Pre-Feasibility Study Beach Resort

Small and Medium Enterprise Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE 6 Floor, LDA Plaza, Egerton Road, Lahore. Tel: (042) 111-111-456, Fax: (042) , 6304926, 6304927 Helpdesk@smeda.org.pk
th

REGIONAL PUNJAB

OFFICE

REGIONAL SINDH

OFFICE

REGIONAL OFFICE NWFP Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 helpdesk-pew@smeda.org.pk

REGIONAL OFFICE BALOCHISTAN Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 2831623, 2831702 Fax: (081) 2831922 helpdesk-qta@smeda.org.pk

8th Floor, LDA Plaza, Egerton Road, Lahore. Tel: (042) 111-111-456 Fax: (042) 6304926, 6304927 helpdesk@smeda.org.pk

5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 Helpdesk-khi@smeda.org.pk

June, 2008

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DISCLAIMER The purpose and scope of this information memorandum is to introduce the subject matter and provide a general idea and information on the said area. All the material included in this document is based on data/information gathered from various sources and is based on certain assumptions. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. SMEDA does not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. Therefore, the content of this memorandum should not be relied upon for making any decision, investment or otherwise. The prospective user of this memorandum is encouraged to carry out his/her own due diligence and gather any information he/she considers necessary for making an informed decision. The content of the information memorandum does not bind SMEDA in any legal or other form.

DOCUMENT CONTROL
Document No. Revision Prepared by Issued by Issue Date PREF-11 0 SMEDA-Balochistan Library Officer June, 2008

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TABLE OF CONTENTS
1 2 PURPOSE OF THE DOCUMENT............................................................................................................. 5 PROJECT PROFILE.................................................................................................................................. 5 2.1 PROJECT BRIEF ..................................................................................................................................... 5 2.2 OPPORTUNITY RATIONALE .................................................................................................................... 5 2.3 MARKET ENTRY TIMING ....................................................................................................................... 6 2.4 PROPOSED BUSINESS LEGAL STATUS ..................................................................................................... 6 2.5 PROJECT CAPACITY AND RATIONALE..................................................................................................... 7 2.6 PROPOSED PRODUCT MIX...................................................................................................................... 7 2.7 PROJECT INVESTMENT........................................................................................................................... 7 2.8 RECOMMENDED PROJECT PARAMETERS ................................................................................................. 7 2.9 PROPOSED LOCATION ........................................................................................................................... 7 2.10 KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS ......................................................................... 8 2.11 GOVERNMENT INCENTIVES FOR INVESTMENT IN TOURISM SECTOR ......................................................... 8 2.11.1 Tourism Industry ............................................................................................................................. 8 2.11.2 Foreign Exchange ........................................................................................................................... 9 2.11.3 Chartered Flights ............................................................................................................................ 9 2.11.4 Work Visas ...................................................................................................................................... 9 3 CURRENT INDUSTRY STRUCTURE ................................................................................................... 10 3.1 GLOBAL SCENARIO ............................................................................................................................. 10 3.2 OVERVIEW OF THE YEAR 2008 ............................................................................................................ 11 3.3 CURRENT DOMESTIC TOURISM INDUSTRY SITUATION AND FUTURE GROWTH ....................................... 12 3.3.1 Demand......................................................................................................................................... 12 3.3.2 Future Growth............................................................................................................................... 12 3.3.3 Contribution to GDP ..................................................................................................................... 13 3.3.4 Employment................................................................................................................................... 13 3.3.5 Visitor Exports............................................................................................................................... 13 3.3.6 Capital Investment......................................................................................................................... 14 3.3.7 Government Expenditure ............................................................................................................... 14 4 MARKETING STRATEGY ..................................................................................................................... 15 4.1 TARGET CUSTOMERS .......................................................................................................................... 15 4.2 MARKET POTENTIAL ........................................................................................................................... 15 4.3 PRICING STRATEGY............................................................................................................................. 15 4.3.1 Additional Revenue........................................................................................................................ 15 5 PROJECT REQUIREMENTS ................................................................................................................. 16 5.1 5.2 5.3 5.4 6 MAIN PROJECT REQUIREMENTS ........................................................................................................... 16 EQUIPMENT DETAILS .......................................................................................................................... 16 FURNITURE AND EQUIPMENT MAINTENANCE ....................................................................................... 17 HUMAN RESOURCE REQUIREMENT ...................................................................................................... 17

LAND & BUILDING REQUIREMENT .................................................................................................. 18 6.1 6.2 6.3 6.4 LAND REQUIRED ................................................................................................................................. 18 COVERED AREA REQUIREMENT ........................................................................................................... 18 RECOMMENDED MODE ....................................................................................................................... 18 UTILITIES AND INFRASTRUCTURE REQUIREMENT ................................................................................. 18

STARTING A SUCCESSFUL BEACH RESORT BUSINESS ........................................................... 19 7.1 HOW TO START A BEACH RESORT?...................................................................................................... 19 2

