3. Red Roof Inn, Biloxi
Introduction
This document outlines a proposal for a 120 room Red Roof Inn Hotel located in the
lovely and historic Biloxi, Mississippi. There are many local attractions within the vicinity of
our hotel that attracts many people, especially over the summer. There are plentiful of beaches
as well as historical sites such as Ship Island and multiple casinos. The hotel will market
towards a younger crowd, but guests any age are welcomed. The hotel will offer several
different amenities to cater to our guests such as a complimentary continental breakfast, free
Wi-Fi, outdoor swimming pool, and a fitness center. The Red Roof Inn, Biloxi will be an
economy brand hotel with ocean-front views, with proximity to restaurants and other
attractions.
A team was put together to complete this proposal with the intent to enlarge the
market in Biloxi. This proposal was completed in the beginning of the 2015 fiscal year. The
information presented in this document mirrors the views of all members of this group. For
more information, or permission to use this document, please contact:
Andrew Spera
36 E. Cleveland Ave.
Newark, DE 19711
516 - 459 - 7016
Dylan Nunn
37 East Park Place
Newark, DE 19711
202 - 607 - 9156
Erin Raphael
132 E. Delaware Ave.
Newark, DE 19711
516 - 375 - 7254
Tosh Chareton
123 E. Main Street
Newark, DE 19711
914 - 621 - 8849
Confidentiality Agreement:
This document is confidential and is only available to the individual to whom it is directly
addressed strictly on the agreement that the contents will not be discussed with any third
parties except with the individual’s that have permission to do so.
Investment in new and small businesses carries high risk, with the possibility of high reward.
Potential investor’s should be aware that no established market exists for the trading of
shares in private companies. Prospective investors are advised to verify all material and take
professional advice before entering into any commitments.
This plan is strictly for information only and does not constitute a prospectus nor an
invitation to subscribe for shares. Projections in the plan have been compiled by the
promoters for illustrative purposes and do not constitute profit forecasts. The eventual
outcome may be more or less favorable than that portrayed.
Red Rood Inn, Biloxi
Hotel Project Proposal
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4. Red Roof Inn, Biloxi
Executive Summary
The Red Roof Inn, Biloxi is a 120-room economy property that will aim to attract a
primary market of leisure travelers and secondary group and business travelers. The hotel will
strive to provide the best experience towards our guests based on our location, amenities, and
employees. It will emphasize high quality standards in all hotel departments. The Red Roof
Inn, Biloxi will provide guests with a clean, relaxing, and enjoyable smoke-free property, in a
“home away from home” atmosphere. In addition, the hotel service will constantly change
according to the specific needs and requests of its guests. The following sections in this
proposal will explain a more in-depth look as to the feasibility of this hotel.
Biloxi, Mississippi is a historic city known for its Gulf coastline, gaming attractions and
professional golf courses. The demand drivers and a detailed list of the attractions in the area
will be discussed in the market analysis section of our report. Red Roof Inn, as an economy
brand aims to provide a budget option for guests of any age to enjoy the attractions.
The franchise comparison section will spend time comparing Red Roof Inn Biloxi to
Howard Johnson Hotel. Both hotels are 120 room economy hotels. This comparison will
reveal the advantages that the Red Roof Inn has over other hotels in the area as well. The
competitive set in this area are Motel 6 Biloxi, Super 8 Biloxi Coliseum Area, Super 8 Ocean
Springs, and Suburban Extended Stay Hotel D’iberville. This section will also address the
hotels layout and the amenities offered. Red Roof Inn will offer guests two types of rooms.
Guests will have the choice of a general king room, or a double room. Some of the amenities
included are continental breakfast every morning, a swimming pool, well-furnished fitness
center, a pet friendly environment, and spacious rooms.
The market strategies and sales section both aim to explain different ways the hotel
will attract more guests to the property. Red Roof Inn is an affordable property with
government discounts available as well as military discounts. Our property uses effective
marketing campaign strategies to attract guests such as save 10% on the first two nights or
20% on three or more nights. Also, book and save 22% Sunday through Thursday. The rest of
this section will show the projections of the hotel’s ADR, and the forecast for average rate as
well as revenue forecast.
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5. Red Roof Inn, Biloxi
Market Area Analysis
History
Biloxi is one of the most historic cities in America tracing its roots back to 1699.
Pierre Le Moyne, a Frenchman found the Native American settlement and named the
newfound city after the Biloxi tribe. The French and Native Americans got along well, and it
was at one point the capital of French Louisiana, before losing that title to New Orleans. By
the turn of the 20th century, Biloxi became known as the Seafood Capital of the World. Forty
seafood factories operated in the city during the 1920’s. Gulf Coast shrimp are still known as
the finest in the world. In 1927, Biloxi’s historic hotels included the Edgewater Gulf Hotel,
White House Hotel, Tivoli Hotel, Buena Vista Biloxi Hotel, Kennedy Hotel, Park Hotel,
Avelez Hotel, and Rivera Hotel. A new era began in the city in 1992 with the opening of the
first Las Vegas-style gambling casino. The resort casinos with their 24-hour entertainment
availability spurred a tremendous growth in both local and tourist populations, and restaurants
and other businesses grew accordingly. The new city of Biloxi has risen from the rubble of
Hurricane Katrina and is one of the premier destinations on the Gulf Coast. Recently, the
Biloxi Gulf Coast was impacted by the 2010 BP Deep Water Horizon oil spill.
While this was a detrimental event, the community attempts to stay resilient. The area
combines scenic beauty and history with local cuisine, hotels,
casinos, and golf courses.
Geography
Biloxi is located on a small peninsula between Biloxi
Bay and the Mississippi Sound on the Gulf of Mexico.
Located just 70 miles north of New Orleans, and 150 miles
west from Jacksonville this semitropical climate and sunny
days are the perfect vacation destination. The months May
through September are full of wonderful warm temperatures
with cool breezes. Winter is primarily warm, clear weather
with occasional cold spills only lasting for a few days.
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6. Red Roof Inn, Biloxi
Climate
As you can see from the accompanying graphs above, Biloxi’s temperature ranges from a low
40°F in the winter months, to a high of 90°F. Biloxi’s occupancy’s percentages tends to be
affected by temperature variances as a majority of our guests like to visit Biloxi towards the
summer months.
Population and Demographics
Biloxi adjoins with the bigger city of Gulfport. Gulfport is the second largest city in
Mississippi with an estimated population of 71,012. According to 2013 census data, Biloxi,
Mississippi has an estimated population of 44,820. Biloxi is home to Keesler Air Force base
and 19.8% of the population are veterans. Caucasians makeup 71.4% of the population, and
African Americans make up just 19%. The census data shows that in 20 years the Mississippi
Gulf Coast region could see an increase of 450,000 people. This is promising data for the
region and will result in increased revenues for the service industry. Adults between the ages
of 25-34 make up most of the population. Second to that are adults between the ages of 18-
24.
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7. Red Roof Inn, Biloxi
Retail Sales
According to the U.S. Census, the retail sales in Biloxi were $573,389 for 2007, while
the sales for the state were $33,751,407. The retail sales per capita for that same year for
Biloxi were $12,399. We were unable to attain data after 2007 because the cities numbers
have not been updated since.
Workforce
Biloxi’s principal property taxpayers are the Beau Rivage Resort and Casino paying
12.83% of the total taxes. Casinos are the top three principal property taxpayers in Biloxi.
