Mainstage Travel Ltd: SME Analysis and Recommendations

Introduction

Small and medium size enterprises signify a huge and significant portion of the British Industry. As per the Federation of Small Businesses, there are nearly five million SMEs in the UK, and around 14 million individuals are working in these organisations, and more than half a million people set up their individual businesses each year. SMEs are crucial for the economic well-being of Britain. The present report discusses in detail about one such SMEs i.e. Mainstage Travel Ltd. which has featured on Dragon’s Den. The following paper shows an in-depth analysis of the company’s strengths and weaknesses together with a comparative evaluation with its competitors. Based on the weaknesses, suitable actions have been recommended to maintain and strengthen its existing performance.

Task 1 Provide a Profile of your selected business from Dragons Den series

AC 1.1 Business Profile

Mainstage Travel is a London based youth-centric tour operator that has developed some of the most exhilarating products and services within the travel sector. The award-winning portfolio of the company entails Takeover Holidays which is a prominent youth travel brand, Snowboxx, which is the second biggest winter festival in Europe, and Hotel2020 which is a distinctive platform that has radically transformed the hotel industry. Mainstage Travel is a Private limited company founded in the year 2011 by Aden Levin and Rob Timney (Trailblazecity Team, 2015). The organisation is still co-owned by its founders. The tour operator has initiated various technological innovations that have created a difference in its industry. In April 2013, it featured among the most successful firms to get funding on Dragons Den. The strengths and weaknesses of business entity is listed below:

Strengths:

• As far as the holiday side of the company is concerned, it has been delivering unparalleled holiday and low-cost clubbing experiences.
• Mainstage Travel received funding on Dragons Den where it sold 15% of its equity for £100,000 (Henesey, 2014)
• One of the main successes of its marketing strategy is its university representative network. Through Facebook, the organisation gets people approaching it from across the world.
• The overheads are low coupled with slim operations as compared to conventional marketing techniques. This is because all the firm’s promotion is the cost per acquisition.
• On the technological front, Mainstage Travel provides flight technology as well as booking system to the best and largest festivals in Europe. The organisation is continuously bringing revolutionary innovations in its industry (Henesey, 2014).

Weaknesses:

• There is little or no high street presence.
• Mainstage Travel only has an online existence, and there is a huge pool of customers that prefers in-store bookings.
• Inability to fully cater to the growing demand for eco-travel.
• The company does not have an established network of third party agents to sell its products (TTG Media, 2015).

AC 1.2 Comparative measures of performance

Comparative Analysis based on Financials: (Amount in million GBP)

By considering the financial analysis of Mainstage Travel and TUI, it can be said that company is performing well in a comparison to their competitors. A Higher ratio of profit shows efficient use of assets in order to enhance net worth of business. The analysis shows that net asset of TUI is higher, but performance and profit earning capacity of Mainstage are better.

Comparative Analysis based on Marketing and Sales:

Mainstage Travel is up against conventional tour operators like Thomas Cook and TUI, both of which have multi-million-pound marketing budgets. Both TUI and Thomas Cook are pursuing the profitable all-inclusive holidays market; an important clear differentiation point provided the mushrooming of online tour operators. In fact, in 2015, Thomas Cook went back to profit for the first time in last five years (Hobbs, 2015). It experienced good demand from the northern Europe and the UK and also witnessed higher sales at branded hotels. The company attributed its novel group-wide marketing strategies for the increased sales. Overall reservations rose by 1% and the average price increased by 3%. TUI also overhauled its Thomson and First Choice brands and launched novel campaigns (Hobbs, 2015). On the other hand, Mainstage Travel focuses on developing exciting packages, sending them via affiliate networks, partners and social media, and enabling them to go viral. Snowboxx was successful in selling 1000 places in its first year with a small budget of just £500 and the summer trips also followed suit (Forsyth, 2014). In 2015, Snowboxx was a 3000 capacity festival. Mainstage Travel also relies heavily on its university representative network. The representatives promote on social media sites like Facebook in the local areas and receive a free holiday for every 10 sold by them. The B2B Sales are also increasing tremendously (TTG Media, 2016).

Comparative Analysis based on Technology:

Both Thomas Cook and TUI are planning to reap benefits from breakthroughs in digital out-of-home advertising. Thomas Cook has 90mn visits to its site each year. The novel digital screens permit them increased flexibility of messaging and the company is expanding its data-driven marketing methods to the offline world from online. Mainstage Travel, on the other hand, is working on technological platforms, offering the most groundbreaking technology in the travel industry. It has also created a pioneering hotel booking system which is set to immensely hike hotels’ occupancy rates and profit margins (Platt, 2014).

