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Yanbu Waterfront Hotel

Preliminary Financial Feasibility


For a

250 Room 3* Hotel


(Package #3; Parcel 3.07 - Harbour Village Hotel)
Yanbu Al-Sinaiyah
Madinah Province
Kingdom of Saudi Arabia

2012 September

Prepared by
Economic Planning Department
Royal Commission at Yanbu
Yanbu Al-Sinaiyah, Kingdom of Saudi Arabia

Yanbu Waterfront 250 Room Hotel Preliminary Financial Feasibility Study

Page 1

Introduction
Investors in the Yanbu Waterfront are being offered a unique opportunity to invest in a once in
lifetime world class resort on the spectacular Red Sea coast of Saudi Arabia. In order to assist
investors considering these opportunities, a preliminary financial feasibility study has been prepared
for the hotel component of this investment opportunity.
The projections in this preliminary study reflect reasonable assumptions prepared by the Royal
Commission at Yanbu based on independent analysis prepared by the international firm Albert Speer
& Partners (AS&P), as well as published market and financial conditions in Yanbu Al-Sinaiyah and the
Kingdom of Saudi Arabia. This preliminary study is intended to serve investors as a basis for a more
detailed analysis and by providing reasonable projections for the investors independent analysis.

Executive Summary
This preliminary financial feasibility study is presented in five sections. The results of this study
conclude that a 3* waterfront hotel in Yanbu Al-Sinaiyah with 250 rooms is a profitable financial
investment. Furthermore:
It is estimated that the hotel construction will cost a total of approximately SR 74 million.
The hotels occupancy is projected to range 64% in year 1 to 70% in the 5th year of operation.
The Internal Rate of Return (IRR) is estimated to average 18.6% during the first 5 years of
operation.
This study is presented in five sections:
1. Hotel Development Costs
2. Hotel Operational Costs
3. Projected Hotel Occupancy
4. Hotel Revenues and Net Operating Income
5. Projected Internal Rate of Return (IRR).

Yanbu Waterfront 250 Room Hotel Preliminary Financial Feasibility Study

Page 2

1. Hotel Development Costs


The total development cost relies upon Royal Commission at Yanbu experience from apartment and
dormitory residential projects constructed in the city. Preliminary hotel construction cost estimates
also are based from data presented by AS&P, the Yanbu Waterfront Master Plan consultant, who
utilized lodging industry data and figures.
It is estimated that the hotel construction in Yanbu Al-Sinaiyah will cost approximately SR100 million:
Total Rooms
250 guest rooms (minimum 24 M per room)
Hotel Total Gross Floor Area
22,085 M
Average Cost per Room USD
SR296,000
Total Hotel Development Cost
SR100 million

2. Hotel Operational Costs


Operational costs are include payroll, the cost of sales and marketing, utilities, insurance,
management fee, land lease payments, and FF&E (fixtures, furnishings and equipment). Operational
and other on-going costs projected by AS&P range from 66% to 68% of the annual revenue.
For purposes of this preliminary analysis, an adjusted more conservative estimate of 71% to 73% of
annual revenue is considered reasonable operational costs for Yanbu. These percentages have been
applied to the annual revenues projected in this study to determine the net annual operating
income.
Annual land leases payments are considered to be a part of the operational costs since there is no
land ownership acquisition cost to the hotel operator/developer

3. Projected Hotel Occupancy


Hotel occupancy will be greatly influenced by tourism activity in the Kingdom of Saudi Arabia.
Tourism plays an increasingly pivotal role in Saudi Arabias economy. Yanbu is positioned to maximize
the citys strategic Red Sea location and proximity to Madinah as a major tourist destination.
According to the 2012 Saudi Tourism Outlook, published by the Saudi Commission for Tourism &
Antiquities (SCTA) in January 2012:
The Saudi tourism industry recorded SR84 billion ($22 billion) in tourist expenditures in
2011.
The average room occupancy rate in hotels in the Kingdom was 63% in 2011.
The Kingdoms domestic tourism expenditures are expected to increase by 12.4% in 2012;
Inbound tourism expenditures are forecast to rise by 9% in 2012.
The Yanbu Waterfront Master Plan consultant AS&P projected hotel occupancy in the first year of
operation of Yanbus waterfront hotels to be 65% and reach 72% by the 5th year of operation. For
Yanbu Waterfront 250 Room Hotel Preliminary Financial Feasibility Study

Page 3

purposes of this preliminary feasibility study, a mid-point between the Kingdoms 2011 average hotel
occupancy rate and the Yanbu Waterfront Master Plan was used ranging from 64% in year 1 to 70%
in the 5th year of operation.

75%

Projected Yanbu Waterfront Hotel Annual Occupancy Rate

70%
65%

64%

60%

66%

67%

68%

Year 2

Year 3

Year 4

70%

63%
55%
50%

Saudi Arabia 2011

Year 1

Year 5

Source: SCTA; RC-Y Economic Planning Department.

4. Hotel Revenues and Net Operating Income


The AS&P Yanbu Waterfront Master Plan projected an average room rate for Yanbu Waterfront
hotels opening in 2012 of $165 to $185 (SR620 to SR695). However, the average published rate for a
standard room at three existing international branded hotels in Yanbu Al-Sinaiyah and Yanbu Al-Bahr
in August, 2012 is SR765 and ranges from SR546 to SR936 per night.
Table I
Yanbu Al Sinaiyah International Branded Hotels Room Rates 2012

Hotel Name

Location

Movenpick
Radisson Blu
Radhwa Holiday Inn

Yanbu Al-Sinaiyah
Yanbu Al-Bahr
Yanbu Al-Bahr

Waterfront Site

Hotel
Rating

Published Room Rate


(for 2 guests)

Yes
Yes (limited)
No

4*
3*
3*

SR 825 SR 900
SR 546 SR 600
SR 793 SR 936

Average Published Rate

SR 765

Source: Hotels.com.

