You are planning to open a new 150 room, full-service boutique hotel with 8,000 square feet of meeting space, a 100-seat restaurant, and a 75-seat lounge in Dania Beach Florida. You want to determine the feasibility of this proposed hotel.

You will use scenario 1 to answer the first 15 multiple choice questions:

You will use scenario 2 to answer questions 16-30:

Scenario 1

You are planning to open a new 150 room, full-service boutique hotel with 8,000 square feet of meeting space, a 100-seat restaurant, and a 75-seat lounge in Dania Beach Florida. You want to determine the feasibility of this proposed hotel.

Your proposed hotel will have to compete for guests with three other well established hotels in the area which have the following current annual operating statistics. No other hotels are planned to open in the area before your proposed hotel opens. One additional hotel with 250 rooms and similar facilities is planned to open in the area one year after your proposed hotel is scheduled to open.

Hotel A – 250 rooms – 70% occupancy – 20% Corporate, 50% Group, 30% Leisure

Hotel B – 200 rooms – 80% occupancy – 30% Corporate, 20% Group, 50% Leisure

Hotel C – 150 rooms – 75% occupancy – 20% Corporate, 10% Group, 70% Leisure

 Scenario 2

You are preparing financial projections for your proposed hotel. For each of the following line items, which method would be your PRIMARY way of analyzing it? Please Note: It is possible that you may use another method to check your projection, but please indicate the PRIMARY way that you will make the projection based on class discussions and recommendation by your esteemed professor:


What is the current annual overall occupancy % for the entire existing competitive set of hotels?

70%

72%

75%

80%

82%

Question 2

3.3 / 3.3 pts

When your proposed hotel opens, how many rooms will there be in the defined competitive set of hotels?

500

750

1000

1500

 

Question 3

3.3 / 3.3 pts

Your proposed hotel opens, what will be its fair-share percentage of the demand for hotel rooms be?

20%

30%

40%

50%

 

Question 4

3.3 / 3.3 pts

If your hotel gets exactly it’s fair share of demand and assuming the leisure segment of the market is projected to have 90,000 occupied room nights in the year your proposed hotel opens, how many room nights of leisure demand would go to your hotel in that year?

18,0000 occupied room nights

27,000 occupied room nights

36,000 occupied room nights

45,000 occupied room nights

 

Question 5

3.3 / 3.3 pts

If you believe that your proposed hotel is NOT as competitive in attracting group guests as the other hotels in the defined competitive set, then which penetration rate below would you choose to apply to your proposed hotel’s fair-share of the group segment of the market?

90%

100%

110%

120%

 

Question 6

3.3 / 3.3 pts

If you believe that your proposed hotel is MORE competitive at attracting leisure guests than the other hotels in the defined competitive set, then which penetration rate below would you choose to apply to your proposed hotel’s fair-share of the leisure segment of the market?

90%

100%

110%

120%

 

Question 7

3.3 / 3.3 pts

A new 250 room hotel opens in Dania Beach one year after your proposed hotel opens. How many rooms will there be in the defined competitive set of hotels after this new hotel opens?

500

750

1000

1500

 

Question 8

3.3 / 3.3 pts

What will be your proposed hotel’s fair-share percentage of the market demand for hotel rooms in the area after the new 250 room hotel opens?

15%

25%

35%

45%

 

Question 9

3.3 / 3.3 pts

If you calculate that, overall, your proposed hotel will penetrate at a rate of 120% of its fair share in its third year of operation, what percent of total market demand will your proposed hotel capture?

15%

18%

20%

23%

 

Question 10

3.3 / 3.3 pts

Assuming the total market demand for hotel rooms during your proposed hotel’s third year of operation is 250,000 occupied room nights, and your calculated penetration of your proposed hotel’s total fair-share is 120%, what would be the total projected occupied room nights that your proposed hotel would expect to capture?

37,500 occupied room nights

45,000 occupied room nights

50,000 occupied room nights

57,500 occupied room nights

 

Question 11

3.3 / 3.3 pts

Based on the same assumption as in question 12, what would your hotel’s occupancy be in that year?

68%

82%

91%

105%

 

Question 12

3.3 / 3.3 pts

If you project that your proposed hotel will achieve 75% occupancy when it stabilizes, and generate $6,160,000 in rooms revenue, what average daily rate (ADR) will your hotel achieve?

$100

$125

$150

$175

 

Question 13

3.3 / 3.3 pts

If you project that your proposed hotel will achieve 75% occupancy when it stabilizes, and generate $6,160,000 in rooms revenue, what will be its RevPAR?

