HAT201A: HOTS Hotel Investment Prospectus for 5-Year Growth Plan

This project outlines an investment prospectus for the HOTS Hotel in Sydney, Australia, aiming to raise capital for a 5-year growth plan. It details the hotel's history, location advantages, and financial performance over the past five years, highlighting its growth from a local restaurant to a 150-room hotel. The prospectus includes plans for developing penthouses, conference rooms, a lounge area, and increasing the number of rooms to accommodate growing customer demand. It projects future net profit increases and return on investment, emphasizing the potential benefits for investors despite initial construction phase impacts. The study concludes that the hotel is at an ideal stage for expansion, making it a promising investment opportunity. Desklib provides students access to similar past papers and solved assignments.

Running head: ENTREPRENEURSHIP IN CONTEXT
Entrepreneurship in Context
Name of the Student:
Name of the University:
Author Note

1ENTREPRENEURSHIP IN CONTEXT
Table of Contents
Introduction................................................................................................................................2
Implications of the location on business....................................................................................2
History and growth of the hotel over the last five years............................................................3
Investment prospectus................................................................................................................5
Conclusion..................................................................................................................................7
References..................................................................................................................................8

2ENTREPRENEURSHIP IN CONTEXT
Introduction
This study aims to focus on the preparation of an investment prospectus of a hotel that
is located in Sydney, Australia. The owners of the hotel are intending to raise capital for
future development of the hotel over the next five years. This calls for the preparation of an
investment prospectus with the aim to attract investment. The prospectus also aims to
highlight the profitability of the venture and thus, convince the investors, that the hotel is a
profitable investment opportunity. The hotel HOTS is located in the heart of the historic
centre of Australia with access to all the wonderful sites at a walking distance from the hotel.
The hotel is surrounded by cultural constructs like the Sydney Opera House, Sydney Harbour
Bridge, Bondi Beach and Darling Harbour. The facilities related to infrastructure provided by
the hotel can be listed down as a twenty four hour help service (front desk), roof garden, non-
smoking rooms upon request, tight security measures, soundproof rooms, air conditioning.
Other facilities in relation to the services provided by the hotel are a twenty-four hour WIFI
service, breakfast in the room, sightseeing arrangements, availability of bikes for touring the
city and other associated services (SELL 2016).
Implications of the location on business
The hotel has a capacity of 150 rooms with the ability to accommodate a guest count
of four hundred people. Each room in the hotel overlooks the Sydney Harbour Bridge which
is its major attraction point. Tourists from all over the world visit Australia especially Sydney
in order to visit the world’s largest steel arch bridge. The hotel with its exotic location, top
the list of preferred stays of tourists visiting Australia. Not only international tourists but the
residents of Australia also prefer this hotel as because the rents charged are reasonable and
affordable by the mid income group. The location of the restaurant also adds to its unique
selling point.

3ENTREPRENEURSHIP IN CONTEXT
History and growth of the hotel over the last five years
The hotel was founded in the year of 2012 with the foundation idea of gaining
revenue through providing quality service to the customers. The hotel was at first started as a
local restaurant at the same location as it is today. Since then this particular hotel has
observed much restoration and renovation in order to meet the position that it is at today. The
restaurant started out as a success and compelled the owners to think about expanding the
business. A major trend that was noticed in the customers of the restaurant was that they
praised both the food and the exotic location of the hotel. Most of the feedback received from
the customers suggested the owners of the restaurant to consider conversion of the restaurant
into a hotel so that the customers could enjoy the view of the harbour bridge not only while
dinner but also from their room. Therefore, in the year of 2013 the restaurant observed a
major renovation in order to become the five storeyed building that it is today (Bowie 2017).
The analysis of the financial performance by the hotel has been carried out next, in
order to understand the current financial condition of business and the economic overview in
which the hotel has been operating during the last five years.
Particulars 2012 2013 2014 2015 2016
Net Income
$
231.12
$
459.58
$
629.10
$
689.45
$
720.15
Total Assets
$
2,093.59
$
5,967.22
$
7,198.38
$
6,766.37
$
7,225.39
Total Liabilities
$
1,893.00
$
5,567.19
$
6,999.40
$
6,210.37
$
6,985.11
Total Sales
$
1,000.25
$
2,267.85
$
2,024.38
$
1,929.51
$
1,875.86
Selling and Administrative
expenses
$
14.20
$
20.10
$
22.12
$
18.71
$
25.55
Significant ratios (Efficiency
ratio)
Return on asset
2.3
5
1.2
8
1.1
7
3.4
4
3.7
9
Liquidity ratio 0.93
0.9
4
0.8
7
0.7
5
0.9
9

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The above table summarizes the journey of the hotel in the past five years. The table
lists the net income obtained by the hotel in the past five years. The net income as observed,
is less in the year of 2012 in relation to all other years. The reason for low profit is much
obvious in the first year. The year of 2012, being the year of foundation of the business, it can
be assumed that the entity will take some time to gain acceleration and accrue estimated
income. The net income for the following financial years become stable and shows a
gradually increasing trend of profit (Srinivasan and Karmakar 2014).
The total assets for the financial years show a healthy figure. The case is similar for
the total liabilities of the firm. The total sales of the firm amounted to $1,000.25 in the
financial year of 2012 and then the firm accelerated its sales revenue by an amount of
approximately $1267 million.
The selling and administrative expenses incurred by the firm also indicate that the
firm has been expending an optimum amount in relation to expenses each year. However, the
last financial year of 2016 show an unprecedented rise of $25.55 million. This indicates that
the customer base of the hotel has expanded and the infrastructure required for supporting
such an expansion is not available. The significant ratios that have been computed show the
ability of the hotel to efficiently utilize the assets of the business. The liquidity ratio of the
hotel also reveal that the liquidity position of the hotel is commendable and there is no
concern regarding the debt position of business (Dogru 2017).
All these factors indicate that the hotel has been doing commendable business for the
last five years. The venture had been started from scratch and has gone up to success. Now,
due to increased customer pressure and visitations by more and more international customers,
the owners are considering plans of expanding the hotel. Therefore, an investment prospectus

