receptive handles the arrangements at the destination for
some or all of the tour.
The business of a receptive tour operator can be varied, and each operation is likely to have a
somewhat different mix of activities and services. The types of services typically provided to
outbound tour operators include:
• Negotiating rates with suppliers;
• Booking accommodation and other arrangements;
• Helping with itinerary planning;
• Providing meet and greet services
• Providing ground transportation
• Providing local tours
• Providing local, step-on guides;
• Coordinating and administrating local arrangements and services, or subcontracting these
services in some instances;
• On-site problem solving.
Receptive operators may provide similar services for other types of clients as well: for example,
companies that plan and market incentive travel services.
Organizations that plan and manage conventions and meetings also sometimes use receptive
operators to handle local tours and hospitality services. (More typically, however, these services
are provided by "destination management companies", or "DMCs", at least in major centres
where DMC services are available.)
Page 3 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
This manual deals with establishing a receptive tour operator business dealing in each of these
types of services, except for DMC services and retail sales.
We make constant references in the manual to ‘the travel trade’. These are businesses in the
tourism industry who act as intermediaries between the end consumer and the product suppliers.
They include:
• Tour operators - outbound, inbound and receptive;
• Travel agencies;
• City/regional destination marketing organizations (DMOs)
• Provincial government tourism marketing departments (PMOs);
• Travel wholesalers and brokers.
This manual is designed for those starting a small-to medium-size business, and is limited to the
elements of the business common to them.
1.3 Contents of the Manual
This manual provides information and advice on a variety of topics which will be important in
understanding the requirements for success: assessing opportunities, planning and development,
and starting operations. The following topics will be covered:
The market for receptive tour operators in Nova Scotia;
Requirements for success;
Preparing a business concept and strategic plan;
Feasibility analysis;
Package development;
Negotiating travel trade partnerships;
Supplier partnerships;
Legal, regulatory, and tax matters;
Planning for operations;
The marketing plan;
The future.
Appendices at the back of the manual cover the following:
Market data;
• Financing;
• Calculation of net income, cash flow and return on investment;
• Business structures;
• List of contacts;
• Standards and Certification.
SECTION 2
The Market for Receptive Tour Operators
in Nova Scotia
Page 4 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 2
THE MARKET FOR RECEPTIVE TOUR
OPERATORS IN NOVA SCOTIA
2.1 Industry Trends Supporting the Development and
Growth of Receptive Tour Operators
The North American tour business has undergone substantial changes in the past 20 years, among
them the growth in the role of the receptive tour operator. This has been supported by the
following marketplace changes:
• Deregulation of the motorcoach industry in the US has spurred an increasing number of
smaller tour operators.
• The growth in ‘loyalty’ programs of various kinds offered by companies, in the travel sector
and in a diversity of other industries as well, has spawned the growth of a major new market
sector for tour operators, that of customized tours and FIT packages for corporate clients who
use them as client redemption products.
• The diversity of itineraries offered by tour operators has expanded substantially.
• There has been growth in small group tours that are oriented to special interest activities such
as learning, culture and heritage or outdoor adventure.
• There has been growth in independent travel packages, commonly referred to as ‘FIT’ (Fully
Independent Travel/Tour) packages.
• Shorter, regional tours are increasing in popularity.
In each case, these trends have created a challenge in trip planning for the tour operator, making it
more appealing and cost-effective in many cases for the tour operator to use a receptive operator at
the destination to assist with product planning and delivery. The growth in the use of receptive
operators can also be attributed to their superior destination product knowledge, their established
relationships with suppliers at the destination, their ability to get the best local guides, and the
added credibility and authenticity the use of local tour operators and guides contributes to the tour.
Page 5 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
2.2 Market and Product Trends
Consumer tastes and expectations change over time and consumers are becoming more demanding
in a number of respects. Some of the marketplace changes seen in recent years with direct
relevance to tours are presented below:
• The rapid growth in the role of the Internet has had profound effects on how people seek out,
plan and book travel products. This is having a number of effects on the tour industry; for
example, more people buying direct from the tour operator rather than through a travel agency.
It also is allowing smaller, niche tour operators with specialty products to reach the consumer
much more effectively. It is also allowing consumers to customize FIT packages to their
liking and booking them online. It has also spawned the growth in Internet ‘travel portals’,
such as www.expedia.ca and www.travelocity.ca.
• Selling tours and packages by direct marketing methods to consumers is a growing marketing
trend. This has been facilitated by modern ‘customer relationship management’ (CRM)
systems designed to build loyalty among past clients.
• The modern traveller is seeking a high level of ‘experiential’ value today. Just having a
getaway and a rest is not good enough; they are looking for experiences that are unique,
exciting, fulfilling and personally enriching, and that will be memorable.
• The modern traveller also prefers products that allow flexibility and customization.
• Today’s educated and well-travelled consumers strongly prefer authenticity. People want
experiences that are genuine, not contrived, and they are more discriminating in this respect
than in the past.
• There has been growth in interest among consumers in culture and heritage products, and in
outdoor products and experiences.
• Well-travelled consumers have high expectations about the standards of hospitality and service
they expect to receive.
• Consumers expect a high standard of cleanliness and repair in all facilities.
• They want food that has a local character, even with fast food items.
• They are concerned about the environment. They expect the operator to observe high
standards of environmental practice and they want to learn about environmental features of the
tour.
• Consumers today expect good value; they are prepared to pay for value but expect to receive
it. Low cost is not the main concern. They will pay more if it is worth it.
• Consumers, more than in the past, like an adventure but they want adventure that is safe. They
still like sightseeing but many of them want to participate in activities as well.
Page 6 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
These trends have resulted in changes in tour products and the way tour operators do business,
such as the following:
• Tour operators are developing group tours with more flexibility in an effort to respond to the
desire among many customers for some customization in their itineraries. They are using a
‘hub and spoke’ approach to itinerary design, involving two or more night stays in different
communities, providing individual tour clients with different optional activities on the non-
travel day.
• The desire for flexibility and customization is a major factor in the growth in FIT packaged
travel. FIT offerings have therefore grown beyond the ‘fly-drive’ package to fly-drive-plus-a-
menu-of-optional-add-ons.
• Packages are being redesigned to add more authenticity and more experiences. Meeting real
people, visiting seniors homes, grain elevators, and fish packing plants are examples.
Basically, packagers are adding features which genuinely represent the culture and lifestyle of
the community and region. Tour operators call these life seeing tours, as opposed to
sightseeing tours.
• Value-added features are playing a larger role in tour design, to appeal to the mid-range
market prepared to pay more if the value is there.
Basically, tour programming is becoming more participatory, enriching and flexible, in response to
demands for more meaningful, experiential vacations that are both educational and fun, as well as
providing the opportunity for customization by individual clients.
2.3 Target Markets
The main markets available to a Nova Scotia receptive operator include:
• Outbound motorcoach tour operators located outside of the province who operate coach tours
to and within Nova Scotia;
• Outbound tour operators who develop and market other Nova Scotia tourism packages such as
independent tours, destination packages, and special interest/special activity packages;
• Travel agencies, group leaders, and others who develop and market custom tours;
• Destination management companies and others who plan and manage conventions and
meetings at your destination;
• Companies providing incentive travel products and services.
• Corporations seeking a customized tour/package program for their staff or their clients.
Appendix I provides data on the volume of travel in Nova Scotia by the number of visitors to the
province and by their origin.
Page 7 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
2.4 Nova Scotia’s Tourism Industry Today
As a member of Nova Scotia’s tourism sector, you need to be aware of the Nova Scotia Tourism
Partnership Council (TPC) and Nova Scotia’s Vision for Tourism.
Nova Scotia Tourism Partnership Council
The Nova Scotia Tourism Partnership Council (TPC) is an industry and government partnership
that shares in planning and decision making for tourism marketing, research and product
development in Nova Scotia. The TPC works with industry stakeholders to realize Nova Scotia's
potential as a world class four season destination. It was established following a 1996 Tourism
Strategy for Nova Scotia that, among other things, called for a true partnership between the
tourism industry and government in everything from marketing to research and tourism
development.
The Council consists of 16 members, 14 of whom are tourism industry leaders, managers and
business owners. Members of the TPC are selected through an industry call for applications. They
must be owners, operators or senior managers of tourism related businesses, and consideration is
given to various other criteria, in the selection of members.
The TPC oversees the development of the Tourism Plan annually which is presented to the
industry at the TIANS fall tourism conference. The Council is also involved in a wide variety of
other programs and initiatives. Visit their website at www.nstpc.com for up-to-date information.
The TPC has three core committees - an Executive Committee, a Long-Term Integrated Planning
Committee and a Short-Term Integrated Planning Committee.
Nova Scotia's Vison for Tourism - Challenging Ourselves
“100% Tourism Revenue Growth by 2012"
The Tourism Partnership Council's Vision Committee spent two years (2000-2002) developing a
process to create a Vision for Nova Scotia's Tourism industry. The Committee looked at issues
that the tourism sector could influence or change that would help to create growth and improve
industry performance. After a process that included industry workshops and consultations, 11
Vision recommendations were identified for implementation.
These recommendations cover product development, environment, the administration of tourism,
marketing, technology, quality, human resources, transportation and research. Responsibility for
leading the implementation of the recommendations has been divided between the Tourism
Partnership Council, TIANS and the Department of Tourism, Culture and Heritage. For up-to-date
information on the implementation of Nova Scotia's Vision for Tourism, check the Tourism Vision
section of the TPC's website ( www.nstpc.com and select Tourism Vision from the menu bar).
Page 8 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
The Tourism Vision is a catalyst to assist Nova Scotia's tourism industry to evolve and grow. It is
not cast in stone and is an “unfolding process”. Achieving the Vision will require change - by all
tourism stakeholders including individual businesses - in how tourism is managed and delivered
in Nova Scotia so as to improve quality and generate increased tourism revenues.
Success will be measured “not only by growth in revenues but our ability to work together,
maintain our culture and authentic character, develop new markets and products, attract new
visitors and improve the recognition of our sector's contributions to our province and various
levels of government”.
For more information on how you can be involved in the Vision for Tourism visit www.nstpc.com.
SECTION 3
Requirements for Success
3 The Economic Planning Group, Tourism is Your Business: Marketing
Management, prepared for Tourism Canada, 1986
Page 9 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 3
REQUIREMENTS FOR SUCCESS
The receptive tour business is a challenging one, and success is dependent on a variety of things.
Trusting to good luck is not recommended. The way you design and develop your business, how
you operate it, how you build business partnerships and how you market it will all play major roles
in determining how well you do. Rather than leave it to chance, the smart operator is sensitive to
the success variables in the business. We will consider the key variables.
While the receptive tour business is challenging, and requires real expertise to be successful, it can
also be a very exciting and enjoyable occupation. You get to be part of an exclusive community of
travel trade professionals, most of whom are motivated, enthusiastic and customer/service oriented
people. Also, if you do a good job, your happy customers will give you a lot of personal
satisfaction.
Each of these are principles of what it takes to succeed. They should be read as an overview of
what you need to accomplish. How you accomplish them is the subject of the rest of the manual.
3.1 The Marketing Concept Approach to Designing Your
Business
To be successful today, owners and managers of tourism businesses have to have a marketing
orientation – a customer focus. That means everyone in the business must make decisions by
asking the question, "How can I best meet the needs of the market and the individual customer?"
Marketing orientation can be defined as follows:
"Marketing orientation is a way of thinking - a frame of mind. It is, if you like, a business
philosophy. If you adopt a marketing orientation, it means that whenever you think about
your business, you do so from your customers' point of view, not from your own. It means
accepting the idea that the purpose of your business is to serve the wants and needs of your
customers, and to meet or exceed their expectations.
In other words, it means putting your customers first. For this reason, it is sometimes also
called a customer orientation.
1
Why is this so important? Why can't we just do what we think is best? Because satisfying a
customer's expectations involves doing a lot of things right, and that doesn't happen easily.
Page 10 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Some tourism businesses think it is good enough to have a decent sign in front of their property
and buy an ad in the Nova Scotia Travel Guide ("Doers and Dreamers" Guide) and then wait for
customers to come. Others - those taking a marketing orientation to their business - make an effort
to identify their best market prospects, modify their product to best serve the needs and demands
of the different groups they are targeting, and then design their marketing activities to focus on
these groups. While having a good sign and an ad in the "Doers and Dreamers" Guide will very
likely be part of this approach, these should not be relied on, by themselves, to bring the business
in the door.
In the receptive tour operator business, like many businesses, the fundamental key to success is to
design and operate your business in response to the customer’s needs and demands. The premise is
that you need to focus on the needs and wants of your customers in all aspects of managing your
business, and that all management actions should link back to providing the customer with what he
or she needs or wants. It forces the manager to look beyond the day to day demands of the
business and focus on the customer in decision-making - on how the decision will benefit the
customer.
The marketing concept is in contrast to the production concept, in which the business is managed
in response to the demands of the facilities and the staff. Too many managers in the tourism
industry do this, and it is understandable, because these day to day demands are real and have to be
dealt with. But the effective manager has to be looking beyond these demands, at the customers,
and at how the customer is going to benefit from the decision being contemplated.
Another common management approach is the sales concept in which the customer is seen to be
central to the success formula, not in terms of what the customer needs or wants but in terms of
what you have to sell. The challenge is to get the customer to buy what you have to offer, by
whatever means possible.
The problem with the latter two management concepts is that they have little to do with the things
that are going to build customer loyalty for your business. They have to do with your needs, of
course, but not the needs of the person that is really key to the business, the customer. Customer
loyalty comes from providing what the customer is looking for. With customer loyalty comes
repeat business, word of mouth referrals, and a willingness to pay the price for the product. If
enough customers do this, your business will be a success.
3.2 The Strategic Plan
Developing your business in the context of the marketing concept requires a strategic plan for the
business, one that identifies the best market opportunities along with all the key business features
necessary to successfully and profitably pursue those opportunities. The strategic plan is an
overall, long term plan for the business, setting out the following:
1. The long term vision and goals, and the measurable objectives for the business
2. The markets to be pursued and the marketing strategies and networks to be employed
3. The markets and services to be developed and delivered that will have the features necessary
for them to succeed in the competitive marketplace
4. The resources that will be bought to bear in achieving success and profitability
5. The tracking tools to measure progress
Page 11 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
The specifics of what is required for success are set out below.
3.3 Market Niche
You need to offer services for a product type where there is a shortage of services, basically a
market niche you can make your own for your destination. The elements you want to define
include:
• The geographic area you are specializing in;
• The types of products and experiences in which you are specializing in;
• The services you are prepared to offer.
The ideal situation is to find a niche that is under-serviced and has a large and growing market.
3.4 Experiential Products
The successful receptive tour operator knows that they are in the experience business that it is the
quality of the experience received by the consumer and the value perceived that is key to
marketability and long-term success. Product development must always focus on this as the
central issue. Equally important are the unique appeals of a product: what makes it special in the
eyes of the consumer, what differentiates it from the products of competitors. This makes product
development a key issue which must be managed carefully throughout the start-up phase and
ongoing life of the company.
3.5 Travel Trade Expectations of Receptive Operators
Outbound tour operators look for a number of things from a receptive tour operator:
• Knowledge of and adherence to industry practices;
• Skill in designing the right products for their market - getting it right the first time;
• Detailed communication of information, arrangements, etc.;
• Timely (next day) turnaround in response to requests;
• Quality planned itinerary proposals;
• Detailed knowledge of the destination and its suppliers.
This last issue is why an outbound operator uses a receptive operator. Without detailed product
knowledge, the receptive has little to offer. With it, they are invaluable.
This is very much a personal-relationship business. It’s a small community of professionals who
nurture personal relationships of trust and then rely on them. It’s hard to break in and earn their
confidence, but once you do, you can rely on their continued support for as long as you continue to
deliver.
You need to learn about the business of tour operators and of the various players in the travel
trade, in general.
Page 12 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
3.6 Quality Website and Internet Strategy
The Internet has rapidly become a vital tool for every tourism business. It provides ready access to
all kinds of information of value to the business. It also makes possible the website, which
companies are increasingly finding to be their primary marketing tool today. Having a good
website is a vital part of every tourism business; not having one, or a reasonably good one, is a dis-
qualifier in many markets.
Having a website is not the only issue associated with the Internet, as discussed below. It also
makes possible email, and modern e-marketing techniques. And working in conjunction with a
company’s website, a website visitor registration program and a database system, it provides the
basis for direct, one-on-one, highly targeting direct marketing to prospects.
3.7 Customer Relationship Marketing and Loyalty
Management
Following from the modern direct marketing methods and internal customer databases available
today is the concept of customer relationship management, or CRM, which has become a key
strategic focus of many businesses today, including tourism businesses. If you plan to operate as a
tour operator as well as as a receptive tour operator, CRM will be critically important to your
business.
The idea here is that once you have a good prospective customer through your marketing efforts,
or a prospective repeat customer, along with some information on the purchase preferences of that
prospect, you have an opportunity to actually build a relationship with that individual, such that
they buy from you; ideally, again and again. They become a loyal customer. Company ‘loyalty’
programs have further built upon this concept; AIR MILES and Aeroplan are examples.
3.8 Product and Market Intelligence
As mentioned above, it’s product knowledge that gives the receptive operator its value in the
marketplace. You should have detailed files on products that you can recommend and that you
use, you should have visited the properties, met the management, experienced the service,
inspected the facilities.
You need to know about the different types of packaged tourism products and their markets.
At the same time, knowledge of the consumer and the markets for packaged tourism products is a
key as well. You have to be able to see how a particular product or experience might fit into a
package and for which markets and operators.
3.9 A Marketing Network
It is vital to develop credibility in the travel trade and to build a network of relationships with
complementary businesses in the marketing of packages and travel products. In this case, we are
not just talking about outbound tour operators, we include others as well. The idea is to piggyback
on the marketing program and resources of others that are targeting the same markets as you and
that are willing to work with you, thereby extending your marketing reach and effectiveness.
Page 13 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Examples include:
• Nova Scotia Tourism Partnership Council/Tourism Division, Department of Tourism,
Culture & Heritage
• Your regional or city destination marketing organization, such as Destination Halifax or
the South Shore Tourism Association
• Destination management companies
• Airline or hotel chain marketing departments
• Suppliers of ground arrangements and packages
Developing and maintaining such relationships and networks can be very valuable for your
business. Also, everyone at the destination is part of the ‘destination sell’ and needs to work
together to that end.
We will discuss the "how to’s" of this later in Section 7.
3.10 Strong Relationships with Suppliers
It is essential that you establish a relationship of mutual confidence and support with the
businesses that will be your suppliers: the local hotels, attractions, sightseeing businesses, etc.
You are going to be asking them to give you the very best prices they can and to transfer blocks of
their product into your control. They have to believe in your ability to produce.
3.11 Multi-Season Potential
One of the challenges confronting Nova Scotia's tourism industry is its seasonality. The province
is more fortunate than many regions of Canada in that it enjoys a long tourism season which
extends well into the fall and it is lengthening each year. However, it is still a challenge to
maintain sufficient business volumes and high enough rates throughout a major portion of the
year.
It is important that the business be able to cater to a combination of markets which, together, have
significant potential to sustain the business throughout more than one season, and preferably for
several seasons. These should be markets which don't require heavily discounted rates.
3.12 Entrepreneurship
Entrepreneurship is the art of being an entrepreneur. An entrepreneur is a business person who, in
operating their business, is constantly responding to market opportunities and challenges. In other
words, an entrepreneur sees his or her business as a mix of assets and people which can respond to
unfulfilled market opportunities that may arise, rather than as a fixed, unchanging product. The
entrepreneur operates on the assumption that markets are changing constantly, that competitive
advantage is a temporary thing, that customer loyalty is fickle, and that opportunities come and go.
Page 14 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
This is in contrast to the business owner who, once they have opened their business, waits for the
business to come in and never seeks to modify their product. The business assumption of such an
operator is that the market changes little over time and that their customers will keep coming. Too
often accommodation operators adopt this latter attitude, while, in reality, the marketplace is much
closer to that perceived by the entrepreneur.
Taking an entrepreneurial approach to planning and designing your business is vital; but it is also
important to continue this management approach in ongoing programming, packaging, and
marketing.
In fact, entrepreneurship is more than just an approach; it is really a state of mind, a perception of
how the world works, an attitude about what is the real role of owners and managers. An
entrepreneur believes that the role of the owner or manager is to be creative, constantly on the
lookout for information and ideas on how to change and improve.
3.13 Flexibility to Adapt and Grow
Part of successful planning for a receptive tour business is anticipating the need to adapt and grow.
Attention should be given to being able to make changes in the business. Perhaps it will be
necessary to shift the market “mix” of the business if one or more markets are disappointing, if
others prove to be better, and if some circumstance opens up entirely new market opportunities.
3.14 Management Skills
The tourism business is a difficult business at which to excel and requires concerted effort and
professional skills in many areas. This particularly applies to receptive tour operations. Success
in this business requires real expertise in the operations of the travel trade and in tourism product
development and marketing. Don’t underestimate the complexities involved and enter the
business ill-prepared in terms of expertise and skills.
In addition to creative skills, the successful receptive tour operator must develop basic
understanding in the areas described in Exhibit 1.
3.15 Computer Skills
The computer has become an indispensable tool for every business today, so having computer
skills is now a virtual necessity for most business people. Managers and staff need to be able to
use word processing to record information and communicate by mail, to send and receive email, to
do research on the Internet, to maintain a decent website and to use a spread sheet for budgeting.
The computer is a also a vital part of virtually all modern internal business systems, including
revenue management systems.
3.16 Staff Skills
Staff skills in many areas are also important, particularly in reservations, guiding tours, and
dealing with the customer. These are addressed in more detail in Section 10.
Staff skills are equally important, if not more important, than the product itself. How well your
staff performs their tasks and relates to your customers is a make-or-break issue in the tour
business.
Page 15 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 1
BASIC SKILLS REQUIRED FOR A RECEPTIVE TOUR OPERATOR
ENTREPRENEURSHIP
• understanding and acceptance of the marketing concept
• understanding of what the customer is looking for
• knowledge about how to reach the customer and what will appeal
MARKETING
• Internet marketing
• advertising media • ad design
• brochure design and distribution • direct selling
• direct mail • market research
• developing packages
• cooperative promotions with tourism partners
• travel trade requirements (tour operators, travel agents)
• group sales
• pricing, commissions, and discounting
• marketing effectiveness measurement
PRODUCT AND PLANNING
• tourism product features at the destination
• services available
• standards of quality
• standards of service
• coordination and quality control
• contingency planning
HUMAN RESOURCES
• hiring and training guides, reservations staff, and product personnel
• staff supervision
• staff motivation
• performance measurement
• organizational structure
OPERATIONS
• tourism product features and variables
• supplier agreements
• reservations systems
• sales administration, including group sales
• tour and package operations and quality control
ADMINISTRATION
• accounting and financial control
• use of computers & business software
• payroll
• business regulations
• finance
• business planning and budgeting
Suggestions on how to acquire these skills are considered in Section 10.
Page 16 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
3.16 Pricing for Profit
Knowledge of package pricing techniques is critical.
An understanding of the process of commissions, net prices, and overrides that are practised in
the tourism industry as well as an understanding of the retail pricing of packaged products is a
prerequisite.
Several objectives have to be achieved through pricing at the retail level: market
competitiveness, prices for each target market and each season, yield maximization (balancing
price against volume potential to achieve the greatest revenue), variances for children, seniors,
groups, and families - each directed to achieving profitability and return on investment.
You will need to understand about break points, the levels of business at which costs are covered.
The topic of pricing will be addressed further in Section 6.
3.18 Sufficient Capital and Affordable Debt
You have to have enough investment capital available to establish and develop the business: and
it is vital that your debt burden not be so high that it drains away all your future profits.
The receptive tour business is not expensive to establish in terms of capital assets; you can start
with a phone line and answering machine, a micro computer, and an office in your home. At the
same time, you’re going to have to spend time and money on marketing, market development,
and product development, and it’s going to be some time before the income will flow. You will
definitely need working capital to carry you through an extended period of time before your
revenues will catch up to your expenses and personal income needs.
Too many businesses are established without an adequate provision for working capital, and often
initial capital cost overruns take up some or all of the intended operating capital. A business
operating with inadequate working capital cuts back on marketing, staffing, and maintenance - all
of which will weaken it in the future. In addition, it will be slow in paying its bills and suffer
difficulties with its bank and creditors. It won’t last long.
You will also face the need for capital investment in office facilities and systems as the business
grows. And if it grows, the need for working capital will increase.
3.19 Quality Program Management
The delivery of trouble free, quality programs is central to your success as a receptive operator.
Planning carefully, checking out the product, paying attention to detail, fixing problems quickly,
communicating, and coordinating: all need to be practised diligently and relentlessly.
You need to have suppliers who will guarantee a quality product and provide the same level of
diligence that you impose on your own operations.
Page 17 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
3.20 Efficiency
The tour and packaging business works on thin margins, so you will need to keep your overheads
low. Lean and mean is the way to make it.
3.21 Minimize Risk
Particularly in the early stages of your business, you must minimize costs by out sourcing
(subcontracting) services rather than establishing your own, until you have enough business to
justify the investment and overhead expenses.
3.22 Membership
It is highly recommended that you join and participate in professional development activities of
appropriate professional trade organizations, those specific to the tour operators’ sector as well as
local and regional tourism associations. These associations can be a good way to make contact
with other people in the industry and seek out partners. In your business, they can also provide
essential contacts for business development. In particular, you should join the National Tour
Association (NTA) which is the US association of tour operators.
3.23 Conclusion
The inescapable conclusion is that the establishment of a receptive tour business requires careful
planning as well as a mix of knowledge and skills in the tourism business. All of the foregoing
success-related issues have to be adequately addressed before any commitment is made to
proceed.
We will now turn to the "how to’s" of developing a business plan for a receptive tour operation.
SECTION 4
Preparing a Business Concept
and Strategic Plan
Page 18 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 4
PREPARING A BUSINESS CONCEPT AND
STRATEGIC PLAN
4.1 Opportunity Search and Assessment
What type of receptive tour business should you establish? Where should it be based? Is there
likely to be an adequate market for it?
You first need to build some models of possible business concepts on paper, identifying the kinds
of products and services you believe might be appropriate. You want to focus particularly on the
unique selling propositions (USPs) and competitive advantages you might be able to offer
potential client tour operators and the consumer. You have to draw on your entrepreneurial skills
to craft one or more business concepts which have a high likelihood of working.
If you’ve been in the tour or packaging business before, you’ll have an advantage, since your
experience will have taught you valuable lessons. If not, you will have to work harder to find the
information you need to make good decisions.
To help in identifying product and service ideas, we suggest you look into what has worked well
for receptive tour companies elsewhere and give consideration to whether the same things might
work in your Nova Scotia market.
A more detailed assessment can be made later. At this point you are looking for general
information which will help you piece together a concept for the business.
Find out where there are successful examples. Visit them; talk to the owners; find out what makes
them successful. What are their USPs? What are the major challenges they face and how do they
deal with them? What are their markets? How are they marketing? How are their markets
changing? What product features appeal to what types of markets? What are the major do’s and
don’ts of the business? Tell them what you have in mind and ask for their constructive criticism.
As long as these businesses are not going to be directly competing with you in your Nova Scotia
market, they are likely to be cooperative. Call them in advance and get them to agree to talk to
you.
Who is the competition in Nova Scotia? What are their products and services? Are they covering
all of the product and market segments, or are there gaps?
Page 19 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Try out the packages of your future competitors. What are they doing right and doing wrong?
Are they including all of the unique attractions of the area in their packages? How can you
develop competitive advantages over them? How busy are they, in each season? Do they seem
to be making money? (Good signals include: Are they maintaining the calibre of their products
and services? Are they paying their bills?)
Talk to the outbound tour operators who are operating tours and packages in Nova Scotia in the
region you intend to provide services for. Do they have all the services they need? Are they
open to a new receptive service for the destination? What services do they require?
You should also talk to the companies in the marketplace who wholesale incentive products,
since they may have an interest in Nova Scotia incentive packages.
Talk to the tourism organizations in the destination area you are considering about how they see
the opportunity and whether they think there is room for a new receptive operator in the market.
What do they think about your ideas? Other people to talk to include:
• The local/regional tourism association (Where are the gaps in the delivery of packages and
tours in the region? Is tourism activity growing or declining? What type of growth is it?);
• Hotel marketing staff (What are their customers looking for in terms of tours and packages?
Where are the gaps in the availability of products? Will they partner with you in packaging?
in marketing?);
• Meeting and convention companies (Are their customers looking for new tours and
packages? Would they sell your product? How satisfied are they with the receptive
operators presently available? How much business could they provide?).
It will be important to consider trends in the product and service mix you are considering and in
the markets you are going to be targeting. These areas of enquiry will provide you with ideas on
how to establish some competitive advantages for yourself. New product concepts can do this for
you, and you can also take advantage in your planning of trends in customer demands and
expectations.
A valuable resource is the Canadian Tourism Commission’s (CTC) business website
(www.canadatourism.com ). You can subscribe to this site for free and get regular email news as
well as access to a wide range of reports, statistics and publications prepared by the CTC. You
can also read ‘Tourism Online’ which features articles about different aspects of Canada’s
tourism industry.
