PROJECT FORMULATION AND IMPLEMENTATION ASSIGNMENT

Submitted by Harish E.L & Srinivasan C

MARKET FEASIBILITY STUDY: PROPOSED 3 STAR HOTEL IN TRIVANDRUM

Department of Planning, SAP, Anna University Chennai

TABLE OF CONTENTS Chapter 1 Introduction Tourism Importance of Tourism Modern Trends in Tourism Chapter 2 Project Design Aim and Objectives Methodology Limitations Chapter 3 Information about the Place History of Kerela Land and People Climate Literature Festival and Folk arts Foods and Drinks Commerce Trivandrum Areas for Interest Chapter 4 Demand Qualification Hotel and their Facilities Chapter 5 Technical Details of the Proposed Hotel 21 14 9 9 9 10 10 10 10 11 11 12 8 8 8 4 4 4 6

Chapter 6 Recommended Marketing Mix Marketing Mix Place Product Promotion Personnel Selling Advertising Out Door Advertisement Chapter 7 Conclusion Market Feasibility Chapter 8 Financial Viability Introduction to Financial Aspects of the Proposed Project Project at a Glance Facilities Provided by the Proposed Hotel Chapter 9 Cost of Project Chapter 10 Means of Finance Chapter 11 Sales Revenue Chapter 12 Operation Expenses Chapter 13 Description Statement Profitability Statement
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30 30 30 31 31 32 32 29

33

34 34 35

36

37

38

39

40 41

Chapter 14 Fund Flow Statement Chapter 15 Break Event Analysis 43 42

Chapter 16 Debt Service Coverage Ratio Chapter 17 Ratio Analysis Sensitivity Ratio Cost Benefit Analysis Chapter 18 Network Analysis Chapter 19 Conclusion Chapter 20 Bibliography Annexures 53 54 52 51 47 48 49 45

Chapter 1 INTRODUCTION
TOURISM
Tourism is the totality of the relationship and phenomenon arising from travel and stay strangers the stay does not imply the establishment of a residence and connected with remunerated activity.

IMPORTANCE OF TOURISM
In creating better appreciation of other peoples ways of the life and institution, tourism may create goodwill for a country. Each year many tourist travel to participate in particular events ranging from congress to corona tings; their visits also afford opportunities to improve co-operation as well as project the correct image of a country to the out side world. Politics, society, education, and culture thus often provide motivations for tourist to travel away from home, they influence tourism and tourism in turn has an influence on them. These factors also help explain participation in tourism generally as we have seen. An evaluation of the significance of tourism may be extending to such aspects as organized sport and religion. The main economic significance of tourism-that money earned in places of normal residence is spent in places visited-is common to all tourism, whether domestic orinternational. Each year vast sums are transferred from the economy from whom it is earned, to economies in receiving areas where they provide a source of income, a means of livelihood, and amenities for the resident population. The outstanding economic effect of tourism lies in the purchasing to spend at a much bigger rate than when they are at home. The flow of money generated by tourist expenditure finds its way into the overall economy of the tourist destination, as the money is turned over and re-spent. But international tourist expenditure introduces an additional aspect of economic significance, as countries, which have separate political and economic entities, have to balance their transactions with the rest of the world. International tourism, therefore, enters into the balance of payments accounts of individual countries and ease of major significance in international trade. For countries, which generate tourist traffic, it represents an import, in much the same way, as the import of merchandise. Globally tourism countries are a major item in world trade, which has shown a much faster rate of growth in recent years than trade in goods. Tourism is evaluated mainly in terms of its economic significance, but reference is made also to its role as source of other, less quantifiable, benefits and to some of the problems which tourism presents to individual destinations. When traveling away from home, tourists come in contact with places they
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visit and with their inhabitance, and so social exchanges take place. Their presence and their social background affects the social structure and mode of life at the destination. Tourists are in turn affected by the experiences and often carry back home with them new habits and new outlook on life. Tourism has an educational significance. In the wider sense it has the altogether beneficial effect which contact between people of different races and nationalities can bring about. In a narrow sense much tourist activity takes the form of study trips and attendance at courses and conferences with specified educational aims in view. Tourism is often accompanied by cultural exchange and by cultural enrichment of those who travel as well as those at the receiving end. The cultural factors that may attract tourists to a particular destination are architecture, historical monuments and birthplaces of famous people. These are some of the places most visited by the tourists. Festivals and exhibition rely heavily to visitor traffic as their audience.

Tourism can be classified into:

a.
Tourists visit places for recreational purposes. Such tourists spots are usually hill stations, beaches etc, such tourists like to get away from the daily grind of life and freshen themselves.

b.

CULTURAL TOURISM:

Such type of tourist satisfies the cultural curiosity of the tourist. Such tourist spots include ancient monuments, places of historical and religious importance etc.

c.

ADVENTURE/SPORTS:

This type of tourism is very particular with the youth. This type provides people to have adventure like diving, skiing, rafting etc.

d.

HEALTH

Such type of tourism takes people to places of recovery like places with curative possibilities. E.g.: Hill-Stations, hot springs, spas etc.

e.

CONVENTION/EDUCATIONAL:

Tourism such as these are meant for organizing conventions for political, cultural or academic reasons.

Tourism can also be classified on basis of region: Domestic:

Domestic tourism is for tourists belonging to their own country and do not require any papers or documentation for travel.

International:
Such type of tourism refers top traveling to other countries other than their own and with different political and economic systems. This requires documents such as visa, passports, etc , to cross the borders.

