Development Of A Five Star Hotel Island Construction Essay

This study has been prepared for Expedition Maldives Pvt. Ltd to measure the feasibleness of puting in a undertaking to develop a five star hotel island under the name of “ Mendhoo Island Resort Development undertaking ” by utilizing undertaking development methods with fiscal appraisal. This study has been structured with the undertaking range definition, range direction, fiscal analysis with a decision drown from the analysis following with the recommendation. Scope direction has been developed with the undertaking life rhythm with needed stages with plants in each stage in item. To analyse the undertaking financially, Discounted Cash flow analysis, Net nowadays value analysis and internal rate of return analysis has been used

Through this study, analysis has shown that puting in development of 100 room hotel is the most feasible option for the Expedition Maldives Pvt. Ltd. The findings have shown that this undertaking provides a good return since the internal rate of return of the undertaking is higher than the needed rate of return. Analysis on clip value for money has besides shown that it ‘s important to put in this undertaking. Properly put to deathing all the stages of project life rhythm is really of import and any hold could incur excess costs since the hard currency influx starts from 3rd twelvemonth, when the hotel is in operation. For this undertaking its extremely recommended for the responsible direction squad of the Expedition Maldives Pvt. Ltd to track, hint and supervise all activities of the undertaking life rhythm and do necessary amendment if requires on clip for the successful achievement of the undertaking.

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1. Introduction

This study has been prepared for Expedition Maldives Pvt. Ltd to measure the feasibleness of puting in a undertaking to develop a five star hotel island under the name of “ Mendhoo Island Resort Development undertaking ” by utilizing undertaking development methods with fiscal appraisal.

For this undertaking whether to put in 50 or 100 suites hotel is been assessed and puting in development of 100 room hotel has been chosen as the most feasible option and analyzed in item.

This study has been structured with the undertaking range definition, range direction, fiscal analysis with a decision drown from the analysis following with the recommendation. Scope direction has been developed with the undertaking life rhythm with needed stages with plants in each stage in item. To analyse the undertaking financially, Discounted Cash flow analysis, Net nowadays value analysis and internal rate of return analysis has been used.

2. Project Scope Management

2.1. Scope Definition

“ Project Scope Management includes the procedure required to guarantee that the undertaking includes all the work required, and merely the work required, to finish the undertaking successfully ” .

( Turner, 1992 )

The undertaking range definition papers is chiefly intended to indue with the undertaking organisation and the undertaking director with a route map of both the work to be completed within the estimated budget and clip frame. It is a usher for future actions. Therefore, the range papers will be of an aid to pull off the undertaking confidently and to keep an effectual communicating procedure within the key stakeholders throughout the undertaking.

Mendhoo Island Resort undertaking is planned to develop a Five Star Hotel ( a Resort Island ) , which requires a immense fiscal investing.

Tourism industry of Republic of Maldives is the fastest turning industry across the island state and it is the major economic activity.

Before sing the rental understanding from the proprietor, The Board of Directors of Expedition Maldives Pvt. Ltd have done necessary environmental analysis and developed a strategic concern program based on the recent market research to measure the feasibleness of puting on this undertaking. With the positive results, the top direction of the organisation decided to engage the island on a long term lease footing for a period of 10 old ages, within that, two old ages period is targeted for the building and the balance seven old ages for the Hotel concern operation at its full swing.

The building and development of the Hotel till its pre-opening is budgeted for US $ 8,000,000.00 ( Eight million US Dollars ) . First activity of this undertaking will be started with building of Breakwaters, in order to assistance and ease the unloading of required heavy burden machineries and tools, stuff and other goods which is needed to continuing with the building. Development stage of this undertaking consists of 100 Guest Rooms ( includes Beach Villas, Water Bungalows.

The other of import activities of this undertaking include transporting out all the other related plants which are required for achievement of this undertaking. Development plants of the undertaking would be carried out in conformity with the undertaking charter and the sanctioned design frame work. Harmonizing to the undertaking charter, the undertaking scheduled to get down on July 2011 and to be completed on July 2013.