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7.1.1 Work in a Similar Hospitality Business........................................................................................... 19 7.1.2 Know Your Target Market ............................................................................................................. 19 7.1.3 Develop a Business Plan................................................................................................................ 19 7.1.4 Choose a Location & Layout.......................................................................................................... 19 7.1.5 Getting the Appropriate Funding ................................................................................................... 20 7.1.6 Be Familiar with Safety Regulations .............................................................................................. 20 7.1.7 Hiring Employees .......................................................................................................................... 20 7.1.8 Advertise & Market ....................................................................................................................... 20 7.2 DECIDING ON THE LAYOUT ................................................................................................................. 20 7.3 HIRING THE RIGHT EMPLOYEES ........................................................................................................... 21 7.4 A GOOD HOSPITALITY BUSINESS E XPERIENCE ..................................................................................... 22 8 PROJECT ECONOMICS......................................................................................................................... 23 8.1 8.2 8.3 9 PROJECT COST .................................................................................................................................... 23 PROJECT RETURNS .............................................................................................................................. 23 PROJECT FINANCING ........................................................................................................................... 23

FINANCIAL ANALYSIS.......................................................................................................................... 24 9.1 9.2 9.3 PROJECTED INCOME STATEMENT ......................................................................................................... 25 PROJECTED BALANCE SHEET ............................................................................................................... 26 PROJECTED CASH FLOW STATEMENT ................................................................................................... 27

10

KEY ASSUMPTIONS............................................................................................................................... 28 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 PROJECT CAPACITY ASSUMPTIONS ...................................................................................................... 28 REVENUE ASSUMPTIONS ..................................................................................................................... 28 ECONOMIC ASSUMPTIONS ................................................................................................................... 28 EXPENSE ASSUMPTIONS ...................................................................................................................... 28 DEPRECIATION EXPENSE ASSUMPTIONS ............................................................................................... 29 COST OF GOODS SOLD ........................................................................................................................ 29 CASH FLOW ASSUMPTIONS .................................................................................................................. 29 FINANCING ASSUMPTIONS ................................................................................................................... 29

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Introduction to SMEDA
The Small and Medium Enterprise Development Authority (SMEDA) was established with the objective to provide fresh impetus to the economy through the launch of an aggressive SME support program.1 Since its inception in October 1998, SMEDA had adopted a sectoral SME development approach. A few priority sectors were selected on the criterion of SME presence. In depth research was conducted and comprehensive development plans were formulated after identification of impediments and retardants. The all-encompassing sectoral development strategy involved recommending changes in the regulatory environment by taking into consideration other important aspects including financial aspects, niche marketing, technology up gradation and human resource development. SMEDA has so far successfully formulated strategies for sectors including, fruits and vegetables, marble and granite, gems and jewelry, marine fisheries, leather and footwear, textiles, surgical instruments, urban transport and dairy. Whereas the task of SME development at a broader scale still requires more coverage and enhanced reach in terms of SMEDAs areas of operation. Along with the sectoral focus a broad spectrum of business development services is also offered to the SMEs by SMEDA. These services include identification of viable business opportunities for potential SME investors. In order to facilitate these investors, SMEDA provides business guidance through its help desk services as well as development of project specific documents. These documents consist of information required to make well-researched investment decisions. Pre-feasibility studies and business plan development are some of the services provided to enhance the capacity of individual SMEs to exploit viable business opportunities in a better way. This document is in the continuation of this effort to enable potential investors to make wellinformed investment decisions.

For more information on services offered by SMEDA, please visit our website: www.smeda.org.pk

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PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study covers various aspects of project concept development, start-up, and production, finance and business management.

PROJECT PROFILE

The project is about starting the business of a Beach Resort at Gwadar beach, Balochistan. The proposed plan is to offer complete package of boarding/lodging and dinning for tourists/visitors, and conference hall for different corporate clients for holding meetings/seminars etc. at Gwadar beach. 2. 1 Project Brief

A seaside resort is a resort located on the coast and where a beach is the primary focus for tourists, it may be called a beach resort. The study provides basic information regarding the investment opportunity for setting up a Beach Resort at any of the Balochistans major coastal areas such as Gaddani, Sonmiani, Ormara, Pasni and Gwadar. Such a business could also be established on beaches that fall in Sindh, after conducting initial market research/surveys and properly analyzing the demand. Currently the project is being designed/proposed for Gwadar being the most developed part of Balochistans coastal Zone. The project would serve as a place where tourists, visitors, vacationers and leisure travelers could stay overnight, dine, and enjoy the breathtaking view of the clear ocean. Initially the project is proposed to attract domestic tourists/visitors but after its maturity, international tourists could also become a major part of its customer base. The main features of the project would include miles of unspoiled virgin beach, luxurious ocean view, beautiful separate huts, in-hut dining, dining hall, conference hall, and other basic entertainment facilities. 2. 2 Opportunity Rationale