Task 2 Be able to propose changes to improve management and business performance

AC 2.1 Recommend with justification, appropriate actions to overcome the weaknesses

The weaknesses of Mainstage Travel mentioned above can be overcome by taking appropriate actions at the right time. Currently, agency sales account for only 2% of the operator’s overall sales. The company should aim at increasing this percentage to nearly 15% in the coming six months. For this, the organisation can provide standard industry commission as well as product training to the agents, coupled with holidays as booking incentive for lead sellers. Mainstage Travel has done a small amount of work with STA Travel, however, working with agents is one domain it ought to develop. Apparently, there is a rise in the number of agents who are keen on selling its packages, and there is a need for the company to raise its brand awareness and what it offers to the trade (TTG Media, 2015). The trade is certainly a significant avenue that will help the firm expand and grow. The operator does get clients enquiring if they can visit and make bookings in-store. Hence, it is important to look for prospects of developing its own pool of agents who sell the brand and its products.

Secondly, the organisation needs to become completely capable of catering to demands of eco-travel. Smaller enterprises could be hard pressed to contend gainfully in the “fly and flop” mainstream travel industry, however, for the rising quantity of SMEs, pursuing sustainable tourism can offer high returns in during the holiday season. Despite being late at addressing eco-awareness, it is the small, niche firms like Mainstage Travels that can leave the industry giants behind when offering a more considerate foreign and domestic product is concerned. Hence, the company should attempt at offering a balance of luxury and no-frills tour options, together with recognising that eco-tourism is a trend that is likely to stay for long (Matthews, 2010). Sustainability should run right through the organisation’s holiday offerings, and this will ensure that the customers keep coming back for an authentic experience.

AC 2.2 Analyse ways in which the existing performance could be maintained and strengthened

Mainstage Travel has performed exceptionally well since the year of its inception. It has recorded significant growth and sales all through these years. However, the British holidaymakers are evolving more than ever in terms of awareness and expectations. Hence, the firm should continue incorporating several varied aspects of a holiday in its package holidays. The tour operator should make its programs more flexible and adaptable to an increasingly sophisticated target market. The biggest challenge that the company still faces is to change from a startup, in which every individual works across many different components, to an organization with a justified number of employees, all of whom perform their individual responsibilities – while still maintaining the collaborative character of the firm (Dwyer et al., 2009). To maintain and strengthen this, Mainstage Travel will require ensuring that it is operating at its full capacity, which again is possible only through a strong structure.

One of the many things that helped the organisation reach where it is today is its outsourcing strategy. The founders started with just £10,000 of savings, and this would fund office, website, employees, graphic designer, secured hotel and a marketing campaign to compete Tui and Thomas Cook. The only feasible thing to do was to outsource. Even with the budget having grown immensely now, the company should still outsource if it is getting the same or improved service for a far lesser price. This way, it would be able to allocate more money towards marketing campaigns, charge lower fares, and hence grow and sell more (Timney, 2014).

The rising individualization of tourist travel and maturing conventional market potential requires the company to work on flexible business frameworks that can address the budding trends in holiday travel. It is not possible to deliver holiday experience products without a powerful distribution network (online and traditional).

AC 2.3 Suggest new areas in which the business could expand with reasonable justification

Tourism is a swiftly burgeoning phenomenon that has turned into one of the biggest industries across the world. Though tourism adds to economic development and employment, it also results in negative social and environmental impacts. Consumer awareness pertaining to environmental effects of tourism and the associated implications of unjustifiable abuse of natural resources has dramatically increased. Such awareness is conveyed in the rising demand for more culturally and environmentally sustainable holiday experiences (Khairat and Maher, 2012). As mentioned in above paragraphs, Mainstage Travel can enter the domain of providing eco-tours to its customers. For this purpose, the tour operator will need to change from faceless managers who are simply representing a holiday firm; rather they would have to become owner-operator who has visited the places sold by them and love them as well as their cultures. When clients ask questions regarding the adverse effect that tourism has on the unprivileged areas of the world, it becomes easier for these SMEs who really know the local tour guides and hoteliers personally and comprehend the issues that foreign tourists can bring (Frey and George, 2010). Staying amidst the forests or on a beautiful farm, consuming locally grown items and living parallel to nature is an experience that many people are likely to enjoy.

Mainstage Travel can offer many unique holiday experiences and themed tours that highlight specific features such as wildlife, marine life, arts & crafts, nature, history, architecture or traditional religion. It can also provide thrilling outdoor adventures such as camping and hiking. There can be cultural immersion programs as well in which the travellers can stay in a village and experience the life of its inhabitants. The main aim of such eco tours should be given the travellers a clearer and better comprehension of what the region is actually about and not just fancy hotels and lavish food that one can get anywhere (Weeden, 2013).

