1. To: John Keifer
Nadege Levallet
Tom Marchese
Luke McElfresh
From: Team 1:
Bobby Abbett
Kalie Cold
Alec Lekas
Nick Welly
Yatao Xie
Date: April 13, 2015
Subject: Feasibility Analysis of opening Banana Cabana vacation lodge in Myrtle
Beach, South Carolina
As requested by the senior partners of Copeland Associates, our team has executed a
feasibility analysis on opening a vacation lodge in Myrtle Beach, South Carolina, and have
prepared this report. This report contains information that is important in determining
whether or not there is an adequate demand in the Myrtle Beach market to make this
business concept feasible. Throughout our analysis we have determined two major demand
scenarios that will predict the amount of customers that will stay at our lodge on a daily
basis.
The scenarios that drive demand within the Myrtle Beach market are:
•Benchmark Companies
•Census Data
Within the report is a financial analysis and appendices to support our demand scenarios
including an analysis of Porter’s Five Forces framework based on the competition within the
lodging industry. The report also includes a PEST analysis of the other external factors that
are present within this industry. Finally, the appendices provide additional information
about our financial analysis of our business concept as well and information pertaining to
the marketing plan and information systems we use to help support our business.
Thank you for the opportunity to perform a feasibility analysis on vacation lodge in the
Myrtle Beach market. We appreciate you allowing us to determine demand scenarios for
our potential business. If you need any further assistance with the information in this
report, please feel free to contact us at any time.
2. Vacation Lodges in the U.S. and
Banana Cabana
Prepared for:
Copeland Associates
College of Business
Ohio University
Prepared by:
MID 107
Team 1
Project Two
Spring 2015
College of Business
Ohio University
April 13 , 2015
Nick
Welly
Bobby
Abbett
Alec
Lekas
Kalie
Cold
Yatao
Xie
3. Executive Summary
Our project assignment was to determine the feasibility of opening a vacation lodge in the Domestic
Tourism industry within the United States. Part of our task was to develop a concept for the vacation
lodge and ways to build an effective brand identity. After conducting a thorough analysis of the industry
and US domestic tourism, our team decided that we would open up a Lodge in Myrtle Beach, South
Carolina called Banana Cabana. We will be providing our customers with lodging to stay at over night,
cabana to rent out on our privately owned beach, and a bar in the middle of it all. Banana Cabana will
also provide customers staying with get priority access to the cabanas.
Business Concept
After developing our business concept, we became very familiar with the vacation lodge industry to
come up with an effective business plan for our store. Due to the rise of disposable income and
continued demand for innovative vacations, the amount of customer able to vacation is increasing
annually. According to IBISWorld, the industry revenue has grown at an average annual rate of 4.2%
from 2010 to 2015. Our team developed a strong business model that is going to take advantage of
these recent social trends of the lodge industry. Our lodge supplies top of the line cabanas on the beach
that you’re able to rent out, equipped with coolers, couches, and other amenities to create the perfect
leisure space. Our land away from the beach is filled with 20 lodge units for customers to stay in over
nigh, along with a bar and pool located in the middle of the lodges. Although Myrtle Beach does have
some competition within the area, no motels/hotels in the area offer seaside cabanas, oceanfront lodges,
and a pool bar all at the same location.
Target Market/Location
Tourism is the number one industry in South Carolina, with Myrtle Beach being the main source of
revenue. With Banana Cabana being on the Grand Strand of Myrtle Beach, oceanfront with a private
beach, and in a high traffic area, we feel that our location is the main source of our success. Myrtle
Beach brings a wide variety of origins including in and out of state visitors, with the majority being
under 55 years of age. We have placed our target market at the middle class and up range, capturing
68% of travelers. Our age range in 18-35 years of age because you need to be at least 18 to rent out or
lodges, and 35 because we feel if we focus on the relatively younger crowd we can create an
environment that anyone would recommend.
Demand Scenarios
We created two different demand scenarios, one being our primary research and the other being our
secondary research. Our primary research compares Banana Cabana to our benchmark companies in
order to forecast the revenue we will incur through our lodges, cabanas, and bar. Our secondary
research analyzes censes data in order to define the available demand, comparing bars, lodges, and
cabanas to the amount of people demanding them. This will help us forecast the demand of our
business.
Conclusion
Further research and more detail on our concept can be found in the remainder of the report. Our team
is confident that this unique concept of oceanfront leisure paradise within Myrtle Beach will produce
strong financial results. This business will continue to deliver value to its consumers in years to come
and is strategically positioned within a growing industry.
8. Introduction
Preview
Domestic tourism is best understood as
spending by residents of one country traveling
only within that country for business,
convention or conference travel, government
business, or vacation. Domestic tourism in the
United States took a huge hit after the recent
violent recession, but since then Americans
have increased their amount of tourism each
year. In fact, last year the amount of domestic
tourism has grown by 3 percent in the US and
is expected to grow in the years to come.
Domestic tourism significantly dominates the
overall tourism market in the US, representing
96.7 percent on total trips or 2.1 billion in
total (Eturbo, 2013).
Purpose
The purpose of this report is to project if the
company we created is a feasible concept
and can generate revenue. We do this by
analyzing domestic tourism in the United
States in order to successfully position our
company, Banana Cabana, into the industry
of vacation lodges. According to The
Minnesota Department of Health, a vacation
lodge area is “any area, whether privately or
publicly owned, used on a daily, nightly,
weekly, or longer basis for the
accommodation of five or more units, for
compensation” (MDH, 2014).
Banana Cabana
Banana Cabana is a first of its kind beach
cabana lodge and bar, placed Oceanfront on
Myrtle Beach, SC. The idea is to attract the
younger crowd of adults during Myrtle
Beach’s busiest months, to enjoy the leisure
environment with or without a rented lodge or
cabana that best suits them. The bar located in
the middle of the secluded area is a great way
to get your alcohol and to interact with people
looking for the same type of enjoyment as
you. For our business to work, we analyze the
business concept as a whole while focusing
on: vision, concept, brand identity, location,
business model, target market, and technology
needs. We also used benchmark companies
and census data to compared our lodge and
find our projected revenue through demand
scenarios. You can see our weights in figure 2
and our logo is referenced in figure 1.
5106
Vision
Concept
Brand Identity
Location
Business Model
Target Market
Technology Needs
1
Figure 1: Business Logo
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
Figure 2: Demand Weights
9. Domestic tourism is a rapidly growing industry that recovered strongly since the 2009 recession. The
growth rate of total trips taken in the US dropped 8.8% in 2009 but went on to increase 6% the next
year. As more US citizens gain financial confidence, we will continue to see constant increase in the
number of travelers (Euromonitor, 2014). Since the level of disposable income is rising annually, the
amount of travelers staying at a vacation lodge has also seen an increase.
Data Sourced: (USTA, 2014)
One of the reasons that domestic
tourism has been successful over
recent years is because of the
instability in foreign countries.
The threat of danger that
accompanies terrorism or
political turmoil happens to
intimidate potential tourists,
which is making headlines all
around the world. Since the
Untied States has been politically
stable and free of war within the
country, tourists feel comfortable
traveling in the US. The rise of
the average household’s
disposable income since the
recession in 2009 is highly
beneficial to the vacation lodge
industry and the amount of
Americans that travel.
-0.3 -2.8
2.5
1.6
2.3
2.2 2.1
-4
-2
0
2
4
Change in Real GDP in the US (in
percentages)
Economic
Economic factors are also a vital part of the industry
because, as stated earlier, people tend to travel more
often when they feel financially confident.
According to figure 3 on the left, real GDP in the US
has not decreased since 2009. From 2008 until now
GDP has steadily increased at an average of 2.3%.
U.S. Travel Association projects the real GDP to
continue to increase through 2017 at around 3%.
After comparing figure 3 to figure 4, you can see
that GDP and total output in domestic travel have a
direct correlation. The years that GDP decreased,
total domestic travel output also decreased. With a
positive trend of real GDP in the US, you can expect
to see domestic tourism continue its growth.
Data Sourced: (USTA, 2014)
Domestic Tourism
662.1 643.9 728 777.9 828.9
0
100
200
300
400
500
600
700
800
900
2008 2010 2012 2014 2016
Total Domestic Travel Output in the US (In
Billions)
2
Figure 3:
Figure 4:
Political
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
10. Social
Domestic tourism appeals mainly to those with middle class incomes and higher. Lower to working
class citizens cannot afford to put money away for vacation time, and more often than not, receive
no paid time off. Also, fewer adults have been travelling with children. From 2008 to 2012, the
amount of adults who brought children with them while traveling decreased by 5%. Businesses
must realize this trend to appeal to adult customers (USTA, 2015).
