Teshome Mitore Hotel

TOM DALE DEALER Hotel
Project proposal on 3(three) Star Hotel
Location: Areka Town, Wolaita Zone, Southern Ethiopia
Promoter: TESHOME MITORE LEIMANGO
Phone Number 0913468472
Feburary, 2023
Areka, Ethiopia
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Table of contents
Contents Page
Confidentiality Agreement.......................................................................................................4
1. Introduction..........................................................................................................................5
1.1 Business description..........................................................................................................5
1.2 overview of project location..............................................................................................5
1.3 Managers/Directors...........................................................................................................7
1.3.1 Management team.......................................................................................................7
2. Executive summary.............................................................................................................8
2.1 Business goals/mission......................................................................................................8
2.2 Business philosophies/identity..........................................................................................8
2.3 Location.............................................................................................................................8
2.3.1 Geographical markets.................................................................................................8
2.4 Vision of the future............................................................................................................8
2.5 Main objectives.................................................................................................................9
2.5.1 Business objectives.....................................................................................................9
2.6 Financial objectives...........................................................................................................9
2.6.1 Marketing objectives..................................................................................................9
2.6.2 Key advantages...........................................................................................................9
2.7 Strategic alliance............................................................................................................10
2.7.1 Strategic positioning.....................................................................................................10
3. Personnel............................................................................................................................11
3.1 Licenses...........................................................................................................................11
3.2 Sales.................................................................................................................................12
3.3 Internet.............................................................................................................................12
4. Marketing...........................................................................................................................13
4.1 Accommodation..............................................................................................................13
4.2 Food Service/Room Service............................................................................................13
4.3 Recreation........................................................................................................................13
4.4 Conference facilities........................................................................................................13
4.5 Market analysis................................................................................................................15
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4.5.1 Market segmentation................................................................................................15
4.5.2 Marketing goals........................................................................................................15
4.5.3 Personnel and the marketing concept.......................................................................16
4.6 Pricing strategy................................................................................................................16
4.7 Operations.......................................................................................................................16
5. Analysis of the advertising expenditures/Advertising with promotion goals:...................18
5.1 SWOT analysis...............................................................................................................18
5.2 Problems and Possibilities...............................................................................................19
5.3 The organizational structure...........................................................................................20
5.4 Contingency.....................................................................................................................21
6. FINANCIAL PLAN..............................................................................................................22
6.1 Revenue Streams:............................................................................................................22
6.2 COST STRUCTURE:.....................................................................................................23
6.3 Project Cost:....................................................................................................................24
6.4 Loan liquidation pattern.................................................................................................25
Table 2 – loan amount and amortization schedule................................................................25
6.5 Profitability analysis.......................................................................................................25
6.5.1 Profit or loss statement.............................................................................................26
Table 3 for the period of five years from commencement of the operation..........................26
6.6 Cash flow statement........................................................................................................26
6.5.1 Cost benefit and sensitivity analysis.............................................................................27
Table 5 computation of NPV and IRR..................................................................................28
7. Implementation:.................................................................................................................29
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Confidentiality Agreement
The undersigned reader acknowledges that the information provided by Teshome Mitore in
this 3(three) star Hotel business plan is confidential; therefore, reader agrees not to disclose it
without the express written permission of Teshome Mitore.
It is acknowledged by reader that information to be furnished in this business plan is in all

respects confidential in nature, other than information which is in the public domain through
other means and that any disclosure or use of same by reader, may cause serious harm or
damage to Hotel business plan.
Upon request, this document is to be immediately returned to Teshome Mitore
Signature ___________________
Name _ Teshome Mitore
Date ---------------------
This is a business plan. It does not imply an offering of securities
1
1. Introduction
1.1 Executive Summary
Name of the Project 3(three) Star Hotel
Name of promoter Teshome Mitore
Nationality Ethiopian
Legal form Sole proprietorship
Project location Areka Town, wolaita Zone, Southern Ethiopia
Land required 3000M2
Employment Permanent : 17
Temporary : 40
Target Customer of the Hotel The hotel is intended to provide service for the district
community, city dwellers as well as the country as a whole
Payback period 10 Year
Project composition:- multipurpose Buildings and Facilities used for diverse services
like Restaurants, bed rooms and Garden and Parks,Swimming
pools and entertainment services.
Social and Economic Benefit: provide better Tourism and entertainment service for local and
foreigners, employment opportunities, generate revenue to
government in the form of taxes and benefits for the local people
Investment capital and sources 110,001,000.00 birr of total investment out of which
of Financial 30% 33,000,300.00 birr from promoter’s equity and
70% 77,000,700.00 birr from long term bank loan.
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1.2. overview of project location

