International Journal of Hospitality Management 30 (2011) 827–835

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International Journal of Hospitality Management

journal homepage: www.elsevier.com/locate/ijhosman

Entrepreneurship in the tourism industry: Issues in developing countries

Mastura Jaafar ∗ , Abdul Rashid Abdul-Aziz, Siti Aishah Maideen, Siti Zaleha Mohd
Sukarno, School of Housing, Building and Planning, Universiti Sains Malaysia, 11800 Minden, Penang, Malaysia

a r t i c l e i n f o a b s t r a c t

Keywords: The tourism industry in Malaysia is one of the most important sectors in terms of
Small and medium hotel owner/manager its contribution to the growth of the nation. The extensive demand on the tourism
Demographic profile industry has stimulated the emergence of many small and medium hotels, resorts, and chalets in
Entrepreneurial characteristics
Malaysia. According to the literature, small and medium hotels are an extension of the entrepreneurial
Issues and problems
characteristics of the owners/managers of the hotels. In Malaysia, small and medium hotel entrepreneurs
(SMHEs) have not been given much attention. Looking at this gap, this study aims to provide a significant
result on entrepreneurship issues in Malaysia. The main objective of this study is to examine the
characteristics of small and medium hotel owners/managers and the issues and problems they confront
in relation to their survivability in the industry. The result revealed that the majority of owners/managers
of small and medium hotels were male, middle-aged and older, with secondary and upper level of
education, and whose prior specialisations or knowledge were not related to tourism. With strong
self-confidence and independent personality characteristics, the majority started to establish their
businesses after the financial crisis in 1997–1998. The result also defined small scale to mean hotels
with less than 50 rooms, which had been constructed with limited personal funding and bank loans.
Information technology was found to be an important tool to promote their hotels, but conventional
techniques such as word of mouth and signboards were still significant. The owners/managers of small
and medium hotels were in agreement over their weaknesses in terms of lack of knowledge and skills in
running the business. At the same time, they also felt that the government should play a more proactive
role in promoting the tourism industry.
© 2011 Elsevier Ltd. All rights reserved.

1. Introduction amount of tourist receipts demonstrated an increase of 478% (from

Since 1959, the Malaysian government has been officially
involved in the tourism industry with the establishment of the
first tourism department under the Ministry of Trade and Industry.
However, the role of this department was limited because during
that period, the government focused more on the agricultural and
mining sectors. In the 1970s, the government showed higher inter-
est in the tourism industry with the establishment of the Tourism
Development Corporation (TDC) under the Parliament Act promul-
gated on 10 August 1972. In the same year, Malaysia organised
the 21st Pacific Asia Travel Association (PATA) annual conference
in Kuala Lumpur, which has been recognised as a platform for
Malaysia to involve itself in tourism aggressively.
Since then, the tourism industry has contributed significantly in
terms of income to the country. Based on the record for the period
1998–2008, the number of tourist arrivals in Malaysia showed
an increase of 300% (from 5.5 million to 22.0 million), while the
∗ Corresponding author. Tel.: +60 4 653 3888/2827; fax: +60 4 657 6523.
E-mail address: masturaj@usm.my (M. Jaafar).
8580.5 million in 1998 to 49561.2 million in 2008). In terms of
the number of hotels and rooms in Malaysia, data for the 10-year
period showed an increase of 66.3% (from 1419 hotels in 1998 to
2360 hotels in 2007) for hotels and 49% for rooms (from 107,791
rooms in 1998 to 160,327 rooms in 2007).
The establishment of the Ministry of Culture, Art, and Tourism
on 19 May 1987 brought many significant changes in promoting
Malaysia as a tourism destination. This ministry has implemented
many strategies to promote tourism at the national and interna-
tional level. Every state also organises its own tourism department
to look into tourism-related issues, and all these ministries coop-
erate to promote Malaysia. At the federal level, the ministries
launched the ‘Zoom Malaysia’ campaign in 2008. Each state also
has its own slogan and campaign to attract tourists.
Kelantan, Terengganu, and Pahang are three states located
in the East Peninsular Malaysia. Collectively they are known
as the ‘heartland of Malay culture’ where traditions are still
preserved amidst a rustic lifestyle. Among the popular tourism
products are stunning islands, beaches, hill resorts and national
parks; culture; food; cottage industries; traditional activities like
kite-flying; and eco-tourism-related activities such a scuba div-

0278-4319/$ – see front matter © 2011 Elsevier Ltd. All rights reserved.
doi:10.1016/j.ijhm.2011.01.003
828 M. Jaafar et al. / International Journal of Hospitality Management 30 (2011) 827–835
ing. Aside from having various attractions, these SMHEs cannot
operate all-year round because of their location, which is ori-
ented facing the South China Sea. These states are affected
by the monsoon season from November to March, which
causes strong, big waves, heavy downpours and floods. How-
ever, the number of international and national tourists visiting
these states has increased every year. In 2008, the number
increased by 35% from 9,387,633 in 2007 to 12,663,918 in
2008.
The application of chaos and complexity theory in tourism by
McKercher (1999) helps to explain the complex relationship that
exists between and among the various elements that constitute a
tourism system. As a dynamic and ever-changing industry (Russell
and Faulkner, 2004), the main agent of change falls on the combina-
tion of entrepreneurs’ perception and creativity, and the fortuitous
confluence of events in identifying opportunities as businesses
expand (Bygrave, 1993). Thus, Lewis and Green (1998) suggest the
evolution of tourism at a particular destination is determined by
the entrepreneur’s role who acts as an agent of change and plan-
ner. However, Russell and Faulkner (2004) argue that the crucial
role of entrepreneurs has been underestimated and not completely
understood, therefore misleading entrepreneurial research in the
industry.