MODERN TRENDS IN TOURISM

Spread over a land mass of 324 million sq.kms with a population of around million, with at the rote of about 13 million every year, with 14 major and 20 not languages and 845 dialects, each state habits, religious customs and festivals. For a foregone visitors to indo, it some how gets on his blood. Love it or not. One can never ignore India. One visit to India can never satisfy the thirst of screening visitor and when back in his/her place , desire to get back there. India is luxurious country. Some places are featureless as some spectacular, the food can be terrible as it is magnificent and the country defies imagination and cold logic. There is diversity and get unity. This is India of the Indus valley civilization; there is also Bharat, the land of Emperor Bharatha. It mixture of natural beautiful and diversity of culture attracts a lot of tourism. India is a country where tourists can enjoy the adventure of Himalayas and the beauty of the sea. They can explore the desert and jungle of Assam. Behind this terrific beauty, India has a never-ending culture, religion, temples, church and mosques. Tourism in India is presently the 3rd largest after gum and jewellery and ready-made garments. The fettle of India tourism is not very attractive when compared to the world scenario. The annual foreign tourist arrival in India is 2 million where as the foreign exchange earnings touched Rs. 70 billion. Most of the India tourism thrives on domestic tourism. Each year, 100 million domestic tourist criss-cross the borders of the states. The government of India had put forward some strategy on order to improve this sector. Now the Indian tourism exchange industry has become the 11th largest foreign exchange earner of the world and during 1997-1998 the estimation made on the earnings of foreign exchange was Rs. 11032/- Crore. Tourism budget has been increased from 100 Crore to
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160 Crore recently and the government has also helped in their organization of visit India year 1999-2000 which boost up the industry. The government, in collaboration with Rajasthan tourism had put forward the Palace of Wheels. It is a luxury train with 14 deluxe saloons. The train covers 8 destinations in 7 days. In February 1995, the Gujarath tourism launched a similar train called Royal Orient which is centrally air-conditioned. Tourism industry in India shows a positive trend for the future and with the developments as well as those, which will occur in future, will without any doubt shoot up the industry.

CHAPTER -2 PROJECT DESIGN

AIM:
To reveal the market feasibility and financial viability of the proposed hotel

OBJECTIVES:
Some of the main objectives of the study of the project are: To determine the marketing feasibility & Financial Viability of a proposed hotel in TRIVANDRUM 1. To estimate the cost of project. 2. To estimate the total expected revenue from the various departments of the proposed hotel. 3. To calculate the profitability ratios and pay back loan period of the proposed hotel. 4. Determine the profitability analysis. 5. To find the break-even point and expected return on investment.

METHODOLOGY:
The information for this project has been collected through the following procedures:

Primary Data:
Some of the primary data, which are collected for the study of this project, were collected from government officials of respected departments. The data, which was collected during the survey through investigation woith hospitality officials.

Secondary Data:
Various data were used from journals, books and various supplementary copies of news and other magazines and from the Internet has helped us in gathering information.

LIMITATIONS:
Calculation made in the project is based on assumption, approximation and subject to change. Getting exact financial figures was not possible.

CHAPTER -3 INFORMATION ABOUT THE PLACE

KERALA
Slender green sliver of land clinging to the south western flank of the Indian peninsula, Kerala is one of the southern states of the Republic of India. Though it's roots date back to the early years of the Christian era, the modern state of Kerala was created in 1956, when all the states of India were reorganized on a linguistic basis. History was created in 1957, when Kerala became the first state in the world to have democratically elected a Marxist government to power. Things have changed, but politics still continues to dominate conversation, particularly in the numerous wayside tea stalls, where the brew is as strong as the ideology. The state has been in the forefront, in terms of education and health services. It has the highest rate of literacy, lowest rate of infant mortality and the leading female to male ratio, in the country. GEOGRAPHY Kerala is made up of fourteen districts. Each of them have a distinct character. Thiruvananthapuram (also known as Trivandrum) is the capital of Kerala, famous for it's Kovalam beach (rated one of the top ten beaches of the world). Geography is destiny in Kerala with the monsoon winds bringing the gift of life annually. It's monsoons are likened to a battalion of wild elephants. HISTORY OF KERALA The history of Kerala belonging to the early Christian era is not much known except that the dynasty called the cheats were the predominant rulers here. But from 6th century onwards the picture gains clarity, revealing the fact that then the land was ruled by dynasty known as the Perumals. The last of the line, Cheraman perumal abdicated kingship and divided the land between his chieftains. The state of Kerala was formed long after Indian independence, in 1856, Travancore , Kochi , Malabar , were united to form the present state of Kerala. Thus the whole Malayalam speaking population was brought within a single physical boundary. LAND AND PEOPLE A total number of 45 rivers make Kerala a fertile piece of land flowering down from the ghats to the west. Kerala is also a paradise of backwaters. The numerous backwaters, canals and ocean inlets play an important role in economic field of the state. Beside the major rivers are Bharathapuzha, Parma and Periyar. Many of the rivers are harassed for power generation and irrigation.Keralas contribution towards the national total of fish production amounts to 35%. The kerala coast is renowned for prawns , sharks and sardines.
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CLIMATE
Being situated very close to the sea, Kochi has a moderate climate. Heavy showers are experienced during the months June, July and August due to the South-West Monsoon. The North-East Monsoon brings light rainfall during the months September, October, November and December. December to February is pretty cool. The annual rainfall is about 310 cm . In summer the temperature rises to a maximum of 35 C while in winter it is around 25 C

LITERATURE
Malayalam , the prime language of Kerala is treasures have of literature. With an envious level of literacy in India (100%) urban area of Kerala have an intellectual background. Large groups of the population possess the capacity to evaluate arts and literature with an aesthetic and objective outlook. Needless to say that there are organizations and forums to encourage and appraise artistic creation in the fields of literature, art and cinema.