Areka is one of the cities located in Wolaita Zone of SNNPR State of Ethiopia. Areka City
was established in 1957 E.C. In 1970E.C, has obtained legal status from Sidamo province
work and urban development minister branch office. By 1996 E.C it was transformed to a
reform City. Due to absence of enlightened municipal leadership and financial constraints,
insignificant development was experienced until 1983 E.C. The increased migration of
people from the surrounding rural kebeles and other areas aggravated the problems of
inaccessibility of infrastructure services. In 1976 E.C, the city had its master plan, which
contributed significantly to the planned growth of the city. The city is along Addis Ababa-
Hosanna Wolaita Soddo road at a distance of 299 Km from Addis Ababa and 197 Km
South from the regional Capital Hawassa and 29 Km south west from Wolaita Soddo, the
capital city of Wolaita.
Areka city was founded in 1964 and it has City Administration Status in 2003.
Geographically, the city is situated at 7.04°-7.1° latitude north and 37.68°-37.72min°’
longitude east. The total area of the city covered by Master Plan is 32 km2, while the total
Built-up area/’Municipal area’/ of the city 15 km2. The altitude of the city ranges from
1500 to 2000 meters above sea level. On the bases of SNNP Regional State City grading
process and proclamation of 65/2003, Areka is categorized as the 2nd grade city.
Important and unique feature of the city includes that its suitability for establishment of
agro industries, like spices processing as the city is surrounded by ginger belt areas,
existence of proximity to tourist attraction sites like Ajora falls ,and prevalence of
institutions like Areka Agricultural Research center which could be considered as to
acquire agro related services.
Spatial form of the city: Areka city is the political, economic, social and administrative
center of Boloso Sorie Woerda, in Wolaita zone, South Nations, Nationalities and People’s
Region. Areka city is one of the 44 reform cites in the SNNP region and it has Three
administrative kebeles. It is located in the southern part of the country, 299km from the
Federal capital Addis Ababa and 185km from the regional capital Hawassa and the total
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area of the city is 3484 hectare (Areka City ATPLUP, 2014/15) is mainly the result of its
altitude. The city is located at an altitude of 1750m above sea level with astronomical
location of 7.170- 7.980 latitude and 37.620- 37.830 longitudes in the east direction. From
this altitudinal point of view, the city's weather condition can be categorized under “Dega”
or medium land climate with warm air condition. The mean annual temperature of the city
ranges from 17.60c- 22.50c. However, the hottest months of the city are January and
February. The average annual rain fall is about 1600-1701 mm on during summer season
(Areka City FEDO, 2013).
Population of the city is about 64316 (49.7% are female) as per report of, whereas the
estimation of the city administration and ZoFED of Wolaita Zone shows that the
population of Areka city is estimated to be about 64316 in the year 2009E.C . This
implies that the population of the city has been growing at the rate of about 6.3% per year,
revealing the alarming rate population growth. Of the total populations in the city, about
31514 (49%) are Working age population (15-60 years), 41% are children under the age of
15; and the remaining 10 % are elderly population (60 & above years). This leads to
dependency ratio of 143. The livelihood of most of the city population was earned from
small trading, farming, and employment in government and non-government organization
(Areka City FEDO, 2017).
Teshome Mitore 3 star Hotel will located in Areka –sodo main asphalt road sefer selam
Kebele Dola Mender local name “ Woga zafiya” located at around 3 KM distance form
Town Administration office Areka, Woliyta Zone.
1.3. Hotel and Tourism sector in Ethiopia
Ethiopia has vast potential for development of various economic sectors. Although
agriculture is the mainstay of the country’s economy the opportunity to invest in other
sectors especially in Hotel, Tourism and various recreation activities are there. Although
Ethiopia is endowed with many natural and manmade tourist attractions, these resources
have not been sufficiently exploited. The country’s geographical location and the
remarkable physical features and climate have endorsed it with rich and varied natural
heritages. Despite considerable demand, tourism sector remains at relatively low stage of
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development. The Hotel and recreation service facilities in Ethiopia have been found at a
lower level of development. The number of Hotel service establishments in the country has
remained insignificant to respond to the customer’s demand. Only few Hotels have the
capacity or quality to provide good accommodation and catering facilities to fulfill tourists
need. There are only few hotels in the capital, Addis Ababa, and other big towns of the
region states that organized on international standard to fulfill the consumer’s needs. The
government of Ethiopia has devised a long term strategy that gives due regard to the
preservation, development and promotion of the country’s tourist attraction. This includes
plan for expansion of tourist facilities and the necessary infrastructure. Indeed in the wider
sense the country has a good potential for the development of high standard hotels,
recreation and market center and there is a growing realization that this sector holds a
significant development perspective, which should be fully exploited in the planned and
controlled manner.
In adopting a planned and regulated approach the country is in a position to expand its
hotel and tourism sector in a way that emphasizes environmental conservation and
enhances the quality of the overall tourist experience. This will contribute substantially
towards improving the standard of living and the quality of life of the population. The past
trend shows that most of the high standard hotels and recreation centers are concentrated in
the capital, Addis Ababa. The number of hotels and recreation service facilities in other
regions of the country has remained insignificant to respond to the customers demand.
Only few hotels and recreation centers out of Addis Ababa have the capacity to provide
accommodation for mid or high-class guests.
By taking this encouraging as an opportunity the promoter project plan to establish 3 star
international Hotel service in Wolaita zone Areka town sefer selam for the benefit of the
promoter, the district community as well as the country as a whole.
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2. The Project
2.1. Project description and Justification
International standard hotel is high-class hotel like 3star hotel where services like
bedroom, catering, meeting rooms, multipurpose assembly hall, swimming pool,
gymnasium, other sports facilities like tennis, and children playground, night club with
dancing to live music or discotheque or cabaret etc. A hotel is an establishment that
provides paid lodging on a short-term basis. Facilities provided may range from a modest-
quality mattress in a small room to large suites with bigger, higher-quality beds, a dresser,
a refrigerator and other kitchen facilities, upholstered chairs, a flat screen television and
en-suite bathrooms. Small, lower-priced hotels may offer only the most basic guest
services and facilities. Larger, higher-priced hotels may provide additional guest facilities
such as a swimming pool, business center (with computers, printers and other office
equipment), childcare, conference and event facilities, tennis or basketball courts,
gymnasium, restaurants, day spa and social function services. Hotel rooms are usually
numbered to allow guests to identify their room. Some boutique, high-end hotels have
custom decorated rooms.
2.2. Ambition of constructing three star hotel project
According to the preliminary market analysis, the demand for hotel service is very high
and yet the supply is limited leaving a huge service gap to the customer. Unfortunately,
there is no saturated standard hotel (3 stars) in the area. Although one international type
hotels have already working in the area, but still huge gap is there in between demand and
supply in the town. The service (3 star hotels) is will widely accepted in Areka town,
Government employees, Private employees, Tourists, local customers, and to some extent
even in rich house-holds. Therefore, there is good scope for establishing the units for
establishing and maintain 3 star standard /international hotel service in Areka town as well
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as in the country. Due to this, it has become imperative to build and maintain three star
standard hotel services for the man kind in prevailing conditions.
2.3. Project Objective
The main objective of the project is aimed at to maximize the return on invested capital in
the form of profit for the promoter. However, its implementation will benefit the
employee, the consumer society and the government at different levels. In this respect, the
project is aimed to promote the following objectives:-
 To raise the significance and importance of the sector and thereby raising its
contribution to the national economic development
 To give quality and standard hotel service
 To provide gainful employment to a large segment of the population of the project