For purposes of this preliminary feasibility study, an average room rate of SR600 per night is
conservatively projected for the 1st year and is projected to increase to an average of SR675 per night
in the 5th year of operation. Revenues from operation of other hotel services will also be generated
from hotel guests. Additional revenues are projected to average SR150 per room in the first year of
operation increasing to SR170 per room by the 5th year of operation.

Yanbu Waterfront 250 Room Hotel Preliminary Financial Feasibility Study

Page 4

Table II
Summary of Hotel Annual Revenues and Expenses Years 1 5
Average
Year of
Nightly
Operation Room
Rate

Other
Total
Average
Total
Revenue Revenue Occupancy Revenues
per Room per Room Rate
(SR)

Total
Operating
Expenses
(SR)

NET
OPERATING
INCOME (SR)

Year 1

SR600

SR150

SR750

64%

43,800,000

31,974,000

11,826,000

Year 2

SR620

SR155

SR775

66%

46,749,656

33,659,753

13,089,904

Year 3

SR638

SR162

SR800

67%

48,833,578

35,160,176

13,673,402

Year 4

SR655

SR165

SR820

68%

50,958,563

36,180,579

14,777,983

Year 5

SR675

SR170

SR845

70%

53,894,531

38,265,117

15,629,414

Source: AS&P; SCTA.

5. Projected Internal Rate of Return (IRR)


The two most important factors in determining a hotels feasibility are the net operating income
(NOI) and the internal rate of return (IRR). The projected NOI for the hotel is estimated to range from
27% to 29% during the first 5 years of operation. The hotels IRR is projected to range from 16.0% to
21.1% during this 5 year period.
Table III
Summary of NOI and IRR Years 1 - 5
Year of
Total
NET ANNUAL OPERATING
NOI % of
Operation Annual Revenues (SR)
INCOME (SR)
Annual Revenues
Year 1
Year 2
Year 3
Year 4
Year 5

Internal Rate of
Return

43,800,000

11,826,000

27%

46,749,656

13,089,904

28%

48,833,578

13,673,402

28%

50,958,563

14,777,983

29%

53,894,531

15,629,414

29%

16.0%
17.7%
18.5%
20.0%
21.1%

28%

18.6%

5 Year Annual Average


Source: AS&P; RC-Y EP Dept.

In conclusion, based on these preliminary projections, a 250 room 3* hotel located along the
waterfront in Yanbu Al-Sinaiyah will be a profitable financial investment.
Yanbu Waterfront 250 Room Hotel Preliminary Financial Feasibility Study

Page 5

Note: The financial projections used in this study should be viewed as approximations. These
projections assume that the hotel will be professionally marketed, managed and maintained
under international hospitality standards and the hotel will be built using quality design,
construction practices and materials.
Each hotel investor may undertake their own study based on their experience in the hotel
industry. The Royal Commission at Yanbu Economic Planning Department is available to
discuss this preliminary study, the data and assumptions incorporated in this document. For a
confidential meeting, contact the Economic Planning Department.

Office:
Mobile:
Fax:

(04) 321-6267
(055) 600-7113
(04) 321-6343

Yanbu Waterfront 250 Room Hotel Preliminary Financial Feasibility Study

Page 6

Yanbu Waterfront Hotel


Preliminary Financial Feasibility
For a

200 Room 3* Hotel


(Package #5; Parcel 3.11 - Harbour Village Hotel)
Yanbu Al-Sinaiyah
Madinah Province
Kingdom of Saudi Arabia

2012 September

Prepared by
Economic Planning Department
Royal Commission at Yanbu
Yanbu Al-Sinaiyah, Kingdom of Saudi Arabia

Yanbu Waterfront 200 Room Hotel Preliminary Financial Feasibility Study

Page 1

Introduction
Investors in the Yanbu Waterfront are being offered a unique opportunity to invest in a once in
lifetime world class resort on the spectacular Red Sea coast of Saudi Arabia. In order to assist
investors considering these opportunities, a preliminary financial feasibility study has been prepared
for the hotel component of this investment opportunity.
The projections in this preliminary study reflect reasonable assumptions prepared by the Royal
Commission at Yanbu based on independent analysis prepared by the international firm Albert Speer
& Partners (AS&P), as well as published market and financial conditions in Yanbu Al-Sinaiyah and the
Kingdom of Saudi Arabia. This preliminary study is intended to serve investors as a basis for a more
detailed analysis and by providing reasonable projections for the investors independent analysis.

Executive Summary
This preliminary financial feasibility study is presented in five sections. The results of this study
conclude that a 3* waterfront hotel in Yanbu Al-Sinaiyah with 200 rooms is a profitable financial
investment. Furthermore:
It is estimated that the hotel construction will cost a total of approximately SR 70.5 million.
The hotels occupancy is projected to range 64% in year 1 to 70% in the 5th year of operation.
The Internal Rate of Return (IRR) is estimated to average 17.3% during the first 5 years of
operation.
This study is presented in five sections:
1. Hotel Development Costs
2. Hotel Operational Costs
3. Projected Hotel Occupancy
4. Hotel Revenues and Net Operating Income
5. Projected Internal Rate of Return (IRR).

