How to Shape a Business Service to Its Customers' Exact Needs: A Hostel in Lisbon

How to Shape a Business Service to Its Customers' Exact Needs: A Hostel in Lisbon

Hugo Miguel de Brito Silva Moreira Faísca (ISCTE-IUL, Lisbon, Portugal) and Leandro Pereira (Department of Marketing, Operations and Geral Management, ISCTE-IUL, Lisbon, Portugal)
Copyright: © 2015 |Pages: 18
DOI: 10.4018/IJKBO.2015100104
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Abstract

The present business plan intents to analyze the financial attractiveness of creating a Hostel within Lisbon and targeting a service proportionate to guests' needs. That is, a service design based in the importance customers attribute to each offer. As observed, the market at Lisbon reflects a very competitive field where Hostels provide high quality services for low prices. During the low season (October-April), money is lost due to low occupancy rates. Nevertheless, profit resulting from the high season (May-September) is enough to null the negative results of the low season and still present a positive result at the end of the year. Financially, the evaluation outputs a NPV of 42 726€, IRR of 25.64% and Payback period of three years and four months. With vital indicators pointing towards a profitable business, the conclusion is that, based on the analysis performed, such a Hostel is financially viable.
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Literature Review

There is no single definition for business plans. However, classic researchers set a common foundation for constructing business plans based on four key elements: definition of strategic goals, generation of alternatives to reach these goals, evolution and decision among alternatives and implementation control (Andrews, 1971; Ansoff, 1965; Ackelsberg & Arlow, 1985; Porter, 1985).

It is also in its being to be formulated anchored on predictions of future events (Wiltbank et al. 2006). Some may say, it personifies the organizational vision and describes each step of the way required to attain it (Hill & Power, 2013; Valentin, 2015).

Authors differ in the way they appraise the economic contribution of business plans. Some find it advantageous (Bracker, Keats & Pearson, 1998; Schwenk & Schraeder, 1993) others do not (Boyd, 1991; Robinson & Pearse, 1983).

By assembling the various findings, one may conclude that business plans’ importance varies according to each business characteristics, how it is used and the phase where the business stands (initial/established). Moreover, it directs a company in every step of its way and obliges managers to think about every detail affecting the organization. Thus, obliging a greater understanding of the business, serving as a tool to avoid errors and seize not so obvious opportunities (Winicott, 2014).

As Staff of Entrepreneur Media (2015) state:

Anybody beginning or extending a venture that will consume significant resources of money, energy or time and that is expected to return a profit should take the time to draft some kind of plan.

Hostel, although a widely known concept, has no definition from a single entity accepted worldwide as a standard to describe Hostels. The one presented ahead, however, encompasses what the present paper refers to:

A hostel is a budget-oriented, shared-room (“dormitory”) accommodation that accepts individual travelers (typically backpackers) or groups for short-term stays, and that provides common areas and communal facilities.

Once again, existent literature does not delineate a fixed set of characteristics for these establishments. In this situation, articles of opinion, online forums and Hostel’s websites compose the ingredients available to build a characterization. The convergence of these, resulted in the following characterization: budget oriented, availability of dormitories and self-catering equipment, high level of social interaction and an informal environment.

Methodology

As a first step, there was a research over existent literature covering business plans and Hostels to better understand their nature and how the paper should be developed.

Secondly, a Market analysis was performed to retrieve information about the industry. First looking at the hospitality sector as a whole and then focusing on a more detailed assessment of the Hostel segment.

Afterwards, an organizational analysis was built based in the concept desired for the business, providing an internal analysis.

Having the internal (organizational) and external (market) analysis, the SWOT and dynamic SWOT frameworks were applied to formulate a business strategy.

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