Balochistan has more than 750 Kilometers long coastline with clean and virgin beaches, tropical forests, exotic mountains, coral reefs and many breathtaking locations. Balochistan coastal zone has so far been neglected for tourism and travel development despite of tremendous potential in the sector. Very few areas are seen to have given a bit of attention by the Government as far as beach tourism and travel is concerned and that too due to traffic increase of visitors because of Gwadar. During the preliminary surveys, it was found that towns such as Gaddani, Ormara and Gwadar have been given attention by the government and private sector for investment. The completion of Makran Coastal Highway has provided the very basic infrastructure facility that connects the major towns such as Gaddani, Sonmiani, Ormara, Pasni and Gwadar. Similarly Gwadar Airport has provided the visitors the facility to reach the town in around 45 minutes from Karachi and in around 90 minutes from Quetta.
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Visitors and vacationers from Karachi city have diverted to beaches of Balochistan due to increase of pollution and crowd on Karachi and adjacent beaches. Families are observed at Gaddani beach on weekends and the number so far has seen inclining. Gwadar on the other hand has seen to have a bit higher rate of development in terms of tourism and travel activities, mainly due to Governments priority in developing Gwadar Port that has attracted the attention of both public and private sector in investment possibilities. Other than Gaddani and Gwadar, Ormara has been given attention by the Government due to its strategically important location in naval point of view. Other tourism and travel related developments on Balochistan Coastal Belt include the establishment of Hingol National Park, a few kilometers away from the beach at Hingol Valley, near Ormara. Looking at a broader perspective, Balochistan coastline was required to be developed by the government and private sector for tourism and related business activities/investments much earlier, but this negligence on the other hand provides countless opportunities for all-scale tourism businesses not only for domestic but also for international investors specifically in Beach Resorts. Following are the key points that make the project very much feasible and attractive for the investors: 2. 3 The only beach resort in the province and country 8 bamboo structured ocean front view huts 24 hour guest service Miles of unspoiled beach Ocean view indoor and outdoor dining facility Ocean view conference hall 24 Hour business center Cable TV Mini Bar Peaceful environment Market Entry Timing

Although the weather conditions in Gwadar is suitable for tourists/visitors almost throughout the year but the project is assumed to have business mostly during the winters and springs as the weather conditions in these 6 months (October March) becomes very much comfortable for the visitors. The project therefore, is proposed to become operational in the start of winter season to attract most of the customers. 2. 4 Proposed Business Legal Status

Although the legal status of the business tends to play an important role in any setup, the beach resort business is proposed to be operated on a sole proprietorship basis which may extend to partnership in case of expansion and/or addition of new products/services that might add significant business to the existing setup. Also less complications and costs are involved in
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forming, administering and running such a setup and the tax rates applicable for such arrangement are lower than private or public limited. 2. 5 Project Capacity and Rationale

The project is proposed to have eight (08) separate huts for visitors to stay overnight, one conference hall, a dinning hall, and an open air dinning place on the first floor. After projects maturity in the peak seasons, the resort would entertain 8 families per day and would facilitate three conferences/seminars/trainings per month. 2. 6 Proposed Product Mix

The business setup is proposed to have the following products/services: 1. 08 separate huts on the beach, made of bamboos providing a unique experience to visitors 2. Conference hall for all sorts of seminars, workshops, and training programs for corporate clients 3. Open-air dining on the roof and indoor dining services (dining hall and hut delivery services) To make the projects operations smooth and less hectic for the investor, it is proposed that the kitchen (food and beverages) should be handed over to the second party on Theka basis. The second party contractee will be responsible for arranging experienced cooks and installing required kitchen machinery & equipments. 2. 7 Project Investment

The total investment required for this project is 9.77 m. The investment mainly covers capital costs of 9.5 m and working capital requirement of 0.25 m. 2. 8 Recommended Project Parameters Human Resource 17 Location Gwadar, Balochistan

Capacity 8 Huts * 180 Days (six months) = 1,440 nights

Financial Summary Project Cost IRR 9.77 million 36% 2. 9 Proposed Location

NPV 15,848,688

Payback Period 3.2 Yrs

Cost of Capital (WACC) 12%

The proposed location for the project could be in any of the following areas on Balochistan coastal belt such as Gaddani, Sonmiani, Ormara/Dam, Pasni, Gwadar and Jiwani. But due to the availability of infrastructure and comparatively high traffic rate, it is highly recommended to establish such a project at Gwadar beach to increase its viability. However, such a project could
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also be established on beaches of Karachi and adjacent areas after careful analysis of market demand and project viability. 2. 10 Key Success Factors/Practical Tips for Success

Location plays the most important role for such a project. Clean virgin beaches of Balochistan coastal zone are suitable for the project and its viability. Trained personnel for the project would add towards the success of the project. Awareness amongst the general people would attract more customers therefore; use of proper marketing techniques is important Makran Coastal Highway and Gwadar International Airport provides the connectivity of the proposed location, Gwadar to the rest of the country making the project easily accessible for visitors/vacationers and tourists Target customers should initially be the domestic tourists. Upon its maturity, international tourists could also be facilitated Consistency in quality products and services would develop confidence amongst the customers and would help in their retention Guest feedbacks should be a regular activity by the management and the viable recommendations/suggestions should be adopted Government Incentives for Investment in Tourism Sector

2. 11

The present Government has taken a number of initiatives to attract investment in tourism sector. The following incentives and concessions are available for domestic and foreign investments in tourism industry2: 2.11.1 Tourism Industry 1. 2. 3. 4. 5. Tourism is categorized as Industry according to the Investment Policy in vogue. Ministry of Tourism can issue a certificate that a project falls in Tourism Industry Permission is not required for setting up of tourism project in the Private Sector Telephone, Telex, Fax facilities are provided to travel trade on priority basis Plant, Machinery & Equipment (PME) not manufactured locally can be imported @ 5% custom duty Initial depreciation is available @ 50% in addition to normal depreciation allowable @ 10% on all depreciable assets. This incentive practically operates as universal tax holiday as income may not generally be liable to tax for a period of five to six years because of carry forward of unadjusted depreciation loss

Ministry of Tourism, Government of Pakistan

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6.

