Establishing Hotel Blue Sky In London – A Business Plan

Discussion

The main focus of the assessment is to formulate a business plan which would be looking to establish a hotel business in the UK. The hotel would be unique in its way as it provides smart home facilities and further will be powered by solar energy. The name of the hotel would be Hotel Blue Sky and the location for the same would be London. The business would be providing rooms to its customers as well as complimentary breakfast for the first day. The hotel would be equipped with a modern restaurant which provides different variety of foods. As per the intention of the management, the hotel rooms would be costing an average of £180 per night.

In the UK, London has always been a hotspot for tourists considering the rich culture and different kinds of cuisines it offers. Further, it is expected that, by the end of 2022, revenue per available room (RevPAR) in London will return to between 43% and 86% of pre-pandemic levels.  Further, the name of the hotel is derived from the most serene color of the sky. In terms of legal structure, the business would be established as a partnership where both the partners would bring in equal capital so that the risk and reward relationship is properly managed (Blackburn, Hart, and Wainwright 2013).

The primary research method which has been used is the survey and the key reason why it has been opted for is to ensure that the opinions of a large number of participants are being engaged. A total of 50 participants have been focused on.

Table 1

Row Labels Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Count of 1. Age
18-25 years	5
26-32 years	7
33-40 years	11
41-50 years	13
Above 50 years	14
Grand Total	50

 

Figure 1

It can be identified that the different customers are spread across different age groups.

Table 2

Row Labels	Count of 2.Income
Above 100000 GBP annually	11
Below GBP 50000 annually	16
Between GBP 50000-100000 annually	23
Grand Total	50

 

Figure 2

A majority of respondents were found to have an income between GBP 50000 to 100000 annually.

Table 3

Row Labels	Count of 3.Gender
Female	19
Male	25
Others	6
Grand Total	50

 

Figure 3

I could be identified that 50% of the respondents were male whereas the rest were female and did not want to identify.

Table 4

Row Labels	Count of 4. How often do you visit restaurants and cafes?
Everyday	16
Once a month	16
Once a week	12
Once in two years	1
Once or twice a year	5
Grand Total	50

 

Figure 4

A majority of customers visited a restaurant every day whereas 32% at least visited a restaurant once a month.

Table 5

Row Labels	Count of 5. How much do you spend on each visit?
Above  GBP 100	7
Below GBP 50	22
Between GBP 50-GBP 100	21
Grand Total	50

 

 Figure 5

It can be identified that a majority of customers spent below GBP 50  on a particular visit followed by spending between 50-100 GBP.

Table 6

Row Labels	Count of 6. Choose one of the restaurants recently visited?
Aquavit London	4
Berners Tavern	5
Chiltern firehouse	7
Gymkhana	11
Hutong	12
Sushi samba Liverpool Street	11
Grand Total	50

Figure 6

It can be identified that Gymkhana, Hutong, and Sushi Samba Liverpool were some of the common restaurants visited by the different participants.

Primary and Secondary Research

Table 7

Row Labels	Count of 7. How often do you visit hotels?
More than once a month	1
Once a month	13
Once in two years	12
Once or twice a year	24
Grand Total	50

 

Figure 7

A majority of the participants visited hotels either once a year or very frequently, once a month.

Table 8

Row Labels	Count of 8. How much do you spend on each visit?
Above GBP 1000	17
Below GBP 300	11
Between GBP 300-1000	22
Grand Total	50

 

 Figure 8

It can be identified that an average customer spent between GBP 300 to 1000 each visit.

Table 9

Row Labels	Count of 9. Choose one of the hotels recently visited?
Airbnb homestays	17
Double tree by Hilton	10
Hampton	9
Travelodge	14
Grand Total	50

 

Figure 9

The Travelodge and Airbnb Homestays appeared to be a common choice by the participants.

Table 10

Row Labels	Count of 10. What are some aspects you look out for in a hotel/cafe?
Good quality food	13
Good service	4
Great offers	4
Great variety	14
Sanitization and cleanliness	15
Grand Total	50

 

Figure 10

Aspects like sanitization and cleanliness, great variety, and good quality food were some common aspects looked out by the participants when visiting a hotel or restaurant.

Table 11

Row Labels	Count of 11. Would you like to visit Blue Sky Hotel and Restaurant- a new initiative for hospitality in the UK?
No	10
Yes	40
Grand Total	50

 

Figure 11

It can be assessed that 80% of the participants wanted to visit the Blue Sky new hotel which indicates the market share.

