The live style of people changed and they have more leisure time than before. They are aware that group vcation are avilable at good price. The industry is less than 10 years old and the market penetration has barely begun. There are unlimited groups available who are looking for group travel. TTG will provide deluxe tours to prime groups. fancy hotels and air transportations. TTG will market its group tours to travel agents. There are positive cashflow in this business.
It will allow for expansion without additional financing. The “back to back” will allow a substantial saving on air fare and also a better price to the hotels because the rooms are utilized all the time.TTG can sell vacations at savings of 35% or more. Steven is offering to sell 25% of the company, and he got an offer from the bank that they will match every dollar of equity he reaised with one dollar of debt.
The business is to offer cheaper vacations to groups by using “back to back” concept.
The key risk are the competition and there is no assets for the company to sell in case they loss. Other companies conentrate on a few destinations and there are a lot of different distinations with limited competition among operators in providing packages. There are new untouched distinations which the company can focus on too. They have the experiance and the best salesmen to acheive thier targets.
There are unlimited groups available and TTG will focus on the prime groups who are known to be extremely responsive to group travel.
The primary source of sales will be through direct sales. TTG will market its group tours to travel agents. It will comprise less than 10% of the sales in the 1st 2 years but will produce 25% of the sales volume. The projection is very conservative. The first year projection is less than 7,000 passengers while the 4 salesman that managment offer positions currently move more than 18,000 passenger per year. TTG also alowed 6 months before the 1st flight to give the sales sufficient time to sell.
There are 2 key departments in the group charter business. 1st is operation, Mr. Belkin will be responsible for the operation. He graduated from Harvard and had a good experianse in small business consulting firm. He worked for GTA for a more than a year. With the development and implemementaion of his new business plan, he turned the company from a sale of $1.8MM with a loss of $250M to an increase of 50% of the sales with a $150M profit. 2nd is sales, the company is hiring the best salesmen in the industry. He will give some of the shares to the salesmen to insure the loyality and a better job from them.
My recomendation is to invest in this company. The market is growing and the industry is new. With reasanable prices, people will love to travel and visit different places. The managment have the experiances to do day by day operation and they hire the best salesmen and give them the opportunity and time to manage thier trips. Also, the company are very conservative with thier projection plan. A new company started running back to back charters and made a profit of 500,000 during the first year. The risk is that there is no assets for the comapny in case if the business didn’t work and they want to sell it. Also, it is a one man show by Steven with his experiances and knowledge. Moreover, other companies can steal the salesmen by better offers. To reduce these risks, they need to give some ownership to most of the salesmen and to make sure that the company will not depend on Belkin only.