Business Plan for Dream Paradise Theme Hotel - Essay Example

Dream Paradise theme hotel- Business Plan Proposal of the Table of Contents Introduction 4 1. The Opportunity 4 1.2. Products and Services 4 1.3. The Customers 5 1.4. The Equipment 5 2. Feasibility Study 5 2.1. Location 5 2.2. Site Selection 6 2.3. Site Expenses 6 2.4. Market Potential 6 2.5. Competition 7 2.6. Sales Forecast 7 2.7. Protection of Business 7 3. Marketing 8 3.1. Brand Positioning 8 3.2. Business Name 8 3.3. Service or Product Mix 8 3.4. Pricing Strategy 9 3.5. Distribution 9 3.6. Promotion and Advertising 9 3.7. Promotion Evaluation 10 4. Financial Plan 10 4.1. Projected Profit and Loss Statement 10 4.2. Projected Balance Sheet 11 4.3. Profitable/Non-Profitable Businesses 12 5. Conclusion 13 References 14 1. Introduction The theme hotel will be positioned in Toronto East York and more specifically it will be located in Ontario PL Blvd and Remembrance Dr. Located near to the Ontario place it will grab attention of huge customers (Hill & Kabir, 2010). Martiny Silverman will be the owner of the theme hotel along with the co-owners Luke Roth and Rachel Pearson. The hotel will be named Dream Paradise theme hotel and it will offer its customers different themed rooms as per the desires of the different customer groups. Moreover the hotel will have twelve two-bedroom units having facility of underground parking, fully equipped kitchens, laundry facilities and stone fireplaces. The tag line or the mission statement of the hotel will be “Wish it, Dream it, Do it!” “Wish it” means consumers whose desires are the hotels external pursuit (Yoo, Donthu & Lee, 2000). “Dream it” mean consumers’ desires will be the hotels ultimate goal. “Do it” means the actions of the hotel will prove everything. The NAIS number of the hotel business will be 721111. The approximate annual revenue in the first year that the business is expecting to generate is $ 73,000 projecting the hotel to operate successfully. The business plan proposal for the theme hotel will include feasibility study, financial planning and marketing plans for opening this new venture (Brown, 2001). 1.1. The Opportunity The Dream Paradise Theme hotel will be built on the parking lot 2 which is near to the Ontario place. The Ontario place will reopen to public by 2016 and this is the main reason the place is most suitable to choose (Nissim & Penman, 2001). Moreover, another reason for selecting the area is that most of the hotels are situated in the downtown area. When the consumers look at these hotels, they might face difficulties in decision making (Der Foo, Wong & Ong, 2005). However, this theme hotel will have special theme rooms and a proper location to attack tourism. 1.2. Products and Services The hotel will offer its customers various themed rooms to its customers and according to the demand of the customers Dream Paradise theme hotel will design its rooms. The hotel has decided to categorize its hotel rooms into primary rooms, silver rooms and gold rooms. The primary room will be designed as per the demands of its customer groups (Mason & Stark, 2004). Themes for kids will be like frozen, hello kitty, Disneyland and Legoland, etc. The themes for teenagers are angry birds, Sea world, Cars, Harry Potter, Star Wars, etc. Themes for adults will be of popular movies, countries and sights, etc and lastly, the themes for senior citizens will be based on four seasons, culture, history and artistic styles. The silver room will be designed based on current and most popular movies, games, countries, sights, etc. The gold rooms of the hotel will be designed as per the customers demand. 1.3. The Customers Dream Paradise Theme hotel will focus on targeted customer segments. 60% focus of the hotel will be on adults from age 19 to 65, 20% focus will be on the seniors over the age of 65 years, 10% focus will be on teenagers from age 13 to 19 years and 10% focus of the business will be on the kids who are less than 13 years old. Additionally, pets will also be the central focus of the theme hotel as 57% of the North American own pet cats and dogs (Susskind & Chan, 2000). 1.4. The Equipment Dream Paradise Theme hotel will require certain equipments to start the operations of the business and offer quality services to its customers. The hotel plans to possess a restaurant cum bar, boutique, a fitness room including SPA, business hub and conference rooms, laundry service, first aid along with safety services, valet parking, 24-hour front desk service and emergency/security services for its customers (Johnson Tew, Lu, Tolomiczenko & Gellatly, 2008). 