Along with the theory’s development, Snepenger et al.
(1995) and Russell and Faulkner (1999, 2004) explore the
entrepreneurial aspects of tourism in combination with the
Butler’s (1980) Destination Life Cycle Model. The type of tourism
entrepreneur’s involvement is dependent on the characteristics
of the entrepreneur, the environment condition and the particu-
lar stage of the destination’s development (Russell and Faulkner,
2004). Barr (1990) describes the small-scale local entrepreneur
as being more prevalent at the involvement phase while migrant
tourism entrepreneurs contribute a significant impact during the
later phases of tourism development. As such, entrepreneurial
personality or characteristics have been acknowledged as a very
important dimension to be studied in tourism development.
In general, research on small and medium enterprises (SMEs) in
the hotel industry worldwide is encouraging. However, a number of
potential research areas need to be explored. There have been pre-
vious studies on small and medium hotel entrepreneurs (SMHEs)
(Glancey and Pettigrew, 1997; Ateljevic et al., 1999; Formica and
McCleary, 2000; Getz and Carlsen, 2000, among others). However,
intensive literature review reveals that there are only a few studies
on tourism entrepreneurship and small businesses in the tourism
industry (Dewhurst and Horobin, 1998; Lynch and MacWhannell,
2000). One of the significant results highlighted from Dewhurst and
Horobin (1998) indicates that entrepreneurs in the tourism indus-
try are not motivated by the desire to maximise economic gain.
As such, tourism entrepreneurs are not profit- or growth-oriented
(Ateljevic and Doorne, 2000; Getz and Peterson, 2004; Hollick and
Braun, 2005; Holmengen, 2007; Reijonen, 2008).
A number of studies on the hotel industry also focus on the bar-
riers to success faced by SMHEs. Many SMEs tend to fail within
five years of their operation. Related factors conveyed by the
researchers are internal factors, such as lack of skills (McKercher
and Robbins, 1998), and external factors, such as the lack of funding
and a supportive environment (Sillignakis, undated). In Malaysia,
research on SMHEs has not been given much attention by academi-
cians as well as by the industry. Among the few studies, Ahmad
(2005) has conducted a study on networking among SMHEs on spe-
cific respondents in Tioman Island, while Chan and Quah (2008)
focus on key issues on managing the small and medium-sized
accommodation industry in Sabah.
To fill this knowledge gap, this study explores the issues related
to small and medium hotel owners/managers in the East Peninsular
Malaysia. The objectives are as follows:
1. To identify the personality and entrepreneurial characteristics
of small and medium hotel owners/managers.
2. To identify the issues and problems facing small and medium
hotel owners/managers.
2. Literature review
Tourism is traditionally a small- and medium-sized enterprise
(Morrison, 1998; Page et al., 1999; DTI, 2003; Bastakis et al., 2004),
as the great majority of tourist facilities are run by small- and
medium-sized businesses (Avcikurt, 2003). According to Morrison
(1996), there are several reasons justifying the high number of
small-sized hotels in the tourism industry: (1) low capital and lack
of specific qualifications and professional requirements needed
to start a business; (2) demand is very localised and segmented,
enabling small accommodation providers to offer a wide range of
products, facilities, and special services to a niche market; (3) the
nature of a small firm allows an owner–manager to respond quickly
to customer needs and expectations; and (4) small hotels are nor-
mally owned and managed by families, making them economically
viable.
Researchers normally define the size of a hotel in terms of the
number of workers and rooms. Moutinho (1990), Wong (1991),
and Buhalis and Main (1998) define SMHEs as enterprises offer-
ing less than 50 rooms and employing fewer than 10 staff. Ingram
et al. (2000) define hotels more specifically: a small hotel has 50
rooms, a medium-sized hotel has 51–100 rooms, and a large hotel
has over 100 rooms. According to Middleton (1998), SMEs employ-
ing less than 250 people are dominant in the industry, which covers
approximately 99% of all tourism businesses.
2.1. Demographic profile
Along with studies on SMEs, many researchers are looking into
the demographic profile of the owners/managers. The most popu-
lar components of the profile of the owners/managers are age and
sex (Ateljevic et al., 1999; Szivas, 2001; Ahmad, 2005; Sharma and
Upneja, 2005), education (Glancey and Pettigrew, 1997; Avcikurt,
2003; Sharma and Upneja, 2005), work experience (Ateljevic et al.,
1999; Szivas, 2001), and marital status (Getz and Carlsen, 2000).
The dominant age of small business owners/managers is in the cate-
gory of middle-age and older, that is, 25–50 (Avcikurt, 2003), 30–45
(Ahmad, 2005), and 45 and older (Szivas, 2001; Getz and Carlsen,
2000). Most of them are reported to be married (Getz and Carlsen,
2000).
Generally, small firms are owned and managed by men
(Morrison et al., 2003; Avcikurt, 2003) except for the findings
of Getz and Carlsen (2000). According to Ahmad (2005), 81.1%
male owners/managers dominate the small tourism industry. This
reflects the influence of traditional culture where males enjoy more
privileges than females, and the male normally acts as the head of
the family and decision maker.