To undertake secondary research, different articles and journals are considered which helps in understanding the operations of the Hotel business.  As per (Rahimi 2017), CRM is one of the important activities for hotel business in the UK and this is a further stepping stone for building a strong reputation in the market. Further research undertaken by Filimonau, V., and Magklaropoulou (2020), shows that the new pay-as-you-use energy management model can be a game-changing factor in terms of cost savings in small budget hotels (Filimonau and Magklaropoulou 2020). Therefore, the analysis makes it clear that the market does have ample opportunities and this is a beneficial factor for the hotel Blue Sky.

The location for the business which is identified would be London and from there the hotel would be looking to expand its operations to different regions of the UK. The potential customers for the business would be tourists and business personnel who are looking for a big place to undertake training sessions, interviews, or group meetings. The hotel would provide a hall so that meetings can be undertaken appropriately. The level of competition in the market is immense the market because room sales are likely to increase shortly. The management of Blue Sky estimates that it will be able to generate a competitive advantage by applying its sustainability approach in the operations and further the use of solar energy in the hospitality business is the future for the company. One effective example which can be given of an existing hotel that is utilizing smart home technology is Hilton Hotels. The management has implemented IOT smart home features in every room which significantly enhances the experiences of the guests and helps the hotel to create a competitive advantage in the market.

Results

The ownership of the business is divided equally between two partners who will be bringing in an equal proportion of capital and would be investing their time in managing one area of operations. In terms of capital structure for the business, the partners would be bringing in capital and further, a long-term loan would be taken so that proper liquidity is maintained in the operations (Burns and Dewhurst 2016). The management of the hotel wants to create an optimum capital structure that comprises both equity and debt capital. The use of debt capital in some proportion is also preferred by the business mainly because it would give tax benefits to the business and help the business to enhance the profit margins of the business.

The market situation reveals that the pandemic affected the hospitality businesses quite serenely and situations are just looking up for the industry. In 2022, the hospitality industry would be looking to achieve growth as tourism commences and popular hotels of the region would again be hotspots for the tourists (Dube, Nhamo and Chikodzi 2021). The primary research which is undertaken appropriately shows that people are willing to visit hotels again, especially when going on a tour. The different tourist locations in London would further be attracting the crowd and enhance the level of opportunities in the market.

It is to be noted that the level of competition in the market would also be immense because there are numerous established hotels in the market. To gain further clarity in terms of market shares and the number of rooms which the hotel offers, a graph is presented below:

 

Source: (UK: biggest hotel chains | Statista 2022))

The hotels which are represented in the chart have developed a unique feature for their service which helps the business to attract more customers and ensure that proper revenue is generated from operations. The level of technology has changed in recent times as most of the new hotels are striving to achieve sustainability in their approach and enhance the revenue further for the business.

Factors	Hiltom	Premier
Strengths	Smart homes facilities are available with IoT and further wide rooms sizes (Itpro.co.uk. 2022).	Highest level of quality in terms of services and good customer ratings
Weaknesses	High costs of operations	High costs of operations
Opportunity	Expansion opportunity in the market	Expansion opportunity in the market
Threat	High level of competition and low generation of revenue	High level of competition and low generation of revenue

The business would be requiring quality staff members who are trained in the ways of hospitality and have the tact to deal with even troublesome customers. The business would be requiring supervisors, managers who would be recruited by the partners directly, and qualifying criteria for them would be their experience in the field (Rahimi 2017). Further cleaning staffs, receptionists and kitchen chefs and staffs would also be priority recruitments for the business.

Age

The remuneration which would be paid to the staff members would be negotiable somewhat based on the experience they bring in and further the industry benchmark would also be a consideration.

Marketing consists of mainly four things. These are – product, place, price, and promotion. 

Product/Service of Blue Sky – The business of Blue Sky would be providing services in terms of hospitality and would be making all efforts so that the overall experience of the customers is heightened. The business would have a restaurant that would be providing appropriate quality cuisines. In addition to this, the hotel would have halls for a meeting, interview purposes so that businessmen are also attracted to the services. In addition to this, the business would be providing laundering services, free wifi, complimentary breakfast on the first day, valet parking services, massage, and entertainment centers as well. On an overall basis, the business would be able to enhance the experience of the clients (Energy Matters. 2020) 

Price – The business would be settings its prices at a reasonable rate because the level of competition in the market is immense. The management would be looking to develop a competitive advantage in the market by maintaining a low-cost structure so that low prices for the rooms can be charged

Place – The management of the hotel for current operations plans to commence business in London from where the intention is to expand the operations to new regions so that a brand name can be created.

Promotion – the products should be promoted on every social media site. The social media presence of the company should be used by the leaders of the company to penetrate the market. Apart from social media marketing, the company should use different promotional platforms to promote their product and service (Frawley, Goh and Law 2019). 