area and augment earning capacity at the grassroots level,
 Increase government revenue through the different forms of taxes, which in turn used
to facilitate social and economic development.
In general, the project is believed to have significant social and economic benefits
that accrue to the society, the region and the country beyond the financial returns to
its owner.
2.4. Mission and goal
2.4.1 Mission
 Mission of the particular project is to construct the standard 3 star hotel and to give
quality service.
 To become financially liquid and guaranteed more than ever.
2.4.2. Goal
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Teshome Mitore 3 star Hotel, We wish to acquire national renown as a business
destination within the next 5 years. We see it as our main mission to provide high
quality accommodation and associated amenities and services at competitive prices to
our targeted markets. Basic business objective is reflected in everything that we do,
which is to contribute to the enrichment of the quality of lives for people around the
nation.
2.5. Key advantages

Teshome Mitore 3 star star Hotel will become a renowned hotel because of the
following key advantages:
 Our hotel is formulated along current ecological guidelines greatly reducing its impact
on the surrounding environment whilst stimulating local economy.
 The hotel will have a state of the art security system with direct communication to the
local law enforcement department.
 Specifically designed ambiance in a classical culture style setting.
 Maintenance of high-quality real time financial and reservation system.
 Our unique formula for service and ambiance.
 Senior management will have significant business experience.
 Foundations will have strict financial guidelines in the areas of liquidity, inventory
management, and profitability and is positioned well for future growth.
 Foundations will have negligible long-term debt.
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3. Marketing
3.1. Demand for hotel services
The feasibility study conducted for this project deals with the demand and supply analysis for
the hotel project to be established in the area by taking the number of international and
national tourist, investors, employers and government directly related with the level of
development of the economy in general and the tourism sector in particular. It is a function of
the number of both domestic and foreign tourist travelers in the area, travelers for the
commercial or business purposes, travelers for conference and other assembly purposes,
residents in the area (in fact it depends up on the standard of the hotel and the living status of
the residents) etc.
3.2 Market analysis

At Teshome Mitore 3 star hotel the following tools were used to analyze and to explore
the market:
 inquiries with existing and potential customers

 requested information from community business support groups
 collected catalogues, price lists and brochures of competitors
The hospitality market is good for millions of birr a year. After two years of struggling, the
hospitality industry is projecting a stronger surge during 2017, in which period a
significant increase in activity is anticipated. Revenues as well as supply and demand all
suggest a season of positive growth. Growth in visitor numbers has steadily increased in
2018. Visitors from Areka town have been the primary source of this growth. We expect
that the increased preferences for domestic travel, close-to-home destinations, and highway
travel will boost Foundations’ visitor numbers.
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3.3 Market segmentation