FESTIVALS AND FOLK ARTS

Onam, the national festival of Kerala is now observed as a part of the tourist week celebrations. All the district capitals and other tourist spots are decorated and provided with entertainment. Onam is a harvest festival celebrated in chingam the first month of Malayalam era (august/september). An interesting pageant of this festivity is the snake boat race held at Alappuzha , Kochi , Kumarakam , Aranmula , Chambakulam etc. Other popular festivals are Vishu , Ramzan and Christmas. Besides, there are numerous celebrations of local importance along the length and breadth of Kerala. Kathakali is a dance drama in which the actors do not speak but express themselves through mudras ( gestures ) accompanied by padams ( recitals ) in the background. Kalarippayattu is an ancient martial art of Kerala. It is a sophisticated way of using weapons like sword, dagger , stick , spear and shield. Training in kalarippayattu is imparted at CVN Kalari, east fort, Thiruvananthapuram and many other centers. FOOD AND DRINKS Kerala has a variety of delicious food specialties. Rice is the staple food. It is accompanied with varies curries , curd , pappad , pickles and other side dishes. The nonvegetarian dishes are made of mutton , beef and chicken. Fish is also a favorite dish. A dessert called payasam usually follows the main course of food. Payasam is a preparation of rice or vermicelli with milk, sugar and spices. The popular thirst aids are buttermilk and bottled soda drinks. However, tender coconut water is the best bet for a refreshing and nourishing

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COMMERCE
Agriculture contributes most to the state's income in the primary sector. Kerala's major sources of exports are agro-based and traditional like coir and cashew as well as marine products and manpower. In spices, pepper is the single most important product, with Kerala being the largest producer and exporter of black pepper. Cardamom and ginger are also exported.

Kerala at a glance Area Districts Taluks Panchayats 38,863 Sq.Km Corporations 14 63 991 Municipalities Rivers 3 54 44

Highest Mountain Anamudi (2652.3 Meters)

TRIVANDRUM
Trivandrum is the capital of the Indian state of Kerala and the headquarters of the Thiruvananthapuram District. It is located on the west coast of India near the extreme south of the mainland. Referred to by Mahatma Gandhi as the "Evergreen city of India", the city is characterized by its undulating terrain of low coastal hills and busy commercial alleys. With almost 745,000 inhabitants per the 2001 census, it is the largest and most populous city in Kerala; the wider urban agglomeration having a population of about one million. The city is the state capital and houses many central and state government offices, organizations and companies. Apart from being the political nerve centre of Kerala, it is also a major academic hub and is home to several educational institutions.

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ORIGIN OF NAME
Thiruvananthapuram literally means "City of Lord Anantha" in Malayalam. The name derives from the deity of the Hindu temple at the centre of the city. Anantha is the serpent Shesha on whom Padmanabhan or Vishnu reclines. The temple of Vishnu reclining on Anantha, the Sri Padmanabhaswamy temple is the most recognizable iconic landmark of the city. The city was officially referred to as Trivandrum in English until 1991, when the government decided in favour of Thiruvananthapuram. However, the city is still widely referred to as "Trivandrum".

AREAS OF INTEREST THIRUVANANTHAPURAM

It is the capital city of Kerala. The Kawadiyar palace, the museum, the zoo, the Chitralayam art gallery with a large collection of paintings, the Sri Padmanabha Swamy temple and the aquarium are the main attraction of the city. Ponmudi, 56 kms from Thiruvananthapuram is a pleasant hill resort. The Padmanabhapuram palace, a monument famous for its moral painting, is located near Thiruvananthapuram. KOVALAM BEACH Its is one if the finest beaches in India and the most attractive tourist center of Kerala. It is 13 kms south of Thiruvananthapuram. PONMUDI Its is one of the tallest peaks in Kerala and an attractive hill station. It is about 1 hour drive from the capital city. MUSEUM AND ART GALLERIES THIRUVANANTHAPURAM MUSEUM : Palayam road , Thiruvananthapuram . This museum has a collection of 19th century oil paintings , old coins , culture , in stone and in plaster of Paris , copies of moral paintings etc. PADMANABHAPURAM PALACE Displays articles of archaeological importance like royal beds , paintings , epigraphs , arms etc. WHERE TO BUY Special local handicrafts rosewood carving , ivory carving , coir products , snake boat models.
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AREAS Bheema Palli, East Fort, Statue Junction

PLACE TO WORSHIP CHRISTIAN St marys church , Palayam HINDU Padmanabha Temple, East Fort. Attukal Devi Temple, East Fort. Vinakaya Temple, East Fort. MUSLIM Juma Masjid, Palayam.

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CHAPTER -4

DEMAND QUANTIFICATION
Demand quantification is a part of Market research and broadly includes: a) Determining the size of both current and potent b) Accessing Market trends c) Demand & sales forecasting

HOTELS AND THEIR FACILITIES SL.No Name of the Hotel

1 2 3 4 5 South Park Leela hotel and Resort Mascot hotel Muthoot hotel Taj green cove

No. of rooms
83 194 64 58 20

Occupancy
65% 65% 60% 70% 70%

Product
5395 12610 3840 4060 1400

Total

419

27305

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1.Hotel South Park

Rooms - 83 Rooms Facilities Doctor on Call, Safe Deposit Locker Facility, In-house Laundry, 24 Hours Currency Exchange Facility, Free Multi Channel CCTV including Movies, Free Parking, Left Luggage Room

2.Leela Hotel and Resort Rooms -194

Facilities Business Center, Swimming Pool, Health Club, Recreation Club, Book Shop, Beauty Parlor, Travel Counter, Conference Hall, Discotheque, Shopping Center, Restaurants

3.Muthoot Hotel
Rooms - 58 rooms Facilities Business Center, Swimming Pool, Health Club, Recreation Club, Book Shop, Beauty Parlor, Travel Counter, Conference Hall, Discotheque, Shopping Center,Restaurants.

4. Mascot Hotel
Facilities 64 rooms,24 hour room service/ Coffee shop, Satellite television ,Restaurant , Bar, Health club, Laundry , Conference hall , Doctor call, Currency exchange, Travel assistance , Car hire.

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5. Taj Green Cove

Business Center, Swimming Pool, Health Club, Recreation Club, Book Shop, Beauty Parlor, Travel Counter, Conference Hall, Discotheque, Shopping

Total Product 1. Average occupancy = Total no of rooms = 27305 419 65.16

Assuming that break-even occupancy is 60% for a three star hotel Therefore demand for the room for the proposed hotel

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2.Total potential of rooms Break even occupancy = 419 X 65.16 60 = 453.91

= Total rooms X Average Occupancy

3. Demand =

(Average Occupancy B.E.O) x Total rooms B.E.O

= (65 60) x 419 60 = 34.91 4.Maximum Number of rooms = Demand 34.91 X 100 60 B.E.O = 58.18

Since the assumption made are not fully validated it is suggested a hotel project of 45 can be promoted in TRIVANDRUM

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CHAPTER -5 TECHNICAL DETAILS OF THE PROPOSED HOTEL

PROFILE OF THE PROPOSED HOTEL NAME STAR CATEGORY NUMBER OF ROOMS ADDRES
HOTEL FORT MANOR

3 STAR 45 Pattom, Pattom palace P.O, Trivandrum, Kerala-695004

ABOUT THE FORT MANOR HOTEL

Accommodation consists of elegantly appointed rooms that range from the suite to the pent house suites. Each features a seating area and balcony. Luxurious marble bathrooms with Victorian style freestanding bathtubs overlook a private walled courtyard.