There are many other sources of trends information worth mentioning, including the Tourism
Division of the Department of Tourism, Culture and Heritage which publishes various tourism
reports and information. These can be found online at www.nstpc.com/research.html . Check out
Tourism Insights (www.gov.ns.ca/dtc/pubs/insights ) for up-to-date statistics on tourism activity
in the province. You may also want to contact your regional tourism industry association to see if
they have collected any research or articles which may be of interest to you. The National Tour
Association website (www.ntaonline.com) or their monthly publication, Courier, are good
sources of information on what is happening in the tour operator business, and in travel generally.
Page 20 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
You can also search the Internet using relevant key words to find research articles, books, news
groups, and discussion groups.
Talk to staff working with the travel trade from the Tourism Division of the Department of
Tourism, Culture and Heritage. They can give you market information, suggest contacts, etc.
Ask them to lend you any market studies they might have available containing relevant
information for planning a receptive tour business, such as data on market trends, tourism product
trends, etc.
You would be well advised to consider retaining some professional help at this point from
consultants who have expertise in the travel trade and know Nova Scotia’s tourism markets and
products. They can expedite a lot of this work for you and they have access to research
information which will be useful. The receptive tour business is a specialized one, so make sure
that you retain a consultant who really knows this business.
4.2 Shortlist Options
The products and services you put on the shortlist for your business concept should be selected
because a market opportunity is available. The criteria to use in qualifying each of the products
and services for the shortlist are suggested as follows:
• Is there a gap between supply and demand?
• If not an actual gap, is the current receptive doing/not doing the job?
• What is the potential volume? Is there enough to justify the effort?
• What are the margins available? Is this enough to cover my costs?
• What capabilities are required to do the job? Will I have them? Can I get them?
• How open are the clients to dealing with a new receptive operator for this product/service?
• Can we really deliver the product? Is it available in Nova Scotia? Can I guarantee
availability and quality?
• Can I work with the Nova Scotia suppliers? Will they give me net rates, block space, etc.?
• Is this product/service complementary to the others I am considering?
You are going to have to do some research on some of these questions and conduct interviews for
others. We will discuss the means of doing these tasks in the next section. For now, we suggest
that you rely on the information and understandings you will have gained in your enquiries so far.
While your judgments remain to be proven right, they will give you a concept for further
evaluation.
If most of the answers to the foregoing questions are favourable, the product or service should be
on your short list for further evaluation.
4.3 Travel Trade and Supplier Partnerships
As important as the market related issues are the questions associated with establishing the travel
trade partnerships you are going to need to operate your business. Tour operators need to be open
to the possibility of dealing with you, willing to give you a try. Destination management
companies, the companies that handle meetings and convention arrangements, should be open to
working with you. The tourism associations in your region need to be willing to support you by
referring enquiries to you.
Page 21 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
You will also need to have the cooperation of suppliers in Nova Scotia; hotels, sightseeing
companies, outdoor adventure operators, etc. You will need their very best net rates, block
bookings, workable administrative arrangements - including help from their staff in planning
local itineraries - and perhaps cooperative marketing support as well. They have to be
professional in their commitment to customer service and available by phone all year. Generally,
they have to understand your needs and how the intermediary business works. They have to have
a travel-trade culture.
The way to find out about these things is to interview the people involved in the travel trade as
well as a good sample of the suppliers you intend to work with. Present your plan to them and
solicit their support. Determine what the conditions are for them to be willing to work with you.
What will their cooperation entail?
4.4 Retail Option
Most receptive tour operators also operate as inbound tour operators with their own packaged
products, selling them directly to consumers and perhaps offering them to outbound tour
operators as well.
Developing a retail market can be a very expensive undertaking. It requires extensive consumer
marketing, sustained over a lengthy period of time, in a very competitive marketplace.
On the other hand, developing a retail business can increase your buying power with suppliers,
and you may simply be forced to move into retail if the wholesale business is too small on its own
for you to survive. We do not deal in this manual with the retail aspect of the industry.
4.5 Market Positioning
Another key strategic issue is how you are going to position your business in the marketplace; in
other words, what role do you stake out for yourself in the marketplace and what do you claim
makes you special?
Market positioning needs to be defined in some combination of the following terms if you are
going to define your niche properly:
• The price/quality level - economy, mid-range, deluxe;
• The types of experiences/products - sightseeing, special interest, outdoor adventure, etc.;
• The types of packages - group escorted tours, independent tours, destination packages;
• The geographic area of specialization - all of Canada, Atlantic Canada, Nova Scotia, Halifax
area, Cape Breton.
4.6 Business Concept Development
The foregoing deliberations will help you focus your business concept and its likely mix of
products and services. The concept should consist of the following elements:
• Initial products and services to be offered;
• Key target markets/client prospects for each;
Page 22 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Initial facilities, staff, etc.;
• Sequence of activities in starting up;
• Marketing activities required;
• Pricing formula;
• Key suppliers and the arrangements with them.
You will need to define some sort of phasing plan. What are you going to do in year one? Year
two? Year five?
The initial phases should focus on what you expect to be the core products and markets of the
business. Other markets and products should be streamed in later in digestible stages. Some
should be market-tested first, if there is any serious question about their potential or their value to
the core business.
It will be important that you design and implement periodic management reports on progress,
supported by some customer research and product reviews.
4.7 The Strategic Plan
You should document these planning activities in a written summary, which will form your initial
business plan.
SECTION 5
Feasibility Analysis
Page 23 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 5
FEASIBILITY ANALYSIS
Will your plan work? Can you get the volume of business you need? Will revenues suffice to
cover operating costs? Will the business make a profit - enough to pay you a living?
These are vital questions you need to address, in order to reduce uncertainty and risk to a
minimum. The cost of making major mistakes can bankrupt you, while the information coming
out of a feasibility assessment can help make the business a success. Why risk everything
without making your best effort to reduce your risks?
While you may be reluctant to spend the time and money on this step, or may think you don’t
need to, your banker or other financiers may very likely insist on it.
So, a proper feasibility study should be undertaken. You can do much or all of it yourself,
following the process outlined in this manual.
If your project is a large, more complex one, or if your banker or other sources of financing
request it, you may have to have a professional feasibility study undertaken. There are ways of
keeping the costs of a professional feasibility study reasonable, and you may be able to get some
financial help for the study from prospective investors or a government agency. If you’ve done
the homework described earlier in preparing your business concept and strategic plan, the
feasibility study can be done a lot more quickly and economically.
A proper feasibility study, assuming a basic business concept and strategic plan has been
developed, consists of the following steps:
• Projections of initial investment costs and financing;
• Research into and analysis of target markets;
• Competitive analysis;
• Projections of revenues, operating costs, debt service, and profits;
• Return-on-investment and break-even analysis.
5.1 How to Do A Feasibility Study
While your feasibility study is likely, in part at least, to be done as part of your early efforts to
establish your business, there are still things you should do before you make any effort to start up.
Below, we present suggestions for the process to follow.
Page 24 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Capital Investment Requirements
We suggest that the first step in preparing a feasibility study should be the development an
estimate of the capital investment required to establish the business, since this can give you an
idea of what kind of financing you will need, and this in turn will give you the basis for
estimating various numbers you will need in your projections of operating costs.
You don’t need a detailed capital-cost schedule or financing plan at this point. You are trying to
assess the feasibility of establishing the proposed receptive tour business, not actually planning
the business. What you need is an estimate of the realm of magnitude of your capital costs and
financing needs.
Exhibit 2 provides a template or worksheet you may find useful.
There are various sources of information you can pursue to help you develop this initial capital
budget. Suggestions are presented below.
As mentioned earlier, it is advisable that you avoid as many capital costs as possible in the initial
stages of the business, until it proves itself. In the meantime, you can subcontract things that you
can’t handle yourself.
The kinds of capital investment items you should consider for start-up, or in the early stages of
growth of the business include:
• A business telephone with an answering service designed to handle calls 24 hours a day and
a toll free number.
• Computers with basic business software as well as specialized software designed for tour and
package operations. The other business software should include E-mail, fax, word
processing, database management, spreadsheet, and basic accounting.
• An office, desk, and filing cabinet.
• A website
• Soft costs: Soft costs are operating-type costs required to start the business that are
capitalized, since they occur prior to the operational phase of the businesses. They include
such things as operating costs incurred prior to opening - management salaries, office
operation, website development. initial marketing, company registration etc. They also
include one-time costs such as initial training costs, consultant’s fees, etc. You should try to
do a work-up of estimates for each relevant item. Where this is not possible, provide for an
allowance to cover the item.
There will probably be a fairly significant level of travel and marketing costs involved in
soliciting travel trade relationships and surveying suppliers. Don’t stint on your investment
in these most-crucial-of-all activities for launching a successful operation.
You will need a quality brochure or catalogue, with photographs. Print enough copies to
support the enquiries you will receive. You will also need to develop a quality website.
Page 25 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 2
CAPITAL REQUIREMENTS WORKSHEET
CAPITAL ASSETS: $
Computer Hardware & Software
Office Furnishings
Office Systems & Equipment
Other
Subtotal A
STARTUP SOFT COSTS:
(Costs prior to revenue being earned)
Salaries
Staff Training Wages & Costs
Initial Marketing & Travel Costs
Brochure/Catalogue/Website
Research and Consulting Costs
Other Professional Fees
Incorporation/Registration/Licensing Costs
Other
Subtotal B
WORKING CAPITAL:
Prepaid Expenses
Other Current Assets
Cash Reserve
Subtotal C
Less: Bank Loan
Subtotal
Net Working Capital Required (C)
TOTAL CAPITAL ASSETS REQUIREMENTS (A)
TOTAL SOFT COSTS (B)
NET WORKING CAPITAL REQUIREMENTS (C)
CONTINGENCY
TOTAL STARTUP FINANCING REQUIRED
Page 26 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Working capital: Your financing is going to have to cover not only your capital costs and
soft costs, but it also has to provide for enough working capital to sustain the operation of the
business. It’s the cash available to run the business and deal with short term contingencies.
With a receptive tour business, you may very likely need enough working capital to support
yourself and the business for many months before you start seeing much in the way of
revenue. It could very well be a year or two before your revenues reach the break-even point.
We suggest that you provide enough cash to cover at least six months of no income for
yourself. Ideally you would have another job with flexible time requirements during this
start-up process. It will probably be at least two years before you can draw a full living from
the business.
• Contingencies: A contingency allowance should be allowed for unanticipated cost increases,
overlooked items, unanticipated additional costs. The allowance should be between 20% and
30%, depending on how refined your costing has been and how confident you are in the
numbers.
Financing
The total of the foregoing represents the amount of financing you are going to require in starting
the business. You will now need to prepare a plan as to how the financing is to be structured,
since the feasibility assessment requires a determination of interest and principal payments on the
money borrowed and the amount of equity to be invested. Further comments on financing can be
found in Appendix II.
Market Analysis
The next stage of a feasibility analysis involves the assessment of markets and determination of
market potential.
In Section 4, we presented a discussion of the method for developing your concept for your
receptive business by interviewing outbound tour operators, destination management companies,
incentive companies, and others. The information you collected and the insights you gained will
be invaluable in helping you assess the market potential for your concept. In fact, your work in
this step was a market assessment.
It should already be clear whether there is enough business to be had through the travel trade to
make it feasible for you to go ahead. However, now that you have defined your business concept,
you should go back to the travel trade and conduct a second round of interviews to market test the
concept further and get a better reading on the likelihood of getting business. You may also be
able to get a better idea of the volume of business potentially available to you.
Talk with the Department of Tourism, Culture and Heritage and get their help in identifying the
companies operating tours and packages to Nova Scotia. This will help with expanding your list
for interviews, but it also will help you build a picture of the total market, the number of travel
trade prospects out there who might be your customers some day.
Page 27 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
The results of the analysis should be a written summary of prospective clients in the travel trade,
accompanied by a brief description of their business, the kinds of products and services they
require, the services you intend to provide them and for which they have an interest, and where
possible, a guesstimate of the number of customers per year.
One of the advantages of the receptive tour business is that you can actually launch the initial
stages of the business without a lot of investment, so the only real risk you have lies in not getting
paid for your time and effort in launching the business. As a result, you are probably not going to
have to do the kind of detailed market study we would recommend for other types of tourism
businesses, and the likelihood of a market study being needed for financing purposes is probably
not as great. (This is fortunate, since it would be very difficult and expensive to do such a study
for a receptive tour operation. The market data is simply not available.)
You can, in fact, assess the market potential of the business by actually starting it. If you are able
to get a few clients, keep going; if not, then your concept is not right or there is some other
combination of reasons for not continuing. If you are getting the business, and there is pressure
on you to grow and make a larger investment commitment to the business, you can do some
market research then.
Competitive Analysis
Part of your research should include a further assessment of your competition - their strengths and
weaknesses, how much business they are doing, what gaps in services/products they have left
open. Talk to the outbound tour operators who are using them. Also talk to your local tourism
organizations about them.
The types of businesses who will compete with you include operators offering:
• Comparable products for comparable destinations;
• Alternative destinations and alternative experiences;
• Alternative discretionary spending options.
You want to give particular attention to the first type of competitor.
By trying out their products and asking around, you can fit together a good picture of their
operation.
Here are some tricks to piecing together a picture of the competition’s business:
• Talk to the tourism organizations in the market as well as the hotel and attraction operators.
Some of them will have information on how the operation is doing.
• Visit their websites or get their brochures, count their departures, and using an estimated load
per departure, estimate their inventory of passenger capacity
• Engage in casual conversation with the staff on the tour and with their suppliers. Ask them
about the operation.
When you’ve done your detective work, make up a form which allows you to summarize your
findings. Use a simple scoring system to rate the competition against how your proposed
receptive business would rate. Exhibit 3 presents a sample worksheet for assessing the
competition.
Page 28 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 3
ASSESSMENT OF THE COMPETITION
Competitor’s Name
Business Description/
Years in Operation
Itineraries
& Schedules Prices/Value Reputation
Quality of
Service
Quality of
Advertising &
Promotion
Relationships
with Suppliers
Conclusions as to
your Competitive
Advantages/
Disadvantages Over
Them
Page 29 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Conclusion of the Market Analysis
The results of the market assessment and the competitive analysis should provide you with some
sense of the future potential for your proposed receptive tour business.
To complete your work on this, you need to develop a supporting analysis for a projection of
revenues. This will involve estimating what business you might get each year in the future,
particularly for the early start-up years. It will also involve estimating the demand for different
products you intend to offer, and from different markets. This will be our next subject.
5.2 Projection of Revenues
You need to project revenues for the types of receptive business you are going to operate. To
project potential revenues for the initial stages of the business, we suggest the following steps:
• Estimate your initial customer numbers for each of your products or for each different type of
product you intend to offer (e.g. hiking packages or escorted motorcoach tours). If you have that
information, develop your estimates for each market.
Exhibit 4 presents a worksheet to assist with this step.
• Estimate the likely prices and your margins for each product (or each type of product). At this
stage you will not have all the information necessary to develop your actual prices, so you have
to rely on the prices charged by comparable operations in other markets and by competing
operations in your own market, to estimate what you might reasonably charge. All you are after
now is an estimate that you can use in preparing a revenue projection to determine the probable
feasibility of the operation. The premise is that if you can’t make the numbers work at
competitive prices, the project isn’t likely to be feasible. If the numbers do work on this basis,
you will still be facing the challenge of actually covering your operating costs and overhead
costs at competitive prices, but we’ll face that challenge later. (In Section 6 we will deal with
the how to’s of actually setting your prices.)
• Calculate net revenues for each year. This involves use of a worksheet, such as that presented in
Exhibit 5, in which the demand for each product, or group of products, is estimated. As well,
retail and net prices, and margins for each market are calculated, and total revenues are derived.
You may want first to project your likely volume of business in a mature year and then estimate
the likely volumes for Year one and subsequent years leading up to the mature year.
5.3 Projections of Operating Expenses
You need to prepare projections of four kinds of expenses: costs of sales, direct operating expenses,
overhead costs, and capital-related charges.
Exhibit 6 presents a worksheet for preparing expense projections. The numbers can be derived either
from a detailed work-up based on analysis of each item, or by using industry norms to provide
realm-of-magnitude estimates. The latter method is simple; however, it is unlikely that you will be
able to find industry norms for your particular business concept. Thus, you will probably have to
work up each cost item from the bottom up, using quotations received from suppliers, insights you
can gain from other operators in the business, and your own estimates of costs.
Page 30 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
PRODUCT A
PRODUCT B
PRODUCT C
EXHIBIT 4
ESTIMATE OF DEMAND FOR EACH PRODUCT AND SERVICE
WHOLESALE DEMAND NUMBER OF NUMBER OF TOTAL
DEPARTURES PEOPLE/TOUR CUSTOMERS
Tour Operator #1 ______________ _______________ _____________
Tour Operator #2 ______________ _______________ _____________
Tour Operator #3 ______________ _______________ _____________
Tour Operator #1 ______________ _______________ _____________
Tour Operator #2 ______________ _______________ _____________
Tour Operator #3 ______________ _______________ _____________
Tour Operator #1 ______________ _______________ _____________
Tour Operator #2 ______________ _______________ _____________
Tour Operator #3 ______________ _______________ _____________
TOTAL ______________ _______________ _____________
Page 31 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 5
PROJECTION OF REVENUE
PRODUCT
YEAR
Mature Year 1 2 3 4 5
Projected # of Customers
Weighted Average Retail
Price*
Your Weighted Average
Margin
Projected Revenue
* See the worksheet in Section 6 for developing the weighted average retail prices of your products.
Page 32 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Cost of Sales
Cost of Sales involves the costs of items resold to customers. For a receptive business, this is
uncommon, but could include such things as specialized clothing sold to customers.
Costs will vary depending on the types of things involved.
Direct Operating Expenses
These costs are also referred to as variable operating expenses. Essentially, they include the costs
that are directly involved in providing your products and services to your customers and they
vary with the frequency your services are offered. These are the costs directly associated with the
packages and tours themselves. In the case of a receptive operation, these will involve such
things as:
• Wages - guides, escorts, drivers;
• Supplies - documents, fuel for owned transportation vehicles;
• Charges of suppliers for services provided for each tour or customer.
Some or all of these costs may be paid directly by the outbound operator, in which case they
should not be included in your analysis. Include only the operating expenses you must pay out of
your margin or the package price.
Overhead Expenses
Overhead expenses, sometimes call fixed expenses, do not vary very much with changes in the
volume of business, as do direct expenses. These are the supporting costs of providing the
products and services and, in general, running the business. They include the following types of
costs.
• Management and administration salaries - reservations, sales administration, operations and
administration;
• Fringe benefits;
• Marketing;
• Repairs and maintenance to owned vehicles;
• Utilities;
• Office supplies;
• Telephone;
• Rent;
• Equipment leasing;
• Insurance;
• Business taxes;
• Bank charges and interest (on operating capital only);
• Professional services;
• Travel;
• Training;
• Miscellaneous.
Page 33 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 6
PROJECTION OF OPERATING EXPENSES ($)
YEAR
BASIS FOR
CALCULATION
Mature
Year 1 2 3 4 5
COST OF SALES:
Retail % of Retail Sales
Total
DIRECT OPERATING EXPENSES:
Wages
Supplies
Charges from Suppliers
Worksheet
Worksheet
Worksheet
Total
OVERHEAD EXPENSES:
Salaries
Fringe Benefits
Marketing
Repair & Maintenance
Utilities
Office Supplies
Telephone
Rent
Equipment Leases
Insurance
Property & Business Taxes
Bank Charges
Professional Services
Travel
Miscellaneous
Worksheet
% of Wages and
Salaries
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Worksheet
Total
TOTAL OPERATING EXPENSES
Note: Worksheet means you will have to develop a worksheet to derive what these costs will be for your business.
Page 34 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Operating Profit
The total of the foregoing costs represents the cost of operating the business for the year, and the
difference between total revenues and operating costs in a year represents the operating profit or
operating income (or loss) for the business. Other costs, including depreciation and interest costs
on financing are discussed in Appendix III, Net Income, Cash Flow and Return on Investment
Analysis. You should reference this Appendix to calculate the projected net income of the
business.
Net Income, Cash Flow and Return on Investment
Having calculated operating profits, it is now possible for you to determine whether or not the
venture will be feasible. Simply put, you need to decide whether the projected profit from
operations is sufficient to repay any debt and to justify the effort and the risks. This is a
judgement call you and your investors (if you have any) have to make.
Appendix III describes the calculations that you have to undertake to determine the net income
and cash flow of the business, and to calculate return on investment.
5.4 Is it Worth it?
The requirements of completing a credible feasibility assessment for your business proposal are
clearly complex and onerous, but it is vital that a proper feasibility assessment be done before any
major commitments are made to establishing your business.
Not all business people make the effort to undertake an assessment of their business plan.
Without an assessment, they proceed to stake their capital and their livelihood on instinct, on gut
feelings, and on the opinions of others who have nothing at stake. With so much at stake, it is
worth a little time, effort, and investment.
The techniques of feasibility assessment are not generally understood, and some people believe
that it isn’t possible to predict the future accurately. These are poor excuses. It is possible to get
some guidance on preparing a feasibility assessment (this manual is one source, of course) and it
is possible to get help to carry it out. And while it may not be possible to predict the future
accurately, predicting the future is not really what’s involved here.
What is involved here is risk reduction, moving a business proposal from the pure seat-of-the-
pants, "gut-feel" stage, a different stage that is almost certain to prove more accurate than gut
feelings. There is a myriad of valuable information out there, some of which are easily obtained
others not, which can help take the unknowns out of a business judgement. In addition, a
feasibility assessment allows you to make a series of small judgements and specific estimates
rather than one huge one, and the sum of a series of small judgements and estimates have proven
again and again to lead to a more accurate prediction of future performance.
In fact, when the estimating is broken down into pieces, there will, more often than not, be
sources of information to help you make an estimate with a high likelihood of accuracy. For
example, you may not have any way of guessing what the total operating costs of your receptive
tour business are likely to be, since your business will not be exactly like anyone else’s.
Page 35 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
However, your wage cost for guides is likely to be similar to that of other operations, your
insurance rates for a twelve-passenger van will be similar, and your utility costs are likely to be
similar to those of other businesses in the community for similar spaces.
Finally, the process of preparing a feasibility study will indicate a whole series of ideas,
opportunities, challenges, and problems for you to consider. As a result, you will be able to
actually improve your business plan as a result of doing a feasibility study, as well as develop
important insights about what it is going to take to be successful in the future.
The best, and perhaps most important, investment you will make in establishing your business is
the preparation of a feasibility assessment.
Where to Get Help
Help in preparing your feasibility study can be found in a variety of possible sources:
• Your accountant.
• Other operators of receptive tour operations. You may be able to talk a noncompeting
operator into coaching you and helping you with projections. You may have to pay them a
fee, but, if you’re lucky, they might do it for the fun of it.
• Someone who’s sold a tour business or has retired from the business.
• An official of a financial agency, such as ACOA and/or the Regional Development Authority
office.
• A private consultant.
Addresses for many of these sources of help can be found in the Appendices to this manual.
Most of these sources will be free or low in cost.
As mentioned earlier, you may decide that the complexities or scale of your project require you to
retain some professional expertise to prepare your feasibility study. You may not, in fact, have a
lot of choice in the matter, since some lenders and investors will insist on a feasibility study
prepared by a professional management consultant.
5.5 Preparing a Business Plan
Once you have completed the feasibility analysis, you need to prepare a business plan. The
business plan is built on the material you have accumulated to date, and includes, as well, a plan
of all the steps and processes you need to go through to get the project up and running, and then
continue running it successfully in the future. This document should be updated periodically to
reflect changes that occur as your plans unfold and should include both strategic issues and
normal operating processes. While lenders will almost always ask to review a copy of your
business plan, you should not look on it as just a means of obtaining financing. The business plan
is critical to the ongoing operation and success of your business, and you should refer to it often.
Page 36 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
The plan itself should contain all of the items outlined in Exhibit II-1 of this manual (the
suggested table of contents for presentation for financing, found in Appendix II), as well as
sufficient additional information to illustrate the steps you will go through to achieve your goal.
You will need to include a marketing plan as well.
The overall plan will identify who will be responsible for each task, when it is expected to be
done, what the anticipated outcome of the effort will be, and what the effort will cost.
Some suggestions for the types of things to include in the marketing part of the plan can be found
in Section 11.
The overall business plan will include similar action plans for all the other key areas of the
company’s operations, including organization and staffing, operating policies, internal controls,
information systems, etc.
There is no definitive table of contents for a business plan; some suggestions are provided in
Exhibit II-1 in Appendix II. Knowledgeable operators all agree that these plans are essential for
strategizing the direction they wish to take and detailing the step-by-step actions necessary for
reaching their goals. In general terms, the more you put into the plan and the more you refer to it,
the more likely you are to reach the targets and objectives you have set for yourself. Furthermore,
the business plan should always be considered an evolving document, being changed as external
conditions dictate and your own decisions require. Other aspects of your business plan will be
considered further in Section 10, Operations.
SECTION 6
Package Development
2
The material in this section has been adapted from several sources, all of which were originally
prepared by The Economic Planning Group. These sources include:
• Nova Scotia HUB and SPOKE Tourism Marketing Seminar Manual, prepared for the Nova
Scotia Tourism RITC, 1989/90
• Tourism is Your Business: Marketing Management, Published by Canadian Hotel &
Restaurant, MacLean Hunter Limited in co-operation with Tourism Canada and the Canadian
Government Publishing Centre, 1986
• Packaging for and Selling in the United States Leisure Market, Published by Tourism Canada,
1995
Page 37 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 6
PACKAGE DEVELOPMENT
2
Developing and marketing successful packages will be crucial to the success of your receptive
tour operator business. As such, we have dedicated an entire section of the manual to developing
and managing packages.
While, in some cases, you will simply be handling arrangements on behalf of outbound tour
operators who have planned their packages themselves, in many instances you will be designing
packages yourself and offering them to outbound tour operators. This section deals with the how
to’s of packaging.
First of all, what is a package?
Packaging can be defined as ‘the presentation of a number of products and services that would
normally be purchased separately, but which, in a package, are offered as a single product at a
single price’ (preferably a lower price than the individual could obtain on their own). Basically,
the concept is to provide a comprehensive experience for customers, accompanied by the various
services they require.
Each package is unique because it is designed for specific market segments. Each is, in fact, a
special product created for a specific market, employing the best mix of features and services
available to appeal to the market being targeted.
6.1 Marketing Power of Packages
Packaging has become a mainstay of the travel industry essentially because:
• It creates a new product which did not exist before, one having appeal to specific markets.
• It usually offers better value then do-it-yourself travel.
Page 38 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• It makes it more convenient for the customer to buy the tourism product - one-stop shopping.
• It improves the appeal of the overall travel experience, since the trip-planning homework is
done by others who presumably know the product well.
• It provides a degree of quality assurance and security to its customers.
Successful packages are ones which offer unique, appealing experiences for purchasers and good
value. Tourism today is very much an experiential business, and a well-designed package has the
marketing advantage of being built around outstanding experiences. Today’s customer is seeking
an experience: one that may be entertaining, exciting, educational, or just fun. The key thing to
remember is that this is an experience business!
Too often owners and managers lose sight of this essential principle, becoming preoccupied with
the day-to-day demands of the business: dealing with staff, paying bills, and handling problems.
But all of these things are being done for a more important purpose - to provide appealing
experiences for customers.
As a consequence, the first priority in planning a package is to design an experience that will
appeal to the consumer (or several different experiences, as the case may be) better than the
alternatives available.
6.2 Types of Packages
There are generally two types of packages provided by professional tour companies, such as the
business you are considering. (There are also single destination packages, such as those offered
by resorts, however, they are not a big factor with Nova Scotia receptive operators, except
perhaps as an add-on to group or FIT packages)
Group Tour Packages
Group tour packages are usually escorted motorcoach tours, although we are now seeing some
interesting hybrids, such as combination air/motorcoach, rail/motorcoach, and cruise
ship/motorcoach combinations. Basically, these are packages in which individuals are booked
into pre-set departure dates and become part of a group tour. Affinity groups (clubs, associations,
and the like) can be a market for these tours, and often the tours are customized for them.
Motorcoach tours typically include transportation (by coach throughout or by air to the
destination area and coach from there), accommodation for each night, some meals, attraction
admissions, and the services of an escort and guides. The appeal of such tours is typically:
• Savings on travel costs;
• Assurance of a quality experience;
• Security of having the escort and driver look after the driving and the headaches;
• Safety;
• Companionship.
Page 39 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
The market for these products has traditionally been retired, mature travellers. While some of the
more successful motorcoach tours have been of the deluxe variety, more of them have been of the
economy or value vacation variety. In the past, most people purchased motorcoach tours because
they offered the cheapest way to travel, and arrangements were looked after for them.
While the economy tour will still be important in the future, we expect to see the greatest growth
in the quality and good value type of product at the middle or upper end of the market, in special
interest and theme tours, and in tours that offer some soft adventure experiences (walking, whale
watching, etc.).
Individual Touring/Travel Packages
These packages are designed for couples and individuals and do not usually involve groups at any
stage of the trip. A typical example is the fly-drive package, offering a saving in booking air, car
rental, and perhaps some additional services on a packaged basis. They may also include
accommodation for some or all nights, and/or some meals and/or attractions. In the travel
industry these packages are called FITs, which used to stand for foreign independent tour, but
which now has come to refer to any ‘fully independent travel’ package.
The FIT package caters to all types of travellers. It is preferred by individuals who like to be free
of the constraints of group packages and are not intimidated by independent travel.
As today’s consumers are more travelled than previous generations and, therefore, less concerned
about being on their own, we are seeing strong growth in FIT packages.
