Business plan of

Homestay

Bangladesh

A report on Home Tourism Business Plan

Submitted To
Junnatun Naym
Lecturer
Department of Finance
Faculty of Business Studies
University of Dhaka

Submitted By
Group No. 03
Section- B
18th Batch
Department of Finance
Faculty of Business Studies
University of Dhaka

Date of Submission: 9th November, 2014.

Group Profile

Group no.

Serial no.

Name

ID

Sumsul Arafine

18-006

Faisal Ahmed

18-012

Faria Lisan

18-030

Md. Arifur Rahman

18-148

Fatema Tabassum

18-172

Md. Johurul Islam

18-251

Letter of Transmittal
Junnatun Naym
Lecturer
Department of Finance
University of Dhaka.
Subject: Submission of report.
Dear Maam,
It gives us immense pleasure to submit the report on Home Tourism Business Plan as a
requirement of the regular BBA course of the Department of Finance, University of Dhaka.
Apart from the academic knowledge gained from this course the preparation of the report has
given us the opportunity to acquaint ourselves with the true experience of how to undertake a
business, how to plan for this, and how to execute and make profitable this business considering
social welfare. We believe that the experience we have acquired from this study will be an
invaluable asset in our near future professional lives.
It expresses our gratitude to you for providing us the opportunity to check the application of
theoretical knowledge in practical professional field. In spite of various shortcomings, we have
been devoted to preparing this report a sound one. We hope you will appreciate our endeavor and
find the report up to your expectation.
We will be pleased to answer any sort of query you may have regarding this report.
Sincerely yours,
Name

ID

Sumsul Arafine

18-006

Faisal Ahmed

18-012

Faria Lisan

18-030

Md. Arifur Rahman

18-148

Fatema Tabassum

18-172

Md. Johurul Islam

18-251

Signature

Acknowledgement
First of all we would like to express our gratitude from heart to the Beneficent, the Merciful, &
Almighty Allah for giving us the strength and patience to prepare this report within the
scheduled time. Then we are especially grateful to our honorable course teacher for giving his
valuable suggestions and precious contributions preparing this report. Different aspects
regarding this plan that she taught us in our course have worked as a beacon while preparing
this report.

Executive summary
The homestay concept is focused on lifestyle and experiential tourism. The uniqueness of the
traditional songs, dances, cuisines and sports as well as rural economic activities are the main
attractions and offers unique experience to the tourists compared to the experience in the
city.Each homestay has something unique to offer visitors and organizes its own special
activities for their guests such as jungle trekking, fishing, kite flying, rubber tapping, fruit
picking, handicraft-making, and more.
Initially we will start homestay in five locations. Those are Coxs Bazar, Rangamati, Bandarban,
Sundarbans, Bogra.
Internet and mobile phone technology will mainly be used for our business purpose. Tourists will
be informed about us through our website or advertisement. Then they will have the options to
book electronically or through our local booking points.
Homestay service requires continuous development and market analysis. We will expand our
business by exploring more tourist spots, training hosts and guides and upgrading the
environment of houses. The prime concern of our agency is to bring the tourists the real travel
experiences, to offer something genuine, a real taste of life around the world.
Our target market consists of tourist both local and coming from abroad. We have targeted the
local customer of higher or higher middle income peoples aged above 30 and who are interested
in making tour for leisure, passing time with family, entertainment and refreshment purpose. On
the other hand we have also targeted foreign tourists who usually set their tourist destination and
interested in South or East Asia and conduct tour for leisure, cultural, amusement and experience
purpose.

The potential competition faced by our company comes from mainly two sources. The first one
is the local tour operating agencies in our country. Dhaka Holidays, Royal Holidays etc. are
some example of tour operating agencies in Bangladesh. On the other hand home stay tourism
service is available in our neighboring country India, Nepal, Srilanka, Malaysia, China etc.
Various specialized companies are operating in those countries and capturing the biggest portion

of customers interested in home stay tourism. So they are our most prominent competitors as
they are providing the customers with great deal of efficiency and quality. But still we can
compete vigorously since Tourism in Bangladesh is still very cheap in comparison to other
tourists attraction in South or East Asian countries. Our 4 nights and 5 days homestay tourism
package will cost only $225 to $300 but its features will amaze the customers.

Besides this, our homestay products are based on customer priority and convenience. Other
tourist attraction of homestay in Malaysia, Indonesia, Srilanka etc. are already crowded with
tourists in pick seasons. In comparison with those spots our tourists spots are less crowded and
our guest can customize their tour in a great extent and enjoy their leisure period with great
excitement and pleasure.
To start the project, we initially need about TK.3800000. Initially we are starting as all equity
firm. However, when we go on expansion, we will use debt about 30% of the capital. Our cost
of capital is 15%. Our firm beta is 1.5 because our business is very much cyclical.
The promoters of the home tourism business are A, B, C, X and Y among whom A,B, C are the
fresh graduates of B.B.A from department of Finance, University of Dhaka and X & Y have
recentlly resingned from their job and provided the capital needed to start the business.
Management team consists of one general manager who is A, one administration manager who is
B And one marketing manager who is X, one financial manager who is C, one operational
manager who is Y and with others staffs needed to run the business. There is also an attorney
general.
Homestay is aimed to increase the participant of the rural community in the tourism industry and
a way to reduce the rural-urban migration. Homestay social responsibility involves sharing the
benefits of the tourism industry with the rural community and encourages their participation in
the tourism sector, boosting household income and improves living standards of the rural
community, which contribute to the reduction of poverty; and developing rural tourism
entrepreneurs and provide job opportunities.

Table of contents
Business introduction 11
Management aspect .. 16
Technical aspect ... 20
Marketing plan . 30
Financial aspect .. 38
Social aspect ..54
References . 57

Origin of the report

One of the essential aspects of modern business studies is exposure to the practical experience.
And the purpose of business studies is to make the students wind up their imagination and to be
innovative in this field. As a part of our course F-306, Entrepreneurship and business project
development we prepared a report on the topic Homestay Tourism: Business Plan. This
report has been prepared as the course requirement of the BBA program. We, hope that this
report will provide a clear view on how a business should be prepared.

Objectives of the report

The main objective of the report is how to work on and carry out a new business. Other
objectives are:

Creatively analyze the business environment, opportunity recognition, and the business
idea-generation process;

Know how to acquire necessary resources and organizational matters of new venture
creation process;

Write a business plan that creates and starts a new venture.

Recognize the innate entrepreneurial potential within themselves;

Understand the many ways in which entrepreneurship can manifests itself in different
walks of life;

Are willing to have big dreams and take responsibility for pursuing those dreams;

Appreciate the role than entrepreneurial behavior can play in enhancing their lives and
the lives of others;

Become better creative problem solvers;

Develop a strong knowledge base and set of tools that enables them to act on creative and
innovative ideas;

Recognize the critical importance of values and ethics when engaged in entrepreneurial
activities.

Methodology of the report

From our educational background we have learnt different methodology to collect data from
different sources and analyse them. With the objective to make our report sound one, we have
the opportunity to implicate our educational knowledge in practical field. We have collected data
from many sources.

Discussing the topic with group members and dividing part.

Browsing the internet.

Limitations of the report

Every study has some limitations. We faced some usual constraints during the course of our
preparation for the report. The major limitations are as follows:

Limited experience and expertise.

Lack of vast knowledge in the respective area.

Lack of primary data.

Lack of time.

Scope of the Study

We feel fortunate to have the opportunity on work on this report. We have worked on the
information given by the course instructor. Because of relevant data and information, the scope
of study this specific area was very broad.