The FORT MANOR Hotel has 45 ROOMS. The Main features of the hotel are: ROOMS
20 SINGLE rooms, 20 DOUBLE rooms, 5 Deluxe suites

TARIFF
2500 3500 4000

1 multi cuisine restaurant ( THE REGENCY- 50 Pax) 1 Bar ( LAGOONA- 30 Pax) 1 Banquet Hall, Conference Hall & Board Room(420 Pax)

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Name of the hotel Star category Location Type Propose site No. Of rooms Facilities offered

HOTEL FORT MANOR 3 star Trivandrum Private ownership Pattom, Trivandrum 45 Restaurant, Accommodation Bar, Car parking etc ICICI 135

Means of Finance Manpower

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AMENITIES
Air conditioned room

Airport transfers Audio visual equipped Baby care Banquet facilities Bar Business center Cable TV Car parking Doctor on call Fax service Fire safeguards Laundry facilities Money changer Parking Photocopy services Power back-up Restaurant Safe deposit Travel desk

BANQUET FACILITIES (420 PAX)

OHP presentations Public address systems lectern, table, and lapel microphones Exhibitions design and execution Business center Full communication facilities National and international Printing, stationary, delegate kits Video coverage and photography 23

CHAPTER -6 RECOMMENDED MARKETING MIX

Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives. The marketing mix refers to the appointment of the effort, the combination, the design and integration of elements of marketing in to a program, which is on the basis of an appraisals of the marketing forces, will vest achieve the objective of an enterprise of a given time.

MARKETING MIX:
In common parlance, marketing is the process of selling something at a shop or market place. A market is regarded as a single or an aggregated or relationship between consumers and producers who are separated by place and time and have a potential to strike an exchange of goods and services. Marketing is concerned with business and the functions, product planning, pricing, selling and advertising. When the functions mentioned above are interlocked in a planned and systematic manner to attain a given objective. They merge their identity in what is called the marketing mix in short; it just means the mixing of marketing ingredients, which are also popularly known as the four Ps viz. Adequate advertising, sales, promotion and personnel selling to create interest and design for the product among customers for the proposed hotel can be based upon the concept of the customer segment aimed at promote the market strategy. The four basic aspect of marketing are:

Place Product Price Promotion

An optional marketing mix, hence involves from a creative blinding of ingredients or elements, so that the product or services is offered to the market under the conditions most favorable to the attainment of marketing objectives.

PLACE:
The place can define as The aggregate of forces or conditions within which buyers and sellers make decision that result in the transfer of goods can be segmented geographically into: Region or place Climate. In the geographic base, regional differences in terms of topography, climate, population and its density, from the base for market segmentation and differentiated marketing effort.

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Choosing the right location is an important and vital decision for any hospitality business. Certain factors have to be taken into account to decide the right place. Some of the factors that decided the selection of proposed hotel place are:
0 0 0

Railway station and bus stand are 5Kms respectively. Main City is just 2 km from the proposed site. Easy accessibility to town area.

PRODUCT:
A product is a bundle of utilities and accompanying services. The proposed three star hotel would be a three-floor building with the following facilities. 0 Car Parking
0

Banquet Facilities Telephone in all Rooms TV with Channels in all Rooms Central Air Conditioning system Multi- Cuisine Restaurant Bar 24 Hours Room Service

The important features of the hotel are that it will have 20Single Rooms, 20 Double rooms, 5 Suite rooms The hotel will have a Multi-cuisine restaurant with 50 covers, and a bar with 30 covers. The hotel and staff will be at their best services to their customers.

PROMOTION:
To make the product and price known and acceptable to the target customers, it is essential to communicate, persuade and motivate them. Promotion can be effected through, 0 Personal Selling
0 0 0

Advertisement Sales Promotion Public Relation 31

PERSONAL SELLING:
The hotels sales persons, who are on its customers so as to make an offer of sale, motivate them to positively respond to it and finally clinch the ideal.

ADVERTISING:
The proposed hotel prompted through advertisements, by giving complementary to the guest and also by suggesting other 3* and 4* hotels by suggesting the name of the hotel if the guest has his company here, so that it is easily accessible in the same way the proposed hotel also in return will help. Advertisement could be referred to as the use of mass communication media to influence existing or potential through newspaper, T V ads. Etc. Advertisements will have positive effects such as:
0

It will help to raise awareness about the company. To increase safer for the company. To create favorable image and confidence of company.

The various elements of advertising are joint media,

RADIO ADVERTISING AND OUT DOOR ADVERTISERS PRINT MEDIA: Newspaper and magazine have a great effect on influencing the people. An alternative advertisement given in the newspaper or magazine will influence the people. Such advertisements are already targeted at particular market segment; there is a large reading audience.