Casinos are also ranked second and third in top employers for Biloxi. Hospitality and leisure
related jobs have the greatest employment because there are so many different jobs in these
departments. In 2005-2009 for the employed population 16 years and older, the leading
industry in Biloxi was hospitality.
Transportation
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8. Red Roof Inn, Biloxi
The Mississippi Gulf is approximately an hour’s
drive from New Orleans, Louisiana to the west and
Mobile, Alabama to the east. You can take
interstates I-55, I-65, or I-85 to I-10, then travel
down I-110 or State Highway 49, which will bring
you on to US Highway 90, which runs along the
Gulf waters. By train, The Amtrak also provides a
stop right on the Northern part of Biloxi.
Located twenty-five minutes away from
Biloxi is the second largest airport terminal in
Mississippi known as the Gulfport Biloxi
International Airport. There are several options
available to get you from the airport to Biloxi as
well as around the city once you arrive. To make
your way to Biloxi from the airport, one would just have to get on I-10 East until you reach
Biloxi: about twenty five to Downtown Biloxi. Once you arrive in Biloxi, several options are
available as a means of transportation from one part of the city to another. There are also
several tour buses/trolleys that would gladly show you around the historic city of Biloxi.
Transportation methods such as by taxi, or by renting a car from Enterprise are just some of
the many options available. As a means of touring and sightseeing the beautiful area of Biloxi,
several trolley companies such as The Biloxi Tour Train. Rolling strong for 53 years, this
open-air train has delighted visitors on a memorable historical journey through one the oldest
settlements in America.. The "Shrimp Train" as “local folks” affectionately call it entertains all
who board with a 90-minute tour through Biloxi's Historic District. More than a million
passengers ride The Trolley each year.
76.6% of the population
drove to work alone with the
average commute of 18.8 minutes.
Other methods of travel although
not as common in Biloxi include
carpooling and walking.
According to the graph above,
29% of residents in Biloxi travel
less than 15 minutes, while 47% of
residents travel to work within the
15-29 minute range.
Attractions
The demand drivers for this area of Mississippi are the sandy beaches, calm waters
perfect for jet skiing or deep-sea fishing. Although Biloxi suffered heavy damage from
Hurricane Katrina in 2005 and the oil spill in 2010, the area is rebounding back with force.
There are several large casinos and golf courses that bring tourists from all over the country.
Every year in mid October Gulfport-Biloxi is the home of the Sun and Sand Film and Music
Festival. The festival attracts film and movie enthusiasts from across the nation to attend
indoor and outdoor concerts and screenings. Biloxi has a variety of attractions that can cater
to a large array of people including:
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9. Red Roof Inn, Biloxi
Hard Rock Casino
Hard Rock Hotel & Casino Biloxi is a striking 12-story
purple and white hotel tower announced by the world's largest
Hard Rock Guitar sign. With its modern design, Hard Rock
Biloxi boast high ceilings, an open casino floor, a sleek
nightclub and boutique rooms with walk-in showers. Located
in the heart of the Mississippi Gulf Coast, guest can easily
access the beach as well as take in spectacular views of the
Gulf of Mexico.
Ship Island
Ship Island is an island owned by the National
Park Service. It is a major attraction with
beautiful beaches, which are more secluded
because in order to get to them you must take a
ferry. It is a protected island with local history.
This pristine beach is a well-preserved Third
System brick fort with significance during the
Civil War. The fort there is also a very nice place
to walk around.
Beauvoir
Beauvoir meaning “beautiful view” in
French, is a wonderful historic sight. This was
the home of Jefferson Davis. It was nearly
destroyed by Katrina in 2005, but has been
restored to its former condition. The trees,
walls, and green front entrance have all been
redone and restored. For a fee, one will be
given an amazing tour of the house, entrance
to the presidential library, and the ability to
wander the beautiful grounds and cemetery of
the Confederates. There are guided tours
given by men dressed in costumes from that time period to really get that historic feel.
Golf Courses
The Mississippi Gulf Coast is known all over the world for its beautiful golf courses.
The courses offered, especially in Biloxi, contain breathtaking views, professionally designed
greens, and famous southern hospitality. Out of the several golf courses offered in the area,
one of the most famous and renown courses is The Preserve Golf Club. Located just minutes
away from Biloxi, The Preserve Golf Club offers eighteen holes of golf with unprecedented
course conditions. Designed by U.S. Open champion and award winning golf course designer,
Jerry Pate, The Preserve encompasses 245 pristine acres, surrounded by an additional 1800
acres of dedicated nature preserve.
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10. Red Roof Inn, Biloxi
Estimated Area Demand
In Biloxi, Mississippi the majority of
its visitors travel in the summer for leisure.
Biloxi is known for its beaches and casinos.
Biloxi is ranked number 3 for the gaming
industry. A handful of casinos are located right on the shore of Biloxi. Gambling is a huge
draw. Each year, about sixteen million people visit these casinos. The pristine gulf beaches are
also in high demand for tourists.
In the 1820s Biloxi became a popular summer resort for New Orleanians wishing to escape
their city’s heat and yellow fever epidemic. Since then, the city has grown and more tourists
come for the casinos. Biloxi has eight casinos open and running.
Families wishing to visit Biloxi come for the Ship Island Cruise, the Biloxi Shrimping Trip, and
Children Museums.
Occupancy Demand Per Season
Historic Market Demand
2009 2010 2011 2012 2013 2014
Avg. Daily Room Count 12,713 13,049 12,815 12,994 12,914
Occupancy 62.4% 67.6% 60.6% 63.7% 57.8% 56.0%
Change 8.4% -10.4% 5.1% -9.4% -3.0%
Average Rate $79.53 $80.19 $82.82 $81.83 $83.04 $85.44
Change 0.8% 3.3% -1.2% 1.5% 2.9%
RevPAR $49.62 $54.25 $50.19 $52.14 $47.96 $47.85
Change 9.3% -7.5% 3.9% -8.0% -0.2%
According to the STR Trends Report Data for Biloxi, Mississippi, the average daily
rate has increased from $79.53 in 2009 to $85.44 in 2014. Average rate has increased over the
years and can only be expected to continue to do so for the years ahead. Occupancy rates, on
the other hand have not had so much luck. Occupancy rates have been on a decline from
2009-2014. RevPAR fluctuates from 2009-2014. There is no steady increase nor decrease,
which makes it difficult to determine whether or not opening a new hotel would prove to be
profitable.
Construction Trends
In the Economy segment there are currently 26 hotels, and a 2,222-room supply
available. In the last 5 years there has been little movement in the supply of rooms. In fact,
there has been a decline of 21 rooms. Looking ahead there are no new economy hotels in the
pipeline. There are 13 hotels in the final planning stages and 3 in construction. These are
mainly upper midscale hotels so they would not compete with our planned economy hotel.
This data presents a huge opportunity for investors looking to construct a new project.
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11. Red Roof Inn, Biloxi
Segment Breakdown
Biloxi attracts its tourists from the casino, golf courses, fishing, its historical
attractions, and from the gulf coast. Considering the whole city is situated on the gulf coast, its
hospitality-based economy has to do with the beach and providing affordable rates for casino
goers. The fishing industry is also a large attraction. The largest revenue generating attraction
Biloxi has to offer is its casino and gambling industries. Some of the many large casinos
include Hard Rock, New Palace, & IP casino resort.
