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2. Market Analysis 2.1. Business Opportunity
The analysis previously presented shows favorable conditions to invest in Nicaragua’s transportation industry. Growing tourists inflow, combined with an expanding economy, as well as increase in traffic congestion in the city are positive factors that support the viability and profitability of our business idea: Aerobus.
In order to quantify the market size and determine the profitability potential of our proposal, we will analyze information from both INTUR and EAAI regarding passenger traffic at Managua International Airport. For such analyses purpose, we will refer to Nicaragua citizens who live in the country as Nicaraguan nationals. All other foreign visitors, as well as Nicaraguans who live abroad on a permanent basis, are considered by Nicaragua’s Immigration Service as foreigners. Given information for 2013 is still limitedly available, most of our forecasting will be calculated with a 2012 baseline.
2.2. Target Market Segmentation Strategy
Aerobus aims to satisfy transportation needs for passengers travelling between Managua International Airport and the capital as well as its metropolitan area, without a prearranged tour and who need a convenient and affordable service to travel independently towards their destination. With this focus, we have divided our target universe into two large categories:
International Terminal passengers, and Domestic Terminal Passengers. Figure 3 shows the target universe division.
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Figure 3 Managua Airport passengers market segmentation
International Terminal passengers: these are all the travelers, regardless of their nationality, who are traveling from/to outside Nicaragua through Managua’s airport. They represent the largest portion of traffic at the airport, about 88% in 2012. This category has been subdivided into two segments:
Nicaraguan nationals – this will be our most important target market. It is composed by citizens of Nicaragua, currently residing in the country; that are travelling from/to outside Nicaragua, regardless of their travel purpose. In 2012, this category represented almost 30% of total passengers. We divided them into two different categories, based on residency:
o Living in Managua and metropolitan area: this will be our core and most important customer source. We look to serve travelers who can’t or don’t want to depend on other person to take them or pick them up at the airport, and who are not willing to pay for a private taxi.
o Living outside of Managua: we will also serve Nicaraguan nationals who live outside of the capital. However, we consider customer inflow from this sub-group won’t be significant.
Foreign citizens – this segment represents the largest amount of passengers, with about 60% of total. We also aim to serve them, but we understand such customers might be travelling with pre-arranged tours, or will utilize their hotel’s shuttle service. This will be a secondary market for us. Competition in this market will be more analyzed
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Domestic Terminal Passengers: these are all the travelers, regardless of their nationality, who are flying inside the country through Managua’s airport. They represent a small fraction of total passengers, with only around 12% in 2012. Given that passengers in this terminal do not go through passport control, no information is available regarding the proportion of Nicaraguans nationals and foreign citizens travelling through the domestic terminal. Along with foreign citizens travelling internationally, all passengers from the Domestic Terminal will be our secondary market.
2.3. Market Size
In 2012, Managua airport served almost 1.2 million passengers in both international and domestic flights. Table 2 shows the travelers division by terminal and nationality. For domestic flights, no information is available regarding passengers’ nationality. Appendix 4 shows the distribution between Nicaraguan and foreign travelers at the International Terminal for both 2011 and 2012.
Starting from this baseline, we have developed two scenarios to forecast market growth. In an optimistic scenario, foreigners travelling internationally will grow at 8.8% CAGR, based on WTTC forecasts. Nicaraguans traveling international will grow at a 4.6% rate, based on historic performance between 2006 and 2012. Domestic Terminal passengers will grow at a 1% CAGR, based on historic performance between 2011 and 2013.
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based on historic performance between 2006 and 2012. Nicaraguans travelling internationally will grow at a 1.5% rate, based on the country’s annual population growth rate. Domestic Terminal passengers will grow at a 1% CAGR, based on historic performance between 2011 and 2013.Table 3 Optimistic and Conservative Growth Scenarios (2014-2018)
2.4. Market Survey
Given this is a new service in the market, particularly focused on Nicaraguan travelers; we have decided to conduct a market survey with 3 specific objectives:
Assess customer acceptance towards this new service
Determine frequency of travels to/from the airport
Determine adequate price according to customer’s expectations
The survey was conducted online throughout a week and it was answered by 140 people. It consisted of a maximum of 25 questions divided into 5 parts: demographic, use of the airport (here the survey is divided into different questions for those who have and those who have never been at the airport), perceptions regarding transportation and traffic (for those who have never been at the airport), information regarding their last time in the airport (for those who have been), questions specifically about Aerobus service, and finally a set of questions about customers’ location in Managua.
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Survey results are mentioned throughout this business plan. Main results summary is available on Appendix 5.