The average age of a leisure traveler is 47.5 years old. The baby boomer generation takes up 36%
of the leisure travel while almost 20% are 45-55, close to the baby boomers. Only 8% of leisure
travelers are 18-24 years old because they have a lack of money, and in many cases time (USTA,
2015).
Technological Needs
Travel has changed a lot because of recent shifts in technology. Travel businesses gain recognition
through the use of destination websites, traveler websites, social networking and other apps. In
2014, the amount of people who searched for a flight from their hand-held device grew by 152%. It
also helps to change last minute flight decisions (Strachan, 2014).
Businesses in the tourism industry must compete with a lot of competition. 90% of the market
share is taken up by small businesses, so the small competitors must do a lot to get their brand
recognized. You will see a lot of deals advertised through social media at a local level. The amount
that companies are willing to spend on advertising through social media on a bile phone will stay on
a gradual increase through the year 2018, so companies should take this into consideration while
attempting to draw consumers (Hoelzel, 2014).
3
Banana Cabana
According to PEST scenario, Banana Cabana
is positioned for success in the vacation lodge
market and appears to be a feasible business
option. Politically in the US, and in Myrtle
Beach specifically, there’s no political turmoil
or active threat of terrorism. The economy is
flourishing since the recent depression, leading
to a higher disposable income and an increase
in lodge vacationers in Myrtle Beach. Socially,
we realize the trend of the amount of adults
who brought children with them while
traveling decreased by 5%, positioning Banana
Cabana away from that demographic. The
shifts in technology works to Banana Cabana’s
advantage, for it’s easier to book lodges, social
media advertise, record buyer tendencies, and
many other beneficial functions.
PEST
Political
Economical
Social
Technological
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
Figure 5: PEST Analysis
11. Lodging Industry
The lodging industry has grown since 2010
because of the increasing economy, and as
referenced in figure 6, the industry revenue
have grown at an average annual rate of 4.2%
over five years to 2015. Also, the industry
revenue in 2015 is expected to increase to
$163.1 billion. In the next five years in,
IBISWorld forecasts that the industry will
continue to expand, with revenue in the
industry expected to increase to $190.3 billion
in 2020 (Alvarez, 2015).
In regards to the the lodging industry, the
power of suppliers, such as Airlines, travel
agencies, and tour operators, is low because
there are large quantities of options within their
industries. The power of customers and the
competitive intensity is moderate, it just
depends on the location of the vacation lodges.
In Myrtle Beach, the Customer power is higher
than average because there are many vacation
lodges in the area. The threat of new entry and
substitute products are high because the top
three companies hold 34% market share, , as
shown in figure 7, making the alternative of
other lodges always an option. (Alvarez, 2015).
8%
13%
13%
66%
InterContinental Hotels Group PLC
Marriott International Inc.
Hilton Worldwide Holdings Inc.
Other
Figure 7: Market Share of Top Lodge Companies
The power of suppliers is low because we can buy materials in a number of ways. For example, we
can buy cabanas from sellers with the lowest prices, such as Natshop.com or resortcabanas.com. The
power of customers is low because, according to the Myrtle Beach Area Chamber of Commerce’s
most recent estimated statistics, 15.2 million people visited the Myrtle Beach area in 2012 (up from
14.5 million in 2011). The level of competition is moderate. There are many lodges in Myrtle Beach,
but just a few of them are as similar as our oceanfront cabana beach lodge. The threat of new
entrance is high because the demand for new and innovative businesses will always be there in
Myrtle Beach. The threat of substitute products is moderate. As we analyzed before, there are many
lodges around the area, but most of the lodges are not oceanfront on the beach and do not provide the
service of cabanas.
Data Sourced: (IBISWorld, 2014)
Figure 6: Lodging Industry Revenue
4
Banana Cabana
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
12. Tourist Population
Myrtle Beach brings in visitors from a wide
range of origins including in and out of state
visitors. In 2013 Myrtle Beach had an
estimated 16.1 million visitors compared to
2012 which had 15.2 million as shown in
figure 8 (MR 2014). In 2014, July held the
highest percentage of occupancy in the
Myrtle Beach area with 84.5% and January
held the lowest at 26.6% (MR 2014). Figure A (MR, 2014)
Tourism is the number one industry in South
Carolina, with Myrtle Beach being the main
source of revenue. In this state, “domestic
travel accounted for a direct economic
impact of $11.5 billion in 2013”. For the
Grand Strand of Myrtle Beach, “tourism
delivers a $6.3 billion direct economic
impact” (MR 2014).
Visitor Profiles
A large majority of the visitors in Myrtle Beach travel to the location for leisure (MR 2014).
Visitors to Myrtle Beach originate from the East coast of the country with nearly half (48.2 %)
of the visitors traveling from North and South Carolina. The Grand Strand of Myrtle Beach
attracts 89% of visitors that are under the age of 65, 53% of which are in the age group of 35-54
as shown in figure 9 (Bernstein, 2014). The Grand Strand mostly attracts middle to high income
travelers with 20% falling into the $100,000 + range, as shown in figure 10 (Bernstein, 2014).
The majority of travelers falling into the 35-54 age group and the $100,000 + income group will
benefit our business as The Golden Mile accommodates the wealthier population and our
business targets this age group.
Visitor Age Visitor Household Income
Data Sourced: (Bernstein, 2014)
Data Sourced: (Bernstein, 2014)
Local Market Analysis
Figure 8
5
Figure 9: Figure 10:
12%
15%
18%
18%
17%
20%
$30,000 or less
$30,001-$44,999
$45,000-$59,000
$60,000-74,4999
$75,000-$99,999
$100,000+
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
11%
53%
25%
11%
18-34
35-54
55-64
65+
13. Visitor Accommodations
Spending Characteristics
Accommodations
Hotels/Motels
Vacation Rentals
Timeshare
Campgrounds
58%
22%
11%
9%
Data Sourced: (Bernstein, 2014)
Data Sourced: (MR,2014)
The Grand Strand offers many activities to
the tourist population varying anywhere
from sport to leisure experiences. “In 2012,
89% of the leisure visitors enjoyed
shopping. Additionally, 94% of overnight
visitors enjoyed eating dinner at a restaurant,
91% went to the beach, and 13% played
golf” Bernstein (2014).
The Grand Strand of Myrtle Beach has
approximately 89,573 bedrooms available to
rent. The majority of the tourist population
chooses to vacation in hotels and motels as
shown in Figure 11. The next popular choice
for vacationers is to rent out homes and
apartments along the coast. The large amount
of tourists that are interested in staying in
hotels and vacation rentals will greatly benefit
our business as we will be located in an area
heavily populated by vacationers looking to
stay overnight.
The visitors of The Grand Strand spend also spend a varying amount of money each day. Leisure
vacationers spent on average $121 per person per day while business travelers spent on average
$262 per person per day (Bernstein, 2014). The total amount of money spent on a vacation in
Myrtle Beach has been consistently increasing over the years along with the duration of time as
shown in figure 12 (Bernstein, 2014).
Year Myrtle Beach
2010 $1.91 billion
2011 $1.94 billion
2012 $2.03 billion
Gross Retail Sales of Myrtle
Beach Area
Data Sourced: (Bernstein, 2014)
The Grand Strand of Myrtle Beach alone
accounted for approximately 24% of gross
retail sales in Horry County. As shown in
Figure 13, the consistent increase in retail sales
form year to year demonstrates the great
potential that our business would have in this
coastal area (Bernstein, 2014).
Tourists and vacationers of The Grand Strand
are attracted to experiences ranging from
leisure to high energy. Myrtle Beach offers
numerous activities to satisfy the needs of the
consumers in the current tourist population and
the consumers of tomorrow.
6
Figure 11: Tourists Accommodations
Figure 12: Tourist Spending
Figure 13: Retail Sales in Myrtle
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
14. Local bars are a secondary competition in
our area. Places such as Ocean Annie’s
Beach Bar, Landshark Bar & Grill, and 8th
Ave Tiki Bar & Grill are popular attractions
for tourists looking to get food or drinks.
