SMEDA Beach Resort

Pre-Feasibility Study

Beach Resort

Small and Medium Enterprise Development Authority Government of Pakistan www.smeda.org.pk HEAD OFFICE th

6 Floor, LDA Plaza, Egerton Road, Lahore. Tel: (042) 111-111-456, Fax: (042) , 6304926, 6304927 [email protected] REGIONAL PUNJAB

OFFICE

8th Floor, LDA Plaza, Egerton Road, Lahore. Tel: (042) 111-111-456 Fax: (042) 6304926, 6304927 [email protected]

REGIONAL SINDH

OFFICE

5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 111-111-456 Fax: (021) 5610572 [email protected]

REGIONAL OFFICE NWFP

REGIONAL OFFICE BALOCHISTAN

Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 [email protected]

Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 2831623, 2831702 Fax: (081) 2831922 [email protected]

June, 2008

Pre-feasibility Study

Beach Resort

DISCLAIMER

The purpose and scope of this information memorandum is to introduce the subject matter and provide a general idea and information on the said area. All the material included in this document is based on data/information gathered from various sources and is based on certain assumptions. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. SMEDA does not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. Therefore, the content of this memorandum should not be relied upon for making any decision, investment or otherwise. The prospective user of this memorandum is encouraged to carry out his/her own due diligence and gather any information he/she considers necessary for making an informed decision. The content of the information memorandum does not bind SMEDA in any legal lega l or other form.

DOCUMENT CONTROL Document No.

PREF-11

Revisio n

0

Prepared by

SMEDA-Baloc histan

Issued by

Library Officer

Issue Date

June, 2008

1 BAL-PREF-11/June BAL-PREF-11/June 2008


Beach Resort

TABLE OF CONTENTS 1

PURPOSE PURPOSE OF THE DOCUMENT......... DOCUMENT................... .................... .................... ...................... ........................ ...................... .................... .................... .................... ................ ...... 5

2

PROJECT PROJECT PROFILE....... PROFILE................... ........................ ........................ ...................... .................... .................... .................... ...................... ........................ ........................ ...................... ............ 5

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11

PROJECT BRIEF ............................ .............. ............................ .............................. ................ ............................ .............. ............................ ............................ ............................ ................... ..... 5 OPPORTUNITY RATIONALE .............................. .............. ................ ............................ .............. ............................ ............................ ............................ ............................ ................ .. 5 MARKET ENTRY TIMING .......................................................................................................................6 PROPOSED BUSINESS LEGAL STATUS ..................... ................................. ........................ ...................... .................... .................... .................... ...................... ................ .... 6 PROJECT CAPACITY AND RATIONALE ..................... ................................. ........................ ...................... .................... .................... .................... ...................... ................ .... 7 PROPOSED PRODUCT MIX............................ .............. .............................. ................ ............................ .............. ............................ ............................ ............................ .................. .... 7 PROJECT INVESTMENT...........................................................................................................................7 RECOMMENDED PROJECT PARAMETERS................... ............................... ........................ ...................... .................... .................... .................... ...................... .............. .. 7 PROPOSED LOCATION ...........................................................................................................................7 KEY SUCCESS FACTORS /PRACTICAL TIPS FOR SUCCESS ................... ............................... ........................ ........................ ........................ .................. ...... 8 GOVERNMENT INCENTIVES FOR INVESTMENT IN TOURISM SECTOR ..................... ................................. ...................... .................... .............. .... 8

2.11.1 2.11.1 2.11.2 2.11.2 2.11.3 2.11.4 3

CURREN CURRENT T INDUST INDUSTRY RY STRUC STRUCTUR TURE E ....... ........... ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........10 ....10

3.1 3.2 3.3 3.3.1 3.3.2 3.3.3 3.3.4 3.3.5 3.3.6 3.3.7 4

4.3.1

TARGET CUSTOMERS ............................ .............. ............................ ............................ .............................. ................ ............................ .............. ............................ ...................... ........ 15 MARKET POTENTIAL ................ ............................ .............. ............................ ............................ ............................ ............................ ............................ ....................... ......... 15 PRICING STRATEGY.............................. .............. ................ ............................ .............. ............................ ............................ ............................ ............................ ......................... ........... 15 Additional Additional Revenue............... Revenue........................... ...................... .................... .................... .................... ...................... ........................ ........................ ...................... ................. ....... 15

MAIN PROJECT REQUIREMENTS ................... ............................. .................... ...................... ........................ ........................ ...................... .................... .................... ............ .. 16 EQUIPMENT DETAILS ............................ .............. ............................ ............................ .............................. ................ ............................ .............. ............................ ...................... ........ 16 FURNITURE AND EQUIPMENT MAINTENANCE ................... ............................. .................... ...................... ...................... .................... .................... ................ ...... 17 HUMAN RESOURCE REQUIREMENT ................... ............................. ...................... ........................ ...................... .................... .................... .................... ................... ......... 17

LAND LAND & BUILD BUILDING ING REQUI REQUIRE REMEN MENT T ....... ........... ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....... ... 18

6.1 6.2 6.3 6.4 7

Demand............ Demand........................ ........................ ........................ ...................... .................... .................... .................... ...................... ........................ ........................ ...................... ............. ... 12 Future Future Growth........... Growth....................... ...................... .................... .................... .................... ...................... ........................ ...................... .................... .................... .................... .......... 12 Contributi Contribution on to GDP ................... ............................... ........................ ........................ ...................... .................... .................... .................... ...................... ...................... .......... 13 Employmen Employment....... t................. .................... ...................... ...................... .................... .................... .................... ...................... ........................ ...................... .................... .................. ........ 13 Visitor Visitor Exports Exports......... ................... .................... .................... ...................... ........................ ........................ ...................... .................... .................... .................... ......................13 ............13 Capital Capital Investment....... Investment................. .................... .................... .................... ...................... ........................ ........................ ...................... .................... .................... .................. ........ 14 Government Government Expenditur Expendituree ................... ............................. ...................... ...................... .................... .................... .................... ...................... ........................ .................. ...... 14

PROJE PROJECT CT REQUI REQUIREM REMENT ENTS S ....... ........... ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... .. 16

5.1 5.2 5.3 5.4 6

GLOBAL SCENARIO .............................. .............. ................ ............................ .............. ............................ ............................ ............................ ............................ ......................... ........... 10 OVERVIEW OF THE YEAR 2008 2008 ................... ............................... ........................ ...................... .................... .................... .................... ...................... ........................ .............. 11 CURRENT DOMESTIC TOURISM INDUSTRY SITUATION AND FUTURE GROWTH ................... ............................. .................... .......... 12

MARKETING MARKETING STRATEGY STRATEGY ................... ............................... ........................ ...................... .................... .................... .................... ...................... ........................ ...................... .......... 15

4.1 4.2 4.3 5

Tourism Tourism Industry Industry ..................... ............................... .................... .................... .................... ...................... ........................ ........................ ...................... .................... ..................8 ........8 Foreign Foreign Exchange Exchange ..................... ................................. ...................... .................... .................... .................... ...................... ........................ ........................ ...................... .............. .... 9 Chartered Chartered Flights Flights ................... ............................. ...................... ........................ ........................ ...................... .................... .................... .................... ...................... ................... ....... 9 Work Visas............................. Visas....................................... .................... .................... ...................... ........................ ...................... .................... .................... .................... .....................9 ...........9

LAND REQUIRED............................ .............. .............................. ................ ............................ .............. ............................ ............................ ............................ ............................ ................ 18 COVERED AREA REQUIREMENT ................... ............................. .................... ...................... ........................ ........................ ...................... .................... .................... ............ .. 18 RECOMMENDED MODE ................... ............................... ...................... .................... .................... .................... ...................... ........................ ...................... .................... .............. .... 18 UTILITIES AND INFRASTRUCTURE REQUIREMENT ................... ............................. .................... .................... ...................... ........................ .................... ........ 18

START STARTING ING A SUCCES SUCCESSF SFUL UL BEACH BEACH RESORT RESORT BUSINE BUSINESS SS ....... ........... ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........19 ....19

7.1

HOW TO START A BEACH RESORT?......................... ?................................... .................... .................... ...................... ........................ ........................ ...................... ............ 19 2

BAL-PREF-11/June BAL-PREF-11/June 2008


7.1.1 7.1.2 7.1.3 7.1.4 7.1.5 7.1.6 7.1.7 7.1.8

7.2 7.3 7.4 8

DECIDING ON THE LAYOUT ................... ............................. ...................... ........................ ...................... .................... .................... .................... ...................... .................... ........ 20 HIRING THE RIGHT EMPLOYEES ................... ............................. .................... ...................... ........................ ........................ ...................... .................... .................... ............ .. 21 A GOOD HOSPITALITY BUSINESS EXPERIENCE ................... ............................. .................... ...................... ........................ ........................ ......................22 ..........22

PROJECT COST ............................ .............. ............................ ............................ ............................ ............................ ............................ ............................ ............................ .................... ...... 23 PROJECT RETURNS ............................ .............. ............................ ............................ ............................ ............................ .............................. ................ .......................... .............. ............ 23 PROJECT FINANCING ................ ............................ .............. ............................ ............................ ............................ ............................ ............................ ....................... ......... 23