The finding on the formal educational level of the own-
ers/managers is inconsistent. In Australia, respondents with
university education form only 34% (Getz and Carlsen, 2000) and
31.8% (Sharma and Upneja, 2005) of the total. However, Glancey
and Pettigrew (1997) find that there is an equal balance between
respondents with secondary education and those with university-
level education in Scotland. In the UK and Turkey, the percentage of
respondents with tertiary education is higher, that is, 70% (Szivas,
2001) and more than 50% (Avcikurt, 2003), respectively. In Turkey,
only 30% of the respondents appear to have received formal tourism
and hotel management education (Avcikurt, 2003).
Due to the ease of entry to this industry, many owners/managers
are reported to have various types of occupation and experi-
 M. Jaafar et al. / International Journal of Hospitality Management 30 (2011) 827–835
ence prior to their venture into this sector (Ateljevic et al., 1999;
Szivas, 2001). In New Zealand, however, previous job experience
in tourism and hospitality is not particularly represented, but the
most common experiences are related to farming, teaching, mar-
keting, and construction (Ateljevic et al., 1999). In the UK, about
one-third of owners/managers have working experience in the
tourism and hospitality industry, while the experiences of others
are from agriculture, retail, education, and various other sectors
(Szivas, 2001).
According to Dewhurst et al. (2007), there are two contradicting
ideas on the need for training in the hotel sector. Some suggest that
the owners/managers do not need training because they know their
business better than anyone else. In contrast, others recognise the
existence of very specific gaps in their own knowledge. A study by
Schroeder (2003) reported fairly low levels of involvement in train-
ing or development programmes related to the tourism business.
Most of the respondents agreed that they have already satisfied the
required knowledge level with their ability to handle their current
operations.
According to Glancey and Pettigrew (1997), motivations for
founding the business fall into two broad groups: those that reflect
the ‘push’ factors, such as redundancy and job insecurity, and the
need for supplementary income, and those that reflect the ‘pull’ fac-
tors, such as either one of the following: the desire to be his/her own
boss, high levels of profit, spotting a business opportunity, or retire-
ment. In Australia, Bransgrove and King (1996) find that the top
goals of owners of small tourism business in both urban and rural
settings are challenge or stimulus, business opportunity, lifestyle,
and long-term financial gain. According to Getz and Carlsen (2000),
34% of the respondents suggest that an appealing lifestyle is the
major reason for entering into the business followed by business
opportunities and investments. Glancey and Pettigrew (1997) find
that the behaviour of the majority of the samples (65%) adheres to
the pull factors. This provides evidence that categorising them as
opportunistic entrepreneurs. Rural entrepreneurs, as reported by
Schroeder (2003), are motivated by multiple pull factors, among
which are providing employment for family members, generating
additional income, meeting the need of the market, companion-
ship with guests, fulfilling their interest or hobby, and providing
employment to communities.
2.2. Entrepreneurial characteristics
Russell and Faulkner (1999) identify the significance of
entrepreneurship’s role in the evolution of tourist destina-
tion. Based on Schumpeter’s idea that links entrepreneurs to
change, turbulence and instability, Russell and Faulkner (1999)
found a significant connection between innovative individuals
known as entrepreneurs and the development of the Gold Coast.
Entrepreneurship has been described by Bygrave (1993, p. 257) as
‘someone who perceives an opportunity and creates an organisa-
tion to pursue it’. However, based on the Chaos and Complexity
theory, Russell and Faulkner (1999, p. 415) argue that many
entrepreneurs go beyond this by actually creating their own oppor-
tunities. In the situation of an ‘edge-of-chaos’ state, Russell and
Faulkner (2004) explain that entrepreneur will spot opportunities
in the environment and apply their creativity to bring innovation.
This provides an alternative perspective in explaining the critical
role of entrepreneur in tourism development.
Literature on entrepreneurship and small business argues over
the overlap between entrepreneurs and small business owners.
Scholars define entrepreneurs in relation to various characteristics
(Carland et al., 1984). These characteristics reflect business growth
orientation (Dunkelberg and Cooper, 1982). In a study by Gilmore
et al. (2004), small firm owners/managers show their reluctance
to take further risks after the business has grown to the ideal size.
829
They identify risky situations that they try avoid. These situations
are related to business growth factors such as cash flow, company
size, uncertainty in a new market, and confidence in the capacity of
the staff in relation to responsibilities. Many researchers agree that
small business owners do not view organisational growth as one of
their principal objectives (Stokes, 1995; Hankinson et al., 1997).
In his book, Komppula (2004) argues that the desire for growth is
often regarded as the criterion by which the enterprise is classified
into an entrepreneurial or a lifestyle-oriented firm. Morrison et al.
(1999) identify lifestyle as a significant element. Businesses are
often initiated by the need to create a chosen lifestyle in which the
needs of family, income, and a way of life are balanced. According
to Williams et al. (1989), the lifestyles of entrepreneurs are gener-
ally based on non-economic goals. They operate businesses often
with very low levels of employment, and managerial decisions are
often based on highly personalised criteria (Dewhurst and Horobin,
1998). Reijonen (2008) finds that small business owners are not
oriented towards growth in terms of the increase in turnover and
employment, prefer to keep their business from developing (Getz
and Peterson, 2004; Hollick and Braun, 2005), and stay within the
fence (Ateljevic and Doorne, 2000). Schroeder (2003) finds very
few rural entrepreneurs who want their business to grow to a
level of significant financial success. However, substantial scholarly
research has come to the conclusion that small business owners are
important in the tourism industry (Reijonen, 2008; Morrison et al.,
1999). Thus, it seems that the dominant number of small business
owners in the tourism sector has underemphasised the importance
of the entrepreneurship concept.
