PROJECT - PROPOSAL - ON - G - 8 - FIVE - STAR - INTERN Paron PDF

PROJECT PROPOSAL ON
THE ESTABLISHEMENT OF
SEVEN STAR LEXURY HOTEL
Project Location:- BAHIR DAR

Promoted by: PARON PLC.
Telephone: +251 911 241896
Contents
Contents
Basic Information .............................................................................................................................. 3
1. EXECUTIVE SUMMARY ................................................................................................... 4
2. INTRODUCTION .................................................................................................................... 7
3. The Project................................................................................................................................ 11
4. MARKET STUDY ................................................................................................................ 16
5. TECHNICAL STUDY ......................................................................................................... 26
Furniture and equipment's required for office, reception, leisure and others....................................... 35
6. ORGANIZATIONS AND MANAGEMENT.................................................................. 44
7. FINANCIAL STUDY ........................................................................................................... 47
8. SENSITIVITY ANALYSIS ................................................................................................ 63
9. RISK ANALYSIS ................................................................................................................. 63
10. MONITORING AND EVALUATION ............................................................................. 65
11. CONCLUSION AND RECOMMENDATION .............................................................. 65
Page 2
BASIC INFORMATION
Name of the Promoter: PARON HOTEL PLC.
Contact Address: 0911241896/0918762995
Type of the Project: SEVEN Star International Tourist standard luxury Hotel
Type of Business: private limited company(PLC)
Project Location: Bahir Dar city

Project capital: The total investment capital of the project is estimated at
birr 2,400,000,000 of which: -
Birr 1,560,000,000 (65%) is for fixed investment cost
Birr 840,000,000 (35%) will be assign for working capital
Source of finance: The total investment capital of the project is to be financed
from the promoter’s equity and bank loan.
70% of the total allocated budget is contributed by the promoter
(PARON plc. 7 STAR HOTEL) and the remaining
30% is to be financed by local banks.
Man power requirement: 3000 employees will be benefited within this
project, out of which 600 permanent (100 skilled & 500 unskilled 8th grade) and
2400 are casual workers during construction phase.,
Land requirement: The total area of 30,000 m2 of land is required for the
project
Page 3
1. EXECUTIVE SUMMARY
The project study proposed on 5-star international tourist hotel investments

has been promoted by PARON PLC, in the city of Bahir dar. Bahir Dar is a
fast-growing regional economic center and the capital Amhara region Economic
growth is further increasing demand at +8% per annum. Therefore, PARON Ho
plc. SEVEN-star hotel investment founded its base on it.
Project justification: International tourist standard 7-star

hotel is high class hotel where services like quality
bedroom, catering, conference whole, Spa (Hot Spring),
gymnasium, sauna and massage, other sports facilities
like tennis or squash court, min-golf or badminton,
bowling, table tennis and children playground, night club
with dancing to live music or discotheque or cabaret
smoking lane etc.
The demand and supply of seven star hotels and its bed rooms service in Bahir
Dar has high gap of the supply of quality hotels and a total of branded supply is
very low; due to this demand and supply analysis PARON Hotels plc. wants to
participate and minimizes the gap of demand and supply in luxury hotels in the
city of Bahir Dar.
In this profile study a Seven-star international tourist standard luxury
hotel is considered to following provides: -
200 King size luxury rooms, standard double bed rooms and single
standard bed rooms totally standard bed rooms services
International and national restaurant service
Standard bar and cafeteria
Page 4
Standard massage and sauna bathe service
Physical fitness room
Conference hole and others important needs
The total area of the 7-star luxury hotel investment is about 6,000-
meter square the area covered and develop the following infrastructures
such as main building (g+10) hotel service and, store, gourd house,
parking area, green area, smoking lane, swimming pool and other
necessaries facilities.
The total investment capital of the project is estimated at birr

2,400,000,000 of which (65%) is for fixed investment cost and (35%) will
be f o r working capital.
Profitability: The financial analysis of the envisaged project is carried out
for the following ten years. Based on the 10 years financial projections
using the income statement, cash flow statement and financial internal rate
of return (IRR), the following results are obtained.
Income statement: According to the projected income statement, the
project will generate profit beginning from the first year of operation.
Based on the 10 years financial projections the projects average annual
net profit after payment of bank interest, depreciation and tax amounts
to birr 13,593,732
Cash flow statement: The cash flow statement also shows a

substantial amount of cash surplus right from the first year of project
operation life. The cash balance grows from birr 21,685,936 i n t h e
first y e a r to cumulative balance of birr,
Page 5
384,396,352. During the 10th year of operation indicating the
capacity of the project to finance itself and generate cash surplus for
further investments.
FIRR Computation: The computation of the project BIRR shows that

the project will profitably generate reasonable return on investment.
Before tax financial internal rate of return is calculated to be 33.9%.
This indicates the project is financially viable with an internal rate of
return (IRR) of 33.9 % and net present value (NPV) 102.2 million at
discount rate 35 %.
Socio economic benefits: The socio-economic benefit of the project is also
very high. The project will provide: - 3000 permanent and casual
employes, generate revenue to government in the form of taxes, Facilitate
and give a good service for local and international tourists
Conclusion and recommendation: The Project is found to be
operationally profitable, viable & has significant socio-economic
benefits. We recommended that according to this attractive financial and
economic benefit of the project all concerned offices & financial
institutions should give their support to facilitate the implementation of
this plan.
Page 6
2. INTRODUCTION
2.1. Investment in Ethiopia
Ethiopia is now becoming more and more investment friendly country. The
Government is creating favorable condition that would highly encourage the private
Sector to be engaged in almost all areas of the economy. The country with
population of come 120 million offers significant domestic market for locally
for Locally produced goods and service the country is also a member of
the common Market for eastern and southern Africa Comesa offering huge
benefit of Exporting commodities in preferential tariff rates to a wider regional
market.
Privet investment should be encouraged to increase form year to year and
Investment constraints have to be alleviated in order to pave development ways
so That investment sector happens to be determinant about factor of
economic development of the country like Ethiopia.
it is usually considered as the engine of the economy .both private and
government Bodies in many ways have commonly agreed this idea
.economic development in any case needs both efforts of the privet as well as
the public sector. There are Investments that could not be undertaken by privet
sector due to its difficult nature I .e high initial capital and long gestation
period.
However, the passed command economy system and the lack of experience
Between both sides have made it so hard for a private sector to flourish .
But now a day as Ethiopia follows free market economy ‘the roll of private
sector for the achievement of the economy policy. Accordingly, the Ethiopia
federal democratic government is encouraging investors to invest their records to
contribute to the development of the country in all sectors by avoiding all
barriers and facilitating all the mince for the investment
Page 7
2.2. 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 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.
Page 8
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 7 star international/tourist Hotel service in the metropolitan city of
Bahir Dar for the benefit of the promoter, the district community as well as the
country as a whole.
2.3. Promoter Background
The promoter, PARON PLC has a work experience in different kinds of

businesses in the city and manages business activities. During this time, the
promoter gained a deep knowledge and skill. With this reliable experience,
PARON PLC knows how to manage and lead any organization to profit and
also know how to handle different challenges in the working environment.
Moreover PARON PLC has a very good reputation with banks and different
financial organizations.
2.4. Ambition of creating the hotel project
According to the preliminary market research, 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 (7 stars) in the area.
Although few less than seven star hotels have already working in
Page 9
The area, but still huge gap is there in between demand and supply in the town. The
service (5 star hotels) is widely accepted in Addis Ababa, Government employees,
Private employees, Tourists, local customers, and to some extent even in rich house-
holds. So there is good scope for establishing the units for establishing and maintain 7
star standard /international and tourist hotel service in Addis Ababa as well as in the
country. Due to this, it has become imperative to build and maintain 7 star standard
hotels service for the mankind in prevailing conditions.
2.5. Purpose and Amount of Loan
Purpose and amount of loan requested: The purpose of the loan is to import
machineries and purchasing steel for building construction. Beside this the
promoter believes that, the loan will strengthen the relationship between the investor
and the bank. Furthermore, the investor gets strength to advance to various viable
economy sectors in the country.
The source of the project finance is from the promoter’s equity and bank loan.
Out of the total investment capital of birr 2,400,000,000 birr 840,000,000 (30%)
will be expected to be contributed by the bank while the remaining balance of
1,560,000,000 (70%) is to be covered by the promoter (PARON PLC)
Page 10
3. The Project
3.1. Project description and Justification
International standard tourist hotel is high class hotel (from three to five- star
level) where services like bedroom, catering, meeting rooms, multipurpose
assembly hall, swimming pool, Spa (Hot Spring), gymnasium, sauna and
massage, other sports facilities like tennis or squash court, min- golf or
badminton, bowling, table 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 (or named in some smaller hotels and B&BS)
to allow guests to identify their room. Some boutique, high-end hotels have
custom decorated rooms. Some hotels offer meals as part of a room and board
arrangement. In the United Kingdom, a hotel is required by law to serve food and
drinks to all guests within certain stated hours. In Japan, capsule hotels provide a
tiny room suitable only for sleeping and shared bathroom facilities.
3.2. 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:-
Page 11
To maximize the return on invested capital through modern Hotel services
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
Effectively use local inputs and strengthening the linkage between
agriculture and other sectors of the economy
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.3.4. Mission and goal
Mission
 Mission of the particular project is to expand the standard star hotel system
and to give quality service.
 To prove to other people that struggle for a better life and economic
independences can do business and bring change and can make a difference if
opportunities are given.
 To become financially liquid and guaranteed more than ever.
Goal
Objectives are the goals toward which activities of the business are directed and
one of the most important functions the business owner must perform is setting
objectives. This important aims of this sole proprietorship business among
others include the following highly interrelated general goals with each other.
To create employment opportunities for 600 permanent and 2400 causal
To achieve standard tourist hotel and give quality service.
Page 12
3.3. Project location and justification
3.3.1. Location
The proposed project of 7 star International hotel will planned to be located in

