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THE FEASIBILITY
DETERMINATIONRossana Briones & Precious Joy Fiesta
DEFINITION
The feasibility study is an evaluation
and analysis of the potential of a
proposed project which is based on
extensive investigation and research
to support the process of decision
making.
OBJECTIVES
Aims to objectively and rationally uncover the strengthsand weaknesses of an existing business or proposedventure, opportunities and threats present in theenvironment, the resources required to carry through,and ultimately the prospects for success.
Should provide a historical background of the businessor project, a description of the product or service,accounting statements, details of theoperations and management, marketing research andpolicies, financial data, legal requirements and taxobligations .
Evaluates the project's potential for success; therefore,perceived objectivity is an important factor in thecredibility of the study for potential investors and lendinginstitutions.
THE SITE
The most important factor in the success or failure
of a propose hotel.
The site must be reviewed in relation to existing
excess to roads which the guest can arrive at and
depart from the hotel. If the site does not have the
proper access roads .They must be built resulting in
further cost increases.
THE MARKET
In order to be well known of the Hotel or Restaurant
the location must be in the City particularly in the
center of business.
The average of stay of visitors in that location can
also help to determine the demand for the Hotel
rooms.
SUPPLY OF ROOMS
It is of extreme importance to ascertain not only the
existing supply of rooms but also the future supply.
While new supply is an external factor, investors
need to anticipate and underwrite the potential
impact that new entrants will have on the market
and the subject hotel.
The supply should be charted first setting down the
names of the current properties, chains , and the
number of rooms they have available , then forming
an opinion as to whether the overall allocations are
good or bad.
LABOR SITUATIONS
The rapid development of the Hotel Industry has
resulted in a labor demand exceeding the supply
especially at the middle management or
supervisory level.
The quality of labor that is available must be
considered must only because poor quality may
have an adverse effect on business but also
because an expected cost maybe incurred to
properly train he staff.
ROOM DEMANDS
Based on the analysis made statistics on arrivals
and room nights a projection should now be made
of future demand for accommodations.
It should be measured in numbers of future room
nights, which can be set down and matched against
the combination of currently available rooms and
future rooms to be constructed.
FACILITIES
This are the things which can be use in Hotels
during the stay of Guests.
Particularly recreational facilities such as swimming
pools , tennis courts and possibly golf courses.
The importance of relating the facilities plan to the
market rather than trying to find a market pre-
determined facilities cannot be over stated.
FINANCIAL PROJECTIONS
The first step in estimating the payroll is to prepare
an expected staffing analysis for the Hotel by job
category. By multiplying the staffing analysis by the
expected workweek, weekly totals of hours, in each
job classifications can be projected.
Current wage rates can be obtained from either the
records of existing hotels or existing union contacts.
COST ELEMENTS OF THE PROJECT
Cost is believed to be one of the main elements
accounted for and monitored in any single project.
Land use is the human use of land
Building construction is the biggest element of cost
in any hotel project.
Interest during construction
Furniture, fixtures and equipment
Operating Equipment
Inventories
Pre-opening expenses
Working capital
SOURCES OF FINANCING
Traditional Sources of Finance
Internal resources have traditionally been the
chief source of finance for a company. Internal
resources could be a company’s assets, factoring
or invoice discounting, personal savings and profits
that have not been reinvested or distributed among
shareholders. Working capital is a short term
source of finance and is the money used for a
company’s day-to-day activities, including salaries,
rent, payments for raw materials and electricity bills.
Sources of Finance: Ownership Capital- is the capital
owned by the shareholders of a company. A company
can raise substantial funds through an IPO (initial public
offering). These funds are usually used for large
expenses, such as new product development, expansion
into a new market and setting up a new plant.
The various types of shares are:
Ordinary shares: These are also known as equity
shares and give the owner the right to share the
company’s profits and vote at the firm’s general
meetings.
Preference shares: The owners of these shares may be
entitled to a fixed dividend, but usually do not have the
right to vote.
Sources of Finance: Non-Ownership Capital
Non-ownership capital includes funds raised from
lenders, such as banks and creditors.
Companies typically borrow a fixed amount from a bank,
at a predetermined interest rate and with a fixed
repayment schedule.
Certain bank accounts offer overdraft facilities.
This is used by companies to meet their short-term fund
requirements, as they usually come at a very high
interest rate.
Sources of Finance: Venture Capital
Firms in the early stages of development can opt for
venture capital. This option gives the financing company
some ownership as well as influence over the direction of
the enterprise.
Sources of Finance: Duration
Depending on the date of maturity, sources of finance
can be clubbed into the following:
Long-term sources of finance: Long-term financing can
be raised from the following sources:
Medium-term sources of finance: Medium-
term financing can be raised from the
following sources:
HOW TO PROTECT FINANCIAL ?
