Hotels Pre-Feasibilities PDF

Yanbu Waterfront Hotel
Preliminary Financial Feasibility

For a
250 Room 3* Hotel
(Package #3; Parcel 3.07 - Harbour Village Hotel)
Yanbu Al-Sinaiyah
Madinah Province
Kingdom of Saudi Arabia
2012 September
Prepared by
Economic Planning Department
Royal Commission at Yanbu
Yanbu Al-Sinaiyah, Kingdom of Saudi Arabia
Yanbu Waterfront 250 Room Hotel Preliminary Financial Feasibility Study Page 1
Introduction
Investors in the Yanbu Waterfront are being offered a unique opportunity to invest in a once in
lifetime world class resort on the spectacular Red Sea coast of Saudi Arabia. In order to assist
investors considering these opportunities, a preliminary financial feasibility study has been prepared
for the hotel component of this investment opportunity.
The projections in this preliminary study reflect reasonable assumptions prepared by the Royal
Commission at Yanbu based on independent analysis prepared by the international firm Albert Speer
& Partners (AS&P), as well as published market and financial conditions in Yanbu Al-Sinaiyah and the
Kingdom of Saudi Arabia. This preliminary study is intended to serve investors as a basis for a more
detailed analysis and by providing reasonable projections for the investor’s independent analysis.
Executive Summary
This preliminary financial feasibility study is presented in five sections. The results of this study
conclude that a 3* waterfront hotel in Yanbu Al-Sinaiyah with 250 rooms is a profitable financial
investment. Furthermore:
 It is estimated that the hotel construction will cost a total of approximately SR 74 million.
 The hotel’s occupancy is projected to range 64% in year 1 to 70% in the 5th year of operation.
 The Internal Rate of Return (IRR) is estimated to average 18.6% during the first 5 years of
operation.
This study is presented in five sections:

1. Hotel Development Costs
2. Hotel Operational Costs
3. Projected Hotel Occupancy
4. Hotel Revenues and Net Operating Income
5. Projected Internal Rate of Return (IRR).
The total development cost relies upon Royal Commission at Yanbu experience from apartment and
dormitory residential projects constructed in the city. Preliminary hotel construction cost estimates
also are based from data presented by AS&P, the Yanbu Waterfront Master Plan consultant, who
utilized lodging industry data and figures.
It is estimated that the hotel construction in Yanbu Al-Sinaiyah will cost approximately SR100 million:
Total Rooms 250 guest rooms (minimum 24 M² per room)
Hotel Total Gross Floor Area 22,085 M²
Average Cost per Room USD SR296,000
Total Hotel Development Cost SR100 million
Operational costs are include payroll, the cost of sales and marketing, utilities, insurance,
management fee, land lease payments, and FF&E (fixtures, furnishings and equipment). Operational
and other on-going costs projected by AS&P range from 66% to 68% of the annual revenue.
For purposes of this preliminary analysis, an adjusted more conservative estimate of 71% to 73% of
annual revenue is considered reasonable operational costs for Yanbu. These percentages have been
applied to the annual revenues projected in this study to determine the net annual operating
income.
Annual land leases payments are considered to be a part of the operational costs since there is no
land ownership acquisition cost to the hotel operator/developer
Hotel occupancy will be greatly influenced by tourism activity in the Kingdom of Saudi Arabia.
Tourism plays an increasingly pivotal role in Saudi Arabia’s economy. Yanbu is positioned to maximize
the city’s strategic Red Sea location and proximity to Madinah as a major tourist destination.
According to the 2012 Saudi Tourism Outlook, published by the Saudi Commission for Tourism &
Antiquities (SCTA) in January 2012:
 The Saudi tourism industry recorded SR84 billion ($22 billion) in tourist expenditures in
2011.
 The average room occupancy rate in hotels in the Kingdom was 63% in 2011.
 The Kingdom’s domestic tourism expenditures are expected to increase by 12.4% in 2012;
 Inbound tourism expenditures are forecast to rise by 9% in 2012.
The Yanbu Waterfront Master Plan consultant AS&P projected hotel occupancy in the first year of
operation of Yanbu’s waterfront hotels to be 65% and reach 72% by the 5th year of operation. For
purposes of this preliminary feasibility study, a mid-point between the Kingdom’s 2011 average hotel
occupancy rate and the Yanbu Waterfront Master Plan was used ranging from 64% in year 1 to 70%
in the 5th year of operation.
75%
Projected Yanbu Waterfront Hotel Annual Occupancy Rate
70%
70%
65% 67% 68%
66%
64%
60%
63%
55%
50%
Saudi Arabia 2011 Year 1 Year 2 Year 3 Year 4 Year 5
Source: SCTA; RC-Y Economic Planning Department.
The AS&P Yanbu Waterfront Master Plan projected an average room rate for Yanbu Waterfront
hotels opening in 2012 of $165 to $185 (SR620 to SR695). However, the average published rate for a
standard room at three existing international branded hotels in Yanbu Al-Sinaiyah and Yanbu Al-Bahr
in August, 2012 is SR765 and ranges from SR546 to SR936 per night.
Table I
Yanbu Al Sinaiyah International Branded Hotel’s Room Rates 2012
Hotel Published Room Rate