Many studies have been conducted on specific entrepreneur
traits and personality characteristics conducted in different indus-
tries. These traits include the need for achievement (McClelland,
1961; Elias and Pihie, 1995; David et al., 1996; Jaafar et al.,
2004), risk taking (McClelland, 1961; Brockhaus, 1980; Mullins
and Forlani, 1998), independence (Chen et al., 2005), innovation
(Schumpeter, 1934), self-confidence (Timmons, 1978; Mamat and
Raya, 1990), and ability to learn from failure (Shepherd et al.,
2008). In contrast, studies on entrepreneurship in the tourism sec-
tor are limited. In general, few researchers find entrepreneurs in
the tourism industry to be innovative and willing to engage in
risk-laden activities (Litzinger, 1965). The researchers find that the
entrepreneurs are the type of people with high internal locus of
control, high achievement motivation and autonomy (Lerner and
Haber, 2000), independence, and self-reliance (Schroeder, 2003).
These traits, among others, have been recognised as significant
attributes that contribute to the success of an entrepreneur.
2.3. Issues and problems in the hotel industry
According to Reynolds et al. (1994), 73% of small businesses in
the tourism industry in Australia close within the first five years
of operation. The low entry barriers to the tourism and hospital-
ity business place constraints on the finance and knowledge of
the owners of the small firms (Morrison, 1996; Ateljevic et al.,
1999). Most of the new, nature-based tourism businesses are run
by owners/operators who have no formal business or marketing
background and no prior experience in the tourism industry (VTOA,
1995; Cotterill, 1996). Fleischer and Engel (1997) find that opera-
tors in the bed and breakfast sector in Israel have little background
on or knowledge in business. In relation to this, McKercher and
Robbins (1998) and De Kock and Saayman (1999) identify many
potential reasons for business failure, such as the lack of expe-
rience and adequate business skills, and insufficient resources to
survive. Shaw and Williams (1990) observe that many tourism busi-
nesses have little capital and weak management and that they are
resistant to change or advice. Saayman and Slabbert (2001) agree
that many small and medium tourism entrepreneurs are business
830 M. Jaafar et al. / International Journal of Hospitality Management 30 (2011) 827–835
persons who lack management skills and managerial knowledge,
inhibiting them to market their product successfully.
The Department of National Heritage (DNH) (1997), Thomas
et al. (1998, 1999a, 2000) and Keep and Mayhew (1999) argue
that these problems will contribute to the employment of unskilled
employees and lead to the poor reputation of the industry as well
as to pressures on the progress of the firm (Page et al., 1999). Fur-
thermore, there are many government-related problems arising
from the tourism industry. Many managers in Canada complain
about the lack of tourism promotion and tourism funding avail-
able from the Ontario Government and financial institutions (Lu
and Chiang, 2003). However, Saayman and Slabbert (2001) raise the
issues related to financial problems faced by small businesses in this
sector, such as shortage of funds and lack of knowledge on how to
approach financing institutions. Furthermore, they find that fund-
ing for small, medium, and micro-enterprises (SMMEs) related to
tourism is not sufficient, and the funding mechanisms are not coor-
dinated. Funding institutions regard tourism as a risky business due
to several reasons, such as the lack of commitment of the govern-
ment to tourism, safety and security, and its being a relatively new
industry. The above findings can provide an answer for the inability
of the business to grow, as external finance plays an important role
in supporting tourism business venture performance (Lerner and
Haber, 2000). In contrast, positive government actions in the Gold
Coast, Australia, has developed the perfect place for entrepreneurial
activity which helps to prosper tourism development (Russell and
Faulkner, 1999).
3. Methodology
3.1. Data collection
This study used the multimethod approach for data collec-
tion to avoid biases associated with specific methods. If the
responses, which were collected though interviews, question-
naires, and observation, strongly correlate with one another, then
the researcher will have more confidence about the goodness of
the collected data (Sekaran, 2003). The advantages of the question-
naire technique are that it allows information to be collected from
a large number of people and that the findings can be expressed
in numerical terms (Veal, 1997), while the interview method will
help the researcher explore more detailed information on certain
issues. Qualitative methods of data collection are done through
a less structured interview. The interviewer may have a plan
of inquiry but not a specific set of questions or order (Babbie,
1999).
The pilot study was carried out before the questionnaires were
distributed to the respondents. Six respondents were selected for
the pilot tests, which were conducted on the owners/managers who
have been extensively involved in the tourism industry. The lists of
small and medium hotels operating in the East Peninsular Malaysia
were gathered from various sources such as the Internet, Travel
Guide Book 2007 published by Ministry of Tourism, pamphlets,
and the observations by the researcher during the conduct of the
field survey. Due to the small size of the small and medium hotels,
some of the operators run their businesses without registration
papers from the tourism board. As such, the initiative to compile the
lists of small and medium hotels through various ways helped the
researcher to come out with a complete list of small and medium
hotels operating in urban, coastal, and island settings. Small and
medium hotels located in these three prime areas were chosen, as
they comprise 90% of the total small and medium hotels population
in these states. From these sources of information, 145 small and
medium hotels were gathered. The respondents were owners who
are also involved in managing their respective firms. A total of 145
questionnaires were distributed, but only 137 were completed and
used for further analysis. This gave a total response rate of 94%. The
respondents who answered the questionnaires were believed to be
the most appropriate persons to be interviewed. From the survey
form, the researcher identified the respondents who were willing
to cooperate for the in-depth interviews. A total of 18 face-to-face
interviews were conducted after the survey.
3.2. Questionnaire design
The questionnaire was divided into three parts. The first part
dealt with the profile and entrepreneur characteristics of the
respondent, followed by the management aspect of the premises.
