Maendeleo Resorts Business Plan Version 3

Maendeleo Resorts Limited
The Royal Dhow - Zanzibar

A Business Plan and Financial Feasibility for A Luxury Concept Resort Hotel at Fumba
Stephen Oehley - Mobile +27 84 800 9119
March 2004
THIS WORKING PLAN IS PREPARED AND UPDATED BY MAENDELEO PROJECTS (PTY) LTD FOR MAENDELEO RESORTS LIMITED AND THE FUMBA FOUNDATION LIMITED ZANZIBAR FEBRUARY 2004 VER3
TABLE OF CONTENTS VISION...................................................................................................................................................................................................................................................5 MISSION................................................................................................................................................................................................................................................5 OBJECTIVES ........................................................................................................................................................................................................................................6 MANAGEMENT & PARTNERS ...........................................................................................................................................................................................................7 BACKGROUND OF ZANZIBAR.........................................................................................................................................................................................................10 INTRODUCING THE MAENDELEO RESORT.................................................................................................................................................................................11 MARKET RESEARCH........................................................................................................................................................................................................................12 MARKETING STRATEGY..................................................................................................................................................................................................................18 MARKETING PLAN ............................................................................................................................................................................................................................18 WHY WILL THE RESORT BE SUCCESSFUL? ...............................................................................................................................................................................20 INFRASTRUCTURE...........................................................................................................................................................................................................................20 FINANCIAL PLAN ...............................................................................................................................................................................................................................22 ADDENDA: - TABLE OF CONTENTS...............................................................................................................................................................................................25
EXECUTIVE SUMMARY
Zanzibar receives in the region of 80 000+ foreign tourists annually and this accounts for approximately 15% of GDP. (Dollar value) Tourism is one of the principal industries that underpin the Zanzibar economy. A Tourism Master Plan for Zanzibar, commissioned by the European Union and used extensively in planning this resort, recommends and evidences support for the development of up market high yield resorts. This Maendeleo Resorts project conforms to all
areas of hotel and tourism service management. Investment in training both formally and 'on the job' will be required to maintain high standards and provide employment opportunities especially to young Zanzibaris. This project shall prioritise these requirements and the stakeholders will be required to commit to sustainable training throughout the career path development of every discipline contributing to the operation of the resort.
This development is differentiated conceptually from the general perception of up market resort hotels and will present an individualized international destination offering a unique historical and cultural theme-driven travel experience to Guests. World-class packaging and marketing, memorable Guest
recommendations in the Master Plan and the development proposal for the site at Fumba offers close proximity to the airport, harbour and key tour points and presents a realistic and profitable development and investment opportunity. Based on the projected demand, the total room requirements would be for approximately 3 200 rooms, of which at least 2 500 would need to be of international standard. The lack and disproportionate number of quality accommodations coupled with the projected shortfall of at least 500 rooms is the basis for this business plan. In order to meet the needs of a growing tourism industry that is able to provide a quality service, there is a need to train local people in all
experiences, international peer recognition, professional incentivised management and well-trained, dedicated, happy and motivated staff will underpin the success of the hotel that will exceed investors expectations on returns. The Sponsors have contributed US$2. The resorts requirements will approximate an additional US$20 million in capital to complete. This capital will be sought from investors who will be offered a
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combination of debt and equity according to their own risk and return profiles. The resort itself will yield at least 10% return on capital employed based on a debt equity split of US$13m / US$9m respectively. These returns are subject to change based on the specific investor requirements, The Guest experience will be memorable, differentiated by a commitment to service and an uncompromised presentation of quality and standards. In addition, Guests shall be offered personalised itineraries. These offerings will ensure that each Guest's expectations are met, professionally executed and managed and provide the opportunity for Guests to realistically claim a holistic, meaningful and memorable Zanzibar experience. (See operating and Design criteria). A project team of development professionals has been assembled all of whom have international development credentials. These include veteran hotel development consultant Mr John Zimmerman, project managers - @Hart Property Development, cost controllers -McIntosh Latilla Carrier & Laing, construction partners Murray & Roberts Developments, architects - Eugene Barnard & Associates, civil and structural engineering consultants - DNS Consulting, environmental specialists - Dr. Richard Cohen of CEN
Integrated Environmental Management Unit, technical consultant Johnny Smit, design consultants - Black Moon Studios, Martin Fine, Regional Manager for Tanzania of the Protea Hospitality Corporation, corporate financial advisors - Executive Consulting and financial and other consultants. The resort development is presented as independently as possible of state utilities in design and strives to presents a model for African coastal sustainable development.
VISION
To establish a world-class eco-friendly resort hotel that will provide genuine hospitality thereby achieving international recognition for professionalism, commitment to training and development, service, quality and standards and to returns that will exceed shareholders expectations.
MISSION
To provide each Guest with a memorable holiday that is differentiated by design, high levels of service, uncompromised standards and quality, friendliness and a unique African experience. The shareholders will empower the local community through skills transfer to achieve international service standards.
OBJECTIVES
COMMERCIAL 1. Establish a resort of first choice on Zanzibar by offering a superb African/Zanzibari experience that will exceed Guests expectations in the following four areas: Design - unique Zanzibar cultural influence architecture, with local tapestries and artwork used in interiors. Entertainment - that is varied and professional, employing local and International talent. Food - a theatre that with emphasis on freshness, local produce and Zanzibari and African flavours. Historic and cultural tours to local places of interest and activities to include island cruises, scuba diving and deep-sea angling. 2. Exceed shareholder expectations 3. Deliver on training commitments. 4. Create, nurture and support small-scale industry in the locality
EDUCATIONAL, SOCIAL AND ENVIRONMENTAL 1. Develop trainee skills to international standards. 2. Provide employment in the locality. 3. Empower the local communities and contribute to their economic wellness. 4. Implement best practices in support of resource and environmental management.
Project Objectives For Years 2004/5
Geotech and surveys land and marine Environmental and Social Impact Assessment (EIA) Construction of the Hotel and Staff Village
Project Objectives for 2006
Complete construction and realise Hotel opening
MANAGEMENT & PARTNERS

STEPHEN OEHLEY
JOACHIM JOHN ZIMMERMANN
John Zimmermann is highly regarded as an international expert in all aspects of food and beverage operations and has over 35 years of experience in the hospitality industry. During this time, he has been involved in the opening of over 40 hotels and has established a worldwide reputation for everything from innovative food and beverage concepts to efficient and cost-effective kitchen designs. These have been created for a wide range of developments, both International and for Southern Africa Regions. Some of the more prestigious developments include: The Ciragen Palace and Hotel in Istanbul, The Sun City Hotel and Casino Complex, including the Palace at the Lost City, A 3000 seat Convention Center in Mmabatho, The luxury passenger liner S.S. Astor, operated by Safmarine, The Sir S Ramgoolam Airport in Mauritius, Hotel Management School in Mmbatho (an offspring of Belvoir Park, Zurich), Hotel St. Geran in Mauritius
Stephen has over twenty years experience in business and has focused on blue chip business development and marketing. Following 10 years experience in the trade and technical publishing and advertising industries, Stephen established Digital Synergy (Pty) Ltd, a design and communications services company. Stephen managed and directed the company from 1990 until 2001 during which time he produced solutions for corporate and parastatal clients. These included Iscor Mining, (now Kumba Resources), JCI, Voltex, Telkom, PPC Cement, the Council for Scientific and Industrial Research and the Southern African Development Community. Stephen, his wife Belinda and family will emigrate to Fumba to serve stakeholder interests and plan to contribute to community development projects in the locality.
John Zimmermann has been involved in the conceptual planning, design, development and refurbishment of some of the most exciting Hotel Projects in Southern Africa and the Indian Ocean Island hotels that has included no less than eight 5 star City Hotels, twelve Casino Hotels, five Resort Hotels and over fifteen major refurbishments In January of 1993, in response to a growing demand for his expertise, John Zimmermann decided to leave corporate life and formed his own consultancy, John J Zimmermann and Associates C.C., which is based in Johannesburg. John brings a wealth of creative and professional expertise to the project and shall directly influence and manage aspects of design, development and management through present stage, pre-opening to opening and management installation. Johns Profile and Career Portfolio are provided in the Addenda - Profiles
maintaining a job at Savage and Lovemore as Site Engineer and Surveyor. After completing his NDP in 1982, Trevor worked as Site agent for various companies before accepting the appointment of Project Manager for MLC Bonnet in 1990. During this time he completed his MDP in Project Management through UNISA. He later joined Sun International as Development Manager where he worked for 7 years before founding @HART PROPERTY DEVELOPMENT in 2002.
WAYNE TWIGG
Wayne qualified as a Chartered Accountant in 1996. He served his