According to 8th Ave Tiki Bar & Grill’s
website, happy hour is from 4-7 PM with
domestic beer for two dollars and shots for
three dollars (8thavetikibar, 2015).
Our strategy for getting ahead of the
competition is to offer an affordable place to
stay, and at the same time providing a fun and
relaxed atmosphere for vacationers. Our pool
and bar area is a great place for customers to
relax and enjoy a drink. Our cabanas do not
have televisions in them, but they have plenty
of room for customers to sit down and enjoy
our private beach. We believe that combining
these amenities is a good strategy to get ahead
of the competition.
Banana
Cabana
Lodge
CabanasBar
Local Competitive Analysis
7
At Banana Cabana, we want to provide our customers with the best vacation experience possible.
We believe that we can meet this goal by providing a fun poolside bar, cabanas on our private
beach, and an affordable but nice place to stay. Given our location, as shown in figure 14, our
customers will be right on the Grand Strand, which is the most popular strip in Myrtle Beach.
The amenities that we offer combined with the easy access to the Grand Strand should provide
our customers with plenty of opportunities to enjoy their vacation.
Our primary competition is going to be the
local motels that are also located on the
Grand Strand. This includes the Twilight
Surf Motel and the Ocean Plaza Motel. Both
establishments offer cable television,
swimming pools, air conditioned rooms,
maid service, and small kitchenette areas.
Both places also have room rates near one
hundred dollars and lower, which attracts
vacationers who are travelling on a budget
(TwilightSurfMotel, 2015).
Figure 14: Grand Strand
Data Source: (Sciway, 2015)
Another form of secondary competition would
be places that offer cabanas for rent. There are
not any places nearby that offer high quality
cabanas like we do. Most companies that offer
places to relax on the beach simply offer beach
chairs and umbrellas. Hotels that offer
poolside cabanas are the only places with the
same concept as ours. Kingston Shores in
Myrtle Beach offers poolside cabanas at a cost
of 185 dollars per day. These cabanas come
with waiter service, a television, couches and
chairs, and free water bottles.
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
15. Business Concept
Vision
At Banana Cabana, our vision is to bring
something new and innovative to Myrtle
Beach in order to create a leisure environment
where vacationers enjoy going to. Banana
Cabana is the first of its kind at Myrtle Beach.
With its oceanfront location, over half an acre
of secluded land, and affordable drinks, it’s a
place where any vacationer can go to have fun
with other people looking for the same fun.
You can relax or party with a group of friends
at our updated cabanas (as shown in figure
15), or hit the beach bar to grab a few drinks
and enjoy the hot day. Banana Cabana
privately owns the beach attached, so only
customers are allowed to inhabit it. When the
night’s over you go to your lodge, sleep, and
repeat.
Vision
Concept
Location
Concept
The business concept is to create an
environment that has everything you need to
get the most out of your day at the beach. The
option of lodging with Banana Cabana will also
attract and encourage more customers to stay
on the property and purchase what’s available
to them. There is .56 acres of land, including
the beach, and a plan to have cabanas on the
beach as well as a volleyball net and a
partnered alcohol vendor. On the mainland
there will be attached lodges on both ends,
creating a nice place for visitors to stay
overnight. There will be music playing
throughout the camp as well and Wifi across to
lodge.
Cabanas come stocked with a cooler in case
you bring your own beverages or food, towels,
a safe, and couches. Banana Cabana will have a
bar at the center of the camp for customers to
purchase their alcoholic or non-alcoholic
beverages. The headquarters will be located at
the entrance gate where customers buy their
entry tickets and sign in to their lodge that they
have reserved
Technology Needs
Not much technology goes into a beach
location. One of the luxuries Banana Cabana
has to offer is the Wifi. The bar comes stocked
with four TV’s with satellite so sports
channels and the news can be broadcasted.
Each room is also equipped with a TV and AC
unit for those hot days. Lastly, our IS system
called eZee FrontDesk will be necessary in
order to allow the use of credit cards, pay
taxes, book rooms, and for the sales of the
lodges, cabanas, and drinks at the bar.
Figure 15: A Banana Cabana Cabana
8
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
16. Location
Banana Cabana is located on 5106 N Ocean
Blvd, Myrtle Beach, South Caroline 29577,
shown in figure 16 and 17. It’s on the “Grand
Strand” which is in between the some of the
most popular spots in the city. Its direct
oceanfront location, spectacular view of the city,
and with over half an acre of land to reside to,
the location of Banana Cabana is vital to its
success. The parking lot next door can be used as
well for guests driving to our location or staying
overnight. The lot payment will cost $1 million,
and the cost to build our lodge is $710,890.90,
which includes a 15% cut for contract and
architect fees.
Brand Identity Location
Data Sourced: (Zillow, 2015)
Figure 16: Banana Cabana Location
Brand Identity
Our brand identity is crucial to our overall business and business concept. It explains how we want
customers to perceive us, and not necessarily how we’re actually perceived. Our customer value
proposition is that we offer an oceanfront beach and lodge and bar, position for vacationers looking for
this type of leisure environment to have a social gathering. We are customer oriented so some of our
personality traits include being personable, laid back, cozy, outgoing, and friendly. Some benefits we
include are seclusion, Wifi, and convenience in regards to our services and what we have to offer. We
consider ourselves as a leisure paradise, in which we offer the poolside bar, on-beach cabanas, and a
comfortable living quarters. You can refer to our brand identity pyramid in Appendix (B) .
Figure 17: Birds Eye Location
Data Sourced: (Zillow, 2015)
9
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
17. Business ModelTarget Market
Target Market
Banana Cabana’s target market will serve a
wide variety of customers, although the main
focus is on vacationers 18 to 35 years of age
because that’s the minimum age to rent out
our lodge for a night, as well as 35 to 54 year
olds, especially golfers, because that the
heaviest population of leisure visitors that visit
Myrtle. Not every vacationer will see all of
what Banana Cabana has to offer, the younger
crowd and leisure enthusiasts will get the most
value and have the most fun at this hot spot.
With what we have to offer and the lodging
rates that we have, the middle class and up are
able to spend their way in to Banana Cabana.
Figure 18 exemplifies the type of market.
Business Model
There are many ways in which we can
generate revenue. The customer’s lodge
stay will be where we get most our revenue
, and they can also rent out separate
cabanas. The cabanas are rented all day at a
flat fee with the customers having first
priorities. We also sell alcohol at the bar in
the middle of our land which will have
liquor drinks, beer, and tropical drinks such
as a Pina Colada in a coconut. What makes
our bar special is that half of it is sit down,
and the other half is attached to our pool
and used as a swim up bar.
GENERAL SPECIFIC
OBSERVED
MEASURES
DEMOGRAPHICS BEHAVIOR
• Younger (18-35)
• Males and females
• Middle income and higher
• Groups
• Golfers
• Middle (35-54)
• Enjoy the bar scene
• Want to relax by the beach
• Frequent vacation drinker
INFERRED
MEASURES
LIFESTYLE ATTITUDES
• College students
• Enjoy social environments
• Like being in the sun with shade
available
• Vacationer
• Leisure Enthusiast
• Looking for a bar to relax at
• Seeking a fun social environment
• Enjoys a relaxed atmosphere
• Loves the beach and music
• Looking for a warm lodge
environment
Target Audience
Figure 18: Target Market of Banana Cabana 10
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
18. Market Segmentation
Banana Cabana will target the younger crowd
and adventurous people ages 18-34. Our lodge
will also attract the younger spirted age group
of 35-54. Together these age groups make up
64% of the current tourists in our area as
shown in Figure 19 (Bernstein, 2014). Our
lodge will be located on the Grand Strand of
Myrtle Beach which attracts tourists that are
looking to relax and spend leisure time while
meeting new people near and on the beach.
Our profits will come from visitors that lodge
with Banana Cabana and visitors that come to
experience the other amenities that we have to
offer like our bar, pool, and beach front
cabanas.
Visitor Ages
Data Sourced: (Bernstein, 2014)
Accommodations
Hotels/Motels
Vacation Rentals
Timeshare
Campgrounds
The most common and popular way to spend a
vacation along the Grand Strand is to obtain a
hotel or a motel as shown in Figure 20.
Because our lodge will offers a more efficient
way to vacation in Myrtle Beach, we are
projecting that the age group of 18-34 will be
more interested in lodging with the Banana
Cabana, while our other visitors will be drawn
in by our other amenities that will be new to
the Grand Strand area.
