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Hotel feasibility studies are the result of a professional activity aimed at establishing if a hotel project that is localized in a given place has enough probability to be economically sustainable, according to specific current and perspective market conditions.

Sometimes it may happen that feasibility studies focus just on single or economic-financial market aspects, without considering other elements, such as building construction costs, or assessing the financial structure of the operation, which is determined by bank credit conditions within the real estate, hotel and accommodation industry.

 

Analysis of Site
  • Analysis of macro site
  • Analysis of micro site
Market Analysis
  • Analysis of competition
  • Comp Set definition
  • Analysis of competitors
Product Analysis
  • Identification of the type of hotel product best suited to the market conditions
  • Configuring the product proposed facilities  
Projections
  • Estimation of hotel performances for the next five years
  • Profit & Loss redaction according to Uniform Standards of Accounts
Conclusions and Recommendations
  • SWOT analysis
  • Recommendations on the project
  • Optional: likely future market value


Generally, a hotel feasibility study should contain the following analyses:

1. Quantification of market potential for the new hotel product, with estimates of penetration, projections of the occupancy rate in the year of management and average yield per room of the accommodation unit (so-called ADR, Average Daily Rate)

2. Preparation of the hotel unit perspective Revenue Account by applying accounting standards, such as USALI (Uniform Standards of Accounts for the Lodging Industry), which allows identifying costs and revenues of single hotel operations

3. Representation of study conclusions and clarification of recommendations addressed to the Client, by drafting and issuing a written and signed report.


In some cases, even at the instance of clients, feasibility studies may contain:

4. Estimate of the hotel value,  as a result of cash flows analyses and suitable hotel valuation methods – commonly based on DCF methods (Discounted Cash Flow) – and comparison of this value with the building construction costs, included possible further cost items for the regularization of hotel operations.

5. A financial analysis of the project – aimed at assessing the real financiability –, including the composition of invested capital, the determination of optimal forms of own and third party capital, according to the costs that can be associated with debt capital and expectations of the return on invested capital.


Feasibility studies support the whole process of real estate development, identifying realistic objectives in terms of performance of the new accommodation structure on the market.

Feasibility studies that are carried out with professionalism and competence reduce the risk of a new hotel real estate project, since they first consider the market conditions in which the hotel will be operating.

Furthermore, feasibility studies are recommended by major international hotel chains, which often need that type of analysis to support the adoption of various types of products in the different hotel markets.

Feasibility studies support the whole process of real estate development, identifying realistic objectives in terms of performance of the new accommodation structure in the market.

Hotel feasibility studies are the result of a professional activity aimed at establishing if a hotel project has enough probability to be economically sustainable, according to current and perspective market conditions.

The process of hotel valuation is linked to the unique features of hotel, hospitality and tourist assets, identifying a monetary value to be attributed to a property in given market conditions.

The hotel valuation is generally carried out by qualified professionals and consists of drafting and issuing a written and signed Report, which also contains the definitions of value determined.

The Investment Memorandums or Information Memorandums represent a key tool to communicate the investment opportunity to the public.

This tool, deriving from the English world, allows a professional, transparent and punctual promotion of the sale and purchase opportunity, qualifying in a unique way the hospitality property offered to the market.

The professional search and selection service of a hotel operator aims at identifying, evaluating and choosing the hotel operator that best suits the hotel owner’s needs, considering his objectives and the hotel features.

The commonly adopted professional approach involves the presence of a professional appointed by the Client that can identify hotel operators interested in signing mainly long-term hotel contracts.

The process of negotiating a hotel contract is a complex professional activity requiring relevant legal and commercial experience, which has to be acquired within the hotel and accommodation industry.

The lease contract and the management agreement are the most common forms in hotel contracts.

It is useful to rely on qualified professionals who know how to draft and negotiate these contracts.

Through franchising, independent hotels can receive commercial and marketing services, associating their own name with a recognizable brand in order to increase customer retention and loyalty.

The franchise agreement negotiation is based on the identification of all elements that are offered by the hotel franchisor, evaluating the perspective benefits that independent hotel entrepreneurs can enjoy through the contract.

Recently, hotel architecture and design have experienced important changes aimed at improving the guests’ experience, in order to best respond to a need of identity and recognition towards the places and the surrounding environment.

Furthermore, for all kinds of accommodation structures there has been a functional innovation path, due to technology advancements and building automation.

Such elements reflect on the distribution of the different areas included in the architectural project.

Hotel due diligence investigations are undertaken by buyers and investors in the process of evaluating a hotel investment, tailored to the acquisition of the asset.

The whole process is often assigned to specialized professionals, whereof principle objective is to render as faithfully as possible the buyer’s vision on asset to current status, legally and physically, technically and fiscally.

Hotel, hospitality and tourist investment sales are experiencing remarkable development thanks to the presence of many international operators and investors who see Italy as a key tourist destination.

The sales process can be directly adopted by the owner or supported by companies and real estate advisors that manage the whole investment sale process towards the market.

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