Establishing a Small Business Tourist Agency in the UAE

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Table of Contents

Introduction
Brief Market Analysis
Brief Customer Profile and Customer Development
Business Model
Team
Financial Analysis
Conclusion
Reference List

Introduction

The proposed start-up business idea targeting the UAE market is establishing a small business tourist agency. The idea emerged because Dubai has been at the top of the bucket-list destinations for millions of tourists who come to visit the city for different reasons. Besides, the growing population has further diversified the Emirates’ culture and tradition, encompassing various recreation areas (Getz and Page, 2016). Even as the COVID-19 pandemic progressed, Dubai was among the first destinations to open up and welcome tourists from around the world while ensuring the following of all safety measures.

The main problem to be addressed is providing affordable services compared to competitors. Many Dubai travel agencies have been focusing on premium and often overpriced services, which has deterred many visitors from visiting the city for fear that it is too expensive. Getting locals to work at the agency could give a unique and authentic look at the city without the costly price tag. I have witnessed many people from other countries noting the lavish lifestyle that Dubai residents and visitors pursue, expressing their concerns that they will not enjoy traveling there because they may feel left out or uncomfortable (Mansoor, 2022). The opportunity to open a smaller-scale travel agency and engage locals as guides throughout Dubai could lead to an increased number of visitors who will see the city from a new perspective.

Brief Market Analysis

The segment that is pursued through the proposed business opportunity entails offering visitors from around the world a new look at the UAE through a more grounded and culturally valuable lens. While the country has always attracted individuals pursuing a lavish lifestyle, it is rich with tradition, culture, architecture, and ample leisure and adventure opportunities. To describe the market need, research on travelers’ expectations regarding pricing on tourist-related services, such as accommodations, air travel, public transport, as well as guide services, is needed. The agency should survey potential UAE visitors about what they would like to see and do when visiting the country to create tourist service packages (bundles) that customers can purchase depending on their preferences. Besides, due to the rising popularity of sustainable tourism and “bleisure” travel, it is necessary to analyze customers’ preferences regarding these new trends (Morgan, 2022). When it comes to the UAE, the country, tourist spending reached $18.4 billion in 2020 due to the pandemic, as compared to $40.7 billion in 2019 (Abbas, 2022). In 2022, the tourism sector has begun experiencing a rebound in pre-pandemic tourist spending, with the industry recovering by 41.1%, with the anticipation to recover further this year, up to 80% (Abbas, 2022). Therefore, the tourism sector is always expected to show growth in the UAE in the absence of external influences that could lead to a decreased inflow of tourists to the country.

In terms of projecting the market size, it is essential to look at the recent statistics on UAE visitors. Specifically, the total number of international visitors that arrived in Dubai only between January and June 2022 was 7.12 million, with India dominating the list of countries from which travelers arrived in the UAE among separate countries (858k visitors) (Global Media Insight, 2022). Nevertheless, visitors from Western Europe represent the largest group of travelers to the country and Dubai specifically, accounting for 22% of the total number of visitors in 2022 (Global Media Insight, 2022). Therefore, it is expected that the market size for the following several years will expand, averaging around 15 million visitors per year. Due to the growth of the market, there are multiple business opportunities for the proposed venture due to a diversified range of visitors who may have different preferences and expectations of traveling to the UAE.

Brief Customer Profile and Customer Development

The target customers for the proposed business venture include a young demographic of visitors who prefer sustainable travel and would like to see a country from an inside perspective. Younger travelers tend to enjoy sightseeing and getting to know the culture of a country closer, but they often cannot afford to pay for stays at luxury hotels. Among millennials between the ages of 23 and 38, only 35% of the demographic stays in upscale and luxury resorts (Global Media Insight, 2022). In addition, the target demographic takes an average of thirty-five days per year at least to vacation. It is expected that the customer group will become interested in affordable travel to the UAE because the travelers could have several vacations per year and distribute their budget accordingly. Depending on their preferences and expectations, they can choose between the travel packages offered to them to select the one that appears the most interesting.

Because the younger target demographic is the focus of the business, the efforts to reach customers will be concentrated on online advertising. Gen Z and Millennial customers tend to pay much attention to social media and other digital ads, which is why the agency will develop promotions to target the demographics interested in its services (Kastenholz, 2021). According to the study conducted by Taylor (2018), advertisements with a high visual impact tend to do well with millennials. Besides, corporate social responsibility embedded into advertising is seen as highly valuable by the target demographic because of the interest of the group in societal and public welfare issues (Taylor, 2018). Attempts to build strong relationships with the target demographic represent another important aspect of targeted advertisements to younger generations of clients (Appel et al., 2020). As the primary research offered specific recommendations to target millennial travelers, secondary research suggests that the demographic is looking for a personalized experience and communication and are willing to share authentic content with others online (Bölükbaşı, 2021). To target millennials, companies should make sure that the product or services they are selling are visually appealing, align with their values, and are authentic, while the communication is honest and transparent (Dwivedi et al., 2021). Notably, similar recommendations apply to the Gen Z target demographic, which values creative content, personalized and relatable information, as well as the showcasing of beliefs and values.

