COMMUNITY BASED LIVELIHOODS RECOVERY PROGRAM (CBLRP)

FOR EARTHQUAKE AFFECTED AREAS OF AZAD JAMMU AND KASHMIR

AND NWFP

CBLRP-UNIDO

INVESTMENT OPPORTUNITY PROFILE

FOR
3 STAR HOTEL
IN
NWFP

SEPTEMBER 2007
SUBMITTED TO
AYESHA KHAN
CHIEF TECHNICAL ADVISOR
Community Based Livelihood Recovery Program (CBLRP)
United National industrial Development Organization (UNIDO)

BY
Sardar Shahid Farid
Chartered Accountant

Disclaimer
All material included in this document is based on data/information gathered from various sources and certain
assumption. Due care and diligence has been taken to compile this document. The document may contain human,
mechanical error or non accuracy of the information at the source. No liability for error, or omission or unintentional
misrepresentation will be accepted. We reserve the right to make correction and changes wherever desired in this
document or its subsequent versions.

1.

PROJECT EXECUTIVE SUMMARY

1.1

PROJECT BRIEF
This document is being prepared for the establishment of a three star hotel. The object of
establishing a three star hotel is to facilitate the internal and external tourist and provide
them with the best boarding and lodging facilities.
The hotel will provide accommodation facilities for 150+ guests at any time. Apart from the
usual guest entertainment facilities and the banquet halls; restaurants and club facilities
would also be available to non occupants. The competitive advantage of the current project
would be its prime location and provision of excellent and competitive services to occupants
and non-occupants.
The project is proposed to be located at Manshera providing comfortable facilities to the
tourist and donor community. Manshera is considered a gate way for all the tourist activities
of the locality. The region has access to all public amenities including water electricity and
telecommunication facilities. The completion time for the project is two years and six
months.
The capital cost is Rs 118 million while the initial working capital required would be
Rs 30 Million, thus the total cost would be 148 million. The sale at full occupancy i.e
150 double rooms and allied services is Rs 370 Million. The human resource requirement is
119 personal in the managerial, skilled and semi skilled level. There will also be numerous
jobs created indirectly. There is no problem of entry into the market as the people here are
known to be very friendly and there are no monopolies in this area of the economy.

1.2

FINANCIAL SUMMARY

Sales

Rs 370 Million

Gross Profit Margin

46%

Net Profit Margin

36%

Internal Rate of Return

21%

NPV @ 10%

137 Million

Pay back period

03 and Half year

Foreign collaboration sought

Joint Venture
Loan
Market access
Sub contracting
Buy back arrangement
Equipment purchase

Management expertise
Technical expertise
Marketing expertise
Technology transfer
Joint R&D
Other :- Franchise

Studies Available

Feasibility study
Other Specify

Project description

Date:

25 October 2007

2.

PROJECT RATIONALE
Manshera is the gateway to some of the most scenic and traditional beauty spots in this part
of the country, namely: Balakot, Showgran, Kaghan, Naran. All these places are renowned
tourist havens, with some key tourist attractions like Lake Saif-ul- Maluk and Sirree Paye.
Among the fresh food delights, the fruit and fresh water trout fish of these areas is
considered to be the best in the country.
This area has an established tourist market in which the number of internal tourists shows
increasing trends over the past five years. The occupancy and visits show some decreases at
times, however the overall availability of the guests is constant in the market throughout the
year.
There is a fair presence of internal and external tourists and guests flowing to the area. This
is due to the fact that this city is gateway to all tourist sites of the area. This area is
renowned for its natural beauty and friendliness of the residents makes the market of the
Manshera favorable for this type of project.
The competitive forces on the project are not very strong at the moment; the government
policies are inclined towards foreign investments and inflow of funds in the economy. There
is a big gap in the tourist market of our identified location. The large capital requirement of
the project raises significant barriers to entry which constrains new entrants into the market.
However, since there is a presence of alternative accommodation providers in the area, there
will still need to be a focus on capturing a substantive market share, particularly when
vying for external tourists. There are no other 3 star hotels available in the market, so the
project is differentiated on the basis of services, costs, facilities, linkages with the
international chains and market standing. As most of the services are being provided by the
hotel itself, therefore, the dependence on subcontractors is reduced. Furthermore, the raw
materials required for the operations of the project are widely available in the market and
there is no need to be dependent on any particular supplier or manufacturer of a commodity.
Because of its inclusion and linkage with the international chain of hotels the project will
enjoy the privileges of the international market by itself. To attract the local market there is
a need of strong personnel to take charge of the marketing activities and attract the local and
internal customers through good relationships, extra value added services and discounts.
The employees should be treated as the main assets of the project. The policies and
incentives for the employees will be set in such a way that the retention will be easier for
the organization. The management will be in an advantageous position as they will get
maximum support in their strategies and policies from the international chain. The project
should be able to fully leverage its international linkage the project, thereby providing its
service quality image and ranking in the market a distinct advantage.
The external factors usually applicable to a project are political pressures. Since, the project
is of a non-political in nature in the local market; therefore, no negative effects are
perceived on its viability due to this aspect. As the project will be providing employment
opportunities for the local people, therefore, its risks are considered as further reduced. The
trends in the local economy and the government and international community efforts of
revival and recovery further provide a favorable environment for such an initiative.

3.

