HOTEL LA MAIRIE
FEASIBILITY STUDY FOR RENOVATION AND OPERATING
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TABLE OF CONTENTS
1 EXECUTIVE SUMMARY .............................................................................. 2
2 PROJECT DESCRIPTION............................................................................ 3
3 SERVICE STRATEGY..................................................................................3
4 MARKET ANALYSIS.................................................................................... 3
4.1 TOURISM INDUSTRY ANALYSIS ................................................................... 3
4.1.1 Nationality of tourists....................................................................... 3
4.1.2 Length of stay and spending per day..............................................3
4.1.3 Number of nights spent at hotels .................................................... 3
4.2 HOTEL SECTOR ANALYSIS......................................................................... 3
4.3 MAIN COMPETITION................................................................................... 3
5 TARGET MARKET ....................................................................................... 3
6 SWOT ANALYSIS ........................................................................................ 3
6.1 STRENGTHS .............................................................................................3
6.2 WEAKNESSES .......................................................................................... 3
6.3 OPPORTUNITIES ....................................................................................... 3
6.4 THREATS ................................................................................................. 3
6.4.1 Business Risks ............................................................................... 3
6.4.2 Environmental Risks ....................................................................... 3
7 MARKETING PLAN...................................................................................... 3
7.1 PRICING................................................................................................... 3
7.2 SALES CHANNELS ..................................................................................... 3
7.3 ADVERTISING AND PROMOTION .................................................................. 3
7.4 PUBLIC RELATIONS ................................................................................... 3
8 FINANCIAL PLAN ........................................................................................ 3
8.1 CONSTRUCTION COSTS .............................................................................3
8.2 MAJOR ASSUMPTIONS ...............................................................................3
8.3 PROJECTED INCOME STATEMENT .............................................................. 3
8.4 PROJECTED BALANCE SHEET .................................................................... 3
8.5 PROJECTED CASH FLOWS......................................................................... 3
8.6 RATIO ANALYSIS ....................................................................................... 3
8.7 BREAK-EVEN ANALYSIS ............................................................................. 3
8.8 SENSITIVITY ANALYSIS .............................................................................. 3
9 RECOMMENDATIONS AND KEY SUCCESS FACTORS ........................... 3
10 ECONOMIC IMPACT EVALUATION........................................................3
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1- Executive Summary
The proposed project consists in renovating and operating a boutique hotel built in 1933
in Zgharta-Ehden caza. The hotel project will include 48 rooms, a restaurant, terrace
and banquet facilities, swimming pool, gardens, night club and other facilities.
The hotel will mainly target vacationing families from Ehden , Zgharta and neighboring
cazas such as Tripoli, Koura and Batroun as well as other Cazas and expatriates
coming to visit their families. It will also target families visiting the area during the yearly
event “Ehden Summer Festival”.
The North of Lebanon lacks hotels and entertainment facilities as confirmed by the
market study. Moreover, the field survey showed that the number of residents increases
by 126% in the summer, which creates demand for various services, especially in the
hospitality and entertainment fields.
The hotel’s Renovation costs are estimated at $614,000 for a built-up area of 3,915
square meters. The total land area is of 9,000 square meters.
The main assumptions are conservative and consider an average occupancy of 15% in
the low season (7 months of the year) and 75% in the high season (5 months) in the
first year. In year 2, it is assumed that the high season occupancy increases to 85%,
which is kept constant in the remaining years.
The projections are taken over a period of 7 years. The hotel is expected to provide an
average annual net profit of $519,500. It will be able to distribute dividends of $100,000
starting in year 3.
The hotel provides an internal rate of return (IRR) of 17% and a payback period of 2
years. These results demonstrate that the project is viable and provides healthy returns
to its shareholders.
A worst-case scenario was developed with the assumption of 5% occupancy in winter
and 60% in summer gave an IRR of 10% and a payback period of 3 years. A best-case
scenario based on 20% occupancy in winter and 85% in summer gave an IRR of 30%
and a payback period of 1.5 years.
Besides the business benefits and satisfactory performance that the hotel is expected to
deliver, it will also reshape and positively influence the economic and social
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environment of Zgharta-Ehden by offering 26 job opportunities as well as lifting the
standards of the area and enhancing the tourism potential of Ehden.
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2- Project description
The project consists in developing a bed & breakfast type of hotel in Zgharta-Ehden
caza. The hotel will have 48 rooms spread on 3 buildings of 3 floors. The project will
include a swimming pool and a night club. It will also have gardens, a restaurant, and a
terrace for banquet facilities, which will host weddings, meetings, seminars or other
events.
The total land area is assumed to be 9,000 m2. The following table shows the proposed
space program with the various planned outlets and their respective areas in square
meters. The total built-up area is 3,915 square meters.
Space program
Item
Lobby area
Rooms
Restaurant
Terrace (Banquet)
swimming pool
Total Built-up area
Total Hotel area
sq.m
225
50
220
700
370
How much
1
48
1
1
1
Total Sq.m
225
2,400
220
700
370
3,915
9,000
Each room will have a total area of 50 square meters, which includes the corridors in
each floor.
The back of the hotel area will include the offices, the kitchen, and other service and
storage areas.
3- Service strategy
The hotel’s main strategic objectives will involve gaining market share and building a
loyal clientele. Its strategy will mainly rely on offering quality service, which implies welltrained and courteous staff, impeccably clean rooms and bathrooms, and good quality
food and room service.
The hotel will offer the following facilities and services:
• 48 well-fitted and spacious rooms spread over 3 buildings of 3 floors in which 3 royal
suites and overlooking the terrace and gardens
• Acceptable size swimming pool
• Beautifully landscaped gardens adjacent to the outdoor terrace, which will host
weddings and other events in the summer.
• Night club
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4- Market Analysis
4.1 Tourism industry analysis
Lebanon is slowly gaining back some of the tourist demand it enjoyed in the prewar
glory days.