Business Model

To start up the tourism business in the UAE and Dubai specifically, it needs to be registered with the Department of Economic Development and the Dubai Department of Tourism and Commerce Marketing. For the current business, it is necessary to apply for an Inbound Tour Operator License. Such a license will enable a company to handle inland travel, events, visa, as well as transportation needs both for locals and visitors traveling to the country and the capital. Additionally, it is of benefit to get the Travel Agent License, which will enable the firm to act as a vendor for booking and ticket-related services on behalf of agents to promote collaboration with independent individuals (Altexsoft, 2021). The services may include tickets to flights, buses, trains, and car rentals, as well as hotels and vacation bookings.

A profit will be made through selling tours and other travel-related services to visitors, both locally and internationally traveling. It is expected that the venture will become profitable within six months because not much of an investment is needed. Instead, the clients will pay for packages of services that the agency will provide. Most of the work that will be done by the firm will entail building connections with hotels, tour guides, restaurants, and café owners, as well as other companies working in the entertainment and hospitality industry. The more clients will the agency bring, the more profitable and popular it will become. The significant risks to consider in the proposed business entail any air travel disruptions linked to possible COVID-19 restrictions, which is why contingency planning and insurance for the impossibility of providing services is crucial.

Team

The founder of the agency will assume the role of the CEO and employ a Travel Agent, a Corporate Travel Consultant, and an Office Manager. The team will expand as the number of clients increases; additionally, it will be necessary to hire a Finance Manager. The gaps in the team will be identified as the agency starts operations regularly. It is expected that several Travel Agents should be hired at the firm due to the growth of the workload. One of the disadvantages of working in a travel agency entails being in constant contact with clients, which often means overtime work. However, getting more clients leads to higher commissions for Travel Agents, which will make their work more rewarding.

Financial Analysis

For the travel agency, the most important assumption is the economic entity assumption, which involves the object of the performance measure. When applied to the business, the accounting system will provide performance information on the specific agency. This goes in line with responding to the demand for company-specific measures of performance and financial position. The financial accounting reports will provide information about the specific profit-seeking company. The pro forma financial statements for the travel agency operating in Dubai will reflect the actual sales and expenses for each quarter that just passed and list projections of the numbers for the current quarter. Because the country has a hot climate, the best time to visit the UAE is between October and April, which will be reflected in the projections. The break-even point will be calculated using the following formula: Break-even point (sales in dollars) = fixed costs/contribution margin. Contribution margin = (sales price per unit – variable cost per unit)/sale price per unit. The break-even analysis will encompass the firm’s sales of travel-related services.

Conclusion

If the proposed business appears to be a feasible venture, the next step is to invest more resources into advertising and expanding the agency to include more employees. The financial need is concerned with the investment into marketing. It is projected that a one-minute video, as well as high-quality photos used for social media advertisement, may cost up to $10,000, while premium services in this area can amount to $50,000. Therefore, it may be beneficial for the company to seek an investor who will be willing to purchase a share of the agency.

Reference List

Abbas, W. (2022) UAE travel, tourism sector rebounds strongly, achieves 3rd fastest growth in region. Web.

Altexsoft. (2021) How to get IATA accreditation for travel business: Options and steps to take. Web.

Appel, G., Grewal, L., Hadi, R., and Stephen, A. T. (2020) ‘The future of social media in marketing’, Journal of the Academy of Marketing Science, 48, pp. 79-95.

Bölükbaşı, İ. (2021) How to advertise to Baby Boomers, Generation X, Millennials and Generation Z.Web.

Dwivedi, Y. K., Ismagilova, E., Hughes, L., Carlson, J., Filieri, R., Jacobson, J., Hain, V., Karjaluoto, H., Kefi, H., Krishen, A., Kumar, V., Rahman, M. M., Raman, R., Rauschnabel, P. A., Rowley, J., Salo, J., Tran, G. A., and Wang, Y. (2021) ‘Setting the future of digital and social media marketing research: perspectives and research propositions’, International Journal of Information Management, 59, 102168.

Getz, D. and Page, S. (2016) ‘Progress and prospects for event tourism research’, Tourism Management, 52, pp. 593-631.

Global Media Insight. (2022) Dubai tourism statistics 2022. Web.

Kastenholz, C. (2021) ‘Gen Z and the rise of social commerce’, Forbes, Web.

Mansoor, Z. (2022) Dubai ranks 14th most expensive city worldwide for ultra-wealthy. Web.

Morgan, B. (2022) ‘What is bleisure travel, and how is it transforming the hospitality industry?’, Forbes, Web.

Taylor, C. R. (2018) ‘Generational research and advertising to Millennials’, The Review of Marketing Communications, 37(2), pp. 165-167.

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