Bahir dar city. It is the seat of the Ethiopian federal government. According to the
2007 population census, the city has a total population of 539,551 inhabitants. The
total land size the promoter requesting for the implementation of the project is
estimated at 30,000 square meters, which will been obtained from the city
municipality, the proposed project will look every aspects of business integrity
tourist area.
3.3.2. Climate:
Bahir Dar has a subtropical highland climate. The city has a complex mix of
highland climate zones, with temperature differences of up to 20 °C,
depending on elevation and prevailing wind patterns. The high elevation
moderates temperatures year-round, and the city's position near the equator
means that temperatures are very constant from month to month. As such the
climate would be maritime if its elevation was not taken into account, as no
month is above 22 °C (72 °F) in mean temperatures.
Geography: Bahir Dar lies at an elevation of 2,200 meters (7,200 ft.) and is a
grassland biome, located at 9°1′48″N 38°44′24″ECoordinates: 9°1′48″N
38°44′24″E.[14] The city lies at the foot and forms part of the watershed
3.3.3. Demographics:
As of the latest 2007 population census conducted by the Ethiopian national
statistics authorities, Although all Ethiopian ethnic groups are represented in
Bahir Dar because it is the capital of the region, the largest groups include all
amhara nationality.
3.3.4. Infrastructure and economic status
Economy: The economic activities in Dar are diverse. According to official

statistics from the federal government, some 119,197 people in the city are
engaged in trade and commerce; 113,977 in manufacturing and industry; 80,391
Homemakers of different variety; 71,186 in civil administration; 50,538 in
Page 13
transport and communication; 42,514 in education, health and social services;
32,685 in hotel and catering services; and 16,602 in agriculture. In addition to the
residents of rural parts of Addis Ababa, the city dwellers also participate in
animal husbandry and cultivation of gardens. 677 hectares (1,670 acres) of land
is irrigated annually, on which 129,880 quintals of vegetables are
cultivated.[citation needed] It is a relatively clean and safe city, with the most common
crimes being pickpocketing, scams and minor burglary.[37] The city has recently
been in a construction boom with tall buildings rising in many places. Various
luxury services have also become available and the construction of shopping
malls has recently increased.
Page 14
Tourism: Tourism is a growing industry within Addis Ababa and Ethiopia as a
whole. The country has seen a 10% increase in tourism over the last decade,
subsequently bringing an influx of tourists to Addis Ababa. In 2015, the European
Council on Tourism and Trade named Ethiopia the #1 tourist spot in the world
Development: The city hosts the We Are the Future center, a child care center
that provides children with a higher standard of living. The center is managed
under the direction of the mayor's office, and the international NGO Global
Forum serves as the fundraiser and program planner and coordinator for the
WAF child center in each city. Each WAF city is linked to several peer cities and
public and private partners to create a unique international coalition.
Page 15
4. MARKET STUDY
4.1. General Overview
The hotel industry consists of many different services, including

accommodation, restaurants, and cafes and catering. The market for the hotel
industry, especially classified hotels in a developing country like Ethiopia,
is closely linked to the tourism industry, because a majority of consumers for
the sector services come from international tourists.
According to the United Nations Statistical Commission, Tourism

comprises the activities of persons traveling to and staying in places outside
their usual environment for not more than one consecutive year and staying at
least 24 hours in the country visited.
The total number of international tourists arriving in Ethiopia is steadily increasing.

The highest number of tourist arrival is in 2005 i.e. 227.4 thousand. As can be
seen from Table 3.3, during the period 1991-2005 except for the decline
observed in year 1998, the number of tourists visiting the country was
consistently growing. The growth rate registered varies from year to year; the
lowest was in 1992 (2%) and the highest in 1997 (27.7%). However, on average
during the period under consideration tourist arrivals have been increasing by
about 8 % per annum.
Table 4.1 Total Tourist arrivals in Ethiopia
Year Number Growth Rate

1991 81,581 -
1992 83,213 2
1993 93,072 11.9
1994 98,070 5.4
1995 103,336 5.4
1996 108,885 5.4
1997 139,000 27.7
1998 112,000 -19.4
Page 16
1999 115,000 2.7
2000 135,954 18.2
2001 148,438 9.2
2002 156,327 5.3
2003 179,910 15.1
2004 184,079 2.3
2005 227,398 23.5
Source: - Ethiopian Tourism Communion.
During the same period (1991- 2005), on average about 17% of the total number of
tourists that have visited the country were for vacation purpose while those who
visited the country for business account 22% of the total. Regarding the others,
transit accounts for 18%, visiting relative 9%, conference 11% and those who did
not stated their purpose account for 22% of the total.
4.2. Present supply in Addis Ababa
According to Current 2017 Information Addis Ababa has a quality supply of 32

hotels and a total of 3634 keys bed rooms currently in the market, giving an
average number of 100 rooms per hotel. Branded supply is very low, with only
Starwood, Rezidor, Marriott and Louvre present. Future supply is predominantly
branded
Table 4.2 international standard hotels in Ethiopia
S/N Name of Hotels in Ethiopia Number of

Beds
1 Hilton Hotel 372
2 Sheraton Hotel 293
3 Ghion Hotel 210
4 Radisson Blu Hotel 204
5 Radisson Blu Hotel 204
6 Elilly Hotel 154
7 Intercontinental Hotel 152
8 Harmony Hotel 150
9 Capital Hotel And Spa 114
10 Ethiopia Hotel 110
11 Jupiter International Hotel - Kasanches 102
12 Dreamliner Hotel 96
13 Saro Maria Hotel 96
14 Mn International Hotel 91
Page 17
15 Wassamar Hotel 66
16 Washington Hotel 65
27 Kaleb Hotel 64
18 Axum Hotel 56
19 Churchll Hotel 53
20 Aphrodite Hotel 52
21 National Hotel 52
22 Global Hotel 50
23 Bole Ambassador Hotel 48
24 Panorama Hotel 45
25 Tds Hotel 41
26 Adot-Tina Hotel 40
27 Jupiter International Hotel – Bole 40
28 Plaza Hotel 39
29 Nigist Towers Guest House 32
30 Kz Hotel 32
31 Nigist Towers Guest House 32
32 The Residence Hotel 19
3174
Source: - Ethiopian Tourism Communion.
Accordingly, assuming 365 working days, currently international standard

hotels in Addis Ababa have a total of 597,140 per annum tourist night room
capacity. Based on discussion with various private hotel managers and other
knowledgeable persons the average stay of tourists in a hotel is assumed to be
4 days.
In order to project tourist arrival in to Ethiopia, the past trend in tourist

arrival is considered. During the period 1991-2005, the total tourist arrival in
the country has registered an 8.2% average growth rate. Accordingly, assuming
that this growth rate will continue in the future and taking year 2005 figure
(227,398) as a base, tourist arrival is forecasted. Moreover, in order to
compute the unsatisfied demand the total annual capacity of international
standard hotels in Addis Ababa, which computed to be 597,140 rooms per
annum is taken as the existing capacity. The projected tourist room
requirement, which is calculated by taking the projected tourist arrival and
multiplying it by the average hotel stay of tourists (4 days), the unsatisfied
demand is shown in Table 4.3.
Page 18
Table 4.3.existing hotel capacities, projectedandunsatisfied demand
Projection of Room Night Existing Hotels Un

Year Tourist Arrival Demand Annual Satisfied
Capacity Demand
2008 286,456 716140 597,140 119,000
2009 309,372 773430 597,140 282,283
2010 334,122 835305 597,140 381,283
2011 360,852 902130 597,140 488,203
2012 389,720 974300 597,140 603,675
2013 420,898 1052245 597,140 728,387
2014 454,570 1136425 597,140 863,075
2015 490,935 1227338 597,140 1,008,535
2016 530,210 1325525 597,140 1,165,635
2017 572,627 1431568 597,140 1,335,303
2018 618,437 1546093 597,140 1,518,543
2019 667,912 1669780 597,140 1,716,443
2020 721,345 1803363 597,140 1,930,175
Accordingly, based on the market study and other considerations a seven star
hotel with room capacity of 175 to 200 is recommended.
4.3. 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. Tourist could come to the country for the purpose of visiting our
country areas is:-
fast growing regional economic center of Ethiopia
African Union
UN Economic Commission for Africa
Page 19
foreign missions
regional NGO’s and the UN Conference Centre
Economic growth is further increasing demand at +8% per annum
.
Hotel supply and its growth
Addis Ababa is poised to undergo a high level of supply growth during the next
five years with a total of 2,375 rooms (76%) having been announced. We
anticipate that 50% of this supply (1,188 rooms) to be completed, with cash
flow constraints, low access to debt funding and a shortage of foreign currency
holding back further supply growth. Promoters with stronger balance sheets,
technical support and access to foreign currency have a higher likelihood of
completing their developments. The result of this is a more measured and
appropriate supply pipeline of new hotels. New supply is increasingly branded
with this growing
Page 20
4.4. Demands Evaluation Mechanism
The following are some of the methods which can be used to evaluate the demand of
the services. By use of Customers feedback follow up form
High GDP growth and increasing corporate entry is driving hotel demand in the
business and conference segment. The aid and diplomatic segments continue to
provide the majority of the market demand in Addis Ababa. Ethiopia has a
strong domestic economy which is driving demand growth in the mid-market.
Performance
Bahir Dar is expected to achieve an occupancy of 58% at an average daily rate

of USD 220 in 2015*. We estimate market wide occupancy at 65% at an ADR
of USD 135. The locally branded quality supply is included.
Investment
Addis Ababa has received significant investment into the hotel sector in recent
years, with a number of successful local entrepreneurs investing in hotels. This has
largely shaped the type of supply in the market, with few of these investors having
turned to global brands to manage their properties. The extensive list of branded
hotels that has been announced, is evidence that this trend has changed. The easier
access to finance and technical service expertise associated with having a brand
are driving this change.
Outlook
Corporate demand growth prospects are positive with strong GDP forecasts and
growing regional demand, complimenting the significant and well established aid
and diplomatic markets that are already present in the city. Performance will be
shaped by the extensive supply pipeline of hotels across the city during the
coming years. Many of these projects have stalled,
Page 21
the expectation of further delays and projects being put on hold, is likely to offer
existing players in the market some respite. On the whole we are positive about the
performance outlook, yet caution against potential oversupply.
5. What drives Bahir Dar demand?