OUT DOOR ADVERTISEMENT:

This type of advertisements covers large number of people with low experiences. The sales can also be promoted by giving discounts to the regular customer. As the proposed hotel is mostly targeting on air travelers, it is suggested to have a airport facilitator to guide to gust and even canvas people for the hotel. The hotel will provide pick up and drop to guest from the airport, and also will have tips with air lines for the staff and customers in cause of stop over and delay of flight etc. One will be offering its facilities at nominal rates. The off-heard saying 5 star facilities at 3 star rates would be a reality as far as The Destiny would be concerned. The pricing strategy will naturally depend on what the proposed hotel offering, the facilities available in the hotel etc. Another factor to be considered when pricing of rooms and out lets are low is to compare it with the competitions. It should be less that of the competitions. 32

CHAPTER -7 CONCLUSION (MARKET FEASIBILITY)

The market survey conducted at Trivandrum revealed good scope for the establishment of a four star hotel. The conclusions regarding the viability of three star hotels. This place occupies a unique position in all Indian scenario. Various factors have made a Trivandrum wonderful place to visit. The activities develop in the city more because of the better facilities in hotel with good rooms, food, services and good conferences, banquet halls accommodating many people at a time. The development of this region has also made it possible for the hoteliers satisfy with their share of profits. But the tourists activities are so much that the city will require a few more star hotels. It is expected that the proposed hotel will help in setting standards for other hotels to follow in years to come. It is also expected the proposed hotel will be a step forward in the even distribution of accommodation and improving its infrastructure. The tourism departments are encouraging hotel projects so it would be easy to obtain necessary licenses. There will be qualified trained efficient and courteous staff properly groomed. The aim would be to provide the best possible service to the guest and for the tie up keep of the hotel. The promotion advertisements will be through print media and hoarding. An attractive brochure would be given along with it. The proposed hotel has a great potential to capture a large share of the developing market. The proposed hotel can expect a good occupancy. Considering the entire favorable factor it is concluded that a 3 star hotel is easily and scope for marketing the hospitality product is excellent.

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CHAPTER -8

FINANCIAL VIABILITY INTRODUCTION TO FINANCIAL ASPECTS OF THE PROPOSED PROJECT

The financial viability means to find out whether it is financially viable to star or three star hotel as this project reports is based on three star hotel in simpler words financial viability is to find out starting a three star hotel is financial successful or not. The financial planning includes the selection of objectives and selection of policies, programmers and procedures to achieve the objectives. The various consideration relating. To the present capital need, requirement of investors and possibilities of expansion resolve themselves into a present determination of: A. The amount of capital to be raised. B. The forms of propitiated amount of securities to be issued. C. Policies as to administration of capital. It is not too much to emphasize the correct estimate of the present and future needs of a capital a sound capital structure and proper projection of capital will lead to success to the company. PROJECT AT GLANCE Total land Area Total Built up Area Type of hotel Location Name of the hotel No of guest room Room tariff = 3500 sq.ft = 13870 sq.ft = Business Hotel = Pattom,Trivandrum = HOTEL FORT MANOR = 45 Rooms =Single Room: 2500/-

Double Room: 3500/- Suite Room: 4000/(Rates are fixed till 3rd then to increase 10% every year) 34

FACILITIES PROVIDED BY THE PROPOSED HOTEL

Multi cuisine Restaurant Bar Banquet/ Conference Hall Centralized A/C Room Service Travel Desk Locker Facility Car Rental Free Pick Up Facility Secretarial / Valet Services Doctor On Call Channel Music Cable Network Foreign Currency Exchange = 50 Covers = 30 Covers = 420 Covers

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CHAPTER -9 COST OF PROJECT

Amount in lakhs Cost of land 49.93 158.65 212.30 39.55 12.12 553.12 Margin for contingency (10% on 1-5) Preliminary POP expenses 55.31 77.50 685.93 Interest on implementation period Total cost of the project 34.29 639.10

Cost of building Plant and machinery Furniture and fixture

Miscellaneous fixed assets

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CHAPTER -10 MEANS OF FINANCE

1) Term loan (65% of project) : 415.41

2) Owners capital (35% of project) : 252.07

DER (DEBT EQUITY RATIO)

Debt equity = Term loan Share capital

DER = 415.41 252.07 = 1.85

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CHAPTER -11 SALES REVENUE ESTIMATION OF INCOME OF 5 YRS Item

% of occupancy (operational level) Year I 60% Year II 65% Year III 70% Year IV 75% Year V 80%

Room sales F and B sales

306.60

332.15

357.70

421.57

494.64

519.68

613.69

718.09

827.91

951.73

Total Sales

686.28

810.84

945.79

1124.48

1326.37

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CHAPTER -12 OPERATIONAL EXPENSES

ESTIMATION OF EXPENSE FOR 5 YRS
Item

Year I

Year II 245.47

Year III 287.23

Year IV 331.16

Year V 380.67

Cost of F and B (40% of F and B 207.87 sales) Electricity (5% of total sales) 44.31 Salaries and wages (annexures) Administration and management expenses (5% of total sales) Advertisement and publicity (15% of total sales) Insurance and legal charges (5% of total sales) Miscellaneous expenses (4% of total sales) Total expenses 88.27

50.54 97.09

57.28 106.80

66.22 117.48

76.31 129.23

44.31

50.54

57.28

66.22

76.31

132.94

151.62

171.86

198.67

228.95

44.31

50.54

57.28

66.22

76.31

35.45

40.43

45.83

52.97

61.05

597.46

686.23

783.56

898.94

1028.85

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CHAPTER -13 DEPRECIATION STATEMENT

Year Building

Dep (10%)

P&M

Dep (25%)

F&F

Dep (25%)

Misc

Dep (25%)

Total Depreciation

206.65

23.66 212.30 53.07 39.55 9.88

12.12 3.03

89.64

II

212.99

21.29 159.23 39.80 29.67 7.41

9.09

2.27

70.77

III

191.70

19.17 119.43 29.85 22.26 5.56

6.82

1.70

56.28

IV

172.53

17.25 89.58

22.39 16.70 4.17

5.12

1.28

45.09

155.28

15.52 67.19

16.79 12.53 3.13

3.84

0.96

36.40

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PROFITABILITY STATEMENT

Particulars 1) Op. Profit 2.) a) Interest on L/T loan b.) Interest 3.) Depreciation on BOD

Year I

Year II

Year III

Year IV

Year V

288.82 324.61 362.23 425.54 497.52 74.90 3.63 89.64 65.54 4.18 70.77 77.50 56.17 4.78 56.28 77.50 46.81 5.52 45.09 77.50 37.45 6.36 36.40 77.50