Banana Cabana will bring in visitors and
tourists looking for the perfect vacation in
Myrtle Beach and way to spend leisure time
and relax with all our business has to offer.Data Sourced: (Bernstein, 2014)
58%
22%
11%
9%
Banana Cabana’s Mission
Banana Cabana is dedicated to providing the Grand Strand of Myrtle Beach with a first of its kind
beach cabana lodge and bar. Our goal is to give tourists and visitors a secluded oceanfront experience
with way to relax, drink, and interact with new people with the same interests. Banana Cabana offers
everything that our visitors need in order to get the most out of a day at the beach.
Marketing Strategy
Figure 19
Figure 20
11
12%
15%
18%
18%
17%
20%
$30,000 or less
$30,001-$44,999
$45,000-$59,000
$60,000-74,4999
$75,000-$99,999
$100,000+
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
19. Banana Cabana Above the Rest
Banana Cabana is an oceanfront cabana lodge
and bar with a vision to serve the population of
Myrtle Beach and tourists from around the
country. Many of the lodges in the Grand Strand
of Myrtle Beach only offer a room to stay in
while on vacation and/or a small area for
recreational activities and only some provide
access to the beach. Banana Cabana will be able
to provide visitors and tourists of the area with
more than a typical lodge with our high quality
rooms, full bar, and beach access with cabanas.
“Discover Oceanfront Leisure”
This perceptual map shows where Banana Cabana ranks with other similar lodges that are available
in the Grand Strand area. The criteria for this map is based off of high to low quality and the young
to old age groups. Compared to Twilight Surf Motel, Ocean Plaza, and others, we offer a much
higher standard of quality while still targeting the younger population of visitors.
Products
We will be offering our lodges, full
bar, and beachside cabanas that we
will be collecting revenue from.
These products allow for Banana
Cabana to stand out against the rest
of the similar business in the Grand
Strand area.
Price
Our prices compared to our
competitors are moderate due to
our high quality standards for our
products. We chose to keep Banana
Cabana affordable so that we can
target a larger group of visitors, yet
we designed our lodge to offer our
visitors with the most for their
vacations (Figure 21).
Place
Banana Cabana will have a tropical, laid back theme that vacationers are looking for when
choosing a location to spend their leisure time. This theme will radiate through all of our amenities
giving our visitors an experience that they won’t forget. Since we are positioned on the Grand
Strand with an oceanfront location, our place is unique and stands out from its competitors.
5106
Young
Crow
d
Old
Crow
d
High Quality
Low Quality
Figure 21: Perceptual
Map
Data Sourced: (Orbitz, 2015)
Banana Cabana
12
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
20. Advertising Expenses
Advertising will be extremely productive
for our business. We compared the
advertising budgets of our competitors in
the area and calculated a rough
percentage of income that they delegate
to advertising and applied that percentage
to our projected income for our first year.
We have set the advertising budget to
$15,000 for the first year and grew 4.38%
based on our projected growth rate. We’ll
also be non-expensed business promotion
on social media such as a Facebook page,
Twitter, and Instagram that will help to
showcase out new business. We will only
Social
Media
Business
Promotion
Facebook
InstagramTwitter
be advertising for a month and a half prior to our opening date each year and then the remainder of
the months of operation. Eight months of advertising gives us a monthly budget of $2,500. This
number can be subject to change depending on promotional sales and other revenue generating
opportunities.
Figure 22: Advertising Expenses
13
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
Advertisements
Our website will be under the name of bananacabanamb.com. It will include everything there is to
know about our opening business including prices, hours of operation, contact information, and our
business’s mission. The price to own this domain will cost a monthly expense of $16.17 (Figure 22).
In order to target a larger number of tourists and visitors that live out of the Myrtle Beach area, we
have arranged to have our lodge promoted on TripAdvisor. This will help to move rooms that have
yet to be booked. Banana Cabana is also looking to target golfers that come to visit the golf courses
of Myrtle Beach. Myrtle Beach is also know as “GolfTown USA”, has been given award for the
Grand Strand being the number one golf destination in America, and brings in millions of golfers to
the area each year. Banana Cabana will be featured in the On The Green Magazine for Myrtle Beach
as well as on myrtlebeachgolf.com in their lodges section. This website also gives visitors and
tourists different options for golf courses and their tee times so when they are looking for the perfect
course, they can book the perfect
lodge for their vacation. Other lodges
on this website are larger, family
oriented, commercial hotels. This
allows for Banana Cabana to stand
out to the golfers that come to the
Grand Strand looking to spend leisure
time. Part of the budget is also
allocated to Google advertising in
order to target tourists that use this
search engine to book their vacation
necessities.
21. Information system can help business be more efficient by combining business processes, people, and
information technology together which also can reduce costs and increase revenue, in turn maximizing
efficiencies. Our business, Banana Cabana, needs an information system that can be used for
management operation of the lodges and the bar, such as online booking, front desk service, customer
management and check out. Also, we need an information system that can take care of our financial
accounting.
eZee FrontDesk Hotel Management System is the main system for
our lodges. As a complete hotel management solution, eZee
FrontDesk is operating in 85 plus countries and has more than 1200
clients. Moreover, eZee FrontDesk is easy to use and quick to
implement, also it can includes a 24/7 Live Support for help. EZee
FrontDesk offers a wide range of integrations to third party software
and hardware, such as financial accounting, eZee Reservation
(online booking service), eZee BurrP! (Point Of Sales), and
electronic door lock, as shown in figure 23. Therefore, it really
matches every need for Banana Cabana to operate smoothly and can
reduce the cost while doing it (capterra.com).
EZee FrontDesk Hotel Mnagement System is a complete PMS
solution for every sizes of hotels, and PMS is a software that’s
used to manage the operational process of a hotel which includes
all aspects of operation. For example, it covers front desk
management, booking management, back office, guest relationship
management, laundry management, banquet management,
housekeeping module, and payroll (ezeefrontdesk.com). It can also
interact with eZee Reservation perfectly, and as shown in figure
24, can provide a direct booking access to customers with two easy
clicks, and it is highly customizable to match the customers needs.
An example would be adding lodge images and maps for our
guests to easily find our business. EZee Reservation is integrated
with our Facebook page, which in turn can increase our social
media presence (ezeereservation.com).
Data Sourced: (eZee FrontDesk, 2015)
Figure 23: eZee Frontdesk System
EZee BurrP!, as shown in figure 25, can interface with eZee
FrontDesk, and it will be used in our bar for managing the
operation. For example, cabana management, bar management,
and inventory management (ezeeburrp.com). eZee Front Desk also
can interface with several financial accounting application, we
choose to use Quickbooks, which is one of the best options for us,
because the price and features are appropriate for our business
needs. For example, it can receive money two times faster, pay
employees, and see business reports (profit & Loss and balance
sheet, etc) (quickbooks.intuit.com).
Figure 24: eZee Reservation System
Figure 25: eZee BurrP! System
Data Sourced: (eZee Reservation, 2015)
Data Sourced: (zEzz BurrP, 2015)
Information System Strategy
14
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
22. We will have one primary source and two
secondary sources of revenue. The primary
source of revenue will come from the sales
for the rooms at our lodge. The secondary
sources of revenue will consist of bar sales
and sales from renting out our
cabanas. Refer to Figure 26 for exact
percentages. We have twenty rooms
available at our lodge. We will be charging
$120 per night, and we will be open for six
months out of the year. With a projection of
selling out seventeen units per day, we
expect to make about $367,200 in sales for
the rooms alone in our fiscal year.
Bar sales is one of our two secondary sources
of revenue. Based on our demand scenario,
we estimate that we will have about 122
customers per day at the bar. The average
price per drink will be $5. This average drink
price will be combined with our projection of
two drinks per customer, which will come
out to about $36,600 per month, or about
$219,600 in the fiscal year.
Financials
15
Net Present Value $33,930.02
Internal Rate of Return 15.90%
Payback Period 5+ Years
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
Year
1
Year
2
Year
3
Year
4
Year
5
Lodge
Bar
Cabanas
Cabana rentals are the second form of secondary
revenue that we will be earning. We will have
fifteen cabanas set up on our private beach
available for rent every day that we are
open. Based on our projected demand for cabana
rentals, we estimate that we will have thirteen
rented out per day. Since we will be charging $60
per day for a cabana rental, we will be earning
about $140,400 in the fiscal year. Figure 27
below portrays the amount of growth each
revenue stream should gain based on our
projections.