Payment of withholding tax at import stage in respect of plant machinery equipment and parts has already been done through inclusion of sub-clause (vii) in clause -56 of part-IV of the Second Schedule to the Income Tax Ordinance, 2001 Special equipment for adventure tourism activities like water sports, hang-gliding, golf, indoor sports equipment, power boats, water rafts, canoes, water skiing equipment provided by the travel trade as a services to the tourists is allowed to be imported on 5% customs duty The central air-conditioning equipment and apparatus of general utility in hotels are charged industrial tariff for electricity The World Bank due to importance of the bargain power of Pakistan has become more relaxed in offering cooperation in various activities Recently they have facilitated Ministry of Water and Power in establishing an Expert Advisory Cell in the Ministry which is made by the locals and a couple of foreign consultants on visibly favorable terms There is a policy of the government to avoid to maximum extent barrowing from World Bank however if felt necessary it can be requested with prior consent of the Finance Ministry

7.

8. 9. 10.

11.

2.11.2 Foreign Exchange 1. 2. 3. 4. Permission of the State Bank of Pakistan is not required for repatriation of profits from tourism projects Foreigners/local and Overseas Pakistanis can open foreign exchange accounts Full repatriation capital, capital gains, dividends and profits is allowed. However, the share of non-residents is required to be registered with State Bank of Pakistan Foreign investment is welcome. However, it is the prime responsibility of all parties concerned to ensure that foreign exchange has been raised through legitimate transactions and not through money laundering etc.

2.11.3 Chartered Flights 1. Permission for chartered flights is given by the Ministry of Tourism in consultation with Ministry of Interior. Chartered flights are allowed on point-to-point basis from Karachi, Lahore, Islamabad and Peshawar Helicopter chartered flight services is allowed anywhere in Pakistan

2.

2.11.4 Work Visas 1. Work visas are granted to foreign technical and managerial personnel for the purpose of transferring skills and know-how. The work visas can be issued for a period up to 5 years. Ministry of Tourisms representative is a member of the team that issues work visas.

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3
3. 1

CURRENT INDUSTRY STRUCTURE

Global Scenario3

The year 2007 exceeded the expectations for international tourism with arrivals reaching new record figures close to 900 million. The results confirm both the sustained growth path of the past years and the resilience of the sector regarding external factors. This development has been supported by a strong world economy, which has experienced its longest period of sustained growth for more than two decades.

According to the latest UNWTO World Tourism Barometer, international tourism arrivals expanded by 6% in 2007, as compared to 2006.

World Tourism Organization (UNWTO) 10

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Of the additional 52 million worldwide arrivals, Europe received some 19 million and Asia and the Pacific 17 million. The Americas was up by around six million, Africa by three million and the Middle East by five million.
52 Million International Arrivals More
As ia and the Pacific + 17 m illion (33%)

Europe + 19 m illion (38%)

Am ericas Africa +6 m illion (12%) +3 m illion (6%)

Middle Eas t + 5 m illion (11%)

All the different regions registered increases above their long-term average, with the Middle East leading the regional growth ranking (+13%), followed by Asia and the Pacific (+10%), Africa (+8%), the Americas (+5%) and Europe (+4%). 3. 2 Overview of the Year 2008

World Gross Domestic Product (GDP) has experienced its longest period of sustained growth for 25 years, with figures around or above 5% since 2004. Particularly emerging markets and developing economies are driving the global GDP for the most part of this decade. This also correlates to their behavior as emerging tourism destinations, which on average nearly double the growth of destinations in high income countries. For 2008, confidence remains high, although this perception might deteriorate. Economies worldwide have shown increased volatility and confidence has weakened in some markets due to uncertainty about the subprime mortgage crises and economic prospects, in particular for the USA, alongside with global imbalances and high oil prices. International tourism might be affected by this global context. But based on past experience, the sectors proven resilience and given the current parameters, it is unlikely to expect that growth in world travel and tourism will come to a halt.

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3. 3

Current Domestic Tourism Industry Situation and Future Growth4

Pakistans overall tourism industry seems to be very promising from the statistics taken from World Travel and Tourism Council WTTC. Following are the details in comparison with the rest of the world. 3.3.1 Demand According to World Travel and Tourism Council (WTTC), Tourism &Travel (T&T) demand in South Asia was expected to reach US$ 82,037.2 M in 2007 and was forecasted to grow to US$ 204,964.5 M in 2017. In Pakistan, in 2007, T&T was expected to post PKR 733.6 billion (US$ 11,744.0 mn) of economic activity (Total Demand), and was forecasted to grow to PKR 1,948.9 billion (US$ 26,376.5 mn) by 2017. WORLD MARKET SHARE 0.2%
0.25% 0.20% 0.15% 0.10% 0.05% 0.00% 1988 1992 1996 2000 2004 2008 2012 2016