The last part was about the issues and constraints the businesses
faced. Questions on entrepreneur characteristics were based on
a 5-point Likert scale (1 = strongly disagree to 5 = strongly agree).
The second part focused on questions on financial and market-
ing aspects, while the last part dealt with problems faced by the
owner/manager. The detailed measures are presented in Section
4. The questions for the interview were structured based on the
answers given in the questionnaire survey. Answers to specific
questions were explored to obtain a detailed explanation on spe-
cific issues. Semi-structured interviews were tape recorded, with
each interview lasting 20–40 min. The interviews were transcribed
and analysed based on the context.
4. Analysis
The profile summary of the respondents is presented in Table 1.
Majority of the respondents were managers or hotel executives
(61 or 44.6%), and owners or general managers (54 or 39.4%). This
industry was monopolised by males (83 or 60.6%), with the females
accounting for 54 or 39.4% of the sample. According to one respon-
dent, the greater involvement of men is due to ‘. . . tradition. Many
people have a negative perception and think that this sector is not
suitable for women’. However he added, ‘There are women who are
involved in this sector, but their involvement is indirect. They do not
hold any position in the company’. Many of the respondents were
Malay (113 or 82.5%), while 19 or 13.8% were Chinese. Only 5 or 3.7%
were from different ethnic groups. In terms of age, data showed a
distribution of different levels of age. Most of the hotel operators
(47 or 34.3%) involved in this sector were in the age category of
40-49 years and below the 29 years category (30 or 21.9%).
With regard formal educational level, majority (68 or 49.6%)
completed their secondary level of education, 24 or 17.5% have
first degrees, and 22 or 16.2% have diplomas. It is interesting to
note that 92 or 67.2% of the respondents did not have any special-
isation related to tourism, and only 14 or 10.2% had specialisation
in hotel, tourism, or hospitality management. Three of the inter-
viewees mentioned ‘Anyone can be involved in this business, even
those without any education, specialization, and related working expe-
rience. The most important thing is to have the interest’. However, four
emphasised the advantage of having education related to the hotel
sector. According to them, ‘Even education is not important. How-
ever, if you were in the hotel sector before, you would understand the
sector better’.
In terms of working experience, 77 or 56.1% did not have related
experience when they started the business, while another 54 or
39.5% had working experience in management, administration, or
marketing and hotel management. Previous experience related to
management can help in running the business. Two respondents
stated, ‘Experience in management is very important in handling the
business. It does not matter whether it is managing a hotel or other
businesses. Theory is different from practice. You may be excellent in
theory, but this needs to be supported with experience. Sometimes we
 M. Jaafar et al. / International Journal of Hospitality Management 30 (2011) 827–835 831

Table 1 make mistakes, but of course we should learn from them and try to
Profile of the respondents on small and medium hotel owner/managers in Peninsular
improve’.
Malaysia.
The majority (104 or 75.9%) started their business after the eco-
Description Criteria Frequency Percen- nomic crisis, that is, during the period of 1998–2008. Twenty-four
tage (%)
or 17.5% started their business between 1987 and 1997, while only
Position of Owner/general manager 54 39.4 9 or 6.6% started their business during 1976–1986. Many of them
respondent (84 or 61.3%) had more than one source of income, such as having
Manager/hotel executive 61 44.6
different businesses. Almost all of these hotel owners/managers did
Assistant manager 11 8.0
Others 11 8.0 not attend any courses either before or after starting the business
Gender Male 83 60.6 (92 or 67.2%), while 93 or 67.9% said that they did not attend any
Female 54 39.4 courses after starting the business. The highest frequency of atten-
Race Malay 113 82.5
dance in courses was three times per year. There are two possible
Chinese 19 13.8
India 3 2.2 explanations for their unwillingness to attend courses. According
Others 2 1.5 to one respondent, ‘We do not have many chances to attend courses
Age <29 30 21.9 because I started my business earlier’. Another respondent said, ‘We
30–39 22 16.1 do not attend any courses because we do not know what courses are
40–49 47 34.3
available’. However, those with high level of enthusiasm were con-
50–59 16 11.7
>60 22 16.0 cerned about attending courses. Two of the interviewees reported,
Level of education First degree 24 17.5 ‘Attending courses are important. This chalet or resort industry may
Diploma 22 16.2 look simple, but when we go through it, it is difficult. This is the rea-
Certificate 4 2.9
son why many chalets or resorts become abandoned. Anyone who
Secondary school 68 49.6
Primary school 15 10.9
does not attend courses will surely incur losses’. Another interviewee
Others 4 2.9 responded, ‘For me, training is important because attending a course
Area of specialisation Management/ 17 12.4 means that we will be taught the correct ways of serving our guests.
administration/ However, when it comes to on the job training, we have to make a
Finance/accounting/
mistake first before we can learn. Sometimes, this gives us a bad name
business
Hotel/tourism/ 14 10.2 as we are in the service industry. So if we went attend courses, we will
hospitality know right away how to avoid the mistakes. This will allow us to main-
Others/not related 106 77.4 tain our resort name’. However, there are few owners/managers who
Working experience Hotel management 15 10.9
believed that rather than attending courses, on the job training is
Restaurant management 6 4.5
Management/ 33 24.1
more applicable in the hotel industry. ‘On the job training is more
administration/ important than attending courses because the staff can learn while
Marketing they are working’.