Four types of hotel properties generally appeal to leisure travelers: economy, mid priced,
upscale and luxury hotels & resorts. Because of its location and formula the hotel will cater
primarily to business people and will be open all year.
3.4 Marketing goals

An important part of Teshome Mitore 3 star hotel marketing goals and strategies will be to
establish and maintain its level of quality accommodation and associated services. Due to a
lack of rating system in the hotel and accommodation sector, the hotel has decided on a
strategy whereby its rating in Areka is at least that of a luxury hotel. To this end we will
regularly invite representatives of the various rating systems to visit the hotel to ensure that
we will remain listed within these categories. Upgrades and renovations will be carried out
whenever necessary.
The product line offers the following additional advantages:
For families
For families we offer access to child care and children’s facilities such as local day care
center, playground, and accommodations suited for small children and babies.
For business travelers
For business travelers we have a complete range of conference and business facilities such
as office space, fax, printer and secretarial services and broad band Internet connections.
Our meeting rooms are fully equipped for conferences and we have limousine and taxi
services. We also will have available reservation of our entire third floor for corporate
gatherings over several days. This area offers secluded conference amenities found on the
main floor while affording uninterrupted meetings.
For couples without children
For tourist couples without children we have a large variety of amenities catering to the
young and old such as a full program of recreational activities: walking, hiking,
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parasailing, boating and other water sports and historical tours of local cities, and many
more.
For single and group travel
For the single or group traveler there is a selection of group activities available which can
be reserved in advance or after arrival at the hotel. These activities include sports and
recreation, dinner dance evenings [at local venues], guided tours and organized coach
travel to areas of interest in the region. All group travel can be accompanied by a [resident
hotel] guide and the hotel can handle any in-house catering for groups.
For physically impaired
The hotel is amply suitable and adapted to persons who travel in wheelchairs, need nursing
care, have vision or hearing difficulties or otherwise require easy access to amenities,
services and accommodation. All hotel buildings are low on thresholds. Ramps and
elevators are located where stairs are necessary, there is clear signing of all services and
amenities and rooms can be fitted out with alarm buttons for immediate medical attention.
Security
State-of-the-art security facilities
Teshome Mitore 3 star hotel will be outfitted with a state of the art security system in
addition to smoke alarms and a sprinkler system. This will include a CCTV (closed circuit
television) system for surveillance of all public areas such as the hotel entrance, the
parking lot, the conference and meeting rooms, and the swimming pool, as well as all
corridors, elevators and service areas of the hotel. Professionally trained security personnel
are part of the hotel staff and can be hired from a local security firm to expand any group
of visitors’ needs. Cooperation with the local authorities furthermore ensures safe transport
to and from the hotel is required. This will ensure that our high profile visitors, be it
dignitaries or businessmen, can be assured of a safe and secure stay at hotel.
3.5 Advertising and promotion
Teshome Mitore 3 star hotel promotional plan is diverse and includes a range of
marketing communications. We will have a Grand Opening to be scheduled upon
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construction completion which will be advertised in local newspapers and local radio
channels. To support expansion efforts, the hotel considers using popular media, such as
local TV, radio and the Internet to advertise. It appears that the most successful hotels /
resorts spend a percentage of net sales revenue for promotion and advertising. Hotel plans
to do likewise with a portion of net sales on a yearly basis. Based on this decision,
advertising and promotional possibilities were prioritized in order of probable
effectiveness.
Opening -- we will send out an introductory press kit to all media and place printed
announcements in key publications.
Ongoing -- during the initial year, we intend to get our leaflets displayed in the many
venues in the city. The staff will be trained as to promote by word-of-mouth.
Future - for our conference services, we intend to hire a sales representative who will be
in charge of prospecting for new clients.
Public relations Press releases are issued to both trade journals and publications such as
local and regional newspapers, travel agents, hotel and accommodation magazines, online
hotel and restaurant directories and in conjunction with local Chambers of Commerce.
3.6. Pricing strategy

In the hotel there is an overall tendency to consider the competitive offers as well as the
degree of acceptance by the customers when planning a pricing strategy. Hotel will follow
this tendency. Foundations’ services are priced at parity with or at a slight premium over
competitive offerings. Extensive promotional activity, including daily and holiday specials,
help to ensure that customers perceive that they are receiving higher quality products and
prompt, courteous service in exchange for the slight premium in price.
3.7. Accommodation
The accommodation of Teshome Mitore 3 Star Hotel consists of various suites (honeymoon,
deluxe, business) and rooms (single and double rooms). Each room includes a bathroom,
TV, mini bar, air conditioner, and internet access. Several rooms will have a panoramic
view while most other rooms have a garden view.
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Additionally Teshome Mitore 3 star Hotel will offer security coded entrance to building
and rooms, safety deposit boxes, secure luggage storage, 24-hour reception and helpdesk
and business amenities.
3.8. SWOT analysis