Bahir Dar has three distinct demand segments, namely the corporate
market, aid and diplomatic markets. The corporate market is primarily domestically
driven, with a limited presence of international companies despite the high growth in
the economy. This segment typically uses 7-star unbranded hotels. There are signs
that the Ethiopian economy is opening up and although this trend is anticipated to
be gradual, it will ultimately increase corporate entry into the market and
subsequently hotel demand from the international corporate market. We are already
starting to see this happen with the number of regional and business travelers to the
market growing steadily. The 7 star markets are in turn primarily driven by the aid
and diplomatic markets.
4.5. Pricing
The pricing of hotel services depends considerably on the quality of service

rendered and its location. The relatively high standard hotels in Bahir Dar charge
a price, which ranges from birr 1000, for single bed, 1400 for double bed room
and 1800 for suit king size hotel per room per single night is proposed.
The hotel service will also earn revenues from the sale of food and drinks and other
hotel services. The total revenue earned from this service is estimated at 35 per cent
of the revenue obtained from room rents.
4.6. Capacity and service programmer
4.6.1. Capacity
From the market study, it is observed that there is a great demand gap
between the demand and supply of international tourist standard hotel service.
Therefore, taking in to account the market study and economic scale of service
provision the envisaged international tourist standard hotel will have capacities
as shown below:
Page 22
Table 4.4 service capacity of the envisaged international tourist standard 7 star hotel
Sr. No. Type of Service Feasible Service Capacity
1 Bedroom 200 rooms, 50 will be double

Rooms, 50 single rooms and 100 suits.
2 Bar and Restaurant

• Restaurant (Modern 200 at a time each
and traditional
• Coffee Shop 10- 15 seats at a time
3 Sauna and steam bath 20 heads/day
4 Gymnasium 20 heads/day
5 Swimming pool (Big and small pools) 45 Heads/day and 20
head/day
6 Meeting room 50x3 seats
7 Night club 300 at a time
Page 23
4.6.2. Service Program:
At the initial stage of the service provision period, the hotel would require some
years to penetrate into the market and capture a significant market share.
Therefore, in the first and second year of service the capacity utilization rate
will be 75% and 90%, respectively. Full service provision shall be attained
in the third year and then after. The proposed service provision program is
shown in Table 4.7.
Table 4.5 service provision program
Sr. Service Service Year

No.
1 2 3- 10
1 Service provision rate (%) 75 90 100
4.7. Marketing strategy
As discussed earlier the major target groups of hotel sector are tourists who
arrives the country for business, leisure, conference and other purposes.
Providing quality services and consistently improving with the changing
situations should be the promoters’ objective. Hence, according to the feasibility
study, the promoter has the following marketing strategies:
Contacting government and private agencies affiliated with tourism on a

regular basis, informing them of any corporate rate, discount programs,
availability of services, etc.
Page 24
Emphasizing the access of the proposed hotel to support client’s
attractions, as well as the services and amenities available,
Special effort will be made to emphasize the price-value relationship of the
service available,
Actively marketing the hotel prior to the completion and opening,
An aggressive local marketing effort and promotion of the hotel market to
enable the hotel to capture a more than proportionate share of support within
the market,
Working with local people to establish a competitive amenity package
responsive to specific requirements.
4.8. Competitors Overview
Nowadays there are many standardized hotels in Ethiopia, but still three is a huge
gap between hotel service and the quality of different hotel services.
In addition to the above, the failure stories that paron plc has observed from
others and the comments collected from many customers will help it to compete with
competitors of same businesses.
In conclusion, my service compared to the competitors looks like:
 The paron plc seven star hotel will keep the promise it make
 Quality service is my motto
 Transparent price setting and fair price will be bases to win the competitors
 The promoter long term experience and goodwill that he has achieved
from his respected customers will allow me to win the competitor. In
addition to the above, the failure stories that we have observed from others
and the comments collected from our customers will help us to win our
competitors.
 In conclusion, his service compared to the competitors looks like:
Page 25
5. TECHNICAL STUDY
5.1. Design and particulars
The project owner interest, as regards to how the overall building design looks
like and the level of service to be rendered by the envisaged project, is dependent
on the area at which the buildings to be placed. The owner has already decided to
commit himself to construct a new seven star luxury hotel having the full
knowledge what is required by the national and international standard of Hotels
in Ethiopia. The standard by the way its exhaustiveness as well as being
explicitly specific on the level of the service expected under the selected
category, determines also the physical and financial requirement of the project.
Hence, in effect the contents of project components to be described below are the
derivatives of the requirements mentioned above.
5.2. Physical appearance
The n e w l y e m e r g i n g s e v e n s t a r hotels would have G+10 building

placed on the given area of 70 % of the total area of land. The architecture of the
buildings are influenced by the modern design setting holding the characters of
attracting customers from out ward and allowing the maximum comfort it can
provide from service point of view. Apart from the need to add a new look within
the locality, exterior of the building will be dominated by a glass panel at the
strategic corners to provide a maximum opportunity for guest to have, a look at
the important land escape/scenery of the area.
The outer space is allocated to have an open garden, children’s playing ground,
parking area, fountains and inter campus paving with a medium size
swimming pool adjoining the front side of the buildings.
5.3. Core facilities
The envisaged hotel should have sufficient and comfortable space to accommodate
the core services as per the requirements of the seven star hotel. Actually this
has been considered seriously at the design stage of the
Page 26
Building along with the allocation of appropriate area and placement of each
components with the building accordingly. On the other hand, it is also important to
figure out the layout of each component not only from the perspective of having
compliance for the standard but for the benefit exploring possibilities of bringing
complementary services under the same location and allow maximum convenience
in the work processes.
The sizes (area) of each service, which will be explained below, determine the
holding capacity of guests as it determines the level and quality of service. Other
than the critical factors mentioned above the market aspect i.e. customers need
and resource availability are considered in which case they are the determinants
to give the final set up of the facilities.
(a) Bed rooms

A total of 200 classes are allotted for room services with options to avail two
different types of accommodations. Actually the standard requires allowing
maximum 30% from the total while the rest can remain with big double bed
rooms or any other smaller rooms. On the bases of the above considerations
under this component, the hotel will have 200 single, double, suit, king size and
presidential rooms bed rooms.
(b) Bars
Standard seven star hotels must have at least two bars with a superior comfort
and service quality. The furniture and equipment’s, as being the basic sources of
customer’s attractions, need to be fashionable of higher quality commensurate
with the expectation of guests who happen to prefer
Page 27
this class. Therefore, the envisaged hotel, having the requirements considered too,
will have one main bar at the ground floor adjoining the reception area. Another bar
preferably with smaller space but furnished with cozy furniture will be placed at top
floor of the building. This is just to add another attractive look for the hotel as it will
be placed at a strategic location for customer to have a panoramic view of the area.
The minimum carrying capacity of the bars is estimated 200 persons at atime.
(c) Main restaurant

Technically a hotel to be classified under seven stars of as such this one must have
at least two dining places having the size proportional to the guests who have
checked in as normally customers do not prefer to worry about going out once they
have settled. The area determination has to take into account this. Hence, the hotel
must provide the maximum range of varieties at all times.
The restaurant will have the capacity entertaining 400 guests and allow maximum
efficiency in the service by having the restaurant located nearer to the main kitchen.
(d) Banquet/Conference hall

A hotel with seven stars needs to have a conference/banquet hall of larger area
which can be used for banquet or conference interchangeably. This project
considers this component as the second important function next to the room
services as this area has a higher potential for such services. The holding capacity
of the main conference hall will be 500 persons.
Page 28
Business center (mini market shop)
A seven star hotel needs to have also a business center with the service that
would the customers need. For such a service, the envisaged project will allocate
a relatively bigger area preferably separate rooms at the ground floor. Rooms are
allocated to secretarial service, executive rooms for business meeting and
shopping corners. The secretarial service will be furnished with all the machines
and equipment to handle any business enquiry that may be raised by hotel guests.
The shopping corner also accommodates mini boutique, cosmetics and d/t type
of shop
(e) Supports
Kitchen
Two kitchens, with the processes of multiple varieties of food preparation and a
proportional capacity to handle the maximum guests to be served in the main
restaurant as well as in banquet hall, is the critical requirement for the proposed
hotel. It should be large enough also to accommodate the working areas of cold
and hot meals on the one hand and pastries and bakery on the other.
In order to allow reasonable space for workers to move around as well as to

avoid the possibility of contamination and spoilage, the pastries and bakery
Page 29
Will be placed at the nearest door joining the main buffet at the gate of the
restaurant. On the other hand, the kitchen should be provided with a space to
add a small store with a flexible structure to contain butchery and cold rooms. These
are critical for easy facilitation of cooking’s. Moreover, the kitchen will have a well-
connected washing corner with at most margin of clearance to make the area safe
and clean.
Power House
For the service of the hotel to continue uninterrupted, a power house is already
planned to be placed in the underground or back to the building. Hence, the
power house will be supplied with a generator planned to be fixed for emergency
service.
Store
Alike the capacity projection made on the kitchen, the envisaged project requires
a store as big as the varieties of items that are needed to be kept as stock. The
store will need to have a systematic management for stocks properly placed and
identified at the time of delivery and inventory. Hence, it is the required procedure
to organize the stock items in separate sections so that the proper handling of
stocks shall be maintained. In view of this, the hotel requires a number of stores
with sections for food items, beverage, glass wares, silver wares, soft furnishings,
cleaning and sanitary materials, stationery materials all placed according to their
physical appearances. The store will be placed in locations nearer to kitchen or
leisure service.
Car Parking
The hotel must provide the service of car parking with 24 hours protection at
least for those customers who have checked in. Again, it should be large enough
to accommodate as many vehicles as the hotel is going to entertain a large crowd.
In view of this, a parking space for about 50 vehicles is planned to be allocated
with the standard width and height of the drive in routes.
Page 30
5.4. Hotel Furniture and Equipment’s
Furniture and equipment required to furnish the envisaged hotel depend on the
space to be available as well as on the quality and volume of service to be
rendered. Normally the quantity required will also depend on the standard of the
hotel i.e. Five star hotel. To the extent that the engineering design of the building
align with the requirements of the standard, the projection of furniture and
equipment’s has to be consistent with the size and number of rooms, bars,
restaurants and leisure center. However, one has to be realistic in the sense that the
forecasting trend to link with the technical feasibility particularly with that of the
envisaged service capacity. Moreover, the balance to be between image building and
income generation capacity has the same level of influence as said above.
Therefore, for this particular category of forecasting two levels of

