Essential insights for starting a tourism business

Starting a tourism business requires confidence and optimism, but it's important to balance that boldness with a dose of practical realism. 

Want to avoid learning the hard way? Benefit from the wisdom of painful lessons and three decades of hindsight. 

The journey from tour guide to accountant and business adviser provides a unique perspective. Accountants work with many businesses, making it easier to notice problem areas or blind spots in others. We also tend to develop a keen analytical mindset that probes exciting ideas and tests their soundness. 

Accountants understand the importance of preparation and research and are familiar with the practical aspects of starting or buying a business. This knowledge and perspective are invaluable to someone entering the holiday industry for the first time. Customer service, financial management, and seasonal market trends can make or break a tourism business.

With that in mind, here are some hard-earned lessons from a former tour guide who learned the importance of preparation and the harsh realities of the tourism industry.

Tourism industry fundamentals

Success in the tourism industry requires dedication, adaptability and a passion for providing unforgettable experiences to travellers. It also requires solid business savvy.  

While technology and the industry have developed in leaps and bounds since 1996, the fundamentals of business never change. As you will see, a little help with the fundamentals now can save you a lot of pain later. 

Fundamental one: Research and planning

Thorough research and planning are essential before entering the travel and tourist sector. Buying any company is a serious undertaking and should never be done without appropriate due diligence. 

Understanding the market demand, target audience, competitors, and regulations will set a strong foundation for your venture. Use that research to create a solid business plan that outlines your goals and strategies. 

Think before you leap into buying a tourism business

Hindsight is 20/20, but one of humanity's greatest strengths is our ability to share the lessons we've learned from painful experiences so that others can avoid those mistakes. If you're considering entering a new industry, try to approach it with more tools than enthusiasm, a lack of fear and a supreme confidence in your own ability to take on the challenge. That means when you are looking for potential business opportunities, carefully consider your previous experience and how it aligns with the new venture before leaping in. 

Taking a personal example, you might be browsing the 'Business for sale' column and see a tour business that sparks your interest. If you are a chef with a background in sales and marketing who currently runs a successful gourmet deli, you may not have the right experience to run a 4WD touring operation for backpackers. 

So, before you put down any money, take some time to evaluate potential risks and challenges.

Fundamental two: Timing your business purchase

They say timing is everything - and when it comes to purchasing a tour guide business, they're not wrong. Tourists are seasonal, with fairly predictable patterns - so you might have lots of people queueing up to go on a 4WD sightseeing adventure in summer and even autumn, only to disappear once the cold weather hits in June.  

So, before you go buying that exciting new tourist venture, consider the time of year. If it's about to be off-season and you may not get enough visitors to keep you busy, could purchasing now become a significant strain on your finances? Recognise the risk, and perhaps you might need to wait for a more opportune moment to break into the industry. 

Seasonal fluctuations: Strategies for year-round profitability

Seasonality can have a significant impact on the profitability of a tourism business. During peak seasons, such as holidays or summer months, businesses may experience higher demand and increased revenues due to more visitors and tourists. However, during off-peak seasons, there may be a decrease in demand, leading to lower revenues and potentially even losses for the business.

To manage the effects of seasonality on profitability, tourism businesses can implement strategies such as diversifying their offerings to attract visitors year-round, adjusting pricing based on seasonal demand, targeting different market segments during off-peak seasons, and promoting special events or packages to stimulate demand during slower periods.

By understanding and planning for seasonality, tourism businesses can better prepare for fluctuations in revenue and maintain a more stable financial performance throughout the year.

Fundamental three: Risk, regulations and insurance

No one plans for accidents to happen - that's why they're called accidents. However, in business, it pays to be prepared. If you're young, healthy and excited about the tour guide business you've just purchased, insurance might sound like an unnecessary expense. It is easy to get tunnel vision, focused on the potential your new business can achieve, without considering the reality of how you will achieve that potential. 

But imagine this: you make your purchase and become the proud owner (and sole operator) of a 4WD tourist attraction. But before the ink has time to dry, tragedy strikes, and you get seriously injured. Now, your shiny new tour fleet is sitting in your driveway, going nowhere – while you’re laid out on an operating table while surgeons attend to your bulging disc. 

Now, you get to spend the next six weeks recovering from surgery while your unimpressed wife cares for your two young children, and your new business earns precisely nothing. 

That chef business you were running will start to look really appealing at this point. 

Working with a professional can save you a lot of suffering. They can help you plan for potential misadventures or at least understand the risks involved in owning a business where you are the sole operator.

