hosp3
wzy19961214
ValuationImprovmentDatar222.xlsxRecommendation 1
| Cash Flow Imrovement | |||||
| Recommendation | Improve Revpar Index by 2 index points within the next year. | ||||
| Discussion | The property is currently underperforming the competitive set. The metrics are given below. The hotel has recently completed a full renovation and feels strongly that they will be able to leverage their new product for both pricing and attracting new group business. | ||||
| Relevant Data | Steps: | ||||
| Available Rooms | 350 | 1. Calculate the occupancy percentage if the INDEX were to increase by 2 points. | |||
| 2. Calculate the number of new room nights based on number 1. above. | |||||
| Hotel | Market | Index | 3. Multiply the number of new room nights by the CURRENT ADR. | ||
| Occupancy | 75.0% | 82.0% | 91.5 | 4. Multiply the new revenue by the profit flow through % | |
| ADR | $ 187.50 | $ 193.00 | 97.2 | ||
| RevPar | $ 140.63 | $ 158.26 | 88.9 | 1. Calculate the ADR if the INDEX were to increas by 2 points. | |
| 2. Multiply ALL room nights (the existing and the new calculated above) by the change in ADR. | |||||
| Increases in occupancy will flow through to profit at 77% | 3. Multiply this new revenue by the flow through % on ADR. | ||||
| Increase in Occupied Rooms | 1. Calculate the total improvement in profit based on these two changes. | ||||
| Increase in Revenue at Existing ADR | 2. Apply a risk discount based on your assessment of the risk | ||||
| Increased Profit | 3. Calculate the value improvement based on this cash flow improvement | ||||
| increases in ADR will flow through to profit at 94% | |||||
| Increase in ADR | |||||
| Applied to ALL room nights, including the above | |||||
| Increased Profit | |||||
| Total Improvement in Profit | |||||
| Risk Adjusted Discount Rate | See Assignment Document | ||||
| Risk Adjusted Improvement in Profit/Cash flow | Multiply B29 by B30 | ||||
| Total Valuation Improvement | Divide B31 by the capitalizaiton rate given in the Assignment Document |
Recommendation 2
| Cash Flow Imrovement | |||||
| Recommendation | Improve Housekeeping Productivity to the Company Benchmark | ||||
| Discussion | The property is currently underperforming the the company benchmark for Housekeeping Productivity. The hotel has recently replaced the Executive Housekeeper. The new Executive Housekeeper has a track record of being able to improve housekeeping productivity quickly. | ||||
| Relevant Data | Steps: | ||||
| 95813 | |||||
| Occupied Rooms Current Year | 95813 | 1. Calculate the reduction in man hours if the benchmark is achieved | |||
| 2. Muitply the number of hours saved by the labor rate per hour | |||||
| Hotel | Benchmark | 3. Assign a discount rate based on your perceived risk of this recommendation. | |||
| Housekeeping Man Hours Per Occupied room | 0.55 | 0.49 | 4. Calculate the value improvement based on this cash flow improvement | ||
| Housekeeping Wage Rate per hour | $ 11.00 | ||||
| Housekeeping Benefit Rate per Hour | $ 5.50 | ||||
| Total Housekeeping Labor cost per hour | $ 16.50 | ||||
| Decrease in Labor hours at benchmark | |||||
| Total Housekeeping Labor Cost per Hour | |||||
| Net Improvement in Profit | |||||
| Risk Adjusted Discount Rate | See Assignment Document | ||||
| Risk Adjusted Improvement in Profit/Cash flow | Multiply B21 by B23 | ||||
| Total Valuation Improvement | Divide B26 by the capitalizaiton rate given in the Assignment Document |
Recommendation 3
| Cash Flow Imrovement | |||||
| Recommendation | Install Automated Parking Gates and Charge for Parking | ||||
| Discussion | This project will install automated parking gates at the two entrances to our parking lot. The office park that surrounmds the hotel has continued to grow, and non-guests are frequently using our parking facilities. We have analyized paid parking within our competitive set, and 3 of our 5 competitive hotels currently charge for parking. We have received Franchisor approval to begin charging for parking. | ||||
| Relevant Data | Steps: | ||||
| Available Rooms | 350 | ||||
| Parking Gate System Installation Cost | $ 65,000 | 1. Calcuate the parking revenue for the year | |||
| Average Vehicles Per night | 125 | 2. Calcualte the profit based on the profit margin | |||
| Competitive Parking Rate | $ 10.00 | 3. Subtract the cost of the project | |||
| Profit Margin | 95% | 4. Assign a Risk Discount based on your perceived risk of achievement | |||
| Increased Profit | 5. Calculation the valuation improvement based on this impoved cash flow | ||||
| Risk Adjusted Discount Rate | See Assignment Document | ||||
| Risk Adjusted Improvement in Profit/Cash flow | Multiply B24 by B17 | ||||
| Total Valuation Improvement | Divide B20 by the capitalizaiton rate given in the Assignment Document |
