REGENERATION LABS – A modern approach to Ecotourism

REGENERATION LABS is a new startup created by a fellow INSEAD student to enable corporates and individuals to improve the environment and support communities through specially designed projects, exercise activities and eco-tourism trips while also learning about traditional Chinese culture and investing in capacity and skills building and ecological restoration and preservation.

Aside from the fact that REGENERATION LABS is founded by a fellow 20D, our team was motivated to choose this project because it encompasses so many aspects of sustainability, creates value both within the local communities and to visiting participants and since it’s still quite young, there is a lot of room for new opportunities, ideas, and growth. Some different projects include water quality improvement, farming practices workshops, supporting traditional artists and ecological restoration.

Our team looks to help Regeneration Labs scale into other parts of China and one day into other countries, as well as capitalize on ‘social selling’: the idea of selling through social media platforms such as vlogging and live streaming. Currently, REGENERATION LABS works with local artisans to sell their art to trip participants, but our team will help the artisans also become self-sellers that are able to access customers outside of REGENERATION LABS participants, contributing to even further income and self-sufficiency. Through newer, more socially targeted forms of marketing to spread awareness, REGENERATION LABS will be able to scale, grow revenues substantially and become more financially viable. As the projects continue to grow, and more corporate partners are brought on board, more villages, communities and individuals can be supported and projects, such as those listed above, can continue to grow and have impact.

As the world moves more towards sustainable practices, and corporate social responsibility becomes higher on the agenda of many companies, organizations like Regeneration Labs will have a solid place in the upcoming 5 years and a stream of participants eager to help.

To make sure that our contribution to REGENERATION LABS is as effective as possible we present in this article a brief analysis of how the company contributes to achieving the Sustainable Development Goals (SDGs) followed by an analysis of its business model as well as some of the challenges the company may face. Finally, we discuss in more detail how we can help further develop the company in the near future.

Figure 1 – A view of Qingshan Ecovillage – a key partner in the development of REGENERATION LABS. It has has a population of approx. 2,600 people and its main sources of income are bamboo, rice, nursery stock and migrant workers.

How does REGENERATION LABS contribute to meeting the SDGs?

The United Nations created the SDGs to act as a guide to a better and sustainable future for everyone. While all of the 17 UN SDGs are interconnected, there are 8 SDGs that REGENERATION LABS touches upon and works towards achieving:

 Goal 1: No Poverty

The local community and individuals receive economic benefits from hosting tour participants, while also learning skills that are transferable to other jobs and allow them to seek further employment.

 Goal 3: Good Health and Well-Being

Health and Well-being are promoted for both the participants, through targeting hikes, treks and other exercise activities and well as for the communities through access to clean water and nutritious farmed foods.

Goal 4: Quality Education

REGENERATION LABS provides free summer camp for local students through volunteer teachers, disseminating information related to ecological best practices and sustainability. Tour participants and corporate partners can learn through REGENERATION LABS’ specially curated programs that teach individuals, firsthand, the value and need for sustainability.

Goal 6: Clean Water and Sanitation

Improvements to the local water supplies target removing nitrogen, phosphorus and dissolved oxygen to meet National Water Category I drinking standards in China and make the water safe to drink for the surrounding communities.

Goal 8: Decent Work and Economic Growth

As more trips and events are brought into the local, rural communities that RENGERATION LABS works with, the more community development needed. Villagers are trained in hospitality, event organization, farming, cooking, tour guiding, and artisanal crafts that keep them employed in their communities but also provide them the opportunity to be employed elsewhere.

Goal 10: Reduced Inequality

By bringing participants and tours into rural communities, more jobs are provided and there is greater potential for communities to earn more income. This extra opportunity translates to the ability to work on reducing the severe inequalities between urban and local populations. While there is still much work to be done, REGENERATION LABS can create an avenue towards empowering communities and reducing inequality.

Goal 12: Responsible Production and Consumption

REGENERATION LABS partners with local agricultural entrepreneurs and agencies to promote ‘green consumption’. So farming practices and skills that are taught to the local communities follow best practices that enable them to continue to produce high-quality food with the least impact on the environment.

Goal 17: Partnerships

A sustainable development agenda can only be achieved by partnerships at various levels; local, national and international. REGENERATION LABS operates through partnerships with various corporate for funding, building awareness and capacity building in local communities. Currently, corporate companies can pair with a local community or village to sustainably invest in over time. As the company continues to grow, more efforts will be dedicated to involving both public and private entities to create a more enriching experience, and hopefully can use any international partner to help scale in the future.