Summary
Sitting along the shores of Mississippi's Gulf Coast, the city of Biloxi has been a
favorite vacation destination for decades, with sandy beaches and calm waters, perfect for jet
skiing or deep-sea fishing. The months of May through September are full of wonderful warm
temperatures with cool breezes. Having suffered heavy damage during Hurricane Katrina,
Biloxi is bouncing back. The casinos (currently ranked 3rd in the gaming industry) and resorts
are back in action, offering championship golf and live entertainment. The city has restored
many historic sites, including Beauvoir, the home of Confederate president, Jefferson Davis.
Hotels located in the city of Biloxi are an area of particular interest that should be
considered. In the Economy market segment, there are currently 26 hotels, and a 2,222-room
supply available. With an increase in area demand due to many factors that we have previously
discussed, and relatively little movement in the supply of rooms offered, the idea of
implementing a hotel development plan in the area might be an idea worth considering.
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12. Red Roof Inn, Biloxi
Operational Strategies
Vision
Red Roof Inn in Biloxi, Mississippi envisions itself to be able to continue to provide
comfortable and affordable rooms to all of its guests in the future. Our target market is
focused towards leisure travelers. Our secondary target market is group and business travelers
who will appreciate the hotel’s excellent accommodations. Hotel service will change according
to the specific needs and requests of its guests.
Mission
The mission of Red Roof Inn is to provide economical lodging facilities and services to
all of its guests by creating a relaxing and enjoyable “home away from home” atmosphere. The
hotel will focus on individual business and leisure travel along with providing comfortable
rooms. It will emphasize high quality standards in all of its rooms and amenities. In addition, it
will hopefully provide a fair return on its investment for its owners. This goal can only be
achieved with the help of well-trained, motivated, and enthusiastic employees.
Values
The Red Roof Inn will try to uphold high values for achieving an excellent guest
experience along with providing sufficient financial benefits for its stockholders, owners,
managers, employees, and suppliers. It will communicate with everyone in a very professional
and friendly manner.
Strengths, Weaknesses, Opportunities, Threats
Strengths
The Red Roof Inn will provide affordable rates to all of its guests. It will also have a
wide variety of room choices and bed sizes for guests to choose. In addition, it will provide
free Internet access along with a free continental breakfast to all of its guests. An outdoor
swimming pool along with gym facilities will also be available for recreational activities.
Weaknesses
The main weakness that the Red Roof Inn will have to deal with is that according to
STR data, occupancy percentages in hotels in the Biloxi, Mississippi area have been on a slow
decline from 2009-2014. The hotel will try to correct this weakness through a widespread
advertising campaign in which it promotes its affordable rates and excellent amenities. Another
weakness is that the revenue per available room (RevPar) may fluctuate from year to year in
this area. As a result, it may be difficult to determine the long-term financial success of this
hotel in the area. The hotel will attempt to maintain affordable prices along with a high
occupancy rate at all times.
Opportunities
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13. Red Roof Inn, Biloxi
Being a Red Roof Inn branded hotel, many guests are already aware of the name and
what the brand values the most; a caring and confortable environment for all guests. The
development of the Red Roof Inn, Biloxi Mississippi will encourage construction of hospitality
related services such as restaurants as well as retail locations. The property will also provide
excellent and profitable employment opportunities for people who live in the area. During
operations, employee’s careers will be valued and they will be encouraged to stay with the
organization. Promotion within will be an important motivator for employees to provide better
service to our guests. Equally important to employee satisfaction is the happiness of our
guests. Guests will be able to enjoy many attractions and recreational activities in the area,
including clean beaches, excellent fishing, fantastic casinos and golf courses, and a wide
variety of music and food festivals.
Threats
A major threat to this hotel may be a significant weather event such as a hurricane or
tornado. Hurricane Katrina previously devastated this area, but the area is continuing to
improve its overall appearance. The hotel will be built to withstand extreme weather
conditions. Another threat might be the possibility of a low occupancy rate due to a poor
economy or horrible weather conditions. The hotel will respond to this threat by continuing to
offer affordable rates and room availabilities during these times.
Goals, Objectives, and Strategies
Goal 1: To ensure the greatest possible guest experience at all times
Objective:
To strive for a greater than 90% customer satisfaction rate over the first two years of
operation
Strategies:
• Hotel employees welcome every guest in a friendly and professional manner
• The hotel provides excellent room accommodations
• Hotel employees always assist guests who require individual needs
• Quick, accurate, and pleasant check-in and check-out experience for every guest
• To allow every guest to provide feedback as to how to improve guest experience for
future visits
Goal 2: Profit for hotel owner/manager
Objective:
Attempt to achieve 2 million dollars in total revenue by the fourth year of operation
Strategies:
• Continuous monitoring of hotel occupancy rates to ensure that the hotel is
functioning up to its capacity
• Hotel controller should constantly monitor hotel costs and expenses and try
to minimize hotel spending without affecting a guest’s hotel experience in a
negative way
Goal 3: To train employees so that they are respectful towards guests and can work well in a
team environment
Objective:
The Red Roof Inn, Biloxi will train all employees so that they have the ability to
succeed. This includes educating all employees so they can do their best
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14. Red Roof Inn, Biloxi
Strategies:
• Train employees to have well rounded skills
• Expose and educate employees to all different types of situations
• Reward employees for proper perfomrance
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15. Red Roof Inn, Biloxi
Franchise Comparison
The market of Biloxi, Mississippi is generally summer based leisure travelers. Most of
the demand comes from the casinos. As analysts, we have compared a 120 room Red Roof
Inn economy hotel and a 120 room Howard Johnson economy hotel. Currently there are 103
hotels in Biloxi and the market is dominated by independent hotels controlling 36% of the
supply. Economy hotels make up 25% of the market. There are no luxury hotels in Biloxi and
only one upper midscale property. There have not been any recent construction of economy
hotels according to the pipeline data. The most recent to open was a Motel 6 in 2009. This
lack in development presents ample opportunity for an economy hotel.
Background of Franchise Options
The Howard Johnson brand is under the parent company Wyndham Worldwide. With
more than 500 locations in 14 countries, Howard Johnson is an iconic American Brand. The
brand originally started in 1925 as a restaurant chain and began franchising hotels in 1954. The
brand has 4 tiers of hotels, Howard Johnson Plaza Hotel, Howard Johnson Hotel, Howard
Johnson Inn and Howard Johnson Express Inn. All tiers offer continental breakfast, are pet
friendly, and have free WIFI. Select locations also offer swimming pools and exercises rooms.
J. D. Power and Associates reports Howard Johnson Express/Inns a ranking of 691/1000
customer satisfaction and a 4/5 J.D. Power circle rating. The average ADR at Howard
Johnson hotels in 2014 was $69.13. Howard Johnson is committed to keeping its guests happy
through convenience, cleanliness and comfortability.
Red Roof Inn is a private company with over 400 locations in 40 states and growing
rapidly. The brand was started in 1973 and is based in Springfield Ohio. Red Roof Inn, like
Howard Johnson, has multiple tiers of hotels. These include Red Roof Inn, Red Roof Plus+,
and Red Roof Plus+ and Suites. Previously the brand was owned by Accor, a French hotel
group. Accor acquired Red Roof Inn in 1991 for $1.1 billion and added 324 properties to the
franchise. In 2007 Accor sold the franchise to Citigroup Global Special Situations Group and
Westbridge Hospitality Fund LP for $1.3 billion. All locations of Red Roof Inn serve
continental breakfast, are pet friendly and have free WIFI. Select locations have swimming
pools, exercise rooms, meeting rooms and business centers. J. D. Power and Associates
reports Red Roof Inn a ranking of 709/1000customer satisfaction and a 4/5 J.D power circle
rating. Red Roof Inn boasts that its brand is more like an upscale economy experience offering
guests a comfortable caring environment.