considerations are taken into account. One, by the fact that the design of building
directly determines the space available for every item, size will be governed by
this and again the quality required furniture will determine base on the kinds of
facilities available. In any case the required quantities are forecasted based on
the components stated below:
 200bed rooms,
o king size luxury bed rooms
o standard Double bedrooms
o standard Single bed rooms
 Special Bar and cafeteria
 Traditional and international restaurant
 conference rooms,
 Massage room
 Sauna and steam bath room
 Physical fitness room
 Night club (dancing area)
 Indoor and outdoor game facilities,
 Management office and store,
Page 31
 Other civil works including land escaping, parking area, fountains and
inter campus paving.
Secondly, in order to fulfill the basic requirements of hotel service, the quantities
forecasted for the above facilities have to be reviewed against the national
standard. Such consideration gives the benefit of consciously sorting out what
item goes with what kind of facility or service. Once this is determined the
forecast of quantity will follow accordingly. The project detail design work has
already been undertaken and the planned facilities of the project and the required
quantities are forecasted in section 5.
5.5. Inputs/ raw materials and utilities
5.5.1. Raw Material cost

The annual cost and list of raw materials are indicated in Table 5.1.
Table 5.1 Annual requirements of raw and auxiliary materials
S/N Raw materials Quantity per cost per per year

month month
Food materials raw costs lamp sum 500,000.00 6,000,000.00
d/t type Beverage raw costs lamp sum 500,000.00 6,000,000.00
massage, sauna bath and other lamp sum 15,000.00
related cost 180,000.00
Cleaning materials and other lamp sum 15,000.00
miscellaneous uses 180,000.00
Total 12,360,000.00
5.2.2. Utilities
Annual requirement of electricity, water and fuel is estimated at 2,367,000 birr
from which, 500,000 kwh, 300,000 m3 and 2000 liters, a r e electricity, water
and fuel respectively. The total costs of utilities are, therefore, about Birr
2,367,000 per annum.
Table 5.2 utilities
Description Qty. Cost per
unit cost year
Electricity, kWh 500000 1.25 625000
Water, m3 300000 4.5 1350000
LPG, lt 2000 16 32000
Diesel, lt 20000 18 360000
Total 2367000
Page 32
5.6. Machinery and equipment
Machinery and equipment required for jute bags manufacturing plant are given in Table
Table 5.3 list of machinery and equipment
Furniture and equipment's required for Suit bed rooms
S/n Description Quantity Unit price Total (birr)

1 Sofa single 100 2,500 250,000
3 TV 65” 10 90,000 900,000
4 Telephone stand 10 3000 30,000
5 Telephone apparatus 10 2500 25,000
6 Refrigerators 10 4,000 40,000
8 Coffee table 30 100,000 3,000,000
9 French Bed (120 x 180cm) 50 200,000 10,000,000
10 Cupboard built in 40 5,000 200,000
11 Head lump 400 1,000 400,000
12 Writing table with chair set 100 2500 250,000
13 Chest drawer 20 1,500 30,000
14 Spring mattress 100 50,000 5,000,000
16 Bed sheets 400 500 200,000
17 Bed cover 400 800 320,000
18 Pillow 400 200 800,000
Total - 21,425,000
Furniture and equipment's required for double bedrooms
1 Sofa single 40 2,500 100,000

3 TV 21” 20 8,000 160,000
7 Standing lump 20 1,000 20,000
8 Coffee table 20 1,500 30,000
9 French Bed (120 x 180cm) 40 12,000 480,000
Page 33
11 Head lump 20 1,000 20,000
12 Writing table with chair 20 2,500 50,000
13 Chest drawer 20 1,500 30,000
14 Spring mattress 40 5,000 200,000
Bed made wood 80 20,000 1,600,000
15 Bed sheets 80 500 40,000
16 Bed cover 80 800 64,000
18 Pillow 80 250 20,000
Total 3,019,000
Furniture and equipment's required for single bedrooms

1 Sofa single 100 2,500 250,000
2 TV stand 50 2,000 100,000
3 TV 21” 50 5,000 250,000
7 Standing lump 50 1,000 50,000
8 Coffee table 50 1,500 75,000
9 French Bed (150 x 180cm) 50 20,000 1,000,000
11 Head lump 50 1,000 50,000
12 Writing table with chair 50 2,500 125,000
13 Chest drawer 50 1,500 75,000
14 Spring mattress 50 3,000 150,000
15 Bed sheets 100 250 25,000
16 Bed cover 100 500 50,000
17 Blanket 100 1,000 100,000
18 Pillow 100 100 10,000
Total - - 2,822,500
Page 34
Furniture and equipment's required for office, reception, leisure and others
1 Executive double redistill desk 2 20,000 40,000

2 Executive swivel arm chair 2 5,000 10,000
3 Double pedestal desk 5 4,000 20,000
4 Servile admin chair 5 3,500 17,500
5 Secretarial desk 2 3,500 7,000
6 Guest chairs 8 600 4,800
7 Safe box 4 4,000 16,000
8 Shelf 4 3,000 12,000
9 Reception desk 2 40,000 80,000
10 Sofa box 2 15,000 30,000
11 Cash register with stand 2 7,500 15,000
12 Telephone apparatus box 2 20,000 40,000
14 Fax machine with stand 2 30,000 60,000
15 Pc with printer and stand 10 15,000 150,000
16 Single sofa high based 4 5,000 20,000
17 Coffee tables 4 2,000 8,000
18 Standing lump 6 2,000 12,000
19 Recreation facilities Ls - 150,000
21 Emergency power generator 2 300,000 600,000
Total - - 1,295,300
Furniture and equipment's required for bar and cafe
1 Tables 60 2,500 150,000

2 Chairs 300 750 225,000
3 Long drawer (Balcony) 2 30,000 60,000
5 TV stand 5 2,000 10,000
6 TV set 27” 5 15,000 75,000
7 Casher box 3 5,000 15,000
8 Stools (high chairs) 12 1,500 18,000
Page 35
9 Coffee machine stand 2 50,000 100,000
10 Refrigerator big 2 20,000 40,000
11 Refrigerator medium 2 12,500 25,000
12 Coffee roaster 2 7,500 15,000
13 Ice maker 2 5,000 10,000
14 Pastries stand 2 15,000 30,000
15 Juice maker 2 5,000 10,000
16 Draft beer machine 2 15,000 30,000
18 Tape recorder 2 10,000 20,000
19 DVD player 2 1,200 2,400
20 Satellite dish with receiver 2 2,500 5,000
21 Shelf with drawer 2 20,000 40,000
22 tea cup 500 25 12,500
23 coffee cup 500 25 12,500
24 Milk cup 500 25 12,500
25 Makiyato cap 500 25 12,500
26 water glass 500 15 7,500
27 draft glass 500 60 30,000
28 wine glass 500 100 50,000
29 Whisky glass 400 100 40,000
30 local gen glass 500 50 25,000
31 service tree 1000 150 150,000
Total - - 1,232,900
Furniture and equipment's required for dinning/restaurant room
1 Tables 50 2,500 125,000

2 Chairs 200 750 150,000
3 Long drawer (Balcony) 2 30,000 60,000
5 TV stand 2 2,000 4,000
6 TV set 27” 2 7,500 15,000
7 Stools (high chairs) 2 1,500 3,000
8 Refrigerator big for beer 2 20,000 40,000
9 Refrigerator medium for soft drank 2 12,500 25,000
Page 36
10 Coffee roaster 2 7,500 15,000
11 Ice maker 2 5,000 10,000
12 Draft beer machine 1 15,000 15,000
13 water glass 200 12 2,400
14 draft glass 200 60 12,000
15 service tree 50 30 1,500
16 30-34 sauce pot 10 20 200
17 Sauce-medium 40 30 1,200
18 Soup pot 40 50 2,000
19 Medium 4 45 180
20 Large – round hot pot 10 80 800
21 Medium – round hot pot 10 57 570
22 Small – round hot pot 10 30 300
23 High rim flat 10 70 700
24 Flat rim round 12 50 600
25 Normal alloy 20 45 900
26 Nonstick normal 20 20 400
Total 485,750
Furniture and equipment's required for Conference rooms
1 Tables 100 2,500 250,000