Task 3 Be able to revise business objectives and plans to incorporate proposed changes

AC 3.1 Give your assessment of existing business objectives and plans

The existing objective of Mainstage Travel is to deliver the ideal holiday for its customer in the best ski resorts and clubbing destinations of the world. The holiday packages of the company are very different from the industry standards, and the underpinning philosophy of its business model is selling holiday experiences at a price lower than if clients purchase each component individually. In addition to this, the tour operator’s marketing is tactful and its operations slick. The founders believe that everything about the prevailing big travel agencies is so old-fashioned and they do not have the knowledge of the current market. Mainstage Travel provides more festival holidays thereby giving the customers an actual event. The company has a powerful understanding and knowledge of their target market together with a definitive knowledge of the figures (Trailblazecity Team, 2015).

The real concept of organised tourism went through a devolution post the 90s because it became cheaper to make online bookings for everything separately. This supplied a gap for the organised tourism to re-enter the industry but at rates even cheaper than online reservations. In addition to this, the travel industry went through drastic changes in the past few years because of the internet and low-fare airlines. However, this uprising neglected something important for the 17-35 age group. These audiences want vacations where they can spend time with like-minded individuals of similar age (Henesey, 2014). Unlike its competitors, Mainstage Travel recognised this opportunity and worked on it. Levin and Romney revolutionised youth travel after understanding how under-served the student and youth holiday market was. Travellers can book a seven-days holiday in Zante, Ayia Napa, Malia or Magaluf with airfare and a clubbing itinerary of £119.99. They can also visit the second biggest ski festival of Europe in Andorra i.e. Snowboxx. This was an event developed by Mainstage Travel, and a complete festival and ski package costs only £200 (O’Sullivan, 2014).

Negotiating wholesale discounts on every aspect of the holiday experience i.e. from festival tickets to airlines and accommodation, the company is offering an all-inclusive experience for remarkably low prices. The three main features of its business plan that have made the company a success are good pricing, good branding and good marketing (Platt, 2014).

AC 3.2 Review business plans and suggest areas where changes can be made

The existing business plan of Mainstage Travel is quite strong and is helping the company work effectively. As the firm is completely online, there are no overheads. It does not have representatives in the ski resorts. There is support if required. However, the majority of the holiday goers are internet savvy, and they are not willing to go on a pub quiz during their stay in the resort. Many travellers only wish to go on a ski vacation, and the remaining offering is sort of redundant. This business model is also working for the big firms like booking.com and Travel Republic, and basically, this is the travel for the current times (O’Sullivan, 2014). The company is also making a huge investment on the technology front and has come up with a breakthrough hotel booking mechanism.

However, as the enterprise will expand its business plan is bound to change. The marketplace has also changed radically since the company was incorporated in 2011. The competition has intensified, and the market is highly quick paced. Mainstage Travel should continuously change the way it works to stay current.

The current business plan is focused on increasing their existing trips; some additions can be incorporated. The tour operator can collaborate with various festivals to offer total interim travel solutions to them. Hotels and festivals are a big market for the company and coming up with tech solutions for this fragment can be a huge source of growth, coupled with increasing its existing trips. In addition to this, the company should undertake related diversification and enter the field of green travel.

AC 3.3 Prepare an action plan to implement the changes

Task 4: Be able to examine the impact of change management on the operations of the business

AC 4.1 The impact the proposed changes will have on the business and its personnel

The proposed variations will have a significant impact on the business as well its employees. Firstly, with the growing scope and size of business, the company will have to recruit more qualified people to take care of the responsibilities. In addition to this, by directly contracting with all the hotels and dropping several elements related to a conventional ski break, the company can give agents prices lower than its rivals. By developing total interim travel solutions for the festivals, the company will make it easier for the clients to travel to them. As Mainstage Travel will be revolutionising the festival travel sector through the changes in its business plan, there would need to invest heavily in technology. The outsourcing of non-core activities will remain the same.

By venturing into eco-tours, the company will be opening itself to a completely new target market as well as new opportunities. This would imply investing more on branding and marketing campaigns. The marketing budget is likely to increase, and so is the marketing team. Besides this, Mainstage Travel would require collaborating with local tour guides and hotels so that sustainable tours can be conducted. It may also take an interest in sending some of its personnel to visit the places to be sold by them.

AC 4.2 The plan for how the changes will be managed in the business

Mainstage Travel is well equipped to manage the proposed changes. As far as the manpower is concerned, the company is in a suitable position to hire a competent pool of talent. In addition to this, the organisation can continue outsourcing the activities it was earlier outsourcing together with some new activities. The company has always been working at its full capacity so managing the increased volume of work will not be a problem for the organisation as it is very efficient.

AC 4.3 The improvements in the performance of the business over the past three years

Conclusion

This overview of the recent events in the UK tours and travel industry and the SME sector lead to the conclusion that the correct answer for the SMEs in the industry to the rising individualization of the market, growing online distribution, rise of online travel sites, hotel portals and bed-banks, issues pertaining to financial crisis etc. are elastic business models that can handle the emerging trends in the tours and travel industry. There is a pressing need to diversify the tourism product, and this long-term need can be executed only through investments. Travel SMEs are the future of sustainable tourism.

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