The report covers the following areas.

Overview of tourism industry in Bangladesh.

Regulatory framework of start-up business.

Abundance of natural beauty and colorful life of Bangladesh.

10

Business Introduction

11

Introduction
Bangladesh is a country of natural beauty. She is blessed with endowment of almighty. It has
variety of natural and cultural destinations suitable for tourist attractions. Tourism is an emerging
sector for Bangladesh and it is one of the most growing industries all around the world. But lack
of accommodation, security, transportation is some of the major problem in tourism sector in
Bangladesh. To solve these problems and to attract tourist from home and abroad, we are
planning to start Home Stay Tourism business in Bangladesh. Tourists will have the
opportunity to experience the lifestyle of local people along with visiting the area. The business
will attract more tourists from home and abroad and it will also involve rural and tribal who will
also be benefitted by this business.

What is Homestay?
The homestay concept is focused on lifestyle and experiential tourism. People living in some
areas away from city surrounded by natural beauty have converted their farm houses, heritage
houses or hill cottages with a view to accommodate a couple of guests. These guests can live in a
homely atmosphere and get a chance to mingle with another local family who are mainly the
host. At some places even more than one family are accommodated at one place.
Besides offering local delicacies in their meals, some Home Stays also offer the guests to learn
some local cuisines. Local visitors and tourist will be able to learn more about close-knit family
relationship enjoy sumptuous home-cooked food and discover the simple lifestyle of people
living in a particular area. It offers tourist a chance to experience the daily life outside the
bustling capital cities and puts the visitor closer to nature, our cultures. This will also increase the
participation of the rural community in the tourism industry and a way to reduce the rural-urban
migration.
The homestay concept is focused on lifestyle and experiential tourism. The uniqueness of the
traditional songs, dances, cuisines and sports as well as rural economic activities are the main
attractions and offers unique experience to the tourists compared to the experience in the city.

Industry background
Bangladesh is bestowed with beautiful coasts and beaches, archeological sites, historical and
religious places, hills and islands, forests and jungles and attractive countryside with
12

innumerable water bodies and green fields of agriculture. These rich natural and cultural
attractions are valuable ingredients for tourism development in Bangladesh. Every year, a large
number of tourists visit these attractive places, which has a significant contribution in the
national economy. That is a better way of generating sustainable GDP for Bangladesh. Real GDP
growth for Travel & Tourism economy is expected to be 5.78% in current situation and to
average 8.64% per annum over the coming 3-5 years.
Since the 1990s tourism has been a small but rapidly growing sector of the national economy.
Nevertheless, Bangladesh is still one of the countries in the South Asian region with the least
arrivals and the lowest revenue earned from the tourism industry. Sustainable tourism initiatives
exist and demand is increasing, but sustainable tourism management is not widespread in the
sector.
Homestay is a new accommodation arrangement in tourism industry. It is an iconic rural tourism
product highlighting Bangladeshi cultural and traditional ways of life. In Bangladesh this tourism
service is not yet prospered. It is almost a new business idea to be flourished and get popularity
in our context. Homestay is getting popularity in some neighbor country of us like Malaysia,
Srilanka and India. It could add diversity to Bangladeshs tourism and help it to meet the
challenges of an increasingly competitive industry. Though a new idea in tourism industry, it has
considerable potentials and if sufficient promotional activities are taken and favorable
government policy are adopted in this sector, homestay industry will tremendously contribute on
the economic development of the nation.

The Project: Homestay Bangladesh

Tag line: get closer to nature, be friend with stranger.
Company Overview
Homestay Bangladesh Pvt. ltd will let the tourists to book accommodation in a local person's
home when they want an authentic travel experience. We have homestays in some popular and
attractive destinations of Bangladesh.

Company Description
The prime concern of our agency is to bring the tourists the real travel experiences, to offer
something genuine, a real taste of life around the world. Through our service travelers will get to
experience life in a traditional village. With an open mind, they will be exposed to a fascinating
culture where they will establish a bond with your friendly foster family and get acquainted with
the village elders. Friendly children and accommodating neighbors will also help show them the
rural ways of life.
13

Something extraordinary and unforgettable that takes the tourists to the heart of the culture and
community they are visiting, that shows, what its really like to live in that place, what it looks
like from the warmth of a real family rather than the isolation of yet another hotel room or empty
apartment.
We will establish a community of homestay hosts, each of whom welcome visitors to stay in
their home. Each host will give the tourists a really affordable alternative to ordinary tourist
accommodation. They will share a meal, learn customs, hear stories and enjoy traditions with the
people
that
really
make
the
place
what
it
is.
It will offer so much more than ordinary travel, where visitors observe a place of our country and
its people. Its an unmissable opportunity to see beyond the usual tourist trail. To not just see the
country, but to experience it as its meant to be experienced.
Vision: To turn the homestay industry of Bangladesh into a major and viable sector and also
contributes to the socio-economic development of the local people and the country.
Mission: The mission of our service are to flourish the tourism business in our country by
providing a different travelling service other than traditional; let them to experience life in a
traditional village as well as disseminate and promote our culture and to represent our country
to the outside and through these making economic development.

Objectives of Company

14

To ensure that host communities have developed a unique experience of the lifestyle of
rural people and are obtaining a fair return for their services and investment;

To ensure that homestays contribute to conserving local cultural and natural heritage

To create a distinctive, authentic, reliable, tourist accommodation and experience homestay packages for visitors.

To attract more tourists in other country.

To represent and promote Bangladeshi culture to the other nations.
To give some income for the villagers of our country.
To increase Bangladeshi economy.
To enhance the size of business and set up more branches in all over Bangladesh.
To provide job op Short Term Objectives
To attract customers and increase the number of customers as large as possible.
To make sure customers knows us and satisfied with our services.

To perform a healthy competition with other competitors.

To fulfill market needs.
To increase the number of entrepreneurs who are involved in this type of business.

In order to achieve these objectives, all employee and the shareholders must nwork closely
together. They must communicate and cooperate with each other. Other than that, all employees
must hold one concept that is 'customers are always right', that is we try to provide the best
services and will not blame customers because of our ownnmistakes or carelessness. Employees
and hosts must always be sincere and serve the customers with great hospitality.

Location: the location of the head office will be at Mirpur 12, Dhaka. We also have five regional
offices at the selected tourist spots initially.
Advantages: the tourists will get many advantages over the traditional tourism service

15

Homestay vacations are the type of tourist accommodation that gives visitors the closest
contact and most authentic experiences with locals.
Homestays can be a good way for families to supplement their income, especially in
regions where there may not be enough economic activity for full employment.
They allow communities to come together as hosts for tourists, generate a festive
atmosphere and create memorable moments shared with visitors.
Homestay vacations can also have strong economic spinoffs: a surge in visitors can be
beneficial for local artists, crafts people and tour operators.

Management aspect

16

The promoter: The promoters of the home tourism business are the fresh graduates of B.B.A
from department of Finance, University of Dhaka. They are A, B, C, D,E.
Legal form of Business: Primarily it is targeted the business is to be established as a Private
Ltd. Co. but in future the company will be turned into a public Ltd. Co.
Manament team: Management team consists of one general manager who is A, one
administration manager who is B And one marketing manager who is D, one financial manager
who is C, one operational manager who is E and with others staffs needed to run the business.
Here positions and activities of each member of management team are described in detail.
Position

Activities

General manager

- Responsible for the overall running of the organization.