3.3.2 Future Growth T&T is a high-growth activity, which is forecasted to increase its total economic activity by 4.4% per annum worldwide in real terms over the next ten years. In South Asia, T&T was expected to post average annualized gains of 7.3% between 2008 and 2017. For Pakistan, T&T activity was expected to grow by 5.2% per annum in real terms between 2008 and 2017.
GROWT H
25% 20% 15% 10% 5% 0% -5% -10% -15%

2007: 6.6%

10Yr: 5.2%

1989

1993

1997

2001

2005

2009

2013

2017

World Tourism Organization (UNWTO) 12

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3.3.3 Contribution to GDP In 2007, the T&T Industry was expected to contribute 3.6% to worldwide GDP. The broader T&T Economy should contribute 10.4% to world GDP in 2007. In South Asia, the T&T Industry is expected to post a GDP contribution of 2.1% in 2007, while the T&T Economy contribution will be 5.5%. Pakistan's T&T Industry was expected to contribute 2.4% to (GDP) in 2007 (PKR 209.6 bn or US$ 3,355.8 mn), rising in nominal terms to PKR 561.5 bn or US$ 7,599.7 mn (2.4% of total) by 2017. The T&T Economy contribution (percent of total) should decline from 6.0% (PKR 520.5 bn or US$ 8,332.4 mn) to 5.8% (PKR 1,347.2 bn or US$ 18,233.1 mn) in this same period.

Pakistan Tourism & Travel Gross Domestic Product (% of Total GDP)

7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%

1988

1992

1996

2000

2004

2008

2012

2016

3.3.4 Employment T&T is human resource intensive, creating quality jobs across the full employment spectrum. In 2007, it was expected that one in 12.0 jobs will be generated by the T&T Economy. The T&T Economy accounts for 8.3% of global employment. Today there are 231.2 million jobs in the T&T Economy, and these will rise to 262.6 million by 2017. The South Asia T&T Economy will account for 31,493,000 jobs (5.2% of total employment). Pakistans T&T Economy employment was estimated at 2,669,000 jobs in 2007, 4.8% of total employment, or 1 in every 20.6 jobs. By 2017, this should total to 3,498,000 jobs, 4.7% of total employment or 1 in every 21.3 jobs. 3.3.5 Visitor Exports T&T is a major exporter, with inbound visitors injecting foreign exchange directly into the economy. T&T exports in South Asia are expected to represent 5.5% of total exports in 2007.

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In Pakistan, exports make up a very important share of T&T's contribution to GDP. Of total Pakistan exports, T&T was expected to generate 6.3% (PKR 91.8 bn or US$ 1,470.1 mn) in 2007, increasing to PKR 299.4 bn, or US$ 4,051.8 mn (4.9% of total), in 2017. 3.3.6 Capital Investment T&T is a catalyst for construction and manufacturing. In 2007, the public and private sectors combined are expected to spend US$ 1,155,427.0 bn on new T&T capital investment (CI) worldwide, 9.5% of total investment, rising to US$ 2,392,765.0 bn, or 9.9% of the total, in 2017. In South Asia, T&T CI was expected to total US$ 23,306.0 mn in 2007, or 8.0% of total regional capital investment. Pakistan T&T CI was estimated at PKR 200.1 bn, US$ 3,203.8 mn or 14.0% of total investment in year 2007. By 2017, this should reach to PKR 452.8 bn, US$ 6,128.1 mn or 11.8% of total. 3.3.7 Government Expenditure T&T is both a generator and receiver of government funds. Globally, in 2007, T&T is expected to garner US$ 334,249.2 bn of government expenditures, or 3.8% of total expenditures. By 2017, government spending on T&T should increase to US$ 545,858.2 bn - 3.9% of total government expenditure. Government T&T operating expenditures in Pakistan in 2007 are expected to total PKR 13.1 bn (US$ 209.9 mn) or 2.0% of the total government spending. In 2017, this spending is forecasted to total PKR 36.8 bn (US$ 498.2 mn), or 2.1% of the total government spending. Description PKR Billion 284.4 144.1 13.1 200.1 64 27.8 733.6 209.6 520.5 1,055.50 2,668.90 2007 % of Total 4.2 2017 % of Total 4.4

Growth 5.7 12.9 6.9 3.8 5.4 8.3 6.6 9.8 8 6.3 4.5

Personal Travel & Tourism Business Travel Government Expenditures Capital Investment Visitor Exports Other Exports Travel & Tourism Demand T&T Industry GDP T&T Economy GDP T&T Industry Employment T&T Economy Employment

PKR Billion 782.9 377 36.8 452.8 189.9 109.5 1,948.90 561.5 1,347.20 1,433.00 3,497.50

Growth 5.5 5.7 5.8 3.3 6.1 9.3 5.2 2.6 5.1 3.4 2.9

2 14 4.4 1.9

2.1 11.8 3.1 1.8

2.4 6 1.9 4.8

2.4 5.8 1.9 4.7

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4. 1

MARKETING STRATEGY
Target Customers

The target market of the project is very wide in nature. All the tourists/visitors whether domestic or international could be the major target market for the project. On the same time, it could also be a facility for the corporate clients who visit Gwadar on business purposes and want to hold seminars/workshops etc. Similarly, the local residents of Gwadar and adjacent areas could also be one of the major components of the target market who could not only stay overnight at the huts but also could enjoy see view dining, lunch or evening tea. 4. 2 Market Potential