2 Chairs 1000 750 750,000
3 Buffet stand 5 20,000 100,000
4 Speaker (big) 5 5,000 25,000
5 Amplifier 3 20,000 60,000
6 Wireless microphone 5 750 3,750
7 Table microphone 20 350 7,000
8 LCD projector 5 30,000 150,000
9 Slid board 5 5,000 25,000
10 Satellite dish with receiver 5 2,500 12,500
11 TV stand 5 2,000 10,000
12 TV set 27” 5 15,000 75,000
Total - - 1,468,250
Page 37
kitchen materials
1 Stove 5 45,000.00 225,000.00
2 Toaster 5 15,000.00 75,000.00
3 Oven 5 40,000.00 200,000.00
4 Aluminum tables 8 4,000.00 32,000.00
5 Grill (electrical) 5 15,000.00 75,000.00
6 Washer sink 5 5,000.00 25,000.00
7 Refrigerator 5 20,000.00 100,000.00
8 Clip fryer 5 5,000.00 25,000.00
9 Pastries formwork 5 5,000.00 25,000.00
10 Petra 10 2,500.00 25,000.00
11 Cupboard 3 7,500.00 22,500.00
12 Shelf 3 5,000.00 15,000.00
13 Grill bench top 5 11,887.00 59,435.00
14 Deep friend double 6 4,218.00 25,308.00
15 Micro wave grill 5 3,250.00 16,250.00
16 Mincer meat 5 12,999.60 64,998.00
17 Brad oven 5 47,999.85 239,999.25
18 Pizza claye oven 5 29,841.00 149,205.00
19 mixer 15 KG capacity 5 37,999.45 189,997.25
20 Range commercial 5 38,745.00 193,725.00
21 Range linear 3 14,995.00 44,985.00
22 Fruit blender 3 3,585.00 10,755.00
23 Potato chopper 3 41,999.30 125,997.90
24 Onion peeler /chopper 3 15,780.00 47,340.00
25 Blender small 3 3,185.00 9,555.00
26 Deep refrigerator 6 9,450.00 56,700.00
27 refrigerator 10 9,960.00 99,600.00
28 Digital scale (35k.g) 3 1,800.00 5,400.00
29 Waiting scale (220 K.g) 3 4,700.00 14,100.00
30 Kitchen hood 5 29,745.00 148,725.00
31 Kitchen cabin with double Sink 5 31,488.00 157,440.00
32 Kitchen cabin 5 27,488.00 137,440.00
33 Kitchen top -stainless steel 8 8,195.00 65,560.00
34 Kitchen top -stainless steel -large 8 13,195.00 105,560.00
35 Chaffing dish -silver 25 9,499.00 237,475.00
36 Spaghetti plate 50 712.2 35,610.00
37 Dinner plate 50 720 36,000.00
Page 38
38 Dessert plate 50 720 36,000.00
39 Table fork 10 163.8 1,638.00
40 Table knife 10 136.8 1,368.00
41 Chopper knife 10 62.1 621.00
42 Table spoon 15 163.8 2,457.00
43 Kitchen Pan 10 499 4,990.00
44 Food Box 5 220 1,100.00
45 soup bowl 3 336 1,008.00
46 Cook pot large 10 693.2 6,932.00
47 Cook pot big 38 10 3,054.00 30,540.00
48 Cook pot medium 20 581.4 11,628.00
49 Cook pot small 20 469.6 9,392.00
50 restaurant Table w/ 4 Chair 50 9,246.00 462,300.00
51 cafe table 20 1,455.00 29,100.00
52 Restaurant chair- sheraton Type 100 2,510.00 251,000.00
53 cafe chair 100 964.5 96,450.00
54 Open generator-24 KV 3 389,748.00 1,169,244.00
sub total 15,237,428.40
steam and sauna bath

S/N Description Qty Unit cost Total Cost
1 sauna electric heater 16 12000 192,000
2 sauna bucket 16 6000 96,000
3 sauna ladle 10 400 4,000
4 sauna thermometer 16 300 4,800
5 electric sauna timer 12 270 3,240
6 sauna hygrometer 16 950 15,200
7 steam generator 2 35000 70,000
8 cloth hunger 17 250 4,250
9 foldable rest 24 400 9,600
10 wall mirrer 12 850 10,200
11 soffa guest chair 16 350 5,600
12 wall mirror 12 4000 48,000
13 wall mounted 10 2500 25,000
14 reception table 2 2200 4,400
15 swivel chair 2 1000 2,000
16 satellite dish with color 2 10000 20,000
17 public addressing system 2 6000 12,000
18 wall watch 2 200 400
total 5,526,690
Page 39
S/N Aerobics and physical fitness Qty Unit cost Total Cost
1 Public addressing system 3 15,000 45,000
2 Aerobics dumbbell 10 3,500 35,000
3 Stepping rocks(assoried) 120 250 30,000
4 Wall mounted mirror 30 200 6,000
5 Bike Proms 9 5,500 49,500
6 Track tread mills(electrical) 2 22,000 44,000
7 Track tread mills(manual) 6 4,000 24,000
8 heart rate monitors and pedometers 6 2,500 15,000
9 body solid endurance up right 2 11,000 22,000
10 muscular dynamics 2 13,000 26,000
11 simplex II series 2 16,000 32,000
portable massage tables with tools and
12
accessories 2 17,000 34,000
13 massage body work tools 6 4,000 24,000
14 massage chairs with tools and accessories 2 11,000 22,000
15 massage store heater 2 1,500 3,000
16 massage table electric warming pad 4 3,000 12,000
17 flece message table pad 12 1,000 12,000
18 massage table and video kit 2 6,000 12,000
19 pillows/body support/back care 16 4,500 72,000
20 cleaner and sanitizers 8 2,500 20,000
21 wall mirror(1.5 -2 ml) 6 400 2,400
22 sofa guest chair(three set) 10 4,500 45,000
23 Wall maound lockers 20 2,500 50,000
24 receptionist table 2 2,200 4,400
25 swivel chair 4 2,000 8,000
26 satellite dish with color 2 10,000 20,000
27 public addressing system 2 6,000 12,000
28 wall watch 2 400 800
Total 5,682,100
Garden recreation center

S/N Garden recreation center Qty Unit cost Total Cost
1 Lawnmower 5 2000 10000
2 wheelbarrow 10 500 5000
3 Metal scraper 10 100 1000
4 Coffee machine 2 10000 20000
5 plastic chair 40 150 6000
6 Oval shaped plastic table 20 800 16000
7 umbrella 20 400 8000
8 juice glass 40 50 2000
9 tea spoon 50 5 250
Page 40
10 coffee spoon 50 5 250
11 juice stranner 2 150 300
12 water glass 30 20 600
13 coffee cups with saucer 20 100 2000
14 tea cups with saucer 20 60 1200
15 ice-cream box 1 5000 5000
16 water sprinkless 30 40 1200
17 water house nylon rope 4 500 2000
18 Gardner's kits 2 100 200
Total 881,000
Summary of equipment
S/n Description Total cost
1 Furniture and equipment for 90 Bed room
Luxury bed room 688,000
For double bed room 3,019,000
Single bed room 2,822,500
2 Furniture and equipment for office and reception area 1,295,300
3 Furniture and equipment for bar and cafeteria 1,232,900
4 Furniture and equipment for restaurant and dining room 485,750
5 Furniture and equipment for conference room 1,468,250
6 Furniture and equipment for kitchen materials 5,237,428
7 Sauna and steam bath materials 526,690
8 Aerobics and physical fitness 682,100
9 Massage service materials 300,000
11 Mini market shop establish costs 200,000
12 Garden and creation area 81,000
Total 27,069,918
5.7. Land, Building and civil work
5.7.1.Land allotment by set lease price
The overall land required is about 30,000 square meters. Land lease cost at the
set price for commercial activities of the city rate is Birr 900 per m2 and for 70
years land holding time is estimated to be Birr 27,000,000. Thus, the total land
& construction cost assuming that the total land lease cost will be paid in
advance (10%) amounts to Birr 2,700,000 government has following
significances the remaining amount paid within 40 years per year .
Land use plan of the project
A properly designed building construction starting in last year before and insures
smooth functioning of all operations. The building will have well-
Page 41
Ventilated appropriate international Hotel service area the structure includes
separate services and other different activates the detail as follows
Table5.4. Description of Land use plan

S/n Description Quantit Unit Price Total Price
y (Br) (Br)
1 Main Building G+10 500 5,000 20,000,000
Gust room
Manager office
Minimarket shops
Bar and restaurant
Bed room ( rooms, will bedouble
rooms, single rooms and
suits.)
Meeting room
Sauna and steam bath
Gymnasium physical fitness
4 Store service 250 5,000 1,000,000
8 Parking area 150 1,000,000
9 Generator house 44 500,000
10 Guard house 30 643,475
Total - 23,143,475
974.00
5.8. Environmental impact assessment
The project will seriously involve itself protecting conserving and developing the
natural and flora of the project area in line with the millennium development goal.
To this to will play a vital role in participating the varies organization and the
community around the project area to from an environmental commute in charge of
all environmental issues to be handled in accordance to varies environmental and
water policies of 97/99.
The owner of the project believes to undertake several environmental issues for
the conservation development and creation of sustainable environmental around the
project area.
Page 42
5.9. Implementation Schedule
The actual implementation of the International 7 star hotel is planned to begin on

the May 2025. The major activities envisaged are processing of land preparation,
construction and delivery, installation and commissioning of the factory line.
Undertaking of civil design works and execution of construction works which will be
carried out by side which opening and processing of L/C will take 3 months. The
FOB delivery of plant machinery and equipment will take 4 months. Allowing
additional one month for sea freight and clearing, the delivery of plant of project site
and thus commencement of installation work requires 5 month. Plant installation and
commissioning will take place for 4 months.
The provision of infrastructural facilities such as Electric Power and water will be
carried out in the course of project implementation schedule. Other activities such us
man power recruitment and training, system development, and procurement of raw
and other supplies will also be duty performed to ensure that everything is in place
by the time the plant is ready for operation. All in all the project is expected to
take 12 months for completion as per the below detailed implementation schedule.
Table 5.5. Implementation schedule
(Months) in Gregorian Calendar
Description 5 6 7 8 9 10 11 12 1 2 3 4
Acquisition of Investment Land
(May 2025)
Opening & Processing of L/C x x x
Building Construction x x x x x x
Delivery of Plant machinery and x x x x x
Clearing
Installation and Commissioning x x x x
Recruitment of man power x x x x x x
arranging for other works
Customers, timely availability all the week including week end days, customer
care, and quick response to the feedback from clients.
Page 43
6. ORGANIZATIONS AND MANAGEMENT
6.1. Organizational Structure
The organizational structure of the project is designed by including all the necessary
personal under the right division. At the top of the organizational structure, there will
be a general manager with the responsibility of supervising the overall activity of
plant. Depending up on the nature of the center and the amount of work to be
performs under each will be supervised by the unit head that is accountability for
general manager
CEO
Adviser G/Manager Internal Auditing