Franchise Fees
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16. Red Roof Inn, Biloxi
Cost/Service Red Roof Inn Howard Johnson
Total Initial fee 30,000 71,000
Total royalty fee 689,555 1,961,401
Total reservation fee 612,938 1,975,004
Total marketing fee 0 980,701
Total Misc. fee 226,660 187,845
Total 1,559,153 5,175,951
*data from Hotel Franchise Fee Guide 2013
Selected Franchise
As analysts, we have decided that the franchise development of a Red Roof Inn would
be the best option for the Biloxi, Mississippi marketplace. Red Roof Inn, being the one and
only brand of the company, means that they are entirely focused on promoting that one brand
and not overcrowding the economy market. Red Roof Inn has been voted the #1 economy
hotel for the last five years by ReviewMetrix CSI Benchmark. The brand has received the
highest customer satisfaction score according to ReviewMetrix. Red Roof Inn is also
dedicated to sustainability. Their efforts include energy-saving fluorescent lighting, water-
saving toilets and showerheads, environmentally sensitive Ecolab Laundry and cleaning
products, and go green select housekeeping service. The average ADR for the Red Roof Inn
brand is $71.93. This number is higher than Howard Johnson’s ADR. The average occupancy
for Red Roof Inn is 71.1%. Red Roof Inn also consistently has one of the highest RevPar of
any hotel in the economy market. Along with superior performance, Red Roof Inn will provide
a 24/7 help desk that utilizes sophisticated problem-tracking system to ensure closure to all
problems and to escalate any emergencies that may need immediate attention. Overall the
amenities, sustainability efforts, and reputation make Red Roof Inn a premier franchising
option.
Projected Revenue and
Occupancy
Projected Occupancy
Using a linear regression model we found our forecasted occupancy for the next four
years. Due to current market trends in Biloxi, Mississippi and our competitive set
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17. Red Roof Inn, Biloxi
performance, occupancy is beginning to increase at a slow and steady pace and then evens out
at 62.4%. A majority of our customers will be leisure travelers which will make up 70% of our
customer base. The remaining 30% of customers will be split up into group and business
clientele with each estimated to be 15% respectively. As seen by the accompanying chart, the
amount of rooms sold each year to each of our different types of customers is calculated based
on a 120 room hotel and projected occupancy for that year.
Number of rooms sold to our clientele (by year)
2018 2019 2020 2021
Leisure 70% 16,648 17,783 20,358 20,358
Business 15% 3,568 3,811 4,362 4,362
Group 15% 3,568 3,811 4,362 4,362
Total Available Room Nights 43,800 43,800 43,800 43,800
Projected occupancy 54.3% 58.0% 66.4% 66.4%
Room Rates
Our average ADR can be shown in the chart below. We suspect that in the first year of
operation, ADR will be $66 per night. ADR is expected to increase each year at 8% the first
two years until it levels off at 3% for the next 4 years. Leisure travelers will pay a slightly
higher premium compared to ADR each year while our group and business clientele will pay a
lower ADR compared to average ADR because of return business over time.
2018 2019 2020 2021
ADR $66 $72 $77 $80
Leisure 70% $68 $74 $79 $82
Business 15% $65 $71 $76 $79
Group 15% $65 $71 $76 $79
Total Revenue
To find total revenue, we multiplied our 120 available rooms to our 365 days of operation.
From there we multiplied our expected occupancy for that year as well as our average ADR
to come up with our expected total. Our percent change of total revenue from year 1 to year 2
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18. Red Roof Inn, Biloxi
is 15.72%. From year 2 to year 3 revenue increases 23.7% to $2,249,804. Finally, in year 4
revenue increases 3% to $2,317,298.
Occupancy % Room Nights Sold ADR Total Revenue
2018(Year 1) 54.3% 23,783 $66.01 $1,571,151
2019(Year 2) 58.0% 25,404 $71.57 $1,818,192
2020(Year 3) 66.4% 29,083 $77.40 $2,249,804
2021(Year 4) 66.4% 29,083 $79.73 $2,317,298
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19. Red Roof Inn, Biloxi
Product and Service Analysis
Biloxi, Mississippi receives most of its business from customers searching for leisure
activities. The city of Biloxi has been a favorite vacation destination for decades, with sandy
beaches and calm waters perfect for jet skiing or deep-sea fishing. The casinos are a big factor
when tourists visit the city of Biloxi. Families enjoy along Biloxi’s historical attractions such as
The Beauvoir, the home of Confederate president, Jefferson Davis as well as the pristine
beaches. The Red Roof Inn, Biloxi will offer a perfect stay to our adventurous, or laid back
guests looking for welcoming hospitality. We aim to accommodate the younger age group of
25-35 years of age, travelers who are interested in enjoying the casinos. At The Red Roof Inn
Biloxi, guests will be able to enjoy the numerous amenities offered at a reasonable price, such
as the in-room coffee, microwaves and mini-refrigerators. Our guests can enjoy all that Biloxi
has to offer while also enjoying free Wi-Fi, free Continental Breakfast, a non-smoking
environment, complimentary coffee and tea in our lobby, coin laundry, flat screen televisions
and a seasonal pool, among other amenities. We believe that along with our location,
amenities, and service, Red Roof Inn, Biloxi will be perfect for a leisure hotel.
Comparative Analysis of Current Lodging Supply
Currently, there are a variety of economy hotels located in the Biloxi area. The main
goal of hotels is to differentiate themselves from their competition. Being that our competitors
are similar, we must set ourselves apart from them through amenities and service. The Red
Roof Inn will always be one step ahead of their guests in maintaining high levels of satisfaction
and comfort.
Motel 6 Biloxi
2476 Beach Blvd, Biloxi, MS 39531
Motel 6 Biloxi is an economy hotel located in Biloxi. It is equipped
with 112 rooms. Motel 6 Biloxi is located off I-10, near shopping, dining
and entertainment. All guest rooms have a modern look and Wi-Fi available
for $2.99 per 24 hours. Amenities include an outdoor pool open all year, guest laundry, and
Hotel Number of Rooms
Motel 6 Biloxi 112
Super 8 Biloxi Coliseum Area 200
Super 8 Ocean Springs 80
Suburban Extended Stay
Hotel
131
*Red Roof Inn Biloxi 120
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20. Red Roof Inn, Biloxi
kitchens in selected rooms. Additional amenities include a beach within 10 miles, pet friendly,
and kids stay free. Parking is available and the coffee is fresh, hot, and free in the morning.
Super 8 Biloxi
1870 Beach Boulevard, Biloxi, MS 39531
For value and convenient access to attractions, Super 8 Biloxi hotel
near Kessler Air Force Base is an economy hotel equipped with a hefty 200
rooms. The convenient location off Highway 90 makes it easy to come and
go. There is a free 8-item SuperStart breakfast bonanza which helps guests
get ready to go each morning. Cooling down after a day of sightseeing is easy with the
outdoor pool, and the kids are able to splash around in the kiddie pool. Each hotel room
features free Wi-Fi Internet access, a microwave and a refrigerator. Kids 17 and under stay
free with an adult at this Biloxi hotel. Waffle House and CQ are within a quarter mile of the
hotel while Snapper Seafood features local favorites less than two miles away. Hunan Chinese
Restaurant and Mr. Greek, which feature authentic Mediterranean dishes, are both five
minutes away. This Biloxi hotel features a 2,500-square-foot conference and meeting room.