6.3 Principles of Packaging
There are a number of important principles to follow in developing your packages:
• Include demand-generators
The key to successful packaging is to include attractions, activities and other experiential
features, - all the features which give the package its appeal. Demand generators are what give
the consumer a reason to buy the package. As discussed earlier, these features should have a
quality experiential character: unique, exciting, one-of-a-kind experiences of appeal to the target
market. Today's customer wants to participate, not just observe; to meet the people, not just be
told about them; to ride the river, not just look at the waterfall.
But it has to be safe – thrilling but not frightening.
• Careful planning and sufficient lead time
Your package will require careful planning and sufficient lead time for implementation and
marketing. The amount of time required will depend on the type of package and whether you are
selling wholesale or retail.
If you are selling to outbound tour operators, your package program should be planned at least 12
to 18 months in advance.
Page 40 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Take your time; do it right. Go in person to check out the proposed package elements. If you are
doing a special, one-time package for a custom group or a package associated with a special
product, you can probably develop it in two to three months.
• Ensure that the package is complete
Do not leave out components that the customer is sure to require: e.g. if the customer is coming
by air, make sure you include ground transportation to the hotel or to pick up the rental car, if it is
not at the airport. Leaving out any of these essential elements will cause resentment from your
customers.
• Schedule activities at a comfortable but appropriate pace
The old descriptor for packaged holidays, "If this is Tuesday, it must be Belgium" is no longer
applicable to the successful modern package. People want to experience the highlights but at a
comfortable pace, with leisure time for optional activities, shopping, or just taking it easy. But
don't leave big gaps that may make people restless. Careful balance is the key. If there are delays
between activities, give suggestions for other things to do.
Arrivals for multi-day packages should be scheduled for late afternoon or early evening, so the
first full day of the package comes after an overnight rest. Departures should be in the morning
or midday to allow for a restful return. Getting home in a state of collapse is not conducive to
fond memories or helpful word-of-mouth recommendations.
• Innovate over time
It is important to give the market a reason to come again in subsequent years or seasons. New
programming, different special events, and special shows can achieve this. The absence of new
programming leads to early market burnout.
While this is particularly important for destination packages, which should be enhanced
frequently, it is also important for group tours, which should be freshened up with new attractions
and appeals periodically. Destinations like Branson, Missouri and Myrtle Beach, South Carolina
have successfully accomplished this, and as a result; they both enjoy high repeats and have
become two of the most successful package destinations in the US
• Offer a benefit or a bonus
Potential purchasers should be offered a benefit in the package that they would not receive if they
purchased each component separately. Examples of such benefits include a price reduction or a
free gift.
Off-peak and off-season periods require extra value in the offering: either a better price or added
features at no extra cost.
• Price the package competitively
A package should be priced competitively in order to make it affordable and provide good value
to the customer. It should also be priced under the total cost of purchasing the components
separately.
Page 41 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Ensure that individual package components are compatible
It is important that the elements of a package are compatible with each other and suitable for the
target market. For instance, a package oriented toward retired, mature travellers should probably
not include vigorous recreational components.
• Consistent quality
Make sure that each component of the package is of similar quality. If you are offering a deluxe
package, don't use cheap motels!
• Attention to detail
Good coordination of packages generally requires that much attention be paid to details. It’s in
the details that things usually go wrong.
• Provide customers with maximum flexibility
One of the weaknesses of packaging is the inflexibility inherent in preselected itineraries. It is
important that you minimize this weakness as much as possible. Provide your customers with as
many suitable choices in the package as possible and inform them of the various options
available.
In addition, people prefer to buy options at the destination rather then being locked in ahead of
time.
• Arrange packages and booking systems to ensure there is some customer compatibility
There are certain mixes of market segments that are not compatible. It would be unwise, for
example, to combine church groups and hockey teams or partying singles with families.
• Keep customers fully informed
Purchasers should be provided with complete information about such matters as clothing, weather
conditions, and extra costs that might be incurred and are not included in the package price.
It is particularly important to notify customers in advance of any changes to be made to an
itinerary.
• Establish a fair refund and credit policy
A set of realistic and fair policies should be established with respect to refunds and credits in the
events of situations such as the unavailability of package components, bad weather, illness, etc.
A generous policy for refunds in the event of cancellation by the customer is also recommended.
You want to retain their goodwill and encourage them to re-book.
Page 42 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Make sure that the package is profitable
In pricing and selling the package, make sure that you can earn an acceptable profit. More on
pricing later.
6.4 Developing the Package
As a receptive tour operator, there are six steps to go through in developing your package.
1. Assessing the tourist attractions and tourist services at your destination;
2. Undertaking market research;
3. Developing your package;
4. Negotiating with suppliers and partners;
5. Pricing the package;
6. Establishing marketing, management and quality control plans.
Negotiating with suppliers and partners is dealt with in separate sections of this manual; the other
topics are discussed in the rest of this section.
1. Assess your destination’s attractions, products, and tourist services
A key element of planning is building an inventory of the appealing experiences and
attractions at your destination that might be included in your packages. Remember that it's
appealing and exciting experiences that sell packages!
You will need to undertake different types of product research. How to do this is discussed in
more detail later in this section of the manual.
You will also need to identify the support services available in those areas of the province
that you will be including in your packages.
2. Undertake Market Research
Sections 4 and 5 of the manual addressed the type of market research you would undertake
for your business as whole. Here, we are concerned with the type of market research you
should complete for your package program.
An understanding of your existing market and the additional markets you might target for the
package is a key element in the development and planning of the package and will help to
ensure that the proposed package is market driven. The opportunities can be identified
through market research.
Relatively basic market research can be accomplished in a number of ways:
• Examine sources of market information, particularly articles and studies dealing with
market demand, growing/emerging markets, trends in travel preferences, and successful
new tourism products and concepts. Such information is available from libraries
maintained by the federal and provincial governments, and often by local community
tourism organizations as well. Both data and strategic tourism studies are generally
Page 43 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
available and they can be used to gain broader insights. Sources of research information
were identified earlier in Sections 4 and 5.
• Gather information from websites or brochures on other successful packages offered in
your market area to obtain ideas.
• Study the package products of successfully competing destinations for ideas.
If you have already been in business for a while and are expanding your program, then you can
undertake these additional types of research:
• Do your own customer research by evaluating past group and tour bookings and enquiries
to determine where your market is coming from, as well as conducting informal
discussions with existing clients to get feedback on your current product and solicit ideas
for potential packages in association with your product.
• Administer your own visitor/guest surveys to obtain specific market information.
3. Develop the Package
First and foremost, it is important to develop a concept for each of your packages that will
meet the needs of the travel market segments you wish to pursue. For each package, we
suggest the following approach:
Develop a long-list of ideas
The basis for this list will come from your product research and your inventory of
packageable features in the province.
For each package, your ideas should centre around the basic experiences you want to offer,
based on the USPs of the attractions and activities available at your destination.
You also want to consider the target markets of the tour operators you will be targeting.
What kinds of experiences do they prefer? What services and standards do they need?
Selection of the Package Theme
Having a theme for a package, based on the central experience to be offered, will increase its
marketability by focussing its appeal to those markets for which the theme is of interest.
Furthermore, having themed activities in the package will serve to enhance the quality of the
experience for purchasers.
When selecting the theme/experience to be packaged, you should remember that the
consumer’s motivation to travel has been shifting from escapism to experience and
enrichment. Tourists want to experience something different and memorable. In future years,
there may well be changes in what the market is looking for and these changes could change
the character and appeal of different types of products. It is important, therefore, to pay
attention to these types of trends.
Page 44 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Determine the Most Appropriate Market Position for the Package
It is important to position your package in the marketplace in an appropriate fashion.
We mean by this that thought in planning should be given to the following:
• Economy versus deluxe: economy typically suggests motels versus downtown quality
hotels, fewer meals, and only the very basic and necessary ingredients;
• The unique selling proposition offered to prospects: basically, the unique appeals and
experiences to be offered, which will be relied upon to sell the package;
• The differentiation of the package against other options in the market;
• The value-added features of the package which will add to its appeal.
Determine what to Include in the Package
With a full list of potential package elements and themes in hand and a perspective on the
best market positioning strategies, it is now time to select those experiences and services to
include in the package. It is very important when going through this selection process to
avoid choosing package elements based on your own likes and dislikes. Elements of the
package should be chosen according to what fits the target market best. Elements should
meet some or all of the following standards:
• Be consistent with the market positioning strategy;
• Be appropriate to the expectations of the market being targeted;
• Contribute to the unique selling proposition;
• Be differentiated from competing packages in the marketplace;
• Offer good value to the customer;
• Add to a quality experience.
Some of the components that you may want to include in your package are as follows;
• Attractions/events and activities
Include these if they are important demand-generators or are central to the theme of your
package. Offer them as options, if they are not. Some possibilities include:
- Boat cruises, train rides;
- Popular dinner theatres;
- Historic sites;
- National/provincial parks;
- Unique museums;
Page 45 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
- Musical shows;
- Local fairs and festivals;
- Visits to such things as farms and features indigenous to the local culture.
Generally, in planning a group tour, the focus should be on obtaining a mix of each of the
following:
- Established, well-known attractions;
- Some lesser known, out of the way places;
- Unique, special experiences indigenous to the local culture or area.
With respect to this last point, you should include experiences of a non-tourist character,
so that your customers can meet the locals, see how they live, and generally do unique
things that the locals take for granted.
Experienced travellers are not as interested today in managed experiences; they want
genuine, real experiences.
• Inter-city transportation
Include this if you are offering a group package or if one particular mode of transport -
the one you would offer - gives your customers a price or time advantage.
• Local transportation
Local transfers are usually included if the package also includes inter-city transportation,
that is if the customer doesn’t have their own car.
• Accommodation
Accommodation is a basic component for most packages, so it should be included,
unless, of course, the package is intended to be a day package.
Cleanliness and state of repair are the key issues with package customers, followed by
value and convenience.
Don't forget to arrange for baggage handling.
• Meals
It is generally a good idea to include at least one meal a day, especially if it enhances the
package. But beyond that, meals should probably be left out of the package to give your
customers more flexibility. Even on all-inclusive packages that include meals, customers
still prefer some free meal times.
For groups, the best times for included meals are at the beginning of the tour or package,
as part of a getting-to-know-you/welcome opportunity, and at the end of the package as
part of a farewell experience. Special themed meals, such as cookouts, are usually
included.
Page 46 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
With group meals, it is preferable to have open menu dining. In this system, you use
vouchers rather than a preselected group meal. This gives customers a choice of menu
items at the restaurant, a choice of dining times, and potentially the choice of restaurants
as well.
Customers on open menu programs are treated as individuals, they get to meet people
other than those on the package or tour, and they generally have a lot more flexibility.
Customers get to act like they would on their own.
With group packages, it is important to make reservations in advance and time the arrival
carefully to ensure the restaurant can handle the group. If possible, customers should
have a choice of menu rather than be forced to order from the tour menu.
• Drinks
Alcoholic beverages should not be included unless they are part of a special event (for
example, a welcome cocktail party). Non-drinkers will resent paying for free drinks.
• Taxes
Taxes should always be included; otherwise, customers will feel there are hidden extras,
which will not be appreciated.
• Gratuities
Generally, for group tours, it is a good idea to include gratuities on included package
items, since customers will not be paying directly and will rarely tip in these
circumstances. You want to ensure that your customers get quality service. On optional
and non-included items, gratuity suggestions should be provided to your customers.
It is important to think through all of the likely needs of the tourist purchasing the package and
make sure that the key services they require are included. Things that are not essential but may
be of interest should be offered as options or listed as suggestions to the customer.
Basically, you need first to identify the types of products, experiences, and services you or your
client would like to have included in the package, and then seek out a quality supplier of that
product in the province. Your research should concentrate first on the demand-generating
experiences you want to include in each package, since these will form the backbone of the
package. Once you are comfortable with these elements, then you can research the other services
that you will need, such as accommodations, places for meals, etc.
Some good sources of information on Nova Scotia’s tourism products include:
• Nova Scotia’s tourism website - www.novascotia.com and the Nova Scotia Travel Guide
(Doer’s and Dreamers Guide to Nova Scotia) - which include a listing of many of the
products and services available in the province;
• Other publications prepared by the provincial Department of Tourism, Culture and Heritage,
available through provincial information centres or by calling the Check In Information
Service;
Page 47 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Regional websites and travel publications and individual supplier websites and brochures;
brochures and other printed collateral are available through local and regional visitor
information centres;
• Nova Scotia Museum, particularly if you are looking for detailed information on special
products such as culture or heritage experiences, birdwatching.
You should start files on each of the products you research. Include all the printed information
on the product as well as your notes and comments on your experiences and your dealings with
the supplier. Add any comments you receive from your customers to help you identify where
changes may need to be made in your arrangements with this supplier. Keep product files even
on products you don’t plan to include in your packages. You never know when you will get a
call to put together a custom tour incorporating some special interest or activity.
6.5 Pricing Your Package
In general, package pricing can be undertaken using the following steps:
1. Calculate Total Variable Costs Per Person
Add up the per person costs of all package components at the rates quoted by your suppliers,
net of all commissions and discounts. These costs could cover meals, accommodation
(usually one-half the double occupancy rate, if the rate is based upon two people per room),
attraction admission fees, and other costs normally charged on a per person basis. Varying
rates for children, retired mature travellers, singles, third persons per room, etc. should be
noted, as should seasonal variations. Don't forget details like taxes, baggage handling, and
maid gratuities.
It is helpful to use a multi-column worksheet where you can record the variations for each
cost item. An example of a package pricing worksheet is found in Exhibit 7. A separate page
is used for each day.
2. Calculate Fixed Costs Per Person for a Specific Departure/Date
Add together the fixed costs for a specific departure or package date. i.e. the costs that will
not change no matter how many customers buy the package. These costs could include a
motor coach charter, the services of a guide, guest speaker, and so on.
Then divide the total fixed costs by, say, 70% of the number of people targeted to buy the
package. By using a percentage less than 100%, you reduce the risk of loss caused by lower-
than-expected package sales and you increase the chances for extra profit if the package is a
greater success.
If there is significant uncertainty as to the numbers of customers on given departures, it may
perhaps be necessary to use a lower percentage. Remember, however, that using a lower
percentage will increase the price of the package and weaken its appeal and competitiveness.
Again, a separate page is used for each day
Page 48 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 7
PRICING WORKSHEET PAGE 1 - VARIABLE COSTS
PACKAGE: ____________________________________________________ DAY: PAGE: 1
PACKAGE
COSTS
Retail Value
Per Unit Net Cost Per
Unit
Net Cost Per
Person
6 Seasonal Discounts 7 6 Discount/Supplements Per Person 7
Shoulder (2)
Off
Season (2) Other (2) Seniors(2) Children(2)
3rd
Person
(2)
Single
Supplement
(2)
Group
VARIABLE COSTS
1. Accommodations (1)
2. (a) Breakfast
(b) Lunch
(c) Dinner
3. Attraction/Activity
4. Attraction/Activity
5. Ground Transfer
6. Baggage Handling
7. Gratuities
8. Other
9. Other
10. Other
TOTAL VARIABLE COSTS
1 Divide the Room Cost by the Number of People per Room.
2 Enter the dollar value in savings per person - discounts as a minus number, supplements as a positive number
Page 49 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 7 continued
PRICING WORKSHEET PAGE 2 — FIXED COSTS (GROUP FEATURES OF PACKAGE ONLY)
PACKAGE: __________________________________________________ DAY: PAGE: 2
Capacity (# of people)____________________________
Estimated Average Load Factor:___________________
PACKAGE
COSTS
Total
Cost Cost Per Day
Allocated Cost
Per Person
(Based on
capacity)
Estimated Load
Factor
(Average
Percentage)
Grossed Up
Cost Per Person
6 Seasonal Discounts 7
Shoulder Off Season Other
FIXED COSTS PER DAY
Motorcoach/Van
Driver
Guide
Step-On Guide/Expert
Other
Other
Other
Other
Other
TOTAL FIXED COSTS
Page 50 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 7 continued
PRICING WORKSHEET PAGE 3 - OVERHEAD COSTS AND GROSS-UP
PACKAGE: OVERHEAD, MARKETING, & MARKUPS PAGE: 3
Cost Allocation
Per
Package
Net Cost per
Person (Pg 1)
Plus Allocated
Cost Per Person
(Page 2)
Load Factor
Gross Up
Grossed Up
Cost Per
Person
6 Seasonal Discounts 7 6 Discount/Supplement Per Person 7
Shoulder
Off Season
Other
Seniors Child 3
rd
Peron
Single
Suppl.*
Total Variable Costs (sum from Page 1
for each day)
Total Fixed Costs (from Page 2 for
each day)
Subtotal
OVERHEAD ALLOCATION
Marketing
Other Overhead
Subtotal Overhead Costs
TOTAL VARIABLE, FIXED &
OVERHEAD COSTS (ALL DAYS)
Gross Up Factor for Profit
Gross Up Factor for
Commissions/Discounts (Page 4)
Calculated Retail Price (Before taxes)
ADOPTED RETAIL PRICE FOR THE
PACKAGE
* Single Supplement, Not Sharing
Page 51 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 7 continued
PRICING WORKSHEET PAGE 4 - CALCULATION OF GROSS UP FACTOR FOR COMMISSIONS AND DISCOUNTS
Calculation of Gross Up Factor for Commissions and Discounts
Source of Business Percentage of Total
(Column 2)
Average Commission/Discount
(Column 3)
Allowance on Total
(Column 4)
Direct Consumer Sales
Travel Agents
Tour Operators
TOTAL
Notes:
Column 2 times Column 3= Column 4
Add Column 4 vertically to determine total allowance for commissions and discounts
Page 52 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
3. Calculate the Package's Marketing and Share-of-Overhead Costs on a Per Person Basis, for
the Program as a Whole
Calculate the package's marketing and share-of-overhead costs, and then (as in Step 2) divide
by +/- 70% of the total number of customers expected. In this case, the worksheet is only
used for the package as a whole, not for each day.
As a receptive operator, you will first have to allocate all of your marketing and overhead
costs to each package program and then, once you have done this, to each departure. Thus
these costs are amortized over all of the dates/departures for each package, as well as over
each of your packaging programs.
4. Calculate Total Package Cost on a Per Person Basis
Add together the per person costs calculated in Steps 1, 2, and 3, to arrive at a total package
cost per person.
5. Mark Up Total Package Costs to Cover Commissions and Provide a Profit
Mark up the total per person costs to cover travel agent commissions and tour operator
margins and, of course, your profit.
This topic is explored more fully in Section 8 - Negotiating Supplier Partnerships.
If a mix of commissionable bookings, or a mix of commissionable and non-commissionable
business, is expected, you will have to calculate a weighted average commissions allowance,
based on the expected proportions of sales.
If the package is being offered for off-season periods, then a lower percentage might be
appropriate than that for high season, where you want to maintain a healthy profit margin.
The total package price per person is therefore:
Total Variable Costs Per Person
Z
Total Fixed Costs Per Person
Z
Share of Marketing and Overhead Costs Per Person
Z
Commissions and Your Profit Per Person
Page 53 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
6. Calculate Selling Prices for a Full Range of Customers
To calculate your selling prices for the full range of your customers, you have to adjust your total
package price per person, so that you can offer rates for singles, third and fourth persons sharing
one room, children, people travelling off-season, retired mature travellers, groups, and so on.
Appropriate reductions and extra charges may have to be negotiated with all the component
suppliers and these should be taken into account when calculating your range of selling prices.
It is important to establish a range of prices which, on average, based on your expected mix of
business, provides you with the average profit targeted in Step 5.
The acid test of package pricing is whether the customer can buy the package for less than the
aggregate retail value of the included elements plus a reasonable fee for your escorts and the other
services you provide. This is what consumers expect; they expect to save by buying a
package. This means that you have to cover all the marketing and overhead costs, as well as the
commissions and your profit margin, with the discounts obtained from the various suppliers
involved, and still have a saving to pass on. This is a significant challenge, and will require a
dedicated effort if you are to accomplish it.
6.6 Product Management and Administration
Quality control when planning and managing your package program is vitally important. Your
best intentions and a well-conceived package program concept are not in themselves enough to
ensure a satisfactory customer experience. Many things can go wrong. What is required,
therefore, is a quality management program consisting of six elements:
• Careful and thorough planning and negotiation with suppliers, directed at coordination,
management, and problem solving processes;
• Contingency arrangements where there is a risk of cancellation, weather problems, and the
like;
• A management process within your company to coordinate arrangements and deal with
problems;
• Communication with the customer;
• A generous policy for refunds and credits;
• A system to track results.
It is important to recognize that each of your packages is a tourism product in its own right, with
its own needs for management systems and procedures to ensure a quality experience for
customers. This is a complex and a sophisticated business and management and administration
must be a top priority. This is not intended to intimidate you, it simply means that you have to
pay attention to details when planning and coordinating your packages.
Page 54 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
We will deal with each of the six elements of a Quality Management Program in turn.
Product Planning
In planning the product, there are a number of quality control initiatives which can help ensure its
quality. The following suggestions are offered:
• Visit each property/service included in each package. This allows you to check out the
physical quality of facilities and determine whether they are really suitable. If parts of the
facility are substandard, you can arrange for your customers to receive only those that are
satisfactory. You can also meet with the management and staff who will be serving your
customers and impress on them your expectations, review policies and procedures, and
discuss any areas of concern.
• Commit all details of the arrangements to writing and have each property/service confirm in
writing. This should cover basics such as dates, prices, and services to be provided. It should
also cover quality standards, special services, and the like.
• Ask each supplier to appoint a liaison/coordination person to be your point of contact. This
person should be in management and have the authority to make decisions regarding
arrangements, problem solving, etc. This person should also be given the responsibility of
overseeing the services being provided to the customer, and should be on call if any problems
arise. (A backup liaison person would be a good idea too.)
• For each supplier, establish a problem-solving procedure agreeable to both parties and agree
on procedures and standards of personalized hospitality to be provided to your customers.
Where possible, little extras should be arranged to provide a pleasant surprise for your mutual
guests.
• Agree on a program to brief/train your own staff and those of your partner on the package
features, services to be provided, problem solving procedures, and expected standards of
hospitality.
Contingency Arrangements
If it is possible that the services in the package may not be available for a particular customer,
there should be a contingency plan, made during the planning stage, for substituting an equivalent
product. (The possibility should be mentioned in your brochure in this respect.)
Your Management Process
Beyond the planning process, a management process is needed within your company for the
delivery of the package itself. This consists of the following elements:
• Appoint a member of your staff to act as the coordinator for the package and to be the contact
person for both customers and suppliers. There should also be one or two backup people
appointed to cover periods when the main coordinator is unavailable.
Page 55 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Use a confirmation form to communicate with suppliers, informing them of
dates/names/special requirements/etc. of bookings received.
• For major package elements, make phone calls to participating suppliers a couple of days
ahead of each departure to reconfirm.
• Confirm the availability of your participating supplier’s liaison person for the package. You
should confirm their ability to meet the customer on the date in question and solve any
problems, etc. or make sure they have a backup person appointed and briefed for this task.
• Ask participating properties to have their liaison person meet the customer(s) upon arrival, if
possible, and offer their services should the customer require any assistance. Encourage
helpful suggestions and offers to make any special arrangements desired by the customer.
Generally, a high standard of personalized service should be the objective.
Customer Communications/Documents
The customer should be sent a package of information well in advance of the package date. The
package should include the following:
• Copies of confirmations for key package services;
• Appropriate vouchers/tickets;
• Maps and other general information on the destination area, its attractions, etc.;
• Detailed instructions regarding the package and such things as customs and immigration,
currency, etc.;
• Suggestions on what to bring, other things to do, etc.;
• Policies and rules governing the package;
• The name and phone number of your coordinator (and your backup people);
• Names of contact people at the participating properties;
• Established procedures for obtaining information or help, solving problems, making
complaints, etc.;
• Other materials appropriate to the particular package.
The kit should also make clear whether any substitutions have been made to the original package
description and the reasons for those changes. If the change is a major one, it is better to call the
customer in advance to discuss the matter and reassure them, and to give them the option to
change their date or cancel.
You will have to negotiate an arrangement with the outbound tour operator on who develops each
of the above.
Page 56 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Refund and Credit Policy
Some tour operators have the attitude that once a customer is booked, the operator is entitled to
aggressive policies to hold on to them or at least their money. They apply cancellation penalties,
non-refundable deposits, and forced substitutions of package elements. Few of these practices
make for a quality customer experience!
We recognize that some policies along these lines are appropriate, particularly for last minute
cancellations without good cause. However, as a general rule, we believe it is a better investment
in long-term customer satisfaction, referrals, repeat business, etc. to have a generous policy,
within reason of course. Customers should be given the maximum, reasonable amount of
flexibility.
Your policies on cancellations, refunds and the like should be carefully designed and developed
in consultation with your tour operator partners, with consideration for the realities of their
business as well as your own. They should also be based upon the real needs of your business.
In cases where you have to make changes to the package, the customer should be given the full
right of cancellation. The likelihood of cancellation can be minimized if a call is made, an
explanation given, and reassurances provided. However, if the customer is not satisfied, give
them the freedom to book something else or to cancel and receive a full refund.
Tracking Results
Finally, it is important to monitor results, as this provides vital feedback to assist you in
improving your packages. Suggested techniques include:
• Customer questionnaires, including questions designed to identify problems, complaints, and
areas for improvement. (Positive experiences should also be sought out and the appropriate
staff commended.)
• Phone interviews of a sample of customers after they return home. This will permit deeper
probing about the customer’s experience.
• Meetings with management and staff at participating properties to review problems and
successes.
• A system to log any complaints received, and a procedure to follow up on complaints
promptly - with both the offending party and the customer.
• Have your product staff provide a report on the results of all the foregoing initiatives, along
with recommendations for package improvements.
In addition to monitoring the package itself, it is important to track the results of your marketing
efforts; specifically, which market segments produced the best results and which promotional
techniques were most effective. If you are marketing directly to consumers, some suggestions
include:
Page 57 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Putting questions on the customer questionnaire about customer demographics and other
relevant market information and about how they learned about the package, what appealed to
them, for example.
• Coding your advertisements, by using coupons and/or department numbers, so that enquiries
can be traced.
• Asking people making reservations where they learned of the package.
• Cross-checking reservations against enquiries to determine conversion rates. Conversion rates
refer to the percentage of enquiries which are converted into actual bookings.
6.7 Phasing
It is important that you don’t try to introduce too many packages at one time. Start with only a
few, carefully plan and debug them and make sure they are working well before introducing any
more. This is one of those situations where less is more. Having two or three successful
packages initially is much better than having eight or ten that are full of problems.
SECTION 7
Negotiating Travel Trade Partnerships
3
The material in this section has been adapted from several sources, all of which were originally
prepared by The Economic Planning Group. These sources include:
• Nova Scotia HUB and SPOKE Tourism Marketing Seminar Manual, prepared for the Nova
Scotia Tourism RITC, 1989/90
• Tourism is Your Business: Marketing Management, Published by Canadian Hotel &
Restaurant, MacLean Hunter Limited in co-operation with Tourism Canada and the Canadian
Government Publishing Centre, 1986
• Packaging for and Selling in the United States Leisure Market, Published by Tourism Canada,
1995
Page 58 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 7
NEGOTIATING TRAVEL TRADE
PARTNERSHIPS
3
We have been referring to the relationship between your receptive business and the travel trade as
a partnership, which it most assuredly is. Your relationship with your suppliers is also a
partnership, with some differences.
In working with the travel trade, the outbound tour operator is the marketer; you are the product
coordinator; your suppliers are the product providers. The elements of the partnership with the
tour operator is as follows:
In consumer marketing, the outbound tour operator is responsible for promotion, reservations and
ticketing. They will look to you to provide copy and photos for the brochure, and material for
inclusion in the customer’s information kit.
In marketing to travel agencies, the outbound operator will look to you to assist with
arrangements for FAM trips.
In providing the product, your role can vary. Generally, the outbound operator will be
responsible for getting the customer to your destination, and you will be responsible for greeting
them and generally coordinating arrangements for them. You may be required to issue vouchers
and other documents to them on arrival.
In administration, your role may be to issue confirmations to suppliers, receive and approve
billings from suppliers and handle payments to suppliers.
Each situation will differ, depending on the respective preferences of the outbound operator and
the receptive operator, and the particular requirements of the package. You will need to establish
the details of the modus operandi of the program with each tour operator and for each program.
Page 59 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
7.1 Coordination, Liaison and Quality Control
Needless to say, managing your relationship with your travel trade partners requires the same
kind of attention as does the management of your own business. Here are some tips:
• Take the time to work out the details of your arrangements, then confirm them in writing.
Where there is the risk of changes, agree on the kinds of contingency arrangements or
substitutions that can be made, and the procedure for making them.
• Put on an initial product orientation/training session for their reservations staff, product staff
and supervisors. Arrange to provide the staff with brochures on your product and other
information on your destination. Where possible, their key staff should participate in a FAM
trip.
• Establish a regular reporting program by the tour operator, so you can track the progress of
their bookings. The reports can be used as the basis for appropriate adjustments in block
space allocations with your suppliers.
• Establish liaison people at both ends, with backups. These people should have decision-
making authority with respect to contracting arrangements.
• Communicate with the tour operator with respect to any changes to arrangements. This
should be in writing, by email or by fax, with follow-up to confirm the communication if the
change is of major significance. Substitutions should be of equal or greater value.
• Be reasonable! The basis for your relationship is one of partnership. Don't stick to firm
policies if circumstances warrant a custom arrangement, or a custom change. Negotiate in
good faith. Also, be reasonable with cancellations, deposits, etc.