& Inspection
Coordinator
Manager/supervisor
Secretary Security
department
Sales & technical Marketing Admin &

Unit Unit finance Unit
As clearly shown the organizational structure, the integrated projected center has
CEO three Departments under the general manager, Addition and the internal
Auditing and inspection. The departments are the production Department, the
marketing department and the general service department under each department
there are different section which are undertaking different activities
Page 44
6.2. Management
As to the management of the project is concerned the owner will be responsible for
the overall project planning, co-ordination and implementation. After project
implementation the promoter serves as a top management body and frequently visits
and supervises the organization.
Paron plc. has participated in Construction of fabrics and in different types of
businesses in the city, gave it a long year experience in managing business
activities. Therefore, the extensive experience of the plc has enabled it to
organize, monitor and run business properly manage the envisaged International
7 star hotel Service.
6.3. Manpower Requirement
For smooth and efficient operation of the organization, it has been

anticipated that each units will have adequate number of qualified and
experienced manpower. The labor component of the International 7 star hotel
Service G/manager will hire qualified and experienced in management whose
main responsibility is to coordinate the overall activity of the project. The distinct
units have their own operational teams under them. To fill in all these work units
with the required manpower The project will provide 3000 employees both casual
and permanent workers during its time of construction and final operation, 6 0 0
permanent and 2400 casual skilled and unskilled workers. For smooth operation of
the project, employees will be given on job training, clear duties and
responsibilities under the direct supervision of their respective units.
Page 45
Table 6.1: Manpower Requirement
Annual
S/n Description of Job Qualification No. Monthly Salary(Br)
1 General Manager BSc in Hotel management 1 100,0000 1,200,000
2 Coordinator/supervisor BSc in Hotel management 15 6000 1,080,000
1 Assistance Supervisor diploma in Hotel management 5 6,000 360,000
2 Receptionist diploma in Accountant 35 5,000 2,100,000
3 Pastry and Staff diploma in food preparation 5 7,000 420000
Cafeteria
4 Cafeteria supervisor diploma in Hotel management 12 5,000 720,000
5 Waiter diploma and Certificate 400 2,000 800,000
6 Cooker diploma in food preparation 20 7,000 1680000
7 Coffee machine operator 12th complete 2 3,000 72000
9 Pastry attendant Certificate 5 5,000 300000
10 Coffee machine operator 12th complete 5 3,000 180000
11 Dessert attendant skill professional 4 1,500 72000
12 Massage expert Certificate 5 5,000 300000
13 Physiotherapist Certificate 5 5,000 300000
14 Sauna /steam Bath Certificate 5 5,000 300000
15 Sauna and Steam bath Certificate 5 5,000
attendant 300000
16 life saver Certificate 4 5,000 240000
17 Casher diploma in Accountant 4 2,500 120000
18 Cleaner vice 8th grade complete 10 1,500 180000
19 Plumber diploma in electrical 2 2,000
engineering 48000
20 Electrician diploma in electrical 6 8000
engineering 576,000
21 Gardener skill professional 2 1000 24000
22 Guards gardener 50 1,000 96000
2 Permanent workers during the hotel operation 600 - 6,432,000
3
24 Casual and temporary workers during its construction 2400
25 Total number of employees 3000
6.4. Training Requirement

Since the machinery and equipment and services are easy to operate, a special
training arrangement is not needed. But operators, chemists, mechanics &
electricians need a two weeks training during erection, commissioning period on
the production process, raw material and product quality and operation and
maintenance of machinery and equipment by the expert of machinery supplier.
Page 46
7. FINANCIAL STUDY
Financial analysis of the proposed project of seven star hotel will be projected to
test the financial visibility if the investigated organization. Quantifying both
project cost and benefits over the assumed project life, which is five years, made
the project visible. Besides it has been tried to make a realistic forecasting of
costs and the benefits based in current market price of all necessary materials.
Once the anticipated cattle fattening operation has been attained both projects
cost and revenue is estimated to be consumed to be compensated by increasing
in sales revenue.
7.1. Classified Investment cost
Fixed cost that include Land development, Building and civil work,
machinery equipment and vehicles and office furniture estimated birr 2.4
Billion (2,400,000,000.) The cost of the project is classified as fixed incitement
cost and initial working capital. With regards to fixed investment cost of the
project, the land lease, building and civil works cost, machinery and equipment
cost office furniture costs and fuel costs will be required. As to working and
operating cost a brief illustration will be given as to utilities, salary expense,
maintenance cost and depreciation cost and the other related costs
7.1.1. Fixed costs

Fixed cost that include Land development, Building and civil work,
machinery equipment and vehicles and office furniture estimated birr 2.4
Billion (735,436,228.) which is 30.6 % of the total project estimated cost.
Table 7.1 land development
Description Qty Unit Price Total Price (Br)
S/N (Br)
1 Land clearing and leveling 30,000 12,500/m2 375,000,000
m2
2 Land lease value with 10% down 30,000 m2 900 27,000,000
payment
3 Canal work 1 6,000,000 6,000,000
4 Water reservoirs 1 12,500,000 12,500,000
Total - - 420,500,000
Page 47
Table 7.2 Building and civil works
S/n Description Qty Unit Total Price
Price (Br)
(Br)
1 Main Building G+10 laid on 3000 15,000 45,000,000
m2
Gust room
Manager office
Supermarket
Bar and restaurant
Bed room (rooms, will be doublerooms,
single rooms and suits kings
Room.)
Meeting room
Sauna and steam bath
Gymnasium
4 Store service 1000m2 15,000 15,000,000
8 Parking area 1000m2 15,000 15,000,000
9 Generator house 100 m2 15,000 1,500,000
10 Guard house 100m2 15,000 1,500,000
Total - 78,000,000
5200.00
N.B. out of the total cost of G+10 Building construction, steel metal is covered 50 % of the
cost therefore the promoter is must import from foreign using duty free by the rule of
Investment initiation.
Table 7.3 List of summarized machinery and equipment’s and cost

S/n Description Total cost
1 furniture and equipment for 90 Bed room
Luxury beds 6,688,000 Import from
Luxury double beds 13,019,000 duty free
Single bed room 12,822,500
2 furniture and equipment for office and reception area 7,295,300 Local market
3 furniture and equipment for bar and cafeteria 11,232,900 Local market
4 furniture and equipment for restaurant and dining room 12,485,750 Local market
5 furniture and equipment for conference room 11,468,250 Local market
6 furniture and equipment for kitchen materials 15,237,428 Local market
7 Sauna and steam bath materials 7,526,690 Duty free
8 Aerobics and physical fitness 10,682,100 Duty free
9 Massage service materials 3,300,000 Duty free
11 Mini market shop establish costs 2,200,000 Local market
12 Garden and creation area 1,081,000 Local market
Total 115,038,918
Page 48
Table 7.4. Procurement of Vehicles and furniture’s
Type of Vehicles Unit Qty Unit Price Remark
S/N
(Br)
1 Pick-up (4WD)/ No. 2 11,250,000 duty free
2 Mini bus No. 2 4,100,000 duty free
3 Bus service No. 2 10,800,000 duty free
4 Office furniture’s Ls - 400,000 Local market
5 computer and accessories 500,000 Local market
Total - - 54,100,000
Table 7.5 Summary of Fixed asset

S/n Description Cost Estimate Remark
(Birr)
1 Land development 22,533,917 100% local market
2 Building & Constructions 23,143,475 50% duty free imported
3 Machinery and equipment 17,069,918 50 % duty free imported
4 Procurement of Vehicles & furniture’s 5,050,000 90 % duty free imported
Total 67,797,310 49.7 % duty free
imported
7.1.2. Operational cost costs

Production cost of the project includes direct production and overhead costs. The
major cost item under this category includes cost of material and labor 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 226,732,310 million 20.8 % of the total project capital is.
Direct cost
Table 7.6.Raw materials
S/N Raw materials Quantity cost per per year
per month month
1 Food materials raw costs Lamp sum 500,000.00 6,000,000.00
2 d/t type Beverage raw costs Lamp sum 500,000.00 6,000,000.00
3 massage, sauna bath and other related Lamp sum 15,000.00
cost 180,000.00
4 Cleaning materials and other Lamp sum 15,000.00
Miscellaneous uses 180,000.00
Total 12,360,000.00
Page 49
Table 7.7 Utilities
Description Qty. unit cost Cost per year
Electricity, kWh 500000 1.25 625000
Water, m3 300000 4.5 1350000
LPG, lt 2000 16 32000
Diesel, lt 20000 18 360000
Total 2367000
Administration cost
Employee benefits : It includes medical expense, uniform and other incentive

package and assumed to be 25% of annual salary expense = birr 1,608,000
Travel expense: It is assumed to be 10% of annual salary expense i.e. birr
643,200
Repair and maintenance
Cost estimate/ year

Item
% Price
Land development 2 50678.34
Building & Constructions 2 462869.5
Machinery and equipment 3 512097.552
Vehicles & furniture’s 5 151500
Total - 1,177,145.39
Insurance: It is assumed to be 1% of fixed investment cost = birr

477,973
Office supplies: Including stationery and sanitary supplies annual cost
of birr 100,000 is considered.
Miscellaneous expense: It includes cost of land rent, telephone and postage,
audit, legal and license fees and other miscellaneous expenses. The total
annual cost of these cost components is estimated to be birr 150,000 /year.
Page 50
Summary of Operational cost/ working capital
Table 7.8 Determination of Initial Working capital requirement
S/n Cost item Annual cost
1 Raw materials
1.1 Direct coast 12,360,000
1.2 Utilities 2,367,000
Sub total 14,727,000
2 Administrative costs
2.1 Salary and wage 6,432,000
2.2 Employee benefits 1,608,000
2.3 Travel expense 643,200
2.4 Repair and maintenance 1,177,145
2.5 Insurance 477,973
2.6 Advertising expense 50,000
2.7 Telephone expense 365,000
2.8 Wi fi Internet service 60,000
2.9 Office supplies 100,000
2.1 Miscellaneous expense 150,000
Initial W.C. requirement 25,790,318
Page 51
7.2. Project Capital and financing
7.2.1. Project Capital