Yanbu Waterfront 200 Room Hotel Preliminary Financial Feasibility Study

Page 2

1. Hotel Development Costs


The total development cost relies upon Royal Commission at Yanbu experience from apartment and
dormitory residential projects constructed in the city. Preliminary hotel construction cost estimates
also are based from data presented by AS&P, the Yanbu Waterfront Master Plan consultant, who
utilized lodging industry data and figures.
It is estimated that the hotel construction in Yanbu Al-Sinaiyah will cost approximately SR70.5
million:
Total Rooms
200 guest rooms (minimum 24 M per room)
Hotel Total Gross Floor Area
21,048 M
Average Cost per Room USD
SR352,500
Total Hotel Development Cost
SR70.5 million

2. Hotel Operational Costs


Operational costs are include payroll, the cost of sales and marketing, utilities, insurance,
management fee, land lease payments, and FF&E (fixtures, furnishings and equipment). Operational
and other on-going costs projected by AS&P range from 66% to 68% of the annual revenue.
For purposes of this preliminary analysis, an adjusted more conservative estimate of 71% to 73% of
annual revenue is considered reasonable operational costs for Yanbu. These percentages have been
applied to the annual revenues projected in this study to determine the net annual operating
income.
Annual land leases payments are considered to be a part of the operational costs since there is no
land ownership acquisition cost to the hotel operator/developer

3. Projected Hotel Occupancy


Hotel occupancy will be greatly influenced by tourism activity in the Kingdom of Saudi Arabia.
Tourism plays an increasingly pivotal role in Saudi Arabias economy. Yanbu is positioned to maximize
the citys strategic Red Sea location and proximity to Madinah as a major tourist destination.
According to the 2012 Saudi Tourism Outlook, published by the Saudi Commission for Tourism &
Antiquities (SCTA) in January 2012:
The Saudi tourism industry recorded SR84 billion ($22 billion) in tourist expenditures in
2011.
The average room occupancy rate in hotels in the Kingdom was 63% in 2011.
The Kingdoms domestic tourism expenditures are expected to increase by 12.4% in 2012;
Inbound tourism expenditures are forecast to rise by 9% in 2012.

Yanbu Waterfront 200 Room Hotel Preliminary Financial Feasibility Study

Page 3

The Yanbu Waterfront Master Plan consultant AS&P projected hotel occupancy in the first year of
operation of Yanbus waterfront hotels to be 65% and reach 72% by the 5th year of operation. For
purposes of this preliminary feasibility study, a mid-point between the Kingdoms 2011 average hotel
occupancy rate and the Yanbu Waterfront Master Plan was used ranging from 64% in year 1 to 70%
in the 5th year of operation.

75%

Projected Yanbu Waterfront Hotel Annual Occupancy Rate

70%
65%

64%

60%

66%

67%

68%

Year 2

Year 3

Year 4

70%

63%
55%
50%

Saudi Arabia 2011

Year 1

Year 5

Source: SCTA; RC-Y Economic Planning Department.

4. Hotel Revenues and Net Operating Income


The AS&P Yanbu Waterfront Master Plan projected an average room rate for Yanbu Waterfront
hotels opening in 2012 of $165 to $185 (SR620 to SR695). However, the average published rate for a
standard room at three existing international branded hotels in Yanbu Al-Sinaiyah and Yanbu Al-Bahr
in August, 2012 is SR765 and ranges from SR546 to SR936 per night.
Table I
Yanbu Al Sinaiyah International Branded Hotels Room Rates 2012

Hotel Name

Location

Movenpick
Radisson Blu
Radhwa Holiday Inn

Yanbu Al-Sinaiyah
Yanbu Al-Bahr
Yanbu Al-Bahr

Waterfront Site

Hotel
Rating

Published Room Rate


(for 2 guests)

Yes
Yes (limited)
No

4*
3*
3*

SR 825 SR 900
SR 546 SR 600
SR 793 SR 936

Average Published Rate

SR 765

Source: Hotels.com.

For purposes of this preliminary feasibility study, an average room rate of SR600 per night is
conservatively projected for the 1st year and is projected to increase to an average of SR675 per night
in the 5th year of operation. Revenues from operation of other hotel services will also be generated

Yanbu Waterfront 200 Room Hotel Preliminary Financial Feasibility Study

Page 4

from hotel guests. Additional revenues are projected to average SR150 per room in the first year of
operation increasing to SR170 per room by the 5th year of operation.

Table II
Summary of Hotel Annual Revenues and Expenses Years 1 5
Average
Year of
Nightly
Operation Room
Rate

Other
Total
Average
Total
Revenue Revenue Occupancy Revenues
per Room per Room Rate
(SR)

Total
Operating
Expenses
(SR)

NET
OPERATING
INCOME (SR)

Year 1

SR600

SR150

SR750

64%

46,428,000

33,892,440

12,535,560

Year 2

SR620

SR155

SR775

66%

49,324,275

35,513,478

13,810,797

Year 3

SR638

SR162

SR800

67%

51,355,500

36,975,960

14,379,540

Year 4

SR655

SR165

SR820

68%

53,983,500

38,328,285

15,655,215

Year 5

SR675

SR170

SR845

70%

57,487,500

40,816,125

16,671,375

Source: AS&P; SCTA.

5. Projected Internal Rate of Return (IRR)


The two most important factors in determining a hotels feasibility are the net operating income
(NOI) and the internal rate of return (IRR). The projected NOI for the hotel is estimated to range from
27% to 29% during the first 5 years of operation. The hotels IRR is projected to range from 14.8% to
19.7% during this 5 year period.
Table III
Summary of NOI and IRR Years 1 - 5
Year of
Total
NET ANNUAL OPERATING
NOI % of
Operation Annual Revenues (SR)
INCOME (SR)
Annual Revenues
Year 1
Year 2
Year 3
Year 4
Year 5

Internal Rate of
Return

46,428,000

12,535,560

27%

49,324,275

13,810,797

28%

51,355,500

14,379,540

28%

53,983,500

15,655,215

29%

57,487,500

16,671,375

29%

14.8%
16.3%
17.1%
18.6%
19.7%

28%

17.3%

5 Year Annual Average


Source: AS&P; RC-Y EP Dept.