(4) PROFIT AND LOSS FORECAST
	Preop
Year	0	1	2	3	4	5
Revenue	0	1,250,000	1,375,000	1,512,500	1,663,750	1,830,125
Cost of sales	0	500,000	550,000	605,000	665,500	732,050
Gross profit	0	750,000	825,000	907,500	998,250	1,098,075
Expenses/overheads
Premises (rent, rates)		55,000	57,750	60,638	63,669	66,853
Wages and salaries		325,000	341,250	358,313	376,228	395,040
General expenses		5,000	5,250	5,513	5,788	6,078
Accountant Fees		750	788	827	868	912
Payroll Tax		32,500	34,125	35,831	37,623	39,504
Utilities		150,000	157,500	165,375	173,644	182,326
Sales and Marketing		30,000	31,500	33,075	34,729	36,465
Postage & Telephone		20,000	21,000	22,050	23,153	24,310
Repairs and Maintainance		10,000	10,500	11,025	11,576	12,155
Preliminary  expenses		8,500	8,925	9,371	9,840	10,332
Lease Payments		10,000	10,500	11,025	11,576	12,155
Total expenses/overheads		646,750	668,588	702,017	737,118	773,974
Profit before tax		103,250	156,413	205,483	261,132	324,101
Tax @ 30%		30,975	46,924	61,645	78,340	97,230
Before tax net margin		8%	11%	14%	16%	18%
Profit after tax		72,275	109,489	143,838	182,793	226,871
Transfer to reserves		72,275	109,489	143,838	182,793	226,871
Particulars		Year 1	Year 2	Year 3	Year 4	Year 5
Return on Investment		9.64%	21.90%	26.15%	30.21%	34.09%

The above table appropriately shows the income and expenses for the business which is forecasted and the same portrays proper profits which the business generates. The financial plan for Blue Sky Hotel shows that the initial investment of $ 1,000,000 would be required to commece the business opeerations and ensure that efficiency is achieved (Cockbill, Mitchell and May 2020). The business would be looking to purchase land, equipments and other appliances which would be essential for the success of the operations. The business is looking to create an optium capital structure so that a proper mixture of debt and equity can be maintained and risks can be managed properly (McKeever 2016). The revenue which the business is able to generate is from room sales, restaurant sales and other services and this revenue helps the management to maintaina proper profit margin. The management of the company is looking to achieve higher level of sales on each year basis and thereby the business can reduce cost of operations. The estimation for the cost of operations is aroound 40% in terms of sales value which signifies that the profit margin would be more considering the operating expenses.

Start-up Requirements
Start-up Expenses
Fixed Costs	Particulars	Amount ($)
	Premises	£      55,000.00
	Salaries	£    325,000.00
	Interest on loan 8%	£      50,000.00
	Accountant Fees	£           750.00
	Payroll Tax	£      32,500.00
	Retainer contracts	£    150,000.00
	Sales and Marketing	£      30,000.00
	Postage & Telephone	£      20,000.00
	Brouchers	£      10,000.00
	Logo Designs	£        5,000.00
	Market survey	£        2,500.00
	Preliminary  expenses	£        8,500.00
	Lease payments	£      10,000.00
	Total Fixed Costs	£    699,250.00
Average Monthly Costs
	Rent	£        4,583.33
	Lease payments	£           833.33
	Interest on loan 3%	£        4,166.67
	Postage & Telephone	£        1,666.67
	Repairs and Maintainance	£           833.33
	Salaries / Wages	£      27,083.33
	Total Average Monthly Costs	£      39,166.67
	x Number of Months:	£             12.00
	Total Monthly Costs	£    470,000.00
Total Startup Expenses	£ 1,169,250.00

Income

The startup funds statement which is presented above shows the amount of startup fund which would be required for the business. The table above covers all the major expense which is expected in the initial year of operations.

Breakeven Point (sales)
Particulars	Year 1	Year 2	Year 3	Year 4	Year 5
Total Fixed Costs	£    646,750.00	£    668,587.50	£    702,016.88	£    737,117.72	£    773,973.60
Contribution Margin	60%	60%	60%	60%	60%
Breakeven point	$ 1,077,916.67	$ 1,114,312.50	$ 1,170,028.13	$ 1,228,529.53	$ 1,289,956.01

 

The above chart appropriately shows the level of revenue that is to be generated by the business to ensure that it can appropriately maintain its costs and a steady level of profit margins.

Conclusion

The above analysis appropriately shows that the business plan is viable and steps need to be taken so that the plan is implemented. The opportunities present in the market provide great initiative for the company to start its operations and further maintain a steady flow of revenue. In addition o this, the financial forecast for the business shows that the company would be able to maintain a steady level of profitability in its five years of operations. features in the hotel which would elevate the experience of the guests.