$ 75

$ 94

$112

$131

 

Question 14

3.3 / 3.3 pts

In the written report, your review and discussion of the proposed hotel’s location should include:

its proximity to the nearest airport.

the surrounding area’s unemployment rate.

a map showing the roads leading to the proposed hotel’s site.

historical sales data for the retail stores in the area.

all of the above.

none of the above.

 

Question 15

3.3 / 3.3 pts

In doing your projections of demand during the analysis, which of the following would you look at as most important in projecting how fast Group demand will grow in the future :

cruise line statistics indicating how many passengers departed from the cruise port

airport statistics indicating how many passengers arrived at the airport

convention center statistics indicating how many people attended events at the convention center

office space statistics indicating how much office space was being occupied in the area

 

Question 16

3.3 / 3.3 pts

Remember to start using Scenario 2 for the following questions

Food and Beverage REVENUES:

Per occupied room

Per available room

Percent of total sales

Percent of total revenue

 

Question 17

3.3 / 3.3 pts

Other Operated Department REVENUES, including Telecommunications, Valet, Audio/Visual rentals and services, Retail Store sales, etc.

Per occupied room

Per available room

Percent of total sales

Percent of total sales

 

Question 18

3.3 / 3.3 pts

Rooms Departmental EXPENSES

Per occupied room

Per available room

Percent of room revenues

Percent of total sales

 

Question 19

3.3 / 3.3 pts

Food and Beverage EXPENSES

Per occupied room

Per available room

Percent of food and beverage revenues

None of the above

 

Question 20

3.3 / 3.3 pts

Other Operated Department EXPENSES

Per occupied room

Per available room

Percent of other operated department revenues

a & b

 

Question 21

3.3 / 3.3 pts

Administrative and General EXPENSES

Per occupied room

Per available room

Percent of total revenues

Percent of total sales

 

Question 22

3.3 / 3.3 pts

Sales and Marketing EXPENSES:

Per occupied room

Per available room

Percent of total revenues

Percent of total sales

 

Question 23

3.3 / 3.3 pts

Property Operations & Maintenance EXPENSES

Per occupied room

Per available room

Percent of total revenues

Percent of total sales

 

Question 24

3.3 / 3.3 pts

Utility EXPENSES

Per occupied room

Per available room

Percent of total revenues

Percent of total sales

 

Question 25

3.3 / 3.3 pts

Management Fees

Per occupied room

Per available room

Percent of total revenues

Percent of total sales

 

Question 26

3.3 / 3.3 pts

Property Taxes

Per occupied room

Per available room

Percent of total revenues

Research with Tax Assesor’s Office to base it on other nearby hotel’s tax amount

 

Question 27

3.3 / 3.3 pts

If, when you inflate your financial projections, you inflate your revenues at 5% annually and you inflate your expenses at 3% annually, your projection will show that your hotel:

Becomes less profitable over time

Becomes more profitable until the 3rd year and then becomes less profitable

Becomes more profitable over time

None of the above

 

Question 28

3.3 / 3.3 pts

Your banker is trying to decide if your proposed hotel is a feasible project to make a loan to. The projected total cost of the proposed hotel is $20 million. You are requesting a $12 million loan. What is the loan-to-value percentage that the banker needs to consider:

40%

50%

60%

70%

 

Question 29

3.6 / 3.6 pts

Your banker needs to determine if your proposed hotel will be able to cover the debt service payments if the loan is provided. A $12 million loan with a 9% interest rate which is amortized over a 20 year period will result in monthly debt service payments of $108,000. Your financial projections indicate that your proposed hotel is expected to generate $2 million annually in net operating income. The banker will need a debt service coverage ratio (DSCR) of at least 1.40 to approve the loan. What DSCR will the banker calculate for your proposed hotel based on your financial projections and the loan terms provided.

1.22 – banker will not approve the loan

1.34 – banker will not approve the loan

1.43 – banker will approve the loan

1.54 – banker will approve the loan

 

Question 30

4 / 4 pts

According to Judy Singer – spa consultant, hotel and resort spas should be designed and operated to:

Serve as an amenity to the guest – does not matter how much money they lose during operations

Be an attraction to draw business – never expect to actually make any profit – target should be “break even”

Serve as a profitable operating department of the hotel or resort

None of the above – markets have changed – hotels and resorts do not need Spas any longer since there are so many outside ‘day spas’

b & c