THE DEVELOPMENT OF SUSTAINABLE TOURISM ON THE PRESTRANEK ESTATE[1]

SUMMARY

It all began in the early nineties when love for horses brought Mr. Uroš Birsa to the deserted village of Prestranek near Postojna, Slovenia. He found a property consisting of an old dilapidated mansion from 16th century, abandoned Austrian imperial horse stables from 17th century, and quite a few empty buildings which used to be a socialist farm, founded after the World War II.

He had a vision to use the redundant buildings and land, through tourism valorization. The project started in 1997. With a group of friends he first rebuilt some old stables for horses to meet their own needs, but the spirit of entrepreneurship eventually led him to the idea of building a tourist village on what had been left from an ex cooperative farm society.

In March 1992, Uroš Birsa and his partners founded Grad Prestranek company, with Mr. Birsa as its director. The company's main focus was tourism, specializing in horse riding and other supporting services. As a preliminary matter, the stables and facilities to keep horses, some apartments and a restaurant were rebuilt in the old buildings.

Five years after setting up the company, Uroš Birsa was concerned with the profitability question and wondered of what other services, apart from those horses-related, to provide, in order to attract enough tourists to fill the vacancies outside the high season and still meet the requirements for sustainable tourism development. He was aware that poorly commercial tourism development can erode the very qualities of natural, social and cultural environment.

The case helps to apply theoretical knowledge about sustainable tourism in a real case, encourages creative thinking, and help discovering the world of real business where multiple factors have to be considered simultaneously (“economic, social and cultural view”). It requires a teamwork and use of brainstorming technique.


THE DEVELOPMENT OF SUSTAINABLE TOURISM ON THE PRESTRANEK ESTATE[2]

Mister Uroš Birsa was an architect and a partner in APE Ltd. (Architecture, Design, Engineering). Based upon his prior experiences with partnerships in Rogaska Slatina, Mr. Birsa, together with a group of economists, lawyers, architects, constructors, and urban designers, undertook a project of rebuilding a new tourist center. In 1997, as manager, he explored possible ways of lowering the vacancy rates and seasonal fluctuations at the Grad Prestranek horse-riding tourist center.

How did Mr. Birsa become the director of the Grad Prestranek tourist center? It all began in the early nineties when his love for horses brought him to the deserted village of Prestranek near Postojna. He found a property consisting of an old dilapidated mansion from 16th century, abadonded Austrian imperial horse stables from 17th century, and quite a few empty buildings which used to be a socialist farm, founded ater the World War II. With a group of friends he first rebuilt some old stables for horses to meet their own needs, but the spirit of entrepreneurship eventually led him to the idea of building a tourist village on what had been left from an ex cooperative farm society. He dreamed of setting up his own business.

In March 1992, Uroš Birsa and his partners founded Grad Prestranek company, with Mr. Birsa as its director. The company's main focus is tourism, specilising in horse riding and other supporting services. As a preliminary matter, the stables and facilities to keep horses were rebuilt or renovated.

Five years after setting up the company, Uroš Birsa was concerned with the question of what other services, apart from those horses-related, to provide, in order to attract enough tourists to fill the vacancies outside the high season.

UROŠ BIRSA'S FIRST IDEAS FOR A NEW TOURIST VILLAGE

The Grad Prestranek estate is situated between the Primorska and Notranjska regions, five kilometers from the world-famous Postojna and its Karst caves. The estate had felicitous connections with the railway system, sports airport and is situated off the main highway linking the capital Ljubljana and the coast. The estate without forests and grassland measures 38,000 m2, of which there were 8,500 m2 of estate buildings and enclosures (houses, stables, storehouses and mansion) which had to be renovated. The whole property, including forests and grassland, had 60,000 m2 (perimeter about 4 km) (see exhibit1).

Uroš Birsa's idea was to set up a company where the local villagers could work in the restaurant, stables and on other premises. A portion of the flats would be for those employed by the village. However, the vast majority of capacities intended for tourists from Slovenia and abroad. These guests could be owners of the horses and the flats in the tourist village, or just visiting.

The main attractions for tourists would include the beautiful surroundings, the spacious indoor riding facilities, the beautiful riding terrain near and far, the professional guides, the lovely flats with cooking facilities, and the renovated mansion-hotel, which is steeped in medieval atmosphere, but also providing 21st century comforts. Holidays could be spent doing many activities: riding, playing tennis, relaxing in saunas, exercising in gyms, walking... In addition excursions would be organized for opera or theatre performances in Ljubljana or, for the more romantic, also a trip to Venice and the gondoliers.

