IHIF Strategy Challenge (investment strategy student project)
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IHIF Strategy Challenge (investment strategy student project)

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Within the context of the Strategy Course of the Ecole hôtelière de Lausanne, our team, composed of 3 students, had the chance to defend our investment project in Berlin, at the world famous......

Within the context of the Strategy Course of the Ecole hôtelière de Lausanne, our team, composed of 3 students, had the chance to defend our investment project in Berlin, at the world famous International Hotel Investment Forum (IHIF) in 2012.

We had to develop a project based in the resort industry, and after a deep analysis of the world economic and environment context, we chose to invest in China.
Our project won the title of best investment strategy.

More in: Business , Travel
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  • 114’ooo’oooIl y a X millions de chinois – midscale – young dans les villes de Chine
  • WESTERN !!
  • Trendydomesticwine wedding urban western Pizzas relax, 2 by 2
  • rovide one signature amenity or anchor attributeProvide five secondary recreation/leisure/entertainment experiencesProvide one full-service food & beverage outletBed-base must include short-term or overnight lodgingMinimum of 25 rooms or other accommodationsEmphasize a leisure or retreat-environment experience 
  • Seasonality issue Loyal customers come on average once/ year Specially impacted by the oil costs as the trips are generally longer
  • APRES LA CHINE ??
  • Parler des %d’investissement arriver à 5% vu qu’onamortit en 20 ansdonc 5% par an!Elodie - GRAPHSInvestment: Fixedassets of 26,462,170€ (land, building + equipment)Revenue:- about 7 mio: how much does it grow from 2011 to 2016? Growth of about 25% from 2013 to 2017. 47% of revenue is from other departments than rooms.Mgmt contract: better revenue for the owner, possibility to remain in core business difficulty to be an owner in China, as western orientated conceptan Asian franchisee may be the best manager Profit for mgmt companies: about 500’000 € per resort per yearHotel’s global Profit:We will be profitable, from 2016 with a first benefice of 137’000 euros.Net cash position:Dividends f 10% of the equity from 2016 Positive net cash position  reimbursement of the debt to reduce the interestWACC : coût de capital de 7.51%VAN: positive 
  • 19%  IRR investors

Transcript

  • 1. 5th IHIF Strategy Challenge
  • 2. Did you know that if the population of China walked past you in single file, the line would never end because of the rate of reproduction ?
  • 3. Budget Luxury Resort industry in China Water based Mainland National brands Urban International brands Mountains
  • 4. 114 million Young Middle class Urban (BCG, 2011 ; Euromonitor, 2012)
  • 5. 33 million travelers (Euromonitor, 2012)
  • 6. 81 million non-customers
  • 7. Evaluation of the potential market China Forecast annual growth of the GDP of 7.2% (IMF, 2012) Forecast annual growth of the tourism: + 15% outbound tourism (UNTWO, 2011) + 16% domestic tourism (BCG, 2011) Forecast to increase: 450 mio (2010) – 650 mio (2020) (Euromonitor, 2012) Middle class Young CAGR disposable income 2008-2020: 8.1% (Thayer Lodging Group, 2011) Shortfall of midscale supply (Deloitte, 2010) The new generation lives in the now and does not save money (UNWTO, 2011) Young travellers often spend more and are responsibility free (UNWTO, 2011) Young Chinese have demonstrated a higher interest in leisure travel (TLG, 2011) Urban Accessibility to transportation infrastructures
  • 8. What do they want? A European experience
  • 9. What do we offer ? they want? Design The Place to be China City centres Wellness centre & activities Wine Bar & wine activities Banquet facilities
  • 10. we offer ? What do they want? Design “A relaxing and trendy European City centres The place to be oasis in the heart of city centres, Wine bar and at an affordable price”wine activities China Banquet facilities Wellness centre & activities
  • 11. Budget Luxury Resort industry in China Water based Mainland National brands Urban International brands Mountains
  • 12. Competitors Price Park Plaza ++ Holiday Inn Aloft Gloria Jin Jiang Inn Silka Ibis --- Attractive to the Young segment National brands International brands ++
  • 13. Criterias of a resort (University of Memphis, 2009) One signature amenity Provide 5 secondary experiences Provide one full-service F&B outlet Short-term overnight lodging Minimum of 25 rooms Emphasize a leisure or retreatenvironment experience
  • 14. Main challenge of a traditional resort (Panel: Profitability of Resorts Hotels, 2011) Seasonality
  • 15. How do we overcome barriers in China ? Local partnerships Asian Investors Management company
  • 16. Development of the 50 resorts Beijing Yantai Guangzhou Chengdu Ningbo Shanghai Qingdao Xian Shenzhen Huangshan Hangzhou Guilin Kunming Dalian Xiamen
  • 17. Investment per resort Land: 1’041’000 € Building: 24’500’000 € 27’300’000 € Equipment: 872’000 € Liquidities: 890’000 € 90’000 € / room
  • 18. Revenues (€) 10% 13% Food Beverage Room Wellness + activities Wedding + banquets 10% 23% 44% 2013 Revenues RevPAR 2014 2015 2016 2017 7,886,000 8,585,000 9,188,300 9,680,000 10,000,400 38 42 45 47 48
  • 19. Profitable activities (in m2) BANQUETS ROOM 2013 2014 2015 2016 2017 Operational profit for 16 rooms (€) 372,592 406,464 433,562 453,865 460,659 677,440 Operational wedding profit (€) 574,000 609,000 644,000 679,000 728,000 728,000 54% 50% 49% 50% 58% 7% 2013 2014 2015 2016 2017 100% TO Operational profit for 4 rooms (€) 93,148 101,616 108,390 113,471 115,165 211,700 Operational wine profit (€) 274,939 286,272 297,158 307,519 316,927 316,927 195% 182% 174% 171% 175% 50% % Variation WINE BAR % Variation 100% TO
  • 20. Net Profit/Loss (€) 1,200,000 1,000,000 800,000 600,000 400,000 200,000 2013 2014 2015 2016 2017
  • 21. Management Fees (€) 900,000 800,000 700,000 Reimbursable Fee 600,000 Incentive Fee 500,000 Base Fee 400,000 300,000 200,000 100,000 0 2013 2014 2015 2016 2017
  • 22. Finance (€) Dividends Net cash position 2013 2014 2015 2016 2017 68,570 2,234,076 309,770 3,424,494 519,740 3,038,368 744,800 2,525,237 904,180 1,887,058 Total Equity 10,900,000 T Internal Rate of Return 19 % Expected ROE WACC 16% 9.44% Economic Value 31,399,000 - Net Asset (27,262,000) Net Present Value 4,063,000
  • 23. Opportunities Urban resort locations • Non captive customers • Few international competitors • Lack of qualified labour • European style • High taxes on imported wine • Growth of : • Domestic tourism • Chinese middle-class • Wellness demand • Wine demand • Entry barriers of Chinese • Government investment in favor of domestic tourism • Lack of mid-scale supply government • Entrance of international competitors • Ease of access to Visas for Chinese Threats • Weaknesses Strengths SWOT
  • 24. Thank you for your attention.
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