1

CHAPTER -1

INTRODUCTION

TOURISM

“Tourism” is the totality of the relationship and phenomenon arising from travel

and stay strangers the stay does not imply the establishment of a residence and connected

with remunerated activity.

IMPORTANCE OF TOURISM

In creating better appreciation of other people’s ways of the life and institution, tourism

may create goodwill for a country. Each year many tourist travel to participate in

particular events ranging from congress to corona tings; their visits also afford

opportunities to improve co-operation as well as project the correct image of a country to

the out side world.

Politics, society, education, and culture thus often provide motivations for tourist to travel

away from home, they influence tourism and tourism in turn has an influence on them.

These factors also help explain participation in tourism generally as we have seen. An

evaluation of the significance of tourism may be extending to such aspects as organized

sport and religion.

The main economic significance of tourism-that money earned in places of normal

residence is spent in places visited-is common to all tourism, whether domestic or

2

international. Each year vast sums are transferred from the economy from whom it is

earned, to economies in receiving areas where they provide a source of income, a means

of livelihood, and amenities for the resident population.

The outstanding economic effect of tourism lies in the purchasing to spend at a much

bigger rate than when they are at home. The flow of money generated by tourist

expenditure finds its way into the overall economy of the tourist destination, as the

money is turned over and re-spent. But international tourist expenditure introduces an

additional aspect of economic significance, as countries, which have separate political

and economic entities, have to balance their transactions with the rest of the world.

International tourism, therefore, enters into the balance of payments accounts of

individual countries and ease of major significance in international trade. For countries,

which generate tourist traffic, it represents an import, in much the same way, as the

import of merchandise. Globally tourism countries are a major item in world trade, which

has shown a much faster rate of growth in recent years than trade in goods.

Tourism is evaluated mainly in terms of its economic significance, but reference is made

also to its role as source of other, less quantifiable, benefits and to some of the problems

which tourism presents to individual destinations.

When traveling away from home, tourists come in contact with places they visit and with

their inhabitance, and so social exchanges take place. Their presence and their social

background affects the social structure and mode of life at the destination. Tourists are in

3

turn affected by the experiences and often carry back home with them new habits and

new outlook on life.

Tourism has an educational significance. In the wider sense it has the altogether

beneficial effect which contact between people of different races and nationalities can

bring about. In a narrow sense much tourist activity takes the form of study trips and

attendance at courses and conferences with specified educational aims in view.

Tourism is often accompanied by cultural exchange and by cultural enrichment of those

who travel as well as those at the receiving end. The cultural factors that may attract

tourists to a particular destination are architecture, historical monuments and birthplaces

of famous people. These are some of the places most visited by the tourists. Festivals and

exhibition rely heavily to visitor traffic as their audience.

Tourism can be classified into:

a. Tourists visit places for recreational purposes. Such tourists spots are usually

hill stations, beaches etc, such tourists like to get away from the daily grind of life

and freshen themselves.

b. CULTURAL TOURISM:

Such type of tourist satisfies the cultural curiosity of the tourist. Such tourist spots

include ancient monuments, places of historical and religious importance etc.

4

c. ADVENTURE/SPORTS:

This type of tourism is very particular with the youth. This type provides people

to have adventure like diving, skiing, rafting etc.

d. HEALTH

Such type of tourism takes people to places of recovery like places with curative

possibilities. E.g.: Hill-Stations, hot springs, spas etc.

e. CONVENTION/EDUCATIONAL :

Tourism such as these are meant for organizing conventions for political, cultural

or academic reasons.

Tourism can also be classified on basis of region:

Domestic:

Domestic tourism is for tourists belonging to their own country and do not require

any papers or documentation for travel.

International:

Such type of tourism refers top traveling to other countries other than their own

and with different political and economic systems. This requires documents such as visa,

passports, etc , to cross the borders.

5

MODERN TRENDS IN TOURISM

Spread over a land mass of 324 million sq.kms with a population of around

million, with at the rote of about 13 million every year, with 14 major and 20 not

languages and 845 dialects, each state habits, religious customs and festivals.

For a foregone visitors to indo, it some how gets on his blood. Love it or not. One

can never ignore India. One visit to India can never satisfy the thirst of screening visitor

and when back in his/her place , desire to get back there.

India is luxurious country. Some places are featureless as some spectacular, the

food can be terrible as it is magnificent and the country defies imagination and cold logic.

There is diversity and get unity.

This is India of the Indus valley civilization; there is also Bharat, the land of

Emperor Bharatha.

It mixture of natural beautiful and diversity of culture attracts a lot of tourism.

India is a country where tourists can enjoy the adventure of Himalayas and the beauty of

the sea. They can explore the desert and jungle of Assam. Behind this terrific beauty,

India has a never-ending culture, religion, temples, church and mosques. Tourism in India

is presently the 3rd largest after gum and jewellery and ready-made garments.

The fettle of India tourism is not very attractive when compared to the world

scenario. The annual foreign tourist arrival in India is 2 million where as the foreign

6

exchange earnings touched Rs. 70 billion. Most of the India tourism thrives on domestic

tourism. Each year, 100 million domestic tourist criss-cross the borders of the states.

The government of India had put forward some strategy on order to improve this

sector. Now the Indian tourism exchange industry has become the 11th largest foreign

exchange earner of the world and during 1997-1998 the estimation made on the earnings

of foreign exchange was Rs. 11032/- Crore. Tourism budget has been increased from 100

Crore to 160 Crore recently and the government has also helped in their organization of

visit India year 1999-2000 which boost up the industry.

The government, in collaboration with Rajasthan tourism had put forward the

Palace of Wheels. It is a luxury train with 14 deluxe saloons.

The train covers 8 destinations in 7 days. In February 1995, the Gujarath tourism

launched a similar train called Royal Orient which is centrally air-conditioned.

Tourism industry in India shows a positive trend for the future and with the

developments as well as those, which will occur in future, will without any doubt shoot

up the industry.

7

CHAPTER -2

PROJECT DESIGN

AIM: To reveal the market feasibility and financial viability of the proposed hotel

OBJECTIVES:

Some of the main objectives of the study of the project are:

• To determine the marketing feasibility & Financial Viability of a proposed hotel

in TRIVANDRUM

• To estimate the cost of project.