Hotel Name Location Waterfront Site Rating (for 2 guests)
Movenpick Yanbu Al-Sinaiyah Yes 4* SR 825 – SR 900
Radisson Blu Yanbu Al-Bahr Yes (limited) 3* SR 546 – SR 600
Radhwa Holiday Inn Yanbu Al-Bahr No 3* SR 793 – SR 936
Average Published Rate SR 765
Source: Hotels.com.
For purposes of this preliminary feasibility study, an average room rate of SR600 per night is
conservatively projected for the 1st year and is projected to increase to an average of SR675 per night
in the 5th year of operation. Revenues from operation of other hotel services will also be generated
from hotel guests. Additional revenues are projected to average SR150 per room in the first year of
operation increasing to SR170 per room by the 5th year of operation.
Table II
Summary of Hotel Annual Revenues and Expenses Years 1 – 5
Average Total
Year of Nightly Other Total Average Total Operating NET
Revenue Revenue Occupancy Revenues OPERATING
Operation Room per Room per Room Rate (SR) Expenses INCOME (SR)
Rate (SR)
Year 1 SR600 SR150 SR750 64% 43,800,000 31,974,000 11,826,000
Year 2 SR620 SR155 SR775 66% 46,749,656 33,659,753 13,089,904
Year 3 SR638 SR162 SR800 67% 48,833,578 35,160,176 13,673,402
Year 4 SR655 SR165 SR820 68% 50,958,563 36,180,579 14,777,983
Year 5 SR675 SR170 SR845 70% 53,894,531 38,265,117 15,629,414
Source: AS&P; SCTA.
5. Projected Internal Rate of Return (IRR)
The two most important factors in determining a hotel’s feasibility are the net operating income
(NOI) and the internal rate of return (IRR). The projected NOI for the hotel is estimated to range from
27% to 29% during the first 5 years of operation. The hotel’s IRR is projected to range from 16.0% to
21.1% during this 5 year period.
Table III
Summary of NOI and IRR Years 1 - 5
Year of Total NET ANNUAL OPERATING NOI % of Internal Rate of

Operation Annual Revenues (SR) INCOME (SR) Annual Revenues Return
Year 1 43,800,000 11,826,000 27% 16.0%
Year 2 46,749,656 13,089,904 28% 17.7%
Year 3 48,833,578 13,673,402 28% 18.5%
Year 4 50,958,563 14,777,983 29% 20.0%
Year 5 53,894,531 15,629,414 29% 21.1%
5 Year Annual Average 28% 18.6%
Source: AS&P; RC-Y EP Dept.
In conclusion, based on these preliminary projections, a 250 room 3* hotel located along the
waterfront in Yanbu Al-Sinaiyah will be a profitable financial investment.
Note: The financial projections used in this study should be viewed as approximations. These
projections assume that the hotel will be professionally marketed, managed and maintained
under international hospitality standards and the hotel will be built using quality design,
construction practices and materials.
Each hotel investor may undertake their own study based on their experience in the hotel
industry. The Royal Commission at Yanbu Economic Planning Department is available to
discuss this preliminary study, the data and assumptions incorporated in this document. For a
confidential meeting, contact the Economic Planning Department.
 Office: (04) 321-6267
 Mobile: (055) 600-7113
 Fax: (04) 321-6343
For a
200 Room 3* Hotel
Yanbu Al-Sinaiyah
Madinah Province
2012 September
Prepared by
Introduction
Executive Summary
 It is estimated that the hotel construction will cost a total of approximately SR 70.5 million.
operation.