Yanbu Waterfront 200 Room Hotel Preliminary Financial Feasibility Study

Page 5

In conclusion, based on these preliminary projections, a 200 room 3* hotel located along the
waterfront in Yanbu Al-Sinaiyah will be a profitable financial investment.

Note: The financial projections used in this study should be viewed as approximations. These
projections assume that the hotel will be professionally marketed, managed and maintained
under international hospitality standards and the hotel will be built using quality design,
construction practices and materials.
Each hotel investor may undertake their own study based on their experience in the hotel
industry. The Royal Commission at Yanbu Economic Planning Department is available to
discuss this preliminary study, the data and assumptions incorporated in this document. For a
confidential meeting, contact the Economic Planning Department.

Office:
Mobile:
Fax:

(04) 321-6267
(055) 600-7113
(04) 321-6343

Yanbu Waterfront 200 Room Hotel Preliminary Financial Feasibility Study

Page 6

Yanbu Waterfront Hotel


Preliminary Financial Feasibility
For a

200 Room 3* Hotel


(Package #8; Parcel 3.17 - Harbour Village Hotel)
Yanbu Al-Sinaiyah
Madinah Province
Kingdom of Saudi Arabia

2012 September

Prepared by
Economic Planning Department
Royal Commission at Yanbu
Yanbu Al-Sinaiyah, Kingdom of Saudi Arabia

Yanbu Waterfront 200 Room Hotel Preliminary Financial Feasibility Study

Page 1

Introduction
Investors in the Yanbu Waterfront are being offered a unique opportunity to invest in a once in
lifetime world class resort on the spectacular Red Sea coast of Saudi Arabia. In order to assist
investors considering these opportunities, a preliminary financial feasibility study has been prepared
for the hotel component of this investment opportunity.
The projections in this preliminary study reflect reasonable assumptions prepared by the Royal
Commission at Yanbu based on independent analysis prepared by the international firm Albert Speer
& Partners (AS&P), as well as published market and financial conditions in Yanbu Al-Sinaiyah and the
Kingdom of Saudi Arabia. This preliminary study is intended to serve investors as a basis for a more
detailed analysis and by providing reasonable projections for the investors independent analysis.

Executive Summary
This preliminary financial feasibility study is presented in five sections. The results of this study
conclude that a 3* waterfront hotel in Yanbu Al-Sinaiyah with 200 rooms is a profitable financial
investment. Furthermore:
It is estimated that the hotel construction will cost a total of approximately SR 95 million.
The hotels occupancy is projected to range 64% in year 1 to 70% in the 5th year of operation.
The Internal Rate of Return (IRR) is estimated to average 15.1% during the first 5 years of
operation.
This study is presented in five sections:
1. Hotel Development Costs
2. Hotel Operational Costs
3. Projected Hotel Occupancy
4. Hotel Revenues and Net Operating Income
5. Projected Internal Rate of Return (IRR).

Yanbu Waterfront 200 Room Hotel Preliminary Financial Feasibility Study

Page 2

1. Hotel Development Costs


The total development cost relies upon Royal Commission at Yanbu experience from apartment and
dormitory residential projects constructed in the city. Preliminary hotel construction cost estimates
also are based from data presented by AS&P, the Yanbu Waterfront Master Plan consultant, who
utilized lodging industry data and figures.
It is estimated that the hotel construction in Yanbu Al-Sinaiyah will cost approximately SR95 million:
Total Rooms
200 guest rooms (minimum 24 M per room)
Hotel Total Gross Floor Area
28,395 M
Average Cost per Room USD
SR475,000
Total Hotel Development Cost
SR95 million

2. Hotel Operational Costs


Operational costs are include payroll, the cost of sales and marketing, utilities, insurance,
management fee, land lease payments, and FF&E (fixtures, furnishings and equipment). Operational
and other on-going costs projected by AS&P range from 66% to 68% of the annual revenue.
For purposes of this preliminary analysis, an adjusted more conservative estimate of 71% to 73% of
annual revenue is considered reasonable operational costs for Yanbu. These percentages have been
applied to the annual revenues projected in this study to determine the net annual operating
income.
Annual land leases payments are considered to be a part of the operational costs since there is no
land ownership acquisition cost to the hotel operator/developer

3. Projected Hotel Occupancy


Hotel occupancy will be greatly influenced by tourism activity in the Kingdom of Saudi Arabia.
Tourism plays an increasingly pivotal role in Saudi Arabias economy. Yanbu is positioned to maximize
the citys strategic Red Sea location and proximity to Madinah as a major tourist destination.
According to the 2012 Saudi Tourism Outlook, published by the Saudi Commission for Tourism &
Antiquities (SCTA) in January 2012:
The Saudi tourism industry recorded SR84 billion ($22 billion) in tourist expenditures in
2011.
The average room occupancy rate in hotels in the Kingdom was 63% in 2011.
The Kingdoms domestic tourism expenditures are expected to increase by 12.4% in 2012;
Inbound tourism expenditures are forecast to rise by 9% in 2012.
The Yanbu Waterfront Master Plan consultant AS&P projected hotel occupancy in the first year of
operation of Yanbus waterfront hotels to be 65% and reach 72% by the 5th year of operation. For
Yanbu Waterfront 200 Room Hotel Preliminary Financial Feasibility Study

Page 3

purposes of this preliminary feasibility study, a mid-point between the Kingdoms 2011 average hotel
occupancy rate and the Yanbu Waterfront Master Plan was used ranging from 64% in year 1 to 70%
in the 5th year of operation.