Gulf Arabs slowly began to return in the early 1990s, however, the assassination of the
prime minister Rafic Hariri in February 2005, the Israeli War in July 2006 and the
continued hostility with Israel in the South border slowed down the recovery.
Nevertheless, visitor numbers have been rising by a cumulative average growth of 12%
per year.
Year
Number of
Visitors
Growth over previous
year
2003
1,015,793
6%
2004
2005
2006
2007
2008
2009
1,278,469
1,139,524
1,062,635
1,017,072
1,332,551
1,851,081
26%
-11%
-7%
-4%
31%
39%
Source: Ministry of Tourism
In 2009, Lebanon has received more than one million eight hundred tourists (1,851,081)
for the first time in nearly 30 years. The political consensus (Doha Agreement) offered
an unexpected boost to the sector, with many Gulf Arabs who normally returned to
spend the summer months in Lebanon, leading to 2009 being a record year. The
number of visitors during the year 2009 have broken the records as shown in the
following chart.
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Number of Visitors
2000000
1,851,081
1500000
1,278,469
1,015,793
1000000
1,332,551
1,139,524
1,062,635 1,017,072
Number of Visitors
Year
500000
0
2003
1
2004
2
2005
3
2006
4
2007
5
2008
6
2009
7
The above chart shows the increasing trend in yearly arrivals over the years, which is
expected to continue growing in the coming years. Additionally, the chart shows the
important rise in the number of visitors starting in June until the end of August in each
year.
Lebanon has a number of attributes that makes it an ideal destination, whether for
business or pleasure. Its geographical position places it close to Europe and the Gulf,
and its landscape and beautiful terrain makes it the perfect get-away.
In addition, seminars, conferences and regional conventions have been rapidly growing
in number and variety (political, banking, international organizations, NGOs, fashion
shows, trade fairs, etc…), and brought many visitors mainly from Europe and the Arab
world. Hotels largely benefited from this rise in activity.
4.1.1 Nationality of tourists
According to the Ministry of Tourism, in 2009, the origin of tourists show Arab countries
came first with 45% visitors, followed by Europe with 25%, Asia with 15%, the Americas
with 10%, Oceania with 2% and Africa with 3%.
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Nationality of Visitors 2009
America
10%
Oceanea Africa
2%
3%
Asia
15%
Arab countries
45%
Europe
25%
Recent political events coupled with the rapid development of various attractions in
Lebanon have made it a magnet for Arab tourists who otherwise may have been
heading to Europe or the Sates.
The Arab and Gulf tourists have always considered Lebanon as a privileged destination
for their holidays. They represent the main tourist population, both in number and in
duration of stay.
In addition to Arabs and Gulf tourists, the Lebanese expatriates are also visiting their
home country in greater numbers each year.
4.1.2 Length of stay and spending per day
Arab businessmen spend the most amount of dollars during their visits. They are
followed by the non-Arab businessmen, which spend about half that amount.
Arabs visiting for leisure spend 15 days in Lebanon as compared to non-Arabs that
spend 10 days.
Lebanese expatriates returning to visit their family/friends spend around 26 days on
average.
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Length of stay and spending per day of visitors
Visitors
Arab businessmen
Non-Arab businessmen
Arabs visiting for leisure
Non-Arabs visiting for leisure
Lebanese returning to visit friends/family
Length of
stay
7
6
15
10
26
$/day
640
304
245
240
227
Source: Ministry of Tourism
4.1.3 Number of nights spent at hotels
The following table and chart show the distribution of nights spent at hotels per
nationality.
Number of nights spent at hotels – 2009
Country/Nationality
Number of hotel residents
Number of nights spent
Length of stay per person
73,614
206,246
2.80
78,619
141,436
1.80
39,289
107,934
2.75
38,654
100,901
2.61
22,374
87,552
3.91
288,185
85,606
0.30
22,922
57,942
2.53
20,056
44,993
2.24
13,000
44,247
3.40
11,811
33,782
2.86
6,757
21,464
3.18
5,322
17,057
3.20
134,819
454,094
3.37
755,421
1,403,253
2.69
Lebanon
Syria
France
Jordan
Egypt
Saudi-Arabia
Kuwait
Russia
United-States
Great Britain
Emirates
Canada
Other (130 countries)
Total
Source: Association of Hotel Owners
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Lebanese visitors rank first with 15% of the total number of nights spent at hotels, they
are followed by the Syrians (10%) and French (8%).
Out of the Arabs, the Syrians, Jordanians, Egyptians and visitors from Saudi Arabia
spent the most number of nights at Lebanese hotels in 2009.
4.2 Hotel Sector Analysis
The following table summarizes the number of existing and operating hotels by region
and by category. (The star ratings given do not follow international norms and standards
but the government has recently revised the categorization system).
Distribution of hotels per regions
Int'l
5*
4*A
4*B
3*A
3*B
2*A
Beirut
15
13
9
14
8
8
5
14
86
27%
Mount Lebanon
7
11
17
22
21
37
13
38
166
51%
North Lebanon
-
6
3
4
3
8
9
18
51
16%
Bekaa
2
1
1
1
2
5
3
5
20
6%
South Lebanon
-
1
1
1
2
1
-
6
12
4%
24
7%
32
10%
31
10%
42
13%
36
11%
59
18%
30
9%
81
25%
335
Total
%
1*
UL
Total
%
Source: Ministry of Tourism
A new rating system was recently introduced by the Ministry of Tourism and made
hotels subject to an annual independent inspection for renewal of their rating, and is
based on quality. Previously, size was a predominant factor in determining how many
stars a hotel should be awarded. Existing hotels will have five years in which to meet
the standards of the present classification or face being downgraded, but new hotels will
be required to meet the standards straightaway
Recent official figures released by the Ministry of Tourism show that the number of
hotels increased, from 2005 to 2009 in the regions as follows:
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Beirut
Mount Lebanon
North Lebanon
South Lebanon
Bekaa
Total
Number
of
hotels (2005)
Number
of
hotels (2009)
%
Change
from 2005 to
2009
Number
of
beds (2009)
Number
of
rooms (2009)
71
161
48
10
18
308
86
166
51
12
20
335
21%
3%
6%
20%
11%
9%
10495
13297
3396
762
1275
29225
6966
7532
1758
389
711
17356
Source: Ministry of Tourism
Between 2000 and 2005, the number of hotel rooms almost doubled to 10,000 and
reached 17,356 by 2009. In fact, the number of rooms in Lebanon has been growing by
20% to 25% per year over the past years overtaking the rise in tourist numbers, which
was growing on average by 10%-15%. Despite the growing number of hotels and
rooms, the demand has been exceeding supply during the summer and holiday
seasons.