5ENTREPRENEURSHIP IN CONTEXT
has been prepared in order to invite investors for further capital required for expansion
(KUMAR 2016).
Investment prospectus
The investment that has been planned by the owners pertains majorly to the sectors of
rooms, food and beverage, conferencing and revenue. The owners are essentially considering
developing a series of pent houses. The luxurious accommodation is being planned to
overlook the Harbour Bridge, Sydney Opera House, Sydney heads, and gorgeous Sydney
skyline. The owners also consider developing a conference room, keeping in mind, the
requirement of the customers that visit the hotel. With the technological leap that currently
the corporate industry has undergone, the need for conferencing has become imperative (Falk
2016).
The renovation regarding the food and beverage section that the management is
considering is introduction of a lounge area that overlooks the harbour bridge. The food and
beverage available here would essentially follow an entirely different theme than what is
served at the diner.
The management has also considered increasing the number of rooms for
accommodating an increased number of guests in the hotel. With the increased exposure, that
Australia is gaining in the recent times, in the international market, more and more tourists
have been visiting Australia. One of the recent assessments conducted by the management of
the hotel had indicated the fact that pre bookings especially during the season of Christmas
occupy all the rooms in the hotel making it difficult for the hotel to provide rooms to the
customers who arrive without booking the rooms previously (Flaherty 2016).

6ENTREPRENEURSHIP IN CONTEXT
The management is of the belief that all these improvisations will surely reap benefits
in the future. The restructuring of the hotel would require enough funds, but the management
provides much assurance to the potential investors that the process of restructuring would
fetch redoubled benefits to them. The hotel already has received much acclamation in Sydney
itself and already has topped the list of most preferred hotels in Sydney. But the owners now,
are aiming to gain exposure in the Australian market and thus, the sated renovations have
been proposed.
Investment prospectus
Particulars Rooms
Conference
room Lounge
Contribution to
revenue
initial cost of
construction 25% 12% 33% 23%
operational expenses
incurred 5% 11% 3% 3%
cost of recruitment of
staff 10% 3% 10% 8%
cost of training 2% 2% 3% 2.30%
Projections
Net Profit increase through the
next five years 12.23%
return on investment
(proceeds of investment / cost)
assumed to be a
positive figure that
would surely
increase in the
course of five years
The above table shows all assumed figures that are estimated by the management of
the hotel. The costs incurred in constructing or establishing the proposed structures and the
operational expenses incurred during the execution of the assigned tasks have been shown in
the investment prospectus. The cost incurred in recruitment of staff required in the expanded
sectors of the hotel and the related costs incurred in training them for adopting to the culture
and philosophy of the hotel, have also been shown in the investment prospectus. The

7ENTREPRENEURSHIP IN CONTEXT
respective percentages indicate the percentage they form of the total cost incurred. The
revenue contributed by the different components of the total structure of the proposed
renovation also has been shown. The management of the hotel has assumed the net profit to
grow through the next five financial years by an estimated percentage of 12.23%. observing
the increasing trend of net profit and keeping in mind the economic fluctuations that may
arise in the future, the assumed figure has been arrived at. The return on investment too has
been assumed to be satisfactory provided all the other financial components of business
remain healthy. It also has to be noted that during the initial phase of renovation and
restructuring, the normal working of business may be hampered at the hotel. This may affect
the financial figures initially but with the improved and increased facilities and amenities that
the hotel has been idealized to provide after the restructuring will surely result in a huge
increase in the revenue incurred thus, offsetting the loss during the construction phase (Myles
and Young 2014).
Conclusion
Thus, the finding that have been arrived at, is that the importance of an investment
prospectus is huge, especially when a business is trying to collect funds for a particular
reason. In this particular case study, the financial condition of the hotel seem to be stable and
it has reached the exact juncture of expansion. The investment prospectus reveals that the
investors, in all probabilities, would not be disappointed by investing in such a venture.
Therefore, as it can be understood from the above discussion an investment prospectus is
imperative in case of an investment proposal.

8ENTREPRENEURSHIP IN CONTEXT
References
Bowie, D., 2017. Innovation and 19 th century hotel industry evolution. Tourism
Management, 64, pp.314-323.
Dogru, T., 2017. C-corporation Hotels vs. Hotel-REITs: A Theoretical and Practical
Comparison. Boston Hospitality Review, 5(1).
Falk, M., 2016. A gravity model of foreign direct investment in the hospitality industry.
Tourism Management, 55, pp.225-237.
Flaherty, G.F., 2016. Hotel Mexico: dwelling on the'68 Movement. Univ of California Press.
KUMAR, K., 2016. DETERMINANTS OF GROWTH AND CHALLENGES IN HOTEL
INDUSTRY: A STUDY OF BUDGET AND LUXURY SEGMENTS OF HOTEL
BUSINESS IN INDIA. CLEAR International Journal of Research in Commerce &
Management, 7(7).
Myles, D. and Young, T., 2014. Growth Assets: High Yield, Securitisation and Retail
Structured Products Are All Emerging in Europe's Capital Markets Boom-Here Are the
Challenges Facing the Instruments. Int'l Fin. L. Rev., 33, p.22.
SELL, M., 2016. the People.
Srinivasan, S. and Karmakar, A., 2014. Changing perception of students towards hotel
management course while pursuing the course. International Journal of Informative &
Futuristic Research, 1(9), pp.101-114.