The total investment capital of the project is estimated at birr 2,400,000,000 of
which birr 735,436,228 (30.6%) is for fixed investment items while the remaining
balance of birr 1,664,563,772 (69.4%) will be initial working capital. The detail of
investment capital of the project is given below
7.9. Project capital and source of income
Investment Source of Income Remark
S/n Description
capital (Br.)
1 Land development 2,533,917 Local Market
2 Building & Constructions 23,143,475 50% foreign currency Duty free
3 Machinery and equipment 17,069,918 45% foreign currency Duty free
4 vehicles and furniture 5,050,000 90% foreign currency Duty free
Sub total 47,797,310 49.7% foreign currency Duty free
5 Working Capital 25,790,318 Local market
32% need foreign Duty free
Total 773,587,629
currency
7.2.2. Financing
The total investment capital of the project is to be financed from the promoter’s
equity and bank loan. Out of the total capital birr 2,400,000,000 (70%) OR
1,680,000,000 is contributed by the promoter, PARON PLC while the remaining
balance of birr (30%) 720,000,000 is to be financed by local banks. The bank
loan will be repaid based on the following terms and conditions:
 Loan amount = birr 720,000,000
 Installment period/ term = 10 years
 Interest on loan (including service charge) = 16.5%
Page 52
Table 7.10 Loan Repayment Schedule
Principal Interest Year ending
Year
Repayment Payment Balance
0 - - 51,511,340
1 5,151,134 5,923,804 46,360,206
2 5,151,134 5,331,424 41,209,072
3 5,151,134 4,739,043 36,057,938
4 5,151,134 4,146,663 30,906,804
5 5,151,134 3,554,282 25,755,670
6 5,151,134 2,961,902 20,604,536
7 5,151,134 2,369,522 15,453,402
8 5,151,134 1,777,141 10,302,268
9 5,151,134 1,184,761 5,151,134
10 5,151,134 592,380 0
Total 51,511,340 32,580,923
Depreciation of fixed investment items

The straight-line method has been used to depreciate/amortize all fixed items of
the project. The depreciation rate applied for all fixed assets is given below:
Table 7.11 Depreciation Schedule
Original Annual Depreciation

S/n Item
Value % Amount (Br.)
1 Land development 2,533,917 10 253,392
2 Building & Constructions 23,143,475 10 2,314,348
3 Machinery and equipment 17,069,918 10 1,706,992
4 vehicles and furniture 5,050,000 10 505,000
Total 47,797,310 - 4,779,731
Page 53
Table 7.12 Summary of project Annual production costs
S/n Cost item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
1 Direct cost
1.1 Direct cost 12,360,000 12,978,000 13,626,900 14,308,245 15,023,657 15,774,840 16,563,582 17,391,761 18,261,349 19,174,417
1.3 Utilities 2,367,000 2,485,350 2,609,618 2,740,098 2,877,103 3,020,958 3,172,006 3,330,607 3,497,137 3,671,994
Sub total 14,727,000 15,463,350 16,236,518 17,048,343 17,900,761 18,795,799 19,735,588 20,722,368 21,758,486 22,846,411
2 Administrative costs
2.1 Salary and wage 6,432,000 6,753,600 7,091,280 7,445,844 7,818,136 8,209,043 8,619,495 9,050,470 9,502,993 9,978,143
2.2 Employee benefits 1,608,000 1,688,400 1,772,820 1,861,461 1,954,534 2,052,261 2,154,874 2,262,617 2,375,748 2,494,536
2.3 Travel expense 643,200 675,360 709,128 744,584 781,814 820,904 861,950 905,047 950,299 997,814
2.4
Repair and 1,177,145 1,236,003 1,297,803 1,362,693 1,430,828 1,502,369 1,577,487 1,656,362 1,739,180 1,826,139
maintenance
2.5 Insurance 477,973 501,872 526,965 553,314 580,979 610,028 640,530 672,556 706,184 741,493
2.6
Advertising 50,000 52,500 55,125 57,881 60,775 63,814 67,005 70,355 73,873 77,566
expense
2.7 Telephone expense 365,000 383,250 402,413 422,533 443,660 465,843 489,135 513,592 539,271 566,235
2.8
Wi fi Internet 60,000 63,000 66,150 69,458 72,930 76,577 80,406 84,426 88,647 93,080
service
2.9 Office supplies 100,000 105,000 110,250 115,763 121,551 127,628 134,010 140,710 147,746 155,133
2.1
Miscellaneous 150,000 157,500 165,375 173,644 182,326 191,442 201,014 211,065 221,618 232,699
expense
Sub total 11,063,318 11,616,484 12,197,309 12,807,174 13,447,533 14,119,909 14,825,905 15,567,200 16,345,560 17,162,838
Total cost working capital 25,790,318 27,079,834 28,433,826 29,855,517 31,348,293 32,915,708 34,561,493 36,289,568 38,104,046 40,009,249
Note: Production costs are assumed to increase by 5% annually.
Page 56
7.3. 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 7.13 Description of revenue projection
No of bed Price/day
S/N Bed room service per year
rooms /night
1 King standard room 10 1800 4320000
2 Double bed room 20 1400 6720000
3 Single bed room 50 1000 12000000
Subtotal 23,040,000.00
S/N Raw materials No of cost per per year
customer month
per day
1 Food service income 100 850,000.00 10,200,000.00
2 Beverage service income 200 850,000.00 10,200,000.00
3 income from Massage service 40 360,000.00 4,320,000.00
4 Income from Gymnasium 20 180,000.00
service 2,160,000.00
5 Income from sauna bath 45 472,500.00 5,670,000.00
6 Income from Meeting hole 20 150,000.00
service days/month 1,800,000.00
Subtotal 34,350,000.00
Grand total 57,390,000.00
Page 57
7.4. Financial statements
7.4.1. Projected Profit/loss statement
PARON PLC 7 STAR

HOTEL
7 star international Hotel
Table 7.14 Project Profit/loss statement Projected profit/loss statement
In ‘birr
Project Year
Description 1 2 3 4 5 6 7 8 9 10
Revenue 57,390,000 60,259,500 63,272,475 66,436,099 69,757,904 73,245,799 76,908,089 80,753,493 84,791,168 89,030,726
Less: Production
25,790,318 27,079,834 28,433,826 29,855,517 31,348,293 32,915,708 34,561,493 36,289,568 38,104,046 40,009,249
costs
Gross Income 31,599,682 33,179,666 34,838,649 36,580,581 38,409,610 40,330,091 42,346,595 44,463,925 46,687,121 49,021,478
Less: Interest on
5,923,804 5,331,424 4,739,043 4,146,663 3,554,282 2,961,902 2,369,522 1,777,141 1,184,761 592,380
loan
Less: Depreciation 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731
Profit before tax 20,896,146 23,068,511 25,319,875 27,654,187 30,075,597 32,588,458 35,197,343 37,907,053 40,722,630 43,649,366
Less: Income tax
7313651.22 8073978.79 8861956.08 9678965.58 10526458.90 11405960.22 12319069.96 13267468.52 14252920.36 15277278.13
(35%)
Net Profit 13,582,495 14,994,532 16,457,918 17,975,222 19,549,138 21,182,498 22,878,273 24,639,584 26,469,709 28,372,088
Note: Sales revenue is assumed to increase by 5% annually
Page 58
7.4.2. Projected cash flow statement
PARON PLC 7 STAR
HOTEL
Table 7.15 Project cash flow Statement Projected cash flow statement
Project Year
Description
0 1 2 3 4 5 6 7 8 9 10
Cash Inflow
Equity 22,076,289 - - - - - - - - -
Bank loan 51,511,340
Revenue 57,390,000 60,259,500 63,272,475 66,436,099 69,757,904 73,245,799 76,908,089 80,753,493 84,791,168 89,030,726
Depreciation 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731
Total Inflow 73,587,629 52,610,269 65,039,231 68,052,206 71,215,830 74,537,635 78,025,530 81,687,820 85,533,224 89,570,899 93,810,457
Cash Out Flow
Fixed Cost 47,797,310 - - - - - - - - -
Initial W.C 25,790,318 25,790,318 27,079,834 28,433,826 29,855,517 31,348,293 32,915,708 34,561,493 36,289,568 38,104,046 40,009,249
Loan Repayment 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134
Total Out flow 73,587,629 30,941,453 32,230,968 33,584,960 35,006,651 36,499,427 38,066,842 39,712,627 41,440,702 43,255,180 45,160,383
Net Inflow - 21,668,816 32,808,263 34,467,246 36,209,178 38,038,207 39,958,688 41,975,192 44,092,522 46,315,718 48,650,075
Cumulative
- 21,668,816 54,477,079 88,944,325 125,153,503 163,191,711 203,150,399 245,125,591 289,218,113 335,533,832 384,183,906
balance
Page 59
7.4.3. Balance sheet
Current asset
Raw cost and utilities 12,360,000
utilities 2,367,000
Administrative costs
Salary and wage 6,432,000
Employee benefits 1,608,000
Travel expense 643,200
Repair and maintenance 1,177,145
Insurance 477,973
Advertising expense 50,000
Telephone expense 365,000
Wi fi Internet service 60,000
Office supplies 100,000
Miscellaneous expense 150,000
Fixed cost
Land development 2,533,917
Building & Constructions 23,143,475
Machinery and equipment 17,069,918
Procurement of Vehicles & furniture’s 5,050,000
Total fixed cost 47,797,310
Total asset 73,587,629
Liabilities
Bank loan 51,511,340.23
owners Capital 22,076,288.67
Total liabilities and capital 73,587,628.90
Page 60
7.5.3. Viability and other measurement
PARON PLC 7 STAR HOTEL
Financial IRR computation
Table 7.16 Financial IRR computation
In ' birr
Year 0 1 2 3 4 5 6 7 8 9 10
Gross income 57,390,000 60,259,500 63,272,475 66,436,099 69,757,904 73,245,799 76,908,089 80,753,493 84,791,168 89,030,726
Total costs 73,587,629 25,790,318 27,079,834 28,433,826 29,855,517 31,348,293 32,915,708 34,561,493 36,289,568 38,104,046 40,009,249
Gross profit -73,587,629 31,599,682 33,179,666 34,838,649 36,580,581 38,409,610 40,330,091 42,346,595 44,463,925 46,687,121 49,021,478
Less: Profit tax 11,059,889 11,612,883 12,193,527 12,803,203 13,443,364 14,115,532 14,821,308 15,562,374 16,340,493 9049001.6
After tax net benefit -73,587,629 20,539,793 13,478,615 13,976,013 14,503,150 15,061,512 14,873,630 15,596,585 16,355,688 17,152,746 17,989,656
DF at 35% rate 1 0.741 0.549 0.406 0.301 0.223 0.165 0.122 0.091 0.067 0.05
Present Value -73,587,629 42,525,990 33,082,466 25,688,625 19,997,266 15,556,013 12,085,557 9,382,787 7,348,568 5,681,008 4,451,536
Net present Value 102,212,186 - - - - - - - - - -
DF at 30% rate 1 0.769 0.592 0.455 0.35 0.269 0.207 0.159 0.123 0.094 0.073
Present Value -73,587,629 44132910.0 35673624.0 28788976.1 23252634.6 18764876.1 15161880.4 12228386.1 9932679.7 7970369.8 6499243.0
Net present Value 128,817,951 - - - - - - - - - -
Page 61
 NPV (Net Present Value)
It is a method of calculating the expected net gain or loss from project by