As the tables show, North of Lebanon is the third developed area in terms of hotels. In
fact, the administrative centralization and the non development and Un- investment in
this area of Lebanon did not allow the development of the sector. Before 2003, Tripoli,
the capital of North Lebanon had only 2 hotels.
After 2003, 6 new hotels were established in the North and currently the total number of
rooms is 1,758. The area still lags behind and an additional number of hotels will be
needed in the coming years.
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4.3 Main competition
The following table shows major hotels currently operating in Zgharta-Ehden and
neighboring:
Name of hotel
Ehden Hotel (Country
Club)
Belmont
Grand Hotel Abshi
Quality Inn
North Palace
Address
Facilities
Rates
Staff
Ehden - North Lebanon
Ehden - North Lebanon
Phone: +961 6 560091
Fax: +961 6 560159
Ehden - North Lebanon
Phone: +961 6 560091
Fax: +961 6 560159
Tripoli - North Lebanon
Zgharta - North Lebanon
Phone: +961 6 660466
Fax: +961 6 663853
Chbat
Bsharreh - North Lebanon
Phone: +961 6 671270
Fax: +961 6 671237
Las Salinas
Enfeh - North Lebanon
Phone: +961 6 540970
Fax: +961 6 540970
Villa Nadia
Tripoli - North Lebanon
Phone: +961 6 634545
Fax: +961 6 440981
Barakat
Hadath el Jebbe - North
Lebanon
Bassil
Hadath el Jebbe - North
Lebanon
Source: Compiled by O'SOS
5 Target market
The town of Zgharta is the administrative center of the district. It is inhabited by nearly
31,000 people (an estimation due to lack of official data). Too many “Zghortiotes” are
located in Kfarhata, Mejdlaya and Kfardlakous which are today the suburbs of Zgharta,
not to mention those living in the capital Beirut (and surroundings) and last, thousands
spread all over the world mainly in USA, Australia, Venezuela, Brasil, Mexico…
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The majority of the “Zghortiotes” spend the summer in Ehden, the most beautiful
summer resort in Lebanon and a town inhabited nearly 4 months a year. Ehden existed
long before Zgharta and these two cities have the same inhabitants, one history, one
municipality,one heritage…
Population Growth
Since the end of the occupation, a growing number of people have been visiting the
South. Among others, the Lebanese expatriates living in various parts of the world have
been increasing in numbers. The field survey led by O’SOS in Zgharta showed that the
number of residents in the caza increases by 126% during the summer with a growing
number of visiting expatriates. The following table shows the number of residents in the
winter and the summer as estimated by each municipality in the respective villages.
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Village
Residents Winter
Residents Summer
» Toula - Aslout
30.00
33
» Kfar Fou
230.00
473
» Kfar Hata (Zgharta)
-
-
» Seraal
290.00
583
» Bneshaai
110.00
220
» Haret el Faouar (Majdlaya)
-
-
» Ras Kifa
176.00
352
» Iaal
73.00
146
15,394.00
30,788
77.00
154
» Zgharta - Ehden
» Bhayri (Toula)
» Mejdlaiya (Zgharta)
3,965.00
7,931
» Sebaal
517.00
1,034
» Kfar Zeina
100.00
207
» Qarah Bach
-
-
» Baslouqit
530.00
1,067
» Aytou
578.00
1,157
» Miziara - Harf - Hmaiss - Sakhra
640.00
1,289
» Aarbet Qouzhaiya
430.00
875
» Ardeh
2,539.00
5,078
» Karm Saddeh
225.00
451
» Kfar Dlaqous
185.00
370
» Aachach
510.00
1,023
» Aarjes
380.00
760
» Kfar Sghab
2,490.00
4,983
» Daraiya - Bchannine
1,007.00
2,014
785.00
1,571
» Aaintourine
» Ehden
-
-
» Miriata - Qadriyeh
877.00
1,755
» Rachaaine
223.00
447
» Mazraat Et Teffah
520.00
1,045
» Aalma
252.00
504
-
-
33,155.00
66,310
Growth
100%
» Kfar Yachi
TOTAL
Growth of 100%
Following the Nahr El Bared war, a large number of NGOs and other aid associations
rushed to the North to provide help and assistance to families.
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Their actions included development programs and capacity building schemes as well as
vocational training and micro-credit financing aiming to revitalize the region. The NGO’s
activities created demand for some hotel rooms, rental of conference halls, restaurant
services, etc…
Moreover, the presence of the Rachid Karame International Exhebition in the region has
also created demand for hospitality services ranging from restaurants to swimming
pools and sports facilities.
Furthermore, part of the demand comes from the Northern Coastal areas of Tripoli,
Batroun and Akkar, which also consider taking a summer vacation in Zgharta Ehden
caza. For example, the village of Ehden attract a number of summer vacationers from
Beirut, mainly those residents that are originally from Zgharta as well as residents from
Tripoli that are attracted by the pleasant summer weather of the caza.
The hotel will mainly target the following market segments:
1. The expatriates visiting the caza during the summer
2. The NGOs operating in the North region require hospitality services and will
appreciate the proximity of the hotel to their main service centers in the North.
3. The local residents in Beirut who are originally from Zgharta also create demand
during holidays and the summer season.
4. The hotel will also target the weddings market as well as conferences, seminars or
other meetings.