FINANC FINANCIAL IAL ANALYSIS..... ANALYSIS................. ........................ ...................... .................... .................... .................... ...................... ........................ ........................ ...................... ................. ....... 24

9.1 9.2 9.3 10

Work in a Similar Similar Hospitali Hospitality ty Business Business......... ................... ...................... ........................ ........................ ...................... .................... .................... ................ ...... 19 Know Your Target Target Market Market ................... ............................. ...................... ........................ ........................ ........................ ...................... .................... .................... ............ .. 19 Develop Develop a Business Business Plan............... Plan......................... ...................... ........................ ........................ ...................... .................... .................... .................... .....................19 ...........19 Choose a Location Location & Layout........ Layout.................. .................... ...................... ........................ ...................... .................... .................... .................... ...................... .............. .. 19 Getting Getting the Appropria Appropriate te Funding Funding ................... ............................. .................... .................... ...................... ........................ ........................ ...................... .............. .... 20 Be Familiar Familiar with with Safety Safety Regulatio Regulations ns ................... ............................. .................... ...................... ........................ ........................ ...................... ................... ......... 20 Hiring Hiring Employee Employeess ................... ............................. ...................... ........................ ...................... .................... .................... .................... ...................... ........................ ................. ..... 20 Advertise Advertise & Market Market ..................... ................................. ........................ ...................... .................... .................... .................... ...................... ........................ ...................... .......... 20

PROJECT PROJECT ECONOMICS....... ECONOMICS................. .................... .................... .................... ...................... ........................ ...................... .................... .................... .................... .................... .......... 23

8.1 8.2 8.3 9

Beach Resort

PROJECTED INCOME STATEMENT ................... ............................. .................... .................... ...................... ...................... .................... .................... .................... .............. .... 25 PROJECTED BALANCE SHEET ................... ............................. ...................... ........................ ........................ ...................... .................... .................... .................... ................ ...... 26 PROJECTED CASH FLOW STATEMENT..................... ................................. ........................ ...................... .................... .................... .................... ...................... .............. .. 27

KEY ASSUMPTIO ASSUMPTIONS...... NS.................. ........................ ...................... .................... .................... .................... ...................... ........................ ........................ ...................... .................... ............ 28

10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8

PROJECT CAPACITY ASSUMPTIONS ................... ............................. ...................... ........................ ...................... .................... .................... .................... ................... ......... 28 REVENUE ASSUMPTIONS ................... ............................... ........................ ...................... .................... .................... .................... ...................... ........................ ...................... .......... 28 ECONOMIC ASSUMPTIONS ................... ............................... ........................ ........................ ........................ ...................... .................... .................... .................... .................. ........ 28 EXPENSE ASSUMPTIONS ............................ .............. .............................. ................ ............................ .............. ............................ ............................ ............................ .................. .... 28 DEPRECIATION EXPENSE ASSUMPTIONS................... ............................... ........................ ...................... .................... .................... .................... ......................29 ............29 COST OF GOODS SOLD ............................ .............. ............................ .............................. ................ ............................ .............. ............................ ............................ .................... ...... 29 CASH FLOW ASSUMPTIONS .............................. .............. ................ ............................ .............. ............................ ............................ ............................ ............................ .............. 29 FINANCING ASSUMPTIONS................... ............................... ........................ ........................ ........................ ...................... .................... .................... .................... .................. ........ 29



Beach Resort

Introduction to SMEDA The Small and Medium Enterprise Development Authority (SMEDA) was established with the objective to provide fresh impetus to the economy through the launch of an aggressive SME support program.1 Since its inception in October 1998, SMEDA had adopted a sectoral SME development approach. A few priority sectors were selected on the criterion of SME presence. In depth research was conducted and comprehensive development plans were formulated after identification of impediments and retardants. The all-encompassing sectoral development strategy involved recommending changes in the regulatory environment by taking into consideration other important aspects including financial aspects, niche marketing, technology up gradation and human resource development. SMEDA has so far successfully formulated strategies for sectors including, fruits and vegetables, marble and granite, gems and jewelry, marine fisheries, leather and footwear, textiles, surgical instruments, urban transport and dairy. Whereas the task of SME development at a broader scale still requires more coverage and enhanced reach in terms of SMEDA’s areas of o f operation. Along with the sectoral focus a broad spectrum of business development services is also offered to the SMEs by SMEDA. These services include identification of viable business opportunities for potential SME investors. In order to facilitate these investors, SMEDA provides business guidance through its help desk services as well as development of project specific documents. These documents consist of information required to make well-researched investment decisions. Pre-feasibility studies and business plan development are some of the services provided to enhance the capacity of individual SMEs to exploit viable business opportunities in a better way. This document is in the continuation of this effort to enable potential investors to make wellinformed investment decisions.

1

For more information on services offered by SMEDA, please visit our website: www.smeda.org.pk



1

Beach Resort

PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study covers various aspects of project concept development, start-up, and production, finance and business management.

2

PROJECT PROFILE

The project is about starting starting the business of a Beach Resort at Gwadar beach, Balochistan. The proposed plan plan is to offer offer complete complete package of boarding/lod boarding/lodging ging and dinning for tourists/vi tourists/visi sitors, tors, and conference hall for different corporate clients for holding meetings/seminars etc. at Gwadar beach. 2.1

Pro je ject Brief

A seaside resort is a resort located on the coast and where a beach is the primary focus for tourists, it it may be called a beach resort. The study provides basic information information regarding the investment opportunity for setting up a Beach Resort at any of the Balochistan’s major coastal areas such as Gaddani, Sonmiani, Ormara, Pasni and Gwadar. Such a business could also be established on beaches that fall in Sindh, after after conducting initial initial market research/surveys research/surveys and properly analyzing the demand. Currently the project is being designed/proposed for Gwadar being the most developed part of Balochistan’s coastal Zone. The project would serve as a place where tourists, visitors, visitors, vacationers and leisure travelers could stay overnight, dine, and enjoy the breathtaking view of the clear ocean. Initially the project is proposed to attract domestic tourists/visitors but after its maturity, international tourists could also become a major part of o f its customer base. The main features of the project would include miles of unspoiled virgin beach, luxurious ocean view, beautiful separate huts, in-hut dining, dining hall, conference hall, and other basic entertainment facilities. 2.2

Opportunity Rationale

Balochistan has more than 750 Kilometers long coastline with clean and virgin beaches, tropical forests, exotic mountains, coral reefs and many breathtaking locations. Balochistan coastal zone has so far been neglected for tourism and travel development despite of tremendous potential in the sector. Very few areas are seen to have given a bit of attention by the Government as far as beach tourism and travel is concerned and that too due to traffic increase of visitors because of Gwadar. During the preliminary surveys, it was found that towns such as Gaddani, Ormara and Gwadar have been given attention by the government and private sector for investment. The completion of Makran Coastal Highway has provided the very basic infrastructure facility that connects the major towns such as Gaddani, Sonmiani, Ormara, Pasni and Gwadar. Similarly Gwadar Airport has provided the visitors the facility to reach the town in around 45 minutes from Karachi and in around 90 minutes from Quetta. 5 BAL-PREF-11/June BAL-PREF-11/June 2008


Beach Resort

Visitors and vacationers from Karachi city have diverted to beaches of Balochistan due to increase of pollution and crowd on Karachi and adjacent beaches. Families are observed at Gaddani beach on weekends and the number so far has seen inclining. Gwadar on the other hand has seen to have a bit higher rate of development in terms of tourism and travel activities, mainly due to Government’s priority in developing Gwadar Port that has attracted the attention of both public and private sector in investment possibilities. Other than Gaddani and Gwadar, Ormara has been given attention by the Government due to its strategically important location in naval point of view. Other tourism and travel related developments on Balochistan Balochistan Coastal Belt include the establishment of Hingol National Park, a few kilometers away from the beach at Hingol Valley, near Ormara. Looking at a broader perspective, Balochistan coastline was required to be developed by the government and private sector for tourism and related business activities/investments much earlier, but this negligence on the other hand provides countless opportunities for all-scale tourism businesses not only for domestic but also for international investors specifically in Beach Resorts. Following are the key points that make the project very much feasible and attractive for the investors: 

The only beach resort in the province and country



8 bamboo structured ocean front view huts



24 hour guest gue st service



Miles of unspoiled beach



Ocean view indoor and outdoor dining facility



Ocean view conference hall



24 Hour business center



Cable TV



Mini Bar



Peaceful environment

2.3

Market Entry Timing

Although the weather conditions in Gwadar is suitable for tourists/visitors almost throughout the year but the project is assumed to have business mostly during the winters and springs as the weather conditions in these 6 months (October – March) becomes very much comfortable for the visitors. The project therefore, is proposed to become operational in the start of winter season to attract most of the customers. 2.4

Proposed Business Legal Status

Although the legal status of the business tends to play an important role in any setup, the beach resort business is proposed to be operated on a sole proprietorship basis which may extend to partnership in case of expansion and/or addition of new products/services that might add significant business to the existing setup. setup. Also less complications and costs are are involved in 6 BAL-PREF-11/June BAL-PREF-11/June 2008


