Detailed Feasibility Study Report: Midland Hotel in Perth, Australia

This report presents a feasibility study for the establishment of the Midland Hotel, a new hotel business in Perth, Western Australia. The study begins with an introduction outlining the business concept and objectives, followed by a discussion of the importance of feasibility studies in evaluating business opportunities. It delves into technical feasibility, assessing the products and services offered, including accommodation, meals, and amenities, and their competitive advantages. The report also analyzes the marketing feasibility, examining the hotel industry's competitive landscape in Perth, market characteristics, and potential customer base, supported by statistical data on tourism and population. Site evaluation considers the strategic location of the hotel in the Perth CBD. The study also covers the supply of raw materials, supply and demand information, and a financial feasibility assessment, including cost estimates and initial expenses. The report concludes with recommendations on the viability of the business and its potential for success.

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Contents
Introduction............................................................................................................................................3
Discussion of feasibility studies...............................................................................................................3
Technical feasibility.................................................................................................................................5
Marketing feasibility and general market characteristics........................................................................6
Site evaluation.........................................................................................................................................7
Supply of raw materials...........................................................................................................................8
Supply and demand information.............................................................................................................9
Financial feasibility assessment...............................................................................................................9
Midland hotel Cost and initial expenses estimates...............................................................................10
Recommendations and conclusion........................................................................................................16

Introduction
This report carries out a feasibility study on a new hotel business in Western
Australia. The hotel business is a private limited liability company that seeks to open
the first branch in Perth. The company envisages opening other branches in Western
Australia in towns such as Mandurah and Rockingham. This report carries out a
feasibility study to determine how suitable the business idea is and whether or not it
can become successful in the chosen location. The first step in this process begins
with definition of the products that are to be offered by the business and the business
structure to be adopted by the company.The technical feasibility of the hotel business
in Western Australia is carried out to determine whether or not the business will be
successful in this region. The study identifies the main benefits to customers and the
resources required to produce the services and products demanded by customers
(O'Fallon& Rutherford, 2011). The study identifies market characteristics and the
industry trends in the hotel industry. The study evaluates the site for locating the hotel
which is to be opened in the Central Business District of Perth, the supply and
demand information on the products and services that the hotel will offer its
customers. The opening of the new hotel business in path will require a substantial
amount of money to start and run the business. The hotel requires finances to rent the
premises, pay employees and acquire furniture to be used in the hotel premises. A
budget estimate of the requirements to open the new business is carried out in the last
section of the report.
Discussion of feasibility studies
Feasibility studies are very important in assessing the feasibility or the potential of a
business opportunity that has already been identified. The study identifies the
practicality or work-ability of the idea and gives recommendation on the way forward.

One of the advantages of feasibility studies is that they allow an investor to make an
informed decision resulting from an in depth research. This therefore ensures that a
person can be able to evaluate the technical feasibility of the project, determine
whether the location is good for the business and if there are any expected major
challenges expected in the business. The investor can also determine the market
feasibility of the products and services they plan to offer the market. The feasibility
study carries out research to determine the demand and supply information of a
particular product in a given locality. This helps the investor predict the expected
sales volumes and hence make a decision on whether or not they should go ahead
with the business or make some changes to the business idea (Russell, 2011). By
carrying out a feasibility study, we are able to identify the source of farm supplies to
be prepared for customers. The other advantage of carrying out the feasibility study
by the business is that it will ensure that the investor estimates the financial costs of
starting the business in a particular area and therefore they can source for funds in
advance so as to start the business without major financial challenges. One of the
strengths of feasibility assessment is that it enables a person evaluate the viability of a
business based on a variety of perspectives (Piotrowski, 2016). This therefore means
that the approach is multidimensional and hence making it a suitable method for
evaluation of the business opportunity. The other strength of feasibility assessment is
that it will enables a person or an organization to measure the risks present and
estimate the cost of starting a new business or launching in a new product by a
company. One of the weaknesses of feasibility studies is that it may fail to identify the
tastes and preferences of customers in Western Australia since it does not carry out an
analysis of consumer behavior.