5. The religious tourists also are potential clients to the restaurant and the swimming
pool.
6 SWOT Analysis
6.1 Strengths
The hotel will offer several advantages:
. It will be a unique quality “bed & breakfast” hotel in the region.
. The hotel will have a swimming pool, a tennis court, gardens and terrace for Banquet
and a Night Club, which will make it a destination for family entertainment, both from
hotel users as well as Ehden residents and visitors.
. Banquet facilities for up to 400 seats with direct access to a contiguous large outdoor
private terrace, and swimming pool which is perfect for special events and weddings.
. High competencies and expertise of the Managing Partner (Hotel Management
Diploma from Suisse and more than 20 years in the field)
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6.2 Weaknesses
The main weakness for the hotel will be the highly seasonal activities, which will
essentially rely on the summer and / or winter volume. Indeed, the number of residents
in the summer increases by around threefold as compared with the winter. This will
require extra marketing efforts to smooth out the seasonality factors.
6.3 Opportunities
. Zgharta Ehden caza has a high percentage of wealthy and educated expatriates and
residents in Beirut and its vicinity that still have constant links with their original villages.
The caza lacks hotels and entertainment facilities to cater for this important market
segment.
. The future of the industry seems optimistic with the prospective peace process.
Furthermore, there are plans for regional integration between Lebanon, Jordan and
Syria, which will allow visiting the 3 different countries in one trip: Lebanon with its
cosmopolitan lifestyle, Jordan with its archeology and desert safaris, and Syria with its
authentic and preserved Middle Eastern life. In this case, the North of Lebanon is
poised to take advantage from its proximity to Jordan and Syria.
. Zgharta Ehden has some important historical sites and ruins, which could become a
destination, such as the Basilica, the Forest and Mar Sarkis.
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This presents important potentials for the area. Moreover, its proximity to other major
sites such as El Arz, Bcharreh and Sir El Donnieh could make of Ehden an important
stop within a guided tour program.
. Lebanon is gradually regaining its pre-war regional role especially in the leisure and
entertainment field. Indeed, Lebanon's nightlife and recreation activities are attracting a
growing number of expatriates visiting their relatives in Lebanon. The same pattern is
happening in the various Lebanese villages. Even if a large number of expatriates
generally have members of their family that would offer them accommodation, there is
still a large need for hotels or furnished apartments for a portion of them.
. A joint program between Lebanon and the European Union is providing subsidized
long-term loans for hotels. Currently, the subsidy covered by the Banque du Liban is 7%
for loans up to 5 billion Lebanese Pounds and 5% for amounts over 5 billion and up to
15 billion Lebanese Pounds.
. Tourist events such as the shopping festivals, artistic festivals at Ehden,Baalback,
Beiteddine, Tyr, and Byblos, and performances at the Casino are increasingly attracting
visitors and thereby offer opportunities for hotels.
. Recently, the government introduced some measures to boost the tourism sector
including:
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- An open skies policy that lifted restriction on the number of international airlines
serving Beirut International Airport, therefore encouraging traffic into Lebanon.
- Cuts in customs tariffs introduced in December 2000, and VAT refund introduced
in 2003 which encourage shopping-tourism and help reduce the hotels' operating
costs.
- Visas are currently granted at the airport to citizens from the Gulf Co-operation
Council (those of Saudi Arabia, Bahrain, Kuwait, Qatar, Oman and the UAE),
Europe, the US, Canada, and Australia. In the past, some touristic and cultural
events, and business conferences were held in neighboring countries because
of the difficulty in obtaining visas.
- In addition, the Lebanese Ministry of Tourism has established six overseas
offices, which are promoting Lebanon at global trade fairs. In addition, the
Ministry holds its own Arab World Travel and Tourism Exchange show, and runs
a tourism festival, which is aimed to increase tourism.
- The government has allocated more than $10 million budget to market Lebanon
internationally.
6.4 Threats
6.4.1 Business Risks
Cost Structure
The hospitality industry requires important investments with long-term returns and it is
not easy to raise capital in Lebanon.
Moreover, the operating costs are relatively high in Lebanon as compared with other
countries in the region, thus increasing the pressure on the hotel performance.
Competition
Competition mainly revolves around the international hotels, several of whom dominate
the market, and are based primarily in Beirut. With this large supply of hotels,
occupancies will have to be shared resulting in less occupancy in each hotel. However,
the hotel in question being a unique hotel in Zgharta Ehden caza will have limited
competition in its field.
6.4.2 Environmental Risks
Economic
Environmental threats include the economic recession in the country and the political
situation in the region. This has been affecting the hotels as well as the restaurants
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business. Moreover, the continuous threats from a devaluation of the Lebanese pound
may consequently affect the hotel business in general.
Country risk
The difficulties facing the peace process in the Middle East is slowing the expected
economic boom especially in the tourism field. Although many are optimistic about the
future of the industry, expecting Lebanon to reemerge as a significant tourist
destination, it is still a very difficult transition period before the peace process
materializes.
War image
Another risk comes from the war image that the country has in the minds of most
potential visitors, especially that Lebanon is rapidly affected by most outside political
and insecurities in the Middle East region.
Legal and Government
The government’s efforts to support and boost Lebanon’s tourism industry are essential
for the growth of the hotel industry. If the government does not follow through on its
plans to decrease taxes, increase promotional activity for Lebanon and increase
spending, this will adversely affect the growth in the hotel and tourism sector.
7 Marketing Plan
The hotel’s main marketing objectives involve:
• Promoting the hotel as a unique destination for expatriates visiting home, local
residents from the Capital and main cities, as well as summer vacationers.
• Building a loyal clientele and gaining awareness among expatriates and locals residing
in the Capital and main cities.
• Promote the banquets facilities for weddings and private parties
• Offer packages for tour operators and travel agencies.
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7.1 Pricing
The prices for the services are determined first and foremost by the market, the
competition, and the seasonality and types of customers.