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21. Red Roof Inn, Biloxi
Super 8 Ocean Springs
13838 Wilfred Seymour Rd, Ocean Springs, MS 39565 US
The Super 8 Ocean Springs falls in the economy market with a
capacity of 80 rooms. This straightforward budget hotel is off Interstate 10,
3.7 miles from Ocean Springs and 7.8 miles from Downtown Biloxi.
Mississippi Sandhill Crane National Wildlife Refuge is 6.4 miles away and
Super 8 is only 8 miles from the Mardi Gras Museum in Biloxi. For more
outdoor activities, De Soto National Forest allows you to fish or paddle canoes in its Black
Creek. The forest also offers more than 60 miles of hiking trails. Tee off at Gulf Hills Golf
Club and one can enjoy a day at one of the most beautiful and challenging 18-hole courses in
the area. All rooms include en suite bathrooms, TVs, desks, coffeemakers, minifridges and
microwaves. There is also free WiFi in every room and kids 17 and under stay free with an
adult. Amenities include complimentary continental breakfast and parking, plus an outdoor
pool, business center, and laundry facilities.
Suburban Extended Stay Hotel
10221 Rodriguez Street, D’Iberville, MS 39540
The Suburban Extended Stay Hotel near Biloxi is an economy
hotel with 131 rooms. At this Suburban Extended Stay Hotel in
D'lberville, MS, guests will be near the Mississippi Gulf Coast and the
city of Biloxi. They are located less than four miles away from nearby Keesler Air Force Base.
This D'lberville hotel is right off Interstate 110 and accessible within five miles of attractions
such as Beau Rivage Casino, Hard Rock Casino Biloxi, Mardi Gras Museum, and Grand
Biloxi Casino. Although the Suburban Extended Stay Hotel in D'lberville is located near many
chain restaurants, guests can prepare their meals in their room’s well-equipped kitchen. Other
extended-stay amenities that let guests’ work and feel at home include free WiFi, a Fitness
room, copy and fax services, and weekly housekeeping service. This is a pet friendly hotel. In
each spacious room guests will find a hair dryer, iron, ironing board and 32-inch flat-screen
TV.
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22. Red Roof Inn, Biloxi
Competitive Set Room Rates
1 King Bed Room 7/25-7/26 3/3-3/4 11/14-11/15
Motel 6 Biloxi $129.99 $59.99 $59.99
Super 8 Biloxi Coliseum Area $109.00 $59.99 $89.99
Super 8 Ocean Springs $89.00 $89.00 $89.00
Suburban Extended Stay Hotel D’Iberville $89.00 $59.95 $94.99
*Red Roof Inn Biloxi $104.99 $59.95 $79.99
Competitive Set Identification and Analysis
The four existing hotels in our proposed property’s competitive set include Motel 6
Biloxi, Super 8 Biloxi Coliseum Area, Super 8 Ocean Springs, and Suburban Extended Stay
Hotel. These hotels are all in the economy market, with rooms varying from a low of $80 per
night to a high of $200 per night. These hotels are similar to our Red Roof Inn Biloxi, which is
also within the economy market.
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23. Red Roof Inn, Biloxi
Comparative Analysis of Services to Target Marget Segments
Each of these hotels is similar in the sense that they have a rather small amount of
rooms, and are appealing to leisure travelers. They also all offer similar amenities, services,
and overall products. Most of Red Roof Inn, Biloxi’s visitors are traveling for tourism or
leisure. Potential guests will be looking for a hotel that is a relaxing place to return to after a
long day of adventure and tourism. The overall ambiance we will have at our hotel is going to
be comforting, yet exciting to cater to our guests.
Our amenities include complimentary breakfast daily, an outdoor pool, an exercise
room, flat-screen TV’s, and rooms featuring balconies with an ocean-front view. Our Red
Roof Inn customers will feel welcome when they enter, and satisfied when they leave.
Amenities Motel 6 Super 8 Biloxi Super 8 OceanSuburban Extended *Red Roof
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24. Red Roof Inn, Biloxi
Biloxi Coliseum Area Springs Stay Hotel Inn Biloxi
Breakfast No Yes Yes Yes Yes
Free Wi-Fi No Yes Yes Yes Yes
Pool Yes Yes Yes No Yes
Pet Friendly Yes No Yes Yes Yes
Non
Smoking
Yes Yes Yes Yes Yes
Laundry
Services
Yes No Yes Yes Yes
Shuttle-
Service
No No No No No
Meeting
Space
No Yes Yes Yes No
Exercise
Room
No No No Yes Yes
Flat-Screen
TV
Yes Yes (King)/No
(Doubles)
No Yes Yes
Kids Stay
Free
Yes Yes Yes No Yes
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25. Red Roof Inn, Biloxi
Operational Plans
Red Roof Inn Biloxi will provide multiple amenities such as an outdoor pool, a fitness
center, onsite laundry, and pet friendly rooms. In addition, five of our rooms will ADA
assessable. Further specification for the different aspects of the hotel will be outlined in the
subsections.
Guest Rooms
Our hotel will have a total of 120 rooms. All guest rooms will be equipped with several
amenities such as free Wi-Fi, flat screen TVs, refrigerators, microwaves, and in-room coffee.
For convenience, laundry machines will be located on each floor. A select number of our
rooms have balconies and outside sitting space with a view of the ocean. Our hotel has two
different room sizes offered. Guests will have the choice of either a general king room, or a
double room.
Room Type Number in
Property
Ocean View 60
Pet Friendly 10
Handicapped
Assessable
5
Double 80
General King 40
Double
Our double rooms are the primary set rooms for our guests to stay in. These are our
general rooms with two queen beds. These rooms will consist of custom furniture in oak
finishes, a 32-inch LCD flat screen TV, refrigerator, and microwave.
A Double Bedroom with 2 queen beds
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26. Red Roof Inn, Biloxi
General King
Our general king rooms have one king sized bed with enough room for a cot. These
rooms also are furnished with custom-built furniture with an oak finish. Included is a 32-inch
LCD TV, refrigerator, and microwave.
A General King Bedroom
Several amenities available to all guests found in any room type
A full bathroom found in any room type
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27. Red Roof Inn, Biloxi
Marketing Strategies
Packages
Local Package
For those guests that are looking for a simple getaway, but do not want to stay too far
from home, this is the package for you! The local package offered by our property, is for
guests who live within a 20 mile radius from the hotel. We will offer guests 15% off the rack
room rate. This package is offered all year round.
Golf Package
Our golf package is offered to any guest staying at our hotel interested in playing golf,
staying for a minimum of three nights. This package includes 20% off 18 rounds of golf, a free
golf cart rental, and 15% off any one item in the pro shop at the The Preserve Golf Club. This
course is public so being a member is not required in order to play. Must stay a minimum of 3
nights to qualify. This package is offered all year round.
Casino Package
The casino package is for anyone looking to gamble in the beautiful Hard Rock Hotel
and Casino Biloxi. This package includes $25 resort credit and two complimentary drinks at
the bar. Must stay a minimum of 3 nights to qualify. This package is offered all year round.