Beach Resort

forming, forming, administerin administering g and running such such a setup and the tax rates rates applicabl applicablee for such arrangement are lower than private or public pu blic limited. 2.5

Pro je ject Capacity and Rationale

The project is proposed to have eight (08) separate huts for visitors to stay overnight, one conference hall, a dinning hall, and an open air dinning place on the first floor. After project’s maturity in the peak seasons, the resort would entertain 8 families per day and would facilitate three conferences/seminars/trainings per month. 2.6

Proposed Product Mix

The business setup is proposed to have hav e the following products/services: 1. 08 separate separate huts huts on the beach, beach, made made of bambo bamboos os providing providing a unique unique experience experience to to visitors visitors 2. Conference Conference hall for for all sorts sorts of seminars, seminars, worksh workshops, ops, and training training programs programs for for corporate clients 3. Open-air Open-air dining dining on the roof and and indoor dining services services (dinin (dining g hall and hut delivery delivery services) services) To make the project’s operations smooth and less hectic for the investor, it is proposed that the kitchen (food and beverages) should be handed over to the second party on Theka basis. The second party contractee will be responsible for arranging experienced cooks and installing required kitchen machinery & equipments. 2.7

Pro ject Investment

The total investment required for this project is 9.77 m. The investment mainly covers capital costs of 9.5 m and working working capital requirement of 0.25 m. 2.8

Recommended Pro ject Parameters

Capacity

Human Resource

8 Huts * 180 Days (six months) = 1,440 nights

17

Location

Gwadar, Balochistan

Financial Summary

2.9

Project Cost

IRR

NPV

Payback Pe riod

Cost of Capital

9.77 millio n

36%

1 5, 8 4 8, 6 8 8

3.2 Yrs

12 %

Proposed Location

The proposed location for the project could be in any of the following areas on Balochistan coastal belt such as Gaddani, Sonmiani, Ormara/Dam, Pasni, Gwadar and Jiwani. But due to the availability of infrastructure and comparatively high traffic rate, it is highly recommended to establish such a project at Gwadar beach to increase its viability. However, such a project could 7 BAL-PREF-11/June BAL-PREF-11/June 2008


Beach Resort

also be established on beaches of Karachi and adjacent areas after careful analysis of market demand and project viability. 2.10 













Key Success Factors / Practical Tips f or Success

Location plays the most important role for such a project. Clean virgin beaches of Balochistan coastal zone are suitable for the project and its viability. Trained personnel for the project would add towards the success of the project. Awareness amongst the general people would attract more customers customers therefore; use of proper marketing techniques is important Makran Coastal Highway and Gwadar International Airport provides the connectivity of the proposed location, Gwadar to the rest of the country making the project project easily accessible for visitors/vacationers visitors/vacationers and tourists Target customers should initially be the domestic tourists. Upon its maturity, international tourists could also be facilitated facilitated Consistency in quality products and services would develop confidence amongst the customers and would help in their retention Guest feedbacks should be a regular activity by the management and the viable recommendations/suggestions should be adopted

2.11

Government Incentives f or Investment in Tourism Sector

The present Government has taken a number of initiatives to attract investment in tourism sector. The following incentives and concessions are available for domestic and foreign investments in tourism industry2: 2.11.1 T our ism I nd ust r r y

1.

Touri Tourism sm is is cate categor goriized as ‘In ‘Indus dustry try’’ accor accordin ding g to the the Inve Invesstment tment Poli Policy cy in vogue vogue.. Ministry of Tourism can issue a certificate that a project falls in Tourism Industry

2.

Permis Permissi sion on is not requi required red for for set settin ting g up up of tourism tourism proje project ct in in the Private Private Sector Sector

3.

Telep Telephon hone, e, Tel Telex, ex, Fax fac facil iliti ities es are are provi provided ded to trav travel el trad tradee on pri priori ority ty basi basiss

4.

Plan Plant, t, Machi Machine nery ry & Equi Equipm pmen entt (PME (PME)) not manu manufa fact cture ured d loc locall ally y can can be imp impor orte ted d @ 5% 5% custom duty

5.

Initial Initial deprecia depreciati tion on is is availab available le @ 50% in addition addition to norm normal al depreci depreciati ation on allo allowabl wablee @ 10% on all depreciable assets. This incentive practically operates as universal tax holiday as income may not generally be liable to tax for a period of five to six years because of carry forward of unadjusted depreciation loss

2

Ministry of Tourism, Government of Pakistan



Beach Resort

6.

Payme Payment nt of of with withhol holdi ding ng tax tax at impor importt stage stage in in res respe pect ct of of plan plantt mach machin iner ery y equi equipm pment ent and and parts has already been done through inclusion of sub-clause (vii) in clause -56 of part-IV of the Second Schedule to the Income Tax Ordinance, 2001

7.

Specia Speciall equip equipmen mentt for for adve adventu nture re touri tourism sm activi activities ties like like wate waterr sport sports, s, hang-gl hang-gliiding, ding, golf, golf, indoor sports equipment, power boats, water rafts, canoes, water skiing equipment provided by the travel trade as a services to the tourists is allowed to be imported on 5% customs duty

8.

The cent central ral airair-con condi diti tion onin ing g equip equipme ment nt and and appar apparatus atus of gen gener eral al util utiliity in hotel hotelss are are charged industrial tariff for electrici e lectricity ty

9.

The Wo Worl rld d Bank Bank due to to impor importan tance ce of the bar bargai gain n pow power er of of Paki Pakist stan an has has bec becom omee more more relaxed in offering cooperation in various activities

10.

Recently Recently they hav havee facili facilitate tated d Minis Ministry try of Water Water and and Power Power in in estab establis lishin hing g an Exper Expertt Advisory Cell in the Ministry which is made by the locals and a couple of foreign consultants on visibly favorable terms

11.

There There is a policy policy of the the gover governme nment nt to to avoid avoid to to maximu maximum m exten extentt barrow barrowin ing g from from World World Bank however if felt necessary it can be requested with prior consent of the Finance Ministry

xchange 2.11.2 F or eign E

1.

Permis Permissi sion on of the State State Bank Bank of Pakista Pakistan n is not requi required red for repa repatri triati ation on of profi profits from from tourism projects

2.

Forei Foreign gner ers/ s/lo local cal and Over Overse seas as Pakis Pakista tani niss can can open open for forei eign gn exch exchang angee acco account untss

3.

Full Full repatri repatriati ation on capital capital,, capi capital tal gains, gains, dividen dividends ds and profi profits is is allowed. allowed. However However,, the the share of non-residents is required to be registered w ith State Bank of Pakistan

4.

Foreig Foreign n inve investme stment nt is welcom welcome. e. However However,, it it is is the the prime prime respons responsibi ibili lity ty of of all partie partiess concerned to ensure that foreign exchange has been raised through legitimate transactions and not through money laundering etc.

2.11.3 C har t d F light s te r ed F

1.

Permi Permiss ssiion for for chart chartere ered d flight flightss is giv given en by the the Mini Minist stry ry of Tour Touriism in con consu sulltation tation with with Ministry of Interior. Chartered flights are allowed on point-to-point basis from Karachi, Lahore, Islamabad and Peshawar

2.

Heli Helico copter pter char charter tered ed flig flight ht serv servic ices es is allow allowed ed any anywh wher eree in Pakis Pakistan tan

2.11.4 W or k k V isas

1.

Work vis Work visas are are gran grante ted d to fore foreiign tech techni nica call and and manage manageri rial al per perso sonn nnel el for for the purpo purpose se of of transferring skills skills and know-how. The work visas can be issued for for a period up to 5 years. Ministry of Tourism’s representative is a member of the team that issues work visas.



3 3.1

Beach Resort

CURRENT INDUSTRY STRUCTURE 3

Global Scenario 3

The year 2007 exceeded the expectations for international tourism with arrivals reaching new record figures close to 900 million. The results confirm both the sustained growth path of the past years and the resilience of the sector regarding external factors. This development has been supported by a strong world economy, which has experienced its longest period of sustained growth for more than two decades.

According to the latest UNWTO World Tourism Barometer, international tourism arrivals expanded by 6% in 2007, as compared to 2006.

3

World Tourism Organization (UNWTO) 10



Beach Resort

Of the additional 52 million worldwide arrivals, Europe received some 19 million and Asia and the Pacific 17 million. The Americas was up by around six million, Africa by three million and the Middle East by five million. 52 Million International Arrivals More Asia and the Pacific + 17 million (33%)

Europe + 19 million (38%)

Americas Africa +6 million +3 million (12%) (6%)

Middle East + 5 million (11%)

All the different regions registered increases above their long-term average, with the Middle East leading the regional growth ranking (+13%), followed by Asia and the Pacific (+10%), Africa (+8%), the Americas (+5%) and Europe (+4%). 3.2

Overview of the Year 2008

World Gross Domestic Product (GDP) has experienced its longest period of sustained growth for 25 years, with figures around or above 5% since 2004. Particularly emerging markets and developing economies are driving the global GDP for the most part of this decade. This also correlates to their behavior as emerging tourism destinations, which on average nearly double the growth of destinations in high income countries. co untries. For 2008, confidence remains high, although this perception might deteriorate. Economies worldwide have shown increased volatility and confidence has weakened in some markets due to uncertainty about the subprime mortgage crises and economic prospects, in particular for the USA, alongside with global imbalances and high oil prices. International tourism might be affected by this global context. But based on past experience, the sector’s proven resilience and given the current parameters, it is unlikely to expect that growth in world travel and tourism will come to a halt.