50.5
30.2
19.3
Revenue
Lodge
Bar
Cabanas
Figure 26: Banana Cabana Revenue
Five-Year Revenue
Trend Projection
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
Figure 27:
23. Net Present Value $33,930.02
Internal Rate of Return 15.90%
Payback Period 5+ Years
With a positive net present value and an internal
rate of return higher than our weighted average
cost of capital, we know that this project is
feasible based on projections. Having a payback
period greater than the five years we did
projections for is typical within the industry we
entered. The NPV and IRR are not high enough
for investors to become overly excited about the
project, but it is nonetheless expected to receive
a positive payback.
If you refer to Appendix H you will find the five
year pro forma income statement. This is where
the expenses are first accounted for. We pulled
the labor expense straight from appendix G,
which breaks down the payments to our maids
and bartenders. Next is the insurance and pub
license expense, with increases and decreases by
$2000 every year because our pub license must
be renewed biannually. Then we have the
monthly booze expense which is $60,000 total
based on an estimated $10,000 a month derived
from primary research. Another expense
considered is for advertising which is explained
on page 13 and comes to 15,000. Lastly, other
expenses include simple expenses less than
$1,000 a piece such as soap, shampoo, towel
service, electricity, maintenance, etc. All the
expenses except for insurance increases yearly
based on the effective annual rate of 4.38%,
which was calculated by averaging out the three
different growth rates for the three revenue
streams.
To view the statement of cash flows you must refer
to appendix J. The start up year includes our
overall investment of $2,160,161.22. Earnings
before interest, taxes, depreciation and
amortization comes from our operating income
from the income statement. We then take out all
that was depreciated from this value in order to tax
the earnings. The tax rate is based on this year’s
average federal tax rate for personal income and is
added to the state tax rate. The average federal rate
comes to 39.28%. The less investment portion
stays fixed based on the quarterly payments you
will see if you refer to our loan amortization in
appendix K. The relevant cash flow is the same as
the free cash flow in all years except for year 5,
where the enterprise value is added to the free cash
flow in order to get a relevant cash flow of
$2,992,763.81.
Last is the balance sheet located in appendix I. The
prepaid expenses includes all the monthly expenses
which we brought to a yearly amount. The
property and equipment is decreasing every year
because of depreciation. Expenses are then broken
down in intangible assets and miscellaneous is
taken from the other expenses in the income
statement. Current portion of long term debt is
taken from the loan amortization principal
payments. Long term debt is calculated by
subtracting the loan amount by the current portion
of debt. The paid in equity capital is our invested
amount from personal funds. We have an excess of
cash so we went on to pay the owner a large
paycheck because the original investment was so
large. The owner makes $300,000 the first two
years and if the pro forma statements are met,
$375,000 is to be made by year 5. Retained
earnings comes from the difference between net
income and the owner’s cut.
16
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
24. Demand Scenario #1
After evaluating what each motel had to offer compared to what we plan on providing, we find
that our price per unit should be well higher than Twilight’s, and just about where Ocean Plaza
charges. We have the lowest revenue from lodge units, but are the only lodge to offer alcohol and
cabanas in order to increase the cash flow.
17
In order to conduct our first demand scenario, we benchmarked ourselves against other
establishments in the area that are similar to Banana Cabana. We decided to benchmark against
companies that have been established for several years because this provides the most accurate
representation of what demand is like in the area. By evaluating what these companies offer and how
they operate, we were able to get an understanding of how Banana Cabana should operate in order to
be successful.
Lodges:
The companies we
benchmarked ourselves
against for lodging were
Twilight Surf Motel and
Ocean Plaza Motel. Both of
these motels offer similar
features as Banana Cabana.
Twilight Surf Motel
charges about $26 less than
Ocean Plaza Motel. This
may be because Twilight
Surf Motel does not offer
the same amenities. Since
Banana Cabana is a new
business, we believe that
the amenities we offer
combined with a reasonable
price should be a good start
for attracting customers.
Bars:
There is an abundance of bars in
the Myrtle Beach area. While
benchmarking against The
Bowery Bar and The Boat House,
we learned that the average
customer consumes two drinks
while at the bar. The Bowery Bar
charges on average six dollars per
drink while The Boat House
charges $4.50 on average per
drink. The reason why Banana
Cabana will be bringing in slightly
fewer customers each day is
because the bar is an additional
part of the lodge. The Bowery Bar
and The Boat House are primarily
bars. Most of our customers will
be the people who are staying with
us while customers for the two
bars go there mainly to drink
alcohol.
Cabanas:
The only company we found
in the area that offers
something similar to our
cabanas is Park and Rec
Chair & Umbrella Rental.
This company rents out
chairs and umbrellas to
vacationers on the beach.
The cost per unit for this
company is much smaller
than ours because we are
offering luxury cabanas for
our customers to relax in.
Since there are no
companies in the area that
offer cabanas like ours, this
presents an opportunity to
grasp a large amount of the
demand in this market.
Primary Research
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
25. TSM
40 Rooms Sold
x 30 days
= 1200 rooms
sold
x $80.23 price
= 96,276 per
month
x 6 months
= $577,656
during the
summer season
Price of $80.23
per night
OPM
55
x 30
= 1650
x $126.86
= 209,319
x 6
= $1,255,914
Price of $126.86
per night
BaCa
17
x 30
= 510
x $120
= 61,200
x 6
= $367,200
Price of $120 per
night
Twilight Surf
Motel (TSM)
• Kitchens
• AC/Heat
• Pool
• Oceanfront
balconies
• TV’s
Ocean Plaza
Motel (OPM)
• Kitchens
• AC
• Pool
• Spa
• TV’s
• Internet
• Rec Room
Banana
Cabana
• Kitchens
• AC
• Pool
• Beachside
Cabanas
• TV’s
• Internet
• Oceanfront
Lodge
• Bar
• Internet
Demand Scenario #1
Primary Research: Benchmarks
Figure 28: Primary Forecast
TBB
143 people/day
x 2 drinks/person
= 286 drinks/day
x 30 days
= 8,580
drinks/month
x $6.5 avg drink
price
= $55,770/month
x 6 months
= $334,620 for 6
months of
operation
TBH
186
x 2.14
= 398.04
x 30
= 11,941.70
x 4.5
= $53,735
x 6
= $322,412.40
BaCa
122
x 2
= 244
x 30
= 7,320
x 5
= $36,600
x 6
= $219,600
Lodging Bars
The Bowery
Bar (TBB)
• Food
• Cover
charge
• Live bands
• Open until
4am
The Boat
House (TBH)
• Food
• Oceanfront
• Live bands
• Open until
2am
Banana
Cabana
(BaCa)
• Oceanfront
• Private
Beach
• Cabanas
• Pool
• Open until
2am
Park and Rec Chair &
Umbrella Rental
(C&U)
Banana Cabana
(BaCa)
600 Units/week = 2,400 units/month = $60,000/month
x x x = $360,000/per 6 months
4 weeks $25 per unit 6 months
91 Units/week = 364 units/month = $23,400/month
x x x = $140,400/per 6 months
4 weeks $60 per unit 6 months
Cabanas
18
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
26. This census analysis on vacationers to Myrtle Beach should broadly explain why we chose our
lodge for this location. We weighted it less than primary research because the data wasn’t as
definite as our benchmark companies located on the Grand Strand.
19
Bars/Cabanas
The research done to project demand for our
bar and for our cabanas was quite similar. We
started with the total visitors to Myrtle Beach
each year, and kept diluting this number until
we arrived at the number of travelers who
visited Myrtle Beach during our six months of
operation. There were 10,220,000 people who
visited Myrtle Beach during those months ,
and since we operate a bar at our lodge, we
calculated that 66%, or 6,745,200, of the
10,220,000 Americans who visited Myrtle
Beach drink while on vacation. We then nailed
it down to the amount of bars and how many
people attend them per night. This provides a
nice benchmark to project demand for our bar.
Unfortunately, we were not able to calculate
how many people who visit Myrtle Beach
during the busy months rent cabanas while on
vacation.
After completing the primary research required for our first demand scenario, we started looking
at secondary research for our second demand scenario. In order to conduct the secondary
research needed, we took an extensive look at different census data for the United States. Some
factors we took a look at include overall population, the number of people who traveled for
vacation, the number of people who visited Myrtle Beach, the percent of people who visited
during the busy months, etc. As we continued to calculate these numbers, we were able to
figure out the demand population for what we offer in our area.