• To estimate the total expected revenue from the various departments of the

proposed hotel.

• To calculate the profitability ratios and pay back loan period of the proposed

hotel.

• Determine the profitability analysis.

• To find the break-even point and expected return on investment.

8

METHODOLOGY:

The information for this project has been collected through the following

procedures:

Primary Data:

Some of the primary data, which are collected for the study of this project, were

collected from government officials of respected departments. The data, which was

collected during the survey through investigation woith hospitality officials.

Secondary Data:

Various data were used from journals, books and various supplementary copies of

news and other magazines and from the Internet has helped us in gathering information.

LIMITATIONS:

• Calculation made in the project is based on assumption, approximation and subject to

change.

• Getting exact financial figures was not possible.

9

CHAPTER -3

INFORMATION ABOUT THE PLACE

KERALA

Slender green sliver of land clinging to the south western flank of the Indian

peninsula, Kerala is one of the southern states of the Republic of India.

Though it's roots date back to the early years of the Christian era, the modern

state of Kerala was created in 1956, when all the states of India were reorganized on a

linguistic basis. History was created in 1957, when Kerala became the first state in the

world to have democratically elected a Marxist government to power. Things have

changed, but politics still continues to dominate conversation, particularly in the

numerous wayside tea stalls, where the brew is as strong as the ideology.

The state has been in the forefront, in terms of education and health services. It

has the highest rate of literacy, lowest rate of infant mortality and the leading female to

male ratio, in the country.

GEOGRAPHY

Kerala is made up of fourteen districts. Each of them have a distinct character.

Thiruvananthapuram (also known as Trivandrum) is the capital of Kerala, famous for

10

it's Kovalam beach (rated one of the top ten beaches of the world). Geography is

destiny in Kerala with the monsoon winds bringing the gift of life annually. It's

monsoons are likened to a battalion of wild elephants.

HISTORY OF KERALA

The history of Kerala belonging to the early Christian era is not much known except that

the dynasty called the cheats were the predominant rulers here. But from 6th century

onwards the picture gains clarity, revealing the fact that then the land was ruled by

dynasty known as the Perumals. The last of the line, Cheraman – perumal abdicated

kingship and divided the land between his chieftains.

The state of Kerala was formed long after Indian independence, in 1856, Travancore ,

Kochi , Malabar , were united to form the present state of Kerala. Thus the whole

Malayalam speaking population was brought within a single physical boundary.

LAND AND PEOPLE

A total number of 45 rivers make Kerala a fertile piece of land flowering down from the

ghats to the west. Kerala is also a paradise of backwaters. The numerous backwaters,

canals and ocean inlets play an important role in economic field of the state. Beside the

major rivers are Bharathapuzha, Parma and Periyar. Many of the rivers are harassed for

power generation and irrigation.Kerala’s contribution towards the national total of fish

production amounts to 35%. The kerala coast is renowned for prawns , sharks and

sardines.

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CLIMATE

Being situated very close to the sea, Kochi has a moderate climate. Heavy

showers are experienced during the months June, July and August due to the South-West

Monsoon. The North-East Monsoon brings light rainfall during the months September,

October, November and December. December to February is pretty cool. The annual

rainfall is about 310 cm . In summer the temperature rises to a maximum of 35 ºC while

in winter it is around 25 ºC

LITERATURE

Malayalam , the prime language of Kerala is treasures have of literature. With an

envious level of literacy in India (100%) urban area of Kerala have an intellectual

background. Large groups of the population possess the capacity to evaluate arts and

literature with an aesthetic and objective outlook. Needless to say that there are

organizations and forums to encourage and appraise artistic creation in the fields of

literature, art and cinema.

FESTIVALS AND FOLK ARTS

‘Onam’, the national festival of Kerala is now observed as a part of the tourist week

celebrations. All the district capitals and other tourist spots are decorated and provided

with entertainment. Onam is a harvest festival celebrated in chingam the first month of

12

Malayalam era (august/september). An interesting pageant of this festivity is the snake

boat race held at Alappuzha , Kochi , Kumarakam , Aranmula , Chambakulam etc. Other

popular festivals are Vishu , Ramzan and Christmas. Besides, there are numerous

celebrations of local importance along the length and breadth of Kerala. Kathakali is a

dance drama in which the actors do not speak but express themselves through mudras (

gestures ) accompanied by padams ( recitals ) in the background.

Kalarippayattu is an ancient martial art of Kerala. It is a sophisticated way of using

weapons like sword, dagger , stick , spear and shield. Training in kalarippayattu is

imparted at CVN Kalari, east fort, Thiruvananthapuram and many other centers.

FOOD AND DRINKS

Kerala has a variety of delicious food specialties. Rice is the staple food. It is

accompanied with varies curries , curd , pappad , pickles and other side dishes. The non-

vegetarian dishes are made of mutton , beef and chicken. Fish is also a favorite dish. A

dessert called payasam usually follows the main course of food. Payasam is a preparation

of rice or vermicelli with milk, sugar and spices. The popular thirst aids are buttermilk

and bottled soda drinks. However, tender coconut water is the best bet for a refreshing

and nourishing

13

COMMERCE

Agriculture contributes most to the state's income in the primary sector. Kerala's

major sources of exports are agro-based and traditional like coir and cashew as well as

marine products and manpower. In spices, pepper is the single most important product,

with Kerala being the largest producer and exporter of black pepper. Cardamom and

ginger are also exported.

Kerala at a glance

Area 38,863 Sq.Km Corporations 3

Districts 14 Municipalities 54

Taluks 63 Rivers 44

Panchayats 991 Highest Mountain Anamudi (2652.3 Meters)

14

TRIVANDRUM

Trivandrum is the capital of the Indian state of Kerala and the headquarters of the

Thiruvananthapuram District. It is located on the west coast of India near the extreme

south of the mainland. Referred to by Mahatma Gandhi as the "Evergreen city of India",

the city is characterized by its undulating terrain of low coastal hills and busy commercial

alleys. With almost 745,000 inhabitants per the 2001 census, it is the largest and most

populous city in Kerala; the wider urban agglomeration having a population of about one

million.