TREVOR t HART
articles with Ernst & Young between 1991 and 1994. After six years in corporate audit, a further two years in the Management Consulting division, and time at Abbey National Bank Plc in the United Kingdom, he founded Executive Consulting in 1999.
Trevor has over twenty years experience in the field of project management and civil engineering. His work ethic and dedication were clearly demonstrated early in his working career by achieving top place in his third year of civil engineering at Wits Technikon while
For the past five years Wayne has been involved in consulting on business and process restructuring with a focus on improving profitability and gaining additional funding for companies. He also served on the board of directors of MKN Equity, a private equity fund. Wayne is a member of the South African Institute of Chartered Accountants and the Institute of Directors in South Africa. He serves as the honorary auditor of Wycliffe, South Africa and Summer Institute of Linguistics, South Africa. He is a trustee of OMF International (Southern Africa) where he is a member of the executive committee and chairs their finance committee.
Corporate
Governance
conducted
by
the
Commonwealth
Association for Corporate Governance in Nairobi and Mutual Evaluation Techniques For Anti Money-Laundering and Combating the Financing of Terrorism conducted by the Eastern and Southern Africa Anti Money-Laundering Group in Bagamoyo. Abdul-hakim is fluent in Kiswahili, French and English and practices as State attorney in the Attorney Generals Chambers on Zanzibar. He presently serves as a member of the Zanzibar Labour Laws Reform Committee, on the Board of Directors of the State Fuel and Power Corporation and as a member of The Medical Council Board. He has also served as a member of the Quality Assurance Team for Country Financial Assessment and Accountability conducted in 2002/3.
ABDUL-HAKIM AMEIR ISSA
Abdul-hakim was awarded his Honours in 1999 after completing a BA LLB at the National Law School of India in Bangalore. Other qualifications include: Stage en Linguistique et Methodologique de Francais undertaken at the University of Burundi, a Company Directors Course in
BACKGROUND OF ZANZIBAR
The name Zanzibar is well known and ranks as "one of those exotic world destinations" that everyone would like to visit. However few people actually know where the island is and even fewer that is part of Tanzania. Historically known as Unguja Island, Zanzibar is a coral island connected to the mainland by a narrow submerged shelf and lies about forty kilometers offshore east of Dar es Salaam on the Tanzanian mainland. It measures about 110km by 40km. Annual rainfall averages 1,500 mm with long rain between March and May and short rains between October and December. Temperatures moderated by sea breezes are fairly constant year round averaging between 24c and 29c. The island was originally covered by tropical high forest 95% of which is now gone. The only remaining forest is Jozani that is a protected reserve.
Most
Zanzibari
are
Sunni
Muslims. Zanzibari claiming direct descent from Omanis follow Ibadhism. Christians barely comprise 1% of the population. Zanzibar shares foreign and monetary policy, postal and telecommunication systems and defense policy with the mainland. There are two major political parties, the ruling CCM party and CUF that draws most of its support from Pemba. Zanzibar not only offers the visitor miles of white sand and blue
The population of the Archipelago is estimated at just over 813,000. Although there is a cosmopolitan grouping in Stone Town on Unguja, there are three principle indigenous ethnic groups, The Hadimu, Tumbatu and the Pemba. Members of the non-African population are primarily Shirazi who consider themselves descendants of immigrants of Shiraz in Persia (Iran).
water but also has many places of historical interest. The island holds out in addition world-class snorkeling, scuba diving and deep sea angling opportunities. This serves to enlarge the Tourist potential by offering history, culture, adventuring and exploring the natural beauty of the islands resources.
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INTRODUCING THE MAENDELEO RESORT

The resort is envisaged as a welcoming, elegantly designed and well built facility offering a spacious, cool and tranquil atmosphere with efficient first-class guest-orientated service. The hotel will feature voluminous use of space and water with sparse select dcor of great beauty. There are 120 guest rooms each with magnificent sea views. Of these, two Plantation luxury suites, four Peninsula Estate suites and a mix of deluxe and standard accommodations with one unit designed to facilitate accessibility for the disabled are planned. The rooms will be interconnected to a central services facility by boardwalks. This central facility will include all back of house support infrastructure, conference facilities, restaurants, lounges, shops, a gymnasium, games room, library, a huge pool and bars and social entertainment areas. The construction will have a minimalist footprint and consequent low impact on the environment and support infrastructure will include road construction, alternative power generation and efficiency management, water boreholes, reservoirs and purification, sewage treatment, waste separation, compaction and management, perimeter security fencing and maintenance infrastructure and support.
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The resort will be marketed and managed by outsourced partners who will be required to commit to training and development and the project will create at least 150 permanent employment opportunities. Transport to and from the ports will be provided and excursions to Stone Town and other places of interest facilitated. Swimming, tennis, a social activity and entertainment calendar, cruises, diving, angling and other water excursions from custom-built dhow craft commissioned locally will be offered assisting local endeavours, employment and empowerment at every opportunity. The resort is planned within an existing free economic zone (ZAFREZA) offering substantial incentives to developers. Details of ZAFREZA are contained in ADDENDUM G : ZANZIBAR FREE ECONOMIC ZONES AUTHORITY (ZAFREZA)
MARKET RESEARCH
STRUCTURE OF THE TOURISM SECTOR Despite its considerable potential, the tourism industry in Zanzibar is relatively small. According to figures compiled by the Commission for Tourism, there are currently 159 tourist accommodation establishments, with a total of 2 979 rooms and 5 945 beds on Unguja, In 1998, less than one-fifth of all beds were in 4 or 5 star properties, and a further one fifth in 3 star properties. Most properties and 37 % of all beds in 1998, are in unclassified establishments. This implies that the bulk of tourist accommodation - probably as much as 60 % of the total - is suitable mainly for budget travelers or backpackers. There has been relatively little new investment in the DEMAND CHARACTERISTICS
Tourist Arrivals
Outside the hotels, there are approximately twenty restaurants of international standard, with several new high quality establishments opened in Stone Town in the past few years.
According to statistics compiled by the Zanzibar Commission for Tourism, a total of 76 329 tourists visited Zanzibar in 2001 (ADDENDUM A : TOURIST ARRIVALS BY NATIONALITY), compared with 97 165 in 2000 - a decrease of 21 %. The decrease was due partly to the adverse publicity received by Zanzibar following the civil disturbances in January 2001 and partly to the worldwide downturn in tourism following the events of 11th September 2001. These figures exclude domestic tourists visiting Zanzibar from the mainland as well as foreign tourists arriving in Zanzibar on internal air services. The true number of tourists visiting Zanzibar could consequently be considerably greater than the official statistics suggest. accommodation sector in recent years and, notwithstanding the large number of projects that have been approved by ZIPA, only one major project (which will add another 400 rooms by 2004 and a further 200 rooms in a second phase), is presently under construction.
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Market Segmentation
How do they come?
Europeans accounted for 70 % of total arrivals in 2001, with the remainder divided between North America (8.3 %), Africa (9.8 %) and Rest of World (11.9 %). total arrivals in 2001. The main regional markets for Zanzibar are South Africa (3 121 arrivals in 2001) and Kenya (2 025 arrivals, mostly business visitors). While mainland Tanzania has limited market potential for vacation travel from South Africa, Zanzibar (while competing with Mauritius and the Maldives) has generated an increase in South African visitors for beach, diving and fishing vacations. The East African expatriate market, concentrated in Nairobi and Mombassa, also offers good potential. The Tanzania domestic market is growing and, though presently limited in size for Zanzibar, it has some potential for development in the short term, including Tanzanian residents with high disposable incomes; expatriate residents living in Dar es Salaam and other cities; VFRs of expatriate residents; conference and meetings; and group travel by schools and clubs. Within Europe, the main source markets are Italy and Britain, which together accounted for 36 % of
In 2001, some 53 % of all tourists arrived by air and the remaining 47 % by sea. Cruise ships made a total of 29 calls with a total of 4 857 passengers.
How long do they stay?
The average length of stay for all categories of visitors is estimated to be five nights in 2001*.
When do they come?
In 2000, 44 % of all visitors came in the period July to October inclusive, compared with only 13.5 % in April-June.
How much do they spend?
The average daily expenditure was estimated at $120 per person for 2001 (for the peak season).
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ZANZIBAR'S MARKET PERFORMANCE

