FEASIBILITY

PROJECT
PROPOSAL
Drs. Agustinus Agus Purwanto, SE MM CHA
 TABLE OF CONTENTS
01 02 03 04
Area, Demographic, Site Review Proposed Development Market Analysis
and Neighborhood Recommendations and
Analysis Costs

05 06 07 08
Proposed Develop- Financial Analysis Feasibility Analysis Comparison of Value Cre-
ment Occupancy and ated to Projected Costs
Average Daily Rate
(ADR)
 Hotel
Management
Our service from ideas, pre-feasibility
study, feasibility study, hotel project
procurement, hotel operations and hotel
Full Internal Audit.
 WHAT WE ARE WORKING ON

PROJECT RESIDENTIAL HOSPITALITY

Hotel Project Property Management Hotel Management
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Procurement
 Hotel Feasibility Study Methodology
A hotel feasibility study is generally required by the mortgage lender or investor before a developer
or organization is able to move forward with constructing a new hotel. Typically completed by an in-
dependent third party consultant who specializes in analyzing hotel projects, a feasibility study determines
whether a proposed hotel development is economically feasible and if the value of the proposed project
equals or exceeds the development costs when completed and operational. The hotel feasibility study will
analyze revenues, expenses, and net income to determine the value of the proposed project compared to
its projected development costs.

Given the economic and health concerns from COVID-19 in 2020, it remains imperative to consider
the current development climate. A feasibility study will take into account the ramifications of the
COVID-19 induced economic downturn and provide projections not only for market recovery, but also how
the proposed development will perform after opening

This overview highlights the major components of a hotel feasibility study that should be analyzed
as part of determining the potential success of a hotel.
 Major Components of a Hotel Feasibility Study

The following major components should be included in a market feasibility and financial
analysis study for a hotel project:

1. Area, Demographic, and Neighborhood Analysis

2. Site Review
3. Proposed Development Recommendations and Costs
4. Market Analysis
5. Proposed Development Occupancy and Average Daily Rate (ADR)
6. Financial Analysis
7. Feasibility Analysis
8. Comparison of Value Created to Projected Costs
 01
AREA, DEMOGRAPHIC,
AND NEIGHBORHOOD
ANALYSIS
AREA, DEMOGRAPHIC, AND NEIGHBORHOOD
ANALYSIS

1. Population trends

2. Household growth

3. Household economics

4. Area economics

5. Attractions

6. Area transportation
 1.AREA, DEMOGRAPHIC, AND NEIGHBORHOOD ANALYSIS
The area, demographic, and neighborhood analysis evaluates the local economy surrounding the proposed hotel. The area anal-
ysis focuses on the social, economic, governmental, and environmental forces that influence the performance and valuation
of a hotel property. Demographic information, including population, households, income levels, employment levels, etc., should
be reviewed in detail to calculate the number of people and potential customers who live within the local and regional ar-
eas. The following are some questions the study should answer:
• Population trends: What is the area population and is the number increasing or decreasing?
• Household growth:  How large is the typical household?
• Household economics: What is the unemployment rate?  What is the median income? How much disposable income do
area households have?
• Area economics: Which large corporations are based in the area? Who is growing or shrinking? What is office
vacancy rate?
• Attractions: Are there tourist attractions in the area?  What are the demand generators for leisure and group travelers?
• Area transportation: How is access to airports, interstate and local highways, and rail stations compared to competi-
tion?
A neighborhood analysis of nearby commercial and tourist establishments is important since many successful hotel projects are
proposed in areas with complementary real estate uses. Successful hotels are developed in neighborhoods where overnight
guests are already traveling and looking for places to stay.
02
SITE REVIEW
 SITE REVIEW