As discussed earlier, currently there are no such facility available in the whole country, therefore, its uniqueness would attract its customers to have a different and new experience staying at its family huts and/or enjoy the see view meals. Also for corporate culture, its see view conference hall would also provide a very unique environment. 4. 3 Pricing Strategy

Since the project has a very wide range of customer class, the pricing strategy should be appealing enough to give its customers the value of their money spend while using its services. On the same time, the charges should neither be very high to compete with PC Gwadar nor very low to give negative impression in the market. After carefully analyzing the current hotel/motel cluster in Gwadar, it is proposed that the customers should be charged somewhere between Rs. 3,000 to 5,000 per night. The investor can always shuffle the charges according to the market situation and seasons. In this report, Rs. 4,000 per night charge for only six months (Sept-March) has been taken to calculate projects revenue streams. However, the investor can always attract customers to stay at the resort in the off-season as well adding more revenue to the project. 4.3.1 Additional Revenue The hall rental per day for different venues such as seminars, training programs, workshops, birthday parties, anniversaries and other social gatherings should be in line with the other similar service providers so that the customers could be attracted. Here, it is assumed that a total of 24 venues (2 per month) will be facilitated and Rs. 10,000 per venue hall rental will be charged. The last revenue component of the project is the monthly/quarterly/semi-annually/annually kitchen Theka. Under normal circumstances, such agreements are made keeping in view the regular flow of customers throughout the year. Since due to weather conditions, this project has one peak-season (Sept-March) in the year, therefore, it is assumed that the flow of customers would not be regular throughout the year. The investor has to keep this factor in mind while deciding the Theka rate. In this pre-feasibility report, a monthly kitchen Theka rate of Rs. 35,000 has been taken to calculate projects additional revenue stream.

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5. 1

PROJECT REQUIREMENTS
Main Project Requirements

The basic requirements for a beach resort includes management staff and waiters/servers, furniture and fixture, electronics such as TV/DVD, Multimedia, fridge, air conditioners, telephone/fax, computer/printer, and electric generator. These equipments are easily and readily available in the local markets. 5. 2 Equipment Details

The details of the different machinery and equipment required for the project are given as below: Table 5.2-1 Description Television Sets DVD Players Multimedia Generator Fridge (small) Air-conditioners Telephone/intercom sets Total Table 5.2-2 Office Equipment Details Qty 2 2 1 3 Cost/Unit 35,000 15,000 12,000 1,000 Total Cost (PKR) 70,000 30,000 12,000 3,000 115,000 Furniture & Fixture Details Total Cost (PKR) 60,000 400,000 200,000 660,000
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Equipment & Machinery Details No. of Units 9 8 1 1 9 4 8 Price/Unit 14,000 5,000 70,000 350,000 8,000 30,000 1,000 Total Price (PKR) 126,000 40,000 70,000 350,000 72,000 120,000 8,000 786,000

Other Equipment Details Computers Printers Fax Telephone Sets Total Table 5.2-3 Description Total Office Furniture Total Hut Furniture Carpeting and Bedroom Necessities Total

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5. 3

Furniture and Equipment Maintenance

The furniture and equipment maintenance process will be conducted on yearly basis. 5. 4 Human Resource Requirement

The manpower required for operating the Day Care Center is as follows: Table 5.4-1 Description Manager Accounts/Admin Officer Waiters/Servers Guards Office Peon Sweepers Total Monthly Cost Human Resource Requirement Details Qty 1 1 5 3 1 6 17 Monthly Salary/Person 25,000 12,000 5,000 4,000 4,000 3,500 Total Monthly Salary (PKR) 25,000 12,000 25,000 12,000 4,000 21,000 99,000

Note: The staff salaries are estimated according to the market trends; however, the investor may set different pay scales.

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6
6. 1

LAND & BUILDING REQUIREMENT

Land Required

Such an arrangement is possible by acquiring the land on 99 year lease from the revenue department, Government of Balochistan, pre-approved by GDA. The details are as under: Table 6-1 Description Land Total 6. 2 Covered Area Requirement Land Requirement Details Area Required Acre Total Lease Price/Acre Rs. 120,000 Total Price (Rs.) 60,000 60,000

The proposed project layout is to have main building of 3,000 Sq.ft. in the center with 08 separate bamboo huts (04 huts on each side of the building). The building will consist of one office, reception area, lobby, kitchen space, and a conference hall. Each hut will have one living room, one bedroom, and one washroom. The estimated cost details are as under: Table 6-2 Description Reception, lobby, Kitchen, Conference Hall, Washrooms (ground floor) Dining hall, Washrooms (1st floor) Terrace Grills (open air dining) 08 Bamboo Huts (each with bedroom, living room, and washroom) Total Building/Covered Area 6. 3 Recommended Mode 396 * 8 = 3,168 850 Covered Area Requirement Details5 Sq .ft Required 3,000 1,500 Construction Rate/Sq.Ft 1,200 1,000 Total Cost (PKR) 3,600,000 1,500,000 20,000 2,692,800 7,812,800

It is recommended that the proposed project should be constructed on leased/purchased land rather than rented space to maximize monthly revenue and to increase viability of the project. 6. 4 Utilities and Infrastructure Requirement Basic utilities like electricity, gas and water are required for operating the project.