Competing Destinations
TOURIST ATTRACTIONS Tourist attractions, together with access, accommodation and other services, are the main features that distinguish one tourist destination from another. Visitors select a destination mainly because of its primary attractions i.e. attractions that have significant appeal and drawing power. When they have made their decision to come to Zanzibar, the objective is to get the visitors to stay as long as possible and to encourage them to spend as much as possible during their visit by providing a wide range of secondary attractions i.e. additional things to do and see. Because of its richly evocative name, Zanzibar already has a head start in the minds of many travelers. Its historical and cultural legacy, tropical climate and idyllic beaches and islands hold out opportunity to invite travelers that have history in common with the island.
Compared with other destinations in eastern and southern Africa, Zanzibar receives a very small market share. According to WTO statistics, Zanzibar received less than one-quarter of the number of persons who visited Reunion in 1998, less than one-fifth of the visitors to mainland Tanzania and less than one-sixth of visitors to Mauritius. Details are shown in ADDENDUM B : INTERNATIONAL TOURIST ARRIVALS IN SUB-SAHARAN AFRICA The number of visitors to Zanzibar is also very small compared with competing island destinations in the Caribbean which, with in many cases a more limited tourist product confined largely to beaches, enjoy high standards of living due mainly to their highly developed tourism industries. Based on tour operator research, the structure of the European longhaul market to sub-Saharan Africa is estimated to be 15% beach holidays only; 40 % beach and safari; 16 % single destination safari/sightseeing; 17 % dual/multiple destination safari/sightseeing; and 12 % soft adventure
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Jozani Forest provides a habitat for the endemic Red Colobus monkey. Additionally, the forest offers a diverse, visually interesting experience in the last remnant of Unguja's native forest vegetation. Other sites and attractions, which are often included in island tours and excursions, include the ruins of Maharubi Palace, the Mtoni Slave Chambers, the ruins of Mtoni Palace, the Kidichi and Kizambani Persian Baths and the Mangapwani Slave Cave. The best known and distinctive arts activity in Zanzibar is carving, especially production of wooden chests and doors, which has now Stone Town, with its wealth of historical buildings and traditional Swahili culture, is Zanzibar's key, unique attraction. The tourist product is further enhanced by a rich marine environment characterised by coral reefs suitable for snorkeling and diving, offshore islands and coral reefs, such as Changuu, Chumbe, and Mnemba, big game fish, sea turtles and dolphins, sand beaches and extensive water areas. Tours to spice plantations depend on the degree of knowledge of the tour guide or taxi driver. A knowledgeable guide or driver will result in an experience that is both enjoyable and educational. Visits to the Agricultural Experiment Station will also be of interest to visitors. been expanded to include picture frames, miniature doors, chests, other furniture and brass, copperware and jewelry. An indigenous form of 'Tinga Tinga' art is available along with Makonde Carving sold in the street markets and shops of Stone Town.
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MARKET POTENTIAL AND GROWTH PROJECTIONS In 2001, according to data compiled by the Commission for Tourism data, Zanzibar received a total of some 76 000 foreign tourists. To this number must be added an allowance for foreign visitors (including expatriates resident in Tanzania) traveling to Zanzibar on internal flights (estimated at around 15 000 persons in 2001) and domestic visitors from the mainland (estimated at around 30,000 persons) who are not at present included in the official visitor arrival statistics. This gives an estimated total of about 121 000 tourist arrivals in 2001, plus just fewer than 5 000 cruise ship visitors. Having fallen sharply in 2001, visitor numbers are expected to show a substantial recovery in 2002. Thereafter, between 2003 and 2012, an average target growth rate of around 6 % per annum has been provisionally assumed for most categories of visitors. On the basis of these assumptions, total tourist arrivals are provisionally projected to reach 220 000 persons by 2012. Of this number, the great majority is expected to be holiday/leisure visitors, with business visitors expected to come mostly from mainland Tanzania.
Based on a projected demand of around 1.2 million bed-nights by 2012, the total room requirements (assuming an average room occupancy rate of 60 % and 1.7 persons per room) would be for around 3 200 rooms, of which at least 2 500 would need to be of international standard. Of the estimated 2 500 international standard rooms required by 2012, some 1 200 rooms are currently available in 3-star or better properties that are operating to acceptable or near acceptable international standards, and approximately 800 rooms are currently under construction, or planned to be provided in the next few years. The remaining 500 rooms will be required by 2012. Tourism in Zanzibar is characterised by a surfeit of low quality 'backpacker' type accommodation that falls below international standards. Analysis of the current situation indicates that, of the one hundred and seventy one developments operating on Unguja Island, 72% (123) have not been given grades by the Commission for Tourism and only ten properties fall within the four or five star category.
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The un-adopted Tourism Policy Statement (1997) produced by the Commission For Tourism states that tourism should be culturally and environmentally sensitive and based on fewer high spending tourists. Services provided should be of the highest quality and mass tourism should be rejected. This view has been widely supported in discussions with various players in the public and private sectors. Historically this assertion has been supported by the Investment Protection Act 1989 which set out to limit the lower levels of investment, thereby encouraging 'quality' development. Chart 1 : Tourist Accommodation by Grades on Unguja Island
4 star 3% 3 star 2% 2 star 13% 5 star 3%
A breakdown of the significant competitor hotels and their pricing is shown in ADDENDUM D : COMPETITOR ANALYSIS.
1 star 7%
No Grade 72%
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MARKETING STRATEGY
In overall terms, the major source markets for vacation travel to Zanzibar will continue to be the European markets, especially UK, Italy, Scandinavia, Germany, France, the Netherlands and Switzerland. The U.S. market is considered to have less growth potential in the short-term - partly because comparatively few Americans visit Zanzibar as a stand-alone destination and partly because Americans are less likely to wish to travel overseas in the present uncertain geo-political climate. The main marketing effort will be focused on the more affluent sections of the major European markets. Other markets should be serviced mostly via the Internet. This prioritisation of markets has implications for overseas representation and trade fair participation. The Resort will package to develop niche markets where it has a comparative advantage, namely diving and other water sports; deep-sea fishing; cultural tourism; eco-tourism; honeymoon market; and smaller conferences, meetings and incentive travel. Special promotions will be undertaken to increase occupancy levels during the off-season, including the development of attractively priced packages aimed at the domestic and regional markets.
MARKETING PLAN
INTERNATIONAL MARKET
International Incentive Groups
Markets will be targeted in conjunction with an outsource partner responsible for marketing the hotel. Such a partner will be selected partly for their international networks and ability to reach what are perceived to be the key markets. It is essential that the resort is able to reach In-bound traffic to Sub Saharan African destinations through sales representatives in London, Germany, Italy, France, Egypt and North America. The resort will be marketed at all the major International Trade Shows.
International Groups
Zanzibar is a popular destination with the main European Markets. The South African Market has only just started to open out. It must be remembered that prior to 1994 South African Passport holders were not allowed entry. The purchase of Air Tanzania by South African Airways who effectively take over the airline in December will facilitate the introduction of Group travel from Johannesburg to the Island. This is the fastest growing section of the market out of South Africa.
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Domestic Tourism International Individual Tourists
Ambassadorial, United Nations and NGO's make up a local Tourist market of 10 000 visitors all of whom tour the Country and stay in resort style hotels. The business sector of Tanzania accounts for more than 500 000 bed nights in resort hotels (figures are supplied from Hoteliers Association) A significant portion the operational marketing plan will be developed by the outsource partner chosen to operate the resort. Part of the selection criteria will be the strength both of their plan and their perceived ability to implement the plan. In selecting outsource partners, management have approached a number of potential partners, the most significant of these being Protea Hotels who have demonstrated their willingness to participate in this venture. of the Tanzanian
This market is an important market, particularly from Europe. The tendency today is for the Travel Agent and Tour Organizer to book one company that can offer a bouquet of experience at their hotels, this capacity will also be a consideration in choosing an outsource partner.
The International Incentive Groups
This sector is seen as an important niche market particularly from South Africa and Europe. The outward-bound incentive conference market from South Africa alone is estimated to be worth more than $50 million. This market is currently visiting Mauritius, Seychelles and the Islands of the Maldives. DOMESTIC MARKET
Local Conference Market
Usually financed by NGO & International Funders, the value of this market is estimated to be worth more than $20 million per year to the Tanzanian Hotel Market.
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WHY WILL THE RESORT BE SUCCESSFUL?