- Provide direction and leadership to motivate her staff to perform the
essential task within the required time frame.
- To ensure that the activities of all departments are integrated and
coordinated for unity of proposed.
- Creating an organization structure that is suitable for achievements of the
company objectives.
- Planning, organizing, directing and controlling.
- Defining and establishing the long-term goals of the organization and
determining the activities to achieve long term goals.
- Make decision and solve the organization problem.
- Decide on organizational structure based suited to achieve the goals.

Administration

- Help organization to achieve company goals.

manager

- Encourage employees to develop performance to maximum potential.

- To put in order and receive the requirements of clients.
- Have a good communication with clients.
- Manage office expenditure, partner's remuneration, organization profit,
holiday of employees, bonus of employees and incentive for employees.
- Organize or take care of entire document, file and corresponding letter.

Marketing
17

- Manager the marketing, promotion and publicity at beginning of business.

manager

- Search for client and develop the market.

- Find the target market, plan and strategy for market, types of services and
amount of service payment.
- Make research about opportunity in market.

Financial manager - Record all organization profit or loss

- To determine types and extend of financial requirements of the company.
- To select the best forms of financing to meet the requirements.
- Concern with acquiring the funds needed to enable the organization to
carry out business activities.
- Seeks to achieve a position
Operational

- Concern with the determination acquisition and scheduling of all facilities

manager

necessary for future production of service to satisfy demand.

- To ensure workers are available where and when required.
- To ensure all activities

Supervisor

- Arrange the activities

- Looking to the welfare of the tourist
- Making reports to the manager regarding any matters related to the
activities.
- Assist the activity operation manager when it is necessary
- Perform clerical work
- Being as the middle person between villagers and the operation
department

Clerk

- Typing documents
- Filing

Consultants & Advisors: our honorable teacher professor Shahjahan Mina and lecturer
Junnatun Naym maam from dept. of Finance University of Dhaka on is expected to advices our
company for management, financing, strategic and marketing aspect.

Bank: HSBC bank which is prominent in this country for its banking services is selected for
transactions and maintaining bank balance.
18

Auditor: Assistant professor Md. Salauddin Chowdhury who is also a renowned ACA from
dept. of finance from Dhaka University has been appointed as Auditor for the company.
HR Management:
Staffing need:
Direct stuff: Total direct stuff needed for the business is primarily seven in number. They are one
general manager, one administration manager, one financial manager, one marketing manager,
one operational manager, one supervisor and one clerk. Since the business will expand with
passage of time, the stuffing requirement will also increase.
Host: Primarily 15 hosting families are selected on the tourist spot.
Staffing budget: All managers remuneration is 25000tk monthly and the supervisor will be
paid 15000tk per month and the clerk will be paid 8000tk per month. The hosting families will
be paid according to the number of tourist and the number of days they will serve. It is
determined 3000tk will be given for per day and per tourist they will serve.

19

Technical aspects

20

Homestay tourism:
The homestay concept is focused on lifestyle and experiential tourism. The uniqueness of the
traditional songs, dances, cuisines and sports as well as rural economic activities are the main
attractions and offers unique experience to the tourists compared to the experience in the city.

Product and services

Each homestay has something unique to offer visitors and organizes its own special activities for
their guests such as jungle trekking, fishing, kite flying, rubber tapping, fruit picking, handicraftmaking, and more.
Homestay products are however essential to the viability of the couch surfing structure. For
example, travellers could be offered an all-in product consisting of bed and breakfast in
different households, so that they can discover different areas of a region, share evening meals
with the host, benefit from transportation and luggage transfer, and enjoy sports activities and
cultural excursions.
Types of activities offered in homestay:
Each homestay program offers different types of activities, depending on the culture, food,
economic activity as well as location. Every tourist spot in Bangladesh has its own uniqueness in
terms of culture, natural beauty and historical background. For example- worlds longest sea
beach is situated in Coxs Bazar, highest hill in Bangladesh is situated in Bandarban, the largest
mangrove forest Sundarban is situated in Sathkhira, Khulna and Bagerhat area etc. Homestay
tourism

21

provides

the

following

activities-

1. Culture and lifestyle

History

Traditional dances, traditional songs and traditional food

Traditional games and sports

Culture: marriage, assembly of animal sacrifice and festivals

2. Economic activity

22

Rubber tapping

Fish breeding and catching

Agriculture: paddy, cocoa, oil palm, fruit

Joom cultivation

3. Recreation

Sightseeing

Jungle trekking

White water rafting

Enjoying traditional food

Visit to nearby tourism products

Utilities
As a minimum requirement, homestay accommodations must be near town as much as possible,
located in a pleasant environment, impeccably clean rooms with access to a full bathroom,
whether private or shared. Host(s) must be available and hospitable and must provide breakfast,
lunch and dinner. Optional services could include a family supper made with locally sourced
ingredients; a private bathroom would be an asset. Evening gathering can be made through
which tourists will be able to learn about the local culture. This type of event could be organized
by the host or our company.
Tourists will use our own transport for visiting purpose. Trained hosts will work as guide to the
local visiting spots.

Security
Every tourist visiting Bangladesh has the biggest concern about his/her security during the trip.
Our homestay program gives top priority to tourists security and right from the moment they

23

arrive in our offices till they leave, we will accompany them throughout the trip for their safety.
As misbehavior of local people is the main threat to tourism business, involving local people and
their interest ensure security from them. Our guides and hosts, preferably from locals, are always
there to attend to every whim and fancy of our customers.

Locations
Initially we will start homestay in five locations. The locations and their attractions to tourists
are:
Hill tracking and tribal tourism

We will build several homestay spots in hilly regions of our country in Bandarban, Khagrachari
and Rangamati district. Customers can have real taste of natural beauty and blessing by living
within the nature in our hosts houses. Highlighting features of this product-

24

Natural beauty and site seeing in different spots such as Nilgiri, Nilachol, Kaptai lake,
Chimbuk hill, golden temple etc.
Opportunity to observe life style of tribal people and build friendship with them and
take their warm hospitality.
Hill tracking and camp firing
Enjoying different cultural and religious festivals

Coastal area

We will build some host spot in area near to the longest sea beach of Coxs bazar. This product
includes site seeing of natural beauty of worlds longest sea beach and observing life style of
local people and sea creatures. Highlighting features of this productSite seeing and sun-bath in sea beach
Water surfing
Under water diving and observing life cycle of sea creatures.
Observing lifestyle of people who depends on sea.

25

26

Natural beauty of tea garden and lifestyle of tribal people

we will build some spot in hilly area of Shyleth with in different tea garden. Highlighting
features of this productSite seeing of natural beauty of tea garden
Enjoying authentic taste of tea
Observing life style and culture of local peoples and tribal people
Camp firing and hill tracking

Largest mangrove forest in earth- the Sundarban

customers can enjoy the natural beauty of Sundarban the largest mangrove forest in world by
choosing different spot in southern part of bangladesg. Highlighting features of this product
Enjoying profound natural beauty of Sundarban
Observing the forest life of Sundarban by staying nearby host villages
Surfing the forest ensuring highest security
Observing the life style of local people who depends on the forest
River cruising in various rivers in the area
Observing the one of the most challenging job of sundarban honey collecting

27

Traditional Banglali culture and natural beauty in North-bangle

this products include observing and participating in the traditional life style of Bangali people
and natural beauty of Bangladesh in different host spots in Bogra one of the northern district in
Bangladesh. Highlighting features of this productSite seeing of historical important and world heritage sites such as Shompur Bihara,
Mohasthangar and various ancient temples situated in different northern distict of
Bangladesh
Observing the life style and culture of Bangali people.
Observing agricultural process and practices in this area and enjoying agricultural
festival the Nobanno uthshob.
Enjoying traditional Bangali food, Pithas (cake), drinks and having opportunity to learn
it
Taking part in the rural and nave lifestyle of Banglali people, enjoying various cultural
and religious festivals and experiencing the world famous hospitality of Bangladesh
Enjoying taste of Hilsha fish and learn the traditional process of fish catching and
cooking.