• Solve problems quickly and thoroughly. Tour operators will drop you if there are too many
headaches in the relationship.
• Log sales results, problems, customer letters, etc. for review with your partner at the end of
the program and to provide the basis for product enhancements for next year. To the same
end, collaborate with your partner in a program of on-tour or follow-up research to determine
guest satisfaction, suggestions for improvements, etc.
Some other guidelines for working with the travel trade are discussed in Section 6 on Packaging
and in Section 11 on Marketing.
SECTION 8
Supplier Partnerships
4
The material in this section has been adapted from several sources, all of which were originally
prepared by The Economic Planning Group. These sources include:
• Nova Scotia HUB and SPOKE Tourism Marketing Seminar Manual, prepared for the Nova
Scotia Tourism RITC, 1989/90
• Tourism is Your Business: Marketing Management, Published by Canadian Hotel &
Restaurant, MacLean Hunter Limited in co-operation with Tourism Canada and the Canadian
Government Publishing Centre, 1986
• Packaging for and Selling in the United States Leisure Market, Published by Tourism Canada,
1995
Page 60 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 8
SUPPLIER PARTNERSHIPS
4
8.1 Potential Suppliers
Potential suppliers for your tours and packages will include a wide range of businesses. Major
suppliers will be:
• Airlines, particularly if you are doing FIT business and selling your own tours direct to
consumers (airlines are both travel trade partners and suppliers);
• Ferries
• Accommodations;
• Attractions;
• Restaurants;
• In-province transportation companies;
• Outdoor adventure operators;
• Local sightseeing operators;
• Car rental companies;
• Performance theatres;
• Festivals.
Basically, all of the providers of services required by customers on the package are potential
supplier partners.
Suppliers You Can Work with
Seek out suppliers who are prepared to cooperate with you in ways you prefer. What you need
are suppliers who generally meet the following criteria:
• Willing to provide net rates you can work with (We expand on this below.);
• Willing to meet other normal terms of trade for travel trade businesses, such as block space,
no deposit required, post-travel payment, etc.;
Page 61 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Make a commitment to deliver what they promise;
• Have a professional approach to business (e.g. having a phone number where they can be
reached in the off-season!).
For the partnership to have any real chances of success, your suppliers have to see themselves as
professionals and be prepared to operate their business in a professional manner. They have to be
willing to make an effort to understand how the travel trade works - to participate in the big
picture of how the tourism industry itself works. Tour operators refer to a’ travel trade culture’,
meaning an understanding and willingness of suppliers to operate their businesses in ways which
allow travel trade partnerships to be successful.
8.2 Price Negotiation
You have the responsibility to negotiate the costs of all the package elements provided by your
suppliers, as well as control the other administrative arrangements involved.
Most suppliers will have an existing schedule of discounts and commissions. These may be good
enough for your purposes. However, your responsibility to your tour operator partner, to the
price competitiveness of the package, and to your own bottom-line profitability is to negotiate the
best possible price for each element of the package. Also, as you are going to have a tour
operator and probably a travel agent involved in marketing the product, the discounts have to be
sufficient to cover their margins as well.
The discounted price negotiated with the supplier is known in the trade as the ‘net rate’.
A summary of the kinds of supplier discounts and commissions considered normal by the travel
trade is presented below.
GUIDELINES ON SUPPLIER COMMISSIONS AND DISCOUNTS
Travel Agent Commission on Individual Bookings 10%
Travel Trade Wholesaler Discounts (Reductions from Retail)
For A Tour Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For A Receptive Tour Operator . . . . . . . . . . . . . . . . . . . . . . . . .
For Group Leaders, Affinity Groups . . . . . . . . . . . . . . . . . . . . .
20% - 25%
25% - 35%
5% - 10%
Consumer Discounts
Off-season . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Children . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10% - 50%
30% - 60%
As you increase your business from year to year, your suppliers should be more receptive to
lower prices and larger tour operator discounts.
Page 62 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Remember in your negotiations that your package promises many appealing things to your
suppliers, and these should be taken into account in the kind of deal you strike. The supplier is
going to benefit in the following ways, which make it more feasible for them to sharpen their
pencil:
• Marketing and overhead costs are being carried by you and the tour operator and are removed
from the supplier.
• Business is booked well in advance, an advantage to the supplier in terms of planning and
scheduling.
• The package may very well be providing business in slow periods.
• If the booking is a group tour, the property can realize a variety of efficiencies; in front desk
operations and housekeeping in particular, and there are rarely any disciplinary problems.
One of the challenges you will face is getting suppliers who have not worked with the travel trade
much in the past to understand and accept the need for, and appropriateness of, the kinds of
discounts from their retail prices that you are going to need. For many suppliers, the prospect of
cutting their prices by 20% to 35% will be daunting. However, there are several powerful
rationales in support of the concept, and many suppliers have discovered the cost effectiveness of
doing business with wholesalers on the basis of deep discounts. The cost effectiveness is based
on the following premises:
• The first is the principle of marginal cost pricing, which can be applied to most tourism
businesses. This principle focuses on the incremental cost of servicing an additional
customer. Given the presence of substantial fixed costs in most tourism businesses, there are
usually substantial economies of scale in adding one more customer, or adding an additional
group of customers.
During periods when your supplier’s business is not expected to operate at capacity, as long as
the revenue from an additional customer covers more than the incremental costs of servicing
the customer, it is profitable to take the booking. A classic example of this is the renting of a
hotel room. The incremental cost of renting one more room on a given date, when otherwise
the room would be vacant (or an additional block of rooms for that matter that otherwise
would be vacant), is only a small fraction of the cost of the normal room rate, probably only
$10 or so. The incremental costs for a hotel to service an additional customer are probably
limited to an additional half-hour of a room attendant’s time, some room supplies, and perhaps
some additional heating cost; but that's about it. All the other costs - for marketing,
overheads, debt service, etc. - will not increase.
The concept of marginal cost pricing is important for rationalizing the discount structure
involved in doing business with wholesalers. To make it work, the program must, on balance,
generate a significant portion of package-related demand for the supplier in periods when
there would normally be surplus capacity: in other words, during periods of the week or the
year that can normally be predicted to be slow. The cost of the discounts can then be weighed
against the incremental profitability of the additional business in these periods.
Page 63 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
It is not, however, reasonable for a supplier just to do business with wholesalers in slow
periods. You are definitely going to want to do business in their busy season as well. It will,
therefore, be important to convince the supplier to weigh the cost-benefit of the discounted
business not only against the incremental profitability involved in off-peak periods, but also
against the lost margin on wholesale business in periods when they might have been able to
sell the product at full rates.
• The second issue is that of cost displacement. The wholesaler assumes various costs in
developing, marketing, and managing the packaging program, and, to some degree at least,
this can represent a cost saving to the product supplier. The most obvious example is
marketing costs. If a property budgets 5% of revenue for marketing, there is a relative cost
saving equal to 5% of the net sales price of the product on business brought in the door from a
wholesale packager who handles their own marketing. There are similar savings on sales
administration, accounting, supervision, and management. It is quite reasonable for an
accommodation property, for example, to realize overall savings of 15% to 20% on its costs in
servicing the customers of travel trade wholesalers.
• A third consideration is that of market diversity and risk reduction for the product supplier.
For example, an accommodation property or an attraction suffering ups and downs in business
because of cyclical swings, poor weather, local price competition, the entry of a new supplier,
or other short term situations can benefit from the longer term stability of wholesaler block
bookings. These bookings are not as likely to be affected by short-term or local conditions,
resulting in a more predictable and stable base of business from completely separate markets,
over a period of time.
In conclusion, for the vast majority of suppliers, it will be worthwhile for them to work with the
wholesale travel trade by offering the expected discounts and commissions. A careful evaluation
of the supplier’s cost and pricing structure and of the incremental costs and revenues associated
with increases in business is necessary to demonstrate the basis for such discounts.
Unfortunately, too few tourism operators understand the foregoing aspects of their business.
Airlines and others such as chain accommodations who practice revenue/yield management in
their businesses do recognize these principles and operate their entire business in accordance with
them. They are in the minority. You will have a job selling the idea to many of your potential
suppliers.
Other things to remember in negotiations with suppliers:
• You will need complimentary services for tour guides, drivers, and FAM trip guests.
• Baggage handling, gratuities, and other details have to be arranged and the costs included in
the package.
• It is reasonable for a supplier to want deposits the first time you do business together, but
deposits should not be necessary on an ongoing basis. Deposits should only be paid on the
basis of deposit receipts from customers.
• Arrangements need to be made with respect to regular booking reviews, with corresponding
adjustments to space being held for the program.
Page 64 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
A receptive tour operator uses the net prices as the base cost of the package and then adds
markups on the net cost to cover additional services to be provided (tour guide, step-on guide,
etc.), as well as overhead and profit, and also the margins required for the outbound tour operator
and a travel agency.
8.3 Sales Administration
The administration of your business relationship with your suppliers will have a number of
elements. Some you will be responsible for, others may be handled directly between the
outbound tour operator and the supplier. In any event, in addition to the net rates, the various
elements to be addressed in the arrangement with the supplier include the following:
• Block booking procedures, including arrangements for sales reports, space release dates, etc.;
• Billing and payment procedures, including deposits, if required;
• Confirmations, including notification of special customer requirements;
• Use of vouchers, coupons;
• Special requirements, if any, for the tour operator’s clientele.
8.4 Coordination and Management
Issues related to the coordination and management of packages with your suppliers were dealt
with in detail in Section 6.
SECTION 9
Legal, Regulatory and Tax Matters
Page 65 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
This section addresses legal, regulatory and tax matters concerned with the establishment
of your receptive tour operator business. There are a multitude of laws and regulations
that affect business and readers should note that the information contained herein is a
guide only.
It is strongly suggested that the reader undertake efforts to verify any information on
which their business plan is based and not rely solely on the information in this manual.
There are areas where you may want to consider retaining the appropriate professional
expertise to assist you.
While the information contained in this manual is believed to be accurate, as of the winter
of 2005, it is not so warranted. The reader should note that federal, provincial and
municipal laws and regulations change frequently and it is recommended that you check
with the appropriate authorities, listed in the Appendix, including representatives of the
Nova Scotia Department of Tourism, Culture and Heritage and your local Business
Service Centre (on line at www.gov.ns.ca/snsmr or at Access Nova Scotia centres around
the province), to obtain up-to-date information on laws that may affect your business.
SECTION 9
Legal, Regulatory, and Tax Matters
9.1 Vehicle Permits and Licensing
As discussed earlier, you can either charter any vans or motorcoaches that you require to operate
your receptive tour business or you can purchase your own vehicles. In the early years of your
business, you are most likely going to charter, in which case you do not have to be concerned
with vehicle permits and licensing. However, if you decide at some point to acquire your own
vehicles, prior to doing so, acquire your various permits and licenses. In any event, it is helpful if
you have an understanding of this issue.
All vehicles used in your operation must have valid permits and licenses issued by Service Nova
Scotia and Municipal Relations Registry of Motor Vehicles. In addition, drivers must have the
appropriate class of drivers’ licenses for the type and size of vehicle they will be operating.
Contact Service Nova Scotia and Municipal Relations’ Registry of Motor Vehicles for additional
information.
You will require a Motor Carrier License to operate a vehicle that holds nine passengers or more
(excluding the driver); or a Commercial Van License for vehicles that carry 8 passengers or less
(excluding the driver)and provide a daily, weekly, or other regular service, or a charter or tour
service that enters or departs any municipality. These are available by contacting the Nova Scotia
Utility and Review Board, Motor Carrier Division (website: www.nsuarb.ca ).
Page 66 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
If you intend to use a limousine or taxi cab to transport passengers, you must obtain a
taxi/limousine operator’s license from your local municipality. Your municipality may have
specific regulations regarding the number of taxis/ limos it will license, as well as fare limits. In
addition, your municipality will likely require an annual inspection of the vehicle for its operating
license renewal. It should be noted that a taxicab is considered to be a vehicle that has a seating
capacity of 8 passengers or less (excluding the driver) and is operated within a municipality, or
under hire on single contracts within the province (one way or return) and is not operated as a
regular service or a charter service.
As previously indicated, a Commercial Van License is required if your vehicles accommodate
eight people or less, excluding the driver, and provide a daily, weekly, or other regular service, or
a charter or tour service that enters or departs any municipality. Under this type of license the
owner/operator of a vehicle is subject to regulations, including those relating to hours of work,
vehicle inspections and maintenance records documentation; as well as the following required
safety features:
• Portable fire extinguisher
• Unitized first-aid kit
• No less than 3 triangular reflectors
As a receptive tour operator utilizing a Commercial Van License, you should pay particular
attention to the hours of work allowed under the Motor Carrier Act Regulations. If you or an
employee will be driving, in addition to performing other duties relating to your business, you
will be subject to regulations relating to the number of hours you are permitted to operate a
vehicle during a given time period.
For larger vehicles - those carrying nine or more persons, excluding the driver, a Motor Carrier
License is required. If you are chartering the vehicles from another company, then the Motor
Carrier License is the responsibility of that company and you only need to worry about whether
your supplier has the necessary operating authorities.
There are two types of Motor Carrier Licenses which are relevant to this type of business:
• A Charter License, which permits you to hire/charter your vehicle for a lump sum price for
the purposes of chartering for groups, tours, and adventure travel;
• A Sightseeing License, which permits you to sell individual tickets for tours using the
vehicle.
You can have both types of license but you can only offer the type of products and services that
are spelled out in the license. Your license will indicate:
• The type and size of the equipment you are using;
• The prices you will be charging, including regular rates, discounted rates for the travel trade,
etc;
• Your itinerary, routes, and where you pick up and drop off passengers (this could cover a
large or a very small geographic area). (Note that this is a key requirement for
5
Many operators in Nova Scotia set up a separate charter company to serve this purpose,
with the fluctuating elements of the tour business handled by the main tour company. In
this way, you may charter your vehicles to your tour company without having to make
license amendments as required for a Sightseeing License.
Page 67 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Sightseeing Licenses. For Charter Licenses, the restriction only pertains to the geographic
area in which you may operate.)
For receptive tour businesses, the Board recommends that you apply for a Charter License which
will permit you to hire out your vehicles for the purposes of group charters, tours, and sightseeing
excursions.
5
If you wish to apply for a Sightseeing License, you should be aware that this license will be much
more restrictive than the Charter License and will set out fixed routes, fares, schedules, etc. This
may not be the preferred licensing method for tour operators, since any changes to your tour
itineraries, fares, etc., will require amendments tothe aforementioned schedules to be approved by
the Board prior to their implementation.
The Nova Scotia Utility and Review Board will assist you in applying for the correct license and
completing the application forms.
For all license categories, the Utility and Review Board will expect to see a comprehensive
business plan identifying your markets and where your business will come from, as well as the
financial basis for your operation. In providing Motor Carrier Licenses, the Board attempts to
ensure that there is a sufficient market available so that existing operations can continue to
operate on a reasonable financial basis, while you also operate a financially viable business.
The process of obtaining a permanent Motor Carrier License takes about six to eight weeks,
assuming there are no major objections. Once your application is completed and submitted to the
Board, they place an advertisement in the Royal Gazette (two issues), and anyone (existing
businesses, the general public) has 21 days to enter an objection. If there are no objections, the
application will proceed to the Board for consideration.
If there are objections, they will be reviewed by the Board and the Board may convene a hearing
to listen to the concerns of the parties objecting. Parties can object to any element of your
application, e.g. rates, route, size and type of coach, etc. If there are objections, the process
lengthens, usually by about another 30 days but possibly much longer, depending on the scale
and nature of the objections.
If you are starting a new business, you may want to consider applying for a Temporary Authority
under the Motor Carrier Act. This license costs a bit more but can be granted by the Board
without going through the process of advertising for objections. The Temporary Authority is
valid for 90 days, can be extended for an additional 90 days and can be granted within a two to
three-week period, provided the applicant can establish an immediate and/or special need which
might permit the Board to issue this Temporary Authority. Note, however, that being issued a
Temporary Authority does not necessarily guarantee that you will be awarded a permanent Motor
Carrier License when you apply for one. You may, therefore, want to consider seriously the level
of investment you want to make in your business, based only on a Temporary License.
Page 68 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
If you already have a Motor Carrier License and want to make changes to any of the items
identified above, you will need to apply for an amendment to your license, and this will have to
go through the same process as the permanent license. If you are just replacing one vehicle with
another of the same size, then you do not need an amendment but if you want to add vehicles,
change your prices, or pick up passengers from a different location than is incorporated in your
permanent license, then you will need an amendment.
Whether you are applying for a Motor Carrier License or a Commercial Van License, your
insurance company will have to complete a Motor Carrier Certificate of Insurance, indicating the
carrier of the insurance on your vehicles and the limit of coverage in accordance with the Act and
Regulations, and forward it to the Utility and Review Board in order for you to receive your
license. In early 2005, insurance requirements for vehicles transporting 20 passengers or less are
$1 million in third party liability coverage, as well as $2 million in passenger liability & property
damage; while vehicles carrying 21 passengers or more must have $1 million in third party
liability and $3 million passenger liability & property damage coverage. It is advised that you
contact the NS Utility and Review Board, or check their website, www.nsuarb.ca, as this
information is subject to change.
As well, your vehicles will have to be inspected prior to business start up and every six months
thereafter. The inspection covers mechanical and body issues, cleanliness (interior and exterior),
and the delivery of service. You will have to have the license renewed on an annual basis, but
this is routine (plate renewal) unless you want to make changes.
If you want to take a tour out of the province, you will need another license - an Extra Provincial
License - and you may also need approvals from the other provinces in which you intend to
operate. You also have to apply to abandon your license, should you decide to stop operating.
With the exception of Regularly Scheduled Service, this is a fairly routine matter.
Given the complexities of obtaining Motor Carrier and Commercial Van Licenses, you should not
make any financial commitments to your business (e.g. purchasing vehicles, buildings, etc.) until
you have obtained your required License and/or Extra-Provincial license.
Contact the Motor Carrier (Public Passenger) Division of the Nova Scotia Utility and Review
Board for further information pertaining to these licenses at (902) 424-3588, or visit them online
at www.nsuarb.ca.
9.2 Other Regulations
License to Sell Travel Insurance
Many tour operators provide an extra service to their passengers by offering travel insurance to
cover such things as trip cancellation or interruption for a medical reason, or baggage loss.
However, in order to sell travel insurance to your passengers, you are required by law to hold an
insurance license issued by the Licensing Section of the Nova Scotia Department of Environment
and Labour. For a tour operator, two licenses are required: one for the business itself (insurance
Agency License) and one for the agent in charge, usually the owner (Insurance Agent License).
The licenses are valid for 3 years and can be renewed. There are a number of requirements that
must be met, including a pre-licensing examination for the Insurance Agent License. Additional
Page 69 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
licenses are required for employees selling travel insurance. Contact the Financial Institutions
Division of the Department of Environment and Labour for application information, (902) 424-
5613 or online at www.gov.ns.ca/enla/fin/fininst.htm .
Note that your company must be registered with Joint Stocks before insurance licenses will be
issued.
License to Sell Airline Tickets
If you are going to sell airline tickets, you must be a Travel Agent with an accreditation from the
International Air Transport Association (IATA), the association of major airlines. To get an
appointment, you will need a minimum of two staff members (one of whom is designated as the
manager) who meet the IATA requirements for previous work experience. This work experience
must have been acquired through an IATA or Air Transport Association of Canada (ATAC)
member airline or travel agency. In addition, you will need to meet certain financial
requirements, including posting a bond to protect the funds owed to airlines in the event of your
business failing. COntact IATA through www.iata.org for details on their requirements.
Nova Scotia Department of Environment and Labour
The Department of Environment and Labour is responsible for occupational health and safety,
public safety, labour standards, as well as the Office of the Fire Marshal. The Department also
administers acts and regulations pertaining to elevators and amusement devices. Specific
regulations that would pertain to a receptive tour operator business include:
• Occupational Health and Safety Act that requires employers to adhere to operational and
employee safety standards. A brief overview of this Act and the implications for business
operations is provided below.
• Labour standards with respect to minimum wage, employee/employer rights, etc. A Fact
Sheet providing general information on the Labour Standards Code is published on the
Internet at www.gov.ns.ca/enla/labstand/lstcode/ or you can contact the Labour Standards
Division of the Department for more information.
• The Pay Equity Act is administered through the Labour Services Division of the Department
of Environment and Labour. Pay equity means equal pay for work of equal value and is a
concept that bases wages on the value of work performed, regardless of whether a man or
woman is doing the job.
• Indoor Air Quality Regulations;
• First Aid Regulations. There is a Guide to First Aid Regulations available at
www.gov.ns.ca/enla/ohs/FirstAidGuide.pdf
• Workplace Hazardous Materials Information [WHMIS] Regulations. A guide to these
regulations is available through the Environment and Labour website, Publications section,
under Public Safety and Occupational Health and Safety. Note that the Nova Scotia Tourism
Human Resource Council offers customized WHMIS training programs for the tourism
sector. Check their website at www.tourismhrc.com for details.
Page 70 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
The Nova Scotia Occupational Health and Safety Act
The current Occupational Health and Safety Act became law in 1997, with some significant
implications for businesses in Nova Scotia. The Act is comprised of some key elements as
described below. It is administered by the Occupational Health and Safety Division, Department
of Environment and Labour - information, including a "How to Guide" can be found at
www.gov.ns.ca/enla/ohs/
The Internal Responsibility System concept is the foundation of the Act and, simply stated,
places the responsibility of workplace safety on all workplace parties. Workplace parties are
defined as anyone connected with a particular workplace, including Employers, Contractors,
Constructors, Employees, the Self-Employed, as well as Owners, Suppliers, Architects,
Engineers, and Occupational Health and Safety Consultants. The Act states in some detail what
the responsibilities (i.e. duties and precautions) of all workplace parties are.
The Act also provides employees with three basic rights. These are:
• The Right to Know - each employee is entitled to information on issues that affect the health
and safety of the employee or that of another person in the workplace;
• The Right to Refuse - employees have the right to refuse unsafe or unhealthy work;
• The Right to Participate - employees can participate on health and safety committees or be
an Occupational Health and Safety Representative, report unsafe conditions, and voice their
concerns or opinions on any issue that affects their health and safety, or that of the
workplace.
The Act states that a business employing five or more people on a regular basis is required to
prepare a written Occupational Health and Safety Policy indicating that the employer is
committed to occupational health and safety, and that the employer will co-operate with
employees in striving to meet the goal of a safer and healthier workplace.
A business employing twenty or more people on a regular basis is required to establish and
maintain a written Occupational Health and Safety Program including provisions for:
• The training and supervision of employees;
• The preparation of written work procedures relative to health and safety;
• The establishment of a Joint Occupational Health and Safety Committee or selection of a
Health and Safety Representative, where one is required;
• The establishment of a hazard identification program and an accident/incident investigation
system;
• The maintenance of records and statistics;
• The monitoring of the implementation and effectiveness of the program.
It is recommended that you obtain a copy of the Occupational Health and Safety Act and any
other regulations that may pertain to you.
Page 71 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Competition Act
Under the Competition Act, it is a criminal offence to engage in certain kinds of deceptive
marketing practices, including inflating regular price, and conducting misleading or false
advertising. The act applies to all businesses in Canada and is enforced by the Competition
Bureau of Industry Canada.
9.3 Personal Information Protection and Electronic
Documents Act
In January 2004, the federal government implemented the Personal Information Protection and
Electronic Documents Act (PIPED). This piece of legislation is applicable to all organizations,
including all private sector businesses and outlines the responsibilities of an organization relating
to personal information collected and stored through the course of normal business activities.
The primary purpose of the Act is to ensure that the privacy of individual consumers is respected
in that any personal information, including that relating to age, name, income, social status and
credit records; is used for legitimate commercial purposes only and is stored or maintained in a
secure fashion.
Following is a basic overview of PIPED:
- If your business wants to collect, use or disclose personal information about people, you
need their consent, except in a few specific and limited circumstances.
- You can use or disclose people’s personal information only for the purpose for which
they gave consent.
- Even with consent, you have to limit collection, use and disclosure to purposes that a
reasonable person would consider appropriate under the circumstances.
- Individuals have the right to see the personal information that your business holds about
them, and to correct any inaccuracies.
- There’s oversight, through the Privacy Commissioner of Canada, to ensure that the law is
respected, and redress if people’s rights are violated.
It is recommended that organizations develop in-house policies and procedures relating to the
retention of personal information. Many businesses have now taken steps to include their privacy
policy in their company literature and have it prominently displayed on company brochures,
websites, etc.
The Office of the Privacy Commissioner has an online guide to PIPED and a number of fact
sheets for businesses available through their website, which can be viewed athttp://www.privcom.gc.ca; or by contacting the Office of the Privacy Commissioner of Canada at
1-800-282-1376.
Page 72 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
9.4 Insurance
The question of insurance is very important for the tour operator business. The various types of
insurance you should be aware of are discussed below.
Vehicle Insurance
Vehicle insurance covers you in the event of bodily injury and/or property damage resulting from
an accident. Normally, a vehicle’s insurance is based on the make and model of the vehicle and
the vehicle’s value.
If you own your own tour vehicles, such as motorcoaches, you are required by law to hold valid
vehicle insurance. This type of insurance is the same as that required for all types of automotive
vehicles and is enforced by the Registry of Motor Vehicles. If you don’t own your own
motorcoaches or other vehicles, but rather charter them, you are not responsible for the vehicle
insurance - the company from which you charter is.
General Liability Insurance
General Liability coverage is insurance for claims against your business for bodily injury and/or
property damage that may arise out of your tour operations and for which you are legally
obligated to pay.
Professional Liability Insurance
Also known as Errors & Omissions or Malpractice insurance, Professional Liability Insurance
protects your company from claims arising out of a negligent act or an error of omission in the
professional service given by your company and/or your employees.
While tour operators and receptive operators are not required to hold professional liability
insurance, it is strongly recommended in order to protect yourself and your company from
financial loss.
All types of tour operators should hold professional liability insurance, regardless of whether they
operate the tours themselves, charter coaches and other vehicles from carriers, or simply offer a
step-on guide service. Although your vendors may have their own insurance coverage, your
company could be held liable in the event of a claim.
For instance, if an accident occurs on a motorcoach tour, your company could be held liable for
failing to investigate the accident record of the motorcoach company. As well, you may be liable
for damages in excess of the motorcoach company’s liability if they are inadequately insured.
In addition, if you don’t have insurance, you would have to pay legal council to defend your
company’s position as well as sue the carrier for compensation. Liability insurance is, therefore,
considered a must in the industry. In fact, in order to be a member of the National Tour
Association (NTA), a travel industry membership organization for tour operators and suppliers,
tour operators are required to hold Professional Liability insurance. Insurance protection will
cover you for the liability of tour vehicles you own, as well as non-owned or hired vehicles you
charter, such as motorcoaches.
6
Dead-heading occurs when you send an empty vehicle ahead to the point where the tour
originates, or return it empty. While the vehicle is dead-headed, it does not carry any
passengers and insurance companies offer lower rates for these periods. Usually tour
operators that dead-head maintain daily log-books that are, in turn, submitted to the
insurance company for year-end adjustment.
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While your local insurance company may be able to offer general liability insurance, they are
not normally able to offer the comprehensive professional liability coverage that is needed by
tour operators. Look into joining a large trade organization, such as NTA, which can offer
group insurance packages more geared to your particular needs.
Generally, professional liability and general liability insurance are issued at a fixed premium per
year, based on a number of factors including the volume of business you conduct, the passenger
capacity of your vehicles, and other factors such as the number of trips run per day and the
mileage of trips where the vehicle is deadheaded
6
.
Travel Insurance
Offering travel insurance to passengers is an effective way to limit liability and deter small
nuisance suits. Passengers holding travel insurance are far less likely to sue the tour operator for
damages when they are already covered by their travel insurance. As well, offering your
customers travel insurance is a good way to strengthen your position in court should a liability
issue arise.
Disclaimer
Another method of limiting tour operator liability is to publish a disclaimer on your tour
brochures, invoices, and itineraries. A disclaimer, which should be fair and equitable to
consumers in order to be recognized by the courts, is a clause used to notify consumers that your
company is a travel intermediary involved in handling travel arrangements of other suppliers,
and is, therefore, not liable for the acts of suppliers (e.g. hotels, restaurants), which are out of its
control. If this disclaimer is not made, you may be made liable for the acts of your suppliers.
The clause cannot disclaim liability for your own company’s negligence. You should get legal
advice in preparing the disclaimer.
9.5 Taxes
Harmonized Sales Tax
The Harmonized Sales Tax (HST) is a 15% value-added tax which replaced the former retail
sales tax and GST in Nova Scotia. All receptive tour operators are required to register for and
collect the HST on tour products and services if their total sales revenues are in excess of
$30,000 in a 12 month period. The HST is in place in Nova Scotia, Newfoundland and Labrador
and New Brunswick; all other provinces have the GST.
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As a tour operator, you pay HST or GST when you buy individual travel services - airline seats,
hotel rooms, attractions - and charge HST or GST on the tour packages and services you sell to
consumers. The HST/GST you pay out is called an input tax credit; you can claim input tax
credits to recover the HST/GST you were charged on the cost of these individual travel services.
For example, when you purchase hotel accommodation to resell as part of a tour package, you can
recover the 15% HST or 7% GST you paid on the accommodation by claiming an input tax credit
on your HST/GST return.