4.) POP expenses 77.50 5.) Profit before tax A[1-(2+3+4)] 6.) Profit for tax B = A 7.) Income tax @ 50% + 10% surcharge(C+D) 8.) Profit after tax E = [B-(C+D)] 9.) Available surplus(8+3+4) 10.) L.T repayment
11.) Net cash flow (9 -10)

43.15 43.15 25.89 17.26

106.62 167.50 250.56 339.81 106.62 167.50 250.56 339.81 63.97 42.65 100.50 150.37 203.88 67.00 100.25 135.93

184.40 190.92 200.78 222.84 249.83 58.51

94.65

58.51
95.41

58.51

58.51

58.51

100.12 103.11 127.38

41

CHAPTER -14

FUND FLOW STATEMENT

Source of funds Share capital Secured loan Gross profit 121.68 176.34 228.45 302.95 383.62 70.77 77.50
Year II

Year

Year

Year

Year

Implementation Year period 252.07

Depreciation 89.64 POP expenses

Application of funds

56.28 77.50
Year III

45.09 77.50
Year IV

36.40 77.50
Year V Implementation period

77.50
Year I

Fixed assets Margin for contingency POP expenses Interest LTL 74.90 Interest W/C 2.96 Repayment of L/T Dividend of shares (35% of cash flow)
42

685.93 55.31 77.50 65.54 3.37 58.51 56.17 3.82 58.51 46.81 4.42 58.51 37.45 5.08 58.51

58.51

CHAPTER -15 BREAK EVEN ANALYSIS

To arrive at Break Even Point for a specific year occupancy. Revenue: - III year 945.79 occupancy: - 70%

Fixed cost:Rupees in lakhs 1.) 2.) 3.) 4.) 5.) Power (40%) Salary (80%) Insurance and license Interest on LTL Administration and management expenses Total 22.91 85.44 2.00 56.17 57.28 223.80

Variable cost:Rupees in lakhs 1.) 2.) 3.) 4.) Power (60%) Salary (20%) Interest on W/C (interest on B.O.D) Expense towards telephone (10%) Total 34.36 21.36 3.82 10.00 69.54

43

1. Contribution = Income - Variable Cost = 1145.79 69.54 = 1076.25 2. Break Even Point = Fixed cost Contribution = 223.80 1076.25 = 0.20 (i.e., 20%) 3. BE Turnover = Total Revenue x B.E.P Assumed occupancy = 1145.79 x 20% 70% = 327.36

44

CHAPTER -16 DEBT SERVICE COVERAGE RATIO

Coverage (A) Profit after tax Interest on L/T loan POP expense Total Year I 43.15 Year II 106.62 70.77 65.54 77.50 320.43 Year III 167.50 56.28 56.17 77.50 357.45 Year IV 250.62 45.09 46.81 77.50 420.02 Year V 339.81 36.40 37.45 77.50 491.16

Depreciation 89.64 74.90 77.50 285.19

Debt (B) Repayment of L/T loan Interest on L/T loan Total

Year I 58.51 74.90 133.41

Year II 58.51 65.54 124.05

Year III 58.51 56.17 114.68

Year IV 58.51 46.81 105.32

Year V 58.51 37.45 95.96

45

DSCR = A/B = 285.19 + 320.43 + 357.45 + 420.02 + 491.16 133.41 124.05 114.68 = 2.13 + 2.58 + 3.10 + 3.90 + 5.11 = 16.83 Average DSCR = I year + II year + III year + IV year + V year = 2.13 + 2.58 + 3.10 + 3.90 + 5.11 5 = 16.83 5 = 3.36

105.32

95.96

46

CHAPTER- 17 RATIO ANALYSIS

R.O.I (RETURN ON INVESTMENT) Return on investment, = Net cash flow x 100 Equity share capital I year = 94.65 x 100 252.07 = 37.54 II year = 95.41 x 100 252.07 = 37.85 III year = 100.12 x 100 252.07 = 39.71 IV year = 103.11x 100 252.07 = 40.90 V year = 127.38 x 100 252.07 = 50.53
47

Average R.O.I = I year + II year + III year + IV year + V year 5 = 37.54+37.85+39.71+40.90+50.53 5 = 206.53 5 = 41.30 Pay Back Period = 100 ROI =100 41.30 =2.42

SENSITIVITY RATIO
Sensitivity change = Change in income Change in expenses

= 16.36 11.19 = 1.46

Sensitivity to income change = Total income Occupancy

48

= 1145.79 70 = 16.36

Sensitivity to expense change = Total expense Occupancy = 783.56 70 = 11.19

III year sensitivity ratio = 1.46

COST BENEFIT ANALYSIS

A = Total cost of project = 639.10 (amount in lakhs)

B = total revenue total expenses = 4893.37 3995.04 = 898.33 (amount in lakhs)

49

Capital intensity = B/A = 898.33 720.22 = 1.24

50

CHAPTER -18 NETWORK ANALYSIS

Description Sl.no 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Project search Preparation of feasibility report Formation of feasibility report Purchase of land Preparation of building plan and tender Application for loan Staff appointment Application for power, water. Project approval Building construction Order for P and M Plumbing and electrification Delivery and installation of machinery Recruitment of staff Furnishing and interior decoration Application for working capital Procurement of material Trail runs and commissioning Land seaping Inauguration and commercial operating Total implementation period
51

Duration (Months) 2 4 2 6 1.5 2 2 5 1 15 3 6 4 2 5 1 1 3 3 3 5 (years) 9(months)

CHAPTER -19 CONCLUSION

The project on financial viability was completed in Trivandrum city of Gods own country Kerala. A market survey conducted before the commencement of the project shows that there is great demand for the products of hospitality industry in Trivandrum, which is the capital of Kerala.Hence the proposed project has been considered and it was decided to construct the hotel near Pattom, Trivandrum. Total cost of project is Rs 639.10/- lakhs and has 45 rooms. The occupancy forecasted for a period of 5 consecutive years from commencement of operations is taken into account as 60%, 65%, 70%, 75% and 80%. Statistical data of the project may be summed as follows Debit. Equity ratio 1.85 Average return on investment: 59.99 Break-even point: 327.36. After studying the above aspect and estimation of profitably statement and other financial status it has been concluded that 3 star hotel with 45 rooms in Trivandrum is financially viable.