Technical feasibility
This section assesses how feasible the project is technically. This considers aspects
such as the products to be offered by the hotel, the introduction cost of the products,
strengths and weaknesses of the products as well as identification of the main
customers for the product (Chon& Maier, 2010). Midland hotel will be a two star
hotel and it will offer both meals and accommodation to potential customers. Some of
the products that the hotel will offer customers include breakfast for family and
individual customers, Accommodation services at cheap price, dinner and different
recipes of traditional recipes will be available to customers. The hotel also has a
swimming pool where customers can enjoy swimming for free. The hotel rooms are
modern state of the art and highly well furnished to give customers a surreal
environment during their stay in the hotel. The hotel rooms are also well lit with high
class room service for all customers. Customers can be able to book rooms and make
meal orders via a mobile application known as Hotel Midland App (Smith, 2009).
This helps to offer customers convenience since they do not have to visit the premises
physically to make inquiries and bookings. In addition to this, Midland hotel will
offer customers spending more than two nights at the hotel free taxi services to
various destinations within the city (Negi, 2014). This service is expected to be major
coups for the hotel since very few hotels offer such a service to its customers. The
hotel will also have a rest room where customers can visit and take a rest as they
watch programs of their choice and enjoy their drinks.
The products that Midland hotel plans to offer customers are not new in the market.
However, these products and services are highly differentiated to give the hotel a
competitive advantage over its competitors (Mutum, Roy & Kipnis, n.d.). The
differentiation of the products ranges from the hotel having rooms that are uniquely

designed and spacious to offer customers extra comfort to having a very big menu
which gives customers a wide variety of food choices when they visit the hotel. The
highly differentiated products are expected to give the hotel an edge over the others
and attract more customers. The products offer many benefits to customers. The main
benefit that Midland hotel products will offer to its customers is convenience and
unique customer experience (Tisdell, 2013) . The hotel will also offer customers in
Perth new tastes and menus that will leave them wanting to visit the hotel many more
times.
Marketing feasibility and general market
characteristics
The hotel industry is very vibrant in Western Australia and precisely in Perth. There is
a lot of competition in this market and the players in the industry are very many.
There are more than 70 hotels with high standards in Perth letting alone low class
hotels and restaurants. This highlights the great level of competition in this market
and the need for Midland hotel to position itself uniquely in the market so to become
highly competitive and successful (In Ivanova In Ivanov,In Magnini& Routledge,
2016). The market for hotel companies is also very big. This is because; Western
Australia is a major tourist destination in Australia. The state experiences many
visitors from other parts of the country and even others from abroad. According to
statistics provided by Western Australia Tourism department, in the year ended June
2017, Western Australia received a total of 477,600 international visitors coming for
holiday. This was a 17.7% increase from the previous year’s numbers. During the
same year, the state received a total of 103,000 visitors visiting for business purpose
with most of them coming from China and then followed by Germany. The statistics
from the same organization also indicates that there were 9,457,000 visitors who came

from other states for holiday in Western Australia. There were also 2,138,000 visitors
who visited for purpose of carrying out business which is a 1.1% increase from the
recordings of the previous year (Tang, 2017). More than 88% of these domestic and
International visitors were found to have spent their nights at hotels in Western
Australia. Of the visitors who spent their nights in Western Australia Hotels,76% of
them were in Perth. These statistics therefore indicates the size and the potential of the
Hotel industry in Western Australia and precisely in Perth. The statistics indicate that
the number of domestic and international visitors continues to rise. This therefore
means the future of hotels in Perth is very bright. Perth City is the state capital of
Western Australia and has a population of over 2.04million (Tang, 2017). This offers
another big pool of potential customers for Midland hotel. This therefore means that
the market is feasible for Midland Hotel.
The competitors of Midland hotels include The Hive Hotel, Emporer`s crown hotel,
The local hotel and Perth City hotel .(Fabbri, 2009) There are also a wide range of
hotels which have not been listed here that expected to offer intense competition to
Midland hotel. There are also very many five and four star hotels in Perth which offer
the same products as Midland plans to offer its customers. This therefore means that
Midland hotel will be operating in a very competitive environment and has to put
measures in place to counter the competition.
Site evaluation
The hotel will be located along Ferentino road, a few blocks off Karrinyup road in the
city of Perth. This is a very strategic location for this business given the high
population of this city. The location is very strategic to offer customers an opportunity
to dine and rest whenever they are in turn to run their errands. The location of the

