How to do a feasibility study for a boutique hotel


All such studies start with an executive summary which typically outlines the following. Where possible sample text gives you an indication of what this may look like in an actual report.

1. Executive summary

Purpose of market and feasibility study

The purpose of this report is to provide Company X with an understanding of the potential feasibility and performance of a boutique hotel.

Scope of work performed

The destination and the country as a whole has been reviewed for the future operation of a boutique hotel in regards to as access and other relevant location-related factors.

The surrounding economic environment has been reviewed to identify economic and demographic trends that may have an impact on future demand for hotels.

The market for hotel accommodations has been investigated, including factors such as the purpose of visit, the average length of stay, facilities and amenities, seasonality, demand fluctuations, and price sensitivity. Key market segments have been studied.

An analysis of existing and proposed competition provides an indication of the current accommodated demand and the degree of competitiveness.

The overall methodology involved using a demand generator build-up approach through the use of interviews and statistical sampling techniques to estimate lodging demand by projecting the room-nights attributable to local demand generators.

Documentation for an occupancy and average rate projection is built through the competitive index method.

A detailed projection of income and expense made in accordance with the Uniform System of Accounts for the Hotel Industry – Version 11, sets forth the anticipated economic benefits of the subject property.

The entire study and conclusions reached are based upon our present knowledge and information with respect to the status and demand characteristics of the subject project’s competitive lodging and meetings market.

The summary of market

  • Destination X for leisure travel describes the opportunity for leisure travellers to the destination
  • Destination X for business travel describes the opportunity for corporate travellers to the destination
  • Destination X for groups describes the opportunity for groups to the destination

Destination hotel supply

Destination X benefits from a mix of short duration business travel (local and regional), long stay international leisure travellers, weekend leisure travel from capital city Y nearby, transit visitors from across the border as well as leisure tourists seeking adventure.

Currently, Destination X has approximately xxx hotel rooms in the mid-scale to economy segment and yyy hotel rooms in the upscale and luxury segment. These range from vacation rentals starting at USD 75 to a more typical boutique luxury hotel at USD 250 per night.

Given the lack of a mid-range boutique hotel with adequate leisure facilities in destination X, there is opportunity for a boutique hotel to accommodate existing and new demand from the area. Creating a very good value proposition is important as travellers can be price-conscious.

Recommendation of proposed facility scope

Primary aspects of the recommended site and project analysed are summarised as follows:

  • Recommended Property Type: Boutique hotel with adequate leisure facilities
  • Recommended Number of Rooms: 70
  • Approximate Site Size : 20,000 sq metres
  • Approximate Built-Up Area: 3,210 sq metres
  • Rooms: Three categories. Over 70% standard doubles (more spacious than competitor doubles). 20% superior doubles and 10% suites
  • Recommended F& B Facilities: Fine dining restaurant with 40 covers, with separate dining areas (including outdoor), Bar, Room Service
  • Recommended Event Facilities: 2 small meeting rooms (at least 30 pax classroom or 60 pax theatre).
  • Other Facilities Recommended: Pool, health club, guest laundry, business centre
  • Parking Spaces Recommended: 20

Feasibility – summary of findings

This report finds the construction of the recommended boutique hotel to be feasible. The following bullet points summarize feasibility aspects of the proposed subject property within the market.

∎ Economic feasibility

Economic feasibility is evidenced by information related to the project site location; availability of trained or trainable labour; utilities; rail, air, and road service to the site; and the overall impact of the project.

Overall, the subject property’s construction is deemed feasible due to the hotel’s planned location in the centre of Destination X. The property location enjoys easy access via regional highways that connect it with the major cities.

The proposed hotel is expected to capture a healthy share of this demand over the forecast period, noting occupancy levels near the market average or above.

∎ Market feasibility

Market feasibility is evidenced by information on the sales organisation and management, nature and extent of the market area, marketing plans for sale of product being developed, extent of competition, and commitments from customers or other stakeholders.  

The proposed subject property’s ownership/management will be well supported by an experienced partner well versed in hotel marketing and operations.

The destination X has only a few good boutique hotels – and even these lack a strong value proposition. Positioning a high-quality modern boutique hotel at excellent value will contribute to the feasibility of the new property in this market. The addition of the subject property is considered favourable due to this gap.

The proposed subject property will be a new construction. This along with the other favourable conditions above is expected to appeal to the demand generators in this market. There is a strong attraction for weekend leisure travel from neighbouring cities.

∎ Technical feasibility

The technical feasibility of the subject property addresses the suitability of the site for its intended use, as well as the feasibility of achieving the levels of income projected and the estimated operating costs.

Overall, given the availability of land in a central location in the market, the technical feasibility of the subject property is reasonable.

∎ Financial feasibility

Financial feasibility can be determined by an opinion on the reliability of the financial projections and ability of the business to achieve the projected income and cash flow. An assessment of the cost accounting system, the availability of short-term credit for seasonal business, and the adequacy of raw materials and supplies are also considered.

The subject property’s projection of income has been estimated in the Forecast of Income and Expense chapter. Overall, the subject property’s construction is deemed feasible as the estimated income and expense levels represent a profitable operation.

In addition, the estimated cost of the hotel at USD X million equates to approximately USD Y per room.

The Net Present Value calculation is also favourable. The project described in this report represents a profitable operation.  

2. Neighbourhood and market area analysis

  • Accessibility and visibility
  • Neighbourhood analysis
  • Market area analysis
  • Demographic statistics
  • Major employers and other pertinent economic indicators
  • Governmental and environmental factors
  • Conclusion

3. Hotel market trends

  • National trends overview
  • Definition of subject market
  • Selected competitive set
  • Secondary competitors
  • New supply
  • Historical market performance
  • Market supply, demand, occupancy, and average rate trends
  • Occupancy – subject property
  • Average rate trends
  • Forecast of future demand change
  • Conclusion

4. Review of the proposed hotel

  • Product recommendations
  • Management recommendations
  • Site improvements, entry, lobby, structure & vertical access
  • Other public areas
  • Guest rooms
  • Support areas & engineering systems
  • Capital expenditures
  • Conclusion

5. Projection of occupancy and average rate

  • Historical data
  • Projection of occupancy
  • Projection of average room rate

6. Forecast of income and expense

  • Forecast of income and expense
  • Positioned base year and forecast

7. Feasibility analysis & conclusion

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Tags: Boutique hotel guide, Planning

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