Corporate Finance Project Evaluation

Topics: Hotel, Investment, Rate of return Pages: 3 (703 words) Published: June 9, 2012
Sunny Beach Hotel

Evaluation Report

Various Scenarios for Adding a Karaoke Pub in the Sunny Beach Hotel .

Dear Sir,

I have considered the scenarios you suggested to be evaluated from economic point of view regarding the opportunity of accepting the offer of Planet Karaoke Pub to install one of its facilities inside the free space from 2nd floor of Sunny Beach Hotel or to extend the activities of our company with a Karaoke pub located on the beach area administrated by our own staff.

The pro- and contra arguments for the two scenarious, some of them already suggested by you, can be resumed as following:

A. Planet Karaoke Pub:

A1: Benefits and additional incomes for Sunny Beach Hotel.

- Additional cash-inflow of around 170000 bahts/month (equivalent to 4700 USD), respectively 2.040 millions baths/year (56666 USD/year). - The pub operator will have to pay a pro rata allocation of the utilization costs of 55000 baht/year (1530 USD) and maintenance costs of 10000 (280 USD) bahts/year. These costs will be claimed by the hotel to the pub operator and will not incurr aditional costs for SBH. - Increased number of patrons and visitors of the hotel due to new attraction, leading to an increased notoriety of our hotel.

A2: Costs and disadvantages for Sunny Beach Hotel

- It is necessary an investment for isolation of the area for the karaoke pub and for the kitchinette, evaluated between 770,000 baht (21400 USD) and 1,000,000 baht (27800 USD), all works on our expenses. - Disturbances of the hotel activity and possible claims due to noise and safety issues, with loss of hotel occupancy especially for family segment of our clients, ranging up to 25% of our clients and possible damages to the hotel prestige. - Reduction in available area for the future connection corridor to the new wing, from the existing free area of 3000 sq.ft (278 sq.m) to only 750 sq.ft (70 sq.m). - There will be additional costs for...
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