28

Information and communication technology

Internet and mobile phone technology will mainly be used for our business purpose. Tourists will
be informed about us through our website or advertisement. Then they will have the options to
book electronically or through our local booking points. Tourists will be transported to the site
through our own transport. Trained guide will be always with the tourists for security purpose.
There are some places where network may not be available. In that case, we will inform the
tourist about this beforehand so they can be aware of the fact.

Supplies and sources of raw materials

We will collect raw materials for building houses and providing tourists daily necessaries from
local market. Hosts will purchase daily necessaries for them and for tourists according to
requirements. Foods will be provided according to customers choice keeping in mind the
traditional appeal of the food.

Manufacturing and service cost declaration

The cost of building and updating houses will be provided by our company. The service charge
that will be collected from visitors will depend on specific tour and spot. So no specific price can
be stated here. On an average, there will be a general 5 days 4 nights tour package for all tourists.
For this types of package service charge will be 15000 to 20000taka. If a tourist wants to stay
more or less, extra daily charges will be applied.

R&D plan
Homestay service requires continuous development and market analysis. We will expand our
business by exploring more tourist spots, training hosts and guides and upgrading the
environment of houses. Local museum which will represent the specific locality and culture will
be built. Souvenir shop in every tourist spot will help visitors to keep their experience alive and
help us to expand our business. Steps will be taken to protect and enrich the environment.

29

Marketing plan

30

Marketing plan is the most significant part of a business plan. It explains the market condition
of the products, the target market in which the company will exercise its offerings, analysis of
present and potential competitors, buying behavior of possible and potential customer, how the
product will be positioned in the competitive market and the marketing mix of the product or
service being developed.

Market analysis and target market

Tourism in Bangladesh is a developing foreign currency earner. The country was listed by
Lonely Planet in 2011 as the "best value destination". The whole tourism market consists of all
kind of travels and tourism service and all kind of tourist in the world. Relevant market of
tourism for our company comprises with number of local tourists who travel and make
entertainment tour inside and outside of our country, numbers of travellers coming to our country
for various purposes and number of travellers and tourist coming to south Asia and south East
Asia in a year. Tourism board of Bangladesh reports that the numbers of travelers coming to
Bangladesh is approximately 300,000 in recent years. On the other hand 1 billion and 8 million
tourists come in south East Asia and south Asian region for tourism purpose and it is growing at
a rate of 8.5% which is highest in all over the world. On the other hand in Bangladesh
approximately 1million tourists make tour in home and abroad in each year. So our whole market
consists of both local and international customers.
From the whole local market we have targeted only .04% of total tourist traveling in a year and
have expected 400 customers for our packages. On the other hand we have targeted only 600
customers coming from abroad. So for our service we have targeted approximately 1000
customers in a year. From local market our target customers are mostly customers of high or
middle income margin and businessman, professionals and corporate persons who have very few
time to spend with their family and thus searching for tour opportunity where they can spend
enough time with their family in a homely environment and enjoy beautiful sites. On the other
hand for foreign customers we have targeted tourist coming to south or East Asian continents.
We have to reach 10% of total market and that is 1.08 million. We will reach 1.08 million by our
promotional package and are expecting approximately 600 customers coming from abroad.
So our target market consists of tourist both local and coming from abroad. We have targeted the
local customer of higher or higher middle income peoples aged above 30 and who are interested
in making tour for leisure, passing time with family, entertainment and refreshment purpose. On
the other hand we have also targeted foreign tourists who usually set their tourist destination and
interested in South or East Asia and conduct tour for leisure, cultural, amusement and experience
purpose.

31

Competitor analysis
The potential competition faced by our company comes from mainly two sources. The first one
is the local tour operating agencies in our country. There are various tour operating and travel
agencies in our countries which offers different tour in different location of our country. Dhaka
Holidays, Royal Holidays etc. are some example of tour operating agencies in Bangladesh. They
offer package tour such as 4 days 3 four nights, 3 days 2 nights in different location of
Bangladesh. Reports show that about 1300 travellers made tour in Bandarban last year which
was operated by different local tourists agencies. They offer their packages at a price within
15000 tk to 40000 tk according to location, hotel services, transportation, securities etc.
On the other hand home stay tourism service is available in our neighboring country India,
Nepal, Srilanka, Malaysia, China etc. Although this service is not available in our country in that
extend, this product is thriving in Malaysia, France, Thailand and contributing a significant
amount in their national income. Various specialized companies are operating in those countries
and capturing the biggest portion of customers interested in home stay tourism. So they are our
most prominent competitors as they are providing the customers with great deal of efficiency and
quality.

Customers behavior analysis

Consumers behavior analysis is important to understand and predict what customers will buy,
how and why. We also need to understand the processes consumers go through in buying and
consuming hospitality products. By understanding and meeting customer expectations we can
expect ensuring customer satisfaction. Tourists choose homestay vacations as a way of meeting
locals, immersing themselves in local life, learning about the history of the region, and
discovering other ways of living. Price can also be an important factor, if it is less expensive than
a hotel, and the services provided by hosts can also be a big plus. As a minimum requirement,
homestay accommodations must be near the center of town, located in a pleasant environment,
impeccably clean rooms with access to a full bathroom, whether private or shared. So site
selection and host selection must be done with due case considering above factors. On the other
hand economic aspect of tourism industry must be understood. Homestay tourism is considered
to be a luxurious product. Customers of this product are people of high income margin and
affluent with communication technology. So before purchasing a package they search for
different packages in different companys websites and compare the price with features and
convenience of the service. Foreign visitors also want to be ensured about the safety, security,
environmental and legal system about the visiting country. The buying behavior of the customers
of this industry is highly influenced by financial and economic condition, socio-cultural factors
and psychological factors. So in time of economic growth and higher customers confidence
there is an increase in consumption of this product. On the other hand people do not feel
comfortable and safe in making tour in such country which socio-cultural condition contradicts
them. On the other hand psychological factors affect consumers to be loyal in certain brand or
country. Our marketing strategy must consider the customers buying behavior of tourism sector.
In case of visiting Bangladesh about 45% foreigners expressed negative view about Bangladesh
such as poverty, politically disturbed, load shedding, overcrowded corruption, traffic congestion,
32

illiteracy etc. on the other hand about 38% foreigner expressed positive view about Bangladesh
as they were excited about the natural beauty of Bangladesh and riding rickshaw and delighted at
hospitality and friendliness of Bangladeshi people. Different survey show that among all the
foreign tourist visiting in Bangladesh 31% described their tour as exciting and 42% of them
described Bangladesh as fascinating tourist spot. So, all the data and variables suggest
Bangladesh as potential tourist attraction to the potential customers.

Strategic position analysis

SWOT analysis

Strength
Pioneer brand in homestay tourism service sector in Bangladesh.
Tax holiday and rebate facilities for belonging in tourism industry.
Natural beauty: Bangladesh is renowned for its natural beauty, greenery, archeological
and historical places and hospitality of people, it has numerous rivers and longest sea
beach of the World.
Pollution free environment.
Cost effective transportation facility.
Rich history and heritage.
Liberal behavior of local people towards tourist.
Rich Cultural heritage.
Low cost of products and services

Weakness
Problems related to safety, security and hygiene.
lack of Infrastructural development
Non-Professional tour operators and lack of skilled hosts
Poor transportation system
Lots of investments in registration and other non-productive activity and systematic
difficulty to start business

Opportunity
Job creation and enriching the standard of people of remote areas by giving them
opportunity to be host along with their usual profession
Synergy for promotional strategy of Tourism
Development of tourism culture
Building awareness among tourist, policy maker and local community
Huge campaign to create a positive attitude toward tourism, Building positive attitude
toward country like Beautiful Bangladesh
Increasing strong security system for both inbound and outbound tourist.
Increasing emphasize and encouragement of government in this sector.