It is estimated that the hotel construction in Yanbu Al-Sinaiyah will cost approximately SR70.5
million:
Total Hotel Development Cost SR70.5 million
income.
2011.
75%
70%
70%
65% 67% 68%
66%
64%
60%
63%
55%
50%
Table I

Source: Hotels.com.
Table II
Average Other Total Average Total Total NET

Year of Nightly Operating
Rate (SR)
Year 1 SR600 SR150 SR750 64% 46,428,000 33,892,440 12,535,560
Year 2 SR620 SR155 SR775 66% 49,324,275 35,513,478 13,810,797
Year 3 SR638 SR162 SR800 67% 51,355,500 36,975,960 14,379,540
Year 4 SR655 SR165 SR820 68% 53,983,500 38,328,285 15,655,215
Year 5 SR675 SR170 SR845 70% 57,487,500 40,816,125 16,671,375
Source: AS&P; SCTA.
Table III

Year 1 46,428,000 12,535,560 27% 14.8%
Year 2 49,324,275 13,810,797 28% 16.3%
Year 3 51,355,500 14,379,540 28% 17.1%
Year 4 53,983,500 15,655,215 29% 18.6%
Year 5 57,487,500 16,671,375 29% 19.7%
 Office: (04) 321-6267
 Mobile: (055) 600-7113
 Fax: (04) 321-6343
For a
200 Room 3* Hotel
Yanbu Al-Sinaiyah
Madinah Province
2012 September
Prepared by
Introduction
Executive Summary
operation.

income.
2011.
75%
70%
70%
65% 67% 68%
66%
64%
60%
63%
55%
50%
Table I

Source: Hotels.com.
Table II
Average Total
Rate (SR)
Year 1 SR600 SR150 SR750 64% 46,428,000 33,892,440 12,535,560
Year 2 SR620 SR155 SR775 66% 49,324,275 35,513,478 13,810,797
Year 3 SR638 SR162 SR800 67% 51,355,500 36,975,960 14,379,540
Year 4 SR655 SR165 SR820 68% 53,983,500 38,328,285 15,655,215
Year 5 SR675 SR170 SR845 70% 57,487,500 40,816,125 16,671,375
Source: AS&P; SCTA.
Table III

Year 1 46,428,000 12,535,560 27% 12.9%
Year 2 49,324,275 13,810,797 28% 14.2%
Year 3 51,355,500 14,379,540 28% 14.8%
Year 4 53,983,500 15,655,215 29% 16.1%
Year 5 57,487,500 16,671,375 29% 17.2%
 Office: (04) 321-6267
 Mobile: (055) 600-7113
 Fax: (04) 321-6343
For a
300 Room 5* Hotel
(Sports Oasis Hotel)
Yanbu Al-Sinaiyah
Madinah Province
2012 August
Prepared by
Introduction
Executive Summary
operation.

income.
2011.
75%
70%
65% 67%
65% 66%
63% 64%
60%
63%
55%
50%
Table I

Source: Hotels.com.
in the 5th year of operation. Revenues from operation of the Ladies Club, restaurant and other hotel
services will also be generated from hotel guests. Additional revenues are projected to average
SR330 per room in the first year of operation increasing to SR375 per room by the 5th year of
operation.
Table II
Average Other Total Average Total Total NET

Year of Nightly Operating
Rate (SR)
Year 1 SR825 SR330 SR1,155 63% 73,584,000 53,716,320 19,867,680
Year 2 SR844 SR338 SR1,181 64% 76,602,094 55,153,508 21,448,586
Year 3 SR863 SR356 SR1,219 65% 79,948,688 57,563,055 22,385,633
Year 4 SR881 SR364 SR1,245 66% 83,085,863 58,990,961 24,094,901
Year 5 SR900 SR375 SR1,275 67% 86,559,750 61,457,423 25,102,328
Source: AS&P; SCTA.
Table III

Year 1 73,584,000 19,867,680 27% 12.5%
Year 2 76,602,094 21,448,586 28% 13.4%
Year 3 79,948,688 22,385,633 28% 14.0%
Year 4 83,085,863 24,094,901 29% 15.1%
Year 5 86,559,750 25,102,328 29% 15.7%
 Office: (04) 321-6267
 Mobile: (055) 600-7113
 Fax: (04) 321-6343
For a
250 Room 5* Hotel
(Seaside Palace Hotel)
Yanbu Al-Sinaiyah
Madinah Province
2012 September
Prepared by
Introduction
Executive Summary
operation.