What are the key aspects of REGENERATION LABS business model?

In response to the negative environmental effects of over-urbanization and population density, REGENERATION LABS has connected with investors to develop the Qin Shan Eco Village for the financial, social, and environmental empowerment of the local community. This was achieved through the development of ecological agricultural products, eco-tourism, educational programs, and the production of traditional handicraft items.

REGENERATION LABS acts as the travel agency and event organizers for both individuals and companies, all of whom have a higher WTP for experiences like the Qin Shan Eco Village relative to the average customer. The company acts as a connecting hub of the corporations that invest, environmentally and/or socially conscious customers, and the local community stakeholders. Regeneration Labs has been profitable in recent years, capturing a large profit margin by targeting folks who are overall wealthier and have higher education than the average. The model is broken into the following 3 customer segments:

  1. Individual travelers: the company acts as the travel agency to organize trips to environmental sites and target wealthier, well-educated folk who are relatively insensitive to pricing
  2. Corporate team building activities: the company designs similar activities for companies and can charge a high price in exchange for higher standards for food and accommodation
  3. International students: the company partners students with local communities for volunteer opportunities vis university application consultancies. These folks are typically high wealth families with high WTP

Figure 2 – A comprehensive overview of the current products and services offered by REGENERATION LABS 

How is this business model sustainable?

The business model of REGENERATION LABS can be considered sustainable given the positive feedback from generating more business: the greater number of customers and revenue generated, the more locals will benefit from employment opportunities (i.e. tour guides, providing accommodations, sales of products created by local artisans and artists, etc.). Moreover, with increased awareness around such activities offered at Qin Shan Eco Village, there will be many others willing to invest in similar projects. The benefit of the large profit margin gained from this business model is that they can be reinvested into the company. Finally, it is important to mention that this project has a positive impact on the Chinese society as a whole: by bringing urban dwellers closer to traditional forms of living in China, a stronger motivation is developed to further develop the country, to invest locally. As such the company can become a clear weapon in the fight against brain drain.

As previously mentioned, there are benefits to targeting the wealthier subset of customers who live in the tier 1 cities like Shanghai and Beijing in China. It allows for the company itself, Regeneration Labs, to reinvest profits back into local communities alongside its corporate partners. The financing can loop back into the development of infrastructure, training programs and substantial investment into the local artisans, farmers, and community stakeholders. This model has proven to be successful for Regeneration Labs for all stakeholders involved.

Figure 3 – Junior high summer camp, led by the REGENERATION LABS stakeholders

Figure 4 – Workshops organized by local artists

What are some of the challenges to consider when scaling REGENERATION LABS and how is REGENERATION LABS responding to those challenges?

It is important to recognize that REGENERATION LABS and ecotourism as a broader industry sometimes has a debatable outcome on the communities it works with. A first consideration is whether there will be any negative effects of further scaling REGENERATION LABS? It will be important to carefully craft the incentives of the participating communities to ensure balanced development.

Another consideration is the current orientation of the business towards wealthy clients. Even if the individuals, corporations, and international students may have a genuine interest in supporting these local communities and their sustainable eco-tourism practices, there is a possibility of the “savior” approach. In the case that wealthier individuals are seeking out ways to bolster their own resumes or experiences, without first prioritizing the local communities, there could be possible negative repercussions such as the lack of long-term sustainability. A serious measurement that for-profit firms, sustainable social businesses, and NGOs must consider and implement moving forward is how to gauge the intangible “genuine approach” and selection of customers who are truly committed to optimizing the triple bottom line for all stakeholders, including the local farmers, artisans, etc. Therefore, it is important to comprehend the significance of the impact of these measurements mentioned above.

REGENERATION LABS is aware of those risks and has taken active steps in its business plan to mitigate these risks. A first important response to these risks is the relentless focus of REGENERATION    LABS on training and awareness activities for its clients. Other than conventional ecotourism, these activities focus on learning and transfer of skills. Locals are leading these activities which creates a teacher-student relationship between the staff and the clients. This setting encourages respectful behavior, which can be contrasted with clients participating in traditional ecotourism activities (where the focus is often on (responsible) consumption).

