A Strategic Report On Opening A Hotel Business In New Zealand

Location Selection

Discuss about the Appraisal of Hotel Project for 5 Year Growth Strategy.

In the current scenario, any type of business, whether it is trading or manufacturing is prevailing in the market. The basic requirement for the flourishing of the business is to conduct the proper research before taking up the business. Similarly for the investors it is very necessary to have the market research about the company, its performance and results before investing any amount in the company. In this report, at first the location will be selected where the HOTS Hotel will be situated and then the places where anyone can go for the visit like any tourist places including historical and so. Then the proposed hotel details will be discussed as to how many rooms will be there in the hotel, what will be occupancy rate of that hotel, what is the bifurcation of the rooms provided and how much the proposed hotel will generate the revenue and is there any facility for conferences also. After discussing all the advantages and disadvantages with regard to the hotel that has been proposed in the specific location, the projection will be discussed for the consecutive period of five years. The projection that has been done has been formed on the basis of the simulation. After analyzing the proposed hotel industry in the specific location along with the financial data, the appropriate conclusion and the recommendation has been given. With this the report will be finished along with giving the path for many of the investors and the stakeholders of the company.         

As per the current scenario, the company is operating and has hotels in the country of Singapore. The hotel is opened out of the city of Singapore. In order to flourish the business of the company, the management of the company plans to open the hotels industry wither in the area of Australia or of the New Zealand. The company has decided to open its hotel chains in New Zealand.

Currently the company hotel has been operating with the 30% occupancy rate with $1000 per day as room rent. The revenue per available per room (REVPAR) is the amount which is obtained by dividing the average daily rate of room by the rate of occupancy in the hotel. In the current situation of five years REVPAR is equivalent to the $1000 divided by 30% and the revenue per available room will be $3333. As the business of the company is low therefore no amount of loan is required (Evanno, 2014).

Proposed Hotel Details

Following are the reasons as to why the New Zealand has been selected for the opening of the hotel industry:

• First is that New Zealand is the emerging destination for the tourist to visit this place. It is because of the major reason that it is the well known place having the large open landscapes.
• Second is that there are less number of hotels and during the peak time, many of the customers usually faces the shortage of room which otherwise can be built if any further hotels are opened with the cheap cost.
• There has been the considerable increase since the year of 1999 regarding hotel industry in New Zealand due to the increase in the international visitation.
• As per the prediction made by the Ministry of Business, Innovation and Employment, the growth that the country of New Zealand has been encountering from year 1999 will continue and will grow continuously.
• Many of the visitors, tourists and people come to see the open landscapes and beauty in its natural terms. For instance, eight wonder of the World is Milford Sound in the heart of Fiordland (Law, 2013).
• Having scored the fifth position across the World, the country has been regarded as the best place for outdoor and adventure tourism.
• In the year of two thousand and fifteen, the country has been awarded as the friendly and geographically situation.
• The country has also provided the cruise package on the ship which is mostly like by the people coming in New Zealand.
• Many of the international film award function and most popular events have been found attractive.
• In this country, the major problem is not there. The major problem is the connectivity issue. But in the case of New Zealand, there is connectivity issue and rather have the 5 international and 30 domestic airports.
• In the market of New Zealand, major people come from China and Australia and that too during the holiday period. This is because of the major reason that in the markets of the respective countries there has been no such open markets and if available then quality will get suffered.    
• New Zealand comprises of five regions namely Auckland, Rotorua, Wellington, Christchurch and Queenstown. Around ninety eight percent of the visitor plans to cover these destination and surely do that.
• As the visitation of the country grows, there will more attractive destination and that too with the maximum occupancy rate along with the high average daily room rate and revenue per available room growth. With the increase in the occupancy rate, there will be rise in the hotel room’s demand in the night because of the international passengers that will receive.
• The returns that the New Zealand is offering to the investor are much higher as compared to Australia. It is because of the reason of the operations that the company operates in respect of each hotel.
• Each of the destinations mentioned in the report very attractive and each of the tourists shall go all the places. First airport is Auckland which is considered as the biggest region of in almost all the Europe (Railsback, 2012).  