52

CHAPTER -22

BIBLIOGRAPHY
S.No. 1. 2. 3. 4. 5. 6. Titles Perspectives on Indian hotel industry Hotel Economics Hospitality Management All India Travel Companion Project Analysis Hotel Accountancy Authors Pushpinder S.Gill P.M. Mathew T. Philip Asia Publishing Companion G. Phyler T. Ryder

WEBSITES

www.answers.com www.hoteliercaterer.com

53

ANNEXURES

ANNEXURE 1 Cost of land = Land required in sq. ft x Rate per sq. ft = 3500sq. ft x 300 = 41.61 lakhs

15% for conveyance = 6.24 lakhs

5% for site development = 2.08 lakhs

Total = 49.93 lakhs

54

ANNEXURE 2

COST OF BUILDING

Total built up area

Rate per sq. ft

13870 sq.ft
Rs 750/-

Cost

104.02 lakhs

15% of Electrical work 12% of Plumbing and Drainage

15.60 lakhs 12.48 lakhs

25% on Consultant Total

26.05 lakhs 158.15 lakhs

55

3. PLANT AND MACHINERY Items

Central a/c Lift Generator Transformer Bore well Boiler EPBAX Instrument Exhaust/ vent CCTV Kitchen equipment Water cooler Fire fitting Typewriter Computer Telex Fax Total

Amount in lakhs
70 25 25 20 2 10 15 5 2 10 15 2 2 Rs 5000/Rs 800000/Rs 75000/Rs 50000/212.30

56

ANNEXURE -4 a. GUEST ROOM

Item Twin bed Double bed Side table Chair Coffee table Cupboard Luggage rack T.V stand Carpets 6600sq.ft Mirrors Wash basin Bath tub W/C Upholstery Dressing table Fixtures Price in Rs 3500 4500 600 500 400 500 400 2500 100/ sq. ft 500 1000 7000 1500 1000 1000 5000 Nos 20 20 80 40 40 40 40 40 6600sq.ft 40 40 40 40 40 40 40 Total 70000 90000 48000 20000 16000 20000 16000 100000 660000 20000 40000 280000 60000 40000 40000 200000 1720000

Total

60

b. FOOD AND BEVERAGE OUTLETS

RESTAURANT: (50Pax)

Item

Price

No

Total

Tables Chairs Side station Dcor and upholstery

2500 500 4000

13 55 2

32500 27500 8000 100000

Carpets Fixtures Total

100/sq.ft

400 sq.ft

40000 100000 308000

61

c. BAR: (30Pax)
Item Stools Table Chair Bar counter Music system Carpets Dcor Total Price 500 1500 500 50000 50000 100/sq.ft No 10 10 30 1 1 200 sq.ft Total 5000 15000 15000 50000 50000 20000 75000 230000

62

d. ROOM SERVICE :( 45Rooms)

Item B/f Trays Tea Trays 12 Salvers 9 Salvers Trolleys Racks O.T cabin Desk Miscellaneous Total

Price 150 200 250 200 1500 500 5000 6000

Number 15 15 10 10 5 5 1 1

Total 2250 3000 2500 2500 7500 2500 5000 6000 6000 36750

63

e. BANQUET :(

420 Pax)

Item

Price

Number

Total

Chairs Tables

500 1000

425 30

212500 30000

Carpets

100/sq.ft

1200sq.ft (1)

120000

Podium Music system

1500

3000 50000

12 salver Fixtures

250

30

7500 100000

Total

523000

64

f. STORES, PURCHASE, HOUSEKEEPING

Item Cupboards

Total 50000

Shelves

25000

Racks

30000

Bins

10000

Fixtures

50000

Total

165000

65

g.ADMINISTRATION

Item

Total

Tables

75000

Chairs

50000

Fixtures

50000

Total

175000

66

h. RECEPTION AND LOBBY

Item Counter Stationery Pigeon hole Cupboard Safe deposit Sofa set Fixtures Luggage carrier Miscellaneous Total

Total 40000 5000 10000 10000 20000 200000 300000 100000 50000 735000

67

i. STAFF CAFETARIA

Item Tables Chairs Fixtures Total

Total 12500 25000 25000 62500

68

5. MISCELLANEOUS FIXED ASSETS

a.FOOD AND BEVERAGE OUTLETS

Item

Price

Number

Total

Table cloth

200

30

6000

Napkins

30

200

6000

Par stock(*3)

12000

Total cost

36000

69

b. BANQUET HALL AND CONFERENCE

Item

Price

Number

Total

Frills

500

30

15000

Table cloth

150

30

45000

Napkins

30

500

15000

Par stock (*3)

34500

Total

103500

70

c.GUEST ROOM AND SUITE ROOM LINEN

Item Single bed sheet

Price 250

Number 25 30 50 50 50 50

Total 6250 9000 20000 10000 50000 10000

Double bed sheet 250 Blankets Blanket cover Mattress Mattress protector Bed cover (single) (double) 400 200 1000 200

200 300

25 30

5000 9000

Pillow cover Hand towel Bath towel Bath mat Pillows Par stock (*4) Total

50 30 100 150 150

100 100 100 50 90

5000 3000 10000 7500 13500 158250 633000

71

d. KITCHEN STEWARDING (RESTAURANT &ROOM SERVICE)

Item

Price (Rs)

Number

Total

Glasses

50

800

40000

Chinaware

30

800

24000

Flatware

30

800

24000

Cutlery

30

800

24000

Miscellaneous

25000

Total

137000

72

e. BANQUETS

Item

Price(Rs)

Number

Total

Glassware

50

1000

50000

Chinaware

30

1000

30000

Flatware

30

1000

30000

Cutlery

25

1000

25000

Total

137000

73

F .STAFF CAFETARIA

Item

Total

Plates

60000

Spoons

20000

Forks

20000

Total

100000

74

g. HOUSE KEEPING MISCELLANEOUS ASSETS

Item Vacuum cleaner Cleaner mug Mops Brooms Squeezer Duster Waiters cloth Miscellaneous Total

