Development Of A Five Star Hotel Island Construction Essay

exploitation Of A Five sensory faculty Hotel Island Construction assayThis report has been prep ared for Expedition Maldives Pvt. Ltd to pass judgment the feasibility of investing in a excogitate to develop a five star hotel island under the see of Mendhoo Island Resort Development cast off by using bewilder developing methods with financial assessment. This report has been structured with the job scope definition, scope attention, financial analytic thinking with a conclusion drown from the analysis following with the recommendation. grasp negotiatement has been developed with the count on biography oscillation with compulsory phases with laps in from each one phase in detail. To break apart the project financi all toldy, Discounted Cash flow analysis, top present value analysis and internal compute of refurbishment analysis has been intentThrough this report, analysis has shown that investing in development of degree Celsius room hotel is the nigh viabl e option for the Expedition Maldives Pvt. Ltd. The findings have shown that this project provides a near go by since the internal rate of return of the project is higher than the necessary rate of return. Analysis on time value for money has alike shown that its monumental to invest in this project. Properly execution of instrument all the phases of project purport cycle is very important and any delay could incur extra be since the cash inflow starts from third family, when the hotel is in operation. For this project its highly recommended for the responsible management team up of the Expedition Maldives Pvt. Ltd to track, trace and monitor all activities of the project life cycle and make prerequisite amendment if requires on time for the successful skill of the project.1. IntroductionThis report has been prepared for Expedition Maldives Pvt. Ltd to evaluate the feasibility of investing in a project to develop a five star hotel island under the name of Mendhoo Island R esort Development project by using project development methods with financial assessment.For this project whether to invest in 50 or 100 cortege hotel is been assessed and investing in development of 100 room hotel has been chosen as the most viable option and analyzed in detail.This report has been structured with the project scope definition, scope management, financial analysis with a conclusion drown from the analysis following with the recommendation. Scope management has been developed with the project life cycle with required phases with working in each phase in detail. To analyze the project financially, Discounted Cash flow analysis, network present value analysis and internal rate of return analysis has been used.2. Project Scope Management2.1. Scope DefinitionProject Scope Management includes the process required to ensure that the project includes all the work required, and only the work required, to sodding(a) the project success in full.(Turner, 1992)The project s cope definition document is mainly intended to endow with the project organization and the project manager with a road map of both the work to be completed within the estimated budget and time corpse. It is a guide for in store(predicate) actions. Therefore, the scope document provide be of an assistance to manage the project confidently and to maintain an effective communication process within the key stakeholders through divulge the project.Mendhoo Island Resort project is contrivened to develop a Five Star Hotel (a Resort Island), which requires a huge financial investment.Tourism industry of Republic of Maldives is the fastest growing industry across the island nation and it is the major economic activity. onward considering the lease agreement from the owner, The Board of Directors of Expedition Maldives Pvt. Ltd have done necessary environmental analysis and developed a strategic contrast invent base on the recent mart research to assess the feasibility of investing on this project. With the positive outcomes, the top management of the organization heady to hire the island on a long term lease basis for a period of ten days, within that, two historic period period is targeted for the construction and the balance seven-spot historic period for the Hotel business operation at its full swing.The construction and development of the Hotel till its pre-opening is budgeted for US$ 8,000,000.00 (Eight million US Dollars). First activity of this project will be started with construction of Jetties, in order to aid and facilitate the unloading of required heavy load machineries and tools, material and another(prenominal) goods which is requisite to proceeding with the construction. Development phase of this project consists of 100 Guest Rooms (includes margin Villas, Water Bungalows.The other important activities of this project include selecting out all the other tie in works which are required for accomplishment of this project. Development wor ks of the project would be carried out in consent with the project charter and the approved public figure frame work. According to the project charter, the project scheduled to commence on July 2011 and to be completed on July 2013.In regard with the all works, the company decided to hire skilled and qualified employees from related fields for the different areas of the total work to be done to accomplish the project. Project team of this project includes a project manager, Engineers and other functional department HODs and other staffs.apart from mentioned scope of the project, While continuing project if the need arises make amendments, that has to be considered in uniformity with all the factors related to the project which includes budget, time frame and the quality of work.2.2. Scope ManagementThe above Figure 1 which is the life cycle of this project, adopted in order to manage the scope of the project .this will provide all the detail activities which are to be carried out for project to succeed.Phase-1Phase-2Phase-3Phase-4Two years to complete the project monitoring deviceing and ControllingGate-1Gate-2Gate-3Gate-4Activities1- Develop business case2- Establish the terms of reference3- Appoint the project team4- Setup the project