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Walking Peru – Market Analysis

Consumer profile
Two significant market segments emerge from our market research with two subgroups each

I. International arrivals
A. Standard or traditional international travelers aged between 31 and 50 years on package tours. Typically they originate in the US, Chile, Germany, Argentina, Spain, Italy and France. Target destinations are Peruvian tourist sites promoted abroad. Travelling on vacation, they favor well organized packages to get the most out of their Peruvian experience.

B. Adventure travelers arrive in Peru to make their own travel arrangements. Basically originating in the same countries named above, their age fluctuates between 18 and 40 years. When travelling they seek for thrills, fun and the freedom to change their plans at will. They also travel on lower budgets.

II. Peruvian travelers
A. A segment of trend-following young Peruvians aged 18 to 24 in the high and middle income levels who look for new ways of recreation. About 40% of travelling Peruvians (32% of the young population)5 travel with friends during vacations or for recreation; recreation is the main expense for 38% of this group.

B. Local travelers from 25 to 50 years of age travel on their savings. Usually these trips are carefully scheduled to take advantage of tight budgets and short vacation periods. Travelers come from the middle and upper low income levels.

Criteria for making consumption choices by income level

Typical foreign tourist Adventure tourist
Service quality.
Perceived service in safety and punctuality.
Variety of route options.
Identification with instructors (by country of origin).
Pricing compared to other types of entertainment.
Service quality.
Identification with instructors (by country of origin).
Young local public Turista nacional
Satisfying entertainment.
Trends and peer opinion.
Exclusive services.
Easily accessible services.
Comfort during service period.
Payment arrangements.

Survey findings
An initial market survey comprising 400 interviews with 200 foreign and 200 Peruvian travelers with a 95% confidence margin gave the following results.

  • Hang gliding came out first among passive recreational activities (58%), followed by jetski (45%), kayaking (40%), four-wheel scooter rides (32%), and finally snow sledges (25%).
  • Cuzco ranked first (68%) among proposed sites for these activities, followed by the Nazca Lines (32%), Paracas Reserve (24%), Huaraz (18%) and finally the beaches of Lima (16%).

A second survey among 500 interviewees (278 foreign nationals and 222 Peruvians) analyzed hang gliding excursions. The results from the survey were as follows:

  • Acceptance level: local interviewees 83% – foreign interviewees 70%
  • Flight time and price: 30 minutes for US$35 to 50
  • Arrangement: On site 72% – Package 28%
  • Complementary services: Flight instruction 53% – Tourist circuit 51% – Filming 41%

The main reason to choose hang glider excursions is that they take place over Peru’s main archeological attractions. An additional factor in deciding for the excursion is the nationality and experience of the proposed instructors. Finally, a suggestion was made to create a Hang Glider-Tourist Excursion Club. (Survey in appendix 2 and complete results in 3).

Competitors are particularly active in industries where returns on investment are high. An important risk of the Airwalk project is to open a market that will not be easily closed. An eventual increase in competition will be met by a three-pronged strategy:

  • Advertising campaigns to enhance company awareness.
  • New product introduction following an established schedule.
  • Expanded complementary activities with service supply.

Price competition is not envisaged because the general strategy is based on differentiation. In the second place, these strategies are fundamentally unstable over time and finally they tend to make new offerings in recreational tourism activities less attractive.

Three types of competitors have been identified: complementary services offered at hotels, formal suppliers and independent suppliers.

  1. Hotels offer complementary recreational services (Las Dunas in Ica and Punta Sal in Tumbes), in particular during the summer season.
  2. Formal suppliers of recreational flight services include the Nazca Ultra Light Aircraft club and Condor Adventure, both of which offer hang glider instruction. However, their revenues are mostly derived from advertising agreements with private companies, air photography and sales of flight equipment.
  3. Independent (free lance) suppliers serve groups of at least 10 persons. Basically they act as interpreters, tourist guides and middlemen for hotels and travel agencies.

Among these, hotels may become the toughest competitors as they already operate in the tourist industry. However, they have gone through a long recession and only recently are new projects emerging. Their principal concern at the moment is to improve their infrastructure to reach higher room and bed occupancy rates.

