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Question 1: What will you tell him? This is clearly a revenue problem and you should use the equation Revenue = price * volume to structure your answer to this first question. A good answer would be something like: I have been told by the client that the problem is unsatisfactory revenues in the tourism sector. To solve this case, I would take a good look at the key elements of revenue, which are price and volume (Revenue=price * volume). By volume in this context, I mean both the number of tourists visiting the region throughout the year and also the number of paying activities that they engage in while they are there. Therefore, when trying to increase volume, we need to focus our efforts on increasing both of these factors. Price is the amount that a tourist pays for each activity that s/he engages in while visiting the region, e.g. eating at a restaurant, taking the children to a water park, renting a deck chair on the beach. On the aggregate level, this is the average spend per tourist. To increase volume, we can seek to increase the number of tourists and the average 144 number of paid activities per tourist. To increase price, we can either try to get current tourists to pay more for their current activities or try to get them to migrate to higher cost activities. Question 2: The meeting is also a chance to gain information from the government. What pieces of information would you ask for? To answer this question you need to ask yourself what information you feel you need to begin to build an understand of what is going on and how to solve the problem. It will be useful to have some historical context and also to try to pinpoint the situation with regard to each aspect of revenue: To begin with, I want to understand the historical trends related to revenue. You have told me that you are unsatisfied with tourist revenues, but not exactly what makes you unsatisfied with the revenue from tourism. I would ask for historical information on tourism revenue. I would also ask for data on the number of tourists visiting the region, the average number of activities they engage in, plus the average spend per tourist. Question 3: Okay, the deputy governor provides you with a report conducted by a local consultancy {See graphs 1 & 2 at the end of the case}. What does this tell you? The graphs indicate that both the number of tourists (volume) and total revenues from tourism have been increasing over the past three years. As we have identified average spend per tourist i.e., average revenue per tourist - as our key indicator we will need to determine if volume of tourists is increasing faster than revenue. This seems to be the case. The number of tourists has increased by around one third in two years, while the total revenue has only increased by around one fifth. This indicates that, although more tourists are visiting our region, the average spend is less. There could be a number of reasons for this. For example, the supply of our tourist offering could have increased faster than demand, leading to overcapacity and a reduction in price, or the demographic 145 of our tourists may have changed, leading to us having, for example, more older tourists who do less and therefore spend less or and increase in tourists from a lower income group. Question 4: Okay, so revenue per tourist is declining. Why do you think that is a problem? When looking for a structure to answer this question with you should ask yourself what key benefit the region is looking to derive from tourism. This has to be profit (not revenue per se) and therefore thinking about the profit equation is a good way to structure this answer. However, in addition to this, you need to remember that your client is the region s government, and consider in your answer how exactly they will derive revenue and therefore profit from tourism (given that the hotel, the beach chair etc are owned by individuals, not by the government): To begin with, the region is not maximizing revenue and is therefore not maximizing profit (Profit = Revenue Costs), and will not accrue all of the wealth possible from tourism. This is especially a problem because capacity hotel rooms, space on the beaches, room in restaurants is likely to be limited and therefore the region is getting less of a return on its finite resources. For our client specifically, this is a problem because they primarily make money from tourism through taxation as a [ Pobierz całość w formacie PDF ] |
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