Beach Resort

4

Current Domestic Tourism Industry Situation and Future Growth4

3.3

Pakistan’s overall tourism industry seems to be very promising from the statistics taken from World Travel and Tourism Council WTTC. Following are the details in comparison with the rest of the world. 3.3.1 Demand

According to World World Travel and Tourism Council (WTTC), Tourism Tourism &Travel (T&T) demand in South Asia was expected to reach US$ 82,037.2 M in 2007 and was forecasted to grow to US$ 204,964.5 M in 2017. In Pakistan, in 2007, T&T was expected to post PKR 733.6 billion (US$ 11,744.0 mn) of economic activity (Total Demand), and was forecasted to grow to PKR 1,948.9 billion (US$ 26,376.5 mn) by 2017. WORLD WORLD MARKET MARKET SHARE 0.2% 0.25% 0.20% 0.15% 0.10% 0.05% 0.00% 1988

3.3.2

1992

1996

2000

2004

2008

2012

2016

F ut ur e Gr owt h

T&T is a high-growth activity, which is forecasted to increase its total economic activity by 4.4% per annum worldwide in real terms over ove r the next ten years. In South Asia, T&T was expected to post average annualized gains of 7.3% between 2008 and 2017. For Pakistan, Pakistan, T&T T&T activity activity was expected to grow by 5.2% 5.2% per annum in real terms between 2008 and 2017. GROWT GROWT H

2007: 6.6%

10Yr: 5.2%

25% 20% 15% 10% 5% 0% -5% -10% -15%

198 9

4

19 93

1 99 7

20 01

20 0 5

World Tourism Organization (UNWTO) 12


20 09

2 0 13

20 1 7


3.3.3

Beach Resort

C ont r DP ri but ion t o G DP

In 2007, the T&T Industry was expected to contribute 3.6% to worldwide GDP. The broader T&T Economy should contribute 10.4% 10.4 % to world GDP in 2007. In South Asia, the T&T Industry is expected to post a GDP contribution of 2.1% in 2007, while the T&T Economy contribution will be 5.5%. Pakistan's T&T Industry was expected to contribute 2.4% to to (GDP) in 2007 (PKR 209.6 bn or US$ 3,355.8 mn), mn), rising rising in nominal terms to PKR 561.5 bn or or US$ 7,599.7 mn mn (2.4% (2.4% of total) total) by 2017. The T&T Economy contribution (percent of total) should decline from 6.0% (PKR 520.5 bn or US$ 8,332.4 mn) mn) to 5.8% (PKR (PKR 1,347.2 bn or US$ 18,233.1 18,233.1 mn) in in this same same period. period.

Pakistan Tourism & Travel Gross Domestic Product (% of Total GDP) 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%

1988

1992

1996

2000

2004

2008

2012

2016

3.3.4 E m plo yment

T&T is human resource intensive, creating quality jobs across the full employment spectrum. In 2007, it was expected that one in 12.0 jobs will be generated by the T&T Economy. The T&T Economy accounts for 8.3% of global employment. Today there are 231.2 million jobs in the T&T Economy, and these will rise to 262.6 million million by 2017. The South Asia T&T Economy will account for 31,493,000 jobs (5.2% of total employment). Pakistan’s T&T Economy employment was estimated at 2,669,000 jobs in 2007, 4.8% of total employment, or 1 in every 20.6 jobs. By 2017, this should total to 3,498,000 jobs, 4.7% of total employment or 1 in every 21.3 jobs. 3.3.5

V isit or E x po por t E ts

T&T is a major exporter, with inbound visitors injecting foreign exchange directly into the economy. T&T exports in South So uth Asia are expected to represent 5.5% of o f total exports in 2007.



Beach Resort

In Pakistan, exports make up a very important share of T&T's contribution to GDP. Of total Pakistan Pakistan exports, exports, T&T was expected expected to generate generate 6.3% 6.3% (PKR 91.8 bn or or US$ 1,470.1 mn) mn) in 2007, increasin increasing g to PKR 299.4 bn, or US$ 4,051.8 mn (4.9% (4.9% of total), total), in 2017. 3.3.6 C a pi pit al I nvest ment

T&T is a catalyst for construction and manufacturing. In 2007, the public and private sectors combined combined are expected to spend spend US$ 1,155,427.0 1,155,427.0 bn on new T&T capital investme investment nt (CI) worldwide, 9.5% of total investment, rising rising to US$ 2,392,765.0 bn, or 9.9% of the total, in 2017. In South Asia, Asia, T&T CI was expected expected to total US$ US$ 23,306.0 23,306.0 mn in 2007, or 8.0% of total total regional regional capital investment. Pakistan Pakistan T&T CI was estima estimated ted at PKR 200.1 bn, US$ US$ 3,203.8 mn or 14.0% of total investm investment ent in year 2007. 2007. By 2017, this should should reach reach to PKR 452.8 bn, US$ 6,128.1 mn or 11.8% of total. total. 3.3.7 Gover nment E x pe pend it ur e E

T&T is both a generator and receiver of government funds. Globally, in 2007, T&T is expected to garner US$ 334,249.2 bn of government expenditures, or 3.8% of total expenditures. By 2017, government spending on T&T should increase to US$ 545,858.2 bn - 3.9% of total government expenditure. Government T&T operating operating expenditures in Pakistan in 2007 are expected to total PKR 13.1 bn (US$ 209.9 mn) or 2.0% of the total government spending. In 2017, this spending is forecasted to total PKR 36.8 bn (US$ 498.2 mn), mn), or 2.1% of the total total government government spending. spending. Description

Personal Travel & Tourism Business Travel Government Expenditures Capital I nvestment Visitor Exports Other Exports Travel & Tourism Demand T&T Industry GDP T&T Economy GDP T&T Industry Employment T&T Economy Employment

PKR Billion

2007 % of Total

Growth

2 8 4. 4

4.2

2

1 4 4 .1 1 3. 1

Growth

5 .7

782.9

4. 4

5 .5

12.9 6.9

377 36.8

2 .1

5 .7 5 .8

2 0 0 .1 64 2 7. 8 7 3 3. 6

14 4 .4 1. 9

3.8 5.4 8 .3 6.6

4 5 2 .8 1 8 9 .9 1 0 9. 5 1,948.90

1 1 .8 3 .1 1 .8

3 .3 6 .1 9 .3 5 .2

2 0 9. 6 5 2 0. 5 1,055.50

2.4 6 1 .9

9 .8 8 6 .3

5 6 1 .5 1 ,3 4 7 .2 0 1, 4 3 3 . 0 0

2. 4 5. 8 1 .9

2 .6 5 .1 3 .4

2,668.90

4 .8

4 .5

3, 4 9 7 . 5 0

4 .7

2 .9


PKR Billion

2017 % of Total


4 4.1

Beach Resort

MARKETING STRATEGY Target Customers

The target market of the project is very wide in nature. All the tourists/visitors whether domestic or international could be the major target market for the project. On the same time, it could also be a facility for the corporate clients who visit Gwadar on business purposes and want to hold seminars/workshops etc. Similarly, the local residents of Gwadar and adjacent areas could also be one of the major components of the target market who could not only stay overnight at the huts but also could enjoy see view dining, lunch or evening tea. 4.2

Market Potential

As discussed earlier, currently there are no such facility available in the who le country, therefore, its uniqueness would attract its customers to have a different and new experience staying at its family huts and/or enjoy the see view meals. Also for corporate culture, its see view conference hall would also provide a very unique environment. 4.3

Pricing Strategy

Since the project has a very wide range of customer class, the pricing strategy should be appealing enough to give its customers the value of their money spend while using its services. On the same time, the charges should neither be very high to compete with PC Gwadar nor very low to give negative impression in the market. After carefully analyzing the current hotel/motel cluster in Gwadar, it is proposed that the customers should be charged somewhere between Rs. 3,000 to 5,000 per night. The investor can always shuffle the charges according to the market situation and seasons. In this report, Rs. 4,000 per night charge for only six months (Sept-March) has been taken to calculate project’s revenue streams. However, the investor can always attract customers to stay at the resort in the off-s o ff-season eason as well adding add ing more revenue to the project. 4.3.1 Ad d di t ional Revenue

The hall rental per day for different venues such as seminars, training programs, workshops, birthday parties, anniversaries and other social gatherings should be in line with the other similar service providers so that the customers could be attracted. Here, it is assumed that a total of 24 venues (2 per month) will be facilitated facilitated and Rs. 10,000 10 ,000 per venue hall rental will be charged. The last revenue component of the project is the monthly/quarterly/semi-annually/annually kitchen Theka. Under normal circumstances, such agreements are made keeping in view the regular flow of customers throughout the year. Since due to weather conditions, this project has one peak-season (Sept-March) in the year, therefore, it is assumed that the flow of customers would not be regular throughout the year. The investor has to keep this factor in mind while deciding the Theka rate. In this pre-feasibility report, a monthly kitchen Theka rate of Rs. 35,000 has been taken to calculate project’s additional revenue stream.