station5- reexamination the phaseActivities1- Project plan2- Resource plan3- Financial plan4- woodland plan5- Risk plan6- Acceptance plan7- parley plan8- Procurement plan9- Contract the suppliers10- Review the phaseActivities1- Build deliverables2- Monitor and control3- Time management4- Cost management5- Quality management6- Change management7- Risk management8- Issue management9- Procurement management10- Acceptance management11- Communication management12- Review the phaseActivities1- bring to pass project closure2- Review project completionActivities1- Current tourism market analysis2-Envirnmental analysis3- feasibility study4- Review the phaseActivities1- cacography operating island as a hotel2- Checking the perf ormanceGate-5Phase-5Phase-6OperationCompletionMarket ResearchCarryout the project worksInitiationPlanningRemaining eight years for operationFigure Project Life Cycle.Life cycle of this project is consisting of six different phases with numbers of activities. The scopes of those activities are described below.The origin phase is market research of the product and service, starting from analyzing the Current tourism market.Environmental analysis, to identify the risks associated with the project environment and to take possible action to mitigate the risk if required.Feasibility study collecting all the information of business problems and gathering required solution option to fix it, finding out the available solution option, evaluating feasibly for each option, identifying risk and resultants associated with each option and developing suggested solution option for implementation.Reviewing the phase is going to check all the requirements are identify and take proper action.The fir st phase of this project is carrying out market research, before considering financial investment decision on this project, the company will be conducting researches to collect information regarding the trends in current tourism industry of the country as well as global market to identify the cost and clear of investing the project, which will be followed by environmental analysis to identify the issues associated with project environment to take proper action before proceeding with a legal contract with the island owner.Carrying out the feasibility of the project is besides include in this phase by evaluating the current business problems and opportunities.Project Initiation is the second phase of the life cycle. The scopes of activities included in this phase are as followsDevelop a business case describing the opportunities, problems and issues which are exist and evaluating options to deliver solution and resolve the problems. This phase alike includes cost and benefit associ ated with each solution option and recommended solution option for approval the business.Establishing the terms of reference, define the project vision, objectives, scope and deliverables, identifying the roles and responsibilities of stakeholders and allocating resource and finance required in accordance with the plan.Appointing project team, holding qualified employees for appropriate positions is the most important function of the project.Settings up the project office, to monitor and control the project environment and manage cultural diversity of workforce.Review the phase, evaluation of achievement of this phase.Considering Initiation phase of this project, finding out business opportunities of investing to pass water 100 retinue hotel and its operation, also identifying the environmental changes that might impact the project period and gathering required solution for those impacts. This phase also will identify the core aspect of business environment such as business visio n, goal and objectives to be archived. This phase also will evaluate the process and technology available for the project.Process and technologies that is germane(predicate) to the project, products and services.legal requirements of goernment on environmental factors and commercial and operational trends which drives towards the business, the key stakeholders information and assuring the most appropriate methods of allocating required resources for the project to be finalized.Appointing the project manager and allocating his responsibilities to proceed with selection of other team members necessary for carrying forward the project and allocating their responsibilities individually. The final activity of this phase is building the project office to use the infrastructure as a base to manage project activities.Iproject planning is the third phase of project life cycle. Scope of this phase includesProject plan to identify the milestones, phases, activities and tasks to quantify the effort required. Allocating resources required and creating a project schedule including slanting of the planning dependencies, assumptions and constraints.Resource plan identify and list out the superior general types of resources required and assigning the resources to the activities and complete the resources usage table.Financial plan to manage the costs and expenses likely to be inquired on the project such as employees wages, equipment, materials and brass cost.Quality plan to maintain the terms of quality consider on the project and identify the targets to be met and describe the quality assurance and control techniques to be under taken.Risk plan identifying list of risks and rating the likelihood of each risks occurring, provide the report of impact and reason of occur and setting up the legal profession action to reduce the likelihood of the risk occurring. Setting out a mitigation action plan to reduce the impact.Acceptance plan identify milestones to be archived and deliverables to be produced, developing what criteria and standards should be maintained for customer acceptance and reviewing the deliverables.Communication plan, provide required information to the stakeholders to keep them regularly informed of the progress of the project status. Scheduling the communicationEvents, methods and release dates, use matrix to highlight resources involved in each communication event and use clear process for each communication event with in the project.Procurement plan, understanding of the external supply market and