Teshome Mitore 3 star hotel analysis is based on input collected during discussions with
staff, distributors, customers interviews.
Summary of Strengths and Weaknesses

Strengths Weaknesses
Business Positive focus on job skills An overcapacity in the industry has
climate training/internships/job creation resulted in a deterioration of trading
endeavors conditions. Atrophy in consumer spending
is fueling decreased visits or numbers.
Internal Built with little (if any) debt Establishment of new organizational
organization load values process will require intense oversight
Political Strong push for job creation Low consumer expenditure. increasing
factors living costs.
Social Many people spend their Poor economic times are decreasing
factors vacations in our town unnecessary spending
Workforce Increased unemployment Internships for
figures will provide optimal unemployed/underemployed workers will
opportunity for full staff require increased number of regular staff
Economic Tax-exempt entity Due to overcapacity in the sector profit
margins are squeezed to the minimum.
Problems and Possibilities

Problems / Threats Possibilities / Opportunities
Economic In times of recession less people Offer excellent value for money.
may be inclined to travel.
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Internal Parent organization (PGCOG) Establish Board of Directors with community

organization changes leadership members, as well as PGCOG members
External factors Lack of community support Job creation and skills training brings hope and
economic uplift to community
Personnel Finding qualified personnel can Motivate current personnel.
be a tedious task
Accommodation Many hotels in area of similar Emphasize focus on business sector and
mix room numbers and pricing conference space availability
price none comparable in area for space available
quality
purchasing
customers
competitors
other
Food No restaurant on site Specific catering for conference needs,
mix complimentary breakfasts and room service
price available (grill)
quality
purchasing
customers
competitors
other
Conferencing Need for increased staff and No other similar sized space available in area
mix marketing, increased risk with equitable pricing
price management issues
quality
purchasing
customers
competitors
other
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4. FINANCIAL PLAN
4.1 Revenue Streams:
These are sources of revenue of Teshome Mitore 3 star Hotel; they are the various sources
from which a business earns money from the sales of its goods and services. These are
aspects of the hotel where we will be receiving revenue and they include:
4.1.1 Sales
 Food Service/Room Service

Food service is intended to serve a complementary breakfast. Room service will offer
lunch and dinner to guests, but also will cater to convention customers during meetings.
Due to the nature of our hotel, we will serve healthy foods, and can even provide a special
diet service.
 Recreation
Hotel will offer several recreational facilities on the ground. Facilities available include:
pool and sauna/whirlpool. Hotel will also offer access to activities in the surrounding area.
Amenities available within the immediate area include: walking, hiking, bicycling,
parasailing, boating and other water sports, tours of the city, and many more.
 Conference facilities
Hotel will have 1-conference areas/rooms, which can be used throughout the year for
meetings, seminars, parties, and corporate gatherings. Seating in our largest area will
accommodate up to 200 individuals seated at tables, 200 in chairs. Equipment such as
overhead projectors, telephone, fax, copiers, and services such as security can be provided.
Additionally, hotel will have an arboretum which will be available for public use: personal
relaxation, weddings, recitals, etc . . .
 Rooms Revenue: This revenue will be generated from the sale of its rooms.
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 Swimming Pool Revenue: Guests will also pay for the use of its swimming pool and
may also decide to be members which will also cost money.
 Gates and Parking: Parking tickets will be issued at the gates and fees will be
charged according to the amount of time used while still in the hotel.
 Gym Subscription: For guests to be able to access the gym, payment will be made
and guests can also subscribe for membership which will cost money.
4.2. Cost structure:
This refers to the types of expenses a business incurs and is typically composed of fixed
and variable costs. For this business plan, the cost structure will be divided into CAPEX
(Capital Expenditure) and OPEX (Operating Expenses).
4.2.1. Capital Expenditure
Fixed cost that include Land development, Building and civil work, machinery
equipment and vehicles and office furniture estimated birr 96,210,682.00.
4.2.2. Operational cost
Production cost of the project includes direct production and overhead costs. The major
cost item under this category includes cost of material and labour inputs, fuel and
lubricants, repair and maintenance, employee salary and benefits, insurance, office supplies
and other miscellaneous expenses; the total estimated production cost is birr 13,790,318.
4.3. Project Cost
The project requires an investment capital of ETB 110,001,000.00. From the amount of
investment capital required Birr 33,000,300.00 which is of 30% of the total investment
and 77,000,700.00 (70%) will be covered will be pooled from financing partners in the
form of cash loan in midterms at capital cost rate 11% per Year.
Table 1- START-UP CAPITAL