Pricing
Single Rooms
Standard Rooms
Suites Rooms
Royal Rooms (Honey moon)
Swimming pool-adults day rate
Swimming pool-kids day rate
Restaurant
Night Club - Entrance
Tennis court – Entrance per hour
Rates
$90
$120
$160
$270
$13
$7
$30
$20
$10
The hotel will offer differentiated pricing depending on various factors including:
• The seasonality, for example, it will give exceptional rates and weekend package
deals during the low seasons months
• The number of days: for example, it would offer package deals including one night free
of charge for reservations of at least 4 days in a row.
• Group rates offering discounts based on the number of rooms taken
7.2 Sales channels
The hotel will establish strategic alliances with travel and tour agents locally as well as
internationally, especially with tour agencies in countries with high concentration of
Zgharta Ehden Caza people. This will increase the exposure of the hotel to expatriates.
The hotel will also establish deals with travel agencies, tour operators, Association’s, or
NGO’s by offering them especially low rates for large groups that would rent a number
of rooms as well as conferences.
7.3 Advertising and promotion
The hotel will allocate a yearly budget of 1% of revenues to marketing and advertising
budget. This budget will mainly cover brochures, advertising in local magazines, as well
as sponsoring of events in the area.
The hotel will start by preparing a colorful and attractive brochure, with pictures of the
rooms, swimming pool, gardens, and banquets hall. This brochure will be distributed to
various NGOs and companies operating in the area and Northern coast, mainly Tripoli.
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It will also be distributed to expatriates through a network of contacts with key people in
foreign countries that have hosted a large number of Zgharta Ehden Caza people.
7.4 Public relations
The public relations efforts will mainly rely on the following:
• Develop a sustained public relations effort, with ongoing contact with key leaders in
foreign countries with high concentration of Zgharta Ehden Caza people such as USA,
Australia, Venezuela, Brasil, Mexico, Arab Gulf and other African countries.
• Establish contact with Ministry of Tourism and other tourist organizations or
publications staff for the purpose of being included in hotels services comparisons, and
publications where competing services are compared. This exposure builds credibility
and market acceptance.
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8 Financial Plan
This section details the calculations, assumptions and methodology used as a basis for
the projections of the expected financial performance of the hotel.
8.1 Construction costs
CONSTRUCTION COST ANALYSIS
Cost Item
Total cost
% of total
Hard Cost
Renovation permit
5,000
1%
Basic Renovation cost
103,000
17%
Fittings and Installations
51,000
8%
Furnitures
126,000
21%
Office Equipment, telephones, TV, Computers…
22,000
4%
Swimming pool
52,000
8%
Tennis court
10,000
2%
Landscaping
15,000
2%
Total Renovation Cost
384,000
63%
Soft costs
0%
Enginnering and supervision
55,000
9%
Occupancy permit
10,000
2%
pre-opening expenses (marketing, lawyer, consultant,..)
15,000
2%
Total soft costs
80,000
13%
Working Capital Needs
150,000
24%
Total Project Cost
614,000
100%
The above table shows the various construction cost elements. The fittings and
installations include kitchen equipment, heating and cooling equipment, and other
fixtures. The landscaping budget includes the plants, irrigation system, outdoor lighting,
drainage system, and the fence.
The project’s total cost is evaluated at USD 614,000. This includes the permits, hard
and soft costs as well as the working capital needs at the start of operations.
22 | P a g e
8.2 Major assumptions
The assumptions on the income side are conservative and are based on current market
levels and achieved results at comparable hotels in the North of Lebanon. They take
into consideration risks and contingencies as well as market levels for costs and prices.
The hotel will have a total of 48 rooms with the following pricing:
Pricing
Single Rooms
Standard Rooms
Suites Rooms
Royal Rooms (Honey moon)
Swimming pool-adults day rate
Swimming pool-kids day rate
Restaurant
Night Club - Entrance
Tennis court – Entrance per hour
Rates
$90
$120
$160
$750
$13
$7
$30
$20
$10
The hotel is expected to have an occupancy rate of 75% during the summer and 2
months during winter; and 15% during the remaining 8 months of the year. This gives
an average occupancy of 40%.
In the second year of operation the hotel is expected to achieve occupancy rate of 85%
in the summer and winter months, while still maintaining 15% during the remaining
seasons. This gives an average occupancy of 44%. For conservatism, in the following
years, the occupancy rate is kept at 44%. (However, the hotel could achieve higher
rates in case intensive marketing is done and as the security situation in Lebanon
improves).
The following table shows assumptions related to rooms revenues including
telecommunications and laundry revenues, as well as the related costs.
Rooms assumptions
Rooms consumable supplies
Telecommunications revenues
Telecom. Cost of sales
Laundry: Avg. revenue
Laundry consumable supplies
Credit card commissions
12%
1%
50%
$2
32%
50%
of rooms revenues
of rooms revenues
of telecom revenues
per room
of laundry revenues
of revenues
23 | P a g e
The following table shows the assumptions for the computation of the swimming pool
revenues.
Swimming pool assumptions
Adults
Kids
Annual increase in revenues
Nbr/weekend
100
70
2%
Nbr/rest of week
50
30
Nbr weeks
16
12
Total/season
2400
1200
The following table shows the assumptions for the computation of the Tennis Court
revenues. For the Tennis court it is assumed that the entrance fees are $10 per hour
with an average play of 3 hours and it is considered as a privilege and not a cost center
generating profits.
Tennis court assumptions
Adults
Annual increase in revenues
couple/weekend
8
2%
couple/rest of week
4
Nbr weeks
16
Total/season
192
The following table shows the assumptions for the computation of the Night Club
revenues. For the Night Club it is assumed that the entrance fees are $20 with a drink.
Night Club assumptions
Adults
Nbr/weekend
350
Annual increase in revenues
2%
Nbr/rest of week
0
Nbr weeks
16
Total/season
5600
The following table shows the main assumptions for the food & beverage outlets
including the main restaurant with 100 seats, the room service and the banquets.