The village will be targeted to well-off tourists: horse owners, managers, entrepreneurs, artists, politicians and the like wanting to take a rest in this oasis of peace.

ACTIVITIES PLANNED FOR AFTER 1997

APE Ltd. ordered a market research which found that the demand for tourist villages specializing in horse riding is significant in Slovenia as well as abroad (see exhibit 2). The estimated demand for the Prestranek tourist village was about 60 apartments with the total of 240 beds.

In 1997, the largest modern indoor rings in Slovenia were built. They are suitable also for competitions and other horse riding events. There are also a new dressing room with showers and 30 boxes for horses. In the rebuilt stables, the horses are housed and cared for throughout the year. Six modern fully furnished flats have already been built, accommodating up to 24 people, two of them are already let on a permanent basis. There was also a bar close to the indoor riding ring.

One plan for the Prestranek estate was to breed and train horses, organize horse riding courses and provide attractive tours in the saddle around Postojna.

THE PROJECT AND PEOPLE INVOLVED IN IT
THE STATE

Although the state supported the project and also financed it to a small extent, Birsa would like the government to see his project as a way of preserving national heritage in the countryside.

PEOPLE AND FIRMS AROUND PRESTRANEK

Postojna and the villages around Prestranek support the project because they are aware that it would attract tourists and create new jobs and profit. Although Grad Prestranek is keen to employ new local workers, sometimes it is not possible to find an appropriate one in the village.

FINANCERS

The payback period for this project was estimated to be 25 years and to carry out the project, around 10 million DEM would be needed. In the beginning, some 50,000 DEM a year should be spent on promotion. Because Slovene banks were not interested in providing the necessary capital, Mr. Birsa opted for private capital that could be obtained by means of issuing shares which would enable their owners a better liquidity. However, the procedure of issuing shares is a very complex one and has therefore been postponed indefinitely.

The project to build the Prestranek tourist village was planned to be carried out in two steps:

  1. Rebuilding the deserted village and all the supporting premises. APE Ltd. was in charge of this stage.
  2. Managing and marketing the Prestranek estate under the supervision of Birsa’s team.

REALIZATION OF THE PROJECT

Due to insufficient financial resources, the project would only be realized gradually in stages. For this purpose the whole estate had been divided into several profit centers. Each unit was organized in such a way so as to be able to sustain itself. This strategy meant a financial boost because the profits of these units could be reinvested.

However, the surrounding parks, lawns, trees and flowerbeds have been a top priority from the very beginning. Later, the old mansion is to be rebuilt so as to offer 60 beds, a restaurant and a multipurpose hall. The last stage would also include other buildings on the estate, all the remaining flats and sports facilities.

WHAT REMAINS TO BE DONE

Uroš Birsa was well aware of the fact that investors were needed if the project was to be profitable. He would also like to keep the level of vacancies as low as possible (fixed cost per unit) (see exhibit 3), and this means providing tourists with services other than those related to horses. Don’t forget that any solutions must be comply with the rules of sustainable tourism (see exhibit4).

What else could be done to attract more tourists?

EXHIBIT 1:

Plan of the Prestranek estate and places of interest in its neighborhood

Diagram 1: Boundaries of the estate

Places of interest:

  • Railway station -1 km
  • Sports airport - 4 km
  • Postojna - 5 km
  • Karst caves: the Postojnska jama caves, the Planinska jama caves, Pivka caves, the Skocjanske jame caves - 10 km.
  • The Kalic ski resort and the Nanos mountain - 15 km .
  • The Cerknisko jezero intermittent lake - 25 km.
  • Bovec 133 km; Ljubljana 50 km; Koper 57 km; Portoroz 73 km, Kranjska Gora 134 km, Trst 55 km.


Diagram 2: buildings on the estate.

Bold line: buildings (1- indoors riding rings, boxes and a bar, 2- the mansion - and the future hotel).

  • The rest: sports areas.
  • Circles: trees


EXHIBIT 2:

Horse riding in Slovenia - supply and demand

Source: Horse riding review in Slovenia: Gral marketing in cooperation with Slovenian Chamber of Commerce and Slovenian Horse Riding Association; April, May, June 1992; investor APE.

In Slovenia there are 57 horse riding clubs, tourist centers and tourist farms with rings.

There are between 450 and 600 horses (in horse sports centers and on farms) in Slovenia.

The characteristics of riders differ from those who also own horses.

50 % of riders are male and 50 % female.

Whereas a vast majority of riders are 25 years old, riders who own horses tend to be older than 25.

Most horse riders in Slovenia have high school education.

Most riders are single and some 40 % of riders - horse owners have families with children.

Horses are seen as entertainment and a life style.