Distribution of Project Cost by Source of Fund in
Total ETB
Remark
S.N Project Item
Investment
Equity Capital % Loan %
2,400,000.0 720,000.0 1,680,000.0
1 0 30 70
Land development 0 0
Building & 56,143,475
2
Constructions 16,843,042.50 30.00 39,300,432.50 70.00
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Machinery and 29,069,918

3
equipment 8,720,975.40 30.00 20,348,942.60 70.00
8,597,289
4
vehicles and furniture 2,579,186.70 30.00 6,018,102.30 70.00
Operational cost/ 13,790,318
5 working capital 4,137,095.40 30.00 9,653,222.60 70.00
110,001,000.0
Total
0 33,000,300.00 30.00 77,000,700.00 70.00
4.4 Loan liquidation pattern

As it is noted above, Teshome Mitore hotel will require about 77,000,700.00 in the form of
long term loan. Loan with its attached interest expense is one of significant factors which
affect liquidity aspect, the overall viability and profitability of the business. Due to this effect
proper plan has been set to settle the loan amount with the interest payment by developing a
loan amortization schedule as indicated below.
Table 2 – loan amount and amortization schedule

outstanding principal interest at 11%
Year balance installment discount rate Total payment
0 77,000,700.00
1 69,300,630.00 7,700,070.00 8,470,077.00 16,170,147.00
2 61,600,560.00 7,700,070.00 7,623,069.30 15,323,139.30
3 53,900,490.00 7,700,070.00 6,776,061.60 14,476,131.60
4 46,200,420.00 7,700,070.00 5,929,053.90 13,629,123.90
5 38,500,350.00 7,700,070.00 5,082,046.20 12,782,116.20
6 30,800,280.00 7,700,070.00 4,235,038.50 11,935,108.50
7 23,100,210.00 7,700,070.00 3,388,030.80 11,088,100.80
8 15,400,140.00 7,700,070.00 2,541,023.10 10,241,093.10
9 7,700,070.00 7,700,070.00 1,694,015.40 9,394,085.40
10 - 7,700,070.00 847,007.70 8,547,077.70

Total 77,000,700.00 46,585,423.50 123,586,123.50
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4.5. Production cost

Production cost of the project includes direct production and overhead costs. The major
cost item under this category includes cost of material and labour inputs, fuel and
lubricants, repair and maintenance, employee salary and benefits, insurance, office supplies
and other miscellaneous expenses; the total estimated production cost is birr 13,790,318.00
million. A detail of profit and/ or loss analysis of the project is presented below.
Table 3 Summary of project Annual production costs

S/n Cost item Year 1 Year 2 Year 3 Year 4 Year 5
1 Direct cost
1.1 Direct cost 8,103,310 8,508,476 8,933,899 9,380,594 9,849,624
1.3 Utilities 867,000 910,350 955,868 1,003,661 1,053,844
Sub total 8,970,310 9,418,826 9,889,767 10,384,255 10,903,468
2 Administrative costs
2.1 Salary and wage 1,753,676.00 1,841,359.80 1,933,427.79 2,030,099.18 2,131,604.14
2.2 Employee benefits 408,400.00 428,820.00 450,261.00 472,774.05 496,412.75
2.3 Travel expense 675,830.00 709,621.50 745,102.58 782,357.70 821,475.59
2.4 Repair and maintenance 507,102.00 532,457.10 559,079.96 587,033.95 616,385.65
2.5 Insurance 500,000.00 500,000.00 500,000.00 500,000.00 500,000.00
2.6 Advertising expense 30,000.00 31,500.00 33,075.00 34,728.75 36,465.19
Telephone expense
2.7 345,000.00 362,250.00 380,362.50 399,380.63 419,349.66
including WI-FI
2.8 Miscellaneous expense 600,000.00 630,000.00 661,500.00 694,575.00 729,303.75
Sub total 4,820,008.00 5,036,008.40 5,262,808.82 5,500,949.26 5,750,996.72
Total cost working capital 13,790,318.00 14,454,833.90 15,152,575.60 15,885,204.37 16,654,464.59
18
4.6. Revenue projection
The project will collect its revenue from the customer service. The selling of food and
beverage and rented rooms has estimated based on the current market price and hotel standard
of similar service provision in town. The annual service program is formulated based on
proposed plant capacity considered the following table
Table 4 Description of revenue projection
No of bed
S/N Bed Room Service Price/day/night per year
rooms
1 Double bed room 10 1000 3600000
2 Single bed room 30 800 8640000
Subtotal 12,240,000.00
No of
customer per per year
Raw materials day cost per month
1 Food service income 150 650,000.00 7,800,000.00
Beverage service
2 180 650,000.00 7,800,000.00
income
Income from
3 40 240,000.00 2,880,000.00
Gymnasium
4 Swimming Pool 50 270,000.00 3,240,000.00
Income from Meeting 10
5 120,000.00 1,440,000.00
hole days/month
Subtotal 23,160,000.00
Grand total 35,400,000.00
4.7. Profitability analysis