hotel at the heart of Perth town will mean that the number of potential customers is
very high and therefore, the Midland hotel will hope to generate more revenue. There
are many businesses located in this street and this locality and the business can benefit
from the other businesses such as banks, footwear and clothing shops as well as
electronics shops (Mill,2007). There are also many other hotels in this locality. This
location is also very suitable for business given that it is the state headquarters. This
means that there are many people who come to the city to seek various services such
as medical services, administrative services for government and state employees as
well as transport services. The city is the communication and transport hub of the
region and this makes it a suitable location for many businesses. The mass movement
of people in and around the city means that Midland Hotel will benefit from these
people booking into the hotel or enjoying lunch or dinner at the hotel. From the
assessment, the location is feasible for the hotel business since its strategic and there
are many potential customers and hence it’s a very promising opportunity for the
business.
Supply of raw materials
Reliable source of raw materials is important for any new business or when an
existing company is introducing a new product in the market. This is because, supply
information is useful in helping the business identify their sources of raw materials
and the strategic suppliers who can supply the materials at low cost. The hotel will
offer customers a wide variety of meals where they can choose different kinds of
foods depending on their tastes and preferences. It is important that the hotel
management identifies farmers who will supply the hotel with farm produce such as
fresh fruits and vegetables that are safe and healthy to the consumers. Midland hotel

will identify 6 farmers who will supply the hotel with fresh vegetable and fruits and
they must be certified for safety by the necessary authorities.
Supply and demand information
In this industry, the supply of is less than demand. The supply of hotel services and
products in Perth city does not meet the demand of the residents and visitors. This is
because, there are many buyers in the market and the city has a population of over 2
million people (Galindo, 2009). There are also very many visitors both domestic and
international and it has been a difficult task for the hotels that are in Perth to meet the
demand in this market. This is so because, the customers have different tastes and
preferences. The levels of incomes of customers also vary and it is difficult to meet
the demands of customers based on their income levels. The demand has been
especially high for the middle income earners who do not wish to book into five or
four star hotels and would prefer cheaper accommodation and dining. The presence of
higher demand than supply therefore offers a good opportunity for Midland hotel to
invest and gain a substantial market share. The supply and demand statistics shows
that the business opportunity is feasible and the management of the hotel can go ahead
with the plan.
Financial feasibility assessment
The section of financial feasibility assessment is very important in determining
whether or not Midland hotel should be go ahead with starting the business or they
should abort the plan. Financial feasibility of the business is done by carrying out
financial analysis to determine whether the business will be able to generate enough
revenue to continue the operations and to meet the objectives of the business
(Hassanien & Dale, 2013) The financial feasibility is carried out by forecasting the

revenues and profits of the business. This section mainly estimates the costs and
expenses that the owners will incur to start the new business. The startup costs that are
to be incurred only once are also estimated. Monthly fixed expenses for the hotel
business are also evaluated in this section.
Midland hotel Cost and initial expenses estimates
Schedule 1
Required Start-Up
Funds
Estimated Monthly Expenses
Column 1 Column 2 Column 3
Item
Your Estimate of
Monthly Expenses
Based on Sales of
$_________ Per
Year
Number of
Months of Cash
Required to
Cover Expenses*
Cash Required To Start Bus
(Column 1 X Column 2)*
Salary of Owner-Manager $800 12 $9,600
All Other Salaries and
Wages $2,400 12 $28,800
Rent $2,100 12 $25,200

Advertising $1,800 8 $14,400
Delivery
Expense/Transportation $110 11 $1,210
Supplies $4,500 12 $54,000
Telephone, Fax, Internet
Service $60 12 $720
Other Utilities $650 12 $7,800
Insurance $400 12 $4,800
Taxes Including
Employment Insurance $800 12 $9,600
Interest $140 12 $1,680
Maintenance $270 12 $3,240
Legal and Other
Professional Fees $440 8 $3,520
Miscellaneous $450 12 $5,400
Total Cash
Requirements for
Monthly
Recurring
$169,970

Expenses: (A)
Start-up Costs You Only
Have to Pay Once
Cash Required to Start Busi
Capital Costs
Fixtures and
Equipment $21,000
Decorating and
Remodelling $8,000
Installation of
Fixtures and
Equipment $5,000
Starting Inventory $47,000
Soft Costs
Deposits with
Public Utilities $7,500
Legal and Other
Professional Fees $800
Licenses and $11,000