Currently the hotel is working at 30% occupancy capacity and if it plans to come under the New Zealand, then it is sure that the company will earn profit because of the increase in the occupancy ratio that the company will welcome at the time when it opens its space in New Zealand.  Similarly Rotorua is very affected by the attractive locations where the tourist comes see the pink and white terraces which belong to the year back in 1880’s. Along with that the culture and outdoor activities is also done by the tourists. The other two parts of New Zealand is also same and has the reason as to why the hotel business shall be opened in the heart of New Zealand.  

After discussing the current strategy of the company, there has been seen that the company has taken the decision on opening the hotel business in New Zealand which is now considered as the best place where everyone should go. With this intent and earlier justifications, the company has simulated the data for the consecutive period of five years for future. The earlier five years have also been shown when no hotel has been opened in New Zealand.

The simulation of data contains nine major columns which represents the following

• Price per room
• Total number of rooms available
• Rate of Occupancy
• Total amount of sales
• Total amount of direct expenditure
• Total amount of indirect expenditure
• Total amount of profit which is calculated by deducting the direct and indirect expenditure from the value of total sales.
• Total amount of loan that will be required either from the banks or the financial institution for the purpose of the business.
• The total amount of cash which is with the bank for the expenses to be incurred (Luke, 2014).

During the period from the first year to the fifth year, the price per room was $1000 and only 30% was the occupancy rate at that time. The same has been prevailed for the first five year and as the business was stagnant at the 30% capacity, he has not taken the loan either from the business or else.  It is because of the fact there has been no need of the loan as the basic requirement of the business are being met from the available funds at the company.

When the company has decided to invest in hotel industry in New Zealand then the projection for the next five years have been made by taking the earlier five years as the base for the future years. For the development of the business, the hotel rooms have been expanded to 225 from 150 earlier. The price per room has been changed from $1000 to $2500. Due to this the revenue available per room will be higher. During the fifth and sixth year the occupancy rate has been kept at the minimum of 80% and thus showing that the company is adequately managing the resources otherwise a wrong decision can make the bad use of the judgment or any kind of work.

Financial Projections

At this time, due to increase in the business of the company, the company will require the additional funds from either of the party. It may include the party or the banking financial institution.  Therefore, the company in the sixth year has applied for the loan of $650 which in result provides the fund for the expansion of the business of the company. From the year of eighth it has been observed that the occupancy rate has been increased from 880% to 90%. It depicts that due to the raise of the fund has considerably increased the business of the company. Along with the repayment of the loan amount, the company has becoming the cash rich company as and when the time passes (Johnson, 2014).

The strategy that the company has adopted is that with the relocation of the business of the company, there might be the chances where more amount is required to be spent and thus the amount shall be obtained from the banks or financial institutions as loan and that will be paid after sometime. As the time passes, the company will start repaying the loan and due to flourishing of business the company has earned profit also along the company will become the cash rich company. Thus, New Zealand is much better than any other option to invest in the hotel industry.      

Conclusion And Recommendation

Hotel industry being an important industry across the world has waived the rays of earning among the number of investors including the potential investors of the company. Though the location of Australia and New Zealand both are the best location for opening of the hotel industry but for the purpose of this report, New Zealand has been chosen. There have been the various reasons majorly because of the happening places and becoming of the tourist spot. The five year operation growth has been done using the previous year’s projections. The projection or future plan so made has given the idea of efficiency and effectiveness of the HITS model. In order to conclude the report, it has laid down various things and has given the insight of how the hotel industry is best in these locations.  

References

Evanno, G.,(2014), “Detecting the number of clusters of individuals using the software STRUCTURE: a simulation study”. Molecular ecology, 14(8), pp.2611-2620

Johnson, B., (2014), “The role of adaptive management as an operational approach for resource management agencies” Conservation ecology, 3(2)

Law, A.M., (2013), “Simulation modeling and analysis” (Vol. 2). New York: McGraw-Hill.

Luke, S., (2014), “Mason: A multiagent simulation environment”. Simulation, 81(7), pp.517-527

Railsback, S.F., (2012), “Agent-based simulation platforms: Review and development  recommendations”. Simulation, 82(9), pp.609-623