MARKET INFORMATION
The hotel industry is the backbone of tourism activity everywhere in the world. It is an
industry of huge dimensions in its own right. The hotel industry is both capital as well as
labor intensive. In Pakistan, the Ministry of Tourism of Pakistan supports the Hotel
industry and makes plans to cover various operational aspects of the industry. The statistical
highlights of the hotel industry in Pakistan are as follows.
S.No. Components
1.

2.

3.

Years
2005-06

Private Sector Hotels / Motels

Hotels / Motels
Rooms
Public Sector Hotels/ Motels
Hotels
Rooms
Motels
Rooms
Private Restaurants AC only
Restaurants
Seats

% Change
2006-07

1605
37590

1729
10519

7.7
7.8

1
47
27
546

1
47
31
580

0
0
14.8
6.2

187
22989

226
25814

20.9
12.3

The information on hotels has been arranged province wise as reflected in the following
table
Provinces

Islamabad (ICT)
Punjab
Sindh
NWFP
Balochistan
Northern Areas
Azad Jammu and Kashmir

Hotel Establishments
2006-2007

Rooms

66
604
161
570
155
120
53

2222
14445
7196
10235
3453
2024
944

1729

40519

Following is the list of three star hotels currently operating, in Pakistan.

Sarbon Hotel, Abbotabad.

Gulf Hotel, Karachi
Beach Luxury Hotel, Karachi
Hotel Jabees, Karachi
Hotel Days Inn, Karachi
Hotel Mehran, Karachi
Hotel Flattis, Lahore.
Amer Hotel, Lahore.
Dream Land Motel, Islamabad.
Flashmans Hotel, Rwalpindi.
Margalla Motels, Islamabad
United Hotel, Rawalpindi.
Swat Serena, Swat
3

Hidatgat Hotel, Peshawer.

Shezan Residence, Multan.
Sindbad Hotel, Multan.
Hotel East Inn, Faisalabad.
Shalimar Hotel, D. G. Khan.
Hotel Humere, Bahawalpur

Currently there are 13 Hotels in Mansehra with the capacity of 10-25 rooms each.
4.

BUSINESS PLAN
Non- availability of three star hotels creates a profitability margin window for the first time
investor. If clean and comfortable stay is provided to the customers, then with a very
conservative estimate, the first year of the projects expected occupancy would be 50%
room occupancy with an annual growth of at least 10% anticipated.

4.1

Product sales.

Main customers would be the seasonal tourists, the business houses and the donor
community with their conferences and seminars. Other major customers include trade
bodies and international adventure tourists. There will be one time and regular commission
for the sales people.
Accommodation
Per Double bed room
Food and Beverages
Room Service
Room Refreshments
Restaurants
Parties
Out Side Service

Price
5,000

Reservations
54,750

Amount
273,750,000

Rooms
150

Days in
year
365

1,000
500
2,000
50,000
30,000

10,950
7,665
21,900
365
365

10,950,000
3,832,500
43,800,000
18,250,000
10,950,000

60
1
1

Parties
365
365
365

87,782,500
Other Operation Departments
Telephone
300
Laundry
200
Pool, Club and others
300
Shop License Fees
Number of Shops

125,000

Total Sales

4.2

9,125
9,125
9,125

2,737,500
1,825,000
2,737,500
7,300,000

10

1,250,000
1,250,000
370,082,500

Raw Materials

The basic requirements for running the hotel business are the amenities, water and utilities.
All the requirements are easily available at low costs. Furthermore, the raw materials
required for the operations of the project are widely available in the market and there is no
need to be dependent on any particular supplier or manufacturer of a commodity.
4.3

Services provided

The services provided will be rooms for night stay, laundry, restaurant, halls for seminars
and parties.
4.4

Distribution/Marketing Channels.
4

Marketing and related promotional activities will require a well thought out strategy and full
advantage of international chain of hotels may be taken. Although, the promotional
activities should start from the first year of the project, the main sales pitch will be taken
from the second year of establishment. This may include awareness-raising among the
potential internal tourists, linkage with international chain of hotels, discount campaigns,
and provision of various added attractions to increase the (hotels) customer value.

4.5

Human Resource Requirement.

The Human resource requirement directly associated with the hotel is listed below.

Description/designation
Operating Management
Cooking Staff
Waiters, Bell boys
Drivers
Janitors
Guards and others

Number
8
20
50
6
20
15
119

Total

4.6

Project Financials

4.6.1

Operational data

Monthly
salary for
the
position
50,000
15,000
10,000
5,000
5,000
5,000
Monthly
salary

Total
monthly
salary
400,000
300,000
500,000
30,000
100,000
75,000
1,405,000

The capacity of the hotel is 150 rooms and allied services. It is expected that the room
occupancy would be 50% in the first year and will increase gradually; the allied services are
expected to increase like wise.
4.6.2

Fixed costs

The project capital cost is detailed below.

(RUPEES)
Land (10 kanals)
Building and Equipment
Furniture Fixtures and Computers
Vehicles
Crockery Lenin and Others
Total

4.6.3

20,000,000
72,000,000
20,000,000
2,000,000
3,300,000
117,300,000

Working Capital

Initial working capital required for the project is Rs 30,000,000.

4.6.4

Overhead cost

In the first year following overhead cost are estimated.

Admin and marketing Salary
Heat Light and Power
Communications
Printing and Stationary
Traveling and Conveyance
Entertainment
Office Supplies
Repair and maintenance

750,000
340,200
513,000
340,200
1,512,000
172,800
196,560
178,200

4,002,960