75%

Projected Yanbu Waterfront Hotel Annual Occupancy Rate

70%
65%

64%

60%

66%

67%

68%

Year 2

Year 3

Year 4

70%

63%
55%
50%

Saudi Arabia 2011

Year 1

Year 5

Source: SCTA; RC-Y Economic Planning Department.

4. Hotel Revenues and Net Operating Income


The AS&P Yanbu Waterfront Master Plan projected an average room rate for Yanbu Waterfront
hotels opening in 2012 of $165 to $185 (SR620 to SR695). However, the average published rate for a
standard room at three existing international branded hotels in Yanbu Al-Sinaiyah and Yanbu Al-Bahr
in August, 2012 is SR765 and ranges from SR546 to SR936 per night.
Table I
Yanbu Al Sinaiyah International Branded Hotels Room Rates 2012

Hotel Name

Location

Movenpick
Radisson Blu
Radhwa Holiday Inn

Yanbu Al-Sinaiyah
Yanbu Al-Bahr
Yanbu Al-Bahr

Waterfront Site

Hotel
Rating

Published Room Rate


(for 2 guests)

Yes
Yes (limited)
No

4*
3*
3*

SR 825 SR 900
SR 546 SR 600
SR 793 SR 936

Average Published Rate

SR 765

Source: Hotels.com.

For purposes of this preliminary feasibility study, an average room rate of SR600 per night is
conservatively projected for the 1st year and is projected to increase to an average of SR675 per night
in the 5th year of operation. Revenues from operation of other hotel services will also be generated
from hotel guests. Additional revenues are projected to average SR150 per room in the first year of
operation increasing to SR170 per room by the 5th year of operation.

Yanbu Waterfront 200 Room Hotel Preliminary Financial Feasibility Study

Page 4

Table II
Summary of Hotel Annual Revenues and Expenses Years 1 5
Average
Year of
Nightly
Operation Room
Rate

Other
Total
Average
Total
Revenue Revenue Occupancy Revenues
per Room per Room Rate
(SR)

Total
Operating
Expenses
(SR)

NET
OPERATING
INCOME (SR)

Year 1

SR600

SR150

SR750

64%

46,428,000

33,892,440

12,535,560

Year 2

SR620

SR155

SR775

66%

49,324,275

35,513,478

13,810,797

Year 3

SR638

SR162

SR800

67%

51,355,500

36,975,960

14,379,540

Year 4

SR655

SR165

SR820

68%

53,983,500

38,328,285

15,655,215

Year 5

SR675

SR170

SR845

70%

57,487,500

40,816,125

16,671,375

Source: AS&P; SCTA.

5. Projected Internal Rate of Return (IRR)


The two most important factors in determining a hotels feasibility are the net operating income
(NOI) and the internal rate of return (IRR). The projected NOI for the hotel is estimated to range from
27% to 29% during the first 5 years of operation. The hotels IRR is projected to range from 12.9% to
17.2% during this 5 year period.
Table III
Summary of NOI and IRR Years 1 - 5
Year of
Total
NET ANNUAL OPERATING
NOI % of
Operation Annual Revenues (SR)
INCOME (SR)
Annual Revenues
27%
46,428,000
12,535,560
Year 1
28%
49,324,275
13,810,797
Year 2
28%
51,355,500
14,379,540
Year 3
29%
53,983,500
15,655,215
Year 4
29%
57,487,500
16,671,375
Year 5
5 Year Annual Average

28%

Internal Rate of
Return
12.9%
14.2%
14.8%
16.1%
17.2%
15.1%

Source: AS&P; RC-Y EP Dept.

In conclusion, based on these preliminary projections, a 200 room 3* hotel located along the
waterfront in Yanbu Al-Sinaiyah will be a profitable financial investment.

Yanbu Waterfront 200 Room Hotel Preliminary Financial Feasibility Study

Page 5

Note: The financial projections used in this study should be viewed as approximations. These
projections assume that the hotel will be professionally marketed, managed and maintained
under international hospitality standards and the hotel will be built using quality design,
construction practices and materials.
Each hotel investor may undertake their own study based on their experience in the hotel
industry. The Royal Commission at Yanbu Economic Planning Department is available to
discuss this preliminary study, the data and assumptions incorporated in this document. For a
confidential meeting, contact the Economic Planning Department.

Office:
Mobile:
Fax:

(04) 321-6267
(055) 600-7113
(04) 321-6343

Yanbu Waterfront 200 Room Hotel Preliminary Financial Feasibility Study

Page 6

Yanbu Waterfront Hotel


Preliminary Financial Feasibility
For a

300 Room 5* Hotel


(Sports Oasis Hotel)
Yanbu Al-Sinaiyah
Madinah Province
Kingdom of Saudi Arabia

2012 August

Prepared by
Economic Planning Department
Royal Commission at Yanbu
Yanbu Al-Sinaiyah, Kingdom of Saudi Arabia

Yanbu Waterfront 300 Room Hotel Preliminary Financial Feasibility Study

Page 1

Introduction
Investors in the Yanbu Waterfront are being offered a unique opportunity to invest in a once in
lifetime world class resort on the spectacular Red Sea coast of Saudi Arabia. In order to assist
investors considering these opportunities, a preliminary financial feasibility study has been prepared
for the hotel component of this investment opportunity.
The projections in this preliminary study reflect reasonable assumptions prepared by the Royal
Commission at Yanbu based on independent analysis prepared by the international firm Albert Speer
& Partners (AS&P), as well as published market and financial conditions in Yanbu Al-Sinaiyah and the
Kingdom of Saudi Arabia. This preliminary study is intended to serve investors as a basis for a more
detailed analysis and by providing reasonable projections for the investors independent analysis.

