Detailed Feasibility Report: Hospitality Business, Western Australia

This report presents a feasibility study for establishing a hospitality business along the Western Australian coastline, driven by the increasing tourist population. The study encompasses a quantitative analysis of market viability, location assessment, cost evaluation, and financial projections. It highlights the growing demand for hotels in the coastal region and the potential for generating substantial returns on investment. The report also addresses key success factors such as customer feedback systems, financial management, and market analysis, while acknowledging threats like economic instability and international tourism fluctuations. It evaluates general market characteristics, focusing on international passenger traffic and tourism growth, and proposes a hotel located in Carnavon city with 50 bedroom suites, emphasizing quality, comfort, and convenient access to local markets. The total investment is estimated at $19.5 million, with pre-tax project returns projected at 15.1% and returns on equity at 25.2%. The report identifies a gap in the market for midscale and higher accommodation options, suggesting a significant opportunity for a well-managed hotel to attract a large number of potential guests. Desklib provides access to this and other solved assignments to aid students.

Running head: HOSPITALITY BUSINESS. 1
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Unit title
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HOSPITALITY BUSINESS. 2
Introduction
This paper is about hotel business. In a study performed by different scholars in Australia shows
that the population of tourists visiting the coastline of Western Australia is growing at a very
high rate. Therefore, there is a gap in the market that needs to be filled. This report will mainly
focus on the aspect of business feasibility, general market characteristics, site evaluation, supply
and demand information, supply and demand analysis and financial analysis, project cash flow.
Adventure is part of human life. As people travel trying to learn more about different
geographical areas, they need somewhere to sleep and get good meals and breakfast. A hotel
building with some history, managed by an owner who has good knowledge of the area as well
as the people around makes a good hospitality business idea. Moreover, this could be a more
enticing prospect for the visitor as well as a good source of income and revenue for a hospitality
entrepreneurs and the Western Australian government respectively.

HOSPITALITY BUSINESS. 3
Business feasibility
Feasibility analysis and study investigate and access the proposed project to see if it is feasible as
a sustainable, profit generating business model. This is mainly done through quantitative analysis
of its viability relating to the market, location, cost and financing.
population forecast for Australian coastline population structure
year
0-14
years
15-59
years 60and more
total absolute 0-14 years in %
15-
59years
200
9
169206
7 809704 882363
24091
2 47.9
52.
1
14.
2
201
0
170283
5 814774 888061
24211
0 47.9
52.
2
14.
2
201
1
171171
6 819041 892675
24345
6 47.9
52.
2
14.
2
201
2
172231
1 824218 898093
24524
7 47.9
52.
1
14.
2
201
3
174554
8 829848 903935
24763
4 47.9
52.
1
14.
3
201
4
175772
2 849848 909934
25042
0 47.9
52.
1
14.
3
201
5
181147
5 835614 916130
25325
0 47.8
52.
1
14.
4
202
0
185646
7 841959 944201
26596
8 47.8
52.
1
14.
7
202
5
189886
6 887661 968806
27701
6 47.7
52.
1
14.
9
203
0
197641
1 906818 992048
28559
7 47.7
52.
1 15
203
5
197606
7 924731 1012910
29008
1 47.7
52.
1 15
204
0
201437
6 942994 1033073
29240
7 47.7
52.
1
14.
8

HOSPITALITY BUSINESS. 4
The data above here shows how the population in western coastline region. It shows a forecast of
population changes over a period of 40 years. It is clear that the number of people settling in
coastline region is increasing rapidly with that of young generations increasing at 0.2 % more
than the elder ones. This rapid growth has been accelerated by the increased number of visitors
touring the region in recent years.
In Western Australia among the most important sources of government sources of revenue is the
tourism sector. During the evaluation period, demand for hotels in the coast region shows an
increasing trend as more visitors are getting attracted to the region. The country’s hotel market
particularly in the coastal region is experiencing positive fundamental indicators of success.
According to one of the mangers of prominent hotel in the region, hospitality industry saw up to
$1.7 billion of hotel transactions. The trend has been characterized by the increased economic
growth that Western Australia has been experiencing. Therefore, it is clear from the statistics that
developing and opening a Hotel at this site should generate an unleveraged, pre-tax return on
total invested capital exceeding 15%, with a return on equity of 25%. The rapid recovery in the
current growth has been as a result of the poor performance on the tourism sector in the past
years.
Primarily the big hotels in the coast region of Western Australia are very expensive and this has
been preventing the continued flow of income from tourism sector due to high cost of renting a
room. Tourism sector is strong in Western Australia, but the management of the big hotels and
the sector itself has been discouraging tourists from visiting and staying in the coast region. This
has been causing losses of about $100 million of cash flow. However, these losses accounts for