The city is the state capital and houses many central and state government offices,

organizations and companies. Apart from being the political nerve centre of Kerala, it is

also a major academic hub and is home to several educational institutions

ORIGIN OF NAME

Thiruvananthapuram literally means "City of Lord Anantha" in Malayalam. The name

derives from the deity of the Hindu temple at the centre of the city. Anantha is the serpent

Shesha on whom Padmanabhan or Vishnu reclines. The temple of Vishnu reclining on

Anantha, the Sri Padmanabhaswamy temple is the most recognizable iconic landmark of

the city. The city was officially referred to as Trivandrum in English until 1991, when the

government decided in favour of Thiruvananthapuram. However, the city is still widely

referred to as "Trivandrum".

15

AREAS OF INTEREST THIRUVANANTHAPURAM

It is the capital city of Kerala. The Kawadiyar palace, the museum, the zoo, the

Chitralayam art gallery with a large collection of paintings, the Sri Padmanabha Swamy

temple and the aquarium are the main attraction of the city. Ponmudi, 56 kms from

Thiruvananthapuram is a pleasant hill resort. The Padmanabhapuram palace, a monument

famous for its moral painting, is located near Thiruvananthapuram.

KOVALAM BEACH

Its is one if the finest beaches in India and the most attractive tourist center of Kerala. It

is 13 kms south of Thiruvananthapuram.

PONMUDI

Its is one of the tallest peaks in Kerala and an attractive hill station. It is about 1 ½ hour

drive from the capital city.

MUSEUM AND ART GALLERIES

THIRUVANANTHAPURAM MUSEUM : Palayam road , Thiruvananthapuram .

This museum has a collection of 19th century oil paintings , old coins , culture , in stone

and in plaster of Paris , copies of moral paintings etc.

16

PADMANABHAPURAM PALACE

Displays articles of archaeological importance like royal beds , paintings , epigraphs ,

arms etc.

WHERE TO BUY

Special local handicrafts rosewood carving , ivory carving , coir products , snake boat

models.

AREAS

Bheema Palli, East Fort, Statue Junction

PLACE TO WORSHIP

CHRISTIAN

� St mary’s church , Palayam

HINDU

� Padmanabha Temple, East Fort.

� Attukal Devi Temple, East Fort.

� Vinakaya Temple, East Fort.

MUSLIM

� Juma Masjid, Palayam.

17

CHAPTER -4

DEMAND QUANTIFICATION

Demand quantification is a part of Market research and broadly includes:

a) Determining the size of both current and potent

b) Accessing Market trends

c) Demand & sales forecasting

HOTELS AND THEIR FACILITIES

SL.No Name of the Hotel No. of rooms

Occupancy Product

1 South Park 83 65% 5395

2 Leela hotel and Resort 194 65% 12610

3 Mascot hotel 64 60% 3840

4 Muthoot hotel 58 70% 4060

5 Taj green cove 20 70% 1400

Total 419 27305

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1.Hotel South Park

Rooms

83 Rooms

Facilities

Doctor on Call, Safe Deposit Locker Facility, In-house Laundry, 24 Hours Currency

Exchange Facility, Free Multi Channel CCTV including Movies, Free Parking, Left

Luggage Room

2.Leela Hotel and Resort

Rooms

194

Facilities

Business Center, Swimming Pool, Health Club, Recreation Club, Book Shop, Beauty

Parlor, Travel Counter, Conference Hall, Discotheque, Shopping Center, Restaurants

3.Muthoot Hotel

Rooms

58 rooms

Facilities

Business Center, Swimming Pool, Health Club, Recreation Club, Book Shop, Beauty

Parlor, Travel Counter, Conference Hall, Discotheque, Shopping Center,Restaurants

19

4. Mascot Hotel

Facilities

64 rooms,24 hour room service/ Coffee shop, Satellite television

,Restaurant , Bar, Health club, Laundry , Conference hall , Doctor call,

Currency exchange, Travel assistance , Car hire.

5. Taj Green Cove

Business Center, Swimming Pool, Health Club, Recreation Club, Book

Shop, Beauty Parlor, Travel Counter, Conference Hall, Discotheque,

Shopping

Total Product 1. Average occupancy = Total no of rooms = 27305 419 = 65.16 Assuming that break-even occupancy is 60% for a three star hotel

Therefore demand for the room for the proposed hotel

20

2.Total potential of rooms = Total rooms X Average Occupancy Break even occupancy = 419 X 65.16 60 = 453.91

3. Demand = (Average Occupancy –B.E.O) x Total rooms

B.E.O

= (65– 60) x 419

60

= 34.91

4.Maximum Number of rooms = Demand 34.91 X 100 = x 100 B.E.O 60

= 58.18

Since the assumption made are not fully validated it is suggested a

hotel project of 45 can be promoted in TRIVANDRUM

21

CHAPTER -5

TECHNICAL DETAILS OF THE PROPOSED HOTEL

PROFILE OF THE PROPOSED HOTEL

NAME HOTEL FORT MANOR

STAR CATEGORY 3 STAR

NUMBER OF ROOMS 45

ADDRES Pattom, Pattom palace P.O,

Trivandrum, Kerala-695004

ABOUT THE FORT MANOR HOTEL

Accommodation consists of elegantly appointed rooms that range from the suite

to the pent house suites. Each features a seating area and balcony. Luxurious marble

bathrooms with Victorian style freestanding bathtubs overlook a private walled

courtyard.

22

The FORT MANOR Hotel has 45 ROOMS.