Executive Summary
This preliminary financial feasibility study is presented in five sections. The results of this study
conclude that a 5* waterfront hotel in Yanbu Al-Sinaiyah with 300 rooms is a profitable financial
investment. Furthermore:
It is estimated that the hotel construction will cost a total of approximately SR 159 million.
The hotels occupancy is projected to range 63% in year 1 to 67% in the 5th year of operation.
The Internal Rate of Return (IRR) is estimated to average 14.2% during the first 5 years of
operation.
This study is presented in five sections:
1. Hotel Development Costs
2. Hotel Operational Costs
3. Projected Hotel Occupancy
4. Hotel Revenues and Net Operating Income
5. Projected Internal Rate of Return (IRR).

Yanbu Waterfront 300 Room Hotel Preliminary Financial Feasibility Study

Page 2

1. Hotel Development Costs


The total development cost relies upon Royal Commission at Yanbu experience from apartment and
dormitory residential projects constructed in the city. Preliminary hotel construction cost estimates
also are based from data presented by AS&P, the Yanbu Waterfront Master Plan consultant, who
utilized lodging industry data and figures.
It is estimated that the hotel construction in Yanbu Al-Sinaiyah will cost approximately SR159 million:
Total Rooms
300 guest rooms (minimum 24 M per room)
Hotel Total Gross Floor Area
42,506 M
Average Cost per Room USD
SR530,000
Total Hotel Development Cost
SR159 million

2. Hotel Operational Costs


Operational costs are include payroll, the cost of sales and marketing, utilities, insurance,
management fee, land lease payments, and FF&E (fixtures, furnishings and equipment). Operational
and other on-going costs projected by AS&P range from 66% to 68% of the annual revenue.
For purposes of this preliminary analysis, an adjusted more conservative estimate of 71% to 73% of
annual revenue is considered reasonable operational costs for Yanbu. These percentages have been
applied to the annual revenues projected in this study to determine the net annual operating
income.
Annual land leases payments are considered to be a part of the operational costs since there is no
land ownership acquisition cost to the hotel operator/developer

3. Projected Hotel Occupancy


Hotel occupancy will be greatly influenced by tourism activity in the Kingdom of Saudi Arabia.
Tourism plays an increasingly pivotal role in Saudi Arabias economy. Yanbu is positioned to maximize
the citys strategic Red Sea location and proximity to Madinah as a major tourist destination.
According to the 2012 Saudi Tourism Outlook, published by the Saudi Commission for Tourism &
Antiquities (SCTA) in January 2012:
The Saudi tourism industry recorded SR84 billion ($22 billion) in tourist expenditures in
2011.
The average room occupancy rate in hotels in the Kingdom was 63% in 2011.
The Kingdoms domestic tourism expenditures are expected to increase by 12.4% in 2012;
Inbound tourism expenditures are forecast to rise by 9% in 2012.

Yanbu Waterfront 300 Room Hotel Preliminary Financial Feasibility Study

Page 3

The Yanbu Waterfront Master Plan consultant AS&P projected hotel occupancy in the first year of
operation of Yanbus waterfront hotels to be 65% and reach 72% by the 5th year of operation. For
purposes of this preliminary feasibility study, a mid-point between the Kingdoms 2011 average hotel
occupancy rate and the Yanbu Waterfront Master Plan was used ranging from 63% in year 1 to 67%
in the 5th year of operation.

75%

Projected Yanbu Waterfront Hotel Annual Occupancy Rate

70%
65%
60%

66%

63%

65%

67%

64%

Year 1

Year 2

Year 3

Year 4

Year 5

63%
55%
50%

Saudi Arabia 2011

Source: SCTA; RC-Y Economic Planning Department.

4. Hotel Revenues and Net Operating Income


The AS&P Yanbu Waterfront Master Plan projected an average room rate for Yanbu Waterfront
hotels opening in 2012 of $165 to $185 (SR620 to SR695). However, the average published rate for a
standard room at three existing international branded hotels in Yanbu Al-Sinaiyah and Yanbu Al-Bahr
in August, 2012 is SR765 and ranges from SR546 to SR936 per night.
Table I
Yanbu Al Sinaiyah International Branded Hotels Room Rates 2012

Hotel Name

Location

Movenpick
Radisson Blu
Radhwa Holiday Inn

Yanbu Al-Sinaiyah
Yanbu Al-Bahr
Yanbu Al-Bahr

Waterfront Site

Hotel
Rating

Published Room Rate


(for 2 guests)

Yes
Yes (limited)
No

4*
3*
3*

SR 825 SR 900
SR 546 SR 600
SR 793 SR 936

Average Published Rate

SR 765

Source: Hotels.com.

For purposes of this preliminary feasibility study, an average room rate of SR825 per night is
conservatively projected for the 1st year and is projected to increase to an average of SR900 per night
in the 5th year of operation. Revenues from operation of the Ladies Club, restaurant and other hotel
services will also be generated from hotel guests. Additional revenues are projected to average
Yanbu Waterfront 300 Room Hotel Preliminary Financial Feasibility Study

Page 4

SR330 per room in the first year of operation increasing to SR375 per room by the 5th year of
operation.

Table II
Summary of Hotel Annual Revenues and Expenses Years 1 5
Average
Year of
Nightly
Operation Room
Rate

Other
Total
Average
Total
Revenue Revenue Occupancy Revenues
per Room per Room Rate
(SR)

Total
Operating
Expenses
(SR)

NET
OPERATING
INCOME (SR)

Year 1

SR825

SR330

SR1,155

63%

73,584,000

53,716,320

19,867,680

Year 2

SR844

SR338

SR1,181

64%

76,602,094

55,153,508

21,448,586

Year 3

SR863

SR356

SR1,219

65%

79,948,688

57,563,055

22,385,633

Year 4

SR881

SR364

SR1,245

66%

83,085,863

58,990,961

24,094,901

Year 5

SR900

SR375

SR1,275

67%

86,559,750

61,457,423

25,102,328

Source: AS&P; SCTA.