55 % of riders spend approximately one hour in the saddle per visit. About 5 % spend 3 hours or more. Riders - owners seem to spend more time with their horses, some 20 % even more than 5 hours.

About 70 % of all riders have not been to a horse-riding center or spent their holidays there. 75 % of those who have are horse owners (more than 2 days, some 40% even 8 days).

Since the beginning of the nineties, the growth in horse-riding in Slovenia has been about 5 % per year.

EXHIBIT 3:

Estimated revenues, expenditure, service prices and rates of utilization per profit centers on the estate for 1997.

Diagram 1: Estimated revenues, expenditure, service prices (in DEM) for 1997.

N / TR / AFC / AVC / PRICE / RATES OF UTILIZATION
1997 1998 1999
Flats 1 / 4 / 57.564 DEM / 31 DEM / 154 DEM / 615DEM/ week / 45% 57% 79%
Flats 2 / 2 / 50% 100% 100%
Boxes for horses / 30 / 101.520 DEM / 40 DEM / 250 DEM / 470DEM/month / 60% - -

The bar has been leased for 25 DEM / square meter per week. Monthly revenues from the rent are 2.500 DEM, that is 30.000 DEM per year.

LEGEND
  • FLATS 1:Flats which are let.
  • FLATS 2: Flats which have been leased on a permanent basis.
  • N: Number of flats and horse boxes which are available for rent.
  • TR.: Total revenue per year.
  • AFC: Average fixed costs.
  • AVC: Average variable costs .
  • SERVICE PRICE:

For flats 1 the rent is paid weekly irrespective of the number of guests in them .

Flats 2 have been leased on a permanent basis. Their owners have invested their money in the Prestranek company and are not paying rents.

The monthly rent for horse boxes also includes horse care and riding.

  • UTILIZATION RATE:

=

=

Estimated seasonal fluctuations

INDOOR HORSE-RIDING FACILITIES AND BOXES: Winter (November - March) the utilization should be about 90%.

PERFORMANCES: Three are planed for the winter period and five for the summer. In the beginning they are free of charge, as a way of promoting the Prestranek tourist village.

FLATS: During the winter period, a lower occupancy rate than in the summer is expected.

© Copyright 1998 The Case Study Programme, Faculty of Economics, Ljubljana

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EXHIBIT 4:

What is sustainable tourism?

Source: Rebuilding old villages with the help of tourism; Research center, Faculty of Economics, 1996; Gombac, Lipovsek, Mihalič)

Sustainable tourism based on sustainable development is a way of tourist development which should promote social, economic, and legal integrity with a view to preserving natural environment and resources, as well as national heritage. Sustainable tourism should facilitate:

Quality life of the local people

High level of satisfaction for the visitors

Preserve natural, cultural and social environments.

Enable economic development, creating new jobs and revenues.

POSITIVE AND NEGATIVE EFFECTS OF SUSTAINABLE TOURISM
ECONOMIC POINT OF VIEW  / 

New revenues.

A higher level of employment.

Positive externalities.

Opportunity cost of investment in tourism.

Inflation

Negative externalities.

SOCIAL POINT OF VIEW  / 

Preservation of national heritage.

Heightened cultural awareness

Learning about other cultures

Mass tourism, lack of recreational facilities and green areas for the locals.

Denationalization.

Social problems (drugs, alcohol, violence)

ENVIRONMENTAL POINT OF VIEW  / 

Tourism encourages environment protection because green countryside is attractive for tourists.

Tourism facilitates the development of local infrastructure.

Tourism promotes ecological and environment friendly mentality.

Water and air pollution due to sewage and gas exhausts.

Architectural eyesores.

Endangering flora and fauna

© Copyright 1998 The Case Study Programme, Faculty of Economics, Ljubljana

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[1] This case was written by Tanja Mihalič, Ph.D. from the Faculty of Economics in Ljubljana, Slovenia with support from Janez Klančar and The Case Study Program, University of Ljubljana. It is part of the CIBER Case Collection sponsored by the Indiana University CIBER. This case writing project was funded under grants from United States Information Agency (USIA) and The Case Study Program, Ljubljana. No part of the case may be duplicated or reproduced without written permission.

Teaching note is available from the Case center or from T. Mihalič (e-mail: ).

[2] This case was written by Tanja Mihalič, PhD. from the Faculty of Economics in Ljubljana, Slovenia with support from Janez Klančar and The Case Study Programme, University of Ljubljana. It is part of the CIBER Case Collection sponsored by the Indiana University CIBER. This case writing project was funded under grants from United States Information Agency (USIA) and The Case Study Programme, Ljubljana. No part of the case may be duplicated or reproduced without written permission.