HOSPITALITY BUSINESS. 5
only about 5% of the total sales from Australian industries (Arain, Campbell, Cooper, &
Lancaster, 2010).
Recently, the hotel market has been changed by the increased demand caused by the population
increase in the coast region. Because the migrant are not residents they need affordable and
better places to rent in their stay. Moreover, they need to be more enticing places for the visitor
to encourage and make them comfortable in the region. This means improving and increasing the
number of affordable and world class hotels is very argent. Moreover, the other important
industries related to hospitality industries such as travel industries across the countries and
aviation industries are expanding and are expected to give a boost to the hospitality industry in
the next couple of years (Hara, Paden, Silva, Kujak, Lawder, & Pavlicek, 2009).
The key hotel market success factors are characterized by: creation of customer feedback
systems for good product and service development and strict adoption of finances to ensure
smooth running and provision of quality services to the visitors. Additionally, market analysis is
important to execute innovation and retain the service competition in the market internationally.
However, on the other hand hospitality industry is faced by threats of unstable Australian
economy, terrorist activities as well as fluctuations in the tourism sector internationally.
General market characteristics
For an investor to venture into a good income generating investment one of the key factors to put
into consideration is the population to sell your product and services to. One must as himself or
herself whether the target population is big enough to buy the services. Moreover is very

HOSPITALITY BUSINESS. 6
important to consider the clients geographical are as well as their interest and believes. If the
investor considers and gives this factor a priority and make information based decisions over the
target population the business or the investment will reach the at the top of the political market
within a very short period of time after the establishment (Jagels, 2007).
In order to run a successful investment in a hotel industry, it is important to understand who your
guests are and what they want in order to provide relevant offers and experience. Look at what
greatly motivates your guest to book the services and also the location of the hotel that many of
your guest find compelling. The target market in hospitality industry can be covered in different
segments as follows:
 International passengers’ traffic to and from Australia: This single target population has
reached record levels in the resent economic years. Over 30 million international traffic
passengers to and from Australia has been spending in the region annually. Moreover,
annual growth has consisted of over 5% in international airline passenger movement
which has been observed to be consistent in resent economic years. Here the previous
guests are the best sources of important and qualified information. Gathering this
important information will not only help to improve the services to ensure that the guests
have a good stay but also help you get insight information about your guest. Knowing the
purpose of the guest’s travel, their activities in their travel, why they stopped at Australia
and when will be their next travel are some of important information in accessing the
target population for the hospitality business. Understanding the nature of the guest’s
trips will help the hotel offer tailored deals and have a good experience to the future

HOSPITALITY BUSINESS. 7
guest. It is also a great deal rather than giving offers for example to your guest to find out
what the guests want. All this provides a reliable market for the hospitality businesses
products and services to the customers who spend (Tavitiyaman, Qiu Zhang, & Qu,
2012).
 Tourists: bearing in mind that tourism sector in Australia is growing rapidly; there is a
strong appetite for hotel investment opportunities driven by investors both offshore and
onshore. Moreover there is a great call for investment in tourism-generating
infrastructures like hotel together with an international convention center.
Trough the analysis of the population which is the major source of the market for the hotel
product and services the entrepreneur will be in a position to have the best location for the
investment. The best location is on the coastal region where the guests can dine by the shores of
the ocean or in the rooms where high-speed Wi-Fi and a television sets are standard features. The
hotel will be an onshore luxury comfort for the customers. Moreover, the management of the
hotel will be bestowed to an experienced manager with a good knowledge of the location as well
as the people around the site. Therefore, the customers are guaranteed of the best services as per
their standards. All the workers in the hotel need to be experienced in hospitality management
sector for them to be productive in the investment and offer experienced services to the guests.
(Schmidt, Cantallops, & dos Santos, 2008)
Site evaluation
The hotel will located in Carnavon city on the onshore coastline of Western Australia cover a
101 of 460 fetes; this will cover about 50 bedroom suits. The hotel will be a great base for