5. Projected Internal Rate of Return (IRR)


The two most important factors in determining a hotels feasibility are the net operating income
(NOI) and the internal rate of return (IRR). The projected NOI for the hotel is estimated to range from
27% to 29% during the first 5 years of operation. The hotels IRR is projected to range from 12.5% to
15.7% during this 5 year period.
Table III
Summary of NOI and IRR Years 1 - 5
Year of
Total
NET ANNUAL OPERATING
NOI % of
Operation Annual Revenues (SR)
INCOME (SR)
Annual Revenues
Year 1
Year 2
Year 3
Year 4
Year 5

Internal Rate of
Return

73,584,000

19,867,680

27%

76,602,094

21,448,586

28%

79,948,688

22,385,633

28%

83,085,863

24,094,901

29%

86,559,750

25,102,328

29%

12.5%
13.4%
14.0%
15.1%
15.7%

28%

14.1%

5 Year Annual Average


Source: AS&P; RC-Y EP Dept.

Yanbu Waterfront 300 Room Hotel Preliminary Financial Feasibility Study

Page 5

In conclusion, based on these preliminary projections, a 300 room 5* hotel located along the
waterfront in Yanbu Al-Sinaiyah will be a profitable financial investment.

Note: The financial projections used in this study should be viewed as approximations. These
projections assume that the hotel will be professionally marketed, managed and maintained
under international hospitality standards and the hotel will be built using quality design,
construction practices and materials.
Each hotel investor may undertake their own study based on their experience in the hotel
industry. The Royal Commission at Yanbu Economic Planning Department is available to
discuss this preliminary study, the data and assumptions incorporated in this document. For a
confidential meeting, contact the Economic Planning Department.

Office:
Mobile:
Fax:

(04) 321-6267
(055) 600-7113
(04) 321-6343

Yanbu Waterfront 300 Room Hotel Preliminary Financial Feasibility Study

Page 6

Yanbu Waterfront Hotel


Preliminary Financial Feasibility
For a

250 Room 5* Hotel


(Seaside Palace Hotel)
Yanbu Al-Sinaiyah
Madinah Province
Kingdom of Saudi Arabia

2012 September

Prepared by
Economic Planning Department
Royal Commission at Yanbu
Yanbu Al-Sinaiyah, Kingdom of Saudi Arabia

Yanbu Waterfront 250 Room Hotel Preliminary Financial Feasibility Study

Page 1

Introduction
Investors in the Yanbu Waterfront are being offered a unique opportunity to invest in a once in
lifetime world class resort on the spectacular Red Sea coast of Saudi Arabia. In order to assist
investors considering these opportunities, a preliminary financial feasibility study has been prepared
for the hotel component of this investment opportunity.
The projections in this preliminary study reflect reasonable assumptions prepared by the Royal
Commission at Yanbu based on independent analysis prepared by the international firm Albert Speer
& Partners (AS&P), as well as published market and financial conditions in Yanbu Al-Sinaiyah and the
Kingdom of Saudi Arabia. This preliminary study is intended to serve investors as a basis for a more
detailed analysis and by providing reasonable projections for the investors independent analysis.

Executive Summary
This preliminary financial feasibility study is presented in five sections. The results of this study
conclude that a 5* waterfront hotel in Yanbu Al-Sinaiyah with 250 rooms is a profitable financial
investment. Furthermore:
It is estimated that the hotel construction will cost a total of approximately SR 100 million.
The hotels occupancy is projected to range 63% in year 1 to 67% in the 5th year of operation.
The Internal Rate of Return (IRR) is estimated to average 20.3% during the first 5 years of
operation.
This study is presented in five sections:
1. Hotel Development Costs
2. Hotel Operational Costs
3. Projected Hotel Occupancy
4. Hotel Revenues and Net Operating Income
5. Projected Internal Rate of Return (IRR).

Yanbu Waterfront 250 Room Hotel Preliminary Financial Feasibility Study

Page 2

1. Hotel Development Costs


The total development cost relies upon Royal Commission at Yanbu experience from apartment and
dormitory residential projects constructed in the city. Preliminary hotel construction cost estimates
also are based from data presented by AS&P, the Yanbu Waterfront Master Plan consultant, who
utilized lodging industry data and figures.
It is estimated that the hotel construction in Yanbu Al-Sinaiyah will cost approximately SR100 million:
Total Rooms
250 guest rooms (minimum 24 M per room)
Hotel Total Gross Floor Area
25,743 M
Average Cost per Room USD
SR400,000
Total Hotel Development Cost
SR100 million

2. Hotel Operational Costs


Operational costs are include payroll, the cost of sales and marketing, utilities, insurance,
management fee, land lease payments, and FF&E (fixtures, furnishings and equipment). Operational
and other on-going costs projected by AS&P range from 66% to 68% of the annual revenue.
For purposes of this preliminary analysis, an adjusted more conservative estimate of 71% to 73% of
annual revenue is considered reasonable operational costs for Yanbu. These percentages have been
applied to the annual revenues projected in this study to determine the net annual operating
income.
Annual land leases payments are considered to be a part of the operational costs since there is no
land ownership acquisition cost to the hotel operator/developer