When you register for the HST/GST you are given a reporting schedule to follow for your
HST/GST returns, depending on the volume of your tour business. When you complete your
return, you deduct all your input tax credits from the HST or GST you charged on your tour sales.
You are required to remit the difference if the HST or GST you collect is more than your credits;
if your credits exceed your payables, you claim a HST/GST refund.
For tour operators, goods and services that are HST/GST taxable include:
• Travel agents’ commissions;
• Domestic tour packages;
• Domestic transportation by bus, train, ship, or aircraft;
• Hotel and other accommodation;
• Car rentals;
• Ticket cancellation fees;
• Restaurant meals;
• Admissions to attractions.
The type of tax that applies (i.e., HST or GST) to these elements depends upon the province in
which the goods and services were purchased in.
Goods and services that are zero-rated for tour operators (things that are subject to the HST/GST
but at a rate of zero or in effect no tax) include international travel (e.g. air travel from Europe to
Nova Scotia).
Goods and services that are completely exempt from the HST/GST include:
• Municipal transit services;
• Ferries transporting passengers and motor vehicles;
• Highway/bridge tolls;
• Most health, medical, banking, and insurance services;
• Commissions paid by insurance companies.
If you operate a small tour business which earns annual sales revenues under $30,000, you are not
required to charge HST/GST. However, you may wish to voluntarily register for and collect the
HST/GST. The advantage of doing this is that you can claim a credit (called an input tax credit)
to recover the HST/GST you paid for expenses and purchases used for the business.
If you need to collect HST/GST, you must first register for the HST/HST with Revenue Canada.
Contact the Business Window at your local Tax Services Office of Revenue Canada for further
information including the Tour Operator Guide and a GST/HST registration form.
Page 75 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Contact Canada Revenue Agency either in person, via phone (1-800-959-5525), by mail or
through the on-line business registry at www. bsa.cbsc.org/gol/bsa/site.nsf/en/index.html and
follow the appropriate links for an HST Registration Form and a copy of the Tour Operator
Guide.
HST Rebates for Nonresident Visitors
HST/GST may be rebated to nonresident (i.e., non-Canadian) visitors and tour operators with
nonresident tour passengers purchasing your tour services. Nonresidents are only eligible for
rebates on 50% of the HST/GST paid on the total price of the tour package.
Employment Taxes
As an employer, you are responsible for deducting income tax, Canada Pension Plan (CPP)
contributions, and Employment Insurance (EI) premiums from the wages and salaries you pay
your employees. You are also responsible for remitting these amounts on a monthly basis to the
Receiver General for Canada, along with your share of CPP contributions and EI premiums that
you pay throughout the year on your employees’ behalf. You are also required to report these
amounts on an annual information return and prepare annual T4 information slips for your
employees.
The Canada Revenue Agency is responsible for ensuring these requirements are met. The
department handles enforcement and some collection activities related to payroll deductions,
prepares the Payroll Deduction Tables used by employers for calculating deductions, and
determines employee insurable earnings for Employment Insurance and pensionable
employment for the Canada Pension Plan.
Contact your local Canada Revenue Agency office for more information and a New Employer
kit.
Nova Scotia Workers’ Compensation
Under the Nova Scotia Workers’ Compensation Act, various industries are mandated to pay for
compensation coverage to protect employees from income loss and medical expenses resulting
from job-related injuries. Under the Act, you are required to pay a premium based on the dollar
value of wages you pay your employees, unless you employ fewer than three employees. (If you
employ three employees or less, you are exempt from this regulation.)
Contact the Nova Scotia Workers’ Compensation Board (www.wcb.ns.ca )for additional
information regarding the regulations, specific premiums applicable to you and a copy of the
registration form.
Corporate Income Tax
Corporations
If your business is federally or provincially incorporated, you must file a corporate income tax
return. This requirement also applies to incorporated not-for-profit organizations; the only
exception is a Registered Charity.
Page 76 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Be sure to file your corporate income tax return within six months of the end of the taxation year.
The taxation year of a corporation coincides with its fiscal year. The services of an accountant
are recommended in completing your income tax return as financial statements are required to be
attached to the T-2 Corporate Return. You can obtain a copy of the T2 Corporation Income Tax
Guide and schedules from the Canada Revenue Agency (CRA).
Corporations are required to pay monthly installments to cover Corporation Income Tax in the 2
nd
year of operation and all following years if their federal taxes exceed $1,000.
Sole Proprietorships and Partnerships
The income from a sole proprietorship or partnership is accounted for on the personal income tax
of the individual proprietor or partner. Your taxable income is essentially your business income
minus any eligible business deductions. A separate Partnership return is required if there are
more than five partners in the partnership.
For additional information or Income Tax forms, check the Business Section of CRA’s website
(www.cra-arc.gc.ca ) or contact them by phone at 1-800-595-5525.
Business Occupancy Tax
Occupancy tax is an annual municipal tax that is administered and collected by your local
municipality. The tax is charged on nearly all commercial buildings in Nova Scotia, and is
applied at a fixed percentage based on the assessed value of a building, taking into consideration
the commercial value of the building (based on the value of the building and its rent per square
foot), and the assessment rate which applies to a particular type of business. The provincial
Assessment Division (Service Nova Scotia and Municipal Relations) is responsible for
determining the assessment value of your property for occupancy tax purposes.
There are plans to introduce legislation in the Spring of 2005 to eliminate the Business
Occupancy Tax in Nova Scotia.
Contact your municipal tax office or the Assessment Division of Service Nova Scotia and
Municipal Relations with enquiries regarding occupancy tax.
9.6 Registration of Companies
Provincial Business Registration
All business owners are required to register the name of their business, although the manner of
doing this varies depending on the type of business structure established. Appendix IV provides
comments on the different types of business structures and the advantages and disadvantages of
each. The Nova Scotia Business Registry is now available on line at www.gov.ns.ca/snsmr/nsbr/
Partnerships and Sole Proprietorships
The Partnership and Business Names Registration Act, administered by the Nova Scotia Registry
of Joint Stock Companies, requires the registration of sole proprietorships and partnerships in the
province.
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If a partnership has two or more partners, the partnership must appoint a recognized agent who is
a resident of Nova Scotia. One of the partners may be the agent.
An annual registration fee is charged. The registration year runs from April 1 to the following
March 31. In addition, there is a charge for conducting a NUANS (Newly Updated Automated
Name Search) to verify that your business name is not already being used by another business in
Atlantic Canada. A NUANS search may be ordered through the Registry of Joint Stock
Companies, Access Nova Scotia, or a private research house.
The registered name of the partnership or sole proprietorship will be protected and no identical or
similar name will be permitted in Nova Scotia.
For further information, contact the Registry of Joint Stock Companies at
www.gov.ns.ca/snsmr/rjsc .
Corporations
Corporations are required to be registered in Nova Scotia under the Corporations Registration
Act. If you wish to establish a Nova Scotia corporation, the first step is to request a NUANS of
your corporate name to verify that it is not already being used in Atlantic Canada. A fee is
required for each NUANS request. Incorporated companies are required to include the corporate
designation Limited or Incorporated as the last word in the business name.
Once your business name and incorporation has been approved, you are required to pay an annual
fee to register the business in Nova Scotia. The registered name of your corporation will be
protected and no identical or similar name will be permitted in Nova Scotia. Every incorporated
business must appoint a recognized agent who is the person that receives official correspondence.
This Agent does not have to be a lawyer but he/she must reside in Nova Scotia.
All business registrations can be completed on line through the Nova Scotia Business Registry
(www.gov.ns.ca/snsmr/nsbr ), via phone (1-800-225-8227) or in person at any Access Nova
Scotia location.
You would be well advised to also register your business in any other provinces in which you are
doing business, particularly if you are not a federally incorporated company. In so doing, you
will register your business name in these provinces and thereby prevent some other business from
using the same name.
Federal Business Registration
Partnerships and Sole Proprietorships
There is no registration for partnerships or sole proprietorships at the federal level. Businesses
wishing to operate in more than one province must be provincially registered in each province in
which they wish to conduct business.
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Canada Corporations
If you are considering incorporation, you have the option of being incorporated at the Federal
level under the Canada Business Corporations Act (CBCA). This replaces the need for provincial
incorporation.
Federal incorporation is often chosen for the heightened name protection it provides and may be
particularly useful to you if you plan to carry on business in more than one province. Location
flexibility is another advantage of federal incorporation. For example, the CBCA does not set
restrictions regarding the province where your head office is located. However, you may still be
required to register with provinces where extra-provincial operations will be carried out. For
Nova Scotia, this can be done at the same time as your Federal incorporation is completed on-
line.
As with provincial corporate registration, you are required to have a name search conducted
(NUANS) and pay an annual corporate registration fee. Your business must be registered to do
business in Nova Scotia, even if it is a federal corporation.
Contact Corporations Canada (www.corporationscanada.ic.gc.ca ), or the Canada/Nova Scotia
Business Service Centre for incorporation and registration information.
Business Number Registration
The federal government business numbering system, or BN, is a numbering system designed to
simplify the way businesses deal with government. When you start a business and open one or
more Canada Revenue Agency (CRA) business accounts (e.g. corporate income tax account,
payroll deductions account, or harmonized sales tax /goods and services tax (HST/GST) account),
you will automatically be assigned a unique Business Number which identifies you and the
various accounts you have. This streamlined system allots you one number only with which to
deal with the federal government, replacing the multiple numbers that businesses required in the
past. You can register for a BN on line at www.cra-rc.gc.ca/business .
Businesses that register for the BN will obtain one-stop business services from the Canada
Revenue Agency, including new business registration, adding new accounts, updating account
information, and account enquiries.
In most cases, new corporations will automatically receive a BN from CRA within 45 days of
incorporating at the federal or provincial level. Contact Revenue Canada if you need to have a
Business Number issued to you before this time.
Contact the Canada Revenue Agency for a copy of the registration application form and guide or
register on line. You may also register by phone, in person, by mail, or by fax.. (If you are a
corporation, your company must be registered and you must also provide a copy of your
Certificate of Incorporation to be registered for a Business Number.)
SECTION 10
Operations
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SECTION 10
OPERATIONS
You have so far developed a concept and a strategic plan for the business, assessed its feasibility,
planned the product - based on a full appreciation of the marketplace and the competition - and
established the business entity. This section presents suggestions and guidelines for starting and
operating the business.
10.1 Organization and Staffing
You need to figure out your management and staffing requirements. Keep the management team
small initially, you can always add more people if you really need them, but it is much harder to
downsize if you have too many. The areas of operation that will have to be covered include:
• General management: banking, planning, budgeting, overall supervision of each area of
operation below;
• Product development: package development, supplier negotiations;
• Marketing: web site, advertising, sales, group sales, promotions, co-op and contra activities,
market research;
• Sales administration: liaison with tour and group clients, reservations, issuing documents,
billings;
• Financial control and accounting: bookkeeping, management reports, tax remittances, payroll,
collections, purchasing;
• Personnel: staff hiring, training;
• Tour operations: staff scheduling, supervision, quality control, problem solving, liaison with
facilities and services involved in tour services, equipment cleaning, and maintenance.
Larger operations may have departments for each of these activities. Small ones will combine
them. For example, the general manager/owner and an assistant might supervise all areas
directly, with individual employees hired for sales and handling group client liaison, office
administration and bookkeeping, tour operations, and personnel.
Other than administrative functions, the main requirements for operations staff in a tour operation
are for a tour director/tour escort/tour guide (choose the name you prefer), and for reservations
staff. In addition, you may employ step-on guides for group tours, meet-and-greet staff to
supervise arrivals and departures of guests, and special guides or experts to guide or assist with
specialized activities and topics.
The skills and knowledge of these front line staff people, as well as their ability to provide quality
service to your guests, will have a large impact on your company's credibility and reputation in
general. Because guests have high expectations about the knowledge tour guides have, it is
essential that your staff are seen to be knowledgeable and skilled professionals with a strong
service orientation.
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Selecting Staff
The staff you place in positions that deal directly with customers need to have the following
qualifications:
• An outgoing, friendly personality;
• Good manners and interpersonal skills;
• Good grooming;
• An enthusiastic attitude;
• A good (diligent) work ethic;
• A high level of education;
• A commitment to customer service;
• Travel experience and knowledge;
• Tour destination product knowledge.
The last three can be enhanced through training, but the other aptitudes have to be in place
already. Good customer service employees can make your business’s reputation; poor ones will
ruin it.
Benefits of Training
It is important to recognize the benefits of staff training and to consider training, like marketing,
as an investment. Ensuring that your staff are quality service providers who are capable of
delivering both the procedural and personal sides of service will enhance repeat business and
promote word-of-mouth advertising. The benefits of training in a tour operation are as follows:
• Increases productivity;
• Reduces staff turnover;
• Improves staff morale;
• Improves quality of performance;
• Enhances clients' experiences;
• Provides competitive edge.
Occupational standards for Local Tour Guides, Tour Operator, Tour Guide/Director and
Reservation Sales Agent are now available in Nova Scotia and across Canada. The standards
outline the skills, knowledge, and attitudinal requirements for these staff members. A
professional certification process based on these standards of competency is available through the
provincial tourism association office. For more information on standards and certification, contact
the Nova Scotia Tourism Human Resource Council at www.tourismhrc.com
Having certified employees will boost the image of your receptive tour company.
Hiring Tips
The following is a list of hiring tips that can be applied to staffing at the start-up phase or in
hiring seasonal or replacement staff:
• Develop job descriptions that meet the needs of your operation, based on the occupational
standards for each occupation.
Page 81 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Advertise in local media for staff; check out the Nova Scotia Tourism Human Resource
Council on-line job board (www.novascotiatourismtalent.com ), contact the nearest Human
Resources Centre of Canada; contact placement offices of public or private training
institutions offering programs in tourism or hospitality; post notices on local community
bulletin boards. To the extent possible, look for applicants who are Certified under the emerit
Standards and Certification program described in the next section.
• Screen applications and develop a short list of qualified candidates for interviewing.
• Interview applicants. It is recommended that the same questions be asked to all applicants
and that consistent criteria be used in your evaluation. This will help you make sound hiring
decisions.
• Select final candidates for the positions required. Ask for and always check references. The
middle of the season is no time to discover that an earlier employer has already noticed that
one of your staff members is a poor performer.
• Make the job offer. At this time clarify roles and responsibilities, training opportunities for
staff, performance expectations, remuneration and benefits, terms of employment for the
season, etc.
10.2 emerit Standards and Certification
Nova Scotia’s Tourism Human Resource Council is a partner with the Canadian Tourism Human
Resource Council in the development of National Occupational Standards and manages the
process for Nova Scotia. Standards and Certification are being developed for occupations in all
sectors of the tourism industry, and standards currently exist for 49 occupations. Certification is
available for 25 of these occupations.
Standards are statements outlining the attitude, knowledge and skills required of an individual in
order to be considered competent in an occupation. Standards clarify expectations and can be
used to design consistent training, education and professional development programs. The
Standards development process involves the sharing of expertise from industry professionals who
perform the job, as well as their supervisors who are recruited to develop the content of the
Standards.
Certification is the recognition of an individual’s competency in his or her occupation. National
Certification is a three-step process involving a written examination, performance review and
industry evaluation. It is voluntary, candidate driven and designed to be completed on the job.
Professionals who achieve National Certification will be recognized across the country for
meeting industry requirements in their selected occupation. The candidate must be employed in
the occupation and must have achieved a minimum number of hours of work experience (the
number of hours varies depending on the occupation), prior to completing Certification.
Flexible learning options for the industry now allow new entrants to gain a solid foundation while
experienced and knowledgeable candidates can challenge the option that best suits their needs.
What each candidate learns is credited towards future learning - creating recognition of prior
learning and allowing candidates to move towards the pinnacle - emerit National Certification - at
their own pace.
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Learners can select the best option for them:
• Standards/Workbook study
• Online Learning
• Study selected modules to enhance performance of specific skills
• Challenge full certification
The development of Standards and the implementation of Certification is having various positive
impacts on the tourism industry, as follows:
• Enhancing the image of tourism occupations;
• Enhancing human resource management skills in the tourism industry;
• Providing practical, realistic training programs for tourism occupations;
• Raising the overall level of professionalism in the industry.
More details on Standards and Certification, and a listing of the occupations for which standards
have been developed can be found at www.emerit.ca and in Appendix VI. Additional
information on human resource tools and certification can be obtained from the Nova Scotia
Tourism Human Resource Council.
10.3 Training
In any guest-oriented operation, there are two sides to service: procedural, requiring technical
skills and training, and personal, requiring human relations skills. Training should be based on
the occupational performance standards and Certification should be a goal for all employees.
Research on the tourism industry in Nova Scotia has shown that hospitality management and staff
place a high value on training in areas related to interpersonal skills, guest service and
communications.
It is important to recognize the benefits of training so that staff will be able to meet your
standards of service. The specific benefits of staff training are:
• Increased skills and knowledge;
• Increased success in performing job functions;
• Improved attitude, self-esteem and morale;
• Better service, higher productivity, and lower turnover;
• Increased guest satisfaction.
Staff Training
Your primary staffing requirements as an inbound/receptive operator will be for tour guides and
reservations agents.
Seasonal staff training can take the form of on-the-job training or job shadowing, or formal
training on or off site. You may wish to combine the two. Experienced staff will benefit from
spring training, and a good orientation is a priority for all staff at the beginning of the season.
Page 83 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Staff meetings can be difficult to organize in the height of the season, but even short
communications meetings with staff at the beginning and throughout the season are conducive to
a smooth running tour operation.
Guest service programs (one or two day) have been shown to be beneficial to staff; and holding a
pre-season seminar on guest service will help motivate staff as they prepare for the busy season.
SuperHost Atlantic - Expect Excellence! is a frontline program offered throughout the province.
SuperHost Atlantic - Expect Excellence! is an internationally recognized Quality Customer
Service Training Program that focuses on communication and customer service. This seven hour
interactive workshop examines attitudes to service and interactions with customers. The program
is suitable for any business that deals with customers and is an inspiration for commitment to
service excellence. Information on SuperHost can be accessed through the Nova Scotia Tourism
Human Resource Council (www.tourismhrc.com ). The NSTHRC also offers a number of other
customer service training programs including Service 1
st
- Making the Connection!, Team
Excellence, Stress Management, Workplace Etiquette, Sales Powered by Service and Managing
Service Excellence, as well as a host of other programs.
You can also develop and deliver your own training sessions or hire an outside person or
organization to do it for you. Training resource materials can be found through your regional
tourism association or the Tourism Human Resource Council.
Most training for new personnel in a tour operation is carried out on the job, starting with an
orientation. The orientation should include the following components:
• Provide information about the company, e.g. mission statement, organizational structure,
policies and procedures;
• Tour office facilities, working areas;
• Introduce new staff to co-workers;
• Complete employment documentation.
The Local Tour Guide, Tour Guide/Director and Reservation Sales Agent standards that have
been validated outline the skill and knowledge areas for achieving competency in the occupation.
In-house training can be developed using the standards as guidelines. The standards can also be
used to develop job descriptions and policies specific to your tour operation.
Training Tips
• During training exercises, your staff should be made aware of the necessity for providing
accurate information and always improving their presentation skills.
• Job shadowing with an experienced tour guide is an effective way for new staff to understand
the requirements of the job as well as your expectations, e.g. the company approach to
guiding.
• Familiarization or product-knowledge tours focusing on the areas covered by your tours can
be done in groups prior to the season's start up. All staff should participate in this type of
exercise so that they will all be familiar with new tourism products and services.
Page 84 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Encourage staff to use humour and local anecdotes during tour presentations. Guests want to
experience the culture and flavour of the province, region or local area. Tasteful jokes,
history, and legends add variety to a guide's commentary.
Product Expertise
Both your tour guides and your reservations agents need detailed product expertise, with tour
guides needing much more in-depth knowledge.
Product expertise means the ability to access accurate information for use during the tour or in
answering enquiries from potential customers and tour guests. The commentary used during a
tour includes the presentation of facts and information pertinent to the tour itself. The Personal
File of each staff member should include a variety of data that will enable them to answer
pertinent questions on local people and culture, local events, and other points of interest.
The basics of the personal file can be developed by you, the tour operator, and provided to each
of your guides. This ensures that consistent information is provided to guests from all company
representatives.
There is no way of being prepared for every enquiry that guests may have, but there are a number
of types of information that are required for any type of tour. They include:
• Company information, company history, services provided;
• Location, hours of operation, access and applicable costs of community services, events and
attractions;
• Natural environment information;
• Government structure;
• Housing;
• Consumer taxes;
• Health benefits;
• Lottery/gambling information;
• Metric conversion, e.g temperatures (Celsius to Fahrenheit), distance (kilometres to miles),
gas prices ( litres to gallons);
• Population;
• Foreign exchange rates;
• Local industry and economy;
• Local legislation and regulations, e.g. liquor, traffic, customs;
• Cultural/ethnic influences, for example: aboriginal, European, African-background, current
make up;
• Past and contemporary distinctive local people, colourful characters;
• Architecture;
• Mythology, legends, folklore;
• Transportation modes and their history;
• History and events of significance.
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Management Training
The success of your business will be related directly to your skills, not only the specific skills you
need to develop and operate your business, but also your skill at servicing your customers and
managing your staff. Exhibit 1 in Section 3 identified some of the basic management skills
required for a successful receptive/inbound tour operator. Since it is quite likely that you will be
the primary, if not the only, manager for the first year or so, you will need to have and/or develop
these skills. Training programs to assist you in developing these skills can be found through the
various locations of the Nova Scotia Community College and programs available at the
universities in the province. Mount St. Vincent University in Halifax and Cape Breton offer
programs in hospitality management.
Standards are also available for a Tourism Small Business Operator and you should consult these
in determining the types of skills and training that are required to operate a small tourism
business.
10.4 Reservations and Sales Administration
A reservations system is an essential element of an inbound/receptive tour operator’s business.
There are affordable software systems for all sizes of businesses that do this and link the
reservations system into your group billings system, which is very helpful. Ideally, you should
have this type of an integrated management system that includes customer information, market
tracking data, and financial information on transactions. With today’s reasonably priced
computers and affordable software systems, it is essential that you acquire a system for this.
Systems for one user can be obtained for as low as $2,500, but you could pay $25,000 or more for
a system from one of the more established providers, so you will want to research this carefully
when establishing your business.
Sales administration activities include the following activities:
• Answering enquiries, sending out literature on request;
• Reservations;
• Custom arrangements;
• Billings - deposits, payment of final balances;
• Group sales administration;
• Issuing documents to customers;
• Issuing confirmations to suppliers;
• Collections.
Your system should be designed to handle all of these activities and they should all be interactive.
In other words, a reservation should automatically trigger a billing for deposit and final payment;
a final payment should trigger the issuance of documents, etc.
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10.5 Product Development and Management
Section 6.7 presented suggestions on the how to’s of product development and management.
10.6 Marketing Management
Section 11 presents information on marketing planning and management.
10.7 Financial Administration
A unique feature of the tour business is that a tour company receives advance payments from its
customers but pays suppliers after the package operates. As a result, substantial sums of cash
from prepayments will be on hand for short periods of time. It can be very worthwhile to invest
these sums in short-term securities and earn interest income. In fact, some tour operators make a
significant part of their income on short-term deposits.
Get some advice on short-term investment techniques and have a senior person in your operation
administer the investment program. It should receive attention daily.
10.8 Program Review
In any business, it is important to monitor and review your product periodically, but in the tour
business it is vital.
We have already talked about having periodic de-briefing sessions with your travel trade partners
and your supplier partners, and in the material to follow we discuss means of getting feedback
from your customers, as well as additional means of getting feedback from the travel trade.
Equally, if not more important, is your internal review process. It should consist of the following
types of initiatives:
• Reports from tour guides on the results of each package departure: detailing problems,
solutions employed, suggestions for improvements, etc.;
• Management reports on administrative problems with tour operators and suppliers;
• Financial reports on each package program: detailing revenues, costs, and margins earned.
10.9 Customer Research
It is important for you to continually monitor your customers’ satisfaction with the products and
services you are providing them. This is true both if you are selling direct to the consumer and
also if you are selling your services to the travel trade. Some suggestions for customer research
are outlined below.
Page 87 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Customer Surveys
You can survey your customers while they are on your tour or after they have left. Options
include:
• Informal interviews by tour guides with customers while they are on tour;
• Questionnaires can be completed by guests before they leave or they can be given to guests to
be mailed back (it is a good idea to give them pre-stamped envelopes so they can mail them
back without the tour guide seeing them), or emailed or mailed out later;
• Comment cards can be used in the same way as questionnaires but are only useful if you are
looking for a minimal amount of information;
• Telephone interviews are useful if you have phone numbers for your guests, you can call
them up and complete a telephone interview afterwards;
• Focus groups are short discussions with small groups of your customers.; this type of
research requires a professional moderator or discussion leader.
You should also talk to the travel agents selling the product about the comments they are getting
back from the consumers.
Travel Trade
You should be in regular contact with your travel trade partners to ensure they are satisfied with
the product and the services you are providing. They will be surveying their customers on a
regular basis as well, so they will also be able to provide you with feedback from their research.
Particular topics to address with your travel trade partners, on an annual basis at least, should
include:
• Any problems they encounter on your tours (in fact, you should be monitoring this on a
regular basis, see the discussion in Section 7);
• Suggestions they have for improvements/additions to the tour;
• Their expectations about the volumes of business they will generate for your tours in the next
year or two (this will help in negotiations with your suppliers).
10.10 Business Systems
Other than sales administration, the administrative requirements of a receptive tour business are
much like those of any other business. They involve bookkeeping, accounting, payroll, HST
administration, payables, receivables, etc.
Your accountant can help get you started in each of these areas. Software programs are available
for each of these requirements.
Page 88 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
10.11 Banking
Talk to several different banks in order to find one that is supportive of your efforts. Some
managers take a helpful approach to small business people, while others treat them like
impending bankrupts. Pick one that understands your business concept and is supportive of it.
You can greatly facilitate your banking relationship by meeting with the manager once a year to
keep him or her informed about your business and your plans for the future. A good time is when
you have your new annual financial statement ready. Walk them through the results and explain
what has changed and why. While they may not necessarily care about the specifics of what
you’re saying, it is very important that they see that you’re on top of the business, committed to
its future, etc. The psychology is just as important as the substance. Bankers to feel that you’re
taking care of their investment for them.
If cash flow problems arise from time to time, go and meet with the bank to keep them informed
about what’s happening and what you’re doing about it. Nothing makes a banker more nervous
than a silent client whose bank account is constantly at its credit limit. On the other hand, if they
believe you’re making an effort to keep them informed, they will be much more cooperative in
helping you through tricky periods.
SECTION 11
The Marketing Plan
7
The material in this section has been adapted from several sources, all of which were originally
prepared by The Economic Planning Group. These sources include:
• Nova Scotia HUB and SPOKE Tourism Marketing Seminar Manual, prepared for the Nova
Scotia Tourism RITC, 1989/90
• Tourism is Your Business: Marketing Management, Published by Canadian Hotel &
Restaurant, MacLean Hunter Limited in co-operation with Tourism Canada and the Canadian
Government Publishing Centre, 1986
Page 89 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
SECTION 11
THE MARKETING PLAN
7
11.1 Introduction
Your marketing plan is a guide for directing your marketing efforts and a tool for monitoring the
progress you are achieving. It is generally written annually. Traditionally, the marketing plan is
prepared in conjunction with your overall financial planning and budgeting.
When you are starting up your business, the marketing plan is a crucial element in your overall
planning process - without marketing, you will have no customers. Frequently in small
businesses, marketing tends to get overlooked or to be given a lower priority when there are
other, apparently more vital, demands for available start-up funds. However, marketing must be
given a high priority; and developing a good marketing plan is an essential first step.
This section discusses the basics of how to develop your marketing plan and introduces some of
the key marketing methods and tools. It also suggests how to use these techniques, when dealing
with consumer markets and the travel trade. We will deal only with marketing to tour operators.
Promoting packages to travel agents and consumers, the job of the outbound tour operator, is not
dealt with.
Developing a Marketing Plan
Your marketing plan should contain several elements, as described below.
Business Assessment
An assessment of your situation - the current status of the market, the competitive environment,
trends - including all of the things discussed earlier in sections on preparing a strategic plan and
feasibility assessment.
Page 90 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Marketing Objectives
With the business assessment completed, develop a clear statement of objectives - sales volume
(number of customers, etc.), total revenues, and profit for which you are striving.
Marketing Strategy
This is your overall approach to achieving your marketing objectives. It should include a
Positioning Statement - what is the service/product, who is it for, and how is it different?
It should also include a definition of your target markets - each of the market segments you wish
to attract.
11.2 Marketing to the Travel Trade
Distribution Network
The network of linkages between you, as an inbound/receptive operator, the travel trade, and the
consumer is illustrated in Exhibit 8. Basically, you sell your products and/or services to the
outbound tour operator in selected markets, who in turn sells them to the consumer, either
directly through a travel agent or through a group leader/affinity club. You can also sell your
services directly to group leaders/affinity clubs, as well as to corporations or associations
needing the services of a receptive operator (to organize an incentive trip, for example).
Potential Partners
There are several potential travel trade partners for the inbound/receptive operator, as follows:
Tour Operators
Tour operators develop, market, and operate packages as their primary business. There are a
number of types of tour operator, the most common types being the escorted group motorcoach
tour operator, the independent package (FIT) operator, the special interest/activity
packager/operator, and the holiday destination packager.
Sometimes tour operators are referred to as outbound operators to distinguish them from the
inbound, or receptive, tour operators.
