Feasibility Study

A feasibility study is a term from the project management. Generally, it is recommended to review the feasibility and economic efficiency of projects, in particular when risks cannot be evaluated because the searchable facts are missing.

The largely saturated hotel market is unforgiving of any errors. The capacity of a hotel business must fit the location, but above all the accessible target groups and market segments. The achievable price level is also derived from 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.

Before such sound calculations can be created, facts need to be gathered and evaluated by experts. Our recommendation is therefore: detailed and practical research is necessary, so planning mistakes of new hotels and renovations are avoided and the economic feasibility can be determined.
A feasibility study determines to what extent, with what means and in what time a project can be realized. In addition, it is also checked if there are contradictions between the project goal and the existing facts.

If this feasibility study is positive, a project can be carried out (a hotel in this case built). Should the study be negative, the project out of inefficiency is rejected or modified in its approach, for example, through other capacities, qualities, or target group orientation.

A serious feasibility study for a hotel project at the RHC Real Hotel Controlling GmbH consists of the following parts:

Location, market, and potential analysis

Within the frame of this analysis will be determined whether and what is necessary for a hotel (or the planned extension or conversion) at the planned location/region. In addition, this development is information for which business type (type, capacities, special facilities and equipment features) are the market opportunities most suitable. This depends on the potential to be determined and the possible target markets or segments of the hotel.
Business type concept

From the findings of the location and potential analysis, the product requirements profile can be derived and the business type concept setup. This includes the necessary facilities in the rooms, meeting rooms, catering, sports and leisure areas and public areas as well as the necessary equipment quality, which is of course dependent on the achievable price.

Thereby it is to be taken into consideration, what are the requirements of the main segments of the competition, which are not fulfilled or insufficient. This applies not only for the hotel sector, but also for the content concept of gastronomy, as well as for the sports and recreation area, because even in these niche areas in the local and regional market should be found and occupied, without neglecting the hotel guest needs.

Profitability prognosis

Preparation of the profitability prognosis and liquidity development for the first ten business years: Within the framework of this calculation, the marginal profit of the individual areas of the hotel is determined and from the hotel concept, a personnel budget is developed and then setup. Each cost area is derived from the experience value of a professionally led, comparable hotel business. Of course, also the determination of building costs is part of the calculation of the profitability prognosis of the new hotel. Only this way, the depreciation and financing costs can be determined and planned.

Revenues are derived from the findings of the market analysis, competition analysis, and general branch development. In determining sales, a segment specific planning is very important because prices can be different depending on the segment in the rooms but also in the Conference area.

A special feature of the RHC profitability forecast is also the detailed planning for the distribution and selling expenses. These represent the third largest cost factor in many hotels after lease / financing and personnel costs, because up to 30% or 40% of the revenues is produced through fee-based intermediary portals such as Expedia, Booking or the HRS group. It is therefore very important that the assessor and consultant be informed about current market developments, as they may otherwise cause significant misjudgments.