Use credit and debit cards with care.
Don’t respond to unsolicited phone calls
or emails with personal information.
Check the site address before buying
online.
Secure your online accounts.
Place a security freeze on your credit
reports.
CONSIDERATIONS
• Each element in a project removes a portion
of uncertainty regarding its outcome.
Because what is “correct” is an individual
decision, analyze your project to determine
the number of elements it should include.
Revenue Management Resources &
Structure
Understanding how the revenue
management function is delivered at a
hotel provides insight as to the resources
currently in place and whether there is
room for improvement.
Business Plan
Having determined how revenue
management is handled, a good next
step is a review of a hotel’s Business
Plan (also referred to as an Operating
Plan or Sales & Marketing Plan).
Competitive Index
Another barometer by which revenue
opportunities can be identified is hotel
performance relative to a competitive set,
referred to as a property’s index.
Segmentation
In developing assumptions about future average
daily rate (ADR) growth potential, an examination of
historical ADR absent an understanding of business
segmentation is a stab in the dark, at best.
Reviewing the contribution and rate by business
segment is the first step to determining opportunities
for rate and profit growth.
Evaluate the level of diversification within demand
segments (corporate, leisure, group, contract) and
demand sources (corporations, attractions, etc.).
Forecasting & Booking Pace
Accurately projecting demand is
critical to developing a pricing strategy
that serves to maximize rate and profit
potential.
Price Value
Determining the existing price/value of a
potential acquisition can be very subjective, but
should be considered during due diligence.
New Supply
While new supply is an external
factor, investors need to anticipate
and underwrite the potential impact
that new entrants will have on the
market and the subject hotel.
IV. CONCLUSIONS
We therefore conclude that feasibility study is very
important in making decisions in proposing a project.
We therefore conclude that The feasibility study
must contain the key elements, namely:
The idea of the project: The nature of the project is
determined in this step, whether (industrial – services
– trade etc.). A simplified concept of the project is
given and the environment it is intended for.
Products: The products or services made or
provided by the project must be mentioned.
Technical elements of the project: This should
include several elements:
Stages of Manufacture: A detailed explanation
of how the manufacture of any product will be
done. Taking into account the balance of raw
materials involved in manufacturing, and the
quantities required for production.
Space and location: A description of the site
where the project is located and the required
space and the equipment for its establishment.
Service requirements of the project: This shows the
needs of the project in terms of services such as water
(square meters), electricity (kilowatts per hour),
telephone and fuel (liters), it should be calculated and
estimated in the form of money each month.
Machinery and equipment: The description of each
machine or equipment needed for the project and power
used for each (kilowatts) and whether the equipment is
going to be domestic or imported. What spare parts
required for the them and the price of the machines.
Raw materials needed for the project: The detailed
description of each piece that goes into production, and
packaging and the amount used, whether by weight or by
the number of pieces.
Employment: A description of the type of employment
required for the project. A description of the job duties,
job titles and wages must be stated.
Working hours: Whether it is a one shift (8 hours) or two
(16 hours) or three (24 hours).
Products: To be described, named and determined by the
quantity as well as specifying the price of each item.
Packaging: The quality of materials used should be
determined in packaging, with the addition of a poster
showing all product data (product name and logos, if
any). Also, the name of the producer, address and the
name of the natural ingredients, additions and date of
production and shelf-life should be on the packaging.
Quality: Quality elements should be prepared for the
project’s products. Beginning with cleanliness of
premises to the health of the employees depending on
the type of the project.
Marketing: To disclose intended marketing schemes
such as participating in various exhibitions or taking the
wholesale approach.
Financial and economic study: One should prepare a
budget for investment costs. Investment costs are split
between direct costs and indirect costs. Direct costs are
the raw materials, intermediate raw materials, wages and
salaries. Indirect costs are electricity, fuel, maintenance,
spare parts, marketing expenses, rental of premises and
insurance on the buildings.
V. RECOMMENDATION
I therefore recommend that feasibility study must be
based on what will be the result of the investigation
of all the factors that could affect the profitability of
a proposed new hotel. The study estimates
probable demand and makes economic projections
based on all sources of income and costs.
VI. REFERENCES
Kristie Dickinson, Vice President, Capital Hotel
Management
http://www.ukessays.com/essays/information-
technology/the-main-elements-of-project-cost-
management-information-technology-
essay.php#ixzz3LoXcfhIZ
http://www.healthcarefacilitiestoday.com/posts/Project-
Solutions-Incorporating-furniture-fixtures-equipment-
and-technology-into-a-new-facility-Maintenance-and-
Operations--3253#sthash.c7LTaQPQ.dpuf
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