In respect with the all plants, the company decided to engage skilled and qualified employees from related Fieldss for the different countries of the entire work to be done to carry through the undertaking. Project squad of this undertaking includes a undertaking director, Engineers and other functional section HOD ‘s and other staffs.

apart from mentioned range of the undertaking, While go oning undertaking if the demand arises make amendments, that has to be considered in conformity with all the factors related to the undertaking which includes budget, clip frame and the quality of work.

2.2. Scope Management

The above Figure: 1 which is the life rhythm of this undertaking, adopted in order to pull off the range of the undertaking.this will supply all the item activities which are to be carried out for undertaking to win.

Phase-1

Phase-2

Phase-3

Phase-4

Two old ages to finish the undertaking

Monitoring and Controling

Gate-1

Gate-2

Gate-3

Gate-4

Activities

1- Develop concern instance

2- Establish the footings of mention

3- Appoint the undertaking squad

4- Setup the undertaking office

5- Review the stage

Activities

1- Undertaking program

2- Resource program

3- Financial program

4- Quality program

5- Hazard program

6- Acceptance program

7- Communication program

8- Procurement program

9- Contract the providers

10- Review the stage

Activities

1- Build deliverables

2- Monitor and control

3- Time direction

4- Cost direction

5- Quality direction

6- Change direction

7- Risk direction

8- Issue direction

9- Procurement direction

10- Acceptance direction

11- Communication direction

12- Review the stage

Activities

1- Perform undertaking closing

2- Review undertaking completion

Activities

1- Current touristry market analysis

2-Envirnmental analysis

3- Feasibility survey

4- Review the stage

Activities

1- Start runing island as a hotel

2- Checking the public presentation

Gate-5

Phase-5

Phase-6

Operation

Completion

Market Research

Carryout the undertaking works

Initiation

Planing

Staying eight old ages for operation

Figure: Undertaking Life Cycle.

Life rhythm of this undertaking is dwelling of six different stages with Numberss of activities. The Scopess of those activities are described below.

The first stage is market research of the merchandise and service, get downing from analysing the Current touristry market.

Environmental analysis, to place the hazards associated with the undertaking environment and to take possible action to extenuate the hazard if required.

Feasibility survey ; roll uping all the information of concern jobs and assemblage required solution option to repair it, happening out the available solution option, measuring practicably for each option, placing hazard and issues associated with each option and developing suggested solution option for execution.

Reviewing the stage is traveling to look into all the demands are identify and take proper action.

The first stage of this undertaking is transporting out market research, before sing fiscal investing determination on this undertaking, the company will be carry oning researches to roll up information sing the tendencies in current touristry industry of the state every bit good as planetary market to place the cost and benefit of puting the undertaking, which will be followed by environmental analysis to place the issues associated with undertaking environment to take proper action before continuing with a legal contract with the island proprietor.

Transporting out the feasibleness of the undertaking is besides included in this stage by measuring the current concern jobs and chances.

Undertaking Initiation is the 2nd stage of the life rhythm. The Scopess of activities included in this stage are as follows:

Develop a concern instance depicting the chances, jobs and issues which are exist and measuring options to present solution and decide the jobs. This stage besides includes cost and benefit associated with each solution option and recommended solution option for blessing the concern.

Establishing the footings of mention, specify the undertaking vision, aims, range and deliverables, placing the functions and duties of stakeholders and apportioning resource and finance required in conformity with the program.

Appointing undertaking squad, choosing qualified employees for appropriate places is the most of import map of the undertaking.

Settings up the undertaking office, to supervise and command the undertaking environment and pull off cultural diverseness of work force.

Review the stage, rating of accomplishment of this stage.

Sing Initiation stage of this undertaking, happening out concern chances of puting to construct 100 suites hotel and its operation, besides placing the environmental alterations that might impact the undertaking period and assemblage needed solution for those impacts. This stage besides will place the nucleus facet of concern environment such as concern vision, end and aims to be archived. This stage besides will measure the procedure and engineering available for the undertaking.

Procedure and engineerings that is relevant to the undertaking, merchandises and services.

legal demands of authorities on environmental factors and commercial and operational tendencies which drives towards the concern, the cardinal stakeholders information and guaranting the most appropriate methods of apportioning needed resources for the undertaking to be finalized.