2. Feasibility Study 2.1. Location The location of Dream Paradise Theme hotel will be in Toronto East York and this is situated at Ontario Blvd and Remembrance Dr. This place is at the central position of Toronto and the position of the hotel will be beside Ontario place which will open for public by 2016. This means the selected location will be very feasible as a huge number of people will visit the place (Joppe, Martin & Waalen, 2001). The hotel will attract a wide range of customers. Location of the hotel is in the commercial area of the country and hence the hotel will gain the advantage of easily available suppliers and smooth transportation service. The potential customers for the hotel in the area are majorly adults’ between the ages 19-65 that represents 60% of the target customers. 20% of the target population in the area is over the age 65. Teenagers between age 13-19 years represents 10% of the target population and kids below 13 years represents 13% of the population in the hotels business area. 2.2. Site Selection The site selected by Dream Paradise Theme hotel is at the downtown Toronto at the parking lot 2, which is near to the Ontario place that always has a huge traffic of people. The hotel will be within distance of 2 kilometers from the Ontario place. The population of people is 115,365 in Toronto East York and the site where the hotel will start its business is the central attraction of the people of the country (Lovelock & Gummesson, 2004). The top local attraction in the area makes the site feasible for the hotel. Though the site where the theme hotel plans to open its business has many other hotels and lodges and in spite of that the existing customers are demanding a different hotel experience that is distinct from the existing hotels in the area. Dream Paradise Theme hotel will provide its customers a unique hotel experience by offering them luxurious and theme based hotel rooms which will successfully meet the desires of the consumer groups (Lovelock & Gummesson, 2004). 2.3. Site Expenses Dream Paradise Dream hotel will start an incorporated business and will use 752 spaces Area, 19798.3m square and 212138 ft square area. The owners will invest $ 100,000 each and they will also secure a mortgage to buy a property for $ 250,000 and arrange loan for $100,000. 2.4. Market Potential Dream Paradise Theme hotel will start its business in the resemblance drive near to the Ontario place. This region in Toronto has been very booming and profitable for many years. The location has many establishments which are primarily engaged in providing short term lodging and complementary service to the many travelers and tourists (OConnor, 2003). For the past two years the area the sales of these hotels has increased by 35%. There are over 20 lodges, hotels and restaurants within 3 miles of the theme hotel location which are running their business successfully (Tufts, 2007). Every year the room occupancy in the hotels is around 100% during the springs. New establishment is planned in the spring time. The people of the locality and tourists will be willing to spend $ 54,000 annually in the peak season and the offseason sale is estimated to be $ 43,000 annually. 2.5. Competition Toronto downtown area has many established hotels, resorts, restaurants and lodges that attract attention of many tourists. Direct competitors are these established hotels in the area which are running successfully. Super Downtown Ontario with annual revenue of $65,000, Fairmont Royal York hotel with annual revenue of 68,000, Hotel Victoria with annual revenue of 42,000 and The Drake hotel with annual revenue of 53,000 are most famous hotels in the area (Wall, Dudycha & Hutchinson, 2011). The theme hotel has a strong competitive edge for sustaining successfully in the locality as the hotel comes with a unique concept to grab attention of customers. The indirect competitors are a few restaurants and guest houses that provide luxurious room facility to its customers. Hotel rooms of Dream Paradise will be luxurious and in addition will be designed based on themes liked by different customer groups. Moreover, the owners have business experience of 8 years as a manager in other restaurants and hence they have excellent skills in operating hotel business successfully and retain customers. 2.6. Sales Forecast The sales forecast in the first year of commencing the business is estimated to be $ 730000, in the second year it is estimated to be $1963000 and in the third year it is anticipated to be $ 2132000. It is expected that the projected sales forecast is viable as the location of business has increased opportunities and target customers which will contribute to business profit (Wall, Dudycha & Hutchinson, 2011). Room rates of the theme hotel will range from $ 170- $ 260 each night during the peak season and during the off season the price of each room will be $100- $180 per night. 