Feasibility Plan Example

Description of the Project

H-T Consulting was engaged by the Board of El Paso Representatives to provide a feasibility business plan of market conditions with the proposed building of Hilton Hotel in El Paso City Center. The plan is based on knowledge and marketing research information presented concerning the El Paso infrastructure. As in all our feasibility studies, results are developed by our competent and efficient management team. These studies are also built on estimations of current economic situations in the El Paso region.

The proposed hotel will contain 500 rooms, a restaurant, an 8,784 party hall, a 5,000 square-foot fitness club and a swimming pool. Additionally, the Convention Center will contain a 37,234 square-foot exhibit hall, and 10,000 square feet of additional space.

The feasibility plan includes:

– Location feasibility analysis
– Economic situation feasibility analysis of El Paso location
– Future and current supply and demand feasibility analysis of Hilton Hotel

Economic Situation Feasibility Analysis

The El Paso economy shows positive growing rates, a diversified structure and continued future growth potential. The main hotel building will be located in downtown El Paso.

Our research shows that without an aggressive marketing program, profits from Hilton Hotel in downtown El Paso will be low, because the project will face two main challenges: (1) the lack of a strong El Paso client base and (2) the lack of parking space. These two points are very important and will impact the overall profitability of the project. To sum up, our findings led us to conclude that project-related risk is very significant. Therefore, we recommend searching for an alternative location for the hotel.

Our feasibility study underlines such strengths and weaknesses of the hotel project:

Strengths

– Assertive image of El Paso City
– Huge inflow of tourists for attractions
– Famous and reputable hotel brand
– Vast variety of attractions in downtown El Paso
– Public sector agreements that reduce risks for businesses
– Close proximity to Mexico

Weaknesses

– Lack parking space
– Unattractive downtown location
– Price sensitivity to the markets
– Hilton’s perceived image is not what many tourists are searching for

Location Analysis Feasibility

The city of El Paso is located in West Texas, and it is included in the El Paso Metropolitan Statistical Area. It borders three states (New Mexico, Texas, Chihuahua) and two countries (U.S., Mexico). The proposed project location fronts on historic San Francisco Street and contains the former Tawt & Sherk Shopping Center Building. The hotel component will be built over the existing store building. The chosen location is in the heart of downtown El Paso and is close to many historic attractions. The number of entertainment locations is quite limited but are expected to grow after the Hilton Hotel development.

Nowadays, major highways and roads connect El Paso to other locations such as Interstate 10, US Highway 54, US Highway 85, US Highway 62, and US Highway 180. For instance, Interstate 10 connects to El Paso via Los Angeles, Phoenix, Tucson, San Antonio and other cities. According to the specific situation of the proposed project, the wide area of the Hilton location can potentially result in traffic and parking issues. This could be a major competitive disadvantage of the project.

Future and Current Demand analysis Feasibility of Hilton Hotel

The market of the El Paso hotel industry is price sensitive, seasonal and tourist-oriented. Such a market situation allows for sufficient profitability for existing hotels. New El Paso hotels earn above-average profit. Increasing demand along US Highway 54 is being absorbed by new hotel buildings. However, the downtown hotel industry showed a recession in the latest years.

The travel and tour demand niche is proposed to bring 65% of the market’s overnight room demand. This demand consists of such social groups such as families, couples, and individuals searching for weekend attractions.

The group segment is estimated to take 20% of overnight room demand in 2013. Furthermore, the group segment is more rate-sensitive than the travel demand, as they book many rooms for the lower price. The commercial part of this segment consists of conferences, seminars, group training, and other business issues. Similarly to the travel niche, commercial group bookings are concentrated on weekends. Our expert guarantee is that building the Convention Center in Hilton Hotel will increase commercial group room demand. It is estimated that the proposed meeting space will create additional reasons for the commercial segment to book rooms.

Military, government and other segments will occupy nearly 5% of the rooms in 2013. The level of demand in this segment is connected with the placement of government institutions in the local territory. We have provided the average room price analysis for Hilton Hotel, based on competitor’s prices and pricing trends in the hotel industry. We concluded that the average room rate must be $113 in the 2013 operational year.

Financial

According to our research, the main part of future project financing will come from Hilton, Ltd. that allocated its investments during the last five years. Hilton, Ltd. owners will each provide $2,000,000 as start-up capital. Additionally, part of future financing will come from the El Paso Administration in the form of a $900,000 loan. This loan will cover initial expenses throughout the first operational year.

Expenditures

License and registration – $2,000
Capital expenditure – $760,000
IT services support – $400,000
Promotion and advertisement campaign – $500,000
Personnel – $900,000
Equipment, building installation – $1,114,000
Additional services – $500,000
Total Expenses = $4,176,000

Hilton Hotel is expected to gain profits through hotel room bookings. The Hilton company can expect to gain $500,000 in profits in the first operational year. The hotel can expect profit improvements during the next five years due to its aggressive marketing policy. It is necessary to provide higher growth margins during the next three years to increase its revenue.

Conclusion

Based on the above presented information, the recommendation is that Hilton Hotel may begin its project initiation only after considering all pros and cons of this feasibility study. The key findings of this business plan show this initiative will not be beneficial to the company and will not have high a probability of success.

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