Evaluating a new concept

Evaluating the market for short break family holidays in central Europe

The client

A leading independent private equity investment firm focused on Central and Eastern Europe, with approximately тВм3.2 billion of funds raised and managed since inception

Background

A team of ex-Centre Parcs executives had developed a comprehensive business plan to establish holiday parks in Poland targeting the short-break family holiday market. Having approached our client for investment, an external consultancy was engaged to critique their business plan. It was felt that the business model and operating assumptions were sound. However, prior to committing the finance necessary to acquire the sites and implement the development, the client needed further research to inform their credit committee deliberations. They assigned us to quickly, independently and concisely:
"в Research, review and comment on the Polish population and demographic trends and determine whether there is a large enough market in Poland that can afford to visit the holiday parks and sustain a profitable business
"в Advise on how many holiday parks the market is likely to bear over time and where the parks should be located given travel time from the relevant catchment areas
"в Review and comment on the capital expenditure budget detailed in the business plan

Consultant/s

Katrina Craig, Ewa Kossakowska, Ian Graham

Project objective

Within a matter of four or five weeks complete the research and form evidence-based hypotheses, meet with the client and discuss our findings. Within a further two weeks document our findings and discussions in a written report to be presented to the client's credit committee

Methodology

Our consultants received and reviewed the business plan, all research collated by the development team and the report by the external consultant. We analysed the data and formed preliminary hypothesis relating to:

Site location / selection
Catchment area: number of people, household profile and affluence (taking into account PDI, employment and degree of urbanisation)
Regional traffic flows (domestic and cross-border from Germany)
Pricing analysis
Spend per night and per person on accommodation and incidentals
Estimate of the "average bill"Э per stay given other domestic short-break destinations
Occupancy analysis (main driver)
Seasonality analysis (winter vs. summer; school holiday vs. term time)
Willingness to travel

Katrina then identified the gaps in the data, obtained and analysed further demographic data showing the number of households of selected market segments within a 200 km radius (i.e. 3-hour drive time) of one of the proposed sites. She also obtained and analysed the concentration of these target segments for the whole of Poland. Moreover, she sought published and proprietary evidence of the Polish informal economy (i.e. the grey market or shadow economy).

In order to project the penetration rate of the holiday parks in Poland, it was necessary to study the launch and growth of the same leisure concept in Germany and arrive at the set of assumptions that could be true for Poland. We identified a benchmark catchment area in Eastern Germany and calculated the penetration rate (aka participation degree) among those residing within the zone. The penetration rate, calculated from the number of rental nights achieved by the holiday parks from the catchment population, was applied to the proposed first site in Poland to determine the appropriate scale of the development.

Concurrently Ewa contacted the central statistical bureau of the Polish government as well as the Polish offices of private enterprises dealing in marketing lifestyle data. She gathered relevant data on the following:

Income and disposable (personal) income (DPI) of the Polish market
Total and leisure / tourism
"grey economy"Э adjustments / benchmarking
Frequency of short holiday breaks throughout the year and average spend per day
Domestic and foreign spending patterns of Poles (for short break holidays)
Transportation
Accommodation (and vs. non-accommodation spending)
Food and beverage
Spa, recreational, and other ancillary revenue sources
Entertainment and activities spending
Spending patterns of foreign visitors in Poland (same as above)

Furthermore Ewa conducted structured interviews with representatives of the target segments, as well as with business people who sell products and services to the target segments and with people with insight on Polish consumer trends.

We also facilitated a discussion of key capital expenditure projections between our client and a Warsaw-based cost consultant. The latter provided detailed comments on the capital expenditure budget.

Finally, we developed a numeric model flowing from the market data. This model allowed us to quantify the market potential today and in the medium term. On several occasions we met with our client and refined the analysis. We finalised the report and delivered it in time for the credit committee meeting.

Results

The credit committee reviewed our report and unanimously approved the investment in the roll-out of 4 holiday parks in Poland.

Associated Experts

Ian Graham: leads and contributes to complex advisory assignments for hotel owners and operators around the world, leveraging his deep understanding of the goals of the guest, the hotelier, the investor, the lender and the brand owner - and all this from a unique base of experience that has seen him working on hotel issues in more than 60 countries

Evaluating a new concept

Evaluating the market for short break family holidays in central Europe

Associated Experts

Associated Areas of Expertise

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