Craftsmanship/ 6 4.4 The respondents gave a variety of reasons when asked about
construction
the important goals in getting started in this business. Many of the
Others 77 56.1
Years of managing 1976–1986 9 6.6 respondents (49 or 35.8%) agreed that to keep the property in the
the business family and to become financially independent are the main rea-
1987–1997 24 17.5 sons for their involvement in the business. Other important reasons
1998–2008 104 75.9
were to be challenged, to make much money, to gain prestige by
Other sources of Having different businesses 66 48.2
income
operating a business, to enjoy a good lifestyle, to live in the right
Working with the 18 13.1 environment, and to support my/our leisure interest. The responses
government are different between the respondents who managed small hotels
Pensioner 53 38.7 on island and coastal settings, and those of budget hotels in urban
Not related
areas. One of the interviewees from an island hotel stated, ‘In the
Attended any course Yes 45 32.8
before starting end of 2003, I bought this land as my vacation spot and to enjoy a
business good lifestyle but not to get involved in tourism. After the increase of
No 92 67.2 the demand from the tourists in 2004, I started to operate a small chalet
Attended any course Yes 44 32.1 with three rooms, which are managed by other people’. However, one
after starting
business
respondent who ran an urban budget hotel asserted that to make
No 93 67.9 a lot of money was his main objective. As he mentioned, ‘My target
Important goal for To be my own boss 27 19.7 for running this business is to make a lot of money and to buy more
starting the business property’.
To keep my family together 28 20.4
Table 2 shows the ranking summary of the owner/manager
To keep this property in the 49 35.8
family characteristics. Based on the test conducted, the most important
To live in the right 31 22.6 characteristics were self confidence, independence, ability to learn
environment from failure, and Need of Achievement Motivation. The mean ranks
To support my/our leisure 31 22.6 for the top four variables are 3.87, 3.79, 3.65, and 3.36 respec-
interest
To enjoy a good lifestyle 32 23.4
tively. As mentioned by one of the more successful respondents
To make a lot of money 39 28.5 who operates a 20-room hotel and had availed of a RM1 million
To gain prestige by operating 33 24.1 loan to extend the business, ‘Self-confidence will lead to business
a business growth’. Few of the interviewees who can be classified as small
To meet interesting people 29 21.2
business owners highlighted the importance of interest and inde-
To provide a retirement 30 21.9
income pendence. Interest acts as a push factor or motivation to continue
To provide me with challenge 43 31.4 the business. Independence is related to the desire to implement
To allow me to become 49 35.8 new ideas or proposal. Based on the result of the questionnaires,
financially independent majority of the budget hotel owners agreed on the importance of
832 M. Jaafar et al. / International Journal of Hospitality Management 30 (2011) 827–835

Table 2 Table 3
Non-parametric test on the entrepreneurial characteristics of small and medium Financial and marketing aspects of small and medium hotels.
hotel owners/managers.
Description Criteria Frequency Percentage (%)
Entrepreneurial characteristics Mean rank Rank
Capital to start the Own savings 79 57.7
Self-confidence 3.87 1 business
Independence 3.79 2 Loan from family and 15 10.9
Ability to learn from failure 3.65 3 friends
Need of Achievement Motivation 3.36 4 Government 6 4.5
Risk-taking tendency 3.18 5 Commercial bank 32 23.4
Innovativeness 3.15 6 Others 5 3.5
Financial help to Commercial bank 37 27.0
Chi square:74.94; Assymp Sig: 0.000.
enlarge business loan
Scale: 1 – strongly disagree, 2 – disagree, 3 – neither agree not disagree, 4 – agree,
Government 2 1.5
5 – strongly agree.
agencies
Internal funds 58 42.3
Loan from family and 14 10.2
self-confidence. According to three interviewees, ‘Self-confidence is friends
the most important characteristic that can motivate us to be competi- Others 26 19.0
Marketing alliance MAS/firefly 8 4.9
tive’ and ‘Confidence is important because it will encourage us to think
Airasia 6 3.7
positively’. However, another respondent emphasised the desire Keretapi Tanah 5 3.1
and Need of Achievement Motivation: ‘For me, the most important Melayu Berhad
thing is the desire to achieve what you want to achieve and how you (KTMB)
Tourism ministry 53 32.7
organise yourself. You cannot put aside whatever problems you are
Tourism state action 53 32.7
facing; you must solve these problems’. Failure cannot be avoided, council
and it will become a lesson for success. Two of the interviewees Lonely planet 12 7.4
emphasised the ability to learn from failure: ‘Failure is important Others 25 15.4
because without failure, people will not learn from their mistakes. I Technology Government portal 51 31.0
Website 90 54.9
have done many mistakes, but I have learned from them’.
Call centre 12 7.3
The majority of small and medium hotel owners/managers (79 Others 11 6.7
or 57.7%) used their own capital to start the business, while 32 or Conventional Brochure 84 17.4
23.43% depended on loans from commercial banks. To enlarge their marketing techniques
Tourism guide book 64 13.2
business, 58 or 42.3% preferred to use internal funds, while 37 or
Yellow pages 16 3.3
27.0% opted for commercial bank loans. Others obtained loans from Banner 22 4.5
various sources. According to all the interviewees, their initial cap- Word of mouth 118 24.4
ital was around RM20,000 (equivalent to USD5,000) to RM200,000. Travel agency 63 13.0
One of the interviewees mentioned, ‘Small entrepreneurs usually use Signboard 103 21.3
Others 14 2.9
their own money and personal bank loans to start their businesses.