2.7. Protection of Business Insurance cost of the business will be 1.20% of the revenue that is $ 8700. As the revenue increases in the 2nd and 3rd year the insurance cost will increase to 1.4 % of the total revenue. For 24 hour surveillance CC TV cameras will be placed all over the hotel. Fire insurance costs will be 0.5% of the total revenue in the first year and will gradually increase in the 2nd and 3rd year. Collection policy of accounts receivable will approximately be in 33 days. Security audit will be done regularly for checking against any theft or other business losses such as equipment breakdown and hospitality errors (Joppe, Martin & Waalen, 2001). An emergency cost of $ 1,230 is to be maintained for protection against unnatural losses. Intellectual property security management costs will be around 0.8% of the total revenue. To avoid electronic devices hacking protocols will be established for quanterring suspicious mails. An increase in discount rate offered by the hotel to its customers may lead to loss. Security capital of $ 10,000 will be maintained by the hotel to compensate for any losses and to lessen the amount of risk involved. 3. Marketing 3.1. Brand Positioning Dream Paradise Theme hotel will position its brand to the public as a theme based hotel with premium service to the customers. The unique idea of the brand will exceed customers’ expectations for luxury accommodations and for offering something different from other hotels and motels in the area. The hotel will be a dreamland for people who can enjoy luxurious service along with soothing environment of themed rooms (Joppe, Martin & Waalen, 2001). The concept “theme-based” will definitely gather customers’ attention as they were in search for something unique and different from other hotels. 3.2. Business Name The name decided for the hotel is “Dream Paradise Theme Hotel”. This name totally depicts the uniqueness o the hotel and will project its distinct concept to the public. The name itself will generate attention of masses as it portrays the appropriate image the hotel wants to reveal to its customers. 3.3. Service or Product Mix Intangibility benefits of the service will be the soothing environment and the feeling of being in the dreamland that the themed rooms will provide to the customers. Inconsistency is another aspect of superior service that will be offered by the theme hotel. The service personnel will be highly skilled and capable in providing speedy and premium quality service to its customers (Nissim & Penman, 2001). Proper training will be provided to the staff. Services are inseparable and along with the tangible benefits the hotel will offer its customers with the superior quality service. The staff will be trained such that they have polite and friendly behavior which will impress many customers and will gain their loyalty. Moreover, the customers will be free to choose themes as per their desires. No other hotel in the locality is operating on the theme concept and this will provide Dream Paradise Theme hotel a competitive advantage over the other hotels (Nissim & Penman, 2001). Certain value added services will be offered by the hotel to its customers such as Wi-Fi accessibility and travel desk, a tour guide and transportation services for the tourists that is not offered by any hotels in the area. 3.4. Pricing Strategy The pricing of the products and services of Dream Paradise Theme hotel will be such that it covers the expenses made by the hotel and also generates favourable revenue (Mangold & Faulds, 2009). In the initial months of the commencement of business the hotel will offer discount up to 30% to the customers who will spend for gold rooms, 15% discount for the customers selecting the primary room and 20% discount to the customers those who will go for silver rooms. In the initial months of business the hotel will follow the penetration pricing that is the prices of the products and the services will be kept low to grab large customers (Mangold & Faulds, 2009). As it is observed that the hotel business is at its peak in the spring season the price of the primary rooms’ will be in the range of $ 120-$ 230, silver rooms $ 160-$ 250and gold rooms will be $ 170-$ 260 in the peak season. During the off season the price of the silver rooms will in the range of $120-$135, price range for gold rooms will be $ 150- $ 160 and the price range for primary rooms will be $80- $100. 3.5. Distribution Unlike products that are manufactured, distributed and then sold the services of a hotel is consumed concurrently in a real time environment. Because of this Dream Paradise Theme hotel will focus on marketing its services available in a convenient way to largest number of target customers (Buhalis, 2000). The hotel will maintain a front office staff member throughout the night so that all the queries’ of the guest are answered whenever they need it. This facility or service distribution will be attractive to the business traveler. The clients will be able to contact the hotel by means of telephone, fax and e-mails. Distribution cans also be done through online travel agencies (Buhalis, 2000). 