5

Beach Resort

PROJECT REQUIREMENTS

5.1

Main Pro je ject Requirements

The basic requirements requirements for for a beach resort includes includes management management staff and waiters/s waiters/servers ervers,, furniture and fixture, electronics such as TV/DVD, Multimedia, fridge, air conditioners, telephone/fax, computer/printer, and electric generator. These equipments are easily and readily available in the local markets. 5.2

Equipment Details

The details of the different d ifferent machinery and equipment required for the pro ject are given as below: Table 5.2-1

Equipment & Machinery Details

Description

No. of Units

Price/Unit

Total Price (PKR)

Televisio n Sets

9

1 4 ,0 0 0

1 2 6 ,0 0 0

DVD Players

8

5, 0 0 0

4 0 ,0 0 0

Mult imedia

1

7 0 ,0 0 0

7 0 ,0 0 0

Generator

1

3 5 0, 0 0 0

3 5 0 ,0 0 0

Fridge (small)

9

8, 0 0 0

7 2 ,0 0 0

Air-condit ioners

4

3 0 ,0 0 0

1 2 0 ,0 0 0

Telephone/interco m sets

8

1 ,0 0 0

8 ,0 0 0

Total Table 5.2-2

786,000 Of f fi ce Equipment Details

Other Equipment Details

Qty

Cost/Unit

Total Cost (PKR)

Computers

2

3 5 ,0 0 0

7 0, 0 0 0

Printers

2

1 5 ,0 0 0

3 0, 0 0 0

Fa x

1

1 2, 0 0 0

12,000

Te lephone Sets

3

1 ,0 0 0

3,000

Total Table 5.2-3

115,000 Furniture & Fixture Details

Description

Total Cost (PKR)

Tot al Office Furniture

6 0 ,0 0 0

Tot al Hut Furniture

4 0 0 ,0 0 0

Carpeting and Bedroom Necessities

200,000

Total

660,000 16



5.3

Beach Resort

Fu rniture and Equipment Maintenance

The furniture and equipment maintenance process will be conducted on o n yearly basis. 5.4

Human Resource Requirement

The manpower required for operatin o perating g the Day Da y Care Center is as follows: Table 5.4-1

Human Resource Requirement Details Qty

Monthly Salary/Person

Manager

1

2 5 ,0 0 0

2 5, 0 0 0

Accounts/Admin Officer

1

12,000

1 2 ,0 0 0

Waiters/Servers

5

5, 0 0 0

2 5 ,0 0 0

Guards

3

4,000

1 2, 0 0 0

Office Peon

1

4, 0 0 0

4, 0 0 0

Sweepers

6

3, 5 0 0

2 1 ,0 0 0

Total Monthly Cost

17

Description

Total Monthly Salary (PKR)

99,000

The staff salaries are estimated according to the market trends; however, the investor may set different pay scales.

Note:



6

Beach Resort

LAND & BUILDING REQUIREMENT

6.1

Land Required

Such an arrangement is possible by acquiring the land on 99 year lease from the revenue department, Government of Balochistan, pre-approved by GD A. The details are as under: Table 6-1

Land Requirement Details

Description

Area Required

Total Lease Price/Acre

½ Acre

Rs. 120,000

L an d

Total Price (Rs.)

60,000

Total 6.2

60,000 Covered Area Requirement

The proposed project layout is to have main building of 3,000 Sq.ft. in the center with 08 separate bamboo huts (04 huts on each side of the building). The building will consist of one office, reception area, lobby, kitchen space, and a conference hall. Each hut will have one living room, one bedroom, and one o ne washroom. The estimated cost details are as under: Table 6-2

5

Covered Area Requirement Details 5 Sq . ft Required

Construction Rate/Sq.Ft

Total Cost (PKR)

Reception, lobby, Kitchen, Conference Hall, Washrooms (ground floor)

3 ,0 0 0

1 ,2 0 0

3 ,6 0 0 , 0 0 0

Dining hall, Washroo ms (1st floo r)

1, 5 0 0

1 ,0 0 0

1 ,5 0 0 ,0 0 0

Description

Terrace Grills (open a ir d ining) 08 Bamboo Huts (each with bedroom, living room, and washroom)

2 0, 0 0 0 396 * 8 = 3,168

850

Total Building/Covered Area 6.3

2 ,6 9 2 ,8 0 0

7,812,800

Recommended Mode

It is recommended that the proposed project should be constructed on leased/purchased land rather than rented space to maximize monthly revenue and to increase viability of the project. 6.4

Utilities and Inf rastructure Requirement

Basic utilities like electricity, gas and water are required for operating the project.

5

All cost estimates are based on June 2008 market prices



7

Beach Resort

STARTING A SUCCESSFUL BEACH RESORT BUSINESS

From small restaurants and motels to large size hotels, more and more tourist stay areas are popping up in attractive places in the country. Since hospitality services are are becoming a common business venture, people must also enjoy running them. However, all of those advantages come at a price – building building and operating operating such a structure structure from from scratch and that too for the first first time in areas like Gwadar is not an easy task. It is a hard and expensive process, and the reality is that many resorts/hotels fail in their first year of business due to improper planning and forecasting. But rest assured there are ways to reduce the risk of becoming another statistic. Following are some of the handy tips t ips that can help run a successful beach resort establishment. 7.1

How to Start a Beach Resort?

7 .1.1

W or k i k pit alit y B y Bu Business k in a Similar H H os pi

One of the best ways to reduce the risk of owning a failed resort is is to have some hospitality service providing experience before you start your own. Many successful hotel/motel/resort owners have said that the best way to prepare for owning a similar similar setup is by working in one. You will learn more more than just how to receive guests and provide your services with with a smile, you can learn marketing, marketing, venue management, payroll, and and other significant components. Working Working in the hotel industry industry and learning the basics basics is an important first first step to becoming becoming a successful owner. 7 .1.2

K now Y our T ar get M M ar k ke t

Who does the investor investor see as guests in his/her his/her resort? Is he/she targeting the whole family, youngsters, seniors, or corporate people? Knowing the target market before before start planning planning will not only help help the investor investor solidify solidify his/her his/her overall overall services services but it will will also help help determine determine the location, location, decor and the overall overall atmosphere atmosphere of the resort. resort. A family-styl family-stylee resort, which which caters to parents and their kids, may not appeal to seniors seniors and/or corporate clients. On the other hand, an upscale, upscale, quiet atmospher atmospheree offering offering a two-hour dining experienc experiencee wouldn't be appealing appealing to teenagers or families with small children. 7 .1.3 Develo p a Business Plan

Like any other type of company, a beach resort will need a concise business plan. This plan should include but is not limited to: the overall concept and goal of the business, specific financial information and projections, a description of the target market, the services, menu and pricing, equipment and employee details, advertising and marketing marketing plan, and a potential exit strategy. 7 .1.4

C hoose a Locat ion & La yout

It is important to find find a location that has a continuous stream of traffic, convenient parking, and is in proximity to other businesses. For a beach resort, u may want to select a beach a little aside the crowded parts of the area where the visitors could enjoy only the beach and not the traffic and noises that they have become fed up of. On the same time, the investor should also keep in view its easy proximity for the visitors from the main town/city. In addition, if the investor 19 BAL-PREF-11/June BAL-PREF-11/June 2008


Beach Resort

acquires the premises premises on rental basis, he/she should make sure that the monthly monthly rent is in-line with the business business plan's projections. Once the location is selected, the layout layout and design of the interior interior should should be taken into account. account. Investor Investor should already already have a concept of his/her his/her resort resort in the business plan and bring the concept into the design of the overall structure. When designing the kitchen kitchen area, the investor investor should already already have the idea about the daily menu menu in order to determine what is needed needed for the food preparation preparation area. 7 .1.5

Get t pr o pr iat e F und ing ti ng t he A p pr

The business plan will help the investor recognize how much money he/she will need to start a beach resort. If unsure about how much money money will be needed upfront, talking talking to other similar business owners can help project the expected start-up costs. 7 .1.6 Be F amiliar w r wit h Sa f et y R y Re Regulat ions

Hotels, motels, restaurants, and resorts are regulated and subject to inspection, and failing to be up to speed with these regulations could be detrimental to the facility. Therefore it is necessary to consult with similar business business owners/related govt. departments to become familiar with what one must do to meet the necessary legal requirements. 7 .1.7 H ir ing E m plo yees

One of the biggest challenges hotels and resorts face is the lack of qualified labor. In order to get and retain qualified employees, make make sure that the pay scales relate clearly to the job's duties and responsibil responsibilities ities.. In addition, find out what other similar similar setups are paying their employees employees so that you can be competitive in the job market, without without spending too much on payroll. However the investor should try linking the payroll with the bottom line and see how much money can be squeezed out for the employees. Similarly, giving priority of hiring the local people in the staff gives another advantage as they might be more aware of the local customs/traditions and would help develop such atmosphere to attract/satisfy customers. In case of difficulty in finding trained/educated staff, investor may want to train the staff after hiring them according to the business needs and requirements. 7 .1.8 Ad ver t ti se & M ar k ke t

Every business needs a comprehensive marketing plan and such a setup that never has existed before certainly would would need a lot of concentration for for its proper introduction in in the market. After determining marketing marketing budget, price out billboard advertising, advertising, flyers in newspapers, and local local cable TV advertising. Ask Ask the customers how they found out about your setup and service, service, so that you can record where the advertising and marketing money could be best spent. 7.2

Deciding on the Layout

Layout and design are major factors in introduction phase of any hospitality business. You'll need to take into account the size and layout layout of the reception area, kitchen space, conference hall, and especially the individual huts.