The assumptions are conservative and take into consideration the low seasons.
For example, for the room service, only 180 days per year are considered and 20% of
these days are taken as a base. An average revenue of $10 is taken as a base for room
service.
The main restaurant also takes into consideration only 180 days in the year with an
average occupancy of 40%. An average revenue of $30 is considered as a base for
restaurant revenues.
For the banquets, only 60 days in the year are considered and occupancy of 80% is
taken for these days with average revenue of $30 per cover.
24 | P a g e
Food
&
assumptions
beverage
Room service
Main restaurant
Banquets
Cost
of
(consumables)
External charges
sales
Average
Occup.
48 rooms
20%
100 seats
40%
400 seats
80%
32% of F&B revenues
Avge
cov./day
10
40
320
#
Days in yr
Avge check
180
180
30
$10.00
$30.00
$30.00
15% of F&B revenues
It is assumed that food & beverage revenues will grow by 5% in year 2, by 3% in year 3,
and by 2% in year 4, and remain constant beyond year 4.
The following table shows the main assumptions for the income statement. The
marketing expenses are assumed to be 1% of annual revenues. An annual increase in
general expenses of 2% is taken into account for inflation factors.
The maintenance expenses are taken as 2% of total fixtures and installations.
Seasonal wages are based on 6 months of summer and winter. An annual increase in
salaries of 1% is taken.
Income Statement Assumptions
Marketing expenses
Annual increase in general expenses
Maintenance expenses
Seasonal wages
Annual increase in salaries
Income Tax Rate
1.0%
2.0%
2%
5
1%
15%
of revenues
of fixtures & installations
months
annually
The following table shows the balance sheet assumptions:
Balance Sheet Assumptions
Accounts Receivable
Inventories
Accounts payable
Expenses payable
15%
2 months
18%
20%
sales
of consumables
of consumables
of general expenses
The following table shows the depreciation rates, which follow international accounting
standards:
DEPRECIATION RATES
Furniture
Fixtures & installations
Office equipment and computers
Construction costs
7.5%
7.5%
20%
2%
25 | P a g e
Staff structure
The staff of the hotel will be carefully selected in order to ensure a dynamic and
competent team, which will be able to provide high standards of services. A thorough
training will be provided to all the staff.
STAFF STRUCTURE
Management and Sales
Number of
employees
Monthly
salary
Total
salaries
NSSF
Transport
Total
Transport
Monthly
Total
Manager
1
1,500
1,500
353
130
130
1,983
Accountant
1
500
500
118
130
130
748
Front office and Customer service
2
500
1,000
235
130
260
1,495
housekeeper
1
700
700
165
130
130
995
Chef
1
1,000
1,000
235
130
130
1,365
Cook
1
800
800
188
130
130
1,118
Cleaners / Attendants
2
350
700
165
130
260
1,125
Maids
2
400
800
188
130
260
1,248
Stewart/Janitor
1
350
350
82
130
130
562
Waiters
2
350
700
165
130
260
1,125
Seasonal staff
12
350
4,200
987
130
1,560
6,747
TOTAL
26
6,800
12,250
2,879
1,430
3,380
18,509
The total number of staff is 26 in high season and 14 during low season. The monthly
salaries including social security charges and transport, during the high season are
around $18,500.
8.3 Projected Income Statement
The following income statement is based on conservative assumptions of revenues as
well as costs.
HOTEL LA MAIRIE
Projected Income Statement
year 1
year 2
year 3
year 4
year 5
year 6
year 7
40%
44%
44%
44%
44%
44%
44%
643,000
662,290
662,290
662,290
662,290
662,290
662,290
Telecommunications revenue
6,430
6,623
6,623
6,623
6,623
6,623
6,623
Laundry revenue
17,520
18,571
18,571
18,571
18,571
18,571
18,571
Total rooms revenue
666,950
687,485
687,485
687,485
687,485
687,485
687,485
Room service revenue
18,000
18,900
19,467
19,856
19,856
19,856
19,856
Restaurant revenue
216,000
226,800
233,604
238,276
238,276
238,276
238,276
Occupancy for rooms
Rooms revenue
26 | P a g e
Terrace (banquet ) revenue
288,000
302,400
311,472
317,701
317,701
317,701
317,701
Swimming pool revenue
39,600
40,392
41,200
42,024
42,864
43,722
44,596
Night Club revenue
95,000
96,900
98,838
100,815
102,831
104,888
106,985
Tennis court
5,760
5,875
5,993
6,113
6,235
6,360
6,487
1,329,310
1,372,877
1,392,065
1,406,157
1,409,014
1,411,928
1,414,900
Rooms consumable supplies
77,160
79,475
79,475
79,475
79,475
79,475
79,475
Telecommunications cost
3,215
3,311
3,311
3,311
3,311
3,311
3,311
Laundry cost
5,606
5,943
5,943
5,943
5,943
5,943
5,943
credit card commission
13,293
13,729
13,921
14,062
14,090
14,119
14,149
Food & Beverage cost
167,040
175,392
180,654
184,267
184,267
184,267
184,267
Food & Beverage external services
78,300
82,215
84,681
86,375
86,375
86,375
86,375
Night club consumable supplies
28,500
29,070
29,651
30,244
30,849
31,466
32,096
Marketing expenses
13,293
13,729
13,921
14,062
14,090
14,119
14,149
Salaries rooms and F&B staff
102,600
103,626
104,662
105,709
106,766
107,834
108,912
Seasonal wages
33,735
34,072
34,413
34,757
35,105
35,456
35,810
social security charges
24,111
24,352
24,596
24,842
25,090
25,341
25,594
Transport staff
32,760
24,960
24,960
24,960
24,960
24,960
24,960
Total Cost of Sales
579,614
589,874
600,188
608,006
610,321
612,666
615,041
Gross Margin
749,697
783,003
791,877
798,151
798,692
799,262
799,859
56%
57%
57%
57%
57%
57%
57%
-
32,000
32,000
40,000
40,000
40,000
40,000
Lawyers & Auditors fees
8,000
8,000
8,000
8,000
8,000
8,000
8,000
Utilities: Electricity, water, Telephone
39,879
27,458
27,841
28,123
28,180
28,239
28,298
Supplies
5,000
5,050
5,101
5,152
5,203
5,255
5,308
Maintenance
6,000
6,000
6,000
6,000
6,000
6,000
6,000
Municipality taxes & other taxes
2,300
2,300
2,300
2,300
2,300
2,300
2,300
Salaries Administrative
44,400
44,844
45,292
45,745
46,203
46,665
47,131
social security charges
10,434
10,538
10,644
10,750
10,858
10,966
11,076
Transport staff
7,800
7,800
7,800
7,800
7,800
7,800
7,800
Other Expenses
6,000
6,300
6,615
6,946
7,293
7,658
8,041
Total General & Administrative Expenses
129,813
150,290
151,593
160,816
161,837
162,882
163,954
EBITDA
619,883
632,713
640,284
637,335
636,856
636,379
635,905
Depreciation expenses
22,975
22,975
22,975
22,975
22,975
22,975
22,975
Tax expenses
89,536
91,461
92,596
92,154
92,082
92,011
91,940
Net Income
507,372
518,277
524,713
522,206
521,799
521,394
520,991
38%
38%
38%
37%
37%
37%
37%
Total Revenues
Gross Profit Margin %
Expenses
Rent
Net Profit Margin %
The income statement shows satisfactory income levels with an average net profit
margin of 46%.