Demand Scenario #2
Secondary Research
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
Lodges
To begin projecting demand for vacation
lodges, we started out by finding the
monthly occupancy rate. Banana Cabana
operates March to August, and we got
occupancy rate for those months based on
a sampling of local chain hotels and
motels from Statistical Abstract for the
myrtle beach area of SC. After finding
how many lodges that Banana Cabana will
rent out every month, we used the number
of lodges times four, the average size of
visitors party. Then we used that number
times 30 days in order to get the average
customers for each month. Finally, we add
every month together and find out the total
number of customers. The reason for the
average occupancy rate being low is
because many of the cheaper, unattractive
hotels/motels rarely fill 50% of their
rooms.
27. Demand Scenario #2
Secondary Research: Census Data
Lodges
20
Figure 29: Census Data
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
249 people per bar * 150 bars in myrtle = 37,350 37,473-37,350= 123 people per day for Banana Cabana who
are thirsty
Bars
66% of Americans drink 6,745,200 visitors drink in Myrtle during busy season
Cabanas
78% visit for leisure 7,971,600 travelers visit Myrtle for leisure purposes
91% visit for beach leisure 704,970 visit for recreational beach leisure
91% visit for beach leisure 704,970 visit for recreational beach leisure
3,916 daily visitors available for outdoor leisure recreation/amusment activites in Myrtle Beach
28. Conclusion
21
After an in-depth analysis of Myrtle Beach, South Carolina and the projected financials of
Banana Cabana in the vacation lodge industry over the next five years, Banana Cabana is a
feasible business. As indicated it will take over 5 years to breakeven. The exact amount has not
been calculated because we only performed a 5-year pro-forma. Banana Cabana’s sales are
projected to grow 3.56 percent between year one and year two and continue to increase over the
next four years ranging from 4.08 percent to 4.96 percent from year two to year five
respectively. Year one profit margin is 43.75 percent, year two’s profit margin is 44.38 percent,
year three’s profit margin is 44.74 percent, year four has a profit margin of 45.45 percent and
finally year five has profit margin of 45.88 percent. However, the decision to go ahead with the
development of this store was based on the projected IRR and the WACC. Banana Cabana has a
Net Present Value of $33,930.02. The Internal Rate of Return of the projected cash flows is
15.90% while the WACC 15.46% therefore, confirming that the project and startup of Banana
Cabana will be feasible.
Banana Cabana will serve the tourists of The Grand Strand in Myrtle Beach with a leisure
environment that offers relaxation and/or social activity, food, and drinks. Our business will be
located within a section of The Grand Strand that is dominated by both rental homes and hotels.
Because the needs of the tourists today and the tourists tomorrow are to stay primarily in hotels
and rental homes, the location of our business will attract these new consumers.
The tourism rates for this area have consistently been increasing over the years and retail sales
have been increasing as well. The Banana Cabana clear business concept and vision will help to
attract customers to our business lodge along with the numerous amenities that our business
provides. The extensive research has concluded that The Grand Strand of Myrtle Beach is a
prime location for Banana Cabana to really flourish.
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
Net Present Value $33,930.02
Internal Rate of Return 15.90%
Payback Period 5+ Years
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Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
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Total recreation expenditure. (2014, October 1). Retrieved March 20, 2015, from
http://clients1.ibisworld.com.proxy.library.ohiou.edu/reports/us/bed/default.aspx?entid=88211
Tourism Flows Domestic in the US. (2014, September). Retrieved March 20, 2015, from
http://www.euromonitor.com/tourism-flows-domestic-in-the-us/report
U.S. Travel Association. (2014, October 21). Retrieved March 20, 2015, from
https://www.ustravel.org/sites/default/files/page/2010/12/ForecastSummary.pdf
References
23
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
31. United States Census Bureau. (n.d.). Retrieved April 3, 2015, from
http://www.census.gov/popest/about/terms.html
Wix. (n.d.). Retrieved April 3, 2015, from
http://www.wix.com/upgrade/website
8th Ave Tiki Bar & Grill (Ed.). (n.d.). Retrieved March 20, 2015, from
http://www.yelp.com/biz/8th-ave-tiki-bar-and-grill-myrtle-beach
8th Ave Tiki Bar & Grill (Ed.). (n.d.). Retrieved March 20, 2015, from
http://8thavetikibar.com/specials/
2014 Annual Marketing Report. (2014). Retrieved March 20, 2015, from
http://www.myrtlebeachareamarketing.com/docs/preso/2014AnnualMarketin
References
24
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
32. Appendix (A)
Business Model Canvas
Key Partners Key Activities Value Proposition
Key Resources Channels
Customer
Relationships
Customer Segments
Cost Structure Revenue Streams
• Cabana rentals
• Bar sales
• Lodging sales
• Liquor
vendors
• Contractors
• Land owner
• Golf
Websites
• Advertising
• Construction
• Cabana purchases
• Land rental
• Salaries
• Inventory
• Maintenance
• Entertainment
at affordable
prices
• Leisure
environment
• City view
• Wi-Fi
available
• Waiter service
• Innovating
the vacation
experience
• Safe place to
leave
belongings
while
enjoying the
bar
• Students
• Groups
• Parents
• Vacationers
over 18 years
old
• Vacationers
• 18-35
• 35-54
• Golf
Courses
• Social media
• Website
• Bar
• Cabanas
• Wi-Fi
• Music
• Waiters
• Large
inventory of
alcohol
• Hiring of
staff
• Purchase of
cabanas and
alcohol
• Construction
of bar/lodge
• Advertising
• Bartender
service
• Waiter
service
Figure 30: Banana Cabana’s Business Model Canvas
25
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
33. SloganPersonality
Emotional BenefitsFunctional Benefits
CredibilityProduct Attributes
Essence/Consumer Value Proposition
Positioning
Competitive Context
PRIMARY: Twilight Surf Motel
Others: Crocodile Rocks
Insight
-Oceanfront leisure
-Golfer Paradise
-Inclusive enjoyment
Target
Figure 31: Brand
Identity Pyramid
-Millennials
-Vacationers
-Groups
-Renovated services
-Friendly atmosphere
-Secluded leisure
-Money back guarantee
-New business trying to innovate
-Convenience
-Secluded -Wifi
-Don’t have to bring cooler
-Leisure paradise
-Discover Oceanfront leisure-Friendly -Customer oriented -Cozy
-Personable -Laid back -Outgoing
-Vacationers looking for a
Oceanfront leisure environment
to have a social gathering and
stay overnight
-Distributes alcohol as well
as encourage social activity
within the property
-Oceanfront Beach Lodge and Bar
Appendix (B)
Brand Identity (Pyramid)
26
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
34. The Power of
Suppliers
• The power of suppliers is low because we can buy materials in a number of
ways. For example, we can buy cabanas from sellers with the lowest prices,
such asAmazon.com or resortcabanas.com.
The Power of
Customers
• The power of customers is low because, according to the Myrtle BeachArea
Chamber of Commerce’s most recent estimated statistics, 15.2 million people
visited the Myrtle Beach area in 2012 (up from 14.5 million in 2011).
Competitive
Intensity
• The level of competition is moderate. There are many bars/clubs in Myrtle
Beach, but just few of them are as similar as our cabana beach bar.
Threat of
New Entry
• The threat of new entrance is high because the demand for new and
innovative businesses will always be there in Myrtle Beach.
Substitute
Products
• The threat of a substitute products is moderate.As we analyzed before, there
are many bars around the area, but most of the bars are not oceanfront on the
beach and do not provide the service of cabanas.
Banana Cabana
Appendix (C)
Micro-Analysis
27
35. Young
Crowd
Old
Crowd
High Quality
Low Quality
Figure 32: Perceptual Map
Data Sourced: (Orbitz, 2015)
Banana Cabana
Appendix (D)
Perceptual Map
28
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
36. Banana Cabana is located on 5106 N Ocean Blvd, Myrtle Beach, South Carolina. We planed to
build 22 units for our lodge, 20 units for customers to stay in and the other two lodges for our
head quarters and warehouse. We chose to build a motel, one story brick on concrete
block/wood truss, nine linear feet story height and 8,000 square feet floor area. According to
US National Average costs from 2013 RSMeans cost data, the cost per square foot is $110.19.