Beach Resort

Separate Bamboo Huts

This component should be the main focus of attention while designing its external and internal layout. The proposed material for constructing the huts is bamboo as it would provide the natural and a bit different look. Similarly, living in a bamboo hut would provide a very unique experience to the visitors/tourists especially the domestic visitors as a major portion of such customers/clients have never had such experience. Since it’s a beach resort, therefore all the openings of huts should be directed towards the sea shores. Also the space between the huts should be reasonable reasona ble enough to provide privacy pr ivacy to visitors. 

Kitchen Operations Operations and Dining Area. Area.

The proposed setup is to hand over the kitchen on Monthly Theka basis. While selecting the contractee, the investor should analyze their previous experience in catering and related services and should discuss/consult the contractee before designing the layout of the kitchen and dining area so that it should meet their requirements. Once again, the ocean view should be kept in mind in designing the layout of the indoor/outdoor dining area. To accommodate the different groups of customers, use tables for four that can be pushed together in areas where there is ample floor space. This gives you flexibility in accommodating both small and large parties. Place movable umbrella shades on the open dining areas (as proposed the facility will have open terrace on the first floor besides the indoor dining hall) so that the visitors find it co mfortable having meals under the sunlight. 

Reception Area

For any hospitality business, the layout of the reception area plays a very important role in attracting and retaining clients. Make sure that the layout should be reasonably large, comfortable and attractive. Similarly, there should be plenty of sitting areas so that visitors could comfortably wait for reservation in peak season. 

Conference Hall

Since Gwadar has become the focus of not only public sector but also private sector businesses/companies, therefore it is expected that there is a dire need of such a facility to accommodate such customers. The conference hall normally is used for organizing seminars, workshops and training programs. The investor should make sure that the layout of the conference hall should be in a way to house a reasonable number of people comfortably in one time. Ocean view window openings concept can also be used for designing the layout of the conference hall. 7.3

Hiring the Right Employees

Choosing employees who will do a good job is not only important to the success of the business, but will also contribute to the overall first and last image of the beach resort, provided they are properly trained. There are several categories of personnel in the hospitality hospitality business such as manager, receptionist, servers, housekeepers, cooks, dishwashers and cleaners. When the business is still still new, some employees' duties may cross over from from one category to another. For example, your servers servers may double as the cleaners. The investor investor should be sure to hire people who are willing willing to be flexible flexible in their duties. 21 BAL-PREF-11/June BAL-PREF-11/June 2008


7.4

Beach Resort

A Good Hospitality Business Experience

Based on some surveys conducted, following following are some of the factors that contribute to a good hospitality business experience: 

Location



Characteristics



Welcome



Food



Environment (parking, restrooms, lighting)



Dessert Variety



Smile factor



Time factor/quick service



The server should greet visitors/tourists on the main gate



The server should be neat and clean



The server should not be too chatty or familiar



The server should know the menu and be able to answer questions



8 8.1

Beach Resort

PROJECT ECONOMICS Pro ject Cost

Description

Amount in (Rs.)

L an d Building & Infrastructure Machinery & Equipment Furniture & Fixtures Office Equ ipment Pre-operating costs Total Capital Cost Working Capital Raw Material I nventory Upfront Insurance Pa yment Cash Total Working Capital

6 0 ,0 0 0 7 , 8 1 2 ,8 0 0 7 8 6 ,0 0 0 6 6 0 ,0 0 0 1 1 5 ,0 0 0 8 9 ,3 3 1 9,523,131 9 ,4 5 0 3 9 ,3 0 0 2 0 0 ,0 0 0 248,750

Total Project Cost

8.2

9,771,881

Pro je ject Returns

Description

IRR MIRR Pay Back Period (Yrs) Net Present Value (NPV) 8.3

Equity

Project

41% 22% 3 .0 8 11,809,899

36% 18% 3 .2 0 1 5 ,8 4 8 ,6 8 8

Percentage

Amount in Rs

Pro ject Financing

Description

Equit y Financing Debt Financing Total

70 % 30 %


6,819,710 2 ,9 5 2 ,1 7 1 9,771,881


9

Beach Resort

FINANCIAL ANALYSIS Financial Evaluation Sum Summary mary of Pre-Feb Beach Resort

Key Variables Total Investment in Project Equity Debt Lease Interest Rate Debt Tenure Total Number of Employees

SMEDA SM EDA

9,771,881 6,819,710 2,952,171 15% 5 17

70% 30% 0%

Rs. in actuals Year 1 Free Cash Flow to Equity (FCFE) Free Cash Flow to Firm(FCFF) Firm( FCFF)

1,168,850 1,952,106 28% 15% 4.28

Profit margin on sales ROE Times interest earned

Internal Rate of Return (IRR) Modified Internal Rate of Return (MIRR)* Payback Period (yrs) Net Present Value (NPV)

@ 16%

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

2,541,288 3,338,994

2,859,183 3,673,506

3,266,733 4,100,165

3,676,202 4,531,608

4,986,232 4,986,232

5,511,006 5,511,006

6,089,690 6,089,690

6,727,770 6,727,770

40% 30% 9.65

Equity 41% 22% 3.08 11,809,899

42% 33% 13.59

@ 12%

45% 35% 21.43

47% 39% 44.92

49% 42% -

49% 45% -

50% 47% -

Year 10

7,464,163 12,016,936

51% 50% -

51% 53% -

Project 36% 18% 3.20 15,848,688

24 BAL-PREF-11/June 2008


9.1

Beach Resort

Pro je jected Income Statement

Statement Summaries

SMEDA

Income Statement Rs. in actuals Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

4,032,000 1,174,800 2,857,200

6,336,000 1,486,860 4,849,140

6,969,600 1,602,727 5,366,873

7,666,560 1,728,409 5,938,151

8,433,216 1,864,793 6,568,423

9,276,538 2,012,846 7,263,691

10,204,191 2,173,629 8,030,562

11,224,610 2,348,302 8,876,309

12,347,072 2,538,133 9,808,938

13,581,779 2,744,514 10,837,264

Administration expense Ut ilities expe nse Travelling & Comm. ex expense ((p phone, fa fax, et etc.) Office expenses (stationary, et c.) Promotional expense Insurance expense Professional fees (lega l, audit, etc.) Depreciation expense Amorti zation expense Miscellaneous expense Subtotal Operating Income

506,760 15,000 73,800 19,680 403,200 39,300 40,320 507,990 17,866 1,623,916 1,233,284

557,436 15,900 81,180 21,648 633,600 35,370 63,360 507,990 17,866 1,934,350 2,914,790

613,180 16,854 89,298 23,813 696,960 31,440 69,696 507,990 17,866 2,067,097 3,299,777

674,498 17,865 98,228 26,194 766,656 27,510 76,666 507,990 17,866 2,213,472 3,724,678

741,947 18,937 108,051 28,813 843,322 23,580 84,332 507,990 17,866 2,374,838 4,193,585

816,142 20,073 118,856 31,695 927,654 19,650 92,765 507,990 2,534,825 4,728,866

897,756 21,278 130,741 34,864 1,020,419 15,720 102,042 507,990 2,730,811 5,299,751

987,532 22,554 143,815 38,351 1,122,461 11,790 112,246 507,990 2,946,740 5,929,569

1,086,285 23,908 158,197 42,186 1,234,707 7,860 123,471 507,990 3,184,603 6,624,335

1,194,914 25,342 174,017 46,404 1,358,178 3,930 135,818 507,990 3,446,592 7,390,672

Income from Kitc hen Theka and Hall Rental Earnings Be fore Interest & Taxes

660,000 1,893,284

726,000 3,640,790

798,600 4,098,377

878,460 4,603,138

966,306 5,159,891

1,062,937 5,791,803

1,169,230 6,468,982

1,286,153 7,215,722

1,414,769 8,039,103

1,556,245 8,946,918

Interest expense Earnings Be fore Tax

442,826 1,450,458

377,148 3,263,642

301,618 3,796,759

214,759 4,388,379

114,871 5,045,020

5,791,803

6,468,982

7,215,722

8,039,103

8,946,918

31 9 101

718,001

835,287

965,443

1,109,904

1,274,197

1,423,176

1,587,459

1,768,603

1,968,322

Revenue Cost of goods sold Gross Profit General administration & selling expenses

T ax


9.1

Beach Resort

Pro je jected Income Statement

Statement Summaries

SMEDA

Income Statement Rs. in actuals Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