discounting rate of all expected future cash inflow and outflows to the present
point in time In the above table shoes that NPV at 30% and 35 % discount rate is
128.8 million and 102.2 million respectively, this figure is positive value or NPV>0
it is indicate that accepted the project until 30 % and 35 % of discount rate
Break-even Analysis
The break-even analysis establishes a relationship between operation costs and revenues. It
indicates the level at which costs and revenue are in equilibrium. To this end, the break-
even point of the project including cost of finance when it starts to operate at full capacity (
year 4) is estimated by using income statement projection.
BE = FixedCost = 23 %
Sales – Variable Cost
 Payback Period (PBP)
The payback period is the amount of time required for a firm to recover its initial
investment in a project, as calculate from cash inflow
The investment cost and income statement projection are used to project the pay-
back period
PBP = Initial investment Cost

Gross Profit + Depreciation
= 2,400,000,000
13,582,495 + 4,779,731
4=5Years
The payback period =4 is less than the maximum acceptable payback period
(10) therefore accept the project.
 IRR
Project Proposal on 7 star international /tourist hotel
The internal rate of the project is the rate of discount that radios the present value
of the investigated project to zero. In calculating the IRR, the discount rate can be
adjusted until the NPV becomes Zero or at least as to zero.
Hence, the IRR of this project is calculated as follows After
tax IRR = 35 + 5 (102.2/128.8)
=33.9%
IRR=33.9% of the project returns its initial investment cost within its life
8. SENSITIVITY ANALYSIS
Sensitivity analysis is variant of scenario analysis in which each scenario

represents a change in only one variable, rather than a number of variables. For
the proposed project, the sensitivity of the project has been computed at 30% and
35% for sales reduction, operating cost increase and investment cost increased
accordingly, as described in table 7.16 the result shows that IRR at 33.9%
operating cost increase and 30 and 35% investment cost increase and 30%
service sales reduction. Predicting among these sales reduction is more sensitive
to the project and it should further expand after the project proposed life time
because in this case NPV equal zero at IRR=33.9
9. RISK ANALYSIS
The major risk of this project shall be high market price fluctuation and turnover the
skilled and trained man power. These risks can be mitigated. The high staff
turnover may be lessened by creating conductive working atmosphere and providing
some benefits. For this project, 25% benefit is proposed for the permanent
employees
Characteristic (Personal) Risk: This is the most important risk, which should
be seriously considered? As to this company, the promoter have sufficient years
of work experience in both government and private organization (leading
private business by engaging themselves), so personal risk is minimum under
this context
Business Risk: The fate of the business is generally found to be dependable. The
demand- supply analysis exhibits the need of the service of the business
63
Project Proposal on the establishment of 7 star luxury hotel
Organization. According to the overall demand the effect of competitors in the
sector would not be an immediate alarming threat at least for the coming few
years. In additional to this long year experience of the owner in the field will help
to react against any adverse situation in the business. However, the reaction of
competitors should be attended. In additional to an advanced promotional work
and sustainable goodwill development by creating new and best quality products
with good service deliveries
Collateral Risk: Since the owners of the project are engaged on different related
business, there is no any risk related to collateral. In this regard, the proposed
building and other proposed equipment and the business as a whole are dependable
securities. The experience and skill of the owner as well as the manager and the other
expertise add confidence to the lenders. Therefore, there is no risk regarding
collateral in general.
Construction Risk: Construction risk is one of the most important areas of risk
that need great consideration during project implementation. In the case of 7 star
international hotel services, the construction work of the proposed building will
be made by phase with self-response supervision. Hence, there is no as such
serious risk related to construction work.
All the identified risks, which are related to the universally accepted lending
policy, are to the acceptable level that keeps the lender’s interest in safe position.
Furthermore, the quality of the assets of the company is dependable and the
projected finical reports show that the company will have a capacity to pay the
principal and interest without any problem with in short period of time.
64
Project Proposal on 7 star international /tourist hotel
10. MONITORING AND EVALUATION
Monitoring and Evaluation (M&E) has long been recognized as a vital aspect of
development projects generally and of industrial and services projects in
particular. The monitoring of project performance consists of the tracking of
human, physical and financial resources and the recording of how they are
converted into outputs (project goods and services), and in turn, outcomes and
impacts.
11. CONCLUSION AND RECOMMENDATION
Conclusion: The Project is found to be operationally profitable & has significant

socio-economic benefits. According to the projected income statement, the envisaged
project starts earning profit from the first year of production. The income statement
and other profitability indicators show that the project is viable. The project is
believed to have significant social and economic benefits that accrue to the society
beyond those financial returns to its owner. The most remarkable social benefits
can be expressed in terms of job creation that leads to reduction in the level of
unemployment.
Recommendation: The project directly employs 3000 persons; therefore,

considering the attractive financial and economic benefits the project is to
produce, the promoter has made the necessary preparation hoping that all the
concerned offices & financial institutions should give their support to facilitate
the implementation of this plan.
65

PROJECT - PROPOSAL - ON - G - 8 - FIVE - STAR - INTERN Paron PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

PROJECT - PROPOSAL - ON - G - 8 - FIVE - STAR - INTERN Paron PDF

Uploaded by

Copyright:

Available Formats

PROJECT PROPOSAL ON

Project Location:- BAHIR DAR

Name of the Promoter: PARON HOTEL PLC.

Contact Address: 0911241896/0918762995

Type of Business: private limited company(PLC)

Project Location: Bahir Dar city

birr 2,400,000,000 of which: -

Birr 1,560,000,000 (65%) is for fixed investment cost

Birr 840,000,000 (35%) will be assign for working capital

Source of finance: The total investment capital of the project is to be financed

from the promoter’s equity and bank loan.

70% of the total allocated budget is contributed by the promoter

(PARON plc. 7 STAR HOTEL) and the remaining

30% is to be financed by local banks.

Man power requirement: 3000 employees will be benefited within this

2400 are casual workers during construction phase.,

The project study proposed on 5-star international tourist hotel investments

Project justification: International tourist standard 7-star

The total investment capital of the project is estimated at birr

Profitability: The financial analysis of the envisaged project is carried out

of return (IRR), the following results are obtained.

Income statement: According to the projected income statement, the

Based on the 10 years financial projections the projects average annual

Cash flow statement: The cash flow statement also shows a

FIRR Computation: The computation of the project BIRR shows that

employes, generate revenue to government in the form of taxes, Facilitate

and give a good service for local and international tourists

Conclusion and recommendation: The Project is found to be

operationally profitable, viable & has significant socio-economic

benefits. We recommended that according to this attractive financial and

economic benefit of the project all concerned offices & financial

institutions should give their support to facilitate the implementation of

2.1. Investment in Ethiopia

Although Ethiopia is endowed with many natural and manmade tourist

By taking this encouraging as an opportunity the promoter project plan to

2.3. Promoter Background

The promoter, PARON PLC has a work experience in different kinds of

2.4. Ambition of creating the hotel project

3.1. Project description and Justification

A hotel is an establishment that provides paid lodging on a short-term basis.

3.2. Project Objective

In general, the project is believed to have significant social and economic

The proposed project of 7 star International hotel will planned to be located in

Economy: The economic activities in Dar are diverse. According to official

4.1. General Overview

The hotel industry consists of many different services, including

According to the United Nations Statistical Commission, Tourism

The total number of international tourists arriving in Ethiopia is steadily increasing.

Table 4.1 Total Tourist arrivals in Ethiopia

Year Number Growth Rate

4.2. Present supply in Addis Ababa

According to Current 2017 Information Addis Ababa has a quality supply of 32

Table 4.2 international standard hotels in Ethiopia

S/N Name of Hotels in Ethiopia Number of

Accordingly, assuming 365 working days, currently international standard

In order to project tourist arrival in to Ethiopia, the past trend in tourist

Projection of Room Night Existing Hotels Un

4.3. Demand for hotel services

Bahir Dar is expected to achieve an occupancy of 58% at an average daily rate

5. What drives Bahir Dar demand?

The pricing of hotel services depends considerably on the quality of service

4.6. Capacity and service programmer

Sr. No. Type of Service Feasible Service Capacity