Getting a bank loan for business is difficult. For my initial capital, I
combined my own money and a bank loan. I spent RM50,000 from
my own savings but it was not enough, so I applied for a bank loan of a financial institution (mean = 2.77), lack of knowledge in tourism
RM50,000’. However, according to some of the respondents, their trends and opportunities (mean = 2.79), and lack of tourism mar-
source of capital came from selling their own assets and from the keting skills (mean = 2.78).
family savings. The result also shows the problems faced by the own-
In terms of forming a strategy with an alliance partner, 53 ers/managers in relation to the federal and state governments. In
or 32.7% of the respondents formed alliances with the Tourism comparing the two governments, most agreed that the federal and
State Action Council and the Tourism Ministry. In terms of tech- state governments were less helpful to small and medium hotel
nology usage, 90 or 54.9% of small and medium hotel operators operators. The mean value is from 2.5 to 3.49, except for the finan-
preferred to use a website to promote their resorts. The main con- cial support from the state government with a higher mean value
ventional marketing techniques used to attract customers were (mean = 3.55). Two respondents from Terengganu reported, ‘The
word of mouth (118 or 24.4%), signboards (103 or 21.3%), brochures government does not give attention to new and small businesses in
(84 or 17.4%), tourism guide books (64 or 13.2%), and information the tourism sector’. Apart from this, they also agreed on the diffi-
provided by travel agencies (63 or 13.0%). One of the respondents culties in obtaining any tourism-related information from the state
mentioned, ‘Having a marketing alliance with the Tourism Ministry government and in gaining access to any commercial bank loan
and the Tourism State Action Council will help disseminate lodging when they need collateral (Table 5).
information to the tourists’. Most of the small and medium hotel
operators in the island setting used their websites to promote their
resorts. However, word of mouth was still the most effective mar-
Table 4
keting tool. As attested to by one of the respondents, during the Problems encountered by small and medium hotel operators.
peak season, his hotel can have up to a 90% occupancy rate even
Problem Mean SD
without promotion through a website. One of the interviewees dif-
ferentiates between the marketing tools used to attract local and Lack of management skills and knowledge in 2.91 1.147
international tourists: ‘The Tourism Guide Book and the Lonely Planet tourism
Lack of knowledge on how to apply for funding 2.77 1.16
are useful for international tourists, while word of mouth is important from financial institutions
for local tourists’ (Table 3). Lack of knowledge in tourism trends and 2.79 1.21
Table 4 explains the constraint faced by the owners/managers. opportunities
Majority of the owners/managers neither agreed nor disagreed Lack of tourism marketing skills 2.78 1.15
about their lack of management skills and knowledge in tourism Scale: less than 1.49 = strongly disagree; 1.5–2.49 = disagree; 2.5–3.49 = neither
(mean = 2.91), lack of knowledge on how to apply for funding from agree nor disagree.
 M. Jaafar et al. / International Journal of Hospitality Management 30 (2011) 827–835
Table 5
Government-related problems encountered by small and medium hotel operators.
Problem Federal State
Mean SD Mean
Lack of plans for the training of 3.40 1.24 3.40
small hotel entrepreneurs by the
government
Less tourism activities planned by 3.10 1.21 3.17
the government
Lack of financial support from the 3.41 1.19 3.55
government to small businesses
Lack of marketing assistance from 3.26 1.23 3.40
the government
Scale: less than 1.49 = strongly disagree; 1.5–2.49 = disagree; 2.5–3.49 = neither
agree or disagree; 3.5–4.49 = agree; 4.5–5.0 = strongly agree.
5. Results and discussion
Based on the result of the quantitative and qualitative research,
this study provides a useful and detailed investigation on small
and medium hotel operators in the tourism industry in Malaysia.
Comparing the results on the demographic profile of small and
medium hotel operators and those from the previous studies, no
significant differences on the results obtained for age, gender, level
of education, and experience were found. Based on the personal
demographic backgrounds, the majority of the small and medium
hotel operators in East Peninsular Malaysia were males, Malays, and
with various levels of education. This finding supports the study
by Morrison et al. (2003), Avcikurt (2003), and Ahmad (2005) but
contrasts with that by Getz and Carlsen (2000). Even in a male-
dominated industry, there were exceptions, particularly in the case
of the minority of women who were identified to have played an
important role as supporters. Their role was not highlighted due
to the part-time nature of their involvement in relation to their
routine work as housewives.
The owners/managers of small and medium hotels tended to
have a mixed level of education, with 50% of the respondents
having secondary education and only 33.7% having university-
level education. This finding supports that of other studies in
Australia (Getz and Carlsen, 2000; Sharma and Upneja, 2005).
Almost 80% of the respondents did not have specific specialisation
related to the industry, and only 10.2% had specific specialisation
in the hotel/tourism/hospitality industry. The percentage of own-
ers/managers having higher education in relation to tourism was
lower compared with that in a study by Avcikurt (2003). How-
ever, having higher education has been confirmed as unimportant
because it does not contribute to business success in the tourism
industry (Lerner and Haber, 2001). In terms of working experience,
only a small number (11%) had previous working experience in the
hotel industry, while the majority had experience in different sec-
tors. This study supports that of Ateljevic et al. (1999) and Szivas
(2001).
The majority (76%) of the respondents started their respective
businesses after the economic recession of 1997–1998. The growth
of the tourism sector in Malaysia after the economic recession
provided an opportunity for them to venture into the business.
Interestingly, many of these owners/managers (nearly 50%) had dif-
ferent sources of income aside from the hotel business. Seasonality
could be a factor as they needed to have other sources of income
during the monsoon season, especially for those in the island and
coastal settings.
