Evaluating hotel branding choices

The client

A UK-based investment company with prior success in the Polish residential market which had just won a tender for a mixed use development that includes a 200-room branded hotel.

Location: Poland

The project

The tender was won by the client against competition because of belief in the client's abilities to deliver, support to the project vision offered by Hilton Hotels as evidenced by a 'Letter of Intent' and a unique architectural proposal. The development will include a hotel, retail and residential elements. As the Client begins work to realise the plan, there is an immediate need to:

validate the choice of brand for the hotel
refine the hotel element of the business plan to reflect achievable revenues and cash flows
integrate the updated hotel business plan into the overall business plan
prepare a document to support the application for the desired debt facilities

Project scope

In the first phase of this assignment, Ian Graham travelled to Wroclaw to conduct a market analysis. This comprised an analysis of existing and future demand and supply for the type of hotel proposed. At the beginning of the study, he visited the site to carry out a detailed appraisal of the proposed development. He assessed its accessibility and its position relative to other hotels in and proposed for the area, transport routes and other places in the relevant market catchment area. He confirmed its suitability for five-star (Polish) use and identified the site's strengths and weaknesses in that regard.

Ian subsequently, and with the services of Ewa Kossakowska,:

obtained current and historic market and operational data on the tourist industry in Wroclaw, including levels of demand, seasonality and market segmentation;
determined the existing and projected characteristics of demand markets, including estimates of growth, which we consider to be of relevance to this project;
determined the present supply of hotel accommodation serving those markets and reviewed any plans for new provision which would be competitive in the future. This included an assessment of the existing hotel supply in Wroclaw;
determined the potential for attracting demand to a five star hotel in Wroclaw and the facilities required to cater to that demand;
obtained other available information relating to the economy, communications and general development of Wroclaw, and assess the economics of and general climate for the operation of hotels there.

Ewa and Ian conducted the interviews that could be arranged with owners and operators of existing hotels, representatives of the conference and travel trade, planning and development information and pertinent economic and other background information. This market research was used to help formulate recommendations regarding the opportunity for developing the hotel, its market positioning, the facilities it should offer and the role of a brand.

At the same time, Hotel Solutions commenced on a research phase in which we identified both brands and operators to approach. Although initial thoughts were to engage with Hilton, Hotel Solutions conducted research that suggested alternative solutions. The output from this research was summarised in a discussion document and shared with the client. From these discussions, the client agreed how to proceed in its negotiations with Hilton.

In the second phase of the assignment Ian projected room occupancy and average room rates for the hotel's accommodation facilities, as well as expected levels of utilisation of and revenue from food, beverage and other facilities over the first five years of operation. These revenue projections were converted to profit projections using estimates of operating costs and the resultant profit and loss projections translated into cash flows.

In the third phase of the assignment, Ian integrated the output from phase two into an overall project plan. He was provided with the necessary data by the client. The project profitability and cash flows were modelled to demonstrate the types of bank facilities required and the covenants that could be met. A report was prepared to support an application for funding to a domestic or foreign bank.

Results

The client is currently negotiating with chosen hotel brand and management company and, once a 'Letter of Intent' is in place, the client will be in a position to consider the funding requirements of the development.

Please do contact us to discuss without obligation how we can help you.

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 hotel branding choices

Associated Experts

Associated Areas of Expertise

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