Threats
Political instability
Foreign tourist may not communicate with local people due to lack of language problem.
33

May face Strong competition with already established giant company in tour operating
industry
Barriers to overcome image crisis of Bangladesh
Misinterpretation or misconception about tourism in local communities.

Overall marketing strategy and product positioning

This section of the report deals with the strategy by which the company will position its product
or service in the competitive market. There are different positioning strategy for product and
service depending on the features of the product and condition of the market. Product
development, market development, market penetration and product differentiation are four
market positioning strategy based on the degree of uniqueness in product and service and
condition of market in which the product or service is going to place. Some fascinating features
of our product which will help our brand to positioned itself in market are described bellow.

Uniqueness
We are developing an apparently new and unique product. Though home stay tourism is an
existing product in different counties. We are going to rebuild it with some exceptional features
and services. On the other hand this product is a new concept in tourism for our local customers.
So our positioning strategy will be product diversification strategy. For the foreign tourist some
cultural aspect and food will be an unique experience.

Product identification
Organizations identify their products in the marketplace with brand names, symbols, and
distinctive packaging. Almost every product distinguishable from another gives buyers some
means of identifying it. Choosing how to identify a firms output represents a major strategic
decision for marketers. The name of our company is Homestay Bangladesh Pvt. Ltd and we
will promote our product to the possible customers using the brand name of Homestay
Bangladesh with its creative logo. This strategy can differentiate our brand from the competitors
and the customers will prefer our brand for its amazing packages and products, world class
hospitality service and distinctive brand identification.

Cultural tourism
Homestay tourism is distinctive from other tourism products for its cultural aspect. By this
product we are not only branding our natural and historical sites but also creating an opportunity
to spread a cultural bondage among our guests and our hosts. Our customers can not only enjoy
profound natural beauty and blessings of our country but also be very much closed to our culture
and people by participating it within the events. In usual tourism this opportunity is not very
ample. In our country various cultural and religious festivals of rigorous colors and enjoyment
happen time to time such as Boishakhi uthshob, village fair, BOISHABI uthshob of tribal
people, Nobanno uthshob, religious festivals such as Eid-ul-fitar, Eid-ul-azha, Durga
puja, Bouddho purnima etc. Customers from different parts of world interested in cultural
tourism will take the opportunity of having taste of real Grameen Bangla and natural beauty
along with lifestyle of tribal people by our homestay packages.
34

Costs and benefits

Tourism in Bangladesh is still very cheap in comparison to other tourists attraction in South or
East Asian countries. Our 4 nights and 5 days homestay tourism package will cost only $225 to
$300 but its features will amaze the customers. A tourist can stay longer or shorter according to
his or her wish. Per day extra charges will be applied in that case. All our packages can be
customized according to customers need and promised to provide highest service in exchange of
low price compared to other homestay destination around the world.

Customer priority
Our homestay products are based on customer priority and convenience. Other tourist attraction
of homestay in Malaysia, Indonesia, Srilanka etc. are already crowded with tourists in pick
seasons. In comparison with those spots our tourists spots are less crowded and our guest can
customize their tour in a great extent and enjoy their leisure period with great excitement and
pleasure.

Integrated marketing strategy

Integrated marketing strategy consists of some activities, processes and ideas which will help the
organization to reach our product to every potential and possible customer, create a positive
mindset about our brand, make the potential customers into actual customers, build a long term
profitable relationship with them and achieve our corporate goals.
Now, the first step in the process of integrated marketing strategy is to search and identify target
customers group and analyzing strategic position of our brand. Target customer section of this
report described this part. The second step in this process is continuous development of products
and features according to the changing aspect of customers demand, taste, trends and
environmental forces. We will build a R&D team consists of expert in this industry for
comprehensive research and continuous development of products and their features over time.
The duty of the R&D team is also to search for new opportunities and gaps in the market and
develop more exciting products to enrich our product portfolio.
The third step of our integrated marketing plan is to identify and develop central marketing
philosophy of our brand according to which our brand will position in the mind of our customers.
The philosophy of our brand is delighting every customer. Execution of our service will ensure
and maintain our marketing philosophy in four layers on our entire homestay package. The first
layer of our product is basic level or core service. This includes the core attributes of our
product such as hygienic accommodation, healthy as well as tasty traditional food and the entire
homestay experience. The second layer is the expected service. These attributes of our product
is expected by customers and take them as granted. This level consists of comfortable
transportation facilities, securities and other utility services. The third layer of our product is
desirable service which customers are known about but do not expect generally. This level of
our service includes helping customers in collecting Airway ticket, ensuring customers safe
return journey, helping customers in processing visa etc. the fourth layer of our product is
unanticipated or surprise service which is designed to delight and surprise the customers and
demonstrates our outstanding service quality. This service includes surprising gift, shopping
35

opportunity, discounts, exceptional service of operators and hosts which will make the trip a
memorable experience to the customers and delight them in great extent.
The fourth step of our integrated marketing strategy is to develop a marketing mix and promote
the brand to the possible groups of customers. This strategy will be discussed in marketing mix
part of this report. The fifth step of the integrated marketing strategy consists of execution and
controlling activities. The execution and operation part of this business plan is jointly done by
the management and hosts of the business. The management must supervise the operation of
each tour and ensure better service of the whole operational team. Management must develop a
control system to get the feedback of the customers and develop strategy to ensure quality
service.

Marketing mix
Product mix
Marketers define a product as being a bundle of benefits. Our product is homestay and cultural
tourism. According to Kurtze (2010), our product can be considered as service for its
intangibility, inseparable from providers, perishability etc. what so ever we have 5 products in
our product portfolio. Our products are divided according to the spot of tourism. All the products
represents different traditional, cultural, natural aspect of Bangladesh which can delight the
customers and make the whole package a memorable experience.

Price mix
Pricing may not be exciting, but it is one of the most important issues for marketers and it is
crucial not only to the profit that is to be made, but also to the quantity of the products that will
be sold. The price of our product will be within $225 to $300 and it will reflect the real value of
the customers. In initial stage of the business we will follow cost plus mark up base pricing but
eventually by popularizing and branding this product we will go for value based and demand
based pricing.

Promotional mix
Promotional mix of products deals with building strong relationship with customers. It is the
most crucial part and significant strategy of a new venture. Our strategy is to reach every
possible targeted group of customers by our various promotional mixes. The tools we will use to
promote our product
Official website
Social networking sites
Internet based advertising and e-commerce sites
Magazine and newspaper advertising
36

Tourism fair and promotional events

Sponsoring events and social awareness programs
Recruiting promotional experts of this sectors for promotion and branding
The target customer of our brand is people of high or higher middle class. Most of our target
customers are handy with communication technology. So our promotion program will emphasize
in social communication network based media such as Facebook, Twitter, and LinkedIn. We can
promote the features and attributes of our products through such social networking sites pages
and the potential customers can satisfy their queries about our products and even can book a
package immediately. This strategy can popularize our product by posting notes, status, offers,
photos, videos and promotional contents about our products by costing a very minimum amount.
We will also encourage our current customers to share their views and experience through our
pages and this promotional strategy will make it more vibrant and attractive to the potential
customers. Other promotional mix such as TV commercials and magazine ads can also be
considered. Booking a stall in different tourism fair can also help to promote the brand and
getting instant booking. Recruiting promotional expert can also increase sales of our product by
means of direct sales and personal relationship.