Formal suppliers center their attention on other activities. Nevertheless, they can derive an advantage from their services’ close relation to hang gliding.

Independent suppliers may be recruited as the company expands.

These and other sources of eventual competition may be beneficial in various ways.

  1. To smooth out fluctuations in demand. Tourist flow in Lima and the interior fluctuates with seasonal weather conditions, local festivities, vacation, and other.
  2. To increase differentiation. As a recreational tourism company, we specialize in the services we supply. We therefore seek to position ourselves as a benchmark for customer satisfaction.
  3. To increase demand by increasing the number of competitors. When the competitor’s number increase produce more attractive the recreational tourism, that means sale in high levels, because is more the diffusion of activities and credibility. Over all this point is very important in the introduction of new disciplines.
  4. To share market development costs, in particular by creating a standard among buyers, meeting substitute service competition, and to overcome legal impediments, and promote conservation at the sites where the services are provided.
  5. To strengthen the image of recreational tourism. Fair competition can go a long way in making this a worthwhile recreational activity. However, a large risk is involved in competing with poor quality and low safety providers who can hurt our credibility as serious suppliers.

When a new market opens, competitors are naturally expected to appear. It is important to clearly identify them by eventual growth potential and the location of the service offered. Clearly, the Lima market is large enough to accommodate several suppliers. However, to secure a dominant position in the smaller Cuzco market, we will seek to increase customer satisfaction through additional complementary services and ongoing promotions. On the basis of permanent customer surveys, we will strive to propose services that give real value to our clients. Another factor with direct incidence on our strategy to meet our competitors’ challenge is the timing of their entry to the market. If this period should prove shorter than a year, we will increase our advertising and publicity budget to speed up our company’s name and service positioning.

In Ancash and Ica, competition may take longer to consolidate as these are tougher markets for new service introduction. However, their geographical location and climate make them ideal places for passive sports and nature watching.

Competitors and substitutes can be challenged through a strong business image involving, for instance, advertising services for local companies. Challenging competitors with larger resources than Walking Peru can afford would be useless and lead to resource waste. A protective strategy through an alliance would seem more appropriate in this case.

Target market
Composed of international travelers aged 18 to 50 and local tourists of the high and middle income levels. The tables below show the target population by department where the service is provided:

Annual population Ancash Lima Ica Cuzco
Pop. % of total Pop. % of total Pop. % of total Pop. % of total
Local tourists 38,654 4.3% 588,796 65.3% 45,449 5.0% 38,426 4.2%
Foreign tourists 2,652 0.2% 105,170 11.6% 13,222 1.5% 69,528 7.7%
Target market
901,897 persons
41,306 4.5% 693,966 76.9% 58,671 6.5% 107,954 11.9%

The potential market was identified after the findings of the market survey. Acceptance was 70% among foreigners and 83% among Peruvians. Results are shown below:

Ancash Lima Ica Cuzco
Local tourists 32,082 488,700 37,723 31,893
Foreign tourists 1,856 73,619 9,255 48,669
Potential market
723,797 persons
33,938 562,319 46,978 80,562

Finally, the market to be served is as follows.

Ancash Lima Ica Cuzco
Current market 47,538 persons 6,096 10,368 6,912 9,456
Percentage market served 23% 2% 16% 24%

Two main considerations were applied in determining the market to be served:

  • Reducing the risk of investing in launching a new product that must first be recognized as safe and accessible.
  • Taking account of restrained service capability given the limited amount of investment funds for the first year of operation. However, market development is a goal to be achieved under the prevailing conditions.

5 Source: Apoyo Opinion y Mercado. Young Population Profile.

Walking Peru
Table of Contents Appendices
0. Executive Summary
1. Product Concept
2. Tourism Industry
3. Market Analysis
4. Competitive Advantages
5. Products
6. Marketing Plan
7. Operations
8. Organization
9. Financial Results
Perus’s tourist calendar
Survey and Results
Operations schedule
Investment budget
Capacity expansion
Revenues first year
Most likely scenario
Contingency scenario
All information herein is confidential and belongs to Walking Peru.

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