4,032,000 1,174,800 2,857,200

6,336,000 1,486,860 4,849,140

6,969,600 1,602,727 5,366,873

7,666,560 1,728,409 5,938,151

8,433,216 1,864,793 6,568,423

9,276,538 2,012,846 7,263,691

10,204,191 2,173,629 8,030,562

11,224,610 2,348,302 8,876,309

12,347,072 2,538,133 9,808,938

13,581,779 2,744,514 10,837,264

Administration expense Ut ilities expe nse Travelling & Comm. ex expense ((p phone, fa fax, et etc.) Office expenses (stationary, et c.) Promotional expense Insurance expense Professional fees (lega l, audit, etc.) Depreciation expense Amorti zation expense Miscellaneous expense Subtotal Operating Income

506,760 15,000 73,800 19,680 403,200 39,300 40,320 507,990 17,866 1,623,916 1,233,284

557,436 15,900 81,180 21,648 633,600 35,370 63,360 507,990 17,866 1,934,350 2,914,790

613,180 16,854 89,298 23,813 696,960 31,440 69,696 507,990 17,866 2,067,097 3,299,777

674,498 17,865 98,228 26,194 766,656 27,510 76,666 507,990 17,866 2,213,472 3,724,678

741,947 18,937 108,051 28,813 843,322 23,580 84,332 507,990 17,866 2,374,838 4,193,585

816,142 20,073 118,856 31,695 927,654 19,650 92,765 507,990 2,534,825 4,728,866

897,756 21,278 130,741 34,864 1,020,419 15,720 102,042 507,990 2,730,811 5,299,751

987,532 22,554 143,815 38,351 1,122,461 11,790 112,246 507,990 2,946,740 5,929,569

1,086,285 23,908 158,197 42,186 1,234,707 7,860 123,471 507,990 3,184,603 6,624,335

1,194,914 25,342 174,017 46,404 1,358,178 3,930 135,818 507,990 3,446,592 7,390,672

Income from Kitc hen Theka and Hall Rental Earnings Be fore Interest & Taxes

660,000 1,893,284

726,000 3,640,790

798,600 4,098,377

878,460 4,603,138

966,306 5,159,891

1,062,937 5,791,803

1,169,230 6,468,982

1,286,153 7,215,722

1,414,769 8,039,103

1,556,245 8,946,918

Interest expense Earnings Be fore Tax

442,826 1,450,458

377,148 3,263,642

301,618 3,796,759

214,759 4,388,379

114,871 5,045,020

5,791,803

6,468,982

7,215,722

8,039,103

8,946,918

T ax NET PROFIT/(LOSS) AFTER TAX

319,101 1,131,357

718,001 2,545,641

835,287 2,961,472

965,443 3,422,936

1,109,904 3,935,115

1,274,197 4,517,606

1,423,176 5,045,806

1,587,459 5,628,263

1,768,603 6,270,501

1,968,322 6,978,596

Balance brought forward Total profit available for appropriation Owner's Withdrawals Balance carried forward

1,131,357 565,679 565,679

565,679 3,111,320 1,555,660 1,555,660

1,555,660 4,517,132 2,258,566 2,258,566

2,258,566 5,681,502 2,840,751 2,840,751

2,840,751 6,775,866 3,387,933 3,387,933

3,387,933 7,905,539 3,952,770 3,952,770

3,952,770 8,998,575 4,499,288 4,499,288

4,499,288 10,127,551 5,063,776 5,063,776

5,063,776 11,334,276 5,667,138 5,667,138

5,667,138 12,645,734 6,322,867 6,322,867

Revenue Cost of goods sold Gross Profit General administration & selling expenses



9.2

Beach Resort

Pro je jected Balance Sheet

S ta te ment Su m m ar ies

S ME DA

Balance Sheet Year 0

Ye a r 1

Ye ar 2

Y ear 3

Year 4

Y ear 5

Year 6

Year 7

Yea r 8

Yea r 9

Rs. in actuals Year 10

20 0,000 9,4 50 39 ,30 0 24 8,7 50

803,171 165,699 14,884 35,370 1,019,123

1,788,799 213,041 16,409 31,440 2,049,689

2,389,416 273,403 18,091 27,510 2,708,420

2,815,399 300,743 19,946 23,580 3,159,667

3,103,667 330,817 21,990 19,650 3,476,125

4,137,129 363,899 24,244 15,720 4,540,993

5,148,847 400,289 26,729 11,790 5,587,655

6,174,762 440,318 29,469 7,860 6,652,408

7,235,394 484,350 32,489 3,930 7,756,163

8,376,690 532,785 8,909,474

Fixed assets La n d Build ing/Infras tru c ture Ma chine ry & equip me nt Furniture & fixt ures Offic e equip me nt T ota l Fi xe d Ass et s

60 ,00 0 7,812 ,800 78 6,0 00 66 0,0 00 11 5,0 00 9,433 ,8 00

60,000 7,422,160 707,400 627,000 109,250 8,925,810

60,000 7,031,520 628,800 594,000 103,500 8,417,820

60,000 6,640,880 550,200 561,000 97,750 7,909,830

60,000 6,250,240 471,600 528,000 92,000 7,401,840

60,000 5,859,600 393,000 495,000 86,250 6,893,850

60,000 5,468,960 314,400 462,000 80,500 6,385,860

60,000 5,078,320 235,800 429,000 74,750 5,877,870

60,000 4,687,680 157,200 396,000 69,000 5,369,880

60,000 4,297,040 78,600 363,000 63,250 4,861,890

60,000 3,906,400 330,000 57,500 4,353,900

Intangible assets Pre-ope rat ion costs T ota l Intangible As se ts TOTAL ASSETS

89 ,33 1 89 ,33 1 9,771,881

71,465 71,465 10,016,398

53,598 53,598 10,521,108

35,732 35,732 10,653,983

17,866 17,866 10,579,373

10,369,975

10,926,853

11,465,525

12,022,288

12,618,053

13,263,374

22,971 22,971

33,971 33,971

35,740 35,740

37,605 37,605

39,571 39,571

41,645 41,645

43,832 43,832

46,139 46,139

48,573 48,573

48,197 48,197

Assets Current assets C a s h & B an k Acc ounts re ce ivable Raw ma ter ial inve ntory Pre-p a id insur a nce T ota l Cur r ent As se ts

Liabilities & Shareholders' Equity Current liabilities Acc ounts pa yable Ot her lia bilities T ota l Cur r ent Lia bilitie s

-


9.2

Beach Resort

Pro je jected Balance Sheet

S ta te ment Su m m ar ies

S ME DA

Balance Sheet Year 0

Ye a r 1

Ye ar 2

Y ear 3

Year 4

Y ear 5

Year 6

Year 7

Yea r 8

Yea r 9

Rs. in actuals Year 10

20 0,000 9,4 50 39 ,30 0 24 8,7 50

803,171 165,699 14,884 35,370 1,019,123

1,788,799 213,041 16,409 31,440 2,049,689

2,389,416 273,403 18,091 27,510 2,708,420

2,815,399 300,743 19,946 23,580 3,159,667

3,103,667 330,817 21,990 19,650 3,476,125

4,137,129 363,899 24,244 15,720 4,540,993

5,148,847 400,289 26,729 11,790 5,587,655

6,174,762 440,318 29,469 7,860 6,652,408

7,235,394 484,350 32,489 3,930 7,756,163

8,376,690 532,785 8,909,474

Fixed assets La n d Build ing/Infras tru c ture Ma chine ry & equip me nt Furniture & fixt ures Offic e equip me nt T ota l Fi xe d Ass et s

60 ,00 0 7,812 ,800 78 6,0 00 66 0,0 00 11 5,0 00 9,433 ,8 00

60,000 7,422,160 707,400 627,000 109,250 8,925,810

60,000 7,031,520 628,800 594,000 103,500 8,417,820

60,000 6,640,880 550,200 561,000 97,750 7,909,830

60,000 6,250,240 471,600 528,000 92,000 7,401,840

60,000 5,859,600 393,000 495,000 86,250 6,893,850

60,000 5,468,960 314,400 462,000 80,500 6,385,860

60,000 5,078,320 235,800 429,000 74,750 5,877,870

60,000 4,687,680 157,200 396,000 69,000 5,369,880

60,000 4,297,040 78,600 363,000 63,250 4,861,890

60,000 3,906,400 330,000 57,500 4,353,900

Intangible assets Pre-ope rat ion costs T ota l Intangible As se ts TOTAL ASSETS

89 ,33 1 89 ,33 1 9,771,881

71,465 71,465 10,016,398

53,598 53,598 10,521,108

35,732 35,732 10,653,983

17,866 17,866 10,579,373

10,369,975

10,926,853

11,465,525

12,022,288

12,618,053

13,263,374

22,971 22,971

33,971 33,971

35,740 35,740

37,605 37,605

39,571 39,571

41,645 41,645

43,832 43,832

46,139 46,139

48,573 48,573

48,197 48,197

Assets Current assets C a s h & B an k Acc ounts re ce ivable Raw ma ter ial inve ntory Pre-p a id insur a nce T ota l Cur r ent As se ts

Liabilities & Shareholders' Equity Current liabilities Acc ounts pa yable Ot her lia bilities T ota l Cur r ent Lia bilitie s

-

Other liabilities De fe rre d tax Long term debt T ota l Lo ng T er m Lia bilities

