The market and financial feasibility study is an essential first step in the process, after securing the site, and we specialise in the preparation of such studies.
There are five main reasons for carrying out a feasibility study of a hotel project: for the benefit of the promoter, to ensure full understanding of the risks and rewards of the project; to determine the most appropriate facility provision for a given site and market; to brief the architect as to what the market requires in terms of facilities; to attract the attention of an operator and to form the basis for contract registration; and to support submissions to debt and equity providers.
In general terms, the output of a feasibility study is information, conclusions and recommendations on:
• the current and projected future economic, political and social environment in which the proposed hotel will operate;
• the location for the proposed development, and the strengths and weaknesses of the site;
• the current and projected future market environment in the project location, with a detailed supply and demand analysis;
• product concept and market positioning, the number and type of guest rooms and other facilities;
• operating factors of relevance, including aspects of management and marketing of the property;
• projections of revenue, cost, profit and annual cash flow, and a calculation of the resultant return on investment.
Our services include:
Confirmation of Viability
On completion of the market analysis and the feasibility study, we will spend time with you to discuss our report, to ensure that you fully understand our conclusions and the assumptions on which they are based.
If necessary, we will undertake additional financial modelling according to your requirements. This would include different financing scenarios, as described below.
Our study will be prepared assuming development of an agreed mix of facilities and services. Following discussion of our conclusions, we can carry out further financial modelling, and look at different physical scenarios, including phasing of the development, as considered appropriate. We will work closely with the project architect, to get the design and the detailed specification right. This will be an iterative process, taking account of the research as well as your own requirements, and should ideally include the selected hotel operator.
Financing Structure and Funding
The nature of hotel project cash flows is such that the financial structure needs careful analysis to avoid, for example, over-burdening the business with debt, and to ensure correlation with the owners’ and investors’ return requirements. Part of the additional modelling would include working with you to derive a financial structure for the project which is both supportable and also achievable.
For selected projects, we are able to introduce sources of debt, and to negotiate terms on your behalf.
We can provide valuation advice throughout the development process and after completion. Our property department is staffed by RICS (UK) qualified Registered Valuers who provide formal valuation advice that is compliant with the requirements of the vast majority of lending institutions. Formal valuations are often required by lenders as part of their loan monitoring process, to ensure that loan-to-value covenants are adhered to.
There are numbers of possible ways to provide management to a hotel, ranging from appointing a management company, to the owner running it personally.
For this development, we understand that you would want to delegate the operation of the hotel to a professional management company.
In the first instance we will undertake desk-based research in order to prepare a list of operators that we think would be appropriate for this project, and who would be interested in the opportunity. We will agree that list with you, and contact each operator to gauge their interest in principle, and the brands that they could offer.
For those with whom it is considered appropriate to pursue discussions, we will prepare a brief detailing each brand’s system size, main characteristics of their brand, and their strengths and any weaknesses relative to this project.
We will also prepare a project dossier to send to them, which will include the feasibility study, or extracts therefrom.
We will write to each of the short-listed companies, providing them with the project dossier and inviting them to submit their tender for the management of the proposed hotel by a stated deadline. It is our usual practice to prescribe the form of their response, so that comparison is easier.
We will analyse the responses, present that analysis to you and discuss it with you, and assist you to select an operator with whom negotiations can commence. We will lead those negotiations, in order to obtain the best commercial deal, and fair terms of contract. You will in addition need to engage the services of legal counsel to ensure that the contract is in accordance with local law.
The output of this work is a management agreement which you can sign with confidence.
We can provide full development management services, handling negotiations with contractors, consultants, suppliers and others, managing the project budget, reporting on programme and quality, providing a coordination point for all involved in the project, and overseeing the design and the finishes.
Procurement and Installation
We have very strong relationships with global manufacturers and suppliers. Based on these, we can eliminate the cost of the middle-man, managing the entire process of FF&E and OSE procurement, ensuring that brand standards are met. We also provide an installation service, receiving and installing all FF&E, testing equipment, training staff in equipment operations, and preparing asset registers.
Once the hotel is open, we can provide asset management services, essentially “managing the manager”, ensuring contract compliance, and that the Owner’s requirements are met, in terms of financial returns. This is a pro-active role, both monitoring and assisting the management team on ground to meet objectives.