2.5. Competition Analysis
The market currently has some participants, but none of them is focused on Aerobus’ target, Nicaraguan travelers living in Managua; nor offers a service like ours. Based on our target universe distribution, we will analyze substitute services based on market segmentation:
Nicaraguan nationals - we have identified three possible competitors in this segment:
Private vehicles: the most common transportation method to travel to/from the airport, according to our survey (79%). There are about 300,000 vehicles in Nicaragua and 2/3 of them are located in Managua city, so the availability is high.
o Strengths
Travelling by private provides flexibility regarding time, and it will transport the passenger until their final destination, regardless whether this is in
Travelers depend on some other person for pick-up or drop-off. The airport is located in the outskirts of the city, making it inconvenient for those who have to take travelers to the airport and then return to the city, especially considering increasing traffic. Depending on the time of the day, and where in the city the trip starts, a round trip to the airport might take up to 2 hours. Overnight stay parking fee at the airport is expensive (around US$5 per night), which could discourage travelers planning to go to the airport with their own vehicles.
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Taxis: This alternative is utilized by 15% of travelers, according to our survey. Two different types of services must be identified in this category: regular taxis, and private taxis. Given their differences, we will analyze their strengths and weaknesses separately.
Regular taxis: they are the most common service on the city. They are usually owned by cooperatives and receive government subsidies, particularly through fuel prices.
o Strengths
Regular taxis are widely available in Managua (about 10,000 units). Although they are allowed to run 24 hours a day, availability is severely reduced at night.
Given they don’t use fare meters, price are arranged based on trip distance, but their prices are considered low.
o Weaknesses
Their quality service is very low. Old vehicles, generally without enough space to carry luggage. Safety has also become an important issue, with many reports of robbery especially to foreigners taking regular taxis outside of the airport.
Drivers do not speak English.
Private taxis: they are generally privately-owned units which don’t belong to any cooperative. They generally do not receive government subsidies. This type of service also focuses on foreign travelers.
o Strengths
Their quality service is higher. Vehicles are generally newer, and their availability at the airport is high. Generally, prices are already fixed for trips from the airport to the city, with prices averaging US$20. They are generally perceived as safer than regular cabs. There is one company, Taxi Managua, which has a website in English and accepts online payments.
o Weaknesses
Their cost is high, compared to other services. Although they are available at the airport, picking up a private taxi somewhere else in the city is very difficult, given they are generally based at the airport. This limits the available options for travelers going to the airport.
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Foreign citizens - we believe that competition in the foreign citizens segment is higher, given the growing number of tourists. This segment is served by competitors who don’t focus on the nationals customers.
Travel Agencies: They organize transportation logistics for their customers, especially when they are large groups. There are many travel agencies operating in Nicaragua and their logistic networks are solid. Given they’re focused on foreign travelers; their service staff is generally bilingual.
o Strengths
Good logistics network, bilingual staff and generally offering transportation towards final destinations are some of the strength of the service offered by travel agencies. Comfortable units.
o Weaknesses
Travelers who haven’t booked their trip with a specific travel agency can’t apply while they are at the airport. Their service is mostly focus on transportation outside of Managua, particularly towards beach resorts on the Pacific coastline. Service is scarcely used by Nicaraguans.
Hotel Shuttles: Their service is similar to the one provided by travel agencies, but it is usually free of charge for hotel customers.
o Strengths
Free of charge service and transportation towards customer’s final destination.
Comfortable units and high levels of safety.
o Weakness
Likewise, service is limited to those customers who have a reservation at the given hotel. Also, customers need to inform of their arrival or departing information in order for the hotel to arrange their pick-up or drop-off. Service is limited to larger chain hotels.
As previously mentioned, foreign travelers are also served by private taxis.
2.6. SWOT Analysis
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developed the following SWOT analysis, which will allow us to create strategies based on our strengths and weaknesses, as well as market opportunities and threats.Strengths Weaknesses
First-mover advantage
Lower price compared to substitute service (private taxi)
Maximized occupancy by using small units Use of alternative energy to reduce fuel
Rising number of passengers at the airport Small hotels which don’t offer shuttle service
Offer integrated service (luggage check-in) with airlines which have service centers at
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Managua, Nicaragua. The airport shuttle service model is implemented in many locations throughout the world, offering travelers many benefits. Aerobus business model will focus on providing local and international travelers with: Convenient transportation method which allows for independent mobility for outbound and inbound passengers.
An affordable alternative to private taxis; a safe alternative to regular taxis; and a comfortable alternative to public transportation.
3.1. Ownership and legal representation
The Company will be will be created as a private limited company, fully-owned by its founder and investors. The Company will be registered as a touristic organization, dedicated to transporting tourist from the airport to their destination inside Managua and its metropolitan area. It is very important that the Company is registered under the “touristic organization” category, in order to enjoy the benefits of Nicaragua’s Law 306 “General Tourism Law”, which includes several tax benefits for touristic companies, including tax exemptions of importing of vehicles related to the Company’s operation. Aerobus’ founder will act as legal representative and General Manager.
3.2. Location and Facilities
Aerobus will operate from a small office located in Managua International Airport, which will also be its operations hub. This office will be dedicated to both administration and management as well as ticket sales. This space will be rented to EAAI on a year-to-year lease, and it will also include the right to install information signs for inbound passenger regarding Aerobus Service. According to EAAI, this lease includes one parking spot at the airport employees’ parking lot.