A business adviser might help you negotiate an extended settlement to start in the summer and ramp up rather than launching in the winter with the downturn. Or they might advise you to keep working a bit longer in your currently successful role as a chef to build up some extra capital to start out with; perhaps build up a buffer to use in case of injury!

Legal obligations and compliance for Australian tourism businesses

Ensuring legal compliance is extremely important in the travel industry since regulations can vary by region. From licensing requirements to safety standards and tax obligations, tourism businesses must navigate a complex legal landscape. Understanding relevant laws, such as those concerning Aboriginal heritage or sustainability practices, is crucial for operational success. Compliance with laws and regulations set by the Australian Competition & Consumer Commission (ACCC) is especially important for businesses in the travel industry, as outlined in their guides and pricing manual. Compliance helps maintain ethical practices, builds customer trust, and avoids costly penalties. Partnering with legal advisers can provide essential guidance in meeting compliance standards and safeguarding your business against legal risks.

To operate a tourism business in Australia, you will need to ensure that you have the necessary Australian business licence. The Australian Business Licence and Information Service (ABLIS) can provide you with information on the specific licences required for your business operations. By using ABLIS, you can obtain a report detailing the licences, registrations, and permits necessary for starting, running, and growing your tourism business. This service will also provide you with application forms and contact details for the relevant authorities. It is essential to comply with all licensing requirements to ensure a smooth and legal operation of your tourism business in Australia.

How do accountants and business advisers help tourism businesses in Australia?

Sometimes accountants are unfairly branded as Dream Takers, but a trusted business adviser can be a necessary reality check to overly enthusiastic notions. They will offer sound advice on the realities of your endeavour. You may decide not to take their advice - but at least you will be informed and better prepared.

For starters, they will prompt you to test the return on investment for the substantial capital you might be about to stump up for your well-thought-out tour guide idea. Your adviser might gently guide you to buy some tickets for a trip for your family instead of immediately purchasing the business from the owner. That lets you enjoy some of the action and maybe stoke your ambition, but it also lets you make future purchasing decisions with a bit more awareness. 

If consulted, experienced advisers can be Dream Makers. They can provide the tools and guidance for a business to stand out in a competitive market. They can help you turn your business dreams into reality.

Questions your accountant might ask a would-be tour guide:

• How many passengers do you need to make a profit?
• You want to be a tour driver, but you are about to leave a thriving business. Why?
• Will the capital you are about to invest give you the best return, or are there other options?
• Have you thought about your cash needs for the next five months - to get you through winter?
• Have you thought about what happens if you get injured?

Tips for managing your tourism business operations

Networking: Building relationships with local partners, travel agencies, and hospitality providers can enhance the quality of your services and expand your reach in the industry. Networking plays a crucial role in establishing credibility and generating referrals.

Financial management: Managing finances prudently is key to long-term success in the tourism sector. Keep a close eye on cash flow, budgeting for marketing efforts, operational costs, and unforeseen expenses to ensure sustainability and growth.

Customer service: Providing exceptional customer service can set your business apart from competitors. Train your staff to prioritise customer satisfaction, handle inquiries and complaints efficiently, and personalise experiences for guests.

Innovation: Stay ahead of the curve by embracing new technologies and trends in the tourism industry. Offer unique experiences, incorporate sustainable practices, and constantly seek ways to improve and differentiate your offerings.

Accessing grants and financial support

Utilise resources like Tourism Australia or GrantConnect to explore available grants and funding for your Australian tourism business. Seek out opportunities tailored specifically to tourism businesses, like grants for sustainable practices or innovative initiatives. Ensure compliance with relevant laws and regulations when applying for financial support. Consider partnering with industry contacts or a full-service firm like RSM for additional support and guidance in securing grants or accessing tax incentive schemes. Remember, financial assistance can be a significant boost in establishing and growing your Australian tourism business.

Sustainable and eco-friendly practices

Sustainable practices in tourism are vital for long-term industry viability. By implementing eco-friendly initiatives, businesses can reduce their carbon footprint and appeal to the growing market of eco-conscious travellers. From promoting local culture to conserving natural resources, sustainable tourism fosters environmental preservation while supporting community development. Embracing these practices, especially in the face of climate change, not only enhances the reputation of a tourism business but also contributes to the overall welfare of the destination and its people.

Partnering for success in the tourism sector

If you’re about to make a significant business decision, make an appointment with an adviser at RSM. It is well worth your while to discuss with an expert the ideas swimming around in your head.

Seeking professional advice can enhance your understanding of the risks and potential challenges. At RSM, we have experts all around the country, with a wide range of experience and expertise. We are very connected, which means your adviser can access specialist expertise, tailored for your business needs. 

Give us a call today, and set out with confidence and understanding.