The Main features of the hotel are:

ROOMS TARIFF

• 20 SINGLE rooms, 2500

• 20 DOUBLE rooms, 3500

• 5 Deluxe suites 4000

• 1 multi cuisine restaurant ( THE REGENCY- 50 Pax)

• 1 Bar ( LAGOONA- 30 Pax)

• 1 Banquet Hall, Conference Hall & Board Room(420 Pax)

Name of the hotel “HOTEL FORT MANOR”

Star category 3 star

Location Trivandrum

Type Private ownership

Propose site Pattom, Trivandrum

No. Of rooms 45

Facilities offered Restaurant, Accommodation

Bar, Car parking etc

Means of Finance ICICI

Manpower 135

23

AMENITIES

• Air conditioned room

• Airport transfers

• Audio visual equipped

• Baby care

• Banquet facilities

• Bar

• Business center

• Cable TV

• Car parking

• Doctor on call

• Fax service

• Fire safeguards

• Laundry facilities

• Money changer

• Parking

• Photocopy services

• Power back-up

• Restaurant

• Safe deposit

• Travel desk

24

BANQUET FACILITIES (420 PAX)

• OHP presentations

• Public address systems – lectern, table, and lapel microphones

• Exhibitions – design and execution

• Business center

• Full communication facilities – National and international

• Printing, stationary, delegate kits

• Video coverage and photography

25

CHAPTER -6

RECOMMENDED MARKETING MIX

Marketing is the process of planning and executing the conception, pricing,

promotion and distribution of ideas, goods and services to create exchanges that satisfy

individual and organizational objectives. The marketing mix refers to the appointment of

the effort, the combination, the design and integration of elements of marketing in to a

program, which is on the basis of an appraisals of the marketing forces, will vest achieve

the objective of an enterprise of a given time.

MARKETING MIX:

In common parlance, marketing is the process of selling something at a shop or

market place. A market is regarded as a single or an aggregated or relationship between

consumers and producers who are separated by place and time and have a potential to

strike an exchange of goods and services. Marketing is concerned with business and the

functions, product planning, pricing, selling and advertising.

When the functions mentioned above are interlocked in a planned and systematic

manner to attain a given objective. They merge their identity in what is called the

marketing mix in short; it just means the mixing of marketing ingredients, which are also

popularly known as the four P’s viz.

26

Adequate advertising, sales, promotion and personnel selling to create interest and

design for the product among customers for the proposed hotel can be based upon the

concept of the customer segment aimed at promote the market strategy.

The four basic aspect of marketing are:

• Place

• Product

• Price

• Promotion

An optional marketing mix, hence involves from a creative blinding of ingredients

or elements, so that the product or services is offered to the market under the conditions

most favorable to the attainment of marketing objectives.

PLACE:

The place can define as “The aggregate of forces or conditions within which

buyers and sellers make decision that result in the transfer of goods can be segmented

geographically into:

• Region or place

• Climate

27

In the geographic base, regional differences in terms of topography, climate,

population and its density, from the base for market segmentation and differentiated

marketing effort.

Choosing the right location is an important and vital decision for any hospitality business.

Certain factors have to be taken into account to decide the right place. Some of the

factors that decided the selection of proposed hotel place are:

� Railway station and bus stand are 5Kms respectively.

� Main City is just 2 km from the proposed site.

� Easy accessibility to town area.

� PRODUCT:

A product is a bundle of utilities and accompanying services. The proposed three star

hotel would be a three-floor building with the following facilities.

� Car Parking

� Banquet Facilities

� Telephone in all Rooms

� TV with Channels in all Rooms

� Central Air Conditioning system

� Multi- Cuisine Restaurant

� Bar

� 24 Hours Room Service

28

The important features of the hotel are that it will have 20Single Rooms, 20 Double

rooms , 5 Suite rooms The hotel will have a Multi-cuisine restaurant with 50 covers, and

a bar with 30 covers. The hotel and staff will be at their best services to their customers.

PROMOTION:

To make the product and price known and acceptable to the target customers, it is

essential to communicate, persuade and motivate them. Promotion can be effected

through,

� Personal Selling

� Advertisement

� Sales Promotion

� Public Relation

PERSONAL SELLING:

The hotels sales persons, who are on its customers so as to make an offer of sale,

motivate them to positively respond to it and finally clinch the ideal.

ADVERTISING:

The proposed hotel prompted through advertisements, by giving complementary

to the guest and also by suggesting other 3* and 4* hotels by suggesting the name of the

hotel if the guest has his company here, so that it is easily accessible in the same way the

29

proposed hotel also in return will help. Advertisement could be referred to as the use of

mass communication media to influence existing or potential through newspaper, T V

ads. Etc.

Advertisements will have positive effects such as:

� It will help to raise awareness about the company.

� To increase safer for the company.

� To create favorable image and confidence of company.

The various elements of advertising are joint media,

RADIO ADVERTISING AND OUT DOOR ADVERTISERS PRINT ME DIA:

Newspaper and magazine have a great effect on influencing the people. An

alternative advertisement given in the newspaper or magazine will influence the

people. Such advertisements are already targeted at particular market segment; there

is a large reading audience.

OUT DOOR ADVERTISEMENT :

This type of advertisements covers large number of people with low experiences.

The sales can also be promoted by giving discounts to the regular customer. As the

proposed hotel is mostly targeting on air travelers, it is suggested to have a airport

facilitator to guide to gust and even canvas people for the hotel. The hotel will provide

30

pick up and drop to guest from the airport, and also will have tips with air lines for the

staff and customers in cause of stop over and delay of flight etc.

l will be offering its facilities at nominal rates. The off-heard saying “5 star

facilities at 3 star rates” would be a reality as far as The Destiny would be concerned.

The pricing strategy will naturally depend on what the proposed hotel offering,

the facilities available in the hotel etc. Another factor to be considered when pricing of

rooms and out lets are low is to compare it with the competitions. It should be less that of

the competitions.

31

CHAPTER -7

CONCLUSION

(MARKET FEASIBILITY)

The market survey conducted at Trivandrum revealed good scope for the

establishment of a four star hotel. The conclusions regarding the viability of three star

hotels.

This place occupies a unique position in all Indian scenario. Various factors have

made a Trivandrum wonderful place to visit.

The activities develop in the city more because of the better facilities in hotel with

good rooms, food, services and good conferences, banquet halls accommodating many

people at a time. The development of this region has also made it possible for the

hoteliers satisfy with their share of profits. But the tourist’s activities are so much that the

city will require a few more star hotels.

It is expected that the proposed hotel will help in setting standards for other hotels

to follow in years to come. It is also expected the proposed hotel will be a step forward in

the even distribution of accommodation and improving its infrastructure. The tourism

departments are encouraging hotel projects so it would be easy to obtain necessary

licenses.

32

There will be qualified trained efficient and courteous staff properly groomed.

The aim would be to provide the best possible service to the guest and for the tie up keep

of the hotel. The promotion advertisements will be through print media and hoarding. An

attractive brochure would be given along with it.