1.Site

2.Amenities

3.Governmental impacts
 SITE REVIEW
The site review evaluates the subject parcel’s size, access and visibility, topography,
availability of utilities, and other site-related attributes necessary for a
successful hotel project. The hotel’s proximity to demand generators is an impor-
tant consideration since hotel guests appreciate convenient access from area
highways, employers, and their destinations. The following are some questions the
study should answer:
• Site: Is the site large enough to support the planned hotel?  Is there room for
future expansions?
• Amenities: Are there nearby amenities that would complement the pro-
posed project?
• Governmental impacts: How do the subject’s ad valorem taxes, zoning, sales
history, governmental restrictions, environmental regulations and other factors
affect the subject property?
 03
PROPOSED DEVELOPMENT RECOMMEN-
DATIONS AND COSTS
PROPOSED DEVELOPMENT RECOMMENDATIONS AND COSTS

1.Physical plant information

2.Facility size

3.Branding
 PROPOSED DEVELOPMENT RECOMMENDATIONS AND COSTS
The consultant will review plans for the facility, the scope of the development and
projected costs to make recommendations for the proposed hotel. The scope of rec-
ommendations includes the number of guestrooms, number of restaurants and
lounges, amount of meeting space, recreational and aquatic features, retail shops, spa
and other amenities to include.
The consultant may estimate a range of costs for the proposed development based
upon recently-constructed projects, or the client may hire an architect and/or engineer
for formal cost estimate for the proposed hotel. The following are some questions the
study should answer:
• Physical plant information: Have any architectural plans been developed?
• Facility size: How many rooms should the hotel offer? How many food and bever-
age outlets should be developed within the hotel?
• Branding: Should the hotel have a franchise affiliation or be an independent prop-
erty?
04
MARKET ANALYSIS
 MARKET ANALYSIS
1.Hotel competitors

2.Employer analysis

3.Recent hotel openings

4.Potential hotel openings

5.Market segmentation and market penetration

6.Projections
 MARKET ANALYSIS
A thorough market analysis of the local and regional hotel market is essential as the projections of financial performance will depend
heavily upon the data gathered. The consultant will analyze occupancy, average daily rate (ADR), and revenue per available room
(RevPAR) of a market area. A hotel market report from STR and interviews with management of competitive hotels will help the consul -
tant gain a greater understanding of the state of the hotel market. Additionally, the consultant will identify all new hotels that are pro -
posed, under construction, and in development that could compete with the proposed resort project. The following factors are
critical to the market analysis:

• Hotel competitors:  How many competitors are in the market and to what degree are they competitive in terms of amenity of-
ferings, affordability, etc.?  How have they performed in past years in terms of occupancy, ADR and RevPAR?
• Employer analysis: Who are the major employers that utilize hotels in the market? What are their training needs? Are there many
meetings in the market?
• Recent hotel openings:  How many hotels have opened in recent years and how have they impacted the market?
• Potential hotel openings:  How many hotel projects are in the works?  What types of hotels will they be?  How many rooms will
they have?  What is their projected impact on the current supply and demand in the market?
• Market segmentation and market penetration: What is the market segmentation and penetration of each competitor in the mar-
ket?  The consultant will review all market segments, including corporate, leisure, group, and contract markets. Hotels in the area
that garner the largest share of the most relevant market segments will be the subject property’s main competitors.
• Projections:  Based on the current market situation, how will the subject likely perform in terms of occupancy, ADR, and revenue
per available room (RevPAR)?  What are its potential penetration rates and market segmentation?
05
PROPOSED DEVELOPMENT
OCCUPANCY AND ADR
PROPOSED DEVELOPMENT OCCUPANCY AND ADR

1.Occupancy and ADR

2.Demand
 PROPOSED DEVELOPMENT OCCUPANCY AND ADR
In estimating the performance of a hotel, the study will project the number of occupied rooms,
ADR, and revenue per available room for the proposed hotel property. A detailed supply and
demand model that calculates the historical performance of the market and makes projections
for the subject property should be presented. The following are some questions to consider:
• Occupancy and ADR: What are the historical and performance of competitive hotels in
the market? How will the subject property penetrate the existing demand in the commercial,
group, leisure, and contract segments? What is the projected ADR by segment?