We decided to build each lodge as 15×17 square foot unit, so a total of 22 units is
15×17×22=5610 square feet. Therefore, the total cost of building 22 units is $618,166. With
the contractor fees at 10% of the total cost, and architectural fees are 5%, the total cost of
contractor fee and architectural fee is $92,724.90. Therefore, the overall cost to build 22 units
is $710,890.90.
Cost Estimate
(Union Labor)
%of total Cost Per SF Cost
Total $110.19 $618,166
Contractor
Fees(GC,
Overhead, Profit)
10% $11.019 $92,724.90
Architectural Fees 5% $5.5045 $61,816.60
Total Building Cost $126.7135 $710,890.9
Figure 33: Motel, 1 Story Construction Cost Assumptions
Data Sourced: (RSMeans, 2013)
Figure 34: Lodge cost estimate
Data Sourced: (RSMeans, 2013)
Appendix (E)
Lodge Construction
29
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
37. Appendix (F)
IS Strategy Cost Assumptions
Data Sourced: (eZee Reservation, 2015)
Figure 35: eZee Functions
Figure 36: eZee Price Calculations
30
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
38. Payroll - Year 1
Year 1 Weekly Hours Wage Weekly Wage Yearly Wage
Federal
Unemployment
State
Unemployment
Social Security
Tax
Maid 28 $20.00 $560.00 $13,440.00 $806.40 $208.32 $833.28
Maid 28 $20.00 $560.00 $13,440.00 $806.40 $208.32 $833.28
Maid 28 $20.00 $560.00 $13,440.00 $806.40 $208.32 $833.28
Maid 28 $20.00 $560.00 $13,440.00 $806.40 $208.32 $833.28
Bartender 32 $8.00 $256.00 $6,144.00 $368.64 $95.23 $380.93
Bartender 32 $8.00 $256.00 $6,144.00 $368.64 $95.23 $380.93
Bartender 32 $8.00 $256.00 $6,144.00 $368.64 $95.23 $380.93
Bartender 32 $8.00 $256.00 $6,144.00 $368.64 $95.23 $380.93
Bartender 32 $8.00 $256.00 $6,144.00 $368.64 $95.23 $380.93
Bartender 32 $8.00 $256.00 $6,144.00 $368.64 $95.23 $380.93
Bartender 32 $8.00 $256.00 $6,144.00 $368.64 $95.23 $380.93
Bartender 32 $8.00 $256.00 $6,144.00 $368.64 $95.23 $380.93
TOTAL $4,288.00 $102,912.00 $6,174.72 $1,595.14 $6,380.54
Appendix (G)
Employee Payment Schedule
31
We are going to be employing four maids and eight bartenders. Since we only offer twenty rooms at
our lodge, we believe that a substantial amount of housekeepers is not necessary. They will all be
working 28 hours a week and earning twenty dollars each hour. The reason we will be paying them
so far above average is because we do not offer health benefits, and also because we are only open
for business six months out of the year. Bartenders will be working 32 hours per week and making
eight dollars per hour. The reason the maids will be making substantially higher wages is because
bartenders will also be receiving tips while they work. Even though some people leave tips for
housekeeping at the end of a stay, these tips do not come in on a regular basis. Tips for bartenders are
usually given on a regular basis. Also, bartenders will be working longer hours because the bar is
going to be open from 8 a.m. until 2 a.m.
Figure 37: Employee Payroll
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
39. Appendix (H)
Pro Forma Income Statement
Pro Forma Revenue Streams
Financial Analysis
32
Figure 38
Figure 39
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
Income Statement Effective Annual Rate 4.38%
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Revenue
Lodge 367,200.00 376,380.00 387,671.40 401,239.90 416,286.40
Bar 219,600.00 232,776.00 247,906.44 265,259.89 285,154.38
Cabanas 140,400.00 143,910.00 148,227.30 153,415.26 159,168.33
Total Revenue 727,200.00 753,066.00 783,805.14 819,915.05 860,609.11
Operating Expenses
Labor 63,168.00 65,934.76 68,822.70 71,837.14 74,983.60
Rent
Insurance and pub license 2,500.00 500.00 2,500.00 500.00 2,500.00
Monthly Booze expense (yearly) 60,000.00 63,600.00 67,734.00 72,475.38 77,911.03
Advertising 15,000.00 15,657.00 16,342.78 17,058.59 17,805.76
Other 12,900.00 13,222.50 13,553.06 13,891.89 14,239.19
Total Operating Expense 153,568.00 158,914.26 168,952.54 175,762.99 187,439.58
Operating Income 573,632.00 594,151.74 614,852.60 644,152.05 673,169.53
Interest Expense (49,716.87) (43,774.38) (37,342.04) (30,379.47) (22,842.95)
Income before income taxes $523,915.13 $550,377.36 $577,510.56 $613,772.58 $650,326.57
Provision for income taxes 39.28% 39.28% 39.28% 39.28% 39.28%
Net Income $318,121.27 $334,189.13 $350,664.41 $372,682.71 $394,878.29
Lodge Growth Rate: 2.50% 3.00% 3.50% 3.75%
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Revenue
Number of customers per day 17.00 17.43 17.95 18.58 19.27
x Average transaction value 120 120 120 120 120
Revenue per day 2040 2091.00 2153.73 2229.11 2312.70
x Number of days open per year 180 180 180 180 180
Revenue $367,200 $376,380.00 $387,671.40 $401,239.90 $416,286.40
Bar Growth Rate: 6.00% 6.50% 7.00% 7.50%
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Revenue
Number of customers per day 122.00 129.32 137.73 147.37 158.42
x Average drinks purchased $2.00 $2.00 $2.00 $2.00 $2.00
x Average transaction value $5.00 $5.00 $5.00 $5.00 $5.00
Revenue per day $1,220.00 $1,293.20 $1,377.26 $1,473.67 $1,584.19
x Number of days open per year $180.00 $180.00 $180.00 $180.00 $180.00
Revenue $219,600.00 $232,776.00 $247,906.44 $265,259.89 $285,154.38
Cabanas Growth Rate: 2.50% 3.00% 3.50% 3.75%
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Revenue
Number of customers per day 13.00 13.33 13.72 14.21 14.74
x Average transaction value $60.00 $60.00 $60.00 $60.00 $60.00
Revenue per day $780.00 $799.50 $823.49 $852.31 $884.27
x Number of days open per year $180.00 $180.00 $180.00 $180.00 $180.00
Revenue $140,400.00 $143,910.00 $148,227.30 $153,415.26 $159,168.33
40. Appendix (I)
Financial Analysis
Pro Forma Balance Sheet
33
Depreciation of Building Rate: 25850.58
Straight Line Method
Year 1 Year 2 Year 3 Year 4 Year 5
Worth 685040.32 659189.74 633339.17 607488.59 581638.01
Depreciation Amount 25850.58 25850.58 25850.58 25850.58 25850.58
Depreciation of Furniture MV at year 0: 50723
MACRS 7 Year Life Rate: 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46%
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Worth 43474.6833 31052.62 22181.17 15845.87 11316.30 6791.81 2262.25 0.00
Depreciation Amount 7248.32 12422.06 8871.45 6335.30 4529.56 4524.49 4529.56 2262.25
Depreciation of Equipment MV at year 0: 34,500.00
14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46%
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Worth 29569.95 21,120.90 15,086.85 10,777.80 7,696.95 4,619.55 1,538.70 0.00
Depreciation Amount 4,930.05 8,449.05 6,034.05 4,309.05 3,080.85 3,077.40 3,080.85 1,538.70
Asset Depreciation
Figure 40
Figure 41
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Cash 60,000.00 421137.03 333729.44 291598.78 220899.28 146576.86
Prepaid expenses (Insurance Included) 62,000.00 62,000.00 38,979.22 38,979.22 38,979.22 38,979.22
Total current assets 122,000.00 483,137.03 372,708.66 330,578.00 259,878.50 185,556.08
Property and equipment
Building 710,890.90 685,040.32 659,189.74 633,339.17 607,488.59 581,638.01
Land 1,000,000.00 1,000,000.00 1,000,000.00 1,000,000.00 1,000,000.00 1,000,000.00
Pool 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00
Furniture 50,723.00 43,474.68 31,052.62 22,181.17 15,845.87 11,316.30
Equipment 34,500.00 29,569.95 21,120.90 15,086.85 10,777.80 7,696.95
Total Property and equipment 1,943,113.90 1,783,084.96 1,736,363.26 1,695,607.18 1,659,112.25 1,625,651.26
Intangible Assets
Labor 63,168.00 63,168.00 65,934.76 68,822.70 71,837.14 74,983.60
Advertisments 15,000.00 15,000.00 15,657.00 16,342.78 17,058.59 17,805.76
eZee 3,979.32 3,979.32 3,979.32 3,979.32 3,979.32 3,979.32
Total Intangible Assets 82,147.32 82,147.32 85,571.08 89,144.80 92,875.05 96,768.68
Miscellaneous (soap, shampoo, etc.) 12,900.00 12,900.00 13,222.50 13,553.06 13,891.89 14,239.19
Total assets 2,160,161.22 2,266,221.99 2,109,071.92 2,026,185.18 1,918,990.75 1,811,207.34
Accrued expenses
Current portion of long term debt $72,089.45 $78,031.94 $84,464.28 $91,426.85 $98,963.36 $107,121.13