The proposed hotel has a great potential to capture a large share of the developing

market. The proposed hotel can expect a good occupancy. Considering the entire

favorable factor it is concluded that a 3 star hotel is easily and scope for marketing the

hospitality product is excellent.

33

CHAPTER -8

(PART-B) FINANCIAL VIABILITY

INTRODUCTION TO FINANCIAL ASPECTS OF THE

PROPOSED PROJECT

The financial viability means to find out whether it is financially viable to star or three

star hotel as this project reports is based on three star hotel in simpler words financial

viability is to find out starting a three star hotel is financial successful or not.

The financial planning includes the selection of objectives and selection of policies,

programmers and procedures to achieve the objectives. The various consideration

relating. To the present capital need, requirement of investors and possibilities of

expansion resolve themselves into a present determination of:

A. The amount of capital to be raised.

B. The forms of propitiated amount of securities to be issued.

C. Policies as to administration of capital.

34

It is not too much to emphasize the correct estimate of the present and future needs of a

capital a sound capital structure and proper projection of capital will lead to success to

the company.

PROJECT AT GLANCE

� Total land Area = 3500 sq.ft

� Total Built up Area = 13870 sq.ft

� Type of hotel = Business Hotel

� Location = Pattom,Trivandrum

� Name of the hotel = HOTEL FORT MANOR

� No – of guest room = 45 Rooms

� Room tariff =Single Room: 2500/-

Double Room: 3500/-

Suite Room: 4000/-

(Rates are fixed till 3rd then to increase 10% every year)

FACILITIES PROVIDED BY THE PROPOSED HOTEL

� Multi – cuisine Restaurant = 50 Covers

� Bar = 30 Covers

� Banquet/ Conference Hall = 420 Covers

35

� Centralized A/C

� Room Service

� Travel Desk

� Locker Facility

� Car Rental

� Free Pick Up Facility

� Secretarial / Valet Services

� Doctor On Call

� Channel Music

� Cable Network

� Foreign Currency Exchange

36

CHAPTER -9

COST OF PROJECT

Amount in lakhs

Cost of land

49.93 Cost of building

158.65

Plant and machinery

212.30

Furniture and fixture

39.55

Miscellaneous fixed assets

12.12

553.12

Margin for contingency (10% on 1-5)

55.31

Preliminary POP expenses

77.50

685.93

Interest on implementation period

34.29

Total cost of the project

639.10

37

CHAPTER -10

MEANS OF FINANCEMEANS OF FINANCEMEANS OF FINANCEMEANS OF FINANCE

1) Term loan (65% of project) : 415.41 2) Owners capital (35% of project) : 252.07

DER (DEBT EQUITY RATIO) Debt equity = Term loan Share capital

DER = 415.41 252.07 = 1.85

38

CHAPTER -11

SALES REVENUE

ESTIMATION OF INCOME OF 5 YRS

Item Year I

Year II

Year III

Year IV

Year V

% of occupancy (operational level)

60% 65% 70% 75% 80%

Room sales

306.60

332.15

357.70

421.57

494.64

F and B sales 519.68

613.69

718.09

827.91

951.73

Total Sales

686.28

810.84

945.79

1124.48

1326.37

39

CHAPTER -12

OPERATIONAL EXPENSES ESTIMATION OF EXPENSE FOR 5 YRS

Item Year

I Year

II Year III

Year IV

Year V

Cost of F and B (40% of F and B sales)

207.87

245.47

287.23

331.16

380.67

Electricity (5% of total sales)

44.31

50.54

57.28

66.22

76.31

Salaries and wages (annexures)

88.27

97.09

106.80

117.48

129.23

Administration and management expenses (5% of total sales)

44.31

50.54

57.28

66.22

76.31

Advertisement and publicity (15% of total sales)

132.94

151.62

171.86

198.67

228.95

Insurance and legal charges (5% of total sales)

44.31

50.54

57.28

66.22

76.31

Miscellaneous expenses (4% of total sales)

35.45

40.43

45.83

52.97

61.05

Total expenses

597.46

686.23

783.56

898.94

1028.85

40

BOD

41

CHAPTER CHAPTER CHAPTER CHAPTER ----14141414

DEPRECIATION STATEMENTDEPRECIATION STATEMENTDEPRECIATION STATEMENTDEPRECIATION STATEMENT

Year

Building

Dep (10%)

P & M

Dep (25%)

F & F

Dep (25%)

Misc

Dep (25%)

Total Depreciation

I

206.65

23.66

212.30

53.07

39.55

9.88

12.12

3.03

89.64

II

212.99

21.29

159.23

39.80

29.67

7.41

9.09

2.27

70.77

III

191.70

19.17

119.43

29.85

22.26

5.56

6.82

1.70

56.28

IV

172.53

17.25

89.58

22.39

16.70

4.17

5.12

1.28

45.09

V

155.28

15.52

67.19

16.79

12.53

3.13

3.84

0.96

36.40

42

PROFITABILITY STATEMENT

Particulars Year

I Year

II Year III

Year IV

Year V

1) Op. Profit

288.82

324.61

362.23

425.54

497.52

2.) a) Interest on L/T loan 74.90

65.54

56.17

46.81

37.45

b.) Interest on BOD

3.63

4.18

4.78

5.52

6.36

3.) Depreciation 89.64

70.77

56.28

45.09

36.40

4.) POP expenses

77.50

77.50

77.50

77.50

77.50

5.) Profit before tax A[1-(2+3+4)]

43.15

106.62

167.50

250.56

339.81

6.) Profit for tax B = A 43.15

106.62

167.50

250.56

339.81

7.) Income tax @ 50% + 10%

surcharge(C+D)

25.89

63.97

100.50

150.37

203.88

8.) Profit after tax E = [B-(C+D)]