All cost estimates are based on June 2008 market prices

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STARTING A SUCCESSFUL BEACH RESORT BUSINESS

From small restaurants and motels to large size hotels, more and more tourist stay areas are popping up in attractive places in the country. Since hospitality services are becoming a common business venture, people must also enjoy running them. However, all of those advantages come at a price building and operating such a structure from scratch and that too for the first time in areas like Gwadar is not an easy task. It is a hard and expensive process, and the reality is that many resorts/hotels fail in their first year of business due to improper planning and forecasting. But rest assured there are ways to reduce the risk of becoming another statistic. Following are some of the handy tips that can help run a successful beach resort establishment. 7. 1 How to Start a Beach Resort?

7.1.1 Work in a Similar Hospitality Business One of the best ways to reduce the risk of owning a failed resort is to have some hospitality service providing experience before you start your own. Many successful hotel/motel/resort owners have said that the best way to prepare for owning a similar setup is by working in one. You will learn more than just how to receive guests and provide your services with a smile, you can learn marketing, venue management, payroll, and other significant components. Working in the hotel industry and learning the basics is an important first step to becoming a successful owner. 7.1.2 Know Your Target Market Who does the investor see as guests in his/her resort? Is he/she targeting the whole family, youngsters, seniors, or corporate people? Knowing the target market before start planning will not only help the investor solidify his/her overall services but it will also help determine the location, decor and the overall atmosphere of the resort. A family-style resort, which caters to parents and their kids, may not appeal to seniors and/or corporate clients. On the other hand, an upscale, quiet atmosphere offering a two-hour dining experience wouldn't be appealing to teenagers or families with small children. 7.1.3 Develop a Business Plan Like any other type of company, a beach resort will need a concise business plan. This plan should include but is not limited to: the overall concept and goal of the business, specific financial information and projections, a description of the target market, the services, menu and pricing, equipment and employee details, advertising and marketing plan, and a potential exit strategy. 7.1.4 Choose a Location & Layout It is important to find a location that has a continuous stream of traffic, convenient parking, and is in proximity to other businesses. For a beach resort, u may want to select a beach a little aside the crowded parts of the area where the visitors could enjoy only the beach and not the traffic and noises that they have become fed up of. On the same time, the investor should also keep in view its easy proximity for the visitors from the main town/city. In addition, if the investor
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acquires the premises on rental basis, he/she should make sure that the monthly rent is in-line with the business plan's projections. Once the location is selected, the layout and design of the interior should be taken into account. Investor should already have a concept of his/her resort in the business plan and bring the concept into the design of the overall structure. When designing the kitchen area, the investor should already have the idea about the daily menu in order to determine what is needed for the food preparation area. 7. 1. 5 Getting the Appropriate Funding

The business plan will help the investor recognize how much money he/she will need to start a beach resort. If unsure about how much money will be needed upfront, talking to other similar business owners can help project the expected start-up costs. 7.1.6 Be Familiar with Safety Regulations Hotels, motels, restaurants, and resorts are regulated and subject to inspection, and failing to be up to speed with these regulations could be detrimental to the facility. Therefore it is necessary to consult with similar business owners/related govt. departments to become familiar with what one must do to meet the necessary legal requirements. 7.1.7 Hiring Employees One of the biggest challenges hotels and resorts face is the lack of qualified labor. In order to get and retain qualified employees, make sure that the pay scales relate clearly to the job's duties and responsibilities. In addition, find out what other similar setups are paying their employees so that you can be competitive in the job market, without spending too much on payroll. However the investor should try linking the payroll with the bottom line and see how much money can be squeezed out for the employees. Similarly, giving priority of hiring the local people in the staff gives another advantage as they might be more aware of the local customs/traditions and would help develop such atmosphere to attract/satisfy customers. In case of difficulty in finding trained/educated staff, investor may want to train the staff after hiring them according to the business needs and requirements. 7.1.8 Advertise & Market Every business needs a comprehensive marketing plan and such a setup that never has existed before certainly would need a lot of concentration for its proper introduction in the market. After determining marketing budget, price out billboard advertising, flyers in newspapers, and local cable TV advertising. Ask the customers how they found out about your setup and service, so that you can record where the advertising and marketing money could be best spent. 7. 2 Deciding on the Layout

Layout and design are major factors in introduction phase of any hospitality business. You'll need to take into account the size and layout of the reception area, kitchen space, conference hall, and especially the individual huts.

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Separate Bamboo Huts This component should be the main focus of attention while designing its external and internal layout. The proposed material for constructing the huts is bamboo as it would provide the natural and a bit different look. Similarly, living in a bamboo hut would provide a very unique experience to the visitors/tourists especially the domestic visitors as a major portion of such customers/clients have never had such experience. Since its a beach resort, therefore all the openings of huts should be directed towards the sea shores. Also the space between the huts should be reasonable enough to provide privacy to visitors.