Total current liabilities $72,089.45 78,031.94 84,464.28 91,426.85 98,963.36 107,121.13
Depreciation of Assets 160,028.94 46,721.69 40,756.08 36,494.93 33,460.99
Long term debt $575,958.92 $497,926.98 $413,462.70 $322,035.85 $223,072.48 $115,951.35
Total Liabilities 648,048.37 $735,987.86 $544,648.67 $454,218.78 $358,530.78 $256,533.48
Paid in equity capital 1,512,112.85 1,512,112.85 1,512,112.85 1,512,112.85 1,512,112.85 1,512,112.85
Retained earnings 18,121.27 34,189.13 25,664.41 22,682.71 19,878.29
Balance, beg of year - 18,121.27 34,189.13 25,664.41 22,682.71
Net Income 318,121.27 334,189.13 350,664.41 372,682.71 394,878.29
Less: Distribution to owner 300,000.00 300,000.00 325,000.00 350,000.00 375,000.00
Balance, end of year 18,121.27 52,310.40 59,853.54 48,347.12 42,561.01
Total equity 1,512,112.85 1,530,234.12 1,564,423.25 1,571,966.40 1,560,459.98 1,554,673.86
Total liabilities and equity 2,160,161.22 2,266,221.98 2,109,071.92 2,026,185.18 1,918,990.76 1,811,207.34
41. Appendix (J)
Financial Analysis
Pro Forma Cash Flows
Net Present Value $33,930.02
Internal Rate of Return 15.90%
Payback Period 5+ Years
Figure 45: Decision Making Criteria
34
Figure 42
Figure 43
Figure 44
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
Cash Flows
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
EBITDA (Operating + D&A) $573,632.00 $594,151.74 $614,852.60 $644,152.05 $673,169.53
Less Depreciation and amortization 38,028.94 46,721.69 40,756.08 36,494.93 33,460.99
EBIT $535,603.06 $547,430.05 $574,096.52 $607,657.12 $639,708.54
x (1-tax rate) 0.6072 0.6072 0.6072 0.6072 0.6072
Operating profit after tax 325,218.18 332,399.53 348,591.41 368,969.40 388,431.02
Plus Depreciation and amortization 38,028.94 46,721.69 40,756.08 36,494.93 33,460.99
Operating cash flow (2,160,161.22) 363,247.12 379,121.22 389,347.49 405,464.33 421,892.01
Less Investment ($121,806.32) ($121,806.32) ($121,806.32) ($121,806.32) ($121,806.32)
Free Cash flow (2,160,161.22) 241,440.80 257,314.90 267,541.17 283,658.01 300,085.70
Plus Enterprise value (end of year 5) 2,692,678.11
Relevant cash flow (2,160,161.22) 241,440.80 257,314.90 267,541.17 283,658.01 2,992,763.81
Required Rate of Return
Enterprise Value Weighted Average Cost of Capital (WACC):
EBITDA (year 5) $673,169.53 Capital Structure Cost of Capital After-Tax Adjustment WACC
x Market multiple 4 Debt 30% 8% 60.72% 1.46%
Enterprise value (end of year 5) 2692678.11 Equity 70% 20% 14.00%
15.46%
43. 36
Appendix (L)
Financial JustificationRevenue Streams
The revenue streams for the lodge, bar, and cabana rentals are all based on the demand scenarios we performed in
pages 16 through 19 from primary and secondary research. 2% of each growth rate is considered for inflation
while the rest is how we felt the business would gain popularity. The bar grows at a higher rate than the other two
streams because outside customers are able to come in and spend money while the lodge and cabanas have a limit
to how much money can be made. We considered changing the price as we grew but concluded that it was too
risky to put loyal customers at stake.
Income Statement
Based on the revenues provided, our net income is positive from the first year. We considered the effective
growth rate of 4.38% for all the operating expenses other than insurance and pub license. The insurance and pub
license is based on our monthly insurance cost as well as a biannual payment for the South Carolina alcohol
license. The ‘Other’ section in operating expenses includes simple charges such as soap, shampoo, irons, etc. The
income tax was derived from finding the average tax rate based on the 2015 tax brackets. We added this
percentage to the state tax rate in South Carolina to get 39.28%.
Cash Flows
The cash flows begin with our EBITDA (operating income) but immediately takes out depreciation and
amortization to give us our EBIT value. This gets taxed by the same 39.28%, then we bring the depreciation and
amortization amount back which gives operating cash flow. The enterprise value is calculated by multiplying the
year 5 EBITDA by the market multiplier of 4, which comes to $2,692,678.11. The value is only considered in
year 5 which adds to the relevant cash flow. We used the relevant cash flows to find our net present value (NPV),
internal rate of return (IRR), and payback period (PP).
Balance Sheet
The balance sheet begins with a cash amount of 60,000 which is there to cover the expected monthly booze
charge of $10,000 per month. The pre-paid expenses include insurance, electricity, and other monthly charges.
The property and equipment section accounts for depreciation provided in Appendix I for the building, furniture,
and the equipment (cabanas). After this comes the intangible assets which includes the labor, advertising cost, and
our POS system, eZee. Labor and advertising costs are each increase by our effective annual rate yearly. The
liabilities starts with long term debt from the loan that was taken out. The current portion of which is derived from
adding the quarterly payments on the loan amortization. The paid in capital is just the amount paid out of pocket.
The net income is posted straight from the income statement followed by the amount of which that is distributed
to the owner. The owner gains a large portion of the earnings because of how large the initial investment was.
With $2.16 million put into the company, a $300,000 paycheck in year 1 is only about 14% of the overall
investment. We subtract the net income by the owner’s distribution in order to get the retained earnings for that
year. The difference for the liabilities + equity and total assets is realized in cash each year. Cash decreases every
year and so does the total amount of our assets because we have less expenses to pay for and a lot of the goods
depreciate. However, the net income always increases so when it comes time to purchase new equipment,
furniture, or fix the building our total asset value along with the liability + equity will be increased.
Conclusion
According to our calculations the project is a go. This is concluded based on a positive NPV ($33,920.02) and an
IRR (15.90%) greater than our 8% given rate. We unfortunately are not able to payback the total investment for
over 5 years, which is common in the vacation lodge industry specific to hotels.
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
44. Banana Cabana has twenty unites to
provides to customers, and every units
has same set, such as two queen size
beds, one bed room, one wash station, a
TV, a small freezer, a microwave, and a
cooking station.
We are going to build our units as
white, which is the best color for the
beach visitors, and it looks like very
clean. Every units is 15× 17, which is
255 square feet, so it is enough to put
everything we are going to set in the
room.
We just offer two queen size bedrooms
because it is better to every type of
visitors, such as families, couples,
friends. TV station will be on the
corner of the room, and freezer will be
under the TV. We need to save any
space to set cooking station.
Cooking station will be next to TV
station, which is near about door. We
want to design as we said before
because it is easy to let smoke go to
outside of room. And we also want to
set cooking station as white to match
up unit’s color. The cooking station has
bask kitchen tools, such as microwave
and electric cooktop. Every unit also
have a small dinner table that
customers can have a space to enjoy
their meal.
Bathroom next to beds, and it has basic
sets, such as a tub, a toilet, and a wash
station and mirror. We want to provide
everything can make customers feel
they are at home. To be convenient is
our faith to service every customer. 37
Appendix (M)
Banana Cabana Visual Complex Figure 47: Banana Cabana Interior
Introduction
External
Analysis
Internal
Analysis
Business
Concept
Strategy Financials
Forecast
Demand
Conclusion
Additional
Information
