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Feasibility Study

Market, demand, location analysis, and feasibility study

 

The largely saturated hotel market does not allow for errors anymore. The capacity of hotel operation must fit the location, but above all fit the target groups and market segments. The wishes and expectations of the hotel and restaurant guests change rapidly. Who applies yesterdays concepts, reduces clearly his chances of success.

The achievable price level is made up of the attractiveness of the location, the target groups, and the quality of the services (as well as its relevance to the various guest segments), but also the activities of the competition. Therefore, before sound calculations can be carried out, facts need to be gathered together and evaluated by experts.
Within the frame of this analysis, is to determine, if and which requirement is necessary for a hotel at the planned location/region. On request and if it makes sense, the most likely economical business type is designed based on the data and reviews.

The following areas belong to this concept:

  • How much is the hotel? Assessment of the construction and development costs
  • Reasonable company size and the optimal combination of number of rooms, event areas, catering and leisure offers
  • Modern requirements of accessible and addressable target groups and their sales or procurement channels at a realistic price level and translation of these requirements into a successful and modern operating concept
  • Recommendations for the marketing, pricing and product strategy
  • Development of pre-opening marketing and sales planning, including the increasingly important technical infrastructure for distribution and data management
  • Identification of all relevant cost areas including the human resources plan
  • Forecast of economic efficiency and liquidity plan.
  • Preparation of business plans for the procurement of finances

 

Analyses and concepts before new hotel construction or optimization of the business

A detailed market, location, and competition analysis helps to assess the market situation and the corresponding need for an additional hotel or an extension or a reconstruction. Only because of this, it is possible to draw up a detailed, demand-oriented, and functional operating concept  and the corresponding economic efficiency calculations.

Within the frame of this analysis is to determine, if and which requirement is necessary for a hotel at the planned location/region. In addition, this preparation gives information of what are the best market chances and for what operation type (category, capacities, special facilities, and equipment features). This depends on the potential to determine the possible target markets or segments of the hotel.

 

The steps of the location and potential analysis are as follows:

  • Assessment of the hotel location: description of the advantages and disadvantages, as well as their impact on the most important target markets
  • Assessment of the hotel location for the business areas: conference guests, business travelers, tourist travelers, party, and events, through the local, national, or international markets.
  • Potential analysis locally and regionally in the segments of business travelers, conferences, seminars and banquets, tourist groups, individual travelers, and possible further segments
  • Analysis of the tourist development of the region, its main target groups and possibly, other planned hotel projects
  • Analysis of the local industry; its planned hotel’s realistic potential for accommodation and conferences. If possible interviews with the purchasing decision makers of the local industry.
  • Analysis of the overnight stays by foreigners in the region (this is important information to create a marketing and sales strategy).
  • Where possible, telephone or personal interviews are made with those responsible for touristic city- and regional marketing, representatives of economic development, trade fair companies, and Chamber of Commerce, as well as other responsible for the marketing of tourism.
  • Description of the most important target markets and requirements of this group of guests as the first step to develop this type of operation
  • To get a realistic impact on the sales costs and room rates, the typical booking channels are also described (and the related agent and of course the cost of sales).
  • There are ratios described, which must fit each other depending on the segment. E.g., how big the conference areas must be to achieve in the segment of conferences or other event types, the optimal sizes and area ratios of room to dining area and other public areas.
  • There will be answers, based on facts, such as which catering concept is useful, whether long stay offers are useful, and how conference and recreational areas should be equipped.

 

Analysis of the competition

Which companies are identified as possible competitors? For example, the distance to a competing conference hotel should be much further away than to a competitor in the business travel market. The eligible hotels are visited for a strengths-weaknesses analysis (and from that are derived niche possibilities). Price and satisfaction analysis complete the search. Moreover, via our network of tour operators or conference agents it is possible to describe also very realistic demand scenarios and required situations.

 

Concept of a business type

From the findings of the location and potential analysis, a profile of the product requirements can be deduced and the concept of a business type created. This includes the necessary facility features in the rooms, conference rooms, catering, the sports, leisure, recreation, and public areas, as well as the necessary quality facilities, which is of course dependent on the achievable price.

Thereby, the requirements of the main segments that are not met or insufficiently met by the competition are taken into consideration. This applies not only to the hotel sector, but also to the content concept of gastronomy, as well as to the sports and recreation areas, because even in these areas niches should be found and occupied in the local and regional market, without overlooking the needs of the hotel guests. Where it makes sense, franchise deals from the hotel industry or system gastronomy can be included and evaluated.

The space requirement is determined based on the business concept. For this, an experienced hotel project developer creates a detailed room program and a   cost estimate of the construction costs for the new hotel buildings according to DIN 276. The business concept provides the requirements for the room program and makes possible a project-related individual estimate of the required investments. This cost estimate presents to the banks a serious basis for the required investment and forms a professional foundation for the tender and for the creative and design specialized architects.

 

Profitability forecast

  • Preparation of profitability calculation and development of liquidity for the first 10 years of operation; within the framework of this calculation the contribution margin of the individual areas of the hotel is determined and a personnel budget developed from the hotel concept. Each cost area is derived from the experience of professionally led, comparable hotels. The individual steps are:
  • Determination of the expected occupancy and the expected average room prices under more realistic market assessment and based on the findings of the location and market analysis. For this follows a description (and cost estimate) of the most important marketing and sales measures, which are necessary to achieve the envisaged target groups in the pre-opening phase.
  • Determination of the personnel structure of the individual operating areas with a description of the required qualification and the compensation estimates for the individual areas of operation as well as determination of the personnel costs of hiring, accommodation, meals, etc.
  • Presentation of the expected business results and liquidity development in the first 10 years of operation

 

The result:

Upon completion of all analyses, you will receive a sound recommendation, if and what you should build. The survey, in the case of the recommendation, will convince banks and other investors. The concepts are up to date and take into consideration the latest requirements of the different market participants.

 

The next step:

Get a consultation without obligation and a customized quote.  Marcus Becks is at your disposal for this.

 

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