Some tour operators develop, market and operate all of their own packages whereas others retain
an inbound/receptive operator to develop and/or operate their packages. It is this segment of the
tour operator market that you are interested in as potential partners.
Travel Agencies
Travel agencies are retailers of travel products who book travel arrangements on behalf of
individuals and businesses, earning a commission from the travel-product supplier in the
process. They retail all types of travel trade packages and often develop and sell their own
packages as well.
Page 91 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT 8
THE TRAVEL TRADE NETWORK
Consumer
Travel Agency
Tour Operator
Receptive Operator
DMO
Tourism Product Supplier
Consumer
Travel Agency
Tour Operator
Receptive Operator
DMO
Tourism Product Supplier
Page 92 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Often their own packages are one-offs, developed on behalf of a particular client or group, but
some travel agents also develop packages for sale to the general public. Common types of the
latter packages include: a package developed for local consumers to attend a special event in
another city, a package in connection with a cruise or rail trip, or a package of services to
supplement a tour operator's package. (For example, the travel agency will add air travel to a tour
package to transport their local clients to the departure point for the tour.)
Incentive Travel Wholesalers
This is a distinctive sector of the market which specializes in premium and incentive travel
reward programs that it develops and manages on behalf of its clients, both on a group and
individual basis. Like tour operators, incentive travel wholesalers sometimes retain an
inbound/receptive operator to make and coordinate all the ground arrangements for their group at
a particular destination.
Convention/Meeting Planners (Destination Management Companies or DMCs)
This is another specialized sector of the market which arranges and coordinates meetings,
conferences, and conventions. Convention/meeting planners sometimes hire a receptive operator
to put together a special program for them or a tour for spouses.
Group Leaders
Group leaders are individuals who organize group trips on behalf of an organization to which
they belong. They act as an intermediary between the group and the travel agent and/or tour
operator, usually receiving free or discounted travel for themselves. Group leaders are most
commonly found planning group travel for seniors.
Sometimes the group leaders themselves organize the trip; in other cases, they may contract with
a tour operator or a receptive operator to make the arrangements.
Destination Marketing Organizations (DMOs)
Another potential partner that can be very important to your business is the destination marketing
organization in your area. These are often referred to as DMOs. These organizations have a
stake in the success of the product or package and may be willing to participate in cooperative
marketing efforts with you.
Destination marketing organizations include Chambers of Commerce, visitor and convention
bureaus, government tourism departments, and other such organizations which undertake
marketing activities on behalf of a community or destination area. In Nova Scotia, the provincial
DMO (known in the industry as a PMO) is the Tourism Division of Department of Tourism,
Culture and Heritage. This Division invites members of the tourism industry to participate in
various cooperative marketing efforts, developed in partnership with the Nova Scotia Tourism
Partnership Council (TPC). It is important for you to maximize your involvement in these
efforts.
Page 93 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Methods and Tools
The key techniques for marketing your product to the travel trade are as follows:
• Collaboration with your PMOs and DMOs
• Personal Direct Sales;
• Marketplaces;
• Familiarization Tours (FAMs);
• Advertisements in Travel Trade Publications;
• Direct Mail;
• Co-op promotions with suppliers;
• Customized collateral materials
• Website
Working with PMOs and DMOs
One of the most important things you can do to market to the travel trade is work closely with the
provincial tourism marketing group. They are an excellent source of information and can provide
pre-screened lists of tour operators who have Nova Scotia product. They also establish
relationships with these tour operators and are a key source of itinerary planning information for
them.
The same is true with the city and regional DMOs, although perhaps not to the same degree as
their travel trade marketing efforts are generally more limited.
Direct Sales
Ultimately, the most effective way to develop a partnership with a tour operator is through direct,
personal selling opportunities, including calls. But this is also among the most expensive forms
of selling.
It is important, therefore, to qualify prospects carefully. You should select tour operators and
members of the travel trade who operate tours or packages to Nova Scotia. You can get this
information from scanning their websites and/or brochures and talking to other product suppliers
in your area who deal with them.
Determine the appropriate person to see (the person who plans new programs, not just the person
who handles the buying) and make an appointment. A personalized letter with some advance
information on your product might help convince the prospect to see you.
Study the operator's product mix, market positioning, and USPs (unique selling propositions)
before meeting them and focus your presentation on how your products and services might fit
into their program and what advantages you have to offer their tour program.
Make sure that your sales representative knows your products and destination intimately and that
they have the authority to negotiate and make decisions. If the prospect is a major one, it is better
to have a member of management accompany your representative or make the call themselves.
Page 94 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
In any event, your sales representative should have the following skills:
• Detailed product and destination knowledge;
• A full understanding of the market position and products of the targeted tour operator;
• A full understanding of the unique appeals and competitive advantages of your products and
services;
• Strong communications and negotiating skills;
• A high level of commitment to customer service.
Telemarketing is not an effective way to solicit business from tour operators. Your unsolicited
intrusion will be resented. Use the telephone to identify the person in the organization you
should see and to make an appointment, nothing more.
Marketplaces
The most effective way of making the initial direct contact with a tour operator is likely be at a
travel trade marketplace.
Membership in one or more trade associations and attendance at their marketplaces can provide
excellent networking and one-on-one selling opportunities. The major tour operator marketplaces
are;
• National Tour Association annual meeting and marketplace;
• The ABA (American Bus Association) annual meeting and marketplace;
• The Ontario Motorcoach Association (OMCA) marketplace;
• United States Tour Operators Association (USTOA) annual conference and marketplace;
• Rendez-vous Canada, which includes European tour operators as well as the US travel trade;
• Atlantic Canada Showcase, where Atlantic Canada suppliers exhibit their products to buyers
from outside the region.
Don't attend marketplaces unprepared. Make sure you have pre-identified the key prospects and
request appointments with them. And don’t forget to follow-up your contacts after the show.
It can take a couple of shows before you really get to know your way around, find out who the
players are, and determine who are the best prospects for your product.
It will be important to be part of ‘Team Nova Scotia’ at the marketplace by working with the
trade sales team from the Province and the RTAs as well. They might also sponsor a special
event, meal or promotion in which you can participate.
Familiarization Tours (FAM Trips)
The most effective way of motivating a wholesaler to add your tour program is to get them to try
it out. FAM trips are an effective means of achieving this, as it is a principle among serious and
successful operators that it is essential to check out a destination, an experience, or a property
first-hand before adding it to their product mix.
It is much better to provide a customized, personal FAM tour for a major tour operator prospect,
rather than put several of them together or add them to a travel agent's FAM. It is most important
that they have an opportunity to meet privately with the product suppliers to discuss negotiable
items.
Page 95 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Direct Mail/Email
Direct mail/email is only fully effective if mailings are undertaken in support of other, more
focussed marketing activities. Like travel agents, wholesalers receive a flood of literature daily,
and most of it is thrown out. Mailings should be customized for the specific operator and
personalized to a specific, pre-qualified person in the organization. Your mailing should include:
• A covering letter, customized to the individual involved - use a P.S. to attract attention to key
points;
• An information sheet containing the technical information required by the operator;
• A brochure;
• A response mechanism, such as a mailback card for more information (which can help in
qualifying prospects for follow-up efforts).
Make sure that you follow-up your mailing with a telephone call or email to see if there is any
interest in your services or if the tour operator requires more information.
Advertisements in Travel Trade Publications
It can be worthwhile to advertise your product in one or more targeted travel trade publications.
The travel trade is usually diligent in reading these publications to keep abreast of new product
opportunities and the activities of competitors. Relevant information from them is routinely
circulated within companies.
Suggestions include NTA's Courier, ABA's Destinations and the National Motorcoach Network's
Byways, as well as the leading travel trade weekly newsletter-style publications distributed to
travel agents.
You may find it more cost effective to work through your destination marketing organization, as
part of a program of joint destination awareness/travel product co-op advertising.
As well, you can advertise in the Nova Scotia Travel Guide or on the province’s website. Many
tour operators use these sources to identify potential new tours and inbound/receptive operators.
Collateral Material
Sales support materials are essential when selling to the travel trade, and your brochures could
vary considerably depending on what you are selling. For example, if you want a tour operator to
pick up one of your tour products, then you will need to provide sufficient information on the
tour program, facilities and services used, and booking information. If you are selling your
services as a receptive operator, then your brochure is going to focus on your specific abilities
and expertise and what you can do for the tour operator.
You should develop a Tour Planner to provide to potential tour operator clients. It should
include:
• Copies of your brochure;
• Descriptions of the different types of programs you offer;
• For each package, a concise description of the package elements, the pricing, any extras,
departure dates, locations, etc.;
Page 96 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Slides of the products so that the tour operator can incorporate pictures in to their brochures;
• Your booking and cancellation policies and procedures.
With modern websites, this can most cost effectively be offered as a downloadable PDF file off
of your website.
Internet Marketing
The Internet has triggered a complete revolution in how companies market themselves, and this is
particularly the case with tourism companies. Even the smallest enterprise can reach out to the
world via the Internet. While marketing expertise and budgets still make a big difference in
marketing effectiveness, these are no longer the absolute determinants of how broadly and far a
company can reach in promoting itself. Even a simple website can be accessed worldwide. The
playing field has been considerably levelled for companies large and small.
The big differences today are not in having an Internet presence; rather they are in a) your ability
to attract prospects to your website and b) the quality of the website itself in terms of ease of
navigating within it and its effectiveness in generating sales.
Internet marketing refers to all forms of marketing associated with the Internet, including
websites, website links, database marketing, relationship marketing, web-based advertising and
web-based tour operators. We will introduce each you to each of them in this section.
Website
The use of a website along with Internet-based e-marketing have exploded onto the scene and
today have become a fundamental and central component of most tourism businesses marketing.
In fact, many businesses are using their other marketing to drive prospects to their website and
some are relying exclusively on their website to market their business.
Early websites were simply electronic brochures people could view on the Internet. Today, many
websites are much more sophisticated and provide a number of helpful functions for the user, all
of them designed to make it easier and more compelling to buy the products on offer. In the text
to follow we summarize the basics involved, and also describe the more sophisticated functions
possible today.
URL
This is the address of your website. (URL stands for ‘Uniform Resource Locator’, which is not
particularly helpful to know.) But having an easy-to-remember URL, or ‘domain name’, is
important. Here are a couple of other important points:
• Your website needs to be a ‘real’ website, not part of a ‘referred’ site, such as those offered
by Sympatico and other Internet ‘portals’, in which your web pages are embodied within their
website. Search engines will no longer recognize your content if it is part of a referred site.
(Problems with spam have forced the search engines to impose this limitation on referred
sites.)
• Use the name of your business in your URL to ensure it will be picked up by the search
engine when someone is searching for your website by business name.
• We recommend you use several different URLs having likely names for your product, all
connected to your website, again to optimize access.
Page 97 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
It is important to realize that you need to have your own Internet address which makes your web
pages into a ‘website’ accessible directly via the Internet through search engines. Just having
web pages on someone else’s site does not accomplish this. People won’t find your content
without going to the hosting portal website first, which is not what you want.
We are not suggesting you not list on a portal website, not at all, we are simply suggesting that
you also need your own separate website, and that any listing on a portal also include a direct
hyperlink to your website.
Website Design
The basic website is much like a traditional brochure but with more information available through
the use of user-selected topics from a sidebar menu on each page. Lure information is displayed
in text and pictures, while more detailed information is accessed via the menu bar. Common
topics include who we are, our history, our products and services and how to contact us.
We strongly suggest you also include lure information on your destination area; its attractions and
appeals, things to do and see. You first have to sell the destination, then your particular product.
More sophisticated websites offer more customized information based on different user-defined
variables, along with such things as a trip planning function, online booking capability and so on.
Here are the kinds of features that are becoming increasingly common with tourism websites:
• Downloadable brochure in PDF format
• Customized presentation of information by user-defined factors - their interests, where they
live, their language, demographic profile (age, income), the intended season of travel, their
previous trip/purchase.
• Different pages for different target audiences, such as tour operators, consumers, the media.
Separate URLs can also be used to facilitate people in these market segments being led
directly to the portion of the site of particular interest to them.
• User opt-in registration for more information - newsletters, contests, offers, promotions
• Trip planning functions, with suggested itineraries and packages, and also do-it-yourself
itineraries and packages. A print-ready mini guide of your itinerary/package can be
downloaded and/or printed out. In some cases the user can also register and use an ID to
revisit and revise his/her earlier itinerary.
• A booking/buying engine to enable website visitors to book directly online
• Inbound email capability for site visitors to use to send a query to the company
• Features to improve the ease of navigation within the website, including, in addition to a
basic sidebar menu, things like:
• ‘first page approach’ (no scrolling down required),
• different entry points to the site based on the user-defined factors, such as their country of
residence, language, etc.,
• site map
• search function
• A built-in content management module to facilitate updating information on the website. It
avoids the time and cost involved with having the site designer make all the changes to the
site, which should not be necessary.
• Statistical monitoring of website visits and pages viewed
Page 98 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
On this last point, an important consideration is getting your website designer to provide your
website with a complete analytical system, permitting you to directly download statistical data
from the host server.
We strongly recommend you avoid letting the website designer talk you into having a ‘splash
page’ at the front of the website. A splash page is a first page that provides pictures, video and
often a soundtrack that you have to click through to enter the website itself. While this may be an
aesthetically pleasing introduction to your business, it creates a barrier to search engine
maximization and it also is irritating to business people accessing the site, as well as other people
wishing to get to the information they want.
A couple of interesting websites that incorporate a number of these features include:
• www.gorp.com (outstanding adventures by destination and by type of experience; a very
successful website)
• www.novascotia.com
• www.explorenovascotia.com
• www.travelalberta.com (easy to navigate, good search engine maximization)
• www.colorado.com (good trip planning, customized by travel group composition,
interest, region)
Here are some good Nova Scotia websites:
• www.princegeorgehotel.com
• www.lordnelsonhotel.com
• www.halliburton.ns.ca
• www.capebretonresorts.com/inverary.asp
• www.pier21.ca
• www.upperclementspark.com
• www.museum.gov.ns.ca/mma
• www.coastaladventures.com
• www.scottwalking.com
Driving People to the Website
As mentioned, one of the big challenges today is attracting the right visitors to the website. This
is accomplished through a number of techniques:
• The use of traditional marketing techniques to attract attention and direct people to visit
the website. All your marketing materials should include reference to the website.
• An easy to remember URL.
• Search engine optimization, through the use of search engine registration, content tags,
meta tags, targeted key words and instruction codes to search engines to search all words
and all pages. (We suggest you get some help from knowledgeable Internet professionals
in this regard.)
• Inbound links (see discussion of this later below)
Page 99 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Attracting People Back to the Website
This involves cookie-based user ID or getting site visitors to register and establish a user log-in
for a “remember me on this site” function. Next time they visit they are automatically taken to
their previously stored information, such as their customized itinerary.
This is not a feature that a small independent tourism operator will likely use, however, it can be a
very effective for larger chain operations, tour operators and destination marketing organizations.
Links
It is useful to develop a link strategy for both inbound (links from other websites) and outbound
links (links to other websites). Inbound links should be maximized to the extent possible.
Outbound links should be designed to open in a separate window so that the user is returned to
the original site once they close out of the linked site.
Partnerships are a key part of tourism market development. Similarly, website links are a critical
element of website development. They are merely on-line partnerships that share web visitors
between like-minded operators and those offering complementary products and services. As
such, a detailed link strategy should be developed and maintained to ensure as many visitors as
possible find links to your website.
This often requires a simple request to partner sites through email. Ideally, a graphic should
accompany the email in the event the host website would like to add an image or icon of the
province highlighting the link. In addition, the website should have a section in the site
encouraging links with a download-able image that can be added to other sites. This additional
promotion can be achieved at virtually zero cost; it simply requires time and attention on an
ongoing basis to increase the exposure in a wide variety of market segments.
If you are listed in the Nova Scotia Doers and Dreamers Guide, you are automatically listed on
the provincial tourism website (www.novascotia.com ) with a link to your website. You are
required to provide a reciprocal link back to www.novascotia.com from a primary page on your
website.
To check how well your site is positioned within the Internet, go to Google (www.google.ca) and
in the space where you enter the search instructions, type in ‘link(single space)
)(your domainname). Here’s an illustration - ‘link :www.bobsmotel.com’. This will illustrate all the links to
your website. If you have more than 40, you are doing OK; if not, your site needs more search
engine optimization.
Web-Based Advertising
Another marketing option today is to advertise on frequently visited websites hosted by others.
Given its cost, it will only be of interest to major players.
Much effort has been spent in the last couple of years promoting and testing the effectiveness of
web-based advertising. Many advertisers have experienced poor performance and questionable
benefits by promoting their product through banner ads, pop-ups and other forms of web-based
advertising on some of the larger sites, such as news-based CNN, Globe & Mail, Canoe, Yahoo,
etc. However, a more targeted approach can be tested, based on a pay-for-performance
Page 100 A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
agreement. Again, tracking can be quite specific, and websites can be very targeted, including
websites offering travel directions, such as Mapquest, or even online versions of the specialty
magazines such as National Geographic Traveler or National Geographic Adventure.
Web-Based Tour Operators
All tour operators are embracing the Internet as a marketing tool, of course; however, there are a
growing number of web-based tour operators; essentially companies that are functioning as
resellers and packagers and using the web as both their marketing medium and reservations
system. In other words, they are fully online marketers. Examples include Microsoft’s Expedia,
Sabre’s Travelocity and numerous others. The Canadian versions of these two websites are
www.expedia.ca and www.travelocity.ca. The USA versions are .com instead of .ca.
Another is a Canadian company, Travelinx, at www.canadatravel.ca. This company also builds
websites and hosts websites for destinations, industry organizations and businesses. They employ
their powerful booking engine to provide their clients with a state-of-the-art website with full
reservations and transaction capabilities. One of such clients, for example is the Canadian Golf
Tourism Alliance at www.canadagolf.com.
These are deserving of attention. In fact, this may offer an optional route to achieving a powerful
site at reasonable cost.
SECTION 12
The Future
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SECTION 12
THE FUTURE
Consumers are continuing to become more demanding and their expectations respecting the
entertainment value of their tourism and recreation experiences will continue to increase. In the
receptive tour business, as for attractions and entertainment products, the competitive battle will
be fought in the future on uniqueness, entertainment value, genuineness, quality and service.
People will judge less on price and more on value.
The ways of doing business will change, particularly because of information technology, which
has radically changed the way people shop for products and provided new marketing techniques
for reaching the consumer.
General touring holidays will also lose ground to special interest tourism - people travelling to
particular destinations to do and experience things in accord with their special interests.
You will need to keep on top of market and product trends and what is happening in the tourism
industry in Nova Scotia. You should continually be reading magazines, attending trade shows,
and talking to your suppliers, your partners, the Tourism Partnership Council and the Tourism
Division of the Department of Tourism, Culture and Heritage to keep yourself up to date on what
is happening in the marketplace. You will have to make adjustments to your products and
services to respond to these changes.
The receptive tour business is an exciting, dynamic one, which is constantly changing as
consumer tastes change and as tour operators innovate by offering new types of products.
Success will be based upon offering something unique and upon providing good value and good
service. It is a business in which excellence and creativity are vital.
Nova Scotia has a lot to offer as a destination, and you can succeed in the receptive tour business
by providing the kinds of products and services that respond to growth markets.
Good Luck.
ACKNOWLEDGEMENTS
Page i A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
ACKNOWLEDGEMENTS
The Department of Tourism, Culture and Heritage and the Economic Planning Group are
grateful for the assistance of Michele Inglis of Eco Tour Atlantic/Brian Moore Tours
Canada in the preparation of the original manual, prepared in 1995.
APPENDIX I
Market Data
_________________________
Page i A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
APPENDIX I
MARKET DATA
EXHIBIT I-1
VOLUME OF VISITORS TO NOVA SCOTIA:
ANNUAL AND MAY TO OCTOBER
2000-2004
(000’s)
2,160
2,046
2,180
2,143
2,243
1,534
1,417
1,559
1,524
1,547
2000 2001 2002 2003 2004
0
500
1,000
1,500
2,000
2,500
Annual Visitors
May to October Visitors
_________________________
Page ii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT I-2
ORIGIN OF VISITORS TO NOVA SCOTIA
January to December 2004
Atlantic Canada
54.8%
Ontario
18.3%
Quebec
4.8%
Western Canada
5.5%
New England
4.6%
Mid Atlantic
2.3%
South America
2.5%
Other US
4.1%
Overseas
3%
_________________________
Page iii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT I-3
NOVA SCOTIA TOURISM RECEIPTS BY EXPENDITURE TYPE. 2003
Transportation
24%
Entertainment
4%
Shopping
10%
Restaurants
23%
Campgrounds
1%
Fixed-Roof Accommodation
22%
Taxi/Vehicle Rental
5%
Groceries/Liquor
4%
Vehicle Fuel
6%
Other
1%
APPENDIX II
Financing
Page i A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
APPENDIX II
FINANCING
Few people starting a business have enough personal capital to do it on their own. It is much
more common for entrepreneurs to need other investors and, usually, some loan capital as well.
This section deals with the "how to’s" of arranging financing for your tour business. As
discussed earlier, depending on the nature of the tour business you are establishing, your initial
financing requirements could be minimal.
Traditional lenders, such as banks, prefer to lend to businesses that have fixed assets having
stable or growing values over time such as real estate assets for example. Purely service
businesses, such as that of a receptive tour company, are less favourably considered, since their
value is usually limited to the income from the business and the skills of the owners. In financing
a tour operator, a bank will want a very credible business plan and solid credentials.
It is important that you learn the basics of business finance if you are going to be seen as credible
and competent by a banker or other lender. They don’t expect you to be an expert on financing
but they do expect you to know enough to be able to meet their needs and provide reassurance
about their major concerns. They also expect you to know enough about business finance to be
able to manage your business’ financial affairs over time.
Rule number one is that you must invest significantly in the business yourself. You have to have
your own neck on the line if others are going to risk their capital on your enterprise. Having
other equity investors will be helpful, but the lenders will look to the managing principals to have
a major, personal equity stake in the business.
Rule number two is that you have to have a credible business plan and preferably a feasibility
study too to provide evidence that the business is going to be able to succeed and pay back its
financing: first its loans and secondly its outside equity investors.
Bankers and lenders are not risk takers. They not only want the foregoing, they also want some
additional security in the form of assets pledged to protect the loan.
We will now briefly explore the different types of financing available and then consider the "how
to’s" of applying for a loan.
Page ii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Equity Capital
Your own investment in the business, be it cash, buildings, equipment, is the primary source of
equity. Additional equity capital will be invested by partners, limited partners, or other investors
who are willing to risk their capital on your idea and your abilities.
Venture Capital Companies
There are many venture capital companies in Canada who invest in small- to medium- size
businesses that have growth potential. Venture capital companies commonly invest between
$100,000 and $500,000.
These companies will put in risk capital but only in ventures that have the potential to grow
dramatically and pay large returns within four to five years. They will want to sell their
investment after four or five years and realize their gain.
Typically, venture capitalists invest in high tech and other high growth companies when they are
in their fledgling stages. While most tourism enterprises don’t have the same kind of growth
potential, some may, particularly if there is the opportunity to franchise a good concept.
Otherwise, this is not a very likely source of financing.
The key things venture capitalists are looking for are:
• Rapid growth potential;
• Strong, committed management;
• A seat on the Board of Directors and pre-emptive rights to replace management if they don’t
perform on target;
• Large returns over a limited number of years.
Debt Financing
Loans are the predominant form of financing for the tourism industry in Nova Scotia and
elsewhere in Canada.
A key lending principle is that long-term assets be financed with long-term loans and short-term
assets be financed with short-term loans. Working capital should be financed by a short-term line
of credit. In other words, the type of financing should fit the useful life of the asset in the
business.
Another key principle, often ignored, is that a business should never commit to loan obligations
that it can’t comfortably support from its earnings.
In addition, your loan financing, combined with your equity financing should be sufficient to
cover all your costs and provide for contingencies in the event of unexpected costs or overruns in
development costs. Otherwise, the working capital of the business will be absorbed by capital
commitments and the ability of the business to operate properly will be compromised, if not
threatened.
Page iii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Fixed Assets Financing
Fixed assets are assets fixed in one place, such as land and buildings. They are assets that
generally have a long life. Such assets are normally financed with long-term debt, either a
mortgage loan or a secured term loan. Mortgage loans extend for the longest period, while term
loans are normally for intermediate periods of five to fifteen years.
In the tour business being discussed in this manual, you are unlikely to have much need of fixed
asset financing since most of your investment will be in office equipment and marketing.
Lenders don’t like to finance more than 75% of the value of assets in this way; they want the rest
covered by equity. The lender looks to the projected earning power of the business to pay off the
loan, although they also want the security of a claim on the assets themselves in the event of
default. They will expect a business plan from you and may also want a feasibility study.
Long-term lenders also look at the overall financing of the business, not just the financing of their
secured assets. They look at the debt/equity ratio and don’t like to see a ratio of more than 1.5 or
2.0 at the most (1.5 or 2 times as much debt as equity).
Lenders may require other things from you. Typical requirements, in addition to the security for
the loan, include:
• Personal guarantees of the main principals for the amount of the loan plus accrued interest;
• A postponement of the repayment of shareholder loans until the loan is repaid;
• Limitation on the salaries and drawings of the principals;
• Restrictions on major capital purchases until the loan is repaid.
Major Equipment Financing
A tour business is also unlikely to have much in the way of major equipment, unless you get into
purchasing your own vehicles. Long-term mortgage loans are not normally used to finance major
equipment purchases. The techniques that are used most often include:
• Secured term loan;
• Conditional sales purchase;
• Equipment lease;
• Sale and leaseback.
Secured Term Loan
This is a standard term loan, generally of five to fifteen years, in which the equipment is taken as
security for the loan, usually in the form of a lien.
Page iv A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Conditional Sales Contract
This is a method wherein the manufacturer of the equipment finances the purchase. The
purchaser makes a down payment and monthly payments until the loan is paid off. The
ownership of the equipment remains with the manufacturer until the debt is paid.
Lease
Leasing is a very common way to finance transportation equipment. This is like the conditional
sales contract, but leases are provided by many different financial institutions, not just equipment
manufacturers. With a lease, the equipment is rented for a pre-set period of time at a fixed
monthly payment that covers the cost of interest as well as a portion of the original value of the
equipment. Depending on the type of lease, the equipment either reverts to the leasing company
at the end of the term (although the lessee usually has an option to buy it for a pre-set value) or
the lessee must buy it for a pre-set amount at the end of the lease term.
The ownership of the assets usually resides with the leasing company.
Leases are popular since they don’t require a large cash outlay at the beginning. They also
provide a means of replacing equipment on a regular basis, since it can be returned at the end of
the lease period and new equipment leased. It is also attractive for companies wanting to own the
equipment, since they can buy it at the end of the lease period, probably for a quarter to a third of
the original cost.
Sale and Leaseback
Companies wanting to reduce their existing debt so that they can borrow for new assets they
require can sell a fixed asset to a financial institution and then lease it back. They effectively
convert a long-term debt into a medium-term lease commitment.
Working Capital Financing
Working capital is going to be your major need in establishing your inbound/receptive tour
company. The financing of short-term working capital is generally done with some combination
of the following:
• Bank line of credit;
• Character loans;
• Commercial loans.
There are other methods, such as accounts receivable financing and factoring, but they are very
unlikely to be used by a tour business, which should have little in the way of receivables.
Bank Line of Credit
This is also called a demand loan since the bank can demand payment at any time. The line of
credit is really an overdraft privilege with a pre-set limit. It allows you to pay your bills with the
bank’s money when you’re short of cash. The amount of the loan is the amount used and interest
is only paid on the amount used.
Page v A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
The bank may require you to pledge your receivables as security for the line of credit and they
will probably want regular financial statements and frequent lists of payables and receivables.
They will also want personal guarantees.
A hybrid of this is the revolving loan, in which the bank automatically extends you small loans as
you draw on the credit available and automatically pays them off as you make deposits. While
you may pay interest on a slightly larger average loan, the interest rate is usually lower.
The bank will monitor your line of credit. They like to see it fluctuate and occasionally go to
zero. If it is constantly at the limit, they will get concerned. If this happens, you probably should
refinance the business to return the line of credit to a fluctuating loan.
Character Loans
These are unsecured loans, generally short-term, which are extended to companies or individuals
with excellent credit ratings. The funds can be used at the company’s discretion.
Commercial Loans
These are more formal loans intended for short-term uses. The bank generally wants them paid
off within a year.
Sources of Financing in Nova Scotia
There are a number of agencies which offer financial assistance for tourism related businesses in
Nova Scotia.
The Business Development Bank of Canada (BDB - formerly the Federal Business
Development Bank) is a federal crown corporation set up to provide financial assistance to small-
and medium-size businesses. Assistance is available in the form of loans, loan guarantees, and
venture capital. Contact the Business Development Bank of Canada for more specific program
details.
The Canada/Nova Scotia Business Service Centre (www.cbsc.org/ns/ ) provides a variety of
helpful information including potential sources for funding programs.
The Office of Economic Development might be able to offer funding assistance through various
programs. For more information, contact the nearest office of the Canada/Nova Scotia Business
Service Centre for details on their programs.
Another potential funding source is the Atlantic Canada Opportunities Agency (ACOA),
which has various assistance programs for business. The programs are designed to help you set
up, expand, or modernize your business and focus on small-and medium-size businesses. They
can provide tourism-related businesses with access to capital in the form of interest-free,
unsecured, repayable contributions. Contact ACOA (or Enterprise Cape Breton Corporation for
businesses in Cape Breton) for information on eligibility and program details.
