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Bed & Breakfasts in Italy: The case of the Emilia-Romagna Region

di Teresa Branzaglia

Alma Mater Studiorum
Università di Bologna
School of Economics Management and Statistics
Campus Rimini
Second Cycle Degree Programme in Tourism Economics and Management
Relatore: Manuela Presutti
Anno Accademico: 2015/2016

3.3.3 - SWOT Analysis

Designed by Albert Humphrey, as part of a research project at Stanford University between the sixties and seventies, the SWOT analysis is aimed at identifying business strategies to deal with strong competition and uncertainty situations. The SWOT analysis diffusion and its application in various sectors are mainly related to its great flexibility, which allows for an analysis of convergence between the needs, objectives and strategies. As explained by Sergio Grea, in the book "Inside the firm's growth. The SWOT and PAR analysis", "SWOT analysis is a bit like a path in the woods or in the mountains: it guides us through a route and suggests the steps to follow and the mistakes to avoid."

It is important to understand that only the internal factors, namely those that characterize the strengths and weaknesses, depend on the effective planning of the company. The external factors instead are uncontrollable and unpredictable agents. Our B&B must be able to manage these changes and threats promptly in order to survive (Figure 12).

Figure 12: SWOT Analysis for “Villa Teresa”

B&B in Italy: the case of the Emilia Romagna - Immagine 21

Strengths

  • Great location: “Villa Teresa” is a great choice both because of the wonderful nature that surrounds it and because of its strategic position, in the exact center of an imaginary square where the corners are Ravenna, Cervia, Cesena, and Faenza (Figure 13). It is also close to Bertinoro, Fratta Terme, Castrocaro, Terra del Sole, etc.
  • Fantastic facilities: our B&B will be full of facilities, among which the most attractive will be the big pool in the garden (8x4 meters), followed by the playground, the tennis court and a lot more...
  • Hearty breakfast: a generous breakfast buffet will be available every morning.
  • Mix of enjoyment and educational experience: in our structure guests will have the opportunity to rest from the stressful routine, have fun doing the numerous activities that we propose, and gain knowledge about Emilia-Romagna through our tours.
  • Owned property: this one is a big strength in financial terms, because we will not need to buy the structure.
  • Variety of events in the surroundings: the quantity of fairs and events in the area is unbelievable in all seasons. Some examples are: in October the “Truffle Festival” in Dovadola and the “Polenta Festival” in Brisighella; in December the “Presepe della Marineria” in Cesenatico (they set up various nativity scenes on the boats in the harbor); in May the “Castrato Festival” in Faenza, etc.
  • Owners’ passion, skills, and field expertise: both my mother and I love the tourism field and all of its aspects, so we will show our great passion together with our experience (my mother is a tourism operator and I am almost a tourism graduate).

Weaknesses

  • Brand visibility: according to the regional law, B&Bs in Emilia-Romagna cannot promote themselves on websites that retain a percentage of the sales (e.g. Booking.com) and, for this reason, we will likely face some issues in terms of visibility. Moreover, being “Villa Teresa” a new establishment, it will be difficult to gain recognition in the first year.
  • Limited number of rooms: with just three rooms, it will be hard to generate revenue in the beginning; plus, a limited number of rooms means a limited
    amount of sales.
  • Struggle with taking care of everything: the staff members will be my mother and I; therefore we will need to be very well organized and efficient, always concentrated on the guests’ desires and ready to take action.
  • High initial investment: being located in such an isolated area, the structure must be highly attractive in order to get tourists to choose us, and this will be achieved by placing a big swimming pool in the back part of the garden.

Opportunities

  • External environment changes can be exploited: we believe it is important for us to monitor the economic conditions of the environment (they influence the buying power of the consumer), the government sector with its rules and regulations (they may become more flexible and we could consequently add services that are now forbidden for B&Bs), and the sociocultural sector (preference for rural places may increase and our market niche may expand).
  • Positive demand trend: the number of tourists travelling to the area is appealing and gives good development perspectives. As we explained in the “Demand Analysis” section, tourist arrivals are increasing both in Emilia- Romagna and in Ravenna.
  • Know-how and expertise sharing with other operators: thanks to the “TURISMO 4” platform – hoping that everybody will collaborate – all the local tourist operators will have the opportunity to share their experience and to build kind of a collaborative network, with the main conceptual pillars being data and content integration.
  • Ability to become more efficient over time: it is known that the learning curve steepens as time passes, and this will lead us to become more and more efficient, thus wasting less and less materials, time, and energy.
  • Streamlined bureaucracy: in Emilia-Romagna the B&B is not considered an entrepreneurial activity, therefore it is not necessary to be VAT registered (in Italian it is called “partita IVA”) nor to enroll in the Business Register at the Chamber of Commerce.
  • Low taxation: the B&B income, net of documentable costs, is taxed as “other income” (“redditi diversi”) resulting from commercial activity not habitually pursued.

Threats

  • Seasonality: a great marketing effort will be required to keep occupancy high during the “low season”, i.e. June and September.
  • Competitors: already established structures can offer more because they have been studying the market and observing the trends for a long time.
  • Potential new entrants: as we already explained when we developed Porter’s 5 forces analysis, the threat of new entrants in this particular industry is high because the entry barriers are low.
  • Slump in the economy: a possible future drastic decline in the economy may lead our profits to drop significantly.
  • No financial help from the Region: Emilia-Romagna does not provide funding for people who want to open a Bed & Breakfast, since these receptive structures are not included in the entrepreneurial forms of business. This means it could be hard to cover all the expenses in the initial stages of the business lifecycle.
  • Strict regional law: the Emilia-Romagna law on Bed & Breakfasts is the most limitative of all the regional laws in Italy. With the possibility of renting only three rooms (to maximum six people) and without being allowed to promote our structure on Booking.com we are not sure we are going to start running the activity. We will better evaluate after writing down the hypothesis of costs in the financial projections.