Fishing Package
Stunning Biloxi, Mississippi is home to some of the best fishing ports in the country.
We will have a partnership with Fish-Finder Charters, which provides professionally guided
fishing tours; either deep sea fishing, or inshore fishing. Fish-Finder is a fully rigged 38' topaz
Charter Boat powered by dependable twin caterpillar diesels. She is also equipped with air
conditioning, satellite TV, latest electronics and a restroom. Fish-Finder is docked in one of
the finest marinas in Biloxi, Mississippi, which is conveniently located on the Gulf Coast.
Come aboard with Captain Mike and enjoy some of the finest Deep Sea Fishing or trolling the
Mississippi Gulf Coast has to offer. This package includes a 10% discount and free rentals on
all fishing equipment. Must stay a minimum of 3 nights to qualify. This package will be offered
all year round.
Sales Support
Through the help of the general manager, the staff will effectively market the Red Roof
Inn, Biloxi. They will attract locals as well as tourists from all over. It is important that our
property has strong relationships with the Hard Rock Hotel and Casino, Fish Finder Charters
and The Preserve Golf Club. The general manager will also go to other local businesses in
hopes to create new stronger partnerships throughout Biloxi, Mississippi.
Biloxi’s main attractions are the Hard Rock Casino, golf courses, and magnificent and
historic beaches. We found that targeting our packages towards the award winning Preserve
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28. Red Roof Inn, Biloxi
Golf Club and the biggest casino in Biloxi would be a good sales strategy that will attract
many guests from all over. Whether one is looking to gamble or just to relax and play a
relaxing round of golf, we have the package for them. Fishing is also a popular activity in
Biloxi so we also offer a fishing package available for guests.
The packages are one of the best ways to set our hotel apart from all the other
economy hotels in the surrounding areas. They also help to bring the local attractions to our
property. We hope that our guests will recommend our hotel property to others and continue
to return to our property after enjoying these promotions.
Since local partnerships are very important for our hotels success. Our general
manager will make sure the public is fully aware of our sales and packaged promotions. For
example, promoting on our hotel website will be a useful communication channel to
implement. Keeping our website up to date is imperative. The content, structure, navigation,
visual design, interactivity and functionality are also very important to keep in mind. Our
website will contain our packaged deals as well as our normal room rates. Any promotions
will be put up on the website as well. Our general hotel information will also be provided such
as location and directions. The website will also have the capabilities to easily book a hotel
room directly. The guest will have to provide general information such as name of guests
staying, requested date of reservation, length of stay, hotel room type, contact information,
and billing information.
One major advantage of our business offerings is that we strive to offer affordable
rates for quality services. Our aggressive pricing strategies will penetrate the market especially
when compared to our competitive set. In customizing our ADR prices towards our different
target markets, (leisure group and business), we will be able to maximize RevPar.
2018 2019 2020 2021
ADR $66 $72 $77 $80
Leisure 70% $68 $74 $79 $82
Business 15% $65 $71 $76 $79
Group 15% $65 $71 $76 $79
In the first year of operation we expect our occupancy percentages and ADR to have a
95% penetration rate when compared to our competitive set. Taking into account that the Red
Roof Inn will be a new property that has not yet established its self in the market, a 95%
penetration rate is reasonable. Over the next 4 years of operations our penetration rate will
rise to 105% with our occupancy percentages staying static at 66.4%. Our ADR rates will also
be penetrating the market at over 100% however these rates will continue to rise due to
inflation. All in all, with penetration rates above 100% we will be leading the other 4 hotels in
our competitive set. See chart below on the next page to evaluate in depth our penetration
rates compared to our competitive set. The gragh shows property Occupancy, ADR, and
RevPar and its accompanying penetration rates for the first 6 years of operation.
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30. Red Roof Inn, Biloxi
Management Organization
Management
General Manager: The purpose of a general manager is to oversee all of the activities
involved with the hotel. The general manager will be in charge of all the departments including
marketing and sales, human resources, food and beverage, and engineering. All departments
will report directly to the general manager with any issues. Guest issues that arise will also be
taken care of by the general manager. This manager will be in charge of ordering the food and
beverages for the complimentary continental breakfast as well. The general manager possesses
the highest level of leadership and the characteristics that come with it such as confidence and
working well under pressure.
Front Office Manager: The front office manager is responsible for all duties of the
front desk operation. This is made up of staff training, inter-department communications, and
staff scheduling. The front office manager is in charge of training not only front desk
personnel, but also the night auditor. They must be available to work any shifts as needed
since hotels are 24 hours, as well as the regularly scheduled shifts. This manager is also in
charge of the food and beverages for the complimentary continental breakfast. They must
make sure inventory is up to date and be in charge of the deliveries of the food. Strong
communication skills and leadership abilities must be demonstrated in order to be a front office
manager.
Human Resources Director and Controller: The human resources director has an
important role relating to all the finances involved with the hotel. They are in charge of
reporting all the finances including projecting and forecasting our sales and budget strategies.
New strategies are proposed by them relating to cash flow, and budgeting our money. Hiring
potential employees and termination of current employees will be done by the human resource
director as well as creating the necessary training programs for the employees. The director
will also make sure that all codes are being followed for our property.
Director of Housekeeping: The director of housekeeping will be in charge of all
functions in relation to the cleanliness and maintenance of the hotel, more specifically the
rooms. They will be in charge of hiring and training the housekeeping employees. All federal,
state, and local guidelines must be adhered to by the director.
Chief Engineer: The chief engineer will be in charge of maintaining the property.
They will be in charge of the operation of the maintenance department, as well as up-keeping
the property’s appearance, which includes preserving the exterior of the hotel, maintaining and
upkeep of the pool, and maintaining equipment. The chief engineer must also make sure all
repairs are completed when needed. The chief engineer will have one assistant.
Summary: Along with the other employees we plan on hiring, we place confidence in
our management team that they are imperative for the proper running of our property, Red
Roof Inn, Biloxi. We feel that each department’s break down is important in running a
successful facility.
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36. Red Roof Inn, Biloxi
Project Management Action Plan
Initial Investment (3 months)
This involves visiting our proposed property location, gathering all the financial and legal
information, and making sure our project is feasible.
Project Proposal (3 months)
Presenting our proposed plan for construction, which includes all designs, blueprints, and
predicted business costs.
Property Acquisition (3 months)
Involves purchasing the land needed in order to build our proposed hotel.
Approvals and Permits (3 months)
Obtaining required permits and approvals from the state of Mississippi in order to begin
construction.
Design Phase (4 months)
Hiring designers and architects for our proposed property and making blueprints for the
property we want to create including designs and dimensions.
Bidding Phase (1 month)
Involves selecting the most qualified contractor to complete the construction of the hotel in
our proposed time frame.
Mobilization (1 month)
This is the process where our contractor will obtain all the necessary resources including
equipment to begin construction for the property.
Building Construction (12 months)
This is the estimated completion time for our property. During this time our hotel will be built
to our standards.
FF&E- Furniture, Fixtures, & Equipment (5 months)
This is the process of selecting, purchasing, and installing all of the furniture, fixtures, and
equipment required for our hotel.
Install PMS (2 months)
This is the purchase and installation of our Property Management System.
Setup Telecommunications (2 months)
The installation of cable wires, Internet, and telephones that will be used throughout the hotel.