Page vi A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Finally, the Canada Small Business Financing Act is a federal government program designed to
help new and existing small business enterprises obtain term loans from chartered banks and
other lenders for financing the purchase and improvement of fixed assets. Loan assistance is
available for the purchase of land, construction or renovation of premises, and purchase of new
equipment. The program is delivered through private-sector financial institutions. Further
information on the Small Business Financing Act is available from ACOA or your lender.
Your Presentation and Negotiations
The First Step
First of all, put together a short description of your business concept, in point form if possible,
and review it with your local economic development officer or a representative of the Regional
Development Authority or the Office of Economic Development. They will be able to help you
identify what you need if your application is to be considered favourably by a banker.
Next, make an appointment with the manager or loan officer and go to meet with them. (It will
help if you review this section before you go so you are able to discuss financing options with
some knowledge.)
Make it clear at the outset of your meeting that this is intended to be a preliminary meeting,
designed to help you prepare the specific information they are going to need to process your
application. It is vital that they understand that you aren’t applying for financing at this point,
only looking for information and advice regarding a possible later application. They are used to
people coming in to make actual applications for financing without having any idea of what’s
involved. Those people instantly have two strikes against them. Make sure they don’t cast you
into this lot!
By giving them an overview of the business concept, they will be able to focus in on the forms of
financing and types of conditions most appropriate for your business. You may, in fact, learn that
they are not the right kind of institution at all and save yourself later frustration.
There are several other advantages of having this initial meeting:
• You will be able to focus your subsequent presentation to them on the things that they
indicate will be most important and avoid wasting effort on things that aren’t important.
• You will get a sense of the aspects of your concept that make them most nervous and you will
be able to concentrate your later presentation on overcoming these concerns.
• It will impress them that you are taking a professional approach; that you recognize their need
for information and evidence of the merits of the proposal; and that you have sought their
advice. The psychology of this can be most valuable later: they will write in their file, “The
principal of this business is taking a professional approach to preparing his/her application”,
or some such supportive comment.
Page vii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
The Second Step - Preparing Your Presentation
In preparing your written presentation, you will need, directly and indirectly, to address a number
of specific concerns that the financial institution will inevitably have:
• The viability of the business concept - potential earnings, risk factors, competitive
advantages/disadvantages. With existing businesses, they will, of course be interested in past
growth, revenues, and earnings as well.
• The tourism industry and the tour operator sector in particular - viability, trends, growth (you
will probably need to do some education as to what the tour operator business entails since it
is not a widely understood sector of the tourism industry).
• The ability of projected earnings to service the financing.
• The opportunity for growth over time.
• The management abilities of the principals - their track records in past projects or jobs, their
experience in this kind of business, their formal training and education.
• The financial integrity of the principals - past credit history, reputation in the business
community for paying bills and fulfilling obligations.
• The amount of equity in the business, particularly from the main principals.
• The realizable value and marketability of the security that is available to secure the financing.
• The level of professionalism evident in the approach to securing financing - the
understanding of the needs of the lender, the use of outside professionals.
The actual presentation should address these issues in the context of the suggested table of
contents in Exhibit II-1. If you have already prepared a business plan and/or a feasibility study,
you can attach them to the submission and reference them where appropriate.
The presentation need not be exhaustive. It can be in a summary form and use bullets to make the
points concisely. The financial institution will come back to you for more information where
they need it.
You should submit the presentation in person, making an appointment, and then make another
appointment to come back and discuss the presentation once they’ve had a chance to read it.
Negotiations
Honesty and openness in negotiations are critical. It isn’t just because you don’t want to be
caught in deceit or concealment of information, it’s also because you are going to have to
establish a relationship of mutual trust and maintain it over a period of years. If the financier has
any reason to doubt your trustworthiness, honesty, or openness, you will find it very hard,
indeed, to get your loan approved.
Page viii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Discuss your own concerns openly: how you intend to deal with the risks and uncertainties, what
you expect to do about major problems that might arise. In general, have an open and full
discussion of how the business is going to overcome its challenges. Financiers know very well
what can go wrong with a business and they believe in Murphy’s Law. In fact, they tend to be
cynical about small business, unfair as that may seem. They want you to make them comfortable
and give them confidence in your ability to deal with problems and challenges.
Don’t be intimidated. If you don’t understand something, ask. If you don’t agree with
something, say so. If you think they are being unreasonable in their demands, ask them to
explain why the demands are necessary and debate the issue.
At all times be open-minded, non-judgmental, and cool.
This is a normal negotiation. You are free to go elsewhere to get the best deal for your business.
However, we recommend that you approach one lender at a time. When you find someone you
like and can deal with, stick with them. You should always deal with your banker in good faith.
If the manager doesn’t think you are serious, or thinks you are wasting his or her time, then you
will have difficulty obtaining the financing you require.
It will take some time and effort to accomplish, but you want to draw your financier into a
partnership-style relationship, where they will be more concerned with keeping your business
afloat and helping you out, rather than worrying about their loan and wishing you’d take your
business elsewhere.
Put yourself in their shoes and act accordingly. Keep them informed. Act like you are in a
partnership relationship and treat them like your partner. Hopefully they will respond in kind.
Page ix A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT II-1
SUGGESTED TABLE OF CONTENTS FOR A BUSINESS PLAN,
SUITABLE FOR A PRESENTATION FOR FINANCING
Executive Summary:
• Very brief description of the business, the concept proposed, and the capital budget
• Outline of proposed financing
• Summary of revenue and cash flow projections
Background:
• Industry/general tourism trends
• History of the company, date of commencement
• Form of business (partnership, etc.)
• Names of the principals, their involvement, and investment
Business Concept:
• The overall concept
• Its unique selling propositions and competitive advantages
• The product mix/product features
• Target markets
• Proposed assets and capital budget
• Project phasing
Proposed Financing:
• Equity
• Debt
• Working capital
• Security available
Management:
• Organizational structure
• Biographies of principals and key management
Page x A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT II-1 cont’d
SUGGESTED TABLE OF CONTENTS FOR A BUSINESS PLAN,
SUITABLE FOR A PRESENTATION FOR FINANCING
Markets and Projected Demand:
• Summary of results of market research and analysis
• Competitive analysis
• Market trends
• Demand projections
Marketing:
• Pre-opening activities/opening promotions
• Summary of the consumer marketing plan
• Summary of the travel trade and group marketing plan
• Marketing partnerships
• Pricing
• Planned market tracking and research
Operations Plan:
• Staffing and training plan
• Business systems
• Other operational issues
Three to Five Year Operating Projections:
• Revenues
• Operating Costs
• Profits
• Debt service
• Asset additions
• Net cash flow
Initial Balance Sheet:
• Assets
• Liabilities
• Equity
Page xi A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT II-1 cont’d
SUGGESTED TABLE OF CONTENTS FOR A BUSINESS PLAN,
SUITABLE FOR A PRESENTATION FOR FINANCING
Return on Investment:
• Internal rate of return or simple return on investment
• Present value of cash flow
• Times interest earned
• Break-even analysis
Summary of Key Risks and Contingencies:
• Key risks and management’s proposed responses to such threats
• Contingency plans to deal with above
References:
• Financial institutions
• Creditors
• Past business associates - customers, suppliers, partners, etc.
• Banker, lawyer, accountant
APPENDIX III
Calculation of Net Income, Cash Flow
and Return on Investment
Page i A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
APPENDIX III
CALCULATION OF NET INCOME, CASH FLOW
AND RETURN ON INVESTMENT
This appendix presents the calculation of net income and cash flow as well as methods of
calculating return on investment, based on professional, accepted standards of analysis.
The proper way to determine the real profitability of a business and its return on investment is to
first calculate net profit, in accordance with established accounting principles and in the way
Revenue Canada calculates business income taxes. By following this method, it is possible both
to determine your projected level of income taxes and determine the actual net cash return
accruing to you and your investors.
However, there is also a shortcut method which is simpler and will also render a cash flow
calculation, although the numbers will, in this case, be pre-tax. If it is your purpose to determine
the basic viability of the business proposal by measuring return on investment, pre-tax returns can
be just as useful as net returns. We will discuss this latter method first.
The short-cut way of calculating cash flow is simply to start with Operating Profit, deduct total
mortgage payments (both principal and interest), and deduct any capital Asset Replacement
allowance. This will give you the net cash flow, prior to business income taxes. It is simpler, by
far, than going through a detailed calculation (which is only required to derive income taxes), and
the pre-tax numbers can be just as readily used for return-on-investment analysis.
To complete a detailed analysis, we need to determine pre-tax profit, net profit and net cash flow.
Pre-tax Profit is the Operating Profit minus all other charges against income. These are the non-
operating costs of the business, and they include:
• Interest on long-term debt;
• Depreciation.
To calculate the interest on your proposed debt financing, we need to split the mortgage payments
between the interest and principal portions for each year. A mortgage program can do this for
you. Ask your accountant or your banker to run the numbers for you.
Page ii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Depreciation should be charged at the Capital Cost Allowance (CCA) rates set out by Revenue
Canada for each type of asset. Generally, these are calculated on a diminishing balance basis (a
constant percentage is applied each year against the un-depreciated balance in the asset account),
although some assets can be depreciated on a straight-line basis (an equal portion of the original
amount each year). Check with your accountant or Revenue Canada for the CCA rates applying
to the major asset items proposed for your operation.
Net Profit is Pre-tax Profit less corporate income taxes. Business income taxes are levied against
pre-tax profit. Ask your accountant which tax rates would apply to your business.
The resulting figure, Net Profit, is the accountant’s way of telling you what the real profit is in
your business. It is a figure which includes the profit that is available to you and your investors at
the end of the year as well as the principal portion of any debt that has been paid off, after
adjusting for the amortization of the original cost of the assets in the business (depreciation or
CCA). In other words, it’s the accrued change in the book value of the net worth of the business
(i.e. assets less liabilities).
However, this is not the same figure as the amount of real cash you have available from the
business, since it includes the principal portion of mortgage payments which have been made and
it also ignores any new capital expenditures which have been made over the year (expenditures
which would have been capitalized rather than expensed against that year’s income). Net Profit is
also net of capital cost allowance or depreciation. Indeed, as this is a book entry and not a real
cash flow charge, it only distorts the cash flow picture.
To calculate Net Cash Flow, which is the real cash figure, you need to start with Net Profit, add
back the depreciation or capital cost allowance, deduct the principal portion of mortgage
payments (the interest portion has already been deducted) and deduct an allowance for capital
purchases (Asset Replacement) for the year. This is the real cash return - the cash flowing out of
the business for the year and available for you and your investors to take out or re-invest.
The short-cut way of calculating cash flow is simply to start with Operating Profit, deduct total
mortgage payments (both principal and interest), and deduct any capital Asset Replacement
allowance. This will give you the net cash flow prior to business income taxes. It is simpler by
far than going through the detailed calculation above (which is only required to derive income
taxes), and the pre-tax numbers can be just as readily used for return-on-investment analysis. A
worksheet is provided in Exhibit III-1.
Return on Investment Methods
Return on Investment is generally referred to as ROI. Another measure of value is Return on
Equity (ROE).
These calculations give you a single measure of the income returned on the invested capital over
a period of future years selected by the analyst to represent the life of the investment. ROI is a
measure of the return on total capital, both debt and equity, while ROE is the return on equity
only. These measures are universally accepted by investors, bankers, and other lenders as means
of evaluating the income potential of a business investment.
Page iii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT III-1
CALCULATION OF PROFIT (LOSS)
Mature
Year 1 2 3 4 5
Revenue
Total Operating Expenses
Operating Profit
Less: Mortgage Payments
(P & I)
Less: Capital Replacement
Allowance
PRE-TAX CASH FLOW
Page iv A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
There are a number of ways to make these calculations, some more complex than others. The
more complex methods are, of course, the better methods. We will start with the simplest.
Simple Average Pre-Tax or Net ROI/ROE
For a particular year, ROI is the pre-tax cash flow plus the interest for the year on long-term debt,
as a percentage of the original total investment (equity plus long-term debt).
ROI = Pre-tax or Net Cash flow + Interest on Long-Term Debt
Original Equity + Original Long-Term Debt
ROE is the pre-tax or net cash flow as a percentage of the original equity investment.
ROE = Pre-tax or Net Cash Flow
Original Equity
These numbers can be averaged over a number of years, say ten years, to give an average pre-tax
ROI or ROE figure.
These are the simplest calculations. However, they are not well regarded by serious financial
analysts because they ignore the time value of money. What we mean is that they give the same
value to a dollar earned in the tenth year as they do to a dollar earned in the first year. In reality
the present value of a dollar earned in the tenth year is really only a portion of a dollar.
However, the simplicity of this method is its beauty and it is easy to understand. Most bankers
will accept such numbers for their purposes. If you are not pressed for a more sophisticated
calculation, leave it at this.
For a project to be commercially feasible, the ROI and ROE values have to be positive (i.e. the
business is making, not losing, money) and they should exceed the costs of alternative, no-risk
investments, such as bonds or guaranteed investment certificates. If they don’t exceed these
alternatives, why bother taking the risk? Just put your capital in guaranteed investments.
Another factor determining what is a satisfactory return is liquidity. Liquid investments, blue
chip stocks and bonds, for example, can be readily and quickly sold, at little cost. An equity
stake in a small retail business, however, may be difficult if not impossible to sell, and there may,
in fact, be an agreement among the investors restricting their rights in this respect.
The degree these rates of return exceed no-risk investments is primarily determined by the level
of risk inherent in the business proposal and, to a lesser degree, the level of liquidity.
Looking at a tourism retail business, its advantages are:
• It has inventory which can be sold or relocated to another site;
• The building can be converted to other types of uses, particularly retail ones.
Page v A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Disadvantages include:
• Highly sensitive to effective inventory and cash flow management;
• Vulnerable to competition;
• Can be difficult to get established, and the start-up period will extend two years or more.
Everyone has a different view on these matters, but we suggest the following guidelines:
ROI (assuming 50% debt and 50% equity):
• Double the interest rate on long-term debt is excellent (provides four-times coverage of
interest on debt) (NB: - For the ROI to be double the interest rate, the ROE has to be
three times the interest rate.);
• 150% of the interest rate is good (provides three-times interest coverage) ;
• 100% of the interest rate is poor from the investor’s standpoint - there is no premium for
risk but not bad from the banker’s perspective, he or she has two-times coverage on
interest;
• Less than 100% - is not a commercially feasible proposition and probably not bankable,
since the lender has little or no income protection.
Assuming the financing was 50/50 debt/equity and that the interest rate on long-term debt was
10% per annum, an ROI of 20% would produce an ROE of 30%.
ROE :
• Triple the interest rate on long term debt is excellent;
• Double is good;
• Equal to the interest rate is poor;
• Less than the interest rate is unfeasible.
Times Loan Payment Coverage
Bankers look at the income protection on their loan. Basically, they want to see operating profit
of at least double the level of annual loan payments. Thus, if there was a 50% deterioration in net
income, the business could still cover its loan payments. For higher risk businesses, they will
want to see triple or better coverage.
This judgement will also be affected by the amount and quality of security you have put up for
the loan. If they don’t have to rely on business income for loan repayment, they may be a little
less demanding on times coverage.
Detailed Return-on-Investment Methods
The more sophisticated methods of calculating return on investment are summarized below. Both
of them share the benefit of accounting for the time value of money in calculating return on
investment.
Page vi A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Internal Rate of Return (IRR):
This method calculates the percentage of rate of return generated from a stream of income over
time, relative to the amount of the original investment. Net cash flow is usually used to represent
income, although a pre-tax IRR can be calculated too, if you are using the simpler pre-tax cash
flow method of projecting earnings.
Essentially, this method determines the discount rate (rate of return) that, when applied to each
future year’s cash flow, will result in a total cash flow for all the years equal to the original
investment.
Ask your banker or your accountant to do this calculation for you. Most spreadsheet programs
today will perform this calculation. To do it manually, you have to be a mathematician!
Net Present Value (NPV):
Net present value (NPV), sometimes called warranted investment, is a very useful ROI measure.
Rather than determining the rate of return itself, it asks you to establish a target rate of return and
then discounts each year’s cash flow at this rate to calculate the level of investment warranted for
the project. In other words, it tells you how much you can afford to invest to produce the desired
rate of return from the projected cash flow. If the warranted investment is higher than the actual
investment required, the project will exceed the target rate of return and vice versa.
Again, the NPV calculation can be done by your accountant or banker.
Time Period for Projections
What time period should we use in measuring ROI?
A primary consideration in this respect is the expected useful life of the investment. The useful
life of an investment can be many years. Buildings, for example, can have an effective life of a
century or more. Other assets will have a much shorter useful life. Assuming, however, that you
will be spending enough annually to refurbish or replace items on a periodic basis, the useful life
of the assets in the business will be extended indefinitely into the future. On the other hand, new
competition could weaken your ability to maintain the business on this basis and its life would be
shortened as a consequence. As a result, the expected useful life of an investment is not a
sufficient consideration, on its own, for determining the time line for ROI analysis.
A second important consideration is the reliability period of future projections. Some experts
believe that any projections beyond five years are so speculative that they are useless. (Some
others believe one year is speculative!)
However, the key question is not really how accurate future projections can be but, rather, is it
reasonable for you to rely on future income from the investment you’re contemplating today and,
if so, for how many years can you reasonably expect to continue to earn this income?
We would suggest that a ten-year time line would probably be appropriate for a tourism retail
business. With reasonable management and investment in marketing, this should be readily
achievable. In addition, there’s not a lot of value in extending the time line significantly beyond
this, since, with the time-sensitive ROI methods, the impact of cash flow more than ten years in
Page vii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
the future is quite small.
With the simple ROI method, you should not include years beyond the tenth year in the
calculation, since to do so would distort the result by giving too much weight to cash flow in the
distant future.
Break-even Analysis
Another useful analysis is break-even analysis. Some financial institutions like it because it
paints a picture of the degree to which a projected level of business exceeds the minimum
necessary to survive and provides a measure of the down-side protection in the projected
numbers.
The break-even point is the volume of revenue at which all costs are covered and the business
breaks even on a revenue-to-cost basis.
There are several different break-even points, as illustrated in Exhibit IV-2. The first comes
when the intersection of volume of business and price produces enough revenue to cover variable
operating costs (costs of sales and direct operating expenses). The amount of revenue in excess
of variable costs is called Contribution to Overhead.
The second level happens when all operating costs, the variable costs as well as all overhead
costs, are covered. The surplus is the Contribution to Non-Operating Costs or Contribution to
Capital Related Costs.
The third level is when all costs of the business are covered. The surplus is Net Cash Flow or
Return on Equity.
Break-even analysis is also very useful to management for the purpose of evaluating feasibility
and also because it can be used in pricing and discounting strategies as part of a yield
management process.
_________________________
Page viii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
EXHIBIT III-2
BREAKEVEN ANALYSIS
$
Revenue
A
B
C
Volume
(Number of Customers)
Financing & Asset
Replacement Costs
Overhead Expenses
Cost of Sales & Direct
Operating Expenses
Net Cash Flow
(ROE)
Contribution to
Overhead
Contribution to
Non-Operational Costs
A Break even on variable costs (direct costs)
B Break even on variable & fixed cost (overhead costs)
C Full Break even - covers all variable & fixed costs, as well as
financing & asset replacement costs
APPENDIX IV
Business Structures
Page i A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
APPENDIX IV
BUSINESS STRUCTURES
Alternative Forms of Business Structures
This section looks at alternative ways of setting up a business and deals with the major
considerations you will face.
The alternative forms of business organization include:
• Sole proprietorship;
• Partnership;
• Corporation - the Limited Company and the Public Corporation;
• Limited Partnership;
• Joint venture.
The features, advantages, and disadvantages of each organizational form are summarized below.
Sole Proprietorship
A sole proprietorship is just what it says. It involves one owner, and that owner and the business
are one entity. In other words, the person owns the assets personally, and the liabilities of the
business are the liabilities of that person. There is no legal form to a sole proprietorship, although
it still has to register itself as a business for the purposes of business licensing and sales tax
registration. The legal status of the business is the legal status of the owner as a citizen. The
income of the business is the personal income of the owner.
The advantages of this form of enterprise include:
• Simplicity;
• Freedom to make your own decisions.
The disadvantages include:
• No limitation of personal liability for the owner;
• Nobody to share the responsibilities of running the business;
• Limited access to equity other than what you have available personally.
Page ii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
This form of enterprise is only feasible where the business is owned solely by an individual, or
perhaps by a married couple, since the laws on marital property will govern the nature of the
relationship between the parties.
Partnership
A partnership is a business form intended for two or more owners. Like the sole proprietorship,
the owners of the business and the business itself are one and the same for legal purposes. The
business has no legal status separate from the individuals involved. The liabilities of the business
are the liabilities of the partners. In fact, each and every partner is liable for all of the liabilities of
the business. Partners are assumed under the law to have equal interests in the business, unless
their partnership agreement specifies differently.
The governing legal instrument is the partnership agreement drawn between the partners. It has
legal status as a contract. It normally covers the key arrangements among the partners, for
example:
• The proportions of partners’ interest, if other than equal;
• Cross indemnification of personal liability;
• Provision for dissolution, or transferring of interests in the partnership;
• The decisions to be made jointly by the partners;
• Prohibited activities;
• Provisions for life and disability insurance to assist surviving partners in acquiring the
interest of the deceased or disabled partner, and compulsions on the partner or his/her estate
to sell that interest to the surviving partners in the event of disability or death;
• The manner in which partners are to be compensated as well as distribution of the
partnership’s profits and losses;
• Procedures for amending or terminating the agreement.
The advantages of a partnership are:
• Basic simplicity;
• Provides for more than one owner.
Disadvantages include:
• Unlimited liability for each partner for all of the liabilities of the business. The partners can
have a mutual indemnification clause in their partnership agreement, which can partially
offset some of risk, but this only establishes a claim on the other partners in the event a
partner is called upon to cover a business liability.
Page iii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Many partnerships fail because the partners do not adequately deal with issues such as those
identified above as needing to be included in the partnership agreement.
Corporation
The corporation is a separate legal entity from its owners. It has the status of a person under law.
It is created when Articles of Incorporation are filed with the Registry of Joint Stock Companies
of the Nova Scotia government in the case of a provincial corporation, or the federal government
in the case of a federally incorporated company. You have the choice of provincial or federal
incorporation. (Since you are likely to be doing business outside of Nova Scotia, it may be of
benefit to establish a federally incorporated company - this means that your business will have
legal status, nationally rather than just within the province. While provincial companies can also
register in other provinces too, they may lack legal status there.)
A corporation issues shares to its owners and equity investors. The liability of the owners and
investors is limited to the amount of their investment. (However, if they provide personal pledges
or guarantees to the bank or other creditors on behalf of the company, their limited liability does
not protect them for the specific liability involved.) In other words, for the most part the
company’s creditors have only the assets of the company as protection for their credit, not the
assets of the owners. There are certain creditors and liabilities which do have a claim on the
owners of an incorporated company, including the Receiver General for Canada for employee
source deductions, the Workers’ Compensation Board, and employees for their back wages.
There are two forms of limited liability corporation, the private corporation and the public
corporation. The private corporation is the one used by the vast majority of small-and medium-
size businesses, where the investors are informally organized by the promoters of the business.
Private corporations are not permitted to promote the sale of their shares to the general public.
In a public corporation, on the other hand, promoters are permitted to solicit the sale of the
corporation’s shares to the general public through investment dealers and other financial
institutions. To do this, however, the promoters have to file detailed information on the business
proposal and on many other topics to the Nova Scotia Securities Commission and receive
approval to sell the share offering.
The cost of legal, consulting, and accounting fees in developing a prospectus can run to hundreds
of thousands of dollars, so this form of business structure is only used for very large businesses.
The advantages of a corporation are:
• Limitation of owners’ liability;
• Can have several owners/investors;
• The business can enter into contracts and conduct business in its own name, rather than the
names of the owners;
Page iv A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• There can be some tax benefits to the owners as compared with the sole proprietorship or
partnership.
Disadvantages include:
• More expensive and complex to establish;
• For very small businesses, much of the advantage of limited liability is usually lost, since
bank and lenders will insist on personal guarantees from the owners anyway.
Limited Partnership
The limited partnership is a form of business organization that was popular in the past decade. It
is like a partnership in some ways and a corporation in others. Basically, the general partner
organizes and runs the business, while the limited partners invest in it. All are partners for tax
purposes; in other words, the net income and losses of the partnership flow directly to them.
However, the liability of the limited partners is limited to the amount of their investment, as long
as they don’t engage in the business in any fashion, other than as passive investors. To remain a
limited partner, a person must not take part in the management of the firm and may not act on
behalf of the company.
Joint Venture
A joint venture is like a partnership but usually involves two or more corporations that enter into
an agreement to operate an enterprise under joint ownership. The respective companies usually
have some business relationship with the joint venture.
Business Registration
Whatever the form of business structure you choose, you need to register the business. This is
discussed in the section of the manual on Legal Matters.
Tax Considerations
There are a number of tax implications with each form of business organization. You are
strongly advised to obtain professional tax advice from a qualified accountant, preferably a tax
specialist.
Agreements Among Principals
Whatever the form of organization, it is vital that the principals in the business execute a formal
agreement among themselves. In the partnership, there is a partnership agreement, while in the
corporation it is a shareholders agreement.
The agreement should cover, at a minimum, the following kinds of issues:
• An understanding as to the purpose of the business, the roles of the principals in it, and any
other mutually agreed intentions;
• Decisions requiring approval of all the principals;
Page v A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
• Decisions requiring approval of a majority of the principals;
• Procedures for selling or transferring an interest in the business;
• Procedures for dissolution;
• Procedures for resolving conflicts when there is a stalemate;
• Methods of compensating the principals;
• Issues having to do with the rights of and prohibitions on the principals.
Which Form of Business Should I Use?
If you’re in this project on your own, a sole proprietorship is simplest and least expensive.
Incorporate a private company in which you hold all or most of the shares if you want some
limitation of liability protection and/or if your tax advisor indicates some tax advantages in
incorporation.
If there’s more than one owner, and they all want to have a say in the running of the business, you
might also form a partnership.
In partnerships, sometimes one partner may be silent, which means he or she will supply the
capital while the other supplies the know-how and the hands-on management. In most cases,
however, partners work together at the business. Ideally, in a working partnership, each partner
will have skills that are different but complementary to the other so that both can contribute to the
business in other ways besides supplying money. Whether silent or active, your partner will
usually insist on some share in management decisions.
A word of caution here: you should be very careful in choosing a business partner. Many
partnerships fail because the partners cannot get along. If you do choose to form a partnership,
you should have a detailed and comprehensive agreement drawn up to protect the interests of all
partners.
If you have several others who are prepared to invest in the business but are not going to be active
in it as partners, then the private corporation may be the best form. Your tax advisor may, on the
other hand, suggest a limited partnership since it gives some tax advantages to the non-active
partners.
You definitely need expert advice on this, however.
APPENDIX V
List of Contacts
Page i A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
APPENDIX V
LIST OF CONTACTS
Tourism Division - Tourism Development
Department of Tourism, Culture and Heritage
1800 Argyle Street, 6th floor
Halifax, NS
B3J 2R5
Tel: 424-5000
Fax: 424-0629
Website: www.gov.ns.ca/dtc
Tourism Division - Tourism Marketing
Department of Tourism, Culture and Heritage
1800 Argyle Street, 6
th
Floor
Halifax, NS
B3J 2R5
Tel 424-5000
Fax: 424-2668
Website: www.gov.ns.ca/dtc
The Nova Scotia Tourism Partnership
Council
World Trade and Convention Centre
Suite 603, 1800 Argyle Street
Halifax, Nova Scotia
B3J 3N8
Tel: 424-0048
Fax: 424-0723
Website: www.nstpc.com
Service Nova Scotia & Municipal
Relations
Access Nova Scotia
Toll free: Throughout Province:
1-800-670-4357
Website:https://www.gov.ns.ca/snsmr
One-stop shopping for government programs
and services. Maintain database of contacts
for government departments in each region
regarding appropriate permits, etc. Also
contact for new Nova Scotia Business Registry.
Regional Access Nova Scotia Offices:
Access Nova Scotia - Amherst
Superstore Mall
126 South Albion St.
Amherst, NS B4H 2X3
Access Nova Scotia - Antigonish
20 St. Andrew’s St.
Antigonish, NS B2G 2L4
Access Nova Scotia - Bridgewater
77 Dufferin Street
Bridgewater, NS B4V 2W8
Tel: 1-800-670-4357
Access Nova Scotia - Halifax
West End Mall
6960 Mumford Rd.
Halifax, NS B3L 4P1
Access Nova Scotia - Kentville
28 Aberdeen Street
Kentville, NS B4N 2N1
Tel:1-800-670-4357
Page ii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Regional Access Nova Scotia Offices
(Cont’d):
Access Nova Scotia - Port Hawkesbury
218 MacSween St., Ste. 22
Provincial Building
Port Hawkesbury, NS
Access Nova Scotia - Sydney
Moxham Centre
380 King’s Rd.
Sydney, NS B1S 1A8
Access Nova Scotia - Truro
35 Commercial Street, Suite 101
Truro, NS B2N 3H9
Access Nova Scotia - Halifax
West End Mall
6960 Mumford Road
Halifax, Nova Scotia
B3L 4P1
Access Nova Scotia - Dartmouth
Superstore Mall
650 Portland Street
Dartmouth, NS B2W 6A3
Access Nova Scotia - Yarmouth
Provincial Bldg.,
10 Starrs Rd., Ste. 127
Yarmouth, NS B5A 2T1
Canada/Nova Scotia
Business Service Centre
1575 Brunswick Street
Halifax, NS
B3J 2G1
Tel: 426-8604
Fax: 426-6530
Toll free: 1-800-668-1010
Information on federal and provincial
government programs and funding assistance
under the Community Business Loan
Program.
