July 17, 2024

CAMPERNIK HOTEL : The Feasibility Study on Setting-Up A New 2-Star Budget Hotel

Abstract: The number of hotels & establishments, based on the rise in international investment together with domestic growth, is expected to increase at a very positive rate, with growth of over 11%/year. Budget hotel has the contribution of 25 % in the market whereas 3 & 4 stars hotel dominate the 40% of the pie chart during the 2010. The occupancy rate of 2 stars hotel reached the average of 75 % on weekdays and based on researchfrom Colliers International, occupancy for budget hotel in 2013 in Indonesia is increasing around 10%.

A budget hotel is not one-star or three-star hotel. It stands in between that we recognize it as 2-star premium hotel. It operates as acommodity where productivity, especially occupancy, is very important with basic necessity and standard product. The growth of budget hotel is in line with the growth of the low cost carrier both domestic and international. The trend is becoming popular by focusing on selling beds, not meals/meetings. The big player in hotel business both local and international have seized the opportunity and managed to operate budget hotel successfully. The data of competitor is served in order to identify where our position in the market is.

Our thesis is presenting return simulation from the highest expectation to the lowest using discounted cash flow method. This has been a challenging process for us as we process the data that we extracted from the hotel expertise and competitors then we served it using the best academic approach using the method of 9 building blocks, SWOT analysis and financial projection. From the scenarios we created, we have come up with the conclusion that 3.1 years is the best payback period for the investor with the investment of Rp. 37 billion including land with the IRR of 28%. We also conclude that this low cost of investment with fast return is more favorable and profitable than 5 stars hotel. From business perspective, we are confident to recommend this business model creation to be materialized since we have strong key success factors and the financial projection that should bring the company.

Keyword: Budget hotel, Discounted Cash Flow, Business

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