Appointing the undertaking director and apportioning his duties to continue with choice of other squad members necessary for transporting frontward the undertaking and apportioning their duties severally. The concluding activity of this stage is constructing the undertaking office to utilize the substructure as a base to pull off undertaking activities.

Iproject planning is the 3rd stage of project life rhythm. Scope of this stage includes:

Undertaking program: to place the mileposts, stages, activities and undertakings to quantify the attempt required. Allocating resources required and making a undertaking agenda including listing of the planning dependences, premises and restraints.

Resource program: identify and list out the general types of resources required and delegating the resources to the activities and finish the resources use tabular array.

Fiscal program: to pull off the costs and disbursals likely to be inquired on the undertaking such as employee ‘s rewards, equipment, stuffs and disposal cost.

Quality program: to keep the footings of quality consider on the undertaking and place the marks to be met and depict the quality confidence and control techniques to be under taken.

Hazard program: identifying list of hazards and evaluation the likeliness of each hazards happening, supply the study of impact and ground of occur and puting up the bar action to cut down the likeliness of the hazard happening. Puting out a extenuation action program to cut down the impact.

Credence program: place mileposts to be archived and deliverables to be produced, developing what standard and criterions should be maintained for client credence and reexamining the deliverables.

Communication program, supply required information to the stakeholders to maintain them on a regular basis informed of the advancement of the undertaking position. Scheduling the communicating

Events, methods and release day of the months, usage matrix to foreground resources involved in each communicating event and usage clear procedure for each communicating event with in the undertaking.

Procurement program, apprehension of the external supply market and supply to identify stakeholders with needed stuffs and dependable inside informations of providers to show the stuffs within the clip and budget to continue procurance in conformity with the company ‘s procumbent policy

Contract the providers: behavior the stamp procedure and measure the provider and choice appropriate provider by looking ability and capableness. Finally negociating a formal contract with the preferable provider.

Review the stage, reexamining to look into if the activities are in conformity with the demands.

Planing stage of this undertaking is concerned on happening the mileposts of undertaking stages, figure of activities and undertakings to be complete within the peculiar timeframe, resource program list out the needed resources for the undertaking such as employee, equipments and stuff. In this stage fiscal program will place the figure of resources required and its related costs. Quality program will supply the quality marks that should be archived. Hazard program is intended to stress the possible hazards and what actions could be taken for extenuation of those hazards. Acceptance program is intended to name out the credence criterion of the client in respect with their outlooks. Communication program will depict what information is required and necessary to pass on with stakeholders. Procurement program will place a list of merchandises and beginning of external providers which will be followed by the activity of undertaking the providers after measuring the best bidders.

Fourth stage of the life rhythm is Carryout the undertaking works. The Scopess of this stage are:

Build deliverables, clearly define the aims and deliverables, the concluding deliverable should run into the demands of clients.

Monitor and control, physically building each deliverable and usage series of direction procedure to supervise and command the activities that are undertaken.

Time direction, place the entire clip required for each activity to finish the work on clip and place the per centum completed and outstanding plants.

Cost direction, place the cost/expenses of overall undertaking and accurately pull off the record the inside informations, O.K. and paid the payments on clip.

Quality direction, maintain the choice criterion of the undertaking harmonizing to the quality program, utilizing most appropriate quality measuring and techniques to mensurate the quality criterions.

Change direction, if any alterations required to the undertaking range, deliverable, timescale or resources, should be evaluated and approved before execution.

Risk direction, utilize the best methods and theories to place the hazard associated with the undertaking which includes quantifying, monitoring, avoiding, reassigning and extenuating the hazard with the aid of hazard registry.

Issue direction, utilize the appropriate method to place the issue through the issue registry and take figure of action to cut down impact that the issue is holding on the undertaking.

Procurement direction, to keep the relationship with providers, proctor things that required and commanding the telling reception, reappraisal and blessing of signifier providers, pull offing overall public presentation of the provider.

Acceptance direction, to look into the deliverables are met with the client demands by showing each deliverable individually until the credence of all the undertaking deliverables.

Communication direction, to supply right information at the right clip to the right stakeholders and should guarantee the message is reached to the right individual.