Apply for LEED Certification (1 month)
Making sure our hotel has all the requirements needed to establish a hotel that is sustainable.
Hiring of Employees (5 months)
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37. Red Roof Inn, Biloxi
This is the interview process associated with finding the most qualified individuals for each
department. Background checks will also be done.
Training of Employees (1 month)
Select and train our recently hired individuals by coaching, teaching, and motivating. Provide
training strategies that improve recipient's performance as well as helping him/her attain a
required level of knowledge and skill.
Create Bank Account (1 month)
Set up a bank account for the hotel with a trusted bank in close proximity to the hotel.
Set Up Payroll Systems for Employees (1 month)
Choose a payroll company, payment dates, and appropriate wage system. W4 forms will be
given to all employees to complete.
Purchase Supplies Needed for All Departments (2 months)
Purchase all the necessary supplies for our hotel in order to perform efficiently and properly.
Obtain Insurance Policies (1 month)
Choose an insurance policy that suits us. Insurance is needed in case anything should happen
to employees, guests, equipment, etc.
Choose and Order Uniforms (1 month)
Select and purchase uniforms for all employees once hired.
Advertise and Market (6 months)
Advertise hotel prior to opening date. Create brochures, posters, fliers, etc. Register with
travel agencies and travel websites.
Create Website (2 months)
Design a website that is accessible and easy to for our potential guests to use. Include
promotions, packages, and discounts.
Obtain Pool License and Variable Frequency Filtration System (1 month)
Get approved by Board of Health to reach qualification and receive proper licensing.
Make Policy for Emergency Procedures (1 month)
Outline written procedures for employees to know what to do in case of any emergency
situation that may arise.
Set Up Food & Beverage Contract (1 month)
Find an outside party to work with Food and Beverage Director to assemble complimentary
continental breakfast.
Pre-Opening (1 month)
Ensure all the necessary preparations are ready for the grand opening of the hotel.
Grand Opening (3 months)
Plan and execute grand opening celebration. Use advertising and promotions to attract
potential guests to come and stay at the hotel.
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40. Red Roof Inn, Biloxi
Sustainability Approaches
Staying Red, Going Green® is our belief that Red Roof will remain a leader in economy
lodging and a good steward of the environment and the community.
Reuse Linen Program in Guest Rooms
Description
We offer our guests the choice to "Go Green" every time they stay at Red Roof. This
"select housekeeping" option lets each guest decide whether bed sheets are changed, towels
are replenished and trash is removed. This reuse linen program in guest rooms will be a great
opportunity as a company to promote that we are striving to become the leading innovator in
sustainable practices for economy hotels.
Projected Financial and Sustainable Benefits
Implementing this program will be very beneficial for our company. The main benefit
of implementing this type of reuse program will be decreases in water, energy and chemical
usage. As well as saving water, these programs mean less wear on fabrics, prolonging their
life, and saving housekeeping staff time. Many hotels advertise a reuse program but often do
not adhere to them, leaving guests cynical, exasperated by the fact that guests often think this
is just a cost saving exercise for the hotel. Rather than imposing a structured program, the
most successful policies are those that allow guests to opt out of having their linen changed on
a daily basis.
Variable Frequency Drivers For Pool Filtration
Description
Hotel’s spend an extra $350 more a month in electricity costs to power the pumps
needed to filter their pools. Variable frequency drives are energy efficient pool filter
attachments that operate at multiple speeds to maintain a water turnover rate consistent with
minimal health department requirements. Most commercial pool filters operate using a two-
speed or multi-speed pump. A variable frequency drive works in conjunction with a pool's
existing pump system, adjusting the speed of the motor in response to changing pool
conditions, allowing the pump to run at more precise speeds and adjust as needed.
Projected Financial and Sustainable Benefits
The installation of variable frequency will save the Red Roof Inn up to 50% in
swimming pool running costs. Other benefits include a cleaner swimming pool, better climate
controlled environment, reduced CO2 emissions, and lower maintenance cost over the life of
the systems.
Electrical Room Key Wall Slots
Description
Electrical room key wall slots are energy-saving technology for turning off the lights
and power in a guest room. When one inserts their hotel room key card in the wall slot upon
entering the room, the lights turn on. When the room key is removed the lights automatically
go off. The technology would offer a 30 second grace phase before the lights automatically go
off to ensure safe departure out of the room. If a guest wants the power to be left on during
their departure, the extra key can be used to maintain electricity in the room. If there is a
refrigerator in your room, the power stays on for this appliance regardless of whether there is
a key in the wall slot or not. There is no need for guests to worry about food being cold, then
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41. Red Roof Inn, Biloxi
warm, then cold again. In addition, emergency lighting in the room will also be not affected by
implementing this room key device.
Projected Financial and Sustainable Benefits
The electrical key wall slot is both financially and environmentally beneficial to the
hotels operation. Electricity is costly in hotels, and if a guest is out of the room for the
duration of the day, it isn’t necessary for the TV or lights in the room to be activated. This
technology allows the convenience of all electricity being turned off when the guest is away,
reducing the electrical consumption of the hotel as a whole. It allows the hotel to be more
sustainable off of less energy, reducing the negative effects associated with power plants that
produce electricity. It is a great idea for energy-savings.
Solar Panels
Description
Solar panels by definition are panels designed to absorb the sun’s rays as a source of
energy for generating electricity or heating. Many commercial buildings are making the
investment in solar panels because it is not only sustainable but it is renewable, meaning we
will never run out of it. Once installed solar panels will not disturb the public and require little
maintenance each year. Especially being located in the southern hemisphere, Biloxi is a perfect
location for renewable solar energy.
Projected Financial and Sustainable Benefits
Unfortunately Mississippi offers no tax credit for solar installation however the federal
government offers a 30% tax credit when you install your system. With today’s technology,
solar panels have the capability to generate 100% of the hotels electricity. In the long run this
will cut utility costs by up to 50%. Although solar panels are expensive at first it is expected
that they will pay for themselves through savings in about 10 years.
Heat and Power Plant CHP
Description
CHP can be an excellent solution for controlling energy costs while also improving the
reliability of power supply for a hotel. This is known as cogeneration or combined heat and
power. Cogeneration is the use of a heat engine or power station to generate electricity and
useful heat at the same time. Combined Cooling, Heat and Power (CHP) refers to the
simultaneous generation of electricity and useful heating and cooling from the combustion of a
fuel or a solar heat controller. CHP uses waste heat, the energy discarded in some energy
systems, and puts it to use. There are two configuration systems, either a topping or
bottoming cycle. In a topping system, fuel is combusted in a prime mover like a gas turbine or
reciprocating engine to generate electricity. The energy usually lost is recovered to provide
heat for other purposes such as food processing, laundry, dishwashing, or for space heating,
cooling, and dehumidification. In a bottoming cycle system, fuel is combusted to provide
thermal input to a furnace and then the heat rejected is used for electricity production. CHP
has high efficiency, which comes from recovering the heat normally lost in power generation.