Distribution mix
We will build a quality distribution and logistics service to provide the customers with our
service and products. In initial stage of our business we will build strategic alliance with different
transport agencies to carry our customer from airport or our corporate office to different spots.
An integrated supply chain system must be developed in this purpose to ensure safe journey,
availability of desired food of customers and other convenience service required. Our hosts are
the main service provider of our customers. So host selection and training must be done with
great care so that the hosts can provide quality service. Hosts and our professional team will
always ready for any situation and security needs of our customers.

37

Financial analysis of the project

38

Cost of the project:

to start the project, we initially need about TK.3800000. This amount will be spent for the
following purposes:
Item
Building & civil work
Preoperative expenses
Training & host development
promotional cost
R&D
Registration &License
Total

quantity
5

cost per
200000

Amount

30

10000

300000
1500000
100000
1000000

Total
1000000

2900000
3900000

We will spend TK. 900000 for building and civil work. We will have these at five locations. We
will not have our own land, rather we will lease it from indigenous people. A huge amount of
money will be spent as preoperative expenses. Among them, TK. 300000 will be spent for host
training and development purpose. It is very much important because through it hosts will know
how to deal with our customers. As the firm is new in our country, a large fund is allocated for
promotional purpose. We will have website, internet domain, social network site . we also have
an allocation for R&D and Registration & license purpose.
Means of Financing:
Initially we are starting as all equity firm. However, when we will go on expansion, we will use
debt about 30% of the capital. Our cost of capital is 15%. Our firm beta is 1.5 because our
business is very much cyclical. It should perform better when the is booming and perform
poorly in case of bad time of the economy like recession.
Cost of capital (Ke )= 6%+1.5(12-6)%
=15%

means of financing
proportion

equity
100%

debt
0

Initially we are going to use no debt. Generally debt is used for tax advantage purpose. Our firm
will have to pay a little or no taxes for initial years. It is one reason for which we dont use debt
initially. However, when we go for expansion, we must use debt and get listed as public limited
company after four to five ears.

39

Cost of service per client:

The cost of servicing one customer include transportation cost- taking to our location and
showing various sites, food and service & host cost-the compensation to be paid to the persons
involved in looking after customers.
The amount is shown below:
Particulars
Transportation
Food
service and host

Cost
3000
4000
3000

Working Capital Requirements:

All of our sales are on cash. In this case, our working capital requirements will be low. It is about
1.5% 0f total sales.
Here the requirements are shown for three possible scenarios.
Normal situation:
Working capital requirement (1.5% of sales)
year
0
1
2
Sales
17500000
21000000
amount
200000
262500
315000
CNWC
200000
62500
52500

3
25200000
378000
63000

4
30240000
453600
75600

5
36288000
544320
90720

Favorable situation:
Year
Revenue
%of
revenue
TWC
CNWC

40

1
21000000
0.015

2
23100000
0.015

3
25410000
0.015

4
27951000
0.015

5
30746100
0.015

200000
200000

315000
115000

346500
31500

381150
34650

419265
38115

461191.5
41926.5

Unfavorable situation:
Year
Revenue
% of
revenue
TWC
CNWC

1
14000000
0.015

2
15400000
0.015

3
16940000
0.015

4
18634000
0.015

5
20497400
0.015

200000
200000

210000
10000

231000
21000

254100
23100

279510
25410

307461
27951

Income statement: there are three I/S for three possible scenarios. The scenarios are normal
(1000 customers per year), favorable (1200) and unfavorable (800).
The following I/S is for 1000 customers per year. Sales growth is 10% for first five years and
becomes constant for 2%.
HOMESTAY BANGLADESH
Income Statement
For the year ended 31 December, 2014
Number of
customer
Revenue per
cost per
Growth
Terminal growth

Year
Revenue
cost of service
Gross profit
Operating expenses
SG&A
EBITD&A
D&A
EBIT
financing cost
income before taxes
income tax
net income

41

1000
17500
10000
10%
2%

2015
17500000
10000000
7500000

2016
19250000
11000000
8250000

2017
21175000
12100000
9075000

2018
23292500
13310000
9982500

2019
25621750
14641000
10980750

5950000
1550000
614250
935750
0
935750
0
935750

6545000
1705000
554288
1150712
0
1150712
0
1150712

7199500
1875500
506537
1368963
0
1368963
154008.3
1214955

7919450
2063050
469488
1593562
0
1593562
426138
1167424

8711395
2269355
441890
1827465
0
1827465
411179.6
1416285

DEPRECIATION calculation:
In case depreciation, we use 15% flat rate on all assets. Depreciation calculation for five years is
shown below:
year
1
2
3
4
5

Beginning value
3900000
3480750
3140963
2870376
2660433

Addition
195000
214500
235950
259545
285499.5

total
4095000
3695250
3376913
3129921
2945932

D&A
614250
554287.5
506536.9
469488.1
441889.8

EV
3480750
3140963
2870376
2660433
2504042

Tax Calculation: as ours is a private limited company, we charge 37.5% tax on our taxable
income. However our company will get tax rebate for the first seven years at a predetermined
rate.
EBT
tax applied on(%)
Taxable income
Tax(.375)

935750
0
0
0

1150712
0
0
0

1368963
0.3
410688.9
154008.3

1593562
0.45
717102.9
268913.6

1827465
0.6
1096479
411179.6

Selling, General & Admistrative expenses allocation:

Particulars

amount

wages and salaries

3500000

0.588235

rent & lease

1000000

0.168067

Promotion

1200000

0.201681

Others

250000

0.042017

5950000

100%

Firm Valuation:
Profitability Analysis:
To measure the profitability of the new venture, we calculate NPV & IRR of firms cash flows.
We use 15% discount rate as it is our cost of equity. Our first year caital expenditure is %% 0f
initial Capex. Then it will grow at a rate of 10% for subsequent years.

42

year
OCF:
NI
D&A
CNWC
NCO
PCFs

200000
3900000
4100000

935750
614250
62500
195000
1292500

1150712
554288
52500
214500
1438000

1214955
506537
63000
235950
1422542

1167424
469488
75600
259545
1301767

1416285
441890
90720
285499.5
1481956

Discount rate
Terminal growth rate
PCF @ year 6
PCF for year 6 to onwards
Total CF at year 5

15%
2%
1511595
11627654
13109610

NPV Calculation
year

PCF

-4100000

1292500

1438000

1422542

1301767

13109610

DF@15%

0.869565

0.756144

0.657516

0.571753

0.497177

PV

-4100000

1123913

1087335

935344.2

744289.5

6517793

NPV

6308674

IRR Calculation
year

PCF

-4100000

1292500

1438000

1422542

1301767

13109610

IRR

48%

According to this calculation, we should step forward.

Free cash flow valuation:

General formula for determining free cash flow is as follows:
EBIT(1-Tax Rate)+ Depreciation expense-Capital expenditure-change in net working Capital.

