Business Plan
This Hotel will be built through a small business loan from local banks. Gold Cost Commercial Bank will take care of 60% of the needed amount of monetary capital required to complete the projection while the owners will supply the other 50% of the construction money. The Loan will be repaid in 5 years at 9% interest rate. We are also assuming that the initial operating capital to take care of the hotel will be provided by Mr. Jones and Mrs. Juliet Jones at an equal portion. Additional capital will be injected into the business after one year by the founders for expansion at equal percentages. The owners will contribute money needed for construction at percentages of 20% and 30% and subsequent money needed for operation will be supplied in equal percentages. Therefore, the Hotel capital contribution and ownership structure will be 60% for Mr. Jones and 40% For Mrs. Juliet Jones. Profits and losses realized from the investment will be shared according to the ratio of capital contribution.
Break-Even Analysis
We project that the average monthly fixed and variable costs will be approximately $8, 000 which will include monthly operational expenses of the hotel and interest payment. In this business, the off-season and peak-season will significantly impact the monthly earnings of the hotel, as this is the general trend in the hotel industry. In the first year of operation, it is expected that the on-season revenues will be used to offset losses that the hotel will incur in the offseason (Padgette & Paulin, 2011). This is expected to change as the hotel builds its market position in the local neighborhood and therefore within three years of operation, off-season revenues will be sufficient to sustain the operations of the business during those periods once the hotel breaks even.
Projected Profit and Loss
As noted above, earnings for the hotel are expected to be influenced significantly by seasonal fluctuations. The owners, however, note that this will be minimized through strengthening the hotel’s market position in the local community who make the largest group of the target market. This will tentatively help in offsetting negative impacts of revenues of the hotel in low season (Dedekorkut-Howes & Bosman, 2015). Below is a table that outlines the projected profit and loss statement for the hotel for the first three years of operation. These projections are to a large extent realistic given the extensive historical analysis of the market that the owners have carried (Barrow, Barrow & Brown, 2012). They are based on the current public pricing research and operational costs in Gold Coast city.
Risks and Contingency Analysis
Political and legal environment
The political-legal environment refers to the number of laws regulating how business in carried out in a given jurisdiction. These laws cover items such as principles of business activities and undertakings and standards of varied products and service offerings. Laws and regulations in legal jurisdictions are passed through acts of parliament. Legal rules and regulations that govern the conduct of business have an inherent impact in how the business order is attained, responsibility and efficiency of business is likely to be affected (McKercher & Robbins, 1988). The laws and regulations in a government also have a tendency to either limit or motivate investments to a given nation. How the laws and regulations are formulated and enacted also affects to a large extent influence the economic and industrial activities in a jurisdiction (Burrow, 2011). The political-legal environment also guides how business organizations are structured and therefore pose a great risk to the business operation I any field and especially to businesses that operate in a hospitality industry. Of importance to note is that the political and legal environment always creates uncertainty as it is closely related to political leadership that comes to power at any given time. Unstable government affects commercial rules and may influence fluctuations the performance of business organizations (Dedekorkut-Howes & Bosman, 2015). The political and legal environment also pose a risk to the business since it regulates the consumer rights and competition among businesses operating in the same environment. While this may present threats to this hotel, it also has a great impact on the performance of this hotel as it will be protected from unhealthy competition from large and established hotel businesses. This risk can be mitigated through ensuring that the business is not in any way affiliated with a political party. The managers will also take due diligence in ensuring that the business follows and complies with all the formulated laws and regulations in Gold Coast territory to ensure that it avoids legal battles that may be costly.
Economic environment
The economic, environmental factors include economic conditions, policies and economic systems that persist in a country. The Australian economic conditions describe the nature of the economy which is closely related to resource markets such as money, raw materials, supply markets and services and how these factors influence supply of materials such as foods ingredients that are used in food preparation, quality of foods, availability, and cost of food in the menu. Economic, environmental conditions such as money markets determine the economic strengths and weaknesses of the market that a business is operating in. The purchasing power of individuals in the target market partly depends on their current income, savings, circulation of money, credit availability and debt (Daley, McGannon & Hunter, 2014). The distribution pattern of people’s income in the economy impacts whether the business enterprise will be successful or will experience negative growth. Fluctuations on the money markets such in Australian dollar money market have possibility of decreasing the number visitors to hotel enterprises. This affects the profitability and revenues streams for the business. The fluctuations in dollar prices can steadily reduce the ability of target markets including local and international visitors to spend their incomes on entertainment in hotels thus affecting revenues of hotel businesses. This risk can be mitigated through developing programs and services that are designed only for local consumption (Godsey, 2010). This means that the hotel will encourage locals to make a considerable market share of the company customers. This way, the hotel will reduce possibilities of lower incomes when international tourists do not frequent its premises.
References
Barrow, C., Barrow, P., & Brown, R. (2012). The business plan workbook. Kogan Page Publishers.
Burrow, L. I. (2011). SunShine Café: A Breakfast Restaurant Business Plan.
Daley, J., McGannon, C., & Hunter, A. (2014). Budget pressures on Australian governments 2014. Grattan Institute, from www. grattan. edu. au/publications/reports/post/budget-pressures-onaustralian-governments-2014.
Dedekorkut-Howes, A., & Bosman, C. (2015). The Gold Coast: Australia’s playground?. Cities, 42, 70-84.
Godsey, J. A. (2010). Organic Restaurant Business Plan (Doctoral dissertation, California Polytechnic State University).
McKercher, B., & Robbins, B. (1998). Business development issues affecting nature-based tourism operators in Australia. Journal of Sustainable Tourism, 6(2), 173-188.
Padgette, R. L., & Paulin, T. D. (2011). U.S. Patent No. 7,877,308. Washington, DC: U.S. Patent and Trademark Office.