Looking at the demographic profiles of the owners/managers,
the majority did not attend any courses to get them ready for
the business. The reason could be related to their reasons for
joining the business. Most of these small and medium hotel own-
ers/managers operated their businesses to keep the property in
833
the family, allow them to become financially independent, pro-
vide them with challenge, and make money. Previous studies also
found mixed motivations for owners/managers for founding their
businesses. According to Storey (1994), positive motivation has
SD
been identified as a key characteristic of an entrepreneur. One dis-
1.22
tinct motivation is that profit is not necessarily the main concern
(Bransgrove and King, 1996; Getz and Carlsen, 2000). Aside from the
1.15 pull factors, such as ease of entry to the industry which provides an
easy path, the push factors, such as family involvement, need for
1.16 additional income, and self-satisfaction, played a very important
1.20
role. Starting with an offering of 20 rooms or less could be a less
risky business for hotel operators especially for those who manage
them as a family business.
Quantitative result shows that the most important
entrepreneurial characteristics were self-confidence, inde-
pendence, and ability to learn from failure. Self-confidence and
interest can be considered as push factors for owners/managers
to start a business. This study supports Storey (1994, p. 134) who
claimed that ‘highly successful entrepreneurs are individuals who
have previously failed in business’. The interview highlighted
the importance of interest as the main criterion needed for
involvement in the industry.
This study also provides support for previous studies on the exis-
tence of a high number of small business owners compared with
the number of real entrepreneurs in the tourism sector (Komppula,
2004; Morrison et al., 1999). Based on their answers on their moti-
vation in starting the business, the majority did not target profit
and growth as their main motivations, which supports the study
by Dewhurst and Horobin (1998). As small business owners, they
opened and managed small-sized businesses due to their limited
resources. They tended to keep their business to a size that is
controllable and manageable. However, a small number of own-
ers/managers who could be referred to as ‘entrepreneurs’ were
very determined, independent, had higher locus of control, and
exhibited moderate risk taking behaviour. Many targeted busi-
ness growth, which was subjected to their capabilities especially
in terms of finance.
Majority of the owners/managers ran their businesses using
their own money to start and enlarge them, while a minority relied
on bank loans. To enlarge their business, 14 or 42.2% preferred to
use internal funds, while 6 or 18.2% opted for commercial bank
loans. Others obtained loans from various sources. Many of them
reinvested revenues collected from the hotel operation. Market-
ing alliances with the Tourism Ministry and Tourism State Action
Council could help small and medium hotel operators in promoting
their hotels or resorts. Small and medium hotels also used new and
conventional marketing tools to market their services.
The majority of the respondents chose not to agree nor disagree
with the weaknesses they have in running the business. Possibly,
this means that they are aware that they are running the business
without having enough skill and knowledge. The fact that profit
is not the main objective of the small businesses in this industry
can explain the above scenario. The same problems were found by
McKercher and Robbins (1998), De Kock and Saayman (1999), and
Saayman and Slabbert (2001).
The respondents also ranked higher the problems they faced
with both the state and federal governments. Based on the mean
value, small and medium hotel operators ranked higher the prob-
lems they faced with the state government compared with that
with federal government. It is possible that they think that the
state government is directly responsible for any activity, promo-
tion, and support in helping the entrepreneur. Two aspects that
were ranked higher than the other problems were the lack of
financial support and the lack of marketing initiatives to help
small and medium hotel operators succeed. Lu and Chiang (2003),
in their study on tourism industry in Canada, also assert the
834 M. Jaafar et al. / International Journal of Hospitality Management 30 (2011) 827–835
lack of assistance to hotel operators in terms of promotion and
financing.
6. Conclusions
This research proved the relative unimportance of education
and knowledge related to the industry in supporting the survivabil-
ity of small and medium hotel operators in the tourism sector. The
dominance of small and medium sized enterprise in the industry is
highly related to a low entry barrier. This study also highlighted the
most important characteristics required of the owners/managers
in this sector: self-confidence and interest. Self-funding and bank
loans provided the start up capital. Through this, most of these small
and medium hotel operators were able to survive even with less
than 50 rooms. The majority of the owners/managers tended to
remain small to suit their capabilities.
Based on the feedback on the issues and problems, many steps
have to be done to enhance the success of small and medium hotel
operators in the East Peninsular Malaysia. What should be mainly
emphasised is the provision of assistance in marketing and finance.
To survive in the industry, small and medium hotel operators have
to market commercially their budget hotels internationally and
locally. The borderless world has seen the importance of informa-
tion technology in reaching out to each potential customer. With
their limited resources and knowledge, it will be beneficial if the
government can find ways to work with them closely in promoting
the small and medium hotels. Other issues raised by the respon-
dents were the lack of promotion in terms of organising tourism
activities to attract tourists and the lack of financing facilities to
upgrade their chalets. It is suggested that the government should
work hand in hand with tourism hotel operators, particularly with
regard to providing advice and courses that can include hands-
on training to the hotel operators and their staff. This will help
them upgrade and improve the management of their hotels and
services. Intensive promotion and excellent support services can
have a significant influence on the competitive advantage of small
and medium hotels. In the service industry, excellent services pro-
vided to customer can be a good marketing strategy for continuous
patronage.
The significant increase in the number of tourists visiting these
states every year provides good business opportunities for the
accommodation business. The potential of the tourism sector in
generating income for many supporting sectors should be viewed
as a strong economic contribution to the state. The success of
each tourism destination development is highly dependent on the
crucial role played by the government and entrepreneurs. Thus,
improvements can be done in relation to the above-mentioned
issues to enhance the economic returns from the tourism indus-
try. This study suggests that thorough research on the issues and
problems should be undertaken by the state and federal govern-
ments. Assistance should be given to real entrepreneurs who have
the potential greatly influence economic prosperity.
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