17.26

42.65

67.00

100.25

135.93

9.) Available surplus(8+3+4) 184.40

190.92

200.78

222.84

249.83

10.) L.T repayment

58.51

58.51

58.51

58.51

58.51

43

11.) Net cash flow (9 -10) 94.65

95.41

100.12

103.11

127.38

44

CHAPTER -16

FUND FLOW STATEMENTFUND FLOW STATEMENTFUND FLOW STATEMENTFUND FLOW STATEMENT

Source of funds

Year

I

Year

II

Year III

Year IV

Year

V

Implementation period

Share capital

252.07

Secured loan

Gross profit

121.68

176.34

228.45

302.95

383.62

Depreciation

89.64

70.77

56.28

45.09

36.40

POP expenses

77.50

77.50

77.50

77.50

77.50

Application of funds

Year

I

Year

II

Year III

Year IV

Year

V

Implementation period

Fixed assets

685.93

Margin for contingency

55.31

POP expenses

77.50

Interest LTL

74.90

65.54

56.17

46.81

37.45

Interest W/C

2.96

3.37

3.82

4.42

5.08

Repayment of L/T

58.51

58.51

58.51

58.51

58.51

Dividend of shares (35% of cash flow)

45

CHAPTER -17

BREAK EVEN ANALYSIS

To arrive at Break Even Point for a specific year occupancy.

Revenue: - III year 945.79 occupancy: - 70%

Fixed cost:-

Rupees in lakhs

1.) Power (40%) 22.91

2.) Salary (80%) 85.44

3.) Insurance and license 2.00

4.) Interest on LTL 56.17

5.) Administration and management expenses 57.28

Total 223.80

Variable cost:-

Rupees in lakhs

1.) Power (60%) 34.36

2.) Salary (20%) 21.36

3.) Interest on W/C (interest on B.O.D) 3.82

4.) Expense towards telephone (10%)

10.00

Total 69.54

46

1. Contribution = Income - Variable Cost

= 1145.79 – 69.54 = 1076.25

2. Break Even Point = Fixed cost Contribution

= 223.80

1076.25 = 0.20 (i.e., 20%)

3. BE Turnover = Total Revenue x B.E.P Assumed occupancy

= 1145.79 x 20%

70% = 327.36

47

CHAPTER -18

DEBT SERVICE COVERAGE RATIO

Coverage (A)

Year I

Year II

Year III

Year IV

Year V

Profit after tax

43.15

106.62

167.50

250.62

339.81

Depreciation

89.64

70.77

56.28

45.09

36.40

Interest on L/T loan

74.90

65.54

56.17

46.81

37.45

POP expense

77.50

77.50

77.50

77.50

77.50

Total

285.19

320.43

357.45

420.02

491.16

Debt (B) Year

I Year

II Year III

Year IV

Year V

Repayment of L/T loan

58.51

58.51

58.51

58.51

58.51

Interest on L/T loan

74.90

65.54

56.17

46.81

37.45

Total 133.41 124.05 114.68 105.32 95.96

48

DSCR = A/B

= 285.19 + 320.43 + 357.45 + 420.02 + 491.16 133.41 124.05 114.68 105.32 95.96 = 2.13 + 2.58 + 3.10 + 3.90 + 5.11 = 16.83 Average DSCR = I year + II year + III year + IV year + V year = 2.13 + 2.58 + 3.10 + 3.90 + 5.11 5 = 16.83 5

= 3.36

49

CHAPTER- 19 RATIO ANALYSIS

R.O.I (RETURN ON INVESTMENT)

Return on investment, = Net cash flow x 100 Equity share capital

I year = 94.65 x 100 252.07

= 37.54 II year = 95.41 x 100

252.07

= 37.85

III year = 100.12 x 100 252.07

= 39.71

IV year = 103.11x 100

252.07

= 40.90

V year = 127.38 x 100 252.07 = 50.53

50

Average R.O.I = I year + II year + III year + IV year + V year 5

= 37.54+37.85+39.71+40.90+50.53

5

= 206.53 5 = 41.30

Pay Back Period = 100

ROI = 100

41.30

=2.42

51

SENSITIVITY RATIO

Sensitivity change = Change in income

Change in expenses

= 16.36

11.19

= 1.46

Sensitivity to income change = Total income

Occupancy

= 1145.79 70

= 16.36

Sensitivity to expense change = Total expense

Occupancy

= 783.56 70

= 11.19

III year sensitivity ratio = 1.46

52

COST BENEFIT ANALYSIS

A = Total cost of project = 639.10 (amount in lakhs)

B = total revenue – total expenses = 4893.37 – 3995.04 = 898.33 (amount in lakhs)

Capital intensity = B/A = 898.33 720.22 = 1.24

53

CHAPTER -20

NETWORK ANALYSIS

Sl.no Description Duration

(Months) 1. Project search 2

2. Preparation of feasibility report 4

3. Formation of feasibility report 2

4. Purchase of land 6

5. Preparation of building plan and tender 1.5

6. Application for loan 2

7. Staff appointment 2

8. Application for power, water. 5

9. Project approval 1

10. Building construction 15

11. Order for P and M 3

12. Plumbing and electrification 6

13. Delivery and installation of machinery 4

14. Recruitment of staff 2

15. Furnishing and interior decoration 5

16. Application for working capital 1

17. Procurement of material 1

18. Trail runs and commissioning 3

19. Land seaping 3

20. Inauguration and commercial operating 3

Total implementation period 5 (years) 9(months)

54

CHAPTER -21

CONCLUSION

The project on financial viability was completed in Trivandrum city of “God’s own

country” Kerala. A market survey conducted before the commencement of the project

shows that there is great demand for the products of hospitality industry in Trivandrum,

which is the capital of Kerala.Hence the proposed project has been considered and it was

decided to construct the hotel near Pattom, Trivandrum.

Total cost of project is Rs 639.10/- lakhs and has 45 rooms. The occupancy forecasted

for a period of 5 consecutive years from commencement of operations is taken into

account as – 60%, 65%, 70%, 75% and 80%.

Statistical data of the project may be summed as follows

Debit. Equity ratio 1.85

Average return on investment: 59.99

Break-even point: 327.36.

After studying the above aspect and estimation of profitably statement and other financial

status it has been concluded that 3 star hotel with 45 rooms in Trivandrum is financially

viable.

