PROJECT PROPOSAL

Renovation of Haean Hotel

1 Description of the Project
Wonsan, the capital of Kangwon Province, is a tourist resort which is surrounded by famous
tourist sites such as Mt. Kumgang, a world-famous scenic spot, Ullim Falls and newly-built
Masikryong Ski Resort and furthermore it has noted Songdowon Bathing Resort and
Myongsasimri Bathing Resort..

1.1 Location
Pongchun-dong, Wonsan, Kangwon Province, DPR Korea

1.2 Aim of the Project

The project aims at providing convenience to the guests who visit Wonsan-Mt. Kumgang
International Tourist Zone and at satisfying the demand of the people who visit the hotel
and as well as contributing to their cultural recreation by building a 4-star 18-storeyed hotel
with accommodation capacity of 500 guests in place of the existing 12-storeyed one.

The planned hotel will be equipped with various service functions that can fulfill the diverse
demands of visitors while it can meet their cultural demands.

1.3 Advantages
Haean Hotel is surrounded by tourist scenic spots such as Mt. Kumgang, Chongsokjong,
Masikryong Ski Resort and is situated near the airport, thus it has very convenient traffic
route from in and out.

Being the hotel on the central beach of Wonsan, it gives tourists an amazing scene, as if
they are on the sea, with a fantastic view of the tourist scenic spots such as beautiful Kalma
Peninsula, Songdowon Bathing Resort and Myongsasimni Bathing Resort, and furthermore
tourists can experience the fresh natural ecological environment.

Most of the raw materials, spare parts and furniture needed for hotel operation and
maintenance can be purchasable in the country and there are existing long experienced
persons for management, technical experts and skilful workers in service area now.

-Analysis of Market Demand

Wonsan is located in the middle of the famous tourist spots such as Mt. Kumgang,
Chongsokjong, Masikryong Ski Resort, Myongsasimni beach and etc but the capacity of
the accommodation in Wonsan is about 1,500 beds. It shows absolute lack of
accommodation comparing with increasing number of tourists (in tourist season, about
4,000 foreign tourists and about 8,000 home tourists).

In tourist season Songdowon Bathing Resort, Myongsasimni Bathing Resort, Masikryong

Ski Resort near the hotel is overcrowded by the tourists from home and abroad.

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1.4 Present state of the Project

Haean Hotel is located on the central beach of Wonsan, Kangwon Province.

It is situated at the crossroads between Pyongyang, the capital of DPRK and the region on
the east coast of the country and in the distance of about 10 km there is an airport, a port
and railway station from home and abroad

The existing Haean Hotel has a 12-storeyed lodging (in L shape) with 216 guest rooms (of
9~18m2 ondol, the traditional Korean-style heating system hot floor) in total where more or
less 400 guests can be served at once.

The total site area of Haean Hotel is 3 200m2

1.5 Service items and scope of the Project

Service scope
Haean Hotel will carry out the mission as comprehensive service complex to serve the
tourists in the visit of Wonsan-Mt. Kumgang International Tourist Zone.

It will be renovated as a hotel with service capacity at the level of 4-star hotel.
Service items

- ISDN (Integrated Service Digital Network), International Telephone, Fax and

E-mail.

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 - Renting the cell phones.

- Interview and meeting, cinema.

- Diverse meals, coffee, beverages and souvenir including Korean indigenous

products.

- Electronic games, billiard, ping-pong and inner golf.

- Medical care and assistants.

- Photographic and mending service

- Swimming, sauna, massage, haircut and beauty art

- Satellite TV, Cable TV and multimedia service

- Park

- Outdoor sports facilities(volleyball, badminton, mini-golf and etc)

1.6 Preliminary Design of the Project

- Outside Arrangement

After removing the existing 12-storey hotel, a18-storey building will be replaced.

The total building area of the new hotel is 3,200m2 and the total floor area is 37,000m2.

Outer wall of the building is to be decorated with bright high tension glasses and the roofs
will be distinctively formed for each block. On the top floor will be arranged a revolving
restaurant and soft drinks bar with a whole view of the landscape and the sea.

- Inner Arrangement

It is planned to arrange two deluxe rooms on the top floor and there will be 7 deluxe suites,
20 premium rooms and the rest of standard class. The central hall of the hotel will be of
arch as much high as the fourth floor and in the first and second floor there will be various
kinds of service facilities are to be arranged such as souvenir shop, coffee bars etc.

- Surrounding Arrangement

The existing park is to be extended conveniently and neatly, the existing livestock shed
area is to be garden area by removing the livestock shed and installing stage-by-stage
fountains, various nice twin street lamps and wooden chairs with special pent roofs.

1.7 Desired Investment Type and Duration of the Project

- Desired Investment Type

Joint venture or other investment types agreed by both sides

- Implementation Period

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 Construction: 18 months

Operation: 20 years

1.8 Primary Project Schedule

The primary project schedule for renovation of Haean Hotel as follow is expected;
Implementation Duration (18 months)
Breakdown
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
1 Detailed Design
2 Frame working
Removal Work
Foundation Work
below ±0.000
above ±0.000
3 Outside Final Working
Outside Final Wall
Roofs
Afforestation, gardening and
landscape
4 Equip. Assembling and Trial
Equip. Assembling and Piping
Wiring and Trial
5 Interior Finish Works
Interior Architectural
Engineering
Electricity and Automation
6 Final Trial and Completion
Inspection

1.9 Estimated Cost and Economic Analysis of the Project

- Estimated Cost
Items Cost(US$) Local(US$) Foreign(US$)
Total 24,341,000 2,204,000 22,137,000
Land 352, 000 352,000
Building+equip.+fixture 22,942,000 1,852,000 21,090,000
Cost for preparation of operation 110,000 110,000
Current fund 937,000 937,000
Investment rate (%) 100 9.1 90.9

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- Profitability and Investment redemption analysis

Annual revenue: US$12,090,000 (Usage rate 50%)

Annual cost: US$ 6,980,000

Annual gross profit: US$ 5 110,000

Annual subtracted amount: US$ 1,750,000

Annual Net Profit Amount: US$ 3,360,000

- Economic Analysis

IRR: 22.7%

NPV: US$ 15,000,000 (discount rate 13%)

Payback Period: 3.7 years

From the above analysis, the proposed project can be expected to be the profitable
project.

2 Project Initiator
Name：People’s Committee of Kangwon Province，the DPRK

Add: Wonsan， Kangwon Province of the DPRK