Nova Scotia House of Assembly- Office of
Legislative Council
Website: www.gov.ns.ca/legislature/legc/
Statutes of Nova Scotia
Government Departments
Federal Government
Atlantic Canada Opportunities Agency
(ACOA)
1801 Hollis St., Suite 600
P.O. Box 2284, Station M
Halifax, NS B3J 3C8
Tel: 426-6743
Fax: 426-2054
Toll free: 1-800-565-1228
Website: www.acoa-apeca.gc.ca
Business Development Bank of Canada
Cogswell Tower - Scotia Square, Suite 1400
Halifax, NS B3J 2Z7
Tel: (902) 426-7850
Fax: (902) 426-6783
Toll free: 1-888-463-6232
Website: www.bdc.ca
Canadian Tourism Commission (CTC)
55 Metcalfe Street, Suite 600
Ottawa, ON
K1P 6L5
Tel: 613-946-1000
Website: www.canadatourism.com
Canada Revenue Agency
Business Services
Website:http://www.cra-arc.gc.ca
Payroll, GST/HST
Business Account Registration
Corporations (taxation)
Sole Proprietorships/Partnerships
Canada Revenue Agency
Tax Services Offices:
Halifax
Ralston Building
1557 Hollis St.
P.O. Box 638
Halifax, NS B3J 2T5
Fax: (902) 426-7170
Page iii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Sydney
47 Dorchester St.
P.O. Box 1300
Sydney, NS B1P 6K3
Fax: (902) 564-3095
Enterprise Cape Breton Corporation
Commerce Tower, 3
rd
floor
15 Dorchester St.
Sydney, NS B1P 6T7
Tel: 564-3600
Fax: 564-3825
Toll free: 1-800-705-3926
Website: www.ecbc.ca
Fisheries and Oceans Canada (Maritimes)
P.O. Box 1035
Dartmouth, NS B2Y 4T3
Tel: (902) 426-3760
Fax: (902) 426-5995
Website: www.dfo-mpo.gc.ca
Industry Canada
Corporations Directorate
365 Laurier Avenue West, 9th floor
Jean Edmonds Tower South
Ottawa, ON
K1A 0C8
Tel: 1-866-333-5556
Fax: (613) 941-0601
Website: www.corporationscanada.ic.gc.ca
Industry Canada
Competition Bureau
50 Victoria St.
Gatineau, PQ
K1A OC9
Tel: 1-800-348-5358
Fax: (819) 997-4282
Website:http://cb-bc.gc.ca
Industry Canada
NUANS Search System
C/O NUANS Administrator
Hewlett-Packard Canada
P.O. Box 13000
100 Herberg Rd.
Kanata, ON
K2K 2A6
Website: www.nuans.com
Office of the Privacy Commissioner of Canada
112 Kent St.
Place de Ville, Tower B - 3
rd
floor
Ottawa, ON K1A 1H3
Toll free: 1-800-282-1376
Tel: (613) 995-8210
Fax: (613) 947-6850
Website: www.privcom.gc.ca
Personal Information & Protection of
Electronic Documents Act
Statistics Canada (Atlantic Office)
1741 Brunswick Street
Box 11, 2
nd
Floor
Halifax, NS B3J 3X8
Toll free: 1-800-263-1136
Website: www.statcan.ca
Population data, Canadian Travel Survey,
International Travel Survey.
Transport Canada, Marine Safety
Tower C, Place de Ville
330 Sparks St.
Ottawa, ON
K1A 0N8
Tel: (613) 990-2309
Website: www.tc.gc.ca/marinesafety
Navigable Waters Protection Program
Office of Boating Safety
Transport Canada (Atlantic Region)
Dartmouth:
P.O. Box 1013
45 Alderney Drive
Dartmouth, NS B2Y 4K2
Tel: 426-7795
Port Hawkesbury:
811 Reeves St.
Shediac Plaza
P.O. Box 2012
Port Hawkesbury, NS B0E 2V0
Tel: (902) 625-0803
Sydney:
196 George St.
Federal Arts Bldg., 2
nd
floor
Sydney, NS B1P 1J3
Tel: (902) 564-7002
Page iv A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Yarmouth:
248 Pleasant St.
P.O. Box 850
Yarmouth, NS B5A 4K5
Tel: (902) 742-6860
Website: www.tc.gc.ca/atl/
St. John Ambulance Training Offices
Headquarters for Nova Scotia Council
88 Slayter Street
Dartmouth, NS B3A 2A6
Tel: 463-5646
Fax: 469-9609
Website: www.stjohnambulance.ns.ca
Canadian Red Cross
1940 Gottingen Street
Halifax, NS B3J 3Y2
Tel: (902) 423-3680
Fax: (902) 422-6247
Website: www.redcross.ca
First Aid, Water Safety courses.
Provincial Government
Nova Scotia Department of Agriculture &
Fisheries - Food Safety Section (Halifax)
PO Box 2223
Halifax, NS
B3J 3C4
Tel: (902) 424-1173
Fax: (902) 424-3948
Website: www.gov.ns.ca/nsaf
Nova Scotia Department of Agriculture &
Fisheries - Food Safety Section (Truro)
P.O. Box 550
Truro, NS
B2N 5E3
Tel: (902) 893-7473
Fax: (902) 893-6531
Website: www.gov.ns.ca/nsaf
Nova Scotia Department of Natural Resources
P.O. Box 698
Halifax, NS
B3J 2T9
Tel: 424-5935
Fax: 424-7735
Website: www.gov.ns.ca/natr
Service Nova Scotia & Municipal Relations
1505 Barrington St., 9
th
Floor, South
PO Box 2271
Halifax, NS
B3J 3C8
Tel: 424-5528
Fax: 424-1298
Website: www.gov.ns.ca/snsmr
Nova Scotia Department of Environment &
Labour
5151 Terminal Road
PO Box 2107
Halifax, NS
B3J 3B7
Tel: 424-5300
Fax: 424-0503
Website: www.gov.ns.ca/enla/
Public Safety Division
Occupational Health & Safety Division
Nova Scotia Office of Economic Development
P.O. Box 2311
14
th
floor South, Maritime Centre
1505 Barrington St.
Halifax, NS
B3J 3C8
Tel: (902) 424-0377
Fax: (902) 424-7008
Website: www.gov.ns.ca/econ
Nova Scotia Human Rights Commission
(Central Office):
1690 Hollis St., 6
th
floor
P.O. Box 2221
Halifax, NS B3J 3C4
Tel: 1-877-269-7699
TTY: (902) 424-3139
Fax: 424-0596
Website: www.gov.ns.ca/humanrights
Nova Scotia Labour Standards
5151 Terminal Road, 7th floor
P.O. Box 697
Halifax, NS
B3J 2T8
Tel: 1-888-315-0110
Fax: 424-0648
Website: www.gov.ns.ca/enla/labstand
Page v A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Nova Scotia Alcohol and Gaming Authority
40 Alderney Dr.
P.O. Box 545
Dartmouth, NS B2Y 3Y8
Tel: 424-6160
Fax: 424-4942
Website: www.gov.ns.ca/aga
Nova Scotia Utility and Review Board
Motor Carrier Division
1601 Lower Water Street, Suite 300
P.O. Box 1692
Halifax, NS
B3J 3P6
Tel: (902) 424-3588
Fax: (902) 424-3919
Website:http://www.nsuarb.ca
Nova Scotia Workers Compensation Board
Main Office (Halifax)
5668 South Street
P.O. Box 1150
Halifax, NS
B3J 2Y2
Tel: 1-800-870-3331 (Halifax)
Website: www.wcb.ns.ca
Nova Scotia Workers Compensation Board
Branch Office (Sydney)
336 Kings Rd., Suite 117
Sydney, NS
B1S 1A9
Tel: 1-800-880-0003
Website: www.wcb.ns.ca
Office of the Fire Marshal
Nova Scotia Environment & Labour
5151 Terminal Rd., 6
th
Floor
P.O. Box 697
Halifax, NS
B3J 2T8
Tel: 1-800-559-3473
Fax: (902) 424-3239
Website: www.gov.ns.ca/enla/ofm
Nova Scotia Transportation & Public Works
1672 Granville St.
PO Box 186
Halifax, NS B3J 2N2
Tel: 424-2297
Fax: 424-0532
Website: www.gov.ns.ca/tran
Provincial Tax Commission
P.O. Box 755
1505 Barrington St.,
8
th
floor, Maritime Centre
Halifax, NS B3J 2V4
Toll free: 1-800-565-2336
Tel: 424-6300
Fax: 424-0602
Web: www.gov.ns.ca/snsmr/taxcomm
Nova Scotia Registry of Joint Stock Companies
PO Box 1529
Halifax, NS
B3J 2Y4
Tel: 1-800-225-8227
Fax
902) 424-4633Website: www.gov.ns.ca/snsmr/rjsc
Registration of company and NUANS search of
business name.
Nova Scotia Museum
Website: www. museum.gov.ns.ca
Page vi A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Educational/Training Resources
Cape Breton University
P.O. Box 5300
1250 Grand Lake Road
Sydney, NS B1P 6L2
Toll Free: 1-888-959-9995
Tel: 539-5300
Fax: 562-0119
Website: www.capebretonu.ca
Dalhousie University
Henry Hicks Academic Administration
Building
6299 South St.
Halifax, NS B3H 4H6
Tel: 494-2211
Registrar’s Office:
Tel: (902) 494-2450
Fax: (902) 494-1630
Website: www.dal.ca
Mount St. Vincent University (MSVU)
166 Bedford Highway
Halifax, NS B3M 2J6
Tel: (902) 457-6117
Fax: (902) 457-6498
Website: www.msvu.ca
Nova Scotia Community College (NSCC)
Admissions
P.O. Box 220
Halifax, NS B3J 2M4
Tel: (902) 491-4911
Toll Free: 1-866-679-6722
Fax: 424-0717
Toll Free:1-866-329-6722
Website: www.nscc.ns.ca
Saint Mary’s University
923 Robie Street
Halifax, NS B3H 3C3
Tel
902) 420-5400Website: www.stmarys.ca
Nova Scotia Tourism Human Resource Council
1099 Marginal Road, Suite 201
Halifax, NS B3H 4P7
Tel: (902) 423-4480
Fax: (902) 422-0184
Website: www.tourismhrc.com
INDUSTRY ORGANIZATIONS/
SECTOR ASSOCIATIONS
National & International
Organizations/
Associations
Canadian Association of Foodservice
Professionals
1644 Bayview Ave., Ste.1219
Toronto, ON M4G 3C2
Tel: (416) 422-3431
Fax: (416) 421-1598
Website: www.cfsea.com
Canadian Culinary Federation (CCF)
700-1281West Georgia St.
Vancouver, BC V6E 3J7
Tel: (604) 681-6087
Fax: (604) 688-5749
Website: www.ccfcc.ca
Canadian Restaurant and Foodservices
Association (CRFA) - Atlantic Office
5121 Sackville St., Ste. 201
Halifax, NS B3J 1K1
Tel: (902) 425-0061
Fax: (902) 422-1161
Website: www.crfa.ca
Tourism Industry Association of Canada
(TIAC)
803-130 Albert Street
Ottawa, ON
K1P 5G4
Tel: 613-238-3883
Fax: 613-238-3878
Website: www.tiac-aitc.ca/
Page vii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Provincial Sector Organizations/
Associations
Tourism Industry Association of Nova
Scotia (TIANS)
1099 Marginal Road, Suite 201
Halifax, NS
B3H 4P7
Tel: (902) 423-4480
Fax: (902) 422-0184
Website: www.tians.org
Affiliated Associations
(Same address, phone & fax as TIANS)
Campground Owners Association of Nova
Scotia (COANS)
Nova Scotia Adventure Tourism Association
Nova Scotia B&B Association
Other Industry Organizations/Associations
Canada Select (Nova Scotia)
1800 Argyle St., Ste. 603
Halifax, NS B3J 2R7
Tel: (902) 424-8929
Fax: (902) 424-0723
Website: www.canadaselect.com
Check In Nova Scotia
2695 Dutch Village Road, Suite 501
Halifax, NS B3L 4V2
Tel: 425-5781
Toll free: 1-800-565-0000
Website: www.checkinnovascotia.com
Nova Scotia Travel Information and
Reservations.
Federation of Nova Scotian Heritage
1113 Marginal Rd.
Halifax, NS B3H 4P7
Tel: (902) 423-4677
Toll free: 1-800-355-6873
Fax: 422-0881
Website: www.fnsh.ns.ca
Hotel Association of Nova Scotia (HANS)
P.O. Box 473, Station M
Halifax, NS B3J 2P8
Website: www.novascotiahotels.ca
Nova Scotia Association of Chefs & Cooks
Howe Hall, 6230 Coburg Road
Halifax, NS
Tel: 494-1262
Nova Scotia Restaurant Association
1161 Hollis Street
VIA Rail Station
Halifax, NS B3H 2P6
Tel: 429-5343
Fax: 429-0659
Taste of Nova Scotia
P.O. Box 368
29 Inglis Place, 2
nd
Floor
Truro, NS B2N 5L5
Tel: 895-3315
Fax 895-1011
Nova Scotia Association of Unique Country
Inns
Website: www.uniquecountryinns.com
Regional Tourism Industry
Associations
Antigonish/Eastern Shore Tourist Association
(AESTA)
RR #1 Musquodoboit Harbour, NS
B0J 2L0
Tel: 889-2362
Web: www.rewardyoursenses.com
Central Nova Tourist Association
P.O. Box 1761, 577 Prince Street
Truro, NS
B2N 5Z5
Tel: 893-8782
Fax: 893-2269
Website: www.centralnovascotia.com
Page viii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Destination Cape Breton
PO Box 1448
Sydney, NS
B1P 6R7
Tel: 563-4636
Fax: 564-5422
Website: www.cbisland.com
Destination Halifax
1800 Argyle Street, Suite 802
Halifax, NS
B3J 3N8
Tel: 422-9334
Fax: 492-3175
Website: www.destinationhalifax.com
Evangeline Trail Tourist Association (ETTA)
654 West Main St.
Kentville, NS B4N 1L7
Tel: (902) 678-1728
Fax: (902) 679-1396
Toll free: 1-866-260-3882
Website: www.evangelinetrail.com
Pictou County Tourist Association (PCTA)
40 Water St.
P.O. Box 1839
Pictou, NS B0K 1H0
Tel: (902) 485-6151
Fax: (902) 485-4415
Toll free: 1-877-81-OCEAN
Web: www.tourismpictoucounty.com
South Shore Tourist Association (SSTA)
Box1390
Lunenburg, NS
B0J 2C0
Tel: 634-8844
Fax: 634-8056
Website: www.sssta.com
Yarmouth County Tourist Association
(YCTA)
Tel: 742-5355
Toll free: 1-866-850-9900
Web: www.aboutyarmouth.com
Regional Development Authorities
Antigonish Regional Development Authority
Farmer’s Mutual Insurance Building,
Suite 2-1
188 Main St.
Antigonish, NS B2G 2B9
Tel: 863-3330 Fax: 863-4095
Website: www.antigonishrda.ns.ca
Cape Breton County Economic Development
Authority
338 Charlotte Street, 3
rd
Floor
Sydney, NS B1P 1C8
Tel: (902) 562-2201
Fax: (902) 562-2866
Website: www.cbceda.org
Colchester Regional Development Agency
P.O. Box 181, 966 Prince Street
Truro, NS B2N 5C1
Tel: 893-0140
Fax: 897-1157
Toll free: 1-866-227-6182
Website: www.corda.ca
Cumberland Regional Economic Development
Association
35 Church Street, Box 546
Amherst, NS B4H 4A1
Tel: (902) 667-3638
Fax: (902) 667-2270
Website: www.creda.net
Guysborough County Regional Development
Authority
P.O. Box 49, 46 Main Street
Guysborough, NS B0H 1N0
Tel: 533-3731
Fax: 533-2064
Toll free: 1-800-355-3731
Website: www.gcrda.ns.ca
Halifax Regional Development Agency
11 Glendale Drive, Unit 9
Lower Sackville, NS B4C 3P2
Tel: 869-4040
Fax: 869-4091 Toll Free 1-800-650-0039
Website: www.hrda.ns.ca
Page ix A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Hants Regional Development Authority
Box 2313
Windsor, NS B0N 2T0
Tel: (902) 798-2284
Enfield Office: (902) 883-3338http://www.hantscounty.com
Straits Highlands Regional Development
Authority
P.O. Box 2200
32 Paint St.
Port Hawkesbury, NS B0E 2V0
Tel: 625-3929
Fax: 625-1559
Website: www.strait-highlands.ns.ca
Kings Community Economic Development
Agency
28 Aberdeen Street, Ste. #5
Kentville, NS B4N 2N1
Tel: (902) 678-2298
Fax: (902) 678-2324
Website: www.kingsced.ns.ca
Pictou Regional Development Commission
Business Service Centre
980 East River Road
New Glasgow, NS B2H 3S5
Tel: (902) 752-6159
Toll Free: 1-888-412-0072
Fax: (902) 755-2722
Web: www.wearepictoucounty.com
South West Shore Development Authority
P.O. Box 131
Yarmouth, NS B5A 4B1
Tel: (902) 742-3210
Fax: (902) 742-3107
Website: www.swsda.com
Western Valley Development Authority
P.O. Box 278
86 Atlantic Ave.,
Cornwallis Park, NS B0S 1H0
Tel: (902) 638-8100
Fax: (902) 638-8101
website: www.wvda.com
Travel Trade Organizations
Canada
Association of Canadian Travel Agencies
(ACTA)
130 Albert Street, Suite 1705
Ottawa, ON K1P 5G4
Tel: 613-237-3657
Fax: 613-237-7052
Website: www.acta.ca
Canadian Bus Association (CBA)
451 Daly Avenue
Ottawa, ON K1N 6H6
Tel: 613-238-1800
Fax: 613-241-4936
Website: www.buscanada.ca
Ontario Motor Coach Association (OMCA)
4141 Yonge Street, Suite 306
Toronto, ON M2P 2A8
Tel: 416-229-6622
Fax: 416-229-6281
Website: www.omca.com
United States
American Bus Association (ABA)
700 13
TH
St., NW, Suite 575
Washington, DC
20005-5923
Tel: 202-842-1645
Toll free: 1-800-283-2877 (US and Canada)
Fax: 202-842-0850
Website: www.buses.org
American Society of Travel Agents (ASTA)
1101 King St., Suite 200
Alexandria, VA 22314
Tel: 703-739-2782
Fax: 703-684-8319
Website: www.astanet.com
Group Leaders of America, Inc. (GLAMER)
P.O. Box 129
Salem, OH 44460
Tel: 1-800-628-0993
Fax: 330-337-1118
Website: www.glamer.com
Page x A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
International Association of Convention &
Visitor Bureaus
2025 M Street, NW Suite 500
Washington, DC
20036
Tel: 202-296-7888
Fax: 202-296-7889
Website: www.iacvb.org
CrossSphere (formerly NTA)
546 E. Main Street
Lexington, KY
40508
Tel: 606-226-4444
Toll free: 1-800-682-8886
Fax: 606-226-4414
Website: www.crosssphere.com
Travel Industry Association
1100 New York Avenue, NW, Suite 450
Washington, DC
20005-3934
Tel: 202-408-8422
Fax: 202-408-1255
Website: www.tia.org
Travel and Tourism Research Association
(TTRA)
PO Box 2133
Boise, ID
83701-2133
Tel: 208-853-2320
Fax: 208-853-2369
Website: www.ttra.com
United States Tour Operators Association
(USTOA)
275 Madison Avenue, Suite 2014
New York, NY
10016
Tel: 212-599-6599
Fax: 212-599-6744
Website: www.ustoa.com
APPENDIX VI
emerit Standards and Certification
Page i A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
APPENDIX VI
emerit STANDARDS AND CERTIFICATION
The Nova Scotia Tourism Human Resource Council (http://www.tourismhrc.com ) is a national
partner of the Canadian Tourism Human Resource Council and has been actively involved in the
development of National Occupational Standards for various occupations in the tourism industry,
and is also the certifying body for non-apprenticeable trades in Nova Scotia. As well, the
NSTHRC is the local partner for emerit, "Canada's best tourism training tools". emerit offers
flexible learning options including on-line accessibility and traditional workbooks. This allows
for self-directed learning of specific skill based modules and also permits individuals to challenge
full certification.
Standards
Standards presently (2005) exist for 49 occupations. These are listed on the following page.
What are Standards?
Standards are statements outlining the attitude, knowledge, and skills required of an individual in
order to be considered competent in an occupation. Standards clarify expectations and can be
used to design consistent training, education, and professional development programs.
How are Standards Developed?
The Standard development process is based on the philosophy that the tourism industry must
determine its own direction. The individuals best suited to determine the content of the Standards
are those directly involved in the occupation. The mandate of the Nova Scotia Tourism Human
Resource Council is to bring together business, labour, education, and training, and other
stakeholders to define the standards and to ensure that they guide education and training.
Standards for a specific occupation become National once seven provinces or territories and one
national association validate and accept them.
Who Benefits from Standards?
Eventually, everyone in contact with the tourism industry will benefit from the evaluation of
performance in relation to industry Standards. As Standards gain recognition, industry
professionals will maintain or increase personal skills, resulting in direct benefits to local and
visiting consumers.
NATI ONAL WORKBOOKS
PRI CE ENG FRE
Bartender 75.00
Campground Operator 75.00
Entry Level Cook 75.00
Food and Bevarage Manger Set 275.00
Food and Beverage Server 75.00
Freshwater Angling Guide 75.00
Front Desk Agent 75.00
Guest Services Attendant 75.00
Heritage Interpreter 75.00
Housekeeping Room Attendant 75.00
Hunting Guide 75.00
Local Tour Guide 75.00
Reservations Sales Agent 75.00
Retail First Level Manager 75.00
Retail Sales Associate 100.00
Sales Manager 75.00
Special Events Coordinator 75.00
Special Events Manager 75.00
Supervisory Skills (set of 4) 275.00
Tour Director 75.00
Tourism Essentials 75.00
Tourism Visitor Information Counsellor 75.00
Travel Counsellor 75.00 N/A
TRAI NER’S GUI DES FOR WORKBOOKS
PRI CE ENG FRE
Bartender/ Food and Beverage Server 150.00
Food and Beverage Manager 150.00
Front Desk Agent 150.00
Guest Services Attendant 150.00
Heritage Interpreter 150.00
Housekeeping Room Attendant 150.00
Local Tour Guide/Tour Director 150.00
Reservations Sales Agent 150.00
Sales Manager 150.00
Tourism Visitor Information Counsellor 150.00
Tourism Essentials 150.00
CAREER PLANNI NG RESOURCES
PRI CE ENG FRE
Career Awareness Video 27.50
Career Expo Manual 45.00
Career Planning Guide (Updated) 35.00
The Student’s Travel Map: 2002 (Updated) 35.00
Tourism – A World of Opportunity (CD-Rom) 25.00
HUMAN RESOURCE BUSI NESS TOOLS
PRI CE ENG FRE
Aboriginal Tourism - A Business Guide 25.00
Performance First Series: 155.00
Great Performances 25.00
Less Talk, More Communication 25.00
Making Training Work 25.00
One-on-One Training 25.00
Predicting Performance 25.00
Setting the Stage 25.00
Winning Ways 25.00
Business Builders Series: 160.00
Developing an Operational Plan 20.00
Developing Your Business Profile 20.00
Getting Your Business Market Ready 30.00
Management and Labour Relations 30.00
Managing Your Business Finances 20.00
Marketing Essentials for Small Business 20.00
Sales Forecasting 20.00
Shaping Your Business Strategy 20.00
HR Tool Kit 195.00
Performance Paks (ELC,HRA, FDA, FBS, TVIC) 25.00
OCCUPATI ONAL STANDARDS
PRI CE ENG FRE
Bartender 40.00
Beverage Services Manager 40.00 N/A
Banquet Server 40.00
Banquet Manager 40.00
Campground Operator 40.00
Catering Manager 40.00
Casino Dealer 40.00
Casino Slot Attendant 40.00
Catering Manager 40.00 N/A
Director of Sales and Marketing 40.00 N/A
Door Staff 40.00
Food & Beverage Manager 40.00
Food & Beverage Server 40.00
Foodservice Counter Attendant 40.00 N/A
Freshwater Angling Guide 40.00
Front Desk Agent 40.00
Golf Club General Manager 40.00
Guest Services Attendant 40.00
Heritage Interpreter 40.00
Housekeeping Room Attendant 40.00
Hunting Guide 40.00
In-room Dining Server 40.00
Kitchen Helper 40.00
Line Cook 40.00 N/A
Local Tour Guide 40.00
Night Auditor 40.00
Outdoor Adventure Guide 40.00
Professional Cooking 80.00
Reservations Sales Agent 40.00
Retail First Level Manager 40.00 N/A
Retail Sales Associate 40.00 N/A
Sales Manager 40.00
Ski Area/Resort Occupational Guidelines 85.00
Small Business Owner/Operator 40.00
Snowmobile Operations 40.00
Special Events Coordinator 40.00
Special Events Manager 40.00
Supervisory Skills 40.00
Taxicab Driver 40.00
Ticket Agent 40.00
Tour Guide/Director 40.00
Tour Operator 40.00
Tourism Small Business Owner/Operator 40.00 N/A
Tourism Trainer 40.00
Tourism/Visitor Information Counsellor 40.00
Tourism/Visitor Information Supervisor 40.00
Travel Counsellor 40.00
Transferable Skills 40.00
Wine Service 40.00
ON-LI NE TRAI NI NG
PRI CE ENG FRE
Bartender (Bundle) 125.00
Modules 25.00
Food and Beverage Server (Bundle) 125.00
Modules 25.00
Front Desk Agent (Bundle) 125.00
Modules 25.00
To order please visit www.emerit.ca or contact 1.800.486.9158.
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Page iii A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
For Service Professionals, Standards:
• Identify career paths;
• Identify the skill and knowledge needed
• Enhance the public image of occupations;
• Provide a basis for challenge, self-improvement, and advancement;
• Provide the basis for certification based on competent performance.
For Employers and Owners, Standards:
• Define area where employees must be proficient, which assists in recruiting, training, and
development of staff. It is important to understand that Standards are not a training program
or a training manual in themselves; they do not specify learning objectives, learning activities
or evaluation methods. To serve as a training tool, the Standards need to be translated into a
learning experience with detailed objectives, activities, and evaluations.
• They can be used to create job descriptions and conduct performance evaluations, as well as
to develop and enhance training programs
• Provide employers with a highly trained workforce, which can increase productivity and
decrease costs incurred by staff turnover.
For Educators, Standards:
• Provide the basis for curriculum and program development;
• Identify areas of industry where educational expertise is needed and applicable.
For Students, Standards:
• Promote the tourism/hospitality industry as a viable and fulfilling career choice;
• Identify career options within the industry.
For the General Public, Standards:
• Increase the level of professionalism of employees in the tourism/hospitality industry. This
results in a higher level of service to customers and a better image of the industry.
Many Standards are available in a Workbook that is a self-study guide including all the Standards
as well as exercises, performance reviews and self-tests. The Workbooks are available through
the Nova Scotia Tourism Human Resource Council and can be ordered on-line from their web
site.
National Certification
What is National Certification?
National Certification is a three step process. Professionals who achieve National Certification
will be recognized across Canada for meeting industry requirements in their selected occupation.
The candidate must be employed in the occupation and must have achieved a minimum number
of hours work experience (varies depending on the occupation) prior to completing certification.
Page iv A Guide to Starting and Operating a Receptive Tour Operator Business in Nova Scotia
Candidates may challenge the knowledge component (i.e. the written examination) of the process
at any time with no prerequisite. Study materials are recommended to assist in achieving optimal
results.
The Certification process is as follows:
Step 1: Written Examination
The examination tests the candidate’s familiarity with the knowledge component of the
Standards. If unsuccessful, re-testing may be arranged. Oral examinations are available in
special circumstances. Some certification exams are available on-line.
Step 2: Performance Review
The Performance Review is derived from the Standards and enables the candidate to practice
performance skills on-the-job. The candidate is encouraged to practice the skills outlined in the
Standards using the Performance Review as a guide. The review can be completed as it best suits
the candidate’s situation, but it is recommended that a candidate work together with his or her
supervisor or a certified peer to complete it. The supervisor/certified peer can provide feedback
for those skills which may need improvement.
When the candidate is ready to have his or her performance skills evaluated, the candidate
contacts the Certification Team and requests an Industry Evaluation. In addition, the candidate
must have a minimum number of hours experience (varies by occupation) before the Industry
Evaluation can be conducted.
Step 3: Industry Evaluation
A trained evaluator observes the candidate on-the-job to ensure the candidate possesses the
essential competencies of the occupation as established by the industry.
Certification
The Certification Team reviews the file to ensure that all requirements have been met. The
successful candidates receive a certificate, a pin, and the Industry Evaluation comments.
Unsuccessful candidates receive the Industry Evaluation comments and are encouraged to
reapply.
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