Location
INFRASTRUCTURE
Zanzibar International Airport (ZNZ)
White sand blue water beach location Close Proximity to entry points Airport & Ferry Terminal. Close Proximity to Stone Town
The airport has a 2.462m runway that in 2001 handled 68 342 international passengers in 1 795 movements (42 633 were nonscheduled services). The domestic passenger services handled 90 910 passengers in 2001 (77 224 passengers in non-scheduled services) by a total of 1 036 aircraft movements.
Quality Accommodation
The market needs quality accommodation most resorts are poorly designed and badly built with the exception of the Protea Mboweni, Serena, Blue Bay and Breezes.
The Power of the Brand
The design process for extending the runway to 3 000 m (US$ 2 million investment) and resurfacing the existing runway (US$ 2.4 million) are expected to be completed by the end of 2004. (World Bank). Civil work is expected to commence March/April of 2004. The terminal building is now being designed so as to separate
A powerfully branded operator will assist in providing credibility and drawing guests to the resort.
Zanzibar and Tanzania
domestic and international traffic and to plan for an overall upgrading. Implementation is anticipated for 2004, subject to securing a loan to finance the project.
Zanzibar and Tanzania are one of the fastest growing Tourist Destinations after South Africa in Sub Saharan Africa.
Labour and Supplies
There is a significant labour pool from the villages of Fumba and neighbouring Bwelio to provide labour resources for the development. There are commercial poultry rearing, fishing and
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farming activities in the district initiated by local residents with whom supply agreements can be reached. There is abundant loose alluvial coral rock in Fumba, which can be crushed for a variety of building aggregate applications. Local people and builders have indicated a plentiful supply of potable water at shallow depths that can be treated and pumped to elevated distribution will reservoirs to points salinity for of and
There is adequate land for horticulture and other agricultural activities. For example: the cultivation of a fresh produce market garden. There is a sand quarry approximately eight km from Fumba and there are engineering contractors and locally available plant and earthmoving equipment for civil works. Cement is transported from Tanga on the Mainland.
requirement. Geotech analysis establish suitability for purpose. There is an existing electricity supply that passes through the property under lease and an accessible (indicated replenished. water on the pipeline water
engineering grid) from which the raw water reservoir can be
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FINANCIAL PLAN
Maendeleo Resorts commissioned McIntosh Latilla Carrier & Laing, quantity Surveyors & Construction Consultants to prepare costings to build a five star 120 key Hotel. These together with forecasts on operating costs that have been independently reviewed, have together been assimilated as the basis for the financial plan and capital requirements. CAPITAL REQUIREMENTS In addition to the US$2 million invested, the cost to build the Resort will amount to US$9,25m. An additional $9.25m is necessary to acquire the furniture and equipment, $1m is required for pre opening expenses and $0,5m for capitalised interest. The total of $22m amounts to 183 333 per key. Maendeleo Resorts will raise this capital using a combination of both debt and equity in such a manor as to facilitate equitable returns to the providers of capital having regard to the risks associated with such an investment. The split between debt and equity together with the expected yields the project will be able to provide are shown in the table below.
Table 1 Captial Requirements
Capital Type Long Term Debt Equity
Amount 13 000 000 9 000 000
Yield 8%
The Industrial Development Corporation in South Africa have expressed an interest in providing the debt funding in the form of a capital export loan. (ECIC). While an initial term sheet was obtained, this is presently being revisited. Any remaining debt finance will be sought from a combination of suppliers and conventional installment sale arrangements.
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An equity partner who will add value to the Resort in the form of expertise and influence will be sought. The return on investment that such a partner will require will be achieved through one or more of the following mechanisms: An exit plan between 10 and 15 years at a fixed price earning ratio Preferential earnings Convertible Stock Based on the debt equity ratio in Table 1, the resort will provide a 10year return on Investment of 14%, while yielding 11.6% return on capital employed. These returns are considered conservative and take into account the following key assumptions: Occupancy levels of 55%, 60%, 65%, 70% in the first three years respectively with an ongoing sustainable level of 70% thereafter. Inflation of 3% Overheads of 8% of turnover Marketing of 5% of turnover Detailed assumptions are contained in ADDENDUM L : FINANCIAL FEASIBILITY.
SUMMARY FINANCIAL DATA
Table 2 Summary Financial Information
Revenue EBITDA Attributable earnings Net Free Cash Return on Capital Employed Return on Investment Internal Rate of Return
3 4980 3787 1517 842 12% 10.2%
Years 5 10 10621 12313 4318 2521 441 16.7% 19.3% 4990 3224 5279 9.5% 11.7%
15 14274 5702 4654 8650 6.3% 10% 21.1%
The table above represents an achievable budget with respect to containing operating costs and maximising revenue through effective management and marketing.
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A worse case scenario is reflected below indicating the robustness of the hotel to fluctuations in occupancy. The table below represents a 10% lower occupation level in each year. Such occupancy levels will result in the Resort operating at levels that are profitable, but yield very low returns for the first 15 years.
Table 3 Worse Case Financial Data
Revenue EBITDA Attributable earnings Net Free Cash Return on Capital Employed Internal Rate of Return
3 7949 3178 873 198 9.5%
Year 5 10 8998 10431 3672 1788 (292) 15.9% 4242 2227 4282 9.4%
15 12092 4904 3418 (9985) 6.3% 13%
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ADDENDA: - TABLE OF CONTENTS