Secondly, to avoid the abovementioned “Savior” effect, REGENERATION LABS doesn’t aim for any form of charity or “development aid” in the transaction. The various stakeholders have considered business partners providing a service to the end clients who pay for that service. This is an important step towards recognizing the value and expertise present in the local communities.

Finally, REGENERATION LABS looks to involve professional partners in the scaling of its business. By partnering up with for example established hotel brands, REGENERATION LABS can benefit from some of the established business expertise. Of course, it is important that REGENERATION LABS remains true to its values and mission.

 

Figure 4 – Some more examples of community-led activities

Figure 5 – Examples of community-led activities bringing clients closer to nature

What is our vision for the next 5 years for REGENERATION LABS?

To scale REGENERATION LABS, the group needs to expand the reach of the business by simultaneously partnering with more eco-travel organizations and recruiting new customers across China. This would establish credibility in the greater Chinese market and achieve increased brand recognition across the country. The target market can be expanded not only geographically, but also socio-economically, as their current customers are mostly from wealthier socio-economic classes from a specific area in China.

To scale geographically, it would be best to find eco-areas near large cities to capitalize on the close market of new potential customers that matches their current client demographics. To scale socio-economically, the company needs to consider what they can offer in terms of pricing variations in order to attract a larger multitude of clients with a variety of willingness to pay. Once scaling across China is achieved on both these fronts, REGENERATION LABS can begin to scale its operations internationally to the rest of Asia and beyond.

One barrier for geographic scaling could be the lack of developed eco-travel areas near the large cities and the typical clients with high WTP that they initially built the business upon. Another potential barrier is the lack of expertise when entering a new market – it would be ideal to find a similar market where a partner or employee could be added to the team. It would reduce friction to hire someone who possesses a developed knowledge of the area and potential future customers. In regards to socio-economic scaling, however, it could prove difficult to provide cheaper offerings to bring in new clients while simultaneously still benefiting the eco-economies that REGENERATION LABS supports. This would need to be diligently explored in order to mitigate any unintended negative effects.

While due diligence could be costly in finding a new eco-destination, it would be best to get recommendations on eco-areas from word-of-mouth in the industry and current partners. The company could test the new locations themselves foremost, paying minimal exploring from a business perspective rather than a pure tourist perspective. Another way to pilot a new program would be to enlist former customers—if there are return customers to REGENERATION LABS, they could potentially be given a discount or a loyalty reward to take a “test trip” to the new eco-site.

As also mentioned earlier, we believe the offerings of the local artisans that REGENERATION LABS works with provides a unique opportunity to support the artisans entering the new market of “social selling,” which is selling through media platforms such as vlogging and live streaming—a very popular concept in China currently. Since the local artisans already sell their artisanal items to the tour groups, there is an opportunity to help them sell on an even larger stage. This may not benefit REGENERATION LABS directly, but it would further support the ecosystems that they were founded to enrich and create potential network effects to persuade new clients to visit the areas in which the artisans reside.

Next Steps

To launch the scaling project, the immediate next steps for geographic expansion would be a strategic market assessment of potential new locations around China. The main priorities would be to find an appropriately developed eco-village (or even one with high potential) near a large city and assess if they could easily garner new customers from this area. New labor capital and customers are needed for a successful geographical expansion of REGENERATION LABS. Costs estimated for this expansion are unclear, so if they could be kept relatively low, they could potentially fund the expansion internally. Geographic expansion is the most attractive option to purse first.

For socio-economic scaling, REGENERATION LABS needs to do an in-depth assessment of the financial sustainability of launching new activities and trips with lower price points into the product offering mix. The main objective of this assessment would be to ensure that the financial benefits to the eco-areas would not be squeezed and the REGENERATION LABS can also sustainably support their employees.

The next steps for the social selling project would be to assess the potential production capacity of the sellers and do a cost-benefit analysis. With this, we could understand if the project would be viable enough considering the required initial costs and costs necessary to continue the operation profitably. A further in-depth assessment would be needed to understand if the investment into the artisans would be more beneficial for the communities than other potential growth options. In addition, the possibility of a stronger partnership with REGENERATION LABS and the artisans should be explored.

Figure 6 – We believe expanding REGENERATION LABS from its current hub in QINGSHAN ecovillage to other sites in China can be a great tool in preserving the richness of the Chinese countryside in a sustainable and future-proof way

Group members: Dan KIM, Kristen MOSER, Amira EAPEN, Jonas DEBRABANDERE

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