• Demand:  What is the projected performance of the subject property?  How plentiful
are demand generators in the area?  Will the projected demand for the hotel be spread
among numerous organizations and attractions or will it be concentrated on a few
demand generators?
 06
FINANCIAL ANALYSIS
 FINANCIAL ANALYSIS

1.Estimate

2.Analyze

3.Projection
 FINANCIAL ANALYSIS
The financial analysis estimates a property’s capacity to generate income and makes financial
projections for the property. Estimating annual operating results for the subject property
involves an analysis of the subject’s scope and characteristics compared with comparable
properties and industry standards. The general steps include the following:

• Estimate the potential gross revenues for the subject property based upon an examina-
tion of the prior operating history of the subject property (if available), operating history
of comparable properties in the subject market area and on a national basis, and an anal-
ysis of industry trends.
• Analyze departmental, undistributed, and fixed expenses, and project appropriate amounts
in each category.
• Project the resultant net operating income (cash flow before debt service) over an appropri-
ate holding period.
 07
HOTEL FEASIBILITY
ANALYSIS
 HOTEL FEASIBILITY ANALYSIS

1.Scenario

2.Cash Flow

3.Capitalization
 HOTEL FEASIBILITY ANALYSIS
The economic value of a hotel is calculated through a discounted cash
flow analysis or a direct capitalization analysis.

The discounted cash flow analysis utilizes the property’s projected net in-
come before debt service for a period of 11 years and applies a discount
rate and terminal capitalization rate to determine the valuation. The
discount rate is the average annual rate of return necessary to attract
capital based upon the overall investment characteristics. The terminal
capitalization rate is applied to a future year’s net income to calculate
a potential sale price for the property in the future.
 08
HOTEL FEASIBILITY
ANALYSIS
 HOTEL FEASIBILITY ANALYSIS

1. Feasibility Financial Model

2. Hotel Feasibility Study Analysis Model

3. Hotel Development Model

4. Hotel Facility Model

5. Hotel FF&E – OS&E Model

 HOTEL FEASIBILITY ANALYSIS
The key component of a feasibility study is to determine if the projected value created as
shown from the discounted cash flow analysis equals or exceeds the development cost for
the proposed project. A feasibility study should present the projected value created after a
detailed analysis of the factors that determine success of the proposed properties. In
some cases, detailed costs will not be available, and this conclusion will be determined
after the client has cost estimates performed by building contractors and architects. In other
cases, the client has estimates of construction costs, and the feasibility study will present
these estimates and compare the value created to the development costs to determine if
the project is feasible. The most viable projects, which have the greatest investor appeal,
are those in which the value created is greater than the development costs for the proposal.
Even if the value created is less than the development costs, the project may still be feasible
if the project can attract municipal incentives such as a tax abatement or capital assistance to
the developer in terms of infrastructure. This would allow for either improved financial pro-
jections or for lower development costs.
 Conclusion
The hotel feasibility study requires analysis and expertise beyond other
types of commercial real estate. A hotel or resort feasibility study re-
quires a thorough market analysis involving a study of the economic and
demographic factors as well as a review of the hotel market. The study also
requires a complete financial analysis, which looks at various revenue
and expense categories. The purpose of the feasibility study is to
provide honest and reliable information to the client to help
them decide whether to develop their proposed hotel project.
NOW
Please consider to hire or not hire
 FUTURE
We are ready to accept any
appointment in this project
 PROJECT STAGES

STAGE 1
Market & Financial STAGE 2
Feasibility Study
Hotel Appraisal & Tax
Appeal Appraisal

STAGE 4
STAGE 3 RFQ Preparation &
Impact Analysis Solicitation
 TIMELINE
Month 2 Month 4
Hotel Appraisal & Tax RFQ Preparation &
Appeal Appraisal Solicitation

Month 1 Month 3 Month 5

Market & Financial Feasibility Study
Impact Analysis
Feasibility Study Contract Complete
THANKS!
Do you have any questions?

info@sphmhospitality.com
+62 812 9444 1224
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Hotel Management SPHM Hospitaliy

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