Projected Financial and Sustainable Benefits
Implementing this system in our hotel will be very beneficial to our property. Not only
will it reduce operating costs and control rising energy costs, but this system will ensure the
availability of reliable hot water and electricity supply. This will also increase energy efficiency
and improve environmental performance. Fuel prices are at a record high and energy costs for
hotels are not declining. To control spiraling energy costs CHP can be used. The hotel
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42. Red Roof Inn, Biloxi
industry alone spends nearly $4 billion per year just on energy. Hotels in the 100-300 room
range can use small CHP 60-250 kW systems. These systems have reciprocating engines, fuel
cells, or microturbines. These turbines supply hot water for domestic hot water, space heating,
and laundry needs. The Embassy Suites Hotel in San Luis Obispo, California installed CHP for
their 196 room hotel. They have monthly savings of $900-$1,200 which overall will save them
over $180,000 over the 15 year life of the contract. Starwood’s Sheraton New York Hotel
and Towers also set up CHP system. The implementation of CHP has saved this 1,750 room
facility an estimated $70,000 in energy costs by the end of their contract. CHP is a best
practice for energy efficiency in hotels and will reduce the property’s environmental impact
through reduced electricity consumption.
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43. Red Roof Inn, Biloxi
Financial Statements
Overview
The analysis was constructed for a 120 room Red Roof Inn hotel in Biloxi, Mississippi.
All of the calculations found below were calculated on Excel Pro Forma Financial Statements.
Using our competitive set data for hotels located in Biloxi, that were found in the HOST
Report, these financial projections were projected, calculated, and finalized.
Occupancy % ADR RevPAR Rooms Revenue
Year 1 (2018) 54.3% $66.01 $35.87 $1,571,151.
Year 2 (2019) 58% $71.57 $41.51 $1,818,192
Year 3 (2020) 66.4% $77.40 $51.37 $2,249,804
Year 4 (2021) 66.4% $79.73 $52.91 $2,317,298
Year 5 (2022) 66.4% $82.12 $54.49 $2,386,817
Year 6 (2023) 66.4% $84.58 $56.13 $2,458,422
Room Revenue
All of the revenue generated by the hotel for a Red Roof Inn economy hotel will be
from the sale of rooms. According to the accompanying chart below, we are expected for year
1 (2018) of operation to have 54.3% occupancy, with an average ADR and RevPar of $66.01
and $35.87 respectively. In order to calculate rooms revenue, we multiplied several variables
including occupancy %, ADR, 365 days, and 120 hotel rooms. Rooms revenue is expected to
increase year to year from $1,571,151 in year 1 to $2,458,422 in year 6. This projected
increase in revenue is attributed to the gradual increase in ADR and occupancy throughout the
first six years of operation.
Occupancy
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44. Red Roof Inn, Biloxi
Occupancy percentage is a major sign that the market in Biloxi, Mississippi is
underperforming compared to the rest of the country. Instead of using the competitive set
occupancy data for the Red Roof Inn, we utilized the market data to achieve a more realistic
prediction that a new economy hotel would fare better than other hotels in that market area.
Over time most hotel’s occupancy percentages will level off as does ours at just above 66.4%.
The graph below represents the occupancy percentage for the first six years of operation.
ADR
The average daily rates are projected to start from $66.01 in year 1 and grow to
$84.58 (year 6. The ADR was calculated similar to occupancy % above. We looked at the
percentage rate of change and determined an average that would give us a proper forecast for
the following years based on our market data. Projected ADR is expected to increase at a
gradual increase of around 7% in the first few years and later increase at an estimated 3%
towards year 5 and 6. The graph below shows projected ADR for the first 6 years of business.
ADR increases year to year can be attributed to the inflation factor.
RevPar
Revenue per available room is projected to increase year to year from $35.87 to
$56.13. To calculate RevPar, one would multiply occupancy to ADR. The graph below
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45. Red Roof Inn, Biloxi
shows annual averages of RevPar for the first 6 years of operation. RevPar is shown to
increase at an average around 3% each year.
Total Revenue
As an economy hotel, Red Roof Inn Hotels only receives revenues from the sale of
rooms. To calculate Total Revenues, please refer to the Room Revenue section (above) of the
Financial Projection section.
Gross Operating Profit
Gross Operating Profit (GOP) was found by subtracting the total departmental
expenses and total undistributed operating expenses from total revenue. Our GOP is expected
to increase from $642,933 in the 2018 fiscal year to $1,191,672 in year 6. Our gross operating
profits for all years are shown below. The total GOP for our first 6 years of operation is
$5,980,095.
Net Operating Income
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46. Red Roof Inn, Biloxi
Net operating income was found by subtracting management fees and fixed costs from
gross operating profit. NOI includes all costs, excluding depreciation, amortization,
interest expenses, and taxes. Our projected net operating income is found in the chart below.
The total project net operating income across 6 years is $4,609,353.
Internal Rate of Return
The construction costs for the Red Roof Inn Biloxi, Mississippi are estimated to cost
$10,674,425. Project construction costs include investigatory, land, initial costs, intangibles,
construction financing fees, project and supervision costs, professional fees, land
improvement, and all other costs. The internal rate of return was then calculated to be 4.9%.
With an interest rate of 5.48%, our projected loan would be $276,509.79. The ADR of our
proposed property are low. Since the hurdle rate is 12% and our rate is 4.9%, our IRR does
not support new construction of a hotel at this time in Mississippi.
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47. Red Roof Inn, Biloxi
Conclusion
After close examination, we believe that constructing a new 120 room economy Red
Roof Inn Hotel at 1610 Beach Boulevard Biloxi, Mississippi will not be feasible based on the
information provided above. Even with the implementation of a successful management team,
as well as other successful policies and procedures, the costs to construct and operate the
hotel will unfortunately be too high to receive enough cash inflows to the property to cover
the costs and receive a profit. The historic location, along with several amazing tourist
attractions will not attract the desired customer count from all over the country. The casinos
(currently ranked 3rd in the gaming industry) and resorts are back in action after the impact of
Hurricane Katrina, offering championship golf and live entertainment as well. The city has also
restored many historic sites, including Beauvoir, the home of Confederate president, Jefferson
Davis. However, even with this recent construction, the demand generators in our area will
still not be able to provide the amount of guests needed to make the necessary revenues.
After the events of Hurricane Katrina, major areas of the Gulf Coast was devastated by
hurricanes and subsequent floods. The area that was significantly impacted by Katrina was the
Gulf Coast of Louisiana. Due to this, a majority of relief efforts were sent into the Louisiana
area. Biloxi, Mississippi was not one of the major areas affected and had very few relief efforts
in the area. This caused occupancy to flourish in the Louisiana area while Mississippi was left
with a disappointing amount of recovery efforts. Occupancy greatly declined in the Biloxi area
after the affects of Hurricane Katrina.
Implementing a new Red Roof Inn Hotel would bring something new to this market
being that there has not been a new hotel opening in the past six years. Although this is true, a
new economy hotel will not be the best choice for this market. This spot as a vacation
destination is not strong enough to attract enough guests to fill the hotel at a steady rate.
There are economy hotels whose occupancy rates have been steady, but not necessarily
increasing. Occupancy percentage forecasts are not heading in the right direction for another
hotel to be added to Biloxi.
In conclusion, occupancy percentage forecasts seem to heading in a horizontal trend at
62.4%, which is not the optimal condition to start construction on a new hotel. Possibly
rebuilding on one of the older economy hotels would be a better choice for our market. It is of
utmost importance to keep in mind that Red Roof Inn’s number one goal is to satisfy all our
guests as well as the idea of going above and beyond in terms of customer service, and this
could best be achieved at a later date. The market is not strong enough at this time to
construct a new property.
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48. Red Roof Inn, Biloxi
Appendices
General Assumptions
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