3.6. Promotion and Advertising The advertising costs of the hotel will be 1.80% of the total revenue which is $ 35,300 annually. The hotel will focus on the cost effective promotional campaign which can be done through direct marketing, publicity and by frequent guest reward program. Advertising will be also done through television, newspapers and social media. The hotel building will be designed colorful incorporating various themes of famous movies, cartoons, nature, etc to attract target customers (Buhalis, 2000). The hotel’s website will be designed highlighting on various themes and special introductory offers. On the commencement day of business the hotel will organize a grand opening and special guests of the locality will be invited such as food critics who can give a good review on website which will grab customers’ attention and increase publicity of the hotel. 3.7. Promotion Evaluation The hotel can evaluate the effectiveness of its promotional campaign by analyzing the changes in the consumer behavior and its market share. The success of the promotional campaign and the popularity of the hotel can be analyzed by observing positive changes in consumers appeal, consumer awareness and repeat purchases. Effective advertising will result to increased sales and the market shares will gradually increase (Mangold & Faulds, 2009). The hotel will analyze the effectiveness of its advertising campaigns and if it is not successful in grabbing customers’ attention then advertising channels will be changed. 4. Financial Plan The following is the financial plan for Dream Paradise Theme hotel. The financial plan describes the estimated costs, sales and revenue that will be generated in the initial year of business. 4.1. Projected Profit and Loss Statement The projected profit and loss statement for the first year, second year and third year of business is depicted in the table below and it is observed that the revenue gradually increases in the 2nd and the 3rd year. Revenues And Expenses 1st year 2nd year 3rd year Total revenue 730000 1963000 2132000 Sales of goods and services 657730 1882500 1980800 All other revenues 72270 80500 151200 Cost of sales (direct expenses) 126290 128816 131379 Wages and benefits 35770 36486 37216 Purchases, materials and sub-contracts 91980 93820 95697 Opening Inventory 6570 6702 6837 Closing inventory 8760 8936 9115 Operating expenses (indirect expenses) 597140 609083 621265 Labor and commissions 181040 184661 188355 Amortization and depletion 70080 71482 72912 Repairs and maintenance 33580 34252 34938 Utilities and telephone/telecommunication 47450 48399 49367 Rent 24090 24572 25064 Interest and bank charges 56940 58079 59241 Professional and business fees 19710 20104 20507 Advertising and promotion 13140 13403 13672 Delivery, shipping and warehouse expenses 0 0 0 Insurance 8760 8935 9114 Other expenses 142350 145197 148101 Total expenses 723430 737899 752657 Net profit/loss 6570 1225101 1379343 4.2. Projected Balance Sheet The estimated balance sheet statement in the year of commencement of business is depicted below. BALANCE SHEET Total assets 3516200 Total current assets 517800 Accounts receivable 119100 Closing inventory 1360000 Other current assets 3851000 Net fixed assets 2688600 Other assets and adjustments 3099000 Total liabilities 3069200 Total current liabilities 801800 Current bank loans 103600 Other current liabilities 698300 Long term liabilities 2267300 Total equity 447000 4.3. Profitable/Non-Profitable Businesses The business will be profitable if the total revenue earned by the hotel is more than the total expenses. The estimated revenue that will be generated in the first year is depicted in the table below. Profitable Percentage of businesses (%) Total revenue 730000 Total expenses 723430 Net profit 6570 If the total revenue generated by the business is less than its total expenses than the hotel will suffer a loss. This is depicted in the table below. Non-Profitable Percentage of businesses (%) Total revenue 730000 Total expenses 732250 Net loss 659250 5. Conclusion This business plan is a disciplined planning methodology for Dream Paradise Theme hotel, which will help the company to anticipate its start up expenses and other critical information that will help the hotel to set up and successfully run its business in Toronto East York. This plan focuses on the feasibility study, marketing strategy, site selection, identification of target consumers, pricing strategy and financial planning for the profitable commencement of the hotel business. References Brown, L. D. (2001). A temporal analysis of earnings surprises: Profits versus losses. Journal of Accounting Research, 39(2), 221-241. Buhalis, D. (2000). Marketing the competitive destination of the future. Tourism management, 21(1), 97-116. Der Foo, M., Wong, P. K. & Ong, A. (2005). Do others think you have a viable business idea? 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