43

We use this formula to determine free cash flow for first five years and assume a flat growth rate
of 2% for subsequent years.
year

EBIT(1-T)
D&A
CNWC
Capex
FCF

935750
614250
62500
195000
1292500

1150712
554288
52500
214500
1438000

1214955
506537
63000
235950
1422542

1167424
469488
75600
259545
1301767

1416285
441890
90720
285499.5
1481956

Discount rate
Terminal growth rate
FCF @ year 6
FCF for year 6 to onwards
Total FCF at year 5
Year
Free Cash Flow
Discount Factor
PVFCF

15%
2%
1511595
11627654
13109610
1
1292500
0.869565
1123913

2
1438000
0.756144
1087335

3
1422542
0.657516
935344.2

4
1301767
0.571753
744289.5

5
13109610
0.497177
6517793

Value of the Firm

10408674
Balance sheet: balance sheet shows the financial condition of a firm on a particular day. We
have prepared B/S for our firm at the beginning and ending of accounting year 2014. As we are
an all equity firm, we dont have any long-term debt. Besides we have no short term liability as
our transactions are in cash and initial working capital will be met by initial investment. We
expect to have an handsome amount of cash at hand at year 2015 that will be invested initially
and will be used for expansion purpose. The B/S is as follows:

44

Homestay Bangladesh
Balance sheet
For 31 December , 2015
1/1/2015

31/12/2015

Cash & cash equivalents

Account receivables
Total current assets
Non-current Assets

200000
0
200000

355000

Building & equipment

preoperative expense
Investments
Total non-current assets

1000000
2900000
0
3900000

1015750
2465000
1200000
4680750

TOTAL ASSETS

4100000

5035750

0
0
0
0
0
0

0
0

4100000
0
4100000
4100000

4100000
935750
5035750
5035750

ASSSETS
current assets

355000

Liability & Stocholders' Equity

current assets
account payable
Accrued expenses
short-term loan
total current liabilities
Non-current Liabilities
long term debt
shareholders' Equity
common stock
retained earnings
Total shareholders' Equity
Total Liability & Stocholders' Equity

45

Ratio analysis
Ratio
current ratio
return on Assets
Return on equity
GPM
profit margin
Debt
Debt to equity

Formula
current assets/current liabilities
net income/total assets
net income/stockholders' equity
Gross profit/revenue
net income/revenue
debt/total asssets
debt/total equity

Result
0.228232
0.228232
0.428571
0.053471
0
0

Total asset turnover

revenue/total assets

4.268293

The above table shows some important ratio for the company. However this information is
useful only if we have a benchmark like industry average to compare with.
Current ratio: We dont get any current ratio because we dont have any current liabilities.
Return on Assets: ROA for the first year is expected to be 22.82% which is satisfactory.
Return on equity: as we have no debt capital, our ROE is the same as return on Assets.
GPM: our gross profit margin is relatively low compared to other business. It is only 43%. We
have to take steps to decrease variable cost and increase gross profit margin.
profit margin: our net profit margin is expected to be 5.34% in first year which is quite low.
Total asset turnover: it shows the efficiency with which the company is using its assets to
generate revenue. Our calculated ratio says that company generates an amount of revenue of
tk.4.26 against 1taka asset.

46

Financial Analysis(profitability) for 800 customers per year:

Income Statement

Revenue
cost of service
Gross profit
Operating expenses
SG&A
EBITD&A
D&A
EBIT
financing cost
income before taxes
income tax
net income

2015
14000000
8000000
6000000

2016
15400000
8800000
6600000

2017
16940000
9680000
7260000

2018
18634000
10648000
7986000

2019
20497400
11712800
8784600

4760000
1240000
614250
625750
0
625750
0
625750

5236000
1364000
554288
809712
0
809712
0
809712

5759600
1500400
506537
993863
0
993863
111809.6
882053.4

6335560
1650440
469488
1180952
0
1180952
199285.7
981666.4

6969116
1815484
441890
1373594
0
1373594
309058.7
1064535

Tax calculation:
EBT
tax applied
on(%)
Taxable
income
Tax(.375)

625750
0

809712
0

993863
0.3

1180952
0.45

1373594
0.6

298158.9 531428.4 824156.4

111809.6 199285.7 309058.7

NPV Calculation
year
OCF:
NI
D&A
CNWC
NCO
PCFs

200000
3900000
4100000

625750
614250
10000
195000
1035000

809712
554288
21000
214500
1128500

882053.4
506537
23100
235950
1129540

981666.4
469488
25410
259545
1166199

1064535
441890
27951
285499.5
1192975

Discount rate
Terminal growth rate
47

0.15
0.02

PCF @ year 6
PCF for year 6 to onwards
Total CF at year 5

year
PCF

0
4100000
DF@15% 1
PV
4100000
NPV
-344103

1216834
9360264
10553239

1
1035000

2
1128500

3
1129540

4
1166199

5
1192975

0.869565 0.756144 0.657516 0.571753 0.497177

900000
853308.1 742691.2 666778.3 593119.3

IRR Calculation:
year
PCF
IRR

0
1
900000
4100000
-3%

2
3
4
5
853308.1 742691.2 666778.3 593119.3

Financial analysis for 1200 customers:

Income Statement
year
Revenue
cost of service
Gross profit
Operating
expenses
SG&A
EBITD&A
D&A
EBIT
financing cost
income before
taxes
income tax
net income
48

2015
21000000
12000000
9000000

2016
23100000
13200000
9900000

2017
25410000
14520000
10890000

2018
27951000
15972000
11979000

2019
30746100
17569200
13176900

7140000
1860000
614250
1245750
0
1245750

7854000
2046000
554288
1491712
0
1491712

8639400
2250600
506537
1744063
0
1744063

9503340
2475660
469488
2006172
0
2006172

10453674
2723226
441890
2281336
0
2281336

0
1245750

0
1491712

196207.1
1547856

338541.5
1667630

513300.6
1768035

Tax calculation:
EBT
tax applied
on(%)
Taxable
income
Tax(.375)

1245750 1491712 1744063

0
0
0.3

2006172
0.45

2281336
0.6

523218.9 902777.4 1368802

196207.1 338541.5 513300.6

NPV Calculation
year

NI

1245750

1491712

1547856

1667630

1768035

D&A

614250

554288

506537

469488

441890

OCF:

CNWC

200000

115000

31500

34650

38115

41926.5

NCO

3900000

195000

214500

235950

259545

285499.5

PCFs

4100000

1550000

1800000

1783793

1839458

1882499

Discount rate
Terminal growth rate
PCF @ year 6
PCF for year 6 to onwards
Total CF at year 5

year
PCF
DF@15%
PV
NPV

49

0
-4100000
1
-4100000
9112898

0.15
0.02
1920149
14770380
16652879

1
1550000
0.869565
1347826

2
1800000
0.756144
1361059

3
1783793
0.657516
1172873

4
1839458
0.571753
1051716

5
16652879
0.497177
8279424

IRR calculation
year
PCF
IRR

0
1
2
3
4
5
1550000 1800000 1783793 1839458 16652879
4100000
58%

Sensitivity Analysis:

Sensitivity of NPV with number of customer:

SENSITIVITY OF NPV WITH NUMBER OF CUSTOMERS
Scenario

Number of customers

NPV

Favorable

1200

9112898

Normal

1000

6308674

Unfavorable

800

-344103

From our calculation, we see that if our number of customer is increased by 20% that is
1200, NPV of the firm will increase by 44%,

Sensitivity of NPV with Selling, General & Administrative expense:

To test sensitivity, we reduce SG&A expenses by 20%. The result is as follows:

Income Statement

Year
Revenue
cost of service
Gross profit
Operating
50

2015
17500000
10000000
7500000

2016
19250000
11000000
8250000

2017
21175000
12100000
9075000

2018
23292500
13310000
9982500

2019
25621750
14641000
10980750

expenses
SG&A
EBITD&A
D&A
EBIT
financing cost
income before
taxes
income tax
net income