ADDENDUM A : ADDENDUM B : ADDENDUM C : ADDENDUM D : ADDENDUM E : ADDENDUM F : ADDENDUM G : ADDENDUM H : ADDENDUM I : ADDENDUM K : ADDENDUM L : ADDENDUM M : ADDENDUM N : ADDENDUM O : TOURIST ARRIVALS BY NATIONALITY...............................................................................................................................26 INTERNATIONAL TOURIST ARRIVALS IN SUB-SAHARAN AFRICA................................................................................27 TOUR OPERATOR CATALOGUES.......................................................................................................................................28 COMPETITOR ANALYSIS......................................................................................................................................................30 SWOT ANALYSIS ....................................................................................................................................................................32 OPERATING CONCEPT AND DESIGN CRITERIA ..............................................................................................................33 ZANZIBAR FREE ECONOMIC ZONES AUTHORITY (ZAFREZA)......................................................................................38 KEY CONTACT DETAILS.......................................................................................................................................................40 LETTERS OF SUPPORT (UPON REQUEST)........................................................................................................................42 CERTIFICATES OF INCORPORATION (UPON REQUEST)...............................................................................................44 FINANCIAL FEASIBILITY ........................................................................................................................................................45 SITE DEVELOPMENT PLAN (UPON REQUEST) ......................................................................................................49 ARCHITECHTURAL & ENGINEERING DESIGN & PERSPECTIVES (UPON REQUEST)............................................50 INTERIOR AND DESIGN PERSPECTIVES (UPON REQUEST)......................................................................................51
ADDENDUM J : PROFILES (UPON REQUEST) ...............................................................................................................................................43
25
ADDENDUM A :
TOURIST ARRIVALS BY NATIONALITY
Table 4 Tourist arrivals by nationality
Europe Italy 1995 1996 1997 1998 1999 2000 2001 8 922 13 502 19 583 23 505 23 279 25 764 14 510 Britain 10 391 11 909 14 884 13 765 14 141 16 307 13 147 Other Europe 18 882 23 669 26 471 25 152 24 939 29 368 25 738 Total Europe 38 195 49 080 60 938 62 422 62 359 71 439 53 395
North America 4 804 5 682 7 603 7 699 6 745 7 757 6 328
Other Africa 6 680 6 388 8 022 6 293 6 367 8 718 7 500
Rest of World 6 736 8 009 9 932 10 041 11 447 9 251 9 106
Total
56 415 69 159 86 495 86 455 86 918 97 165 76 329
Source: Zanzibar Commission for Tourism
26
ADDENDUM B :
INTERNATIONAL TOURIST ARRIVALS IN SUB-SAHARAN AFRICA

Table 5 : Tourist Arrivals in Sub-Saharan Africa
Destination South Africa Zimbabwe Kenya Botswana Mauritius Namibia Tanzania (incl. Zanzibar) Reunion Zambia Swaziland Uganda Malawi Seychelles TOTAL Zanzibar
International Tourist arrivals Number (000) 5,981 1,600 951 740 558 560 447 377 362 325 238 205 128 12,344 (86) Source: World Tourism Organisation % share 47 13 8 6 4 4 4 3 3 3 2 2 1 100 (0.7)
27
ADDENDUM C :
TOUR OPERATOR CATALOGUES

Table 7 Market Demand - European Tour Operators
As per the tour operator survey (Market Demand Survey for Tanzania, August 2002) with programs to east and central Africa destinations, the following inclusion of destinations were found:
Table 6 Market Demand - US Tour Operators
Destinations Tanzania
% of Operators 84 79 39 45 55 8 12
Destinations Zanzibar Zimbabwe Namibia Uganda Mozambique Sudan Indian Ocean Islands
% of Operators 76 57 51 39 20 5 5
Destinations Tanzania Kenya Malawi Zambia Botswana Madagascar
% of Operators 100 100 30 40 50 10
Destinations Zanzibar Zimbabwe Namibia Uganda Mozambique
% of Operators 60 50* 50 40 10
Kenya Malawi Zambia Botswana Madagascar Ethiopia
Source : Market Demand Survey for Tanzania, August 2002 69% of those tour operators interviewed found Serengeti / Ngorongoro and Zanzibar to be popular programs while 17% opted for Serengeti / Ngorongoro and Kenya Beach.
*Dropped considerably since the year 2000 Source : Market Demand Survey for Tanzania, August 2002 70% of the tour operators interviewed considered the tour program Serengeti / Ngorongoro and Zanzibar to be popular, whereas 20% found Kenya Beach and Serengeti / Ngorongoro to be popular. While the US tour operators sell Zanzibar, most of their market is not looking for beach holidays, instead they are more interested in small and mid-scale character filled hotels in Stone Town.
Italian Tour Operators
Zanzibar is extensively covered by African Explorer, Francorosso, Turisanda, African Safari Club etc. in the Italian market. This is due to the direct charter flights selling mainly beach holidays with optional safari trips to the mainland.
28
United Kingdom Tour Operators
French Tour Operators
Of the UK tour operators interviewed 12 included Tanzania while 11 had Zanzibar in their catalogues. An estimated 43% of British holidaymakers book 2-week safari and beach combinations.
German Tour Operators
From the tour operators surveyed 4 had Tanzania in their program, while 2 included Zanzibar. An estimated 50% of French tourists book safari only. The most popular combination is Kenya beach and Serengeti / Ngorongoro.
Swiss Tour Operators
Tanzania is in 8 of the catalogues of interviewed tour operators, however, Zanzibar is only available with a limited offer in some of the programs, i.e. TUI: Meiers Weltreisen: Airtours: Best of Africa: Reiseservice Africa: Studiosus: Northern Circuit Safari and Mombassa Beach Northern Circuit Safari and Mombassa Beach Northern Circuit Safari and Zanzibar (Mnemba Island and Serena Inn) Safaris and Zanzibar (Breezes, Bluebay, Sau Inn) Safari, Kilimanjaro and Zanzibar (Serena Inn, Breezes, Mnemba Island) Safari and Zanzibar (Breezes, Serena Inn)
Of the Swiss tour operators interviewed, 6 had both Tanzania and Zanzibar in their catalogues; some 25% take 2-week beach holidays in Kenya, while 60% book safari and beach combinations.
South African Tour Operators
Tanzania and Zanzibar are increasingly being included in tour operator catalogues in the South African market, while Zanzibar, as a beach destination has to compete with other Indian Ocean island destinations.
29
ADDENDUM D :
COMPETITOR ANALYSIS
BB HB FB
BLUE BAY BAY BEACH RESORT Situated midway up the East Coast possibly the best on the Island 80 rooms Single Double Single Double BREEZES Situated midway up the East Coast 80 rooms Standard room Deluxe (Supplement $25 on Deluxe room only) Superior Standard room Deluxe Superior Standard room Deluxe (Supplement $22 in deluxe only) Superior MAPENZI BEACH CLUB Situated on the east coast 45kms from the airport 60 rooms deluxe resort Single Double $135 $176 Per person per day Per person per day Per person per day per person per day per person per day per person per day per person per day per person per day per person per day High Season: 19h Dec-31st March $100 $120 $130 Low Season: 30th April 30th June $65 $75 $90 $90 $110 $120 High Season : 1st July - 19th Dec $135 $220 Low Season: 1st April - 30th June $75 $150 $93 $168 $153 $238
Mid high Season : 1st July - 19th December
30
BB RAS NUNGWI VILLAGE North of the island opposite Memba Island 40 rooms just burnt down
HB
FB
Low Season: 1st March - 24th April & 1st Nov-10th Dec Single Double Chalet room without AC Single Double Single Double FISHERMAN'S BEACH RESORT - (now Zanzibar beach resort) Located next to Protea Mboweni Ruins it has an excellent location but is poorly managed and run down 60 rooms Single Double CLUB VACANZE Biggest of the Italian Resorts sleeps 600 people situated on the East Coast south of Blue Bay Single Double PROTEA HOTEL MBWENI RUINS Only 13 rooms located close to the airport and Stone town currently running at 60% the highest occupancy in 5 years. Standard Single Standard Double $95 $170 $105 $190 $120 $220 High season - 2002 $133 $266 $143 $286 $153 $306 $100 $130 $110 $140 $118 $148 $180 $270 High Season $170 $220 $160 $200
Low Season: April-July: the hotel close down
31
ADDENDUM E :
SWOT ANALYSIS
STRENGTHS
WEAKNESSES
Zanzibar - known name Historic and cultural legacy Proximity to entry/exit / key tour points Aesthetic beauty of site Stone Town - uniqueness and cultural experience Paradise Islands - Pemba etc. Variety marine activities Friendliness of the Zanzibari OPPORTUNITIES
Limited Beach Infrastructure - roads, utilities, refuse and litter State of sea and airport facilities Low occupancy levels - affecting viability Ineffective security / policing Short high season period
THREATS
Infrastructure improvements Community strengthening and funding Participate in tourism association Training staff - improving service standard Product and activities improvements
Health and hygiene risks Increase in rooms - insufficient airlift Terrorism and global economic slump
32
ADDENDUM F :
OPERATING CONCEPT AND DESIGN CRITERIA