27 | P a g e
8.4 Projected Balance Sheet
The balance sheet shows the projected assets and liabilities of the company.
HOTEL LA MAIRIE
Projected Balance Sheet
year 1
year 2
year 3
year 4
year 5
year 6
year 7
Cash & Equivalents
566,217
946,992
1,291,102
1,634,533
1,926,452
2,217,969
2,509,086
Accounts Receivable
199,397
205,931
208,810
210,924
211,352
211,789
212,235
Inventory
41,634
43,468
44,345
44,947
44,947
44,947
44,947
Current Assets
807,248
1,196,392
1,544,257
1,890,404
2,182,751
2,474,706
2,766,268
Construction cost (renovation)
265,000
265,000
265,000
265,000
265,000
265,000
265,000
Fixture & Installations
51,000
51,000
51,000
51,000
51,000
51,000
51,000
Furniture
126,000
126,000
126,000
126,000
126,000
126,000
126,000
Office Equip.,Computers, Telecom
22,000
22,000
22,000
22,000
22,000
22,000
22,000
Accumulated Depreciation
22,975
45,950
68,925
91,900
114,875
137,850
160,825
Non Current Assets
486,975
509,950
532,925
555,900
578,875
601,850
624,825
1,294,223
1,706,342
2,077,182
2,446,304
2,761,626
3,076,556
3,391,093
Accounts Payable
44,965
46,946
47,893
48,543
48,543
48,543
48,543
Expenses Payables
141,885
148,033
150,356
153,764
154,432
155,110
155,799
Current Liabilities
186,851
194,979
198,249
202,308
202,975
203,653
204,342
Loan (Financial Institution - Kafalat)
400,000
285,714
228,571
171,428
114,285
57,142
-
Non Current Liabilities
400,000
285,714
228,571
171,428
114,285
57,142
-
Invested Capital
200,000
200,000
200,000
200,000
200,000
200,000
200,000
Retained Earnings
507,372
1,025,649
1,450,362
1,872,568
2,244,367
2,615,760
2,986,751
Shareholders Equity
707,372
1,225,649
1,650,362
2,072,568
2,444,367
2,815,760
3,186,751
1,294,223
1,706,342
2,077,182
2,446,304
2,761,627
3,076,555
3,391,093
Total Assets
Total Liab. & Shareholders Equity
HOTEL LA MAIRIE
Retained Earnings statement
year 1
year 2
year 3
year 4
year 5
year 6
year 7
Beginning Retained Earnings
-
507,372
1,025,649
1,450,362
1,872,568
2,244,367
2,615,760
507,372
518,277
524,713
522,206
521,799
521,394
520,991
-
-
100,000
100,000
150,000
150,000
150,000
507,372
1,025,649
1,450,362
1,872,568
2,244,367
2,615,760
2,986,751
Net Income
Dividends Paid
Ending Retained Earnings
A Capital expenditure of $25,000 are expected in year 5, as the hotel will renew some of
its computer equipment and furniture.
The company is expected to start distributing dividends of $100,000 annually starting in
year 3.
28 | P a g e
8.5 Projected Cash Flows
The following table shows the projected cash flows of the hotel.
HOTEL LA MAIRIE
STATEMENT OF CASH FLOWS
year 1
year 2
year 3
year 4
year 5
year 6
year 7
507,372
518,277
524,713
522,206
521,799
521,394
520,991
22,975
22,975
22,975
22,975
22,975
22,975
22,975
Changes in Working Capital
(100,130)
(46,227)
(46,428)
(44,600)
(20,705)
(45,701)
(45,699)
Total Adjustments
(77,155)
(23,252)
(23,453)
(21,625)
2,270
(22,726)
(22,724)
Cash provided by operating activities
430,217
495,025
501,260
500,581
524,069
498,668
498,267
Net Income
Adjustments to reconcile net income to cash
provided by operating activities
Depreciation
Cash Flow from investing activities
Capital expenditures
Invenstment in Fixed Assets
(464,000)
Net cash used in investing activities
(464,000)
(25,000)
-
-
-
(25,000)
-
-
Cash Flow from financing activities
Net injection by owners
200,000
Net borrowings & repayment of loans
400,000
(114,250)
(57,150)
(57,150)
(57,150)
(57,150)
(57,150)
-
-
(100,000)
(100,000)
(150,000)
(150,000)
(150,000)
600,000
(114,250)
(157,150)
(157,150)
(207,150)
(207,150)
(207,150)
-
566,217
946,992
1,291,102
1,634,533
1,926,452
2,217,969
Changes in Cash
566,217
380,775
344,110
343,431
291,919
291,518
291,117
Cash at End of Year
566,217
946,992
1,291,102
1,634,533
1,926,452
2,217,969
2,509,086
Dividends distributed
Cash provided by financing activities
Cash at beginning of year
The projected cash flows show the initial net investment in fixed assets. It also shows
the net invested capital by the owners. The distributed dividends are shown starting in
year 3.