3. Projected Hotel Occupancy


Hotel occupancy will be greatly influenced by tourism activity in the Kingdom of Saudi Arabia.
Tourism plays an increasingly pivotal role in Saudi Arabias economy. Yanbu is positioned to maximize
the citys strategic Red Sea location and proximity to Madinah as a major tourist destination.
According to the 2012 Saudi Tourism Outlook, published by the Saudi Commission for Tourism &
Antiquities (SCTA) in January 2012:
The Saudi tourism industry recorded SR84 billion ($22 billion) in tourist expenditures in
2011.
The average room occupancy rate in hotels in the Kingdom was 63% in 2011.
The Kingdoms domestic tourism expenditures are expected to increase by 12.4% in 2012;
Inbound tourism expenditures are forecast to rise by 9% in 2012.
The Yanbu Waterfront Master Plan consultant AS&P projected hotel occupancy in the first year of
operation of Yanbus waterfront hotels to be 65% and reach 72% by the 5th year of operation. For
Yanbu Waterfront 250 Room Hotel Preliminary Financial Feasibility Study

Page 3

purposes of this preliminary feasibility study, a mid-point between the Kingdoms 2011 average hotel
occupancy rate and the Yanbu Waterfront Master Plan was used ranging from 63% in year 1 to 67%
in the 5th year of operation.

75%

Projected Yanbu Waterfront Hotel Annual Occupancy Rate

70%
65%
60%

66%

63%

65%

67%

64%

Year 1

Year 2

Year 3

Year 4

Year 5

63%
55%
50%

Saudi Arabia 2011

Source: SCTA; RC-Y Economic Planning Department.

4. Hotel Revenues and Net Operating Income


The AS&P Yanbu Waterfront Master Plan projected an average room rate for Yanbu Waterfront
hotels opening in 2012 of $165 to $185 (SR620 to SR695). However, the average published rate for a
standard room at three existing international branded hotels in Yanbu Al-Sinaiyah and Yanbu Al-Bahr
in August, 2012 is SR765 and ranges from SR546 to SR936 per night.
Table I
Yanbu Al Sinaiyah International Branded Hotels Room Rates 2012

Hotel Name

Location

Movenpick
Radisson Blu
Radhwa Holiday Inn

Yanbu Al-Sinaiyah
Yanbu Al-Bahr
Yanbu Al-Bahr

Waterfront Site

Hotel
Rating

Published Room Rate


(for 2 guests)

Yes
Yes (limited)
No

4*
3*
3*

SR 825 SR 900
SR 546 SR 600
SR 793 SR 936

Average Published Rate

SR 765

Source: Hotels.com.

For purposes of this preliminary feasibility study, an average room rate of SR825 per night is
conservatively projected for the 1st year and is projected to increase to an average of SR900 per night
in the 5th year of operation. Revenues from operation of the restaurants and other hotel services will
also be generated from hotel guests. Additional revenues are projected to average SR330 per room
in the first year of operation increasing to SR375 per room by the 5th year of operation.

Yanbu Waterfront 250 Room Hotel Preliminary Financial Feasibility Study

Page 4

Table II
Summary of Hotel Annual Revenues and Expenses Years 1 5
Average
Year of
Nightly
Operation Room
Rate

Other
Total
Average
Total
Revenue Revenue Occupancy Revenues
per Room per Room Rate
(SR)

Total
Operating
Expenses
(SR)

NET
OPERATING
INCOME (SR)

Year 1

SR825

SR330

SR1,155

63%

66,398,063

48,470,586

17,927,477

Year 2

SR844

SR338

SR1,181

64%

68,985,000

49,669,200

19,315,800

Year 3

SR863

SR356

SR1,219

65%

72,287,109

52,046,719

20,240,391

Year 4

SR881

SR364

SR1,245

66%

74,980,125

53,235,889

21,744,236

Year 5

SR900

SR375

SR1,275

67%

77,950,313

55,344,722

22,605,591

Source: AS&P; SCTA.

5. Projected Internal Rate of Return (IRR)


The two most important factors in determining a hotels feasibility are the net operating income
(NOI) and the internal rate of return (IRR). The projected NOI for the hotel is estimated to range from
27% to 29% during the first 5 years of operation. The hotels IRR is projected to range from 17.9% to
22.6% during this 5 year period.
Table III
Summary of NOI and IRR Years 1 - 5
Year of
Total
NET ANNUAL OPERATING
NOI % of
Operation Annual Revenues (SR)
INCOME (SR)
Annual Revenues
Year 1
Year 2
Year 3
Year 4
Year 5

Internal Rate of
Return

66,398,063

17,927,477

27%

68,985,000

19,315,800

28%

72,287,109

20,240,391

28%

74,980,125

21,744,236

29%

77,950,313

22,605,591

29%

17.9%
19.3%
20.3%
21.7%
22.6%

28%

20.3%

5 Year Annual Average


Source: AS&P; RC-Y EP Dept.

In conclusion, based on these preliminary projections, a 250 room 5* hotel located along the
waterfront in Yanbu Al-Sinaiyah will be a profitable financial investment.
Yanbu Waterfront 250 Room Hotel Preliminary Financial Feasibility Study

Page 5

Note: The financial projections used in this study should be viewed as approximations. These
projections assume that the hotel will be professionally marketed, managed and maintained
under international hospitality standards and the hotel will be built using quality design,
construction practices and materials.
Each hotel investor may undertake their own study based on their experience in the hotel
industry. The Royal Commission at Yanbu Economic Planning Department is available to
discuss this preliminary study, the data and assumptions incorporated in this document. For a
confidential meeting, contact the Economic Planning Department.

Office:
Mobile:
Fax:

(04) 321-6267
(055) 600-7113
(04) 321-6343

Yanbu Waterfront 250 Room Hotel Preliminary Financial Feasibility Study

Page 6