And within this ethos and team spirit provide the most rewarding
MARKET/GUEST PROFILE
Source
Guest experiences offering: 30% 70% 7 days Concept architecture and accommodation inspired by the rich history and culture of Zanzibar. Inspirational, informative and interactive theatrical food preparation and presentation with emphasis on local flavour, produce and freshness. 60% 40% 0% Comfortable quality leisure time at amenities on offer at the resort Days of inspirational discovery with personal itineraries drawn from resort dhow excursions that will include: o Swimming with dolphins and reef snorkeling Trips to private islands for luncheons Photographic sea tours Evening cocktails cruises on the Indian ocean A comprehensive list of competent and professional tour and activity providers on the island that include Trips into Stone town and cultural tours and events Game fish angling and scuba diving Memorable themed evenings integrating food, dcor and entertainment. o o o
Southern Africa Europe Average stay

Guest mix
Tour groups/packages Individuals Walk-ins
Inclusion- Breakfast, dinner, on site entertainment and water sports Exclusions - Lunch and beverages Operational concept To establish among staff an ethos and commitment thereto who will deliver attentive and professional, personal, friendly, efficient and caring service to each Guests needs and preferences and provide relaxed, comfortable, varied, visually appealing and deliciously memorable experiences.
Plus daytime activities drawn from o
33
INFRASTRUCTURE/SERVICES
Electrical.
Transport
Local outsourced operator to transport guests and staff.

Laundry
The existing power supply is to be employed. Cost analysis for redundant diesel generation to be undertaken by Johnny Smit
Water
To be centralized. Outsourced partner to be identified on provide building and operator to equip and run basis.
Consumables
The existing water supply is 1.2km away. This will be first source complimented by borehole. Both to feed raw water reservoir. An in line treatment plant will be installed to feed a potable water reservoir.
Waste water
Commissary kitchen. Locate on site to process goods available fresh on island. Seasonality will require efficient planning, bulk buying and freezing. Will be a good training facility. All other goods to be imported portioned and ready for use.
Gas
Treatment (settling) plant needs to be installed. Prevailing wind direction has been taken into account in location per site plan.
Refuse
Bottled supply available

Maintenance, Landscaping maintenance, & Security
Initial Patrick Watson to consult on establishment of nursery and same as future training and development opportunity.
Jetty
Municipal dump: This is some distance away. Refuse be disposed of on site by incineration.
Telephone
Deep-water jetty to be constructed at Waterworld.
Existing telephone to be complimented by mobile or Satellite phone system.
34
HOTEL PUBLIC AREAS

Porte cohere
Guest entertainment
Bandstand: visible from restaurant, bar/lounge and pool bar. Water sports Private beaches (man-made), loungers, shade, shower, ablutions and food and beverage service Curio village Health spa: in room service. Snooker/pool table: adjacent to bar/lounge. Satellite TV: in bar for special occasions and in bedrooms. HOTEL BEDROOMS
Guest profile
95% bus, 5% hire car. Parking and Porte cochere planned accordingly.
Reception and facilities
Desk, tour operator, shop, small business center 20-seater executive conference boardroom / library Luggage storage: external access and departure day storage. FOH offices: Requirement - 4 plus general office. Other offices requirements noted
Toilets Food and beverage outlets
Buffet restaurant Bar/lounge Pool/beach bar

Pool
(150 seats) (100 seats) (serviced)
85% double, small conference, mainly tour groups

Bed mix
60% double/double - 2 x 900mm. 40% king

Room facilities
Size: currently 450m. Loungers, tables, umbrellas Features: rim-flow type. Towel service. Storage required.
Desk/dressing table Armoire incorporating mini bar, TV with satellite channels, tea and coffee Lounger chairs (2)
35
Coffee table Telephone: internal system only. Luggage rack Cupboard with two hanging doors and one drawer Mini safe Air-conditioning Card lock system
Bathroom facilities
OTHER FACILITIES ON SITE

Staff housing
Senior expat staff (families) Middle local management (single) Junior staff (single) Do all laundry at central laundry
Staff feeding
Bath with hand shower Vanity with single basin Shower Separate toilet
Patio facilities
40 seat facility located staff village

Training
Theoretical training (2 X 20 seats) Practical (in hotel)
Size (4m X 3m) Armchairs (2), drinks table, chaise