The above business plan which formulated shows that the hotel has great potential to achieve new heights and therefore a private investment can be made in case the partners are looking for additional funds. The business idea would be unique because the partners intend to add smart homes and sustainability. The business is looking to establish a proper reputation in the market and therefore it would be charging a reasonable amount of price so that more customers are attracted. This is a positive sign showing that there is an opportunity in the market to expand its operations and at the same time create a brand name for itself.

The capital structure which is selected by the company is also appropriate considering more reliance is being placed on equity funding and debt is only being used so that tax benefits can be gained. The level of risks which is associated with the business would also below and this would further enhance the efficiency level of the operations. The market is further opening up after the pandemic scenario which suggests that tourism would be commencing and this would further expand the earnings of the business significantly. Therefore, considering the market scenario, it is clear that there is an opportunity to establish a name in the market and enhance the profit margins of the company.

The primary and secondary research which is undertaken to support the information of the business plan reveals that most of the data show that customers are willing to visit the new hotel which is being established and further the operational model the company is looking to follow would also help the management gain further competitive advantage in the market. Therefore, it can be said that there is more scope for development, and hotel businesses that are looking to enter the market can flourish in such a circumstance. The financial plan further shows that even the cost of operations is significantly high, the business still manages to generate a decent level of revenue from operations which suggests that it can generate even higher margins or profits once the business is established.

Therefore from an investment point of view, it can be said that the venture would be a viable option to make investments. Further, the management would be able to generate more revenue from operations once it gains more experience and reputation in the market. It is advisable to the company that they should start their operations on an immediate basis.

The above analysis shows that the business of Sky Hotels would be a viable choice for making investments and some recommendations which can be suggested to the company are listed below:

• The management of the company needs to work on controlling its cost of operations as it directly affects the profit margins of the business. The cost can be controlled by applying budgeting techniques and ensuring that efficiency is maintained.
• The management further needs to make an effort to retain the existing client base and appropriately promoting its services so that new customers can be attracted.
• The business needs to promote the fact that it is using renewable source of energy which is also sustainable for generating power which is future prospect and is perfectly viable.
• Once the business is successful in London, the management should look to expand the operations in other regions of UK so that more revenue can be generated and further a level of efficiency can be achieved in the operations.

Reference

Blackburn, R.A., Hart, M. and Wainwright, T., 2013. Small business performance: business, strategy and owner-manager characteristics. Journal of small business and enterprise development, 20(1), pp.8-27.

Burns, P. and Dewhurst, J. eds., 2016. Small business and entrepreneurship. Macmillan International Higher Education.

Cockbill, S.A., Mitchell, V. and May, A.J., 2020. Householders as designers? Generating future energy services with United Kingdom home occupiers. Energy Research & Social Science, 69, p.101615.

Dube, K., Nhamo, G., and Chikodzi, D. 2021. COVID-19 cripples global restaurant and hospitality industry. Current Issues in Tourism, 24(11), 1487-1490.

Energy Matters. 2020. Smart Homes And The Internet Of Things – How does solar fit in?. [online] Available at: https://www.energymatters.com.au/energy-efficiency/smart-home-automation/ [Accessed 9 Oct. 2020].

Filimonau, V. and Magklaropoulou, A., 2020. Exploring the viability of a new ‘pay-as-you-use’energy management model in budget hotels. International Journal of Hospitality Management, 89, p.102538

Frawley, T., Goh, E., and Law, R. 2019. Quality assurance at hotel management tertiary institutions in Australia: An insight into factors behind domestic and international student satisfaction. Journal of Hospitality & Tourism Education, 31(1), 1-9.

https://www.pwc.co.uk/industries/hospitality-leisure/insights/uk-hotels-forecast.html#:~:text=By%20the%20end%20of%202022,%25%20of%20pre%2Dpandemic%20levels.

Itpro.co.uk. (2022)  Available at: https://www.itpro.co.uk/technology/30118/hilton-embraces-iot-smart-home-technology-in-its-hotel-rooms (Accessed: 10 March 2022).

McKeever, M., 2016. How to write a business plan. Nolo.

Rahimi, R., 2017. Customer relationship management (people, process and technology) and organisational culture in hotels: Which traits matter?. International Journal of Contemporary Hospitality Management.

UK: biggest hotel chains | Statista (2022). Available at: https://www.statista.com/statistics/809752/leading-hotel-brands-by-number-of-rooms-united-kingdom-uk/ (Accessed: 10 March 2022)