Profitability assessment of the project is made based on the prevailing situation of the area,
south region and the socio economic develop trend of the country in general. Due attention
has been given for pay capacity of the users and affordability of the service and quality of
services to be delivered by setting price.
Cognizant with the demand analysis prices for the product is set price in the sector and
quality is one of key competition factors in the business yield quick revenue to discharge
responsibility of loan repayment and a return on investment for the promoter.
19
Table 5. Project Profit/loss statement
Project Year
Description 1 2 3 4 5
35,400,000.0 37,170,000.0 39,028,500.0 40,979,925.0 43,028,921.2
Revenue
0 0 0 0 5
Less: Production 13,790,318.0 14,479,833.9 15,203,825.6 15,964,016.8 16,762,217.7
costs 0 0 0 7 2
21,609,682.0 22,690,166.1 23,824,674.4 25,015,908.1 26,266,703.5
Gross Income
0 0 1 3 3
Less: Interest on loan 8,470,077.00 7,623,069.30 4,739,043.00 4,146,663.00 3,554,282.00

2,785,484.1 2,646,209.9 2,513,899.4 2,388,204.4 2,268,794.2
Less: Depreciation
0 0 0 3 1
10,354,120.9 12,420,886.9 16,571,732.0 18,481,040.7 20,443,627.3
Profit before tax
0 1 0 0 2
Less: Income tax
(15%) 1,553,118.14 1,863,133.04 2,485,759.80 2,772,156.10 3,066,544.10
Net Profit 8,801,002.77 10,557,753.87 14,085,972.20 15,708,884.59 17,377,083.22
4.8 Cash flow statement

Cash flow analysis is made so as to identify whether the financial statement have positive
balances and oversight the liquidity status of the project. Accordingly the project has shown
positive cash flow balance right starting from the first year of service. There recorded
incremental positive net cash inflow for each consecutive year too. The first year of the
operation has net cash flow of ETB 10,354,120.90 and cumulative total net inflow throughout
the project period including book value of fixed asset is ETB 73,187,049.75
Table 6 a project cash flow statement for the project period

description Year_0 Year_1 Year_2 Year_3 Year_4 Year_5
Cash inflow - - - - - -
Sales revenue 35,400,000.00 37,170,000.00 39,028,500.00 40,979,925.00 43,028,921.25
Depreciation 2,785,484.10 2,646,209.90 2,513,899.40 2,388,204.43 2,268,794.21
Owner's equity 33,000,300.00
Bank loan 77,000,700.00
Total cash inflow 110,001,000.00 32,614,515.90 34,523,790.11 36,514,600.60 38,591,720.57 40,760,127.04
20
Cash outflow
Initial investment 110,001,000.00

cost of direct materials 8,970,310.00 9,418,825.50 9,889,766.78 10,384,255.11 10,903,467.87
Operating costs less
deprecation 4,820,008.00 5,036,008.40 5,262,808.82 5,500,949.26 5,750,996.72
Interest payment on loan 8,470,077.00 7,623,069.30 6,776,061.60 5,929,053.90 5,082,046.20
Total out flow 22,260,395.00 22,077,903.20 21,928,637.20 21,814,258.27 21,736,510.79
Net cash flow 10,354,120.90 12,445,886.91 14,585,963.40 16,777,462.30 19,023,616.25
Cumulative cash flow 10,354,120.90 22,800,007.81 37,385,971.21 54,163,433.50 73,187,049.75
4.8.1 Cost benefit and sensitivity analysis

The project’s costs and benefit are discounted to the present value (PV) and the discounted
benefit over the discounted cost would indicate the net benefit of the project. Accordingly,
the project benefit has shown a positive net present value (NPV) of Birr 242,067,368.30
discounted at 15% , that is the cost capital, and the internal rate of return (IRR) is also 70
%, which is greater than the cost of capital (6%), confirming of the project as it is depicted
on the following table.
Table 7 computation of NPV and IRR
Year 1.00 2.00 3.00 4.00 5.00
Net cash inflow 10,354,120.90 12,445,886.91 14,585,963.40 16,777,462.30 19,023,616.25
Total inflow 10,354,120.90 22,800,007.81 37,385,971.21 54,163,433.50 73,187,049.75
Discunting factor at 10% 0.897 0.804 0.721 0.647 0.580

Present value of cash
flows 9,287,646.45 18,331,206.28 26,955,285.24 35,043,741.48 42,448,488.86
Total PV cash inflow 132,066,368.30
Less intial investment 110,001,000.00
Net present value 242,067,368.30

IRR 70%
21
5. land use
Table 8. The project requires 3000-meter square area of land.
FACILITY FLOOR AREA

COVERED
1000
Main restaurant Ground & G + 1
450
Bed rooms G+2 & G+3
G+1 500
Bars
Conference hall ground 200
100
mini market shop ground
Supports; ground 150
Kitchen, Power House, Store
Parking ground 200
Green Area ground 400
Total area 3000 m2
5.1 The organizational structure