provide to key stakeholders with required materials and reliable details of suppliers to present the materials within the time and budget to proceed procurement in accordance with the companys unerect policyContract the suppliers conduct the tender process and evaluate the supplier and select appropriate supplier by looking ability and capability. Finally negotiating a formal contract with the preferred supplier.Review the phase, reviewi ng to check if the activities are in accordance with the requirements.Planning phase of this project is concerned on finding the milestones of project phases, number of activities and tasks to be complete within the particular timeframe, resource plan list out the required resources for the project such as employee, equipments and material. In this phase financial plan will identify the number of resources required and its related costs. Quality plan will provide the quality targets that should be archived. Risk plan is intended to emphasize the potential risks and what actions could be taken for mitigation of those risks. Acceptance plan is intended to list out the acceptance standard of the customer in regard with their expectations. Communication plan will describe what information is required and necessary to communicate with stakeholders. Procurement plan will identify a list of products and source of external suppliers which will be followed by the activity of contracting the suppliers later evaluating the best bidders.Fourth phase of the life cycle is Carryout the project works. The scopes of this phase areBuild deliverables, clearly define the objectives and deliverables, the final deliverable should meet the requirements of customers.Monitor and control, physically constructing each deliverable and use series of management process to monitor and control the activities that are undertaken.Time management, identify the total time required for each activity to complete the work on time and identify the percentage completed and outstanding works.Cost management, identify the cost/expenses of overall project and accurately manage the record the details, approve and paid the payments on time.Quality management, maintain the quality standard of the project according to the quality plan, using most appropriate quality measurement and techniques to measure the quality standards.Change management, if any changes required to the project scope, deliverable, time scale or resources, should be evaluated and approved before implementation.Risk management, use the best methods and theories to identify the risk associated with the project which includes quantifying, monitoring, avoiding, transferring and mitigating the risk with the help of risk register.Issue management, use the appropriate method to identify the issue through the issue register and take number of action to reduce impact that the issue is having on the project.Procurement management, to maintain the relationship with suppliers, monitor things that required and controlling the order of magnitude receipt, review and approval of form suppliers, managing overall performance of the supplier.Acceptance management, to check the deliverables are met with the customer requirements by presenting each deliverable separately until the acceptance of all the project deliverables.Communication management, to provide right information at the right time to the correct stakeholders and should e nsure the message is reached to the right person.Carrying out the project works This phase will provide with the final deliverables to the stakeholders. While carrying out the project works, deliverables would be checked on a regular interval to get the feedbacks from respective stakeholders before beginning every stage which would be done through monitory and controlling.Each activity would be allocated with a particular time frame to meet deadlines. Variance has to be considered and adjusted if required and project scope should be discussed at managerial level for approvals. Risk management of the project should be carried out by recording in the project risk register to take necessary action for mitigation of the risk. In same manner other project issues also have to be registered in issue register to take required and needful actions. Procumbent of the project would be managed according to the procumbent plan, suppliers performance will be monitored are reviewed regularly.Furthe r, all necessary information relating to project has to be recorded and delivered accordingly to the respective parties timely.Fifth phase of the life cycle is Completion scopes of this phase arePerform project closure, to ensure from the stakeholders the deliverables are met with their acceptation and check project achieved the objectives and delivered the benefits describe in the business case.Review project completion, to monitor achievements and failures of the project, to get better ideas for feature projects.Completion, phase of this project will check and ensure the deliverables are delivered according to the stakeholders expectation and project fully archived the objectives that are mentioned in the project scope and all the activities are review to identify the mistakes and errors to avoid in the feature projects.The last phase of the project is operations of hotel scope areStart operating island as a hotel, increasing the number of customers visiting on hotel providing qua lity standard services to them.Checking the performance, maximize the receipts of the hotel.Operation, phase of this project is to provide quality product and service customer to attract them to hotel and maintain their first choice holiday destination in Maldives and also yearly increasing the revenue of the company.3. Financial Analysis of Project3.1. Factors influences the choice of discount rateConsidering to this project factors influence to the choice of discount rate are interest rate and inflation. When discounted if the interest rate is higher the outcome of NPV (time) would lower and vice versa due to inverse relation. quantity InvestmentCapitalInterest p.a. rack up money paymentEquity8,000,00014%560,000Total8,000,000560,000Table Cost of capitalThe bank saving rate at bank of Maldives is 10% p.a. for