Transporting out the undertaking works: This stage will supply with the concluding deliverables to the stakeholders. While transporting out the undertaking works, deliverables would be checked on a regular interval to acquire the feedbacks from several stakeholders before get downing every phase which would be done through monitory and controlling.

Each activity would be allocated with a peculiar clip frame to run into deadlines. Discrepancy has to be considered and adjusted if required and project range should be discussed at managerial degree for blessings. Risk direction of the undertaking should be carried out by entering in the undertaking hazard registry to take necessary action for extenuation of the hazard. In same mode other undertaking issues besides have to be registered in issue registry to take required and needed actions. Procumbent of the undertaking would be managed harmonizing to the procumbent program, providers public presentation will be monitored are reviewed on a regular basis.

Further, all necessary information associating to undertaking has to be recorded and delivered consequently to the several parties seasonably.

Fifth stage of the life rhythm is Completion ; Scopess of this stage are:

Perform undertaking closing, to guarantee from the stakeholders the deliverables are met with their acceptation and look into undertaking achieved the aims and delivered the benefits describe in the concern instance.

Review undertaking completion, to supervise accomplishments and failures of the undertaking, to acquire better thoughts for characteristic undertakings.

Completion, stage of this undertaking will look into and guarantee the deliverables are delivered harmonizing to the stakeholder ‘s outlook and undertaking to the full archived the aims that are mentioned in the undertaking range and all the activities are review to place the errors and mistakes to avoid in the characteristic undertakings.

The last stage of the undertaking is operations of hotel range are

Start runing island as a hotel, increasing the figure of clients sing on hotel supplying choice criterion services to them.

Checking the public presentation, maximise the gross of the hotel.

Operation, stage of this undertaking is to supply quality merchandise and service client to pull them to hotel and keep their first pick vacation finish in Maldives and besides annually increasing the gross of the company.

3. Fiscal Analysis of Undertaking

3.1. Factors influences the pick of price reduction rate

Sing to this undertaking factors influence to the pick of price reduction rate are involvement rate and rising prices. When discounted if the involvement rate is higher the result of NPV ( clip ) would take down and frailty versa due to inverse relation.

Entire Investing

Capital

Interest p.a.

Entire money payment

Equity

8,000,000

14 %

560,000

Entire

8,000,000

560,000

Table: Cost of capital

The bank salvaging rate at bank of Maldives is 10 % p.a. for fixed sedimentations and the bank lends long term loans at 15 % involvement ( which is the cost of borrowing ) . The house proprietors ( stockholders ) who have invested for equity capital, although they are non anticipating any involvement for the invested equity capital, they have outlooks about the company ‘s public presentation and return for the hazard that they have taken alternatively of puting in the bank. They would be acquiring a 10 % return p.a. which is even less hazardous. Therefore the outlook of the stockholders in respect with the return is higher, which is 14 % p.a. as presented in the above tabular array 1.0.

Therefore the piece taking investing determination the company has to put in such a manner that fulfills the outlooks of the stockholders in conformity with rate of return on their investing.

The company decided to put in a undertaking to construct a five star hotel. Before sing this investing determination the company carried out initial feasibleness surveies to make up one’s mind whether to put in building and operations of 100 suites or 50. The chief purpose feasibleness this survey is to place the cost/ benefit of the undertaking and to see the investing which gives highest rate of return.

The undermentioned tabular arraies ( table 2.0 and 3.0 ) provide the inside informations of choice between two picks.

Expected hard currency influx per twelvemonth if invested in 50 suites

Room Type

No of suites

Expected tenancy per room p.a

Room Rate US $

Water Villa

25

180 yearss

450

Beach Villa

25

180 yearss

250

Entire

A

Table: Expected hard currency influx per twelvemonth if invested in 50 suites

Entire undertaking continuance ten old ages

Construction and development requires one twelvemonth.

Full board operation nine old ages

Expected continuance to construct and develop 50 room hotels requires one twelvemonth. Operation will be started right after this period. Therefore this undertaking wholly consists of entire ten old ages out of which nine old ages would be in full operations.

The entire expected hard currency influx of this undertaking by the terminal of 10 twelvemonth is US $ 28,350,000 at the rate of US $ 3150000 hard currency influx per twelvemonth for nine old ages.