Number 4 20 30 30 30 100 500

Price 5000 20 30 25 25 5 40

Total 20000 400 900 750 750 500 20000 25000 68300

75

6. PRELIMINARY AND PRE-OPERATIVE EXPENSES

Item 1.) Salary and wages

Rs In Lakhs 20.00

2.) Loan procurement and application 2.00

3.) Project fees 4.) Registration and establishment fees 5.) Insurance 6.) Advertisement and publicity 7.)Deposits a.) Electricity b.) Telephone c.) Water supply d.) NSC

2.50

2.00 15.00 10.00

5.00 5.00 3.00 3.00

8.) Miscellaneous expenses POP Total

10.00 77.50

76

7. SALARY AND WAGES

NO.OF SALARY PERSON (RS.) REQUIRED

S. NO

DESIGNATION

TOTAL AMOUNT

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

General manager Front office manager Lobby manager GRE Front office assistant Travel desk operator Bellboys Telephone operator Bell captain Night auditor F & B Manager Banquet manager Restaurant manager Barman Captains Senior Captain

1 20000 1 9000 1 8000 1 5000 4 5000 1 4500 4 2500 2 3000 2 3000 1 4000 1 12000 1 9000 1 9000 1 5000 2 4000 2 5000

20000 9000 8000 5000 20000 4500 10000 6000 6000 4000 12000 9000 9000 5000 8000 10000

77

17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Stewards Executive chef Souse Chef Commis Chef de partie Steward supervisor Dish / pot washer Executive house keeper House keeping supervisor Floor supervisor Room attendant/house man Personal manager Sales & marketing manager Sales & marketing executive Accountant Chief accountant Cashier B.Sales executive Bakery chef

20 3000 1 25000 2 10000 6 4000 3 5500 1 4500 4 2000 1 12000 2 5500 3 5000 10 3000 1 8000 1 9000 1 5000 1 5000 1 10000 2 6000 2 4000 1 15000

60000 25000 20000 24000 16500 4500 8000 12000 11000 15000 30000 8000 9000 5000 5000 10000 12000 8000 15000

78

36 37 38 39 40 41 42 43 44 45 46

Desk control supervisor Linen attendants Laundry attender Flower. Assistant Carpenter Plumber Hostess R.S.OT Training manager Training assistant G.M secretary

2 4000 2 3000 2 3000 1 2500 1 2500 2 2500 2 3000 2 3000 1 8000 1 3000 1 6000

8000 6000 6000 2500 2500 5000 6000 6000 8000 3000 6000

47 48 49 50 51 52 53

Pest controller Laundry manager Personnel office asst. Drivers Doorman Apprentices Life guard

2 2000 1 8000 2 3000 2 4000 2 3000 4 1500 2 2500

4000 8000 6000 4000 6000 6000 2500

79

54 55 56 57 58 59 60 61 62

Security manager Security Supervisor Security guard Chief engineering Supervisor Technicians Purchase officer Purchase manager Stores keeper

1 8000 2 4500 4 2500 1 9000 2 4000 2 3000 1 5000 1 8000 2 3000

8000 9000 10000 9000 8000 6000 5000 8000 6000

TOTAL

135

613000

Add benefits 20% 0f 613000 = 122600 + 613000 = 735600 x12 months Total Salary = Rs 8827200

80

8. INTEREST ON L/T LOANS

(Rate of interest 16%) Year I II III IV V VI VII VIII Installment 58.81 58.81 58.81 58.81 58.81 58.81 58.81 58.81 L/T loan 468.14 409.63 351.12 292.61 234.10 175.59 117.08 58.57 Interest 74.90 65.54 56.17 46.81 37.45 28.09 18.73 9.37

81

9. ROOM SALES
Room sales = Room Tariff x No: of Rooms x % Occupancy x 365 100

SINGLE ROOM (20 Rooms)

year

Room Tariff

No: of Rooms

% Occupancy

No. of days

Total Rs in Lakhs

2500

20

60

365

109.50

II

2500

20

65

365

153.30

III

2500

20

70

365

127.75

IV

2750

20

75

365

150.56

3025

20

80

365

176.66

82

DOUBLE ROOMS (20 Rooms)

Year

Room Tariff

No: of Rooms

No. of days % Occupancy

Total Rs in Lakhs 153.30 166.07 178.85 210.78 247.32

I II III IV V

3500 3500 3500 3850 4235

20 20 20 20 20

60 65 70 75 80

365 365 365 365 365

83

SUITE ROOMS (5Rooms)

Year

Room Tariff

No: of Rooms

No. of days Total % Rs in Occupancy Lakhs 60 365 43.80

4000

II III

4000 4000

5 5

65 70

365 365

47.40 51.10

IV

4400

75

365

60.22

4840

80

365

70.66

84

10. FOOD & BEVERAGE SALES

F & B SALES=No: of Pax x Average Cover Charge x 365

BAR (30 Pax)

Year

No. of covers Average sold/day cover h

Number of days

Total Rs in lakhs

I II

8 12

285 320

365 365

8.32 14.01

III

18

355

365

23.32

IV

22

390

365

31.31

30

425

365

46.53

85

RESTAURANT (50 Pax)

Year

No. of covers Average Number of sold/day cover charge days 30 300 365

Total Rs in Lakhs 32.85

II

35

325

365

41.51

III

40

350

365

51.10

IV

45

375

365

61.59

50

400

365

73.00

86

ROOM SERVICE (45 Rooms)

Year

No. of covers Average Number of sold/day cover charge days

Total Rs in Lakhs

37

300

365

40.51

II

39

325

365

46.26

III

41

350

365

52.37

IV

43

375

365

58.85

45

400

365

65.70

87

BANQUET & CONFERENCE HALL (420 Pax)

Year

No. of covers sold/day 300

Average per cover

No. of days

Total Rs in Lakhs

400

365

483.00

II

330

425

365

511.91

III

360

450

365

591.30

IV

390

475

365

676.16

420

500

365

766.50

88