obdurate deposits and the bank lends long term loans at 15% interest (which is the cost of borrowing). The firm owners (shareholders) who have invested for comeliness capi tal, although they are not expecting any interest for the invested equity capital, they have expectations about the companys performance and return for the risk that they have taken instead of investing in the bank. They would be getting a 10% return p.a. which is even less risky. Therefore the expectation of the shareholders in regard with the return is higher, which is 14% p.a. as presented in the above table 1.0.Therefore the while winning investment decision the company has to invest in such a way that fulfills the expectations of the shareholders in accordance with rate of return on their investment.The company decided to invest in a project to build a five star hotel. Before considering this investment decision the company carried out initial feasibility studies to decide whether to invest in construction and operations of 100 rooms or 50. The main purpose feasibility this study is to identify the cost/ benefit of the project and to consider the investment which gives highest rate of return.The following tables (table 2.0 and 3.0) provide the details of selection between two choices.Expected cash inflow per year if invested in 50 roomsRoom TypeNo of roomsExpected occupancy per room p.aRoom Rate US$Water Villa25 clxxx days450Beach Villa25180 days250TotalTable Expected cash inflow per year if invested in 50 roomsTotal project duration ten yearsConstruction and development requires one year.Full board operation nine yearsExpected duration to build and develop 50 room hotels requires one year. Operation will be started right after this period. Therefore this project totally consists of total ten years out of which nine years would be in full operations.The total expected cash inflow of this project by the end of ten year is US$ 28,350,000 at the rate of US$ 3150000 cash inflow per year for nine years.Expected cash inflow per year if invested in 100 roomsRoom TypeNo of roomsExpected occupancy per room p.aRoom Rate US$Water Villa50180 days450Beach Villa5018 0 days250TotalTable Expected cash inflow per year if invested in 100 roomsTotal project duration ten yearsConstruction and development requires two year.Full board operation eight yearsExpected duration to build and develop 100 room hotels requires two year. Operation will be started right after this period. Therefore this project totally consists of total ten years, out of which eight years would be in full operations.The total expected cash inflow of this project by the end of ten year is US$ 50,400,000.at the rate of US$ 6300,000 cash inflow per year for eight years.Since investing in construction and operation of 100 rooms givers higher cash inflow than 50 rooms hotel, the company decided to invest in construction and development of 100 rooms.3.2. Discounted cash flow analysisThe management of the company evaluated the option of investing in the project for construction and development of 100 (hundred) Rooms which includes Beach villas and water bungalows. The details are state d below.3.3. Net present value (NPV) analysisNet present Value (NPV) represents the difference between the present vale (PV) of cash inflows and the Present value (PV) of cash outflows. Net Present Value is used to evaluate and analyze the profitability of this project since.The Net Present Value of following projected cash flow is calculated with consideration of amount and timing of future cash inflows, amount and timing of future cash outflows and by using discount rate (at the rate of 14%).Project cash flow and Net Present Value(NPV)YearNet cash flows0-8000000102036300000463000005630000066300000763000008630000096300000106300000Net Present Value at 14%Table Project cash flow and Net Present Value (NPV)3.4. sexual rate of return analysisInternal rate of return is calculated to find the true rate of return earn on this investment over the course of 10 years life. The higher the projects internal rate of return, the more desirable to proceed with the productProject cash flow and I nternal rate of Return(IRR)YearsNet cash flows0-8000000102036300000463000005630000066300000763000008630000096300000106300000Internal Rate of Return (IRR) = 21.185Table Project cash flow and Internal Rate of Return (IRR)The Required Rate of Return (ROR) is 14% but the Internal Rate of Return (IRR) is 21.185% which means IRR is greater than ROR, and therefore project has to be preceded and carried forward.Since IRR ROR the project has to be preceded and carried forward.4. ConclusionsThrough this report, analysis has shown that investing in development of 100 room hotel is the most viable option for the Expedition Maldives Pvt. Ltd. The findings have shown that this project provides a good return since the internal rate of return of the project is higher than the required rate of return. Analysis on time value for money has also shown that its significant to invest in this project. Properly executing all the phases of project life cycle is very important and any delay could incur ext ra costs since the cash inflow starts from third year, when the hotel is in operation.The success depends on the ability of the project team to carry out the project work phases in accordance with the plan. If the project team is incompetent to carry out the planned work scheduled, it would be a countable threat to succeed the project5. RecommendationAs mentioned under conclusion the project team of Expedition Maldives Pvt. Ltd should ensure all means to stay with the project plan but to meet and resolve any unexpected issues on timely basis. Since Maldives is a country geographically widespread, regular transfer of required materials should be well in advance prepared and the senior management of the project must be ready to face this challenge if arises at any phase of the project life cycle to accomplish the project on time. Delay in accomplishment is costly since no cash inflow is projected before the hotel is in operation. Therefore its highly recommended tracking, tracing and monitoring of all activities of the project life cycle and make necessary amendment if requires on time.