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Real Entrepreneurship Case Study Aparthotels Teddy In 2009 two brothers decided to exploit a market opportunity in the Czech

h Republic by building touristic apartment-hotels in the middle of national park Sumava. The concept was a success and since that time the company has grown. Now its building its third Aparthotel and this one includes more luxury. However, the most important question for the company since the start of their business has been: Who are their customers? A question that, up until now, they had no clear answer to. Are they building hotels for the local tourist, the international tourist or both? An extra difficulty the company faces is that they are not allowed to change their original business plan due to the EU-grand they receive for this project. They only get one change to make a choice and it has to be the right one. Aparthotels Teddy consists of apartment-hotels in the middle of the national perseveration park Sumava in the Czech Republic. It is owned by the Arko conslult SRO company which belongs to two brothers, Petr and Vaclav Kotal. The aim of these two entrepreneurs was to offer a comfortable accommodation, suitable for large families and groups of friends. Aparthotel Teddy consists of large fully equipped apartments which enable a relatively low price, comfortable stay in this protected area. Being situated in an attractive geographical zone, the owners of this business can offer various additional activities to their clients. Such as excursions in the natural park or to cities nearby, various winter and summer sports in the natural reserve or simply relaxation in a peaceful untouched part of nature. Arko-consult SRO company, seized the opportunity of a natural sanctuary that derived from the forbidden travel zone near the German border during the World War II. Since this area stayed abandoned for many years it is now an ideal leisure place for tourists who are attracted by the beauty of nature. At the moment, Arko has two aparthotels and the business is expanding with a third in construction. This case is an excellent example of how business needs to adapt their value proposition to effectively target the ideal customer segment. The value proposition has to be chosen very prudently in order to aim the precise customer segment that the company is looking for. The question is: which customer segment should they look for? Can there be several customer segments aimed for? How does this company deal with these issues will be discussed further on. The brothers Petr and Vaclav Kotal owned land in natural reserve park Sumava . When the EU offered grants to new promising businesses in 2009 they decided to seize the opportunity and built two Aparthotels on their land. Since they were allocated a grant that represented 55% of the costs they had to follow numerous rules. As for following their initial business plan very closely, building the Aparthotels in a relatively short deadline, employing the number of people as

announced at the beginning and offering the number of beds according to what was planned. They decided to have a slim structure business model that enables the business to shut down during low season without any additional costs. The company has two employees. One optimizes the website and is remunerated according to the occupied number of beds, therefore doesnt generate any costs when the business closes down. The second one receives the clients, takes care of them if needed and cleans the apartments, he is paid on an hourly bases and therefore doesnt generate cost during the low season either. This structure enables this business to be seasonal if there is a lack of demand during some periods. At the moment the Aparthotels operate three months in winter and three months in summer.

Initially, Petr and Vaclav sought to cater to the international tourist market, expecting the beauty of the national park to be a very attractive destination for foreigners. They soon discovered, however, that the proximity of the location and the convenience of the apartment-hotel formula meant that many locals found it ideal for family holidays in the area; the international segment made up for only 10% of their clientele. Nevertheless, they didnt directly address this issue and continued to run the business in the same manner, regardless of how different the two types of customer are.

In terms of customer segmentation the international tourist and the local family interested in staying at the Teddy Aparthotels are at two different ends of the spectrum: they knew from experience that the typical local customer was far less interested in preorganised activities and luxury, was more cost sensitive and often closely followed local seasonal trends. Indeed, they had many returning customers who were large Czech families looking for a beautiful, relatively inexpensive vacation spot on national holidays, for example. The foreign tourist, on the other hand, was travelling from abroad, in smaller numbers, and was therefore more likely to value a certain amount of luxury and activities (these already formed additional revenue streams). They may, for example, not need or want a large kitchen as they seek local cuisine which is relatively cheap too; they also had the tendency to visit during local low season, when the company was closed. So overall there was more demand for typical hotel characteristics in the international market.

These different forms of demand obviously affected the business value proposition, and the Aparthotels VP already consisted of a mixture of the two, such as the additional services activities, day plans, etc., and the high season availability. Moreover, aspects such as customer relations would vary widely to cater to either of the customers: the only real customer relation that Teddy offered was an employee

responsible for the Aparthotels who could be reached by the customer if they needed anything. This was ideal for local consumers and it kept staff costs at a minimum, but the foreign tourist may appreciate a better customer service.

Arko-consult SR have started building a third Aparthotel to expand the business, and in order to do so effectively Petr and Vaclav decided they needed to adapt and finetune their businesss value proposition to a specific customer base. They had already decided to have a spa in the new building, another example of extra features or activities the business offers, which would undoubtedly move them away from their current market segment. The real question was what customer segment they wanted to focus on, the local, cost-effective one or higher-profile international tourism, or a mixture of both.

Changing their value proposition to fit a market segment would involve a series of other changes in the business model as well as the Aparthotels themselves. (When opening a new Aparthotel the company was allowed to make a new business plan, they just were not allowed to change the ones from the Aparthotels already running.) With the local market, the company never had to invest much in marketing. They relied heavily on word of mouth and found out first hand that the potential local customers were unaffected by advertising when, a few years previously, they had invested in a television commercial. The commercial did nothing to boost sales and was ultimately considered a useless expense, and the two Kotal brothers understood that the locals werent interested in being told where to stay, as they knew their country well. But marketing was without a doubt one of the fundamental tools for increasing their international customer base, and so if they were to choose this direction they would have to invest in distribution channels and key partners. For example, one option was to expand their web network, an increasingly popular option for tourists, targeting international websites such as Expedia and Kayak. Another possibility would be to approach travel agencies, a valuable potential partner and channel. There was also the option of reinforcing the association between the national park itself and Teddy, through documentaries and the parks information channels.

Of course this direction would greatly offset the companys current cost model and revenue streams. All of the aforementioned expansion possibilities would mean high investment expenses for the Arko-consult group, on top of the cost of constructing the new building. But the added value would justify a higher price to the service and the additional services and activities would add to the revenue stream.

Through Teddy Aparthotels, Petr and Vaclav have really come to understand the importance of a flexible business model. They have identified the benefits of effectively targeting a market segmenting and now face the opportunity to expand their business and put this into action. The question remains as to how they want to do this. Their existing business model has the potential to cater for a very lucrative, high risk segment in the international market, one they are unfamiliar with and that would entail very high costs; on the other hand they could stick to their guns, exploiting their experience and know-how in the local market and minimise costs or opt for a mixture of the two, diluting their business model and possibly increasing their customer base and profits.

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