2,952 ,171 2,952 ,1 71

93,720 2,514,318 2,608,038

100,980 2,010,787 2,111,767

108,240 1,431,727 1,539,967

115,500 765,807 881,307

122,760 122,760

112,728 112,728

102,696 102,696

92,664 92,664

82,632 82,632

72,600 72,600

Shareholders' equity Paid -up ca pital Reta ined ea rnings T ota l Eq uity TOTAL CAPITAL AND LIABILITIE

6,819 ,710 6,819 ,7 10 9,771,881

6,819,710 565,679 7,385,389 10,016,398

6,819,710 1,555,660 8,375,370 10,521,108

6,819,710 2,258,566 9,078,276 10,653,983

6,819,710 2,840,751 9,660,461 10,579,373

6,819,710 3,387,933 10,207,643 10,369,975

6,819,710 3,952,770 10,772,480 10,926,853

6,819,710 4,499,288 11,318,998 11,465,525

6,819,710 5,063,776 11,883,486 12,022,288

6,819,710 5,667,138 12,486,848 12,618,053

6,819,710 6,322,867 13,142,577 13,263,374



9.3

Beach Resort

Pro je jected Cash Flow Statement

Statement Summaries

SMEDA

Cash Flow Statement Rs. in actuals Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Operating activities

Net profit Add: depreciation expense amortization expense Deferred income tax Accounts receivable Raw material inventory Advance insurance premium Accounts payable Other liabilities Cash provided by operations

(9,450) (39,300) (48,750)

1,131,357 507,990 17,866 93,720 (165,699) (5,434) 3,930 22,971 1,606,702

2,545,641 507,990 17,866 7,260 (47,342) (1,526) 3,930 10,999 3,044,818

2,961,472 507,990 17,866 7,260 (60,362) (1,682) 3,930 1,769 3,438,244

3,422,936 507,990 17,866 7,260 (27,340) (1,854) 3,930 1,865 3,932,653

3,935,115 507,990 17,866 7,260 (30,074) (2,044) 3,930 1,966 4,442,009

(437,853) (437,853)

(503,531) (503,531)

(579,060) (579,060)

(665,919) (665,919)

(765,807) (765,807)

4,517,606 507,990 (10,032) (33,082) (2,254) 3,930 2,073 4,986,232

5,045,806 507,990 (10,032) (36,390) (2,485) 3,930 2,187 5,511,006

5,628,263 507,990 (10,032) (40,029) (2,740) 3,930 2,307 6,089,690

6,270,501 507,990 (10,032) (44,032) (3,021) 3,930 2,434 6,727,770

6,978,596 507,990 (10,032) (48,435) 32,489 3,930 (375) 7,464,163

Financing activities

Change in long term debt Issuance of shares Purchase of (treasury) shares Cash provided by / (used for) financing

2,952,171 6,819,710 9,771,881

-

-

-

-

-

-

-

-

-

-

Investing activities

Capital expenditure Acquisitions Cash (used for) / provided by investing NET CASH

(9,523,131) (9,523,131) 200,000

1,168,850

2,541,288

2,859,183

3,266,733

3,676,202

4,986,232

5,511,006

6,089,690

6,727,770

7,464,163


9.3

Beach Resort

Pro je jected Cash Flow Statement

Statement Summaries

SMEDA

Cash Flow Statement Rs. in actuals Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Operating activities

Net profit Add: depreciation expense amortization expense Deferred income tax Accounts receivable Raw material inventory Advance insurance premium Accounts payable Other liabilities Cash provided by operations

(9,450) (39,300) (48,750)

1,131,357 507,990 17,866 93,720 (165,699) (5,434) 3,930 22,971 1,606,702

2,545,641 507,990 17,866 7,260 (47,342) (1,526) 3,930 10,999 3,044,818

2,961,472 507,990 17,866 7,260 (60,362) (1,682) 3,930 1,769 3,438,244

3,422,936 507,990 17,866 7,260 (27,340) (1,854) 3,930 1,865 3,932,653

3,935,115 507,990 17,866 7,260 (30,074) (2,044) 3,930 1,966 4,442,009

(437,853) (437,853)

(503,531) (503,531)

(579,060) (579,060)

(665,919) (665,919)

(765,807) (765,807)

4,517,606 507,990 (10,032) (33,082) (2,254) 3,930 2,073 4,986,232

5,045,806 507,990 (10,032) (36,390) (2,485) 3,930 2,187 5,511,006

5,628,263 507,990 (10,032) (40,029) (2,740) 3,930 2,307 6,089,690

6,270,501 507,990 (10,032) (44,032) (3,021) 3,930 2,434 6,727,770

6,978,596 507,990 (10,032) (48,435) 32,489 3,930 (375) 7,464,163

Financing activities

Change in long term debt Issuance of shares Purchase of (treasury) shares Cash provided by / (used for) financing

2,952,171 6,819,710 9,771,881

-

-

-

-

-

-

-

-

-

-

Investing activities

Capital expenditure Acquisitions Cash (used for) / provided by investing

(9,523,131) (9,523,131)

-

-

-

-

-

NET CASH

200,000

1,168,850

2,541,288

2,859,183

3,266,733

3,676,202

4,986,232

5,511,006

6,089,690

6,727,770

7,464,163

Cash balance brought forward Cas h available for appropr ia iation Owner's Withdrawals Cash carried forward

200,0 00 00 200,000

200,000 1,368,850 565,679 803,171

803,171 3,344,459 1,555,660 1,788,799

1,788,799 4,647,982 2,258,566 2,389,416

2,389,416 5,656,150 2,840,751 2,815,399

2,815,399 6,491,600 3,387,933 3,103,667

3,103,667 8,089,899 3,952,770 4,137,129

4,137,129 9,648,135 4,499,288 5,148,847

5,148,847 11,238,537 5,063,776 6,174,762

6,174,762 12,902,532 5,667,138 7,235,394

7,235,394 14,699,557 6,322,867 8,376,690



Beach Resort

10 KEY ASSUMPTIONS 10.1

Pro ject Capacity Assumptions

Description

Calculation

Number of Huts

08

Assumed total No. of Business Days

180 (6 months)

Tot al Assumed Capacit y

08 * 180 = 1,440 Units

Capacity Utilization 1st Year

70%

Gro wth in Capac it y Ut ilizat ion

30%

Maximum Attainable Capacit y

100%

10.2

Revenue Assumptions


Beach Resort

10 KEY ASSUMPTIONS 10.1

Pro ject Capacity Assumptions

Description

Calculation

Number of Huts

08

Assumed total No. of Business Days

180 (6 months)

Tot al Assumed Capacit y

08 * 180 = 1,440 Units

Capacity Utilization 1st Year

70%

Gro wth in Capac it y Ut ilizat ion

30%

Maximum Attainable Capacit y

100%

10.2

Revenue Assumptions

Description

Calculation

Hut Rent / Night

Rs. 4,000

Rent Growth Rate / Year

10%

Yearly Inco me fro m Kitchen Theka

Rs. 420,000 (Rs. 35, 000/month)

Yearly Income from Hall Rental

Rs. 240,000 (24 events, Rs. 10,000 rent / event)

st

4,000 * (1,440*0.70) = Rs. 4,032,000

st

420,000 + 240,000 = Rs. 660,000

1 Year Revenue from Hut Rentals 1 Year Total Additional Income 10.3

Economic Assumptions

Electricit y Price Gro wth Rate

6%

Gas Price Growth Rate

6%

Water Price Growth Rate

6%

Salary Gro wth Rate

10 %

10.4

Expense Assu mptions

Communication Expense

15% of administration expense

Office Expense

4% of administration expense

Promot ional Expense

10% of revenue

Professional Fee (Legal, Audit et c)

1% of revenue

Administration Benefit Expe nse

3% of administration expense 28



Beach Resort

Operating Cost Growth Rate

5%

Machinery & Equipment Insurance Rate

5%

10.5

Depreciation Expense Assumptions

Depreciat ion Method

Straight Line

Building & Infrastructure

5%

Ma c h ine r y & E q u ip me nt

10%

Furniture & Fixtures

5%

Office Equ ipment

5%

10.6

Cost of G f Goods Sold

All the direct costs that directly affect the revenue of any project are called Cost of Goods Sold (COGS). For a beach resort, following are the components and estimated value of COGS in the first year: Description

Daily Hut Makeup Cost

Daily Cost

Total Yearly Cost (6 months) Rs.

225 * 8 =1,800

1,800 * (180*.70) = 226,800

Direct Labor Cost

6 9 6, 0 0 0

Equipment Maintenance

37,800

Direct Electr icit y Cost

1 8 9 ,0 0 0

Direct Water Cost

2 5 ,2 0 0

Total COGS 10.7

1,174,800

Cash f low Assumptions

Accounts Receivables Cycle (In Days)

15

Accounts Pa yable Cycle (In Days)

30

Init ial Cash in Bank

2 0 0 ,0 0 0

10.8

Financing Assumptions

Debt

30%

Equit y

70%

Long Term Debt Interest Rate

15%

Tax Treatment

Sole pro prietorship

Discount Rate for NPV (WACC)

12


SMEDA Beach Resort

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