income.
2011.
75%
70%
65% 67%
65% 66%
63% 64%
60%
63%
55%
50%
Table I

Source: Hotels.com.
in the 5th year of operation. Revenues from operation of the restaurants and other hotel services will
also be generated from hotel guests. Additional revenues are projected to average SR330 per room
in the first year of operation increasing to SR375 per room by the 5th year of operation.
Table II
Average Total
Rate (SR)
Year 1 SR825 SR330 SR1,155 63% 66,398,063 48,470,586 17,927,477
Year 2 SR844 SR338 SR1,181 64% 68,985,000 49,669,200 19,315,800
Year 3 SR863 SR356 SR1,219 65% 72,287,109 52,046,719 20,240,391
Year 4 SR881 SR364 SR1,245 66% 74,980,125 53,235,889 21,744,236
Year 5 SR900 SR375 SR1,275 67% 77,950,313 55,344,722 22,605,591
Source: AS&P; SCTA.
Table III

Year 1 66,398,063 17,927,477 27% 17.9%
Year 2 68,985,000 19,315,800 28% 19.3%
Year 3 72,287,109 20,240,391 28% 20.3%
Year 4 74,980,125 21,744,236 29% 21.7%
Year 5 77,950,313 22,605,591 29% 22.6%
 Office: (04) 321-6267
 Mobile: (055) 600-7113
 Fax: (04) 321-6343

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Yanbu Waterfront Hotel

Preliminary Financial Feasibility

This study is presented in five sections:

2. Hotel Operational Costs

3. Projected Hotel Occupancy

Source: SCTA; RC-Y Economic Planning Department.

4. Hotel Revenues and Net Operating Income

Hotel Published Room Rate

Year 2 SR620 SR155 SR775 66% 46,749,656 33,659,753 13,089,904

Year 3 SR638 SR162 SR800 67% 48,833,578 35,160,176 13,673,402

Year 4 SR655 SR165 SR820 68% 50,958,563 36,180,579 14,777,983

Year 5 SR675 SR170 SR845 70% 53,894,531 38,265,117 15,629,414

Source: AS&P; SCTA.

5. Projected Internal Rate of Return (IRR)

Year of Total NET ANNUAL OPERATING NOI % of Internal Rate of

5 Year Annual Average 28% 18.6%

Source: AS&P; RC-Y EP Dept.

This study is presented in five sections:

2. Hotel Operational Costs

3. Projected Hotel Occupancy

Source: SCTA; RC-Y Economic Planning Department.

4. Hotel Revenues and Net Operating Income

Hotel Published Room Rate

Average Other Total Average Total Total NET

Year 2 SR620 SR155 SR775 66% 49,324,275 35,513,478 13,810,797

Year 3 SR638 SR162 SR800 67% 51,355,500 36,975,960 14,379,540

Year 4 SR655 SR165 SR820 68% 53,983,500 38,328,285 15,655,215

Year 5 SR675 SR170 SR845 70% 57,487,500 40,816,125 16,671,375

Source: AS&P; SCTA.

5. Projected Internal Rate of Return (IRR)

Year of Total NET ANNUAL OPERATING NOI % of Internal Rate of

5 Year Annual Average 28% 17.3%

Source: AS&P; RC-Y EP Dept.

This study is presented in five sections:

2. Hotel Operational Costs

3. Projected Hotel Occupancy

Source: SCTA; RC-Y Economic Planning Department.

4. Hotel Revenues and Net Operating Income

Hotel Published Room Rate

Year 2 SR620 SR155 SR775 66% 49,324,275 35,513,478 13,810,797

Year 3 SR638 SR162 SR800 67% 51,355,500 36,975,960 14,379,540

Year 4 SR655 SR165 SR820 68% 53,983,500 38,328,285 15,655,215

Year 5 SR675 SR170 SR845 70% 57,487,500 40,816,125 16,671,375

Source: AS&P; SCTA.

5. Projected Internal Rate of Return (IRR)

Year of Total NET ANNUAL OPERATING NOI % of Internal Rate of

5 Year Annual Average 28% 15.1%

Source: AS&P; RC-Y EP Dept.

This study is presented in five sections:

2. Hotel Operational Costs

3. Projected Hotel Occupancy

Source: SCTA; RC-Y Economic Planning Department.

4. Hotel Revenues and Net Operating Income

Hotel Published Room Rate

Average Other Total Average Total Total NET

Year 2 SR844 SR338 SR1,181 64% 76,602,094 55,153,508 21,448,586

Year 3 SR863 SR356 SR1,219 65% 79,948,688 57,563,055 22,385,633

Year 4 SR881 SR364 SR1,245 66% 83,085,863 58,990,961 24,094,901

Year 5 SR900 SR375 SR1,275 67% 86,559,750 61,457,423 25,102,328

Source: AS&P; SCTA.

5. Projected Internal Rate of Return (IRR)

Year of Total NET ANNUAL OPERATING NOI % of Internal Rate of

5 Year Annual Average 28% 14.1%