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Feasibility study for your hotel project’s success

Feasibility study for your hotel project’s success

Today, the tourism sector market has complicated the keys to achieving the success of a hotel. It is no longer enough only having a good central location and being next to the most interesting places in the city, but also another series of factors have to make a hotel project profitable enough to carry out. […]

Today, the tourism sector market has complicated the keys to achieving the success of a hotel. It is no longer enough only having a good central location and being next to the most interesting places in the city, but also another series of factors have to make a hotel project profitable enough to carry out.

The importance of a feasibility study

Firstly, investors and promoters analyze in detail the possibilities for their idea to become a reality, that is, whether the project is viable or not. These types of studies can be carried out by the experienced staff of the development team itself, and by hotel consultants, as they tend to give more precise results. An example of this could be our consulting firm IHCS, International Hotel Consulting Services, which offers comprehensive advisory and consulting services. hotel management.

A feasibility study can be complemented with the development of a good business plan that summarizes the economic needs, as well as the necessary strategies to develop in each area to meet the established objectives. The success or failure of your hotel project will depend largely on the accuracy of these forecasts, since factors such as the market, its evolution, competition and available resources, among others, mark the path to follow during the start-up process.

Factors to take into account in a feasibility study

Some of these factors can be summarized as:

Market area

This phase of the study covers geographical and economic information about the environment, available market, distribution channels and existing attractions in the area. This helps us determine what type of market our new hotel should target. At this point, the developer must ensure that the hotel can attract a sufficient number of guests to make the hotel business profitable enough, and must also anticipate staffing needs.

Competence

The next step to carry out is the assessment of competence. It is time to see the position we will occupy within the market. To arrive at this information, developers have to know the market objectives of the competition, their occupancy rates, the average number of rooms, as well as their services and facilities. It is also important to evaluate the designs of other potential projects under construction.
Location: Since investors gain a foothold in the hotel market, they must decide if the chosen location is appropriate for the construction of the hotel. The estimation of the distance to the most important attractions, including the business center and recreational areas, together with the previous preparation of the land, the possibility of a future expansion and the environmental regulations that affect the place, play a key role in this phase.

Demand

Demand involves focusing on the market target again, this time to determine the expected occupancy rate and finally calculating the average room price. At this stage it would be important to document the reasons for travel and the current and planned expenses for the coming years of tourists visiting the area, new accommodation offers, changes in seasonal costs, average length of stay and means of transport. . Therefore, thanks to these references we can divide demand into three types: current, latent and unabsorbed.

Facilities and services

After calculating demand and occupancy, the decision comes about what type of hotel to build and what size. For the project to be viable, occupancy rates must be around 60%, since if a hotel is built that is too large for the expected demand, occupancy can be noticeably low. The studies on the infrastructure lead us to the construction of the building, which must be built according to the needs of the market.

Financial estimates

This type of valuation not only helps investors make the final decision to get involved in the project, but also helps them obtain financing. In this way, the income of the different departments of the hotel can be forecast, together with the costs of construction, opening and operation of the property.

In short, we are faced with the decision to be part of a new hotel project, a big step that involves compromising certain elements of value, such as money and time, but that will respond to market needs reliably.

 

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