The Loan repayment will starts after the grace period and amortized over 7 years.
8.6 Ratio analysis
The following table shows the main financial ratios for the hotel. The current ratio, which
is equal to current assets divided by current liabilities, shows satisfactory levels in all
years. The return on average assets grows over the years as the net income of the
hotel increases.
29 | P a g e
HOTEL LA MAIRIE
Ratio Analysis
year 1
year 2
year 3
year 4
year 5
year 6
year 7
Current ratio
1.29
1.28
1.28
1.26
1.26
1.26
1.26
Return on Average Assets
39%
35%
28%
23%
20%
18%
16%
Total Assets Turnover (sales/T.A)
1.03
0.80
0.67
0.57
0.51
0.46
0.42
Gross Profit Margin
56%
57%
57%
57%
57%
57%
57%
Operating Profit Margin
0.47
0.46
0.46
0.45
0.45
0.45
0.45
Net Profit Margin
38%
38%
38%
37%
37%
37%
37%
Return on Average Equity - ROE
72%
42%
32%
25%
21%
19%
16%
The total assets turnover improves from 39% to 20% by year 5, mainly due to the
increase in total assets over the years.
The profitability margins are satisfactory over the years. The return on average equity is
around 32%. The return on investment is also around 15%. These are considered
acceptable levels for a hotel.
The internal rate of return is 17% and the payback period, which is the period necessary
to pay back the investment, is 2 years.
8.7 Break-even analysis
The following table shows the annual revenue levels needed for the hotel to break even.
Thus, an average of $312,900 per year is a minimum level of revenues for the hotel.
HOTEL LA MAIRIE
BREAK EVEN ANALYSIS
year 1
year 2
year 3
year 4
year 5
year 6
year 7
1,329,310
1,372,877
1,392,065
1,406,157
1,409,014
1,411,928
1,414,900
Total Variable Costs
579,614
589,874
600,188
608,006
610,321
612,666
615,041
Total Fixed Costs
152,788
173,265
174,568
183,791
184,812
185,857
186,929
Break -even Revenues
270,914
303,794
306,878
323,797
326,036
328,325
330,665
Total Revenues
8.8 Sensitivity analysis
A worst-case scenario is taken by assuming that the occupancy rate is only 5% during
the low season instead of 15% and the high season rate is only 60% instead of 75%.
Thus, an average occupancy of 28% for year 1 is taken, and in the consecutive years,
an average occupancy of 35% is considered.
30 | P a g e
Moreover, the swimming pool, the restaurant and the night club occupancy will be
affected by this analysis.
In this case, the hotel still has an average profitability of $275,200 annually. The internal
rate of return is 10%. The payback period is 3 years.
A best-case scenario is developed considering 20% occupancy in the low season and
85% occupancy in the high season.
This scenario gives an average profitability of $892,700 annually. The internal rate of
return is 30% and the payback period is 1.5 years.
Worst case
Most likely
Best case
Occupancy rate low season
5%
15%
20%
Occupancy rate high season
60%
75%
85%
275200
519500
892700
Average net profit margin
34%
37%
49%
Internal rate of return - IRR
10%
17%
30%
3
2
1.5
Average net income
Payback period in years
These results show the viability of the project, especially if it is well-managed providing
quality at affordable prices. Of course, the general improvement of the situation in the
North will further enhance the results to be achieved by the hotel.
9 Recommendations and key success factors
In order to achieve satisfactory results, there are some key success factors that should
be highlighted:
• The hotel should focus on quality services implying courteous staff, impeccable
cleanliness of the rooms, restaurants, and other public areas.
The food should be of high quality and well presented for weddings and special events.
The main idea is to offer quality at affordable and competitive prices.
• The hotel should strive to build a loyal clientele, which will be coming back time after
time. This will ensure the long-term sustainability of the business.
31 | P a g e
• It should develop a well-targeted marketing strategy including advertising activities,
promotional packages and discounts, special deals with companies, travel agencies, or
tour operators for group reservations, contacts with key persons and tour agents in
countries with high concentration of Zgharta Ehden people, etc..
• Marketing the banquets facilities is very important for the hotel, especially that
weddings and other banquets generally constitute about 60% to 70% of food and
beverage revenues in most hotels. This important revenue generator should be given
special attention and should be diligently marketed in the region.
• The swimming pool is also an important profit center and would enhance the summer
revenues of the hotel.
• Most importantly, the hotel management should provide intensive training to its staff on
quality services, mainly emphasizing courtesy, discreetness, and promptness in serving
guests, while giving a high priority on client satisfaction, which is key to the long-term
success of the hotel.
10 Economic Impact Evaluation
Besides the business benefits and satisfactory performance that it is expected to
deliver, the hotel will reshape and positively influence the economic and social
environment of Zgharta Ehden.
Indeed, it will create 14 new jobs (26 in high season), thereby contributing positively to
society by offering new opportunities to young Zgharta Ehden citizens. Most importantly,
it will help prevent this group of people from emigrating by opening new career
opportunities to them.
On the other hand, it will play an important and positive role in the community by lifting
the standards of the whole area. It will add animation and new activities to the
neighborhood, thereby attracting visitors and tourists, which in turn will highly contribute
to the revenues of the region.
This will pave the way for further new developments in Zgharta Ehden, which has good
potentials to become a tourism destination.
Besides its expected business performance, the hotel will be seen as an organization
that is contributing to enhance the social good of Zgharta Ehden
32 | P a g e