4760000
2740000
614250
2125750
0
2125750

6545000
1705000
554288
1150712
0
1150712

7199500
1875500
506537
1368963
0
1368963

7919450
2063050
469488
1593562
0
1593562

8711395
2269355
441890
1827465
0
1827465

0
2125750

0
1150712

154008.3
1214955

268913.6
1324648

411179.6
1416285

NPV Calculation:
Year
OCF:
NI
D&A
CNWC
NCO
PCFs

2125750
614250
200000 62500
3900000 195000
4100000 2482500

Discount rate
Terminal growth rate
PCF @ year 6
PCF for year 6 to onwards
Total CF at year 5
Year
PCF
DF@15%
PV
NPV

51

1150712
554288
26250
214500
1464250

1214955
506537
28875
235950
1456667

1324648
469488
31762.5
259545
1502829

1416285
441890
34938.75
285499.5
1537737

1
2482500

2
1464250

3
1456667

4
1502829

0.86956
5
2158696

0.75614
4
1107183

0.65751
6
957782

0.57175
3
859247.
3

0.15
0.02
1568492
1206532
2
1360305
9
0
-4100000
1
-4100000
7746033

5
1360305
9
0.497177
6763125

We see that if SG&A expenses are reduced by 20%, NPV will increase by 23%. It
indicates that NPVis less sensitive to SG&A than Number of customer per year.

Sensitivity of NPV with Variable cost:

Income Statement

Revenue
cost of service
Gross profit
Operating
expenses
SG&A
EBITD&A
D&A
EBIT
financing cost
income before
taxes
income tax
net income

2015
17500000
8000000
9500000

2016
19250000
8800000
10450000

2017
21175000
9680000
11495000

2018
23292500
10648000
12644500

2019
25621750
11712800
13908950

5950000
3550000
614250
2935750
0
2935750

6545000
3905000
554288
3350712
0
3350712

7199500
4295500
506537
3788963
0
3788963

7919450
4725050
469488
4255562
0
4255562

8711395
5197555
441890
4755665
0
4755665

0
2935750

0
3350712

426258.3
3362705

718126.1
3537436

1070025
3685640

NPV
year
OCF:
NI
D&A
CNWC
NCO
PCFs

2935750
614250
200000 62500
3900000 195000
4100000 3292500

Discount rate
Terminal growth rate
PCF @ year 6
PCF for year 6 to onwards
Total CF at year 5
52

3350712
554288
26250
214500
3664250

3362705
506537
28875
235950
3604417

3537436
469488
31762.5
259545
3715616

3685640
441890
34938.75
285499.5
3807092

0.15
0.02
3883234
29871031
33678123

year
PCF
DF@15%
PV
NPV

0
-4100000
1
-4100000
22772100

1
3292500
0.869565
2863043

2
3664250
0.756144
2770699

3
3604417
0.657516
2369962

4
3715616
0.571753
2124416

5
33678123
0.497177
16743979

Our calculation shows that if Variable cost per customer decreases by 20% that is
TK.2000, NPV will increase by 260%.
So we can say that NPV has the highest sensitivity with variable cost compared to other two
variables because in this case the change in NPV is the highest.

53

Socio-Economic Aspects

54

Social Responsibility
Homestay is aimed to increase the participant of the rural community in the tourism industry and
a way to reduce the rural-urban migration. Homestay social responsibility involves sharing the
benefits of the tourism industry with the rural community and encourages their participation in
the tourism sector, boosting household income and improves living standards of the rural
community, which contribute to the reduction of poverty; and developing rural tourism
entrepreneurs and provide job opportunities.

Business Ethics
The project will focus tourism industry ethics as well as standard ethical code adopted. So as to
regards, furniture and furnishings should be adequate, clean and well maintained. Standard food
will be provided. For the ethical code to maintain, the Halalfood will be supplied to the Muslims
tourists. Kitchen would have adequate supply of clean water, lighting, and food storage, proper
waste collection and disposal methods, clean& well maintained, free of smoke, odor and pest.
Where water for drinking is not available from a public source the host would ensure purified
water. Fresh, well cooked, clean utensils follow approved health standards; avoid food
poisoning, consistent supply of food, local delicacies will be provided to maintain business
ethics.

Environmental Impact of the Project

The location would be suitable to receive and host paying guests depending on the theme
concept of the Home stay. It also would be attractive, in harmony with the
Natural, cultural and built up environment, and in compliance with the local government
regulations, well maintained environment, excellent sanitation and refuse disposal. There will
have eco- friendly practices such as Energy saving, alternative energy sources, water
conservation &harvesting techniques, waste management, recycling and pollution.
Environmentally friendly Toilets/Pit latrines should be provided. Not less than 5m deep. Safe &
washable floors and walls.
Clean, well lit and ventilated. Freeform fly/mosquito. Train visitors to use the different types of
facilities e.g. Pit latrines. Guests be provided with running water where not available improvise
like Tip tap tissue paper & liquid soap. Alternatively acquire plastic toilet seat to improvise for
those who cannot squatting
There should be appropriate waste storage, collection and disposal facilities, in line with health
standards and environmental protection regulations of the area. In addition should exercise waste
separation and proper management Encourage separation of waste e.g. plastic, metal, glass and
the biodegradables. Animal waste be used for energy like Bio gas and sludge (organic farming).
Adequate and appropriate firefighting equipment should be provided. At least (Buckets with dry
and looses and/soil) should be available. Host/Family should be familiar with fire fighting skills.
Fire extinguishers be introduced where applicable and a water source be available. Designate and
mark a fire assembly point.

55

Environmental Opportunities of Homestay

conducted
areas.

Contribution towards the Economy

Bangladesh is a country of natural beauty. She is blessed with endowment of almighty. Proper
nurturing of natural beauty can attract tourists from across the world as well as Bangladesh. The
tourism sector can be a major contributor in Gross Domestic Product (GDP) of Bangladesh. As a
new concept of tourism industry, Home stay can play vital role by attracting tourists toward
contribution of our economy. Home stay offers immense potentiality for employment generation,
poverty alleviation and maintaining ecological balance. It is relatively a modern phenomenon,
which plays an intensely important role in the economic development of our country. Tourism is
a part of service sector which is contributing a major part of total GDP of Bangladesh. Though
the contribution of tourism in GDP is only 7% in 2004-05, it has increased to 9.44% by the year
2009-10. This simple data could be helpful to understand how promising the sector is for
Bangladesh. A large number of employment opportunities are being created by this project. Tour
operator business is doing well in Bangladesh. Thousands of young people will have engaged
themselves as tourists guide in this project. Moreover some other induced impact of truism
results in economic progress in local area and the country as a whole. Communication,
throughout the country, will develop because of the project. As a result, other economic activities
will be augmented.
Solar, wind and other renewable energy sources installation highly preferable for the project,
thus contributes to economy. Homestays can be a good way for families to supplement their
income, especially in regions where there may not be enough economic activity for full
employment. This project creates consciousness among villagers, the way of living, the reduction
of income gap between the urban and the village. The government can earn handsome revenue
from this sector. Besides the other economic opportunities of the Homestay as follow:

Economic Opportunities of Homestay

ransforming economic and employment opportunities to rural areas and thus alleviating
poverty.
hip in tourism and its many other related sectors.
-consumption of food, accommodation and purchase of souvenirs.

56

References
Lectures and handouts provided by the course teacher.
http://www.banglayp.com/category/Homestay
http://www.thefinancialexpress-bd.com
http://www.dhakaholidays.com
http://en.wikipedia.org/wiki/Homestay
https://www.academia.edu/6800362/Home_Stay

57