Room service - provided at a premium from main kitchen if required Store rooms - used only for linen and cleaning equipment Room quantity and mix
Total 120 keys Paraplegic: one part of 120 keys. Suites: 4 parts of 120 keys.
36
STAFF MATRIX 120 Bedrooms 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 15 16 17 18 19 20 21 22 23 24 25 26 Expat. Expat. Expat. Expat. Expat. Expat. Expat. Expat. Expat. Local Local Local Local Local Local Local Local Local Local Local Local Local Local Local Local Local Local Total Housing Quantity Exec Single Director 1 1 General Manager 1 1 Rooms Division Manager 1 1 Housekeeper 1 1 F&B Manager 1 1 Chef 1 1 Finance Manager 1 1 Training Manager 1 1 Engineer 1 1 Human Resources Manager 1 Personal Manager 1 Human Resources Clerks 2 Accounts Staff 3 Assistant F&B Managers 2 Sales Executive 2 Reception Staff 6 Housekeeping Staff 16 Maintenance/Pool 5 Security Manager 1 Security Staff 20 Bar 10 Waiters 30 Linen / Housekeeping 3 Grounds Staff 5 Switchboard Operators 3 Training Trainers 2 Kitchen & Stewarding 30 151 9 142 86 56
Expat Staff Local Staff Core Staff Local Trainees
34 56
37
ADDENDUM G :
ZANZIBAR FREE ECONOMIC ZONES AUTHORITY (ZAFREZA)

Although all investments generally are welcome, preference is given to manufacturing or assembly industries for a variety of goods in electronics, plastic wares, textile, garments and fruit canning that are mainly export-orientated - in line with the Government policy of industrialization for export. The statutory conditional requirement to qualify to operate in an EPZ holds that a minimum of 80% of the production of an enterprise must be exported. Transit and entropot trade, high potential for further expansion of tourism and ancillary services; maritime ventures, infrastructure projects on B.O.O.T or B.O.T basis and industrial fisheries make up a few of the opportunities presented. ZAFREZA INVESTMENT INCENTIVES
The Zanzibar Free Economic Zones Authority - (ZAFREZA), was established by law in 1992 as the sole Authority responsible for management, administration and operation of the Export Processing Zones Program on Zanzibar with full powers to approve and admit projects therein. The legal instruments of its creation and authority are the Free Economic Acts, No.s 16 & 17 of 1992 with subsequent amendments enacted in April 1997. These, together with the Investments Acts of 1986, lay the legal framework for a safe and lucrative foreign investment climate in Zanzibar. The Authority is an autonomous Government organ with a Common Seal and has exclusive jurisdiction in the administration of the Free Economic Zones that it is striving to promote and mobilize investments thereto as part of the general effort to improve the economy of Zanzibar. (ZAFREZA) administers three export-processing zones (EPZ) s - the Amaan Industrial Park, Fumba on the southwestern seaboard and Micheweni on Pemba Island. The Authority caters for a variety of investments development. in manufacturing, trade and industrial estate
10 years corporate tax holiday. For subsequent 5 years tax will be at 25% and thereafter at 50% of the ruling rate. No customs duty and other taxes charged on the imports of machinery, equipment, spare parts, raw materials, and other supplies, necessarily required for the projects established.
38
Withholding tax exemptions for the initial period of 10 years. Exemption from income tax for the initial period of 10 years on dividends, interest on shareholders loans or any other type of income received by the investors. No restrictions on recruitment of foreign staff on management and technical contracts. No restrictions on the repatriation of profits. 100% foreign ownership is allowed. ZAFREZA one-stop-center completed within ten days. Availability of low cost labour Personal effects of eligible Directors and expatriates are exempt from import duties within a period of six months from date of first arrival in Zanzibar. No exchange control restrictions Autonomous control entrepreneurs of investment proceeds by appraisal procedures
Exemption from obligation to withhold tax from royalties and other payments for the provision of know-how. Exports are exempt from any export duty or levy. ZAFREZA aftercare and facilitation.
COMPARATIVE ADVANTAGES Good infrastructure Good communication and transport network An abundance of trainable English-speaking labour Easy access to PTA, EAC, SADC, EU and other world markets. Political stability and warm attitude of welcome. Favourable policy and positive government support. Good business and social environments No import licensing requirements Minimal customs formalities. Foreign and local currency accounts facilities. Source ZAFREZA
Exemption from Capital Gains Tax on the sale of fixed assets Exemption from obligation to withholding tax from interest on loans from foreign banks and on bonds issued by companies, provided funds borrowed in both cases are used exclusively for investment or to finance operations in the EPZ sector.
39
ADDENDUM H :
KEY CONTACT DETAILS
Legal - Zanzibar
Abdul-Hakim A Issa PO Box 259 Zanzibar, TZ Tel: +255 24 2232502 Fax: Email: abhakim73@yahoo.com
Legal name and status of business: Promoter / Developers Directors/partners/proprietor Address of main office: Address of registered office: Main telephone: Main fax: Main e-mail Website: Name and address of Parent Company: Address of registered office: Business incorporation/registration date: Business incorporation / registration number: Main shareholders: The Fumba Foundation Limited, Stephen Oehley, Abdul-Hakim Issa Technical Services Advisor Auditors Legal advisers South Africa To be appointed Wertheim Bekker PO Box 2277 Houghton, South Africa Contact: Neil de Jager Tel: +2711 483 3313 Maendeleo Projects (Pty) Limited Stephen John Oehley 61 Komari Street, Paulshof Ext 10 Sandton, Gauteng, South Africa PO Box 518 Paulshof 2056 South Africa +2711 803 4889 +2711 803 4889 fumba@eject.co.za Under construction Maendeleo Resorts Limited PO Box 1448 Zanzibar, Tanzania 01st October 2002 Zanzibar Government Certificate L1771 Accountant Bankers Corporate Advisors
National Bank of Commerce Stone town, Zanzibar Executive Consulting PO Box 540 Sundowner 2161 South Africa Contact: Wayne Twigg Tel: +2711 795 2230 Cell: + 27 11 82 551 6770 Email: waynetwigg@acenet.co.za Lex Edy Chartered Accountant SA PO Box 927 Riverclub 2149 South Africa Contact: Lex Edy Tel: +2711 465 5630 Fax: +2711 467 0492 Email: lexedy@global.co.za Johnny Smit PO Box 1606, Honeydew, 2040 South Africa Tel: +2782 800 8996 Fax: + 2711 794 3465 Email: Johnny-smit@mweb.co.za
40
Consulting Engineers
DNS Consulting Engineers PO Box 298, Olifantsfontein 1665, South Africa Contact Nick Stolp Tel: + 2711 316 3990 Fax: + 2711 316 5137 Email dnseng@worldonline.co.za
Construction Partners
Murray & Roberts Developments PO Box 237, Pavillion 3611, South Africa Contact: Peter Sherwin Tel: +2711 820 4600 Fax: +2711 820 4668 Email: petersh@murrob.com
Environmental Management Consultants CEN
Integrated
Environmental
Consulting Architects
Eugene Barnard & Associates PO Box 5952, Halfway House 1685, South Africa Contact: Eugene Barnard Tel: +2711 315 7357 Fax: +2711 315 9873 Email: eba@global.co.za
Management Unit 36 River Road Walmer Port Elizabeth 6070 South Africa Contact Dr Cohen Telephone: +27 41 581 2983 Fax:+27 41 581 2983 Email: steenbok@iafrica.com Hotel Management and Marketing * * - MOU Protea Hospitality Corporation PO Box 75 Sea Point 8060 South Africa Contact Mr Otto Stehlik Tel: +2711 430 5000 Fax: +2711 430 5333 Email: otto@proteahotels.com Interior and Design Consultants Black Moon Design Studio PO Box 6560944, Sandton, SA Contact: Lauren Beckworth Tel: +2711 656 0944 Email: mwblackmoon@mweb.co.za
Consulting Quantity Surveyors
McIntosh Latilla Carrier & Laing PO Box 52348 Saxonwold 2132 South Africa Contact: Philip de Wet Tel: +2711 283 1500 Fax: +2711 788 9015 Email pdewet@mlc.co.za
Project Managers
@Hart Property Development PO Box 14050 Farrarmere South Africa Contact: Trevor t Hart Tel: +2711 425 3717 Fax: +2711 849 6526 Email: athart@mweb.co.za
41
ADDENDUM I :
LETTERS REQUEST)
of Employment,
OF
SUPPORT
(UPON
a)
Ministry
Women,
Youth
and
Children
Development b) Ministry of Trade Industries, Marketing and Tourism c) Ministry of Agriculture, Natural Resources, Environ. And Cooperatives
42
ADDENDUM J :
PROFILES (UPON REQUEST)
a) Joachim J Zimmermann b) Murray & Roberts Developments c) McIntosh Latilla Carrier & Laing d) CEN Integrated Environmental Management Unit e) @Hart Property Developments
43
ADDENDUM K :
CERTIFICATES OF INCORPORATION (UPON REQUEST)
a) Fumba Foundation Limited b) Maendeleo Resorts Limited c) Maendeleo Projects (Pty) Ltd
44
ADDENDUM L :
FINANCIAL FEASIBILITY
a) Key Notes and Assumptions b) Ratio Analysis and Investment Returns c) Projected Income d) Balance Sheet
45
KEY ASSUMPTIONS
A Hotel of 120 rooms can be built and furnished for $183 333 per room. An average room rate of $218 per night can be achieved on opening Occupancy will be 55%, 60%, 65%, 70% in years 1 through 4 respectively with a sustainable 70% thereafter. 85% of the rooms will have double occupancy 90% of breakfasts and dinners will be taken by guests, and 20% of the snacks and lunches will be eaten at the hotel The hotel will achieve 82%, 34%, and 80% profit on rooms, food and beverages and other revenues respectively. 8% of turnover will be spent on overheads 5% of turnover will be spent on marketing Debt will cost approximately 8% pa. All interest prior to commencement of operations will be capitalised and will approximate $0.5m.
46
RATIO ANALYSIS AND INVESTMENT RETURNS The Internal rate of return based on the projects earnings, varies predictably with changes in the occupancy levels and room rates, with sharper changes experienced at the lower occupancy levels. But far the greatest impact on internal rate of return is the structure of the project between debt and equity where the greater the proportion of debt, the higher the yield for shareholders. A project funded entirely by equity is unlikely to provide adequate returns for shareholders. Change in the capital cost of the project also significantly affect the viability of the project with a $1m under spend increasing the internal rate of return from 21.1% to 21.6% after 15 years. A $1m overspend will reduce the IRR to 20.6% for the same period.
Sensitivity Analysis The project yields are significantly impacted by any differential between planned occupancy of the resort and actual occupancy achieved. Changes in occupancy that are planned do affect the returns with higher occupancies yielding greater returns however by far the greatest impact is not achieving the planned levels of occupancy. By way of illustration, a 10% lower occupancy achieved (in the long term) will reduce earnings by 20%. Room rates affect earnings to a lesser extent with a 10% drop in rate resulting in an 10% drop in earnings. From this one can conclude that key to the success of the resort is accurate planning, and secondly that where necessary, room rates should be discounted in favour of achieving as close to planned for occupancy as possible.
47
RATIO ANALYSIS The project is initially highly geared taking both losses expected in the initial period of operation, and finance charges into account. Once fully operational, the gearing reduces to 0% by year 5. The project retains a health ability to meet its interest commitments with a minimum interest cover of 3.35 times in year one and rising to 49.79 times in year 5. Return on capital employed rises to 16.9% in year five before falling back to 11% in year 8 as a result of capital replacement. In theory this would happen every seven years. in the smoothing of this effect. The profit margin anticipated varies from 23% to 27% depending on the capital replacement levels with an average of 24.1% for the 15 years projected. The project will start yielding positive internal rates of return from year 6, which will climb to 21.1% in year 15. In practice, an ongoing capital replacement scheme would be put in place that would result
48
ADDENDUM M : SITE (UPON REQUEST)
DEVELOPMENT
PLAN
49
ADDENDUM N :
ARCHITECHTURAL & ENGINEERING DESIGN & PERSPECTIVES (UPON REQUEST)
50
ADDENDUM O :
INTERIOR AND DESIGN PERSPECTIVES (UPON REQUEST)
51