Expected hard currency influx per twelvemonth if invested in 100 suites

Room Type

No of suites

Expected tenancy per room p.a

Room Rate US $

Water Villa

50

180 yearss

450

Beach Villa

50

180 yearss

250

TotalA

Table: Expected hard currency influx per twelvemonth if invested in 100 suites

Entire undertaking continuance ten old ages

Construction and development requires two twelvemonth.

Full board operation eight old ages

Expected continuance to construct and develop 100 room hotels requires two twelvemonth. Operation will be started right after this period. Therefore this undertaking wholly consists of entire ten old ages, out of which eight old ages would be in full operations.

The entire expected hard currency influx of this undertaking by the terminal of 10 twelvemonth is US $ 50,400,000.at the rate of US $ 6300,000 hard currency influx per twelvemonth for eight old ages.

Since puting in building and operation of 100 suites givers higher hard currency influx than 50 suites ‘ hotel, the company decided to put in building and development of 100 suites.

3.2. Discounted hard currency flow analysis

The direction of the company evaluated the option of puting in the undertaking for building and development of 100 ( hundred ) Rooms which includes Beach Villa and H2O cottages. The inside informations are stated below.

3.3. Net present value ( NPV ) analysis

Net nowadays Value ( NPV ) represents the difference between the present valley ( PV ) of hard currency influxs and the Present value ( PV ) of hard currency escapes. Net Present Value is used to measure and analyse the profitableness of this undertaking since.

The Net Present Value of following jutting hard currency flow is calculated A A with consideration of sum and timing of future hard currency influxs, sum and timing of future hard currency escapes and by utilizing price reduction rate ( at the rate of 14 % ) .

Undertaking hard currency flow and Net Present Value ( NPV )

Year

Net hard currency flows

0

-8000000

1

0

2

0

3

6300000

4

6300000

5

6300000

6

6300000

7

6300000

8

6300000

9

6300000

10

6300000

Net Present Value at 14 %

Table: Undertaking hard currency flow and Net Present Value ( NPV )

3.4. Internal rate of return analysis

Internal rate of return is calculated to happen the true rate of return earn on this investing over the class of 10 old ages life. The higher the undertaking ‘s internal rate of return, the more desirable to continue with the merchandise

Undertaking hard currency flow and Internal rate of Return ( IRR )

Old ages

Net hard currency flows

0

-8000000

1

0

2

0

3

6300000

4

6300000

5

6300000

6

6300000

7

6300000

8

6300000

9

6300000

10

6300000

Internal Rate of Return ( IRR ) = 21.185

Table: Undertaking hard currency flow and Internal Rate of Return ( IRR )

The Required Rate of Return ( ROR ) is 14 % but the Internal Rate of Return ( IRR ) is 21.185 % which means IRR is greater than ROR, and hence undertaking has to be preceded and carried forward.

Since IRR & gt ; ROR the undertaking has to be preceded and carried forward.

4. Decisions

Through this study, analysis has shown that puting in development of 100 room hotel is the most feasible option for the Expedition Maldives Pvt. Ltd. The findings have shown that this undertaking provides a good return since the internal rate of return of the undertaking is higher than the needed rate of return. Analysis on clip value for money has besides shown that it ‘s important to put in this undertaking. Properly put to deathing all the stages of project life rhythm is really of import and any hold could incur excess costs since the hard currency influx starts from 3rd twelvemonth, when the hotel is in operation.

The success depends on the ability of the undertaking squad to transport out the undertaking work stages in conformity with the program. If the undertaking squad is unqualified to transport out the planned work scheduled, it would be a denumerable menace to win the undertaking

5. Recommendation

As mentioned under decision the undertaking squad of Expedition Maldives Pvt. Ltd should guarantee all agencies to remain with the undertaking program but to run into and decide any unexpected issues on timely footing. Since Maldives is a state geographically widespread, regular transportation of needed stuffs should be good in progress prepared and the senior direction of the undertaking must be ready to confront this challenge if arises at any stage of the undertaking life rhythm to carry through the undertaking on clip. Delay in achievement is dearly-won since no hard currency influx is projected before the hotel is in operation. Therefore its extremely recommended trailing, following and monitoring of all activities of the undertaking life rhythm and do necessary amendment if requires on clip.

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