55

CHAPTER -22

BIBLIOGRAPHY

S.No. Titles Authors

1. Perspectives on Indian hotel industry Pushpinder S.Gill

2. Hotel Economics P.M. Mathew

3. Hospitality Management T. Philip

4. All India Travel Companion Asia Publishing Companion

5. Project Analysis G. Phyler

6. Hotel Accountancy T. Ryder

WEBSITES

www.answers.com

www.hoteliercaterer.com

56

ANNEXURESANNEXURESANNEXURESANNEXURES

ANNEXURE 1

Cost of land = Land required in sq. ft x Rate per sq. ft

= 3500sq. ft x 300

= 41.61 lakhs

15% for conveyance = 6.24 lakhs

5% for site development = 2.08 lakhs

Total = 49.93 lakhs

57

ANNEXURE 2

COST OF BUILDING

Total built up area

13870 sq.ft

Rate per sq. ft

Rs 750/-

Cost

104.02 lakhs

15% of Electrical work

15.60 lakhs

12% of Plumbing and Drainage

12.48 lakhs

25% on Consultant

26.05 lakhs

Total

158.15 lakhs

58

3. PLANT AND MACHINERY

Items Amount in lakhs

Central a/c 70

Lift 25

Generator 25

Transformer 20

Bore well 2

Boiler 10

EPBAX 15

Instrument 5

Exhaust/ vent 2

CCTV 10

Kitchen equipment 15

Water cooler 2

Fire fitting 2

Typewriter Rs 5000/- Computer Rs 800000/-

Telex Rs 75000/-

59

Fax Rs 50000/- 9.30

Total 212.30

ANNEXURE -4

a. GUEST ROOM

Item

Price in Rs

No’s Total

Twin bed 3500 20 70000

Double bed 4500 20 90000

Side table 600 80 48000

Chair 500 40 20000

Coffee table 400 40 16000

Cupboard 500 40 20000

Luggage rack 400 40 16000

T.V stand 2500 40 100000

Carpets 6600sq.ft 100/ sq. ft 6600sq.ft 660000

Mirrors 500 40 20000

Wash basin 1000 40 40000

Bath tub 7000 40 280000

W/C 1500 40 60000

Upholstery 1000 40 40000

60

Dressing table 1000 40 40000

Fixtures 5000 40 200000

Total 1720000

b. FOOD AND BEVERAGE OUTLETS

RESTAURANT: (50Pax)

Item

Price

No

Total

Tables

2500

13

32500

Chairs

500

55

27500

Side station

4000

2

8000

Décor and upholstery

100000

Carpets

100/sq.ft

400 sq.ft

40000

Fixtures

100000

Total

308000

61

c. BAR: (30Pax)

Item Price No Total

Stools 500 10 5000

Table 1500 10 15000

Chair 500 30 15000

Bar counter 50000 1 50000

Music system 50000 1 50000

Carpets 100/sq.ft 200 sq.ft 20000

Décor 75000

Total 230000

62

63

d. ROOM SERVICE :( 45Rooms)

Item

Price

Number

Total

B/f Trays

150

15

2250

Tea Trays

200

15

3000

12” Salvers

250

10

2500

9” Salvers

200

10

2500

Trolleys

1500

5

7500

Racks

500

5

2500

O.T cabin

5000

1

5000

Desk

6000

1

6000

Miscellaneous

6000

Total

36750

64

e. BANQUET :( 420 Pax)

Item

Price

Number

Total

Chairs

500

425

212500

Tables

1000

30

30000

Carpets

100/sq.ft

1200sq.ft (1)

120000

Podium

1500

2

3000

Music system

50000

12” salver

250

30

7500

Fixtures

100000

Total

523000

65

f. STORES, PURCHASE, HOUSEKEEPING

Item

Total

Cupboards 50000

Shelves 25000

Racks 30000

Bins 10000

Fixtures 50000

Total 165000

66

g.ADMINISTRATION

Item

Total

Tables

75000

Chairs

50000

Fixtures

50000

Total

175000

67

h. RECEPTION AND LOBBY

Item

Total

Counter

40000

Stationery

5000

Pigeon hole

10000

Cupboard

10000

Safe deposit

20000

Sofa set

200000

Fixtures

300000

Luggage carrier

100000

Miscellaneous

50000

Total

735000

68

i. STAFF CAFETARIA

Item

Total

Tables

12500

Chairs

25000

Fixtures

25000

Total

62500

69

5. MISCELLANEOUS FIXED ASSETS

a.FOOD AND BEVERAGE OUTLETS

Item

Price

Number

Total

Table cloth

200

30

6000

Napkins

30

200

6000

Par stock(*3)

12000

Total cost

36000

70

b. BANQUET HALL AND CONFERENCE

Item

Price

Number

Total

Frills

500

30

15000

Table cloth

150

30

45000

Napkins

30

500

15000

Par stock (*3)

34500

Total

103500

71

c.GUEST ROOM AND SUITE ROOM LINEN

Item

Price

Number

Total

Single bed sheet

250

25

6250

Double bed sheet

250

30

9000

Blankets

400

50

20000

Blanket cover

200

50

10000

Mattress

1000

50

50000

Mattress protector

200

50

10000

Bed cover (single) (double)

200 300

25 30

5000 9000

Pillow cover

50

100

5000

Hand towel

30

100

3000

Bath towel

100

100

10000

Bath mat

150

50

7500

Pillows

150

90

13500

Par stock (*4)

158250

Total

633000

72

d. KITCHEN STEWARDING (RESTAURANT &ROOM SERVICE) Item

Price (Rs)

Number

Total

Glasses

50

800

40000

Chinaware

30

800

24000

Flatware

30

800

24000

Cutlery

30

800

24000

Miscellaneous

25000

Total

137000

73

e. BANQUETS

Item

Price(Rs)

Number

Total

Glassware

50

1000

50000

Chinaware

30

1000

30000

Flatware

30

1000

30000

Cutlery

25

1000

25000

Total

137000

74

F .STAFF CAFETARIA Item

Total

Plates

60000

Spoons

20000

Forks

20000

Total

100000

75

g. HOUSE KEEPING MISCELLANEOUS ASSETS

Item

Number

Price

Total

Vacuum cleaner

4

5000

20000

Cleaner mug

20

20

400

Mops

30

30

900

Brooms

30

25

750

Squeezer

30

25

750

Duster

100

5

500

Waiters cloth

500

40

20000

Miscellaneous

25000

Total

68300

76

6. PRELIMINARY AND PRE-OPERATIVE EXPENSES

Item

Rs. In Lakhs

1.) Salary and wages 20.00

2.) Loan procurement and application 2.00

3.) Project fees 2.50

4.) Registration and establishment fees

2.00

5.) Insurance 15.00

6.) Advertisement and publicity 10.00

7.)Deposits a.) Electricity b.) Telephone c.) Water supply d.) NSC

5.00 5.00 3.00 3.00

8.) Miscellaneous expenses 10.00

POP Total 77.50

77

7. SALARY AND WAGES

S. NO

DESIGNATION NO.OF

PERSON REQUIRED

SALARY (RS.)