Maendeleo Resorts Business Plan Version 3

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Maendeleo Resorts Limited

The Royal Dhow - Zanzibar

Stephen Oehley - Mobile +27 84 800 9119

Complete construction and realise Hotel opening

MANAGEMENT & PARTNERS

JOACHIM JOHN ZIMMERMANN

Wayne qualified as a Chartered Accountant in 1996. He served his

ABDUL-HAKIM AMEIR ISSA

INTRODUCING THE MAENDELEO RESORT

How do they come?

ZANZIBAR'S MARKET PERFORMANCE

Domestic Tourism International Individual Tourists

WHY WILL THE RESORT BE SUCCESSFUL?

Labour and Supplies

engineering grid) from which the raw water reservoir can be

Capital Type Long Term Debt Equity

Amount 13 000 000 9 000 000

SUMMARY FINANCIAL DATA

Table 2 Summary Financial Information

3 4980 3787 1517 842 12% 10.2%

15 14274 5702 4654 8650 6.3% 10% 21.1%

Table 3 Worse Case Financial Data

3 7949 3178 873 198 9.5%

15 12092 4904 3418 (9985) 6.3% 13%

ADDENDA: - TABLE OF CONTENTS

ADDENDUM J : PROFILES (UPON REQUEST) ...............................................................................................................................................43

TOURIST ARRIVALS BY NATIONALITY

Table 4 Tourist arrivals by nationality

North America 4 804 5 682 7 603 7 699 6 745 7 757 6 328

Other Africa 6 680 6 388 8 022 6 293 6 367 8 718 7 500

Rest of World 6 736 8 009 9 932 10 041 11 447 9 251 9 106

56 415 69 159 86 495 86 455 86 918 97 165 76 329

Source: Zanzibar Commission for Tourism

INTERNATIONAL TOURIST ARRIVALS IN SUB-SAHARAN AFRICA

TOUR OPERATOR CATALOGUES

Destinations Tanzania Kenya Malawi Zambia Botswana Madagascar

% of Operators 100 100 30 40 50 10

Destinations Zanzibar Zimbabwe Namibia Uganda Mozambique

Kenya Malawi Zambia Botswana Madagascar Ethiopia

Italian Tour Operators

United Kingdom Tour Operators

French Tour Operators

Mid high Season : 1st July - 19th December

Low Season: April-July: the hotel close down

OPERATING CONCEPT AND DESIGN CRITERIA

Southern Africa Europe Average stay

Tour groups/packages Individuals Walk-ins

Plus daytime activities drawn from o

Local outsourced operator to transport guests and staff.

Bottled supply available

Deep-water jetty to be constructed at Waterworld.

Existing telephone to be complimented by mobile or Satellite phone system.

HOTEL PUBLIC AREAS

Buffet restaurant Bar/lounge Pool/beach bar

(150 seats) (100 seats) (serviced)

85% double, small conference, mainly tour groups

60% double/double - 2 x 900mm. 40% king

OTHER FACILITIES ON SITE

40 seat facility located staff village

Theoretical training (2 X 20 seats) Practical (in hotel)

Size (4m X 3m) Armchairs (2), drinks table, chaise

Expat Staff Local Staff Core Staff Local Trainees

ZANZIBAR FREE ECONOMIC ZONES AUTHORITY (ZAFREZA)