Management and personnel: See Chart Below
Board of Directors
General Manager
Accounting Chief Rooms Security Food & Housekeeping Director of

Auditor Engineer Assistant Beverage Marketing
Manager and
Convention
Services
22
5.2 Personnel and the marketing concept

The employees must be able to carry out the philosophy and the strategy of the company.
This will be emphasized until the strategies are carried out as planned and the results are
obvious. All new strategies will be forwarded and discussed with the employees on a
regular basis during the weekly meetings. Responsible for the correct flow of information
will be the department heads as laid out in the organizational chart.
The 9-year projection for personnel is expected to show the following:
Personnel projection Year 1 Year 2 Year 3 Year 4 Year 5
Accounting 2 4 4 5 5
Engineer – Plant 3 2 1 1 1
Hotel Accommodations 15 17 17 20 20
Security 2 3 4 4 4
Food/Beverage/Catering 5 8 10 10 10
Housekeeping 6 8 9 9 9
Marketing 2 2 3 3 3
Sales – Convention 2 3 3 3 3
Convention/Conference 3 2 2 2 2
Total 40 49 53 57 57
23
6. Implementation:
We anticipate that the project approval would take 90 days, following which time they
would have finished organizing financing. They plan to begin construction by April of
2016 E.C and complete the project on March 2017 E.C.
Construction will commence with establishment of a site store/office after which a

temporary fence will be erected, and after this, the demolition of the existing houses will
immediately take place. Once the site is thus secured the building levels shall be
established, the excavation for the construction of the basement floor will be done and the
retaining walls done to secure the basement & the ground floor. Then construction of
structures will begin from the foundation hotel, and then followed by finishes, while site
works commence. This will be the boundary wall, parking, storm-water collection and
water and sewage disposal. On completion the project will be commissioned and a
management unit will then handle the operations of the development.
24

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TOM DALE DEALER Hotel

Project proposal on 3(three) Star Hotel

Location: Areka Town, Wolaita Zone, Southern Ethiopia

Promoter: TESHOME MITORE LEIMANGO

Phone Number 0913468472

It is acknowledged by reader that information to be furnished in this business plan is in all

Upon request, this document is to be immediately returned to Teshome Mitore

Name _ Teshome Mitore

This is a business plan. It does not imply an offering of securities

Name of promoter Teshome Mitore

Legal form Sole proprietorship

Project location Areka Town, wolaita Zone, Southern Ethiopia

Land required 3000M2

Payback period 10 Year

70% 77,000,700.00 birr from long term bank loan.

1.2. overview of project location

1.3. Hotel and Tourism sector in Ethiopia

2.1. Project description and Justification

2.2. Ambition of constructing three star hotel project

2.3. Project Objective

 To give quality and standard hotel service

 To provide gainful employment to a large segment of the population of the project

2.4. Mission and goal

 To become financially liquid and guaranteed more than ever.

2.5. Key advantages

3.2 Market analysis

 inquiries with existing and potential customers

3.3 Market segmentation

3.4 Marketing goals

The product line offers the following additional advantages:

For business travelers

For couples without children

For single and group travel

For physically impaired

State-of-the-art security facilities

3.5 Advertising and promotion

3.6. Pricing strategy

3.8. SWOT analysis

Summary of Strengths and Weaknesses

Problems and Possibilities

Internal Parent organization (PGCOG) Establish Board of Directors with community

 Food Service/Room Service

Table 1- START-UP CAPITAL

Machinery and 29,069,918

4.4 Loan liquidation pattern

Table 2 – loan amount and amortization schedule

1 69,300,630.00 7,700,070.00 8,470,077.00 16,170,147.00

2 61,600,560.00 7,700,070.00 7,623,069.30 15,323,139.30

3 53,900,490.00 7,700,070.00 6,776,061.60 14,476,131.60

4 46,200,420.00 7,700,070.00 5,929,053.90 13,629,123.90

5 38,500,350.00 7,700,070.00 5,082,046.20 12,782,116.20

6 30,800,280.00 7,700,070.00 4,235,038.50 11,935,108.50

7 23,100,210.00 7,700,070.00 3,388,030.80 11,088,100.80

8 15,400,140.00 7,700,070.00 2,541,023.10 10,241,093.10

9 7,700,070.00 7,700,070.00 1,694,015.40 9,394,085.40

10 - 7,700,070.00 847,007.70 8,547,077.70

4.5. Production cost

Table 3 Summary of project Annual production costs

2.8 Miscellaneous expense 600,000.00 630,000.00 661,500.00 694,575.00 729,303.75

Sub total 4,820,008.00 5,036,008.40 5,262,808.82 5,500,949.26 5,750,996.72

Total cost working capital 13,790,318.00 14,454,833.90 15,152,575.60 15,885,204.37 16,654,464.59

4.6. Revenue projection

Table 4 Description of revenue projection

1 Food service income 150 650,000.00 7,800,000.00