HOSPITALITY BUSINESS. 8
exploring the well-built coast line. The natural landscape, external terraces and the courtyards
makes the hotel a unique location to view the coastal line and the Indian Ocean. The promise of
quality and comfort in the simplest way will be observed in every Chiefly property and a noise
free zone location. The project quality is set to meet the physical and operating standards of the
Australia suits as well as meeting the international standards. Complementary shuttles will be the
best mode of transport to take the guest quickly to the local market to taste some local flavors.
For expansion purposes as per the growth and need in the future the planners will provide the
best plan for this particular purpose. The hotel coverage will provide spacious parking to the
visitors as well as spacious rooms (Zylowska, Ackerman, Yang, Futrell, Horton, Hale, &
Smalley, 2008).
Total investment
Assets cost
Land and building budget $ 2,850,000
Improvement budget $16,650,000
Total investment $19,500,000
Pre-tax project returns 15.1%
Pre-tax returns on equity 25.2%

HOSPITALITY BUSINESS. 9
Supply and demand information/analysis
Supply
The city offers 131 sleeping rooms raging from luxury beds and breakfast suits to several
economy motels. Chiefly hotels are located in the city where the beds and the breakfast are
located along the downtown city square with the motels being positioned closer to the onshore of
the Indian Ocean. Again the competitive lodgings are scattered throughout the Australian
country from cottage and small river sides in the towns. The other closest competitors being
located some miles away from the coastal line. The hotels or inns in Western Australia coast line
can be defined as either economy class or upscale. These properties are within the surrounding
region which is primarily a recreational destination. The hotels and resorts range from seasonal
cabins and cottage to the city.
Since the class of the hotels in Western Australia leaning heavily on the independent economy
then there is a gap in lodging choices in the hotel market. Visitors to the coastal region will have
the choice of either economy level hotel or a world class affordable one. Most of the hotels in the
region are indicating poor rating and reflects the physical conditions of the property despite the
ranking. In general the Western Australia coastline is lacking a midscale and higher
accommodation beyond the economy class. This tourism investment property may fetch a lot of
income from increased number of potential guests who seek accommodation elsewhere in an
alternative market.

HOSPITALITY BUSINESS. 10
Demand
The demand in hotel rooms can be examined by quantifying the occupancy at the existing hotels
or the demand which is turned away at existing hotels because of capacity limits to an extent of
visitors seeking accommodation outside the city. Moreover, this demand can as well be
quantified by the consistent year-round business travelers to and from Australia as well as tourist
attractions and events.
Financial analysis
The data presented below provide a fair share percentage of the demand in the 50 room hotel in
Western Australia coast line in the five year determined rate of growth.
total
competiti
ve rooms
subject
propert
y
rooms
fair
share
%
corporat
e rooms
sold
subjec
t hotel
share
subject
hotel
penetrati
on
projecte
d rooms
sold
occupanc
y
project
averag
e rates years
338 50 14.90% 10804 1579 233% 3662 38% $81.00 1
338 50 14.90% 10912 1625 235% 3801 38% $84.20 2

HOSPITALITY BUSINESS. 11
338 50 14.90% 11229 167 237% 3944 37% $85.53 3
338 50 14.90% 11555 1720 239% 4093 37% $90.99 4
338 50 14.90% 11890 1790 241% 4249 38% $94.59 5
leisure
338 50 14.90% 23675 3554 100% 3554 37%
$100.0
0 1
338 50 14.90% 24588 3659 105% 3839 38%
$103.9
6 2
338 50 14.90% 25279 3763 110% 4139 39%
$108.0
8 3
338 50 14.90% 26012 3872 110% 459 39%
$112.3
8 4
338 50 14.90% 26767 3984 110% 4382 39%
$116.8
0 5
group
338 50 14.90% 17787 2648 100% 2648 8% $91.00 1
338 50 14.90% 18303 2723 100% 2725 27% $94.60 2
338 50 14.90% 18834 2804 100% 2804 27% $98.34 3
338 50 14.90% 19380 2885 100% 2885 27%
$101.2
4 4
338 50 14.90% 19942 2969 100% 2869 27%
$106.9
0 5

HOSPITALITY BUSINESS. 12
The total number of rooms consists of the supply of the competitive investments. While the fair
share percent is the percentage of the total rooms of the hotel project. The average rate is the rate
of the demand market on daily bases as achieved by the proposed hotel project.
Finance analysis
finance scenario
total project
$19500
000
EQUIT
Y
AMOUN
T
MORTGA
GE
YEAR
S
INTERE
ST
30%
$1,106,50
0 $3,748,500 0
35%
$1,874,25
0 $3,480,750 20 5%
40%
$2,142,00
0 $3,213,000 20 5%
45%
$2,409,25
0 $2,945,250 20 5%
50% $2,677,50 $2,677,500 20 5%