Feasibility And Market Research
The hotel development cycle consists of several steps,
once a location is found the next step is feasibility and market research
The intention of a feasibility study is to provide an invaluable tool which would provide the promoter with an indication whether a project is sound using the internal rate of return as the ultimate indicator of the viability of the proposed project. It will not only advise the developer and promoters the highest and best use for the location they have chosen for their property. It can also be used to source operators and as a bankable document when looking for funds.
There are various sections with a feasibility study including a review of the macro environment in which the location of the project will be, the second stage we go down into the macro environment right down in to the location of the property where we will do an in-depth site analysis. We also do a demand analysis to see what sort of demand there is for what type of products. Another section is, supply analysis where we see who are the current and incoming competitors that will be there by the time the hotel is open which could be 2 to 3 years from that time or longer depending on the complexity of the project.
We then do the P&L analysis /the financial analysis to say if the hotel opens at the location with the recommended rooms and other facilities what is the revenue that will be generated and gives a financial projection over a ten year period. We then move into the investment analysis based on the development cost defined by the product that was identified and then we get our internal rate of return which is the ultimate indicator of performance in a project. We finally conclude the feasibility study with a risk analysis, giving an indication of what could be the challenges with the project and how to mitigate them.