TOTAL AMOUNT

1 General manager 1 20000 20000

2 Front office manager 1 9000 9000

3 Lobby manager 1 8000 8000

4 GRE 1 5000 5000

5 Front office assistant 4 5000 20000

6 Travel desk operator 1 4500 4500

7 Bellboys 4 2500 10000

8 Telephone operator 2 3000 6000

9 Bell captain 2 3000 6000

10 Night auditor 1 4000 4000

11 F & B Manager 1 12000 12000

12 Banquet manager 1 9000 9000

13 Restaurant manager 1 9000 9000

14 Barman 1 5000 5000

15 Captains 2 4000 8000

16 Senior Captain 2 5000 10000

78

17 Stewards 20 3000 60000

18 Executive chef 1 25000 25000

19 Souse Chef 2 10000 20000

20 Commis 6 4000 24000

21 Chef de partie 3 5500 16500

22 Steward supervisor 1 4500 4500

23 Dish / pot washer 4 2000 8000

24 Executive house keeper 1 12000 12000

25 House keeping supervisor 2 5500 11000

26 Floor supervisor 3 5000 15000

27 Room attendant/house man 10 3000 30000

28 Personal manager 1 8000 8000

29 Sales & marketing manager 1 9000 9000

30 Sales & marketing executive 1 5000 5000

31 Accountant 1 5000 5000

32 Chief accountant 1 10000 10000

33 Cashier 2 6000 12000

34 B.Sales executive 2 4000 8000

35 Bakery chef 1 15000 15000

79

36 Desk control supervisor 2 4000 8000

37 Linen attendants 2 3000 6000

38 Laundry attender 2 3000 6000

39 Flower. Assistant 1 2500 2500

40 Carpenter 1 2500 2500

41 Plumber 2 2500 5000

42 Hostess 2 3000 6000

43 R.S.OT 2 3000 6000

44 Training manager 1 8000 8000

45 Training assistant 1 3000 3000

46 G.M secretary 1 6000 6000

47 Pest controller 2 2000 4000

48 Laundry manager 1 8000 8000

49 Personnel office asst. 2 3000 6000

50 Drivers 2 4000 4000

51 Doorman 2 3000 6000

52 Apprentices 4 1500 6000

53 Life guard 2 2500 2500

80

54 Security manager 1 8000 8000

55 Security Supervisor 2 4500 9000

56 Security guard 4 2500 10000

57 Chief engineering 1 9000 9000

58 Supervisor 2 4000 8000

59 Technicians 2 3000 6000

60 Purchase officer 1 5000 5000

61 Purchase manager 1 8000 8000

62 Stores keeper 2 3000 6000

TOTAL

135

613000

Add benefits 20% 0f 613000 + 122600 735600 x 12 Total Salary = Rs 8827200

81

8. INTEREST ON L/T LOANS

(Rate of interest 16%) Year Installment L/T loan Interest

I 58.81 468.14 74.90

II 58.81 409.63 65.54

III 58.81 351.12 56.17

IV 58.81 292.61 46.81

V 58.81 234.10 37.45

VI 58.81 175.59 28.09

VII 58.81 117.08 18.73

VIII 58.81 58.57 9.37

82

9. ROOM SALES

Room sales = Room Tariff x No: of Rooms x % Occupancy x 365 100 SINGLE ROOM (20 Rooms) year

Room Tariff

No: of Rooms

% Occupancy

No. of days

Total Rs in Lakhs

I

2500

20

60

365

109.50

II

2500

20

65

365

153.30

III

2500

20

70

365

127.75

IV

2750

20

75

365

150.56

V

3025

20

80

365

176.66

83

DOUBLE ROOMS (20 Rooms) Year

Room Tariff

No: of Rooms

% Occupancy

No. of days

Total Rs in Lakhs

I

3500

20

60

365

153.30

II

3500

20

65

365

166.07

III

3500

20

70

365

178.85

IV

3850

20

75

365

210.78

V

4235

20

80

365

247.32

84

SUITE ROOMS (5Rooms) Year

Room Tariff

No: of Rooms

% Occupancy

No. of days

Total Rs in Lakhs

I

4000

5

60

365

43.80

II

4000

5

65

365

47.40

III

4000

5

70

365

51.10

IV

4400

5

75

365

60.22

V

4840

5

80

365

70.66

85

10. FOOD & BEVERAGE SALES

F & B SALES=No: of Pax x Average Cover Charge x 365

BAR (30 Pax) Year

No. of covers sold/day

Average cover charges

Number of days

Total Rs in lakhs

I

8

285

365

8.32

II

12

320

365

14.01

III

18

355

365

23.32

IV

22

390

365

31.31

V

30

425

365

46.53

86

RESTAURANT (50 Pax) Year

No. of covers sold/day

Average cover charge

Number of days

Total Rs in Lakhs

I

30

300

365

32.85

II

35

325

365

41.51

III

40

350

365

51.10

IV

45

375

365

61.59

V

50

400

365

73.00

87

ROOM SERVICE (45 Rooms) Year

No. of covers sold/day

Average cover charge

Number of days

Total Rs in Lakhs

I

37

300

365

40.51

II

39

325

365

46.26

III

41

350

365

52.37

IV

43

375

365

58.85

V

45

400

365

65.70

88

BANQUET & CONFERENCE HALL (420 Pax)

Year

No. of covers sold/day

Average per cover

No. of days

Total Rs in Lakhs

I

300

400

365

483.00

II

330

425

365

511.91

III

360

450

365

591.30

IV

390

475

365

676.16

V

420

500

365

766.50