Kitchen Operations and Dining Area. The proposed setup is to hand over the kitchen on Monthly Theka basis. While selecting the contractee, the investor should analyze their previous experience in catering and related services and should discuss/consult the contractee before designing the layout of the kitchen and dining area so that it should meet their requirements. Once again, the ocean view should be kept in mind in designing the layout of the indoor/outdoor dining area. To accommodate the different groups of customers, use tables for four that can be pushed together in areas where there is ample floor space. This gives you flexibility in accommodating both small and large parties. Place movable umbrella shades on the open dining areas (as proposed the facility will have open terrace on the first floor besides the indoor dining hall) so that the visitors find it comfortable having meals under the sunlight.

Reception Area For any hospitality business, the layout of the reception area plays a very important role in attracting and retaining clients. Make sure that the layout should be reasonably large, comfortable and attractive. Similarly, there should be plenty of sitting areas so that visitors could comfortably wait for reservation in peak season.

Conference Hall Since Gwadar has become the focus of not only public sector but also private sector businesses/companies, therefore it is expected that there is a dire need of such a facility to accommodate such customers. The conference hall normally is used for organizing seminars, workshops and training programs. The investor should make sure that the layout of the conference hall should be in a way to house a reasonable number of people comfortably in one time. Ocean view window openings concept can also be used for designing the layout of the conference hall.

7. 3

Hiring the Right Employees

Choosing employees who will do a good job is not only important to the success of the business, but will also contribute to the overall first and last image of the beach resort, provided they are properly trained. There are several categories of personnel in the hospitality business such as manager, receptionist, servers, housekeepers, cooks, dishwashers and cleaners. When the business is still new, some employees' duties may cross over from one category to another. For example, your servers may double as the cleaners. The investor should be sure to hire people who are willing to be flexible in their duties.
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7. 4

A Good Hospitality Business Experience

Based on some surveys conducted, following are some of the factors that contribute to a good hospitality business experience: Location Characteristics Welcome Food Environment (parking, restrooms, lighting) Dessert Variety Smile factor Time factor/quick service The server should greet visitors/tourists on the main gate The server should be neat and clean The server should not be too chatty or familiar The server should know the menu and be able to answer questions

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8
8. 1

PROJECT ECONOMICS
Project Cost Amount in (Rs.) 60,000 7,812,800 786,000 660,000 115,000 89,331 9,523,131 9,450 39,300 200,000 248,750

Description Land Building & Infrastructure Machinery & Equipment Furniture & Fixtures Office Equipment Pre-operating costs Total Capital Cost Working Capital Raw Material Inventory Upfront Insurance Payment Cash Total Working Capital

Total Project Cost

8. 2 Project Returns Equity 41% 22% 3.08 11,809,899

9,771,881

Description IRR MIRR Pay Back Period (Yrs) Net Present Value (NPV) 8. 3 Project Financing

Project 36% 18% 3.20 15,848,688

Description Equity Financing Debt Financing Total

Percentage 70% 30%

Amount in Rs 6,819,710 2,952,171 9,771,881

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FINANCIAL ANALYSIS
Financial Evaluation Summary of Pre-Feb Beach Resort
Key Variables Total Investment in Project Equity Debt Lease Interest Rate Debt Tenure Total Number of Employees

SMEDA

70% 30% 0%

9,771,881 6,819,710 2,952,171 15% 5 17 Rs. in actuals Year 10 7,464,163 12,016,936 51% 53% -

Free Cash Flow to Equity (FCFE) Free Cash Flow to Firm (FCFF) Profit margin on sales ROE Times interest earned

Year 1 1,168,850 1,952,106 28% 15% 4.28

Year 2 2,541,288 3,338,994 40% 30% 9.65

Year 3 2,859,183 3,673,506 42% 33% 13.59

Year 4 3,266,733 4,100,165 45% 35% 21.43

Year 5 3,676,202 4,531,608 47% 39% 44.92

Year 6 4,986,232 4,986,232 49% 42% -

Year 7 5,511,006 5,511,006 49% 45% -

Year 8 6,089,690 6,089,690 50% 47% -

Year 9 6,727,770 6,727,770 51% 50% -

Internal Rate of Return (IRR) Modified Internal Rate of Return (MIRR)* Payback Period (yrs) Net Present Value (NPV)

@ 16%

Equity 41% 22% 3.08 11,809,899

@ 12%

Project 36% 18% 3.20 15,848,688

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9. 1

Projected Income Statement

SMEDA
Year 1 Year 2 6,336,000 1,486,860 4,849,140 Year 3 6,969,600 1,602,727 5,366,873 Year 4 7,666,560 1,728,409 5,938,151 Year 5 8,433,216 1,864,793 6,568,423 Year 6 9,276,538 2,012,846 7,263,691 Year 7 10,204,191 2,173,629 8,030,562 Year 8 11,224,610 2,348,302 8,876,309 Year 9 12,347,072 2,538,133 9,808,938 Rs. in actuals Year 10 13,581,779 2,744,514 10,837,264

Statement Summaries
Income Statement

Revenue Cost of goods sold Gross Profit General administration & selling expenses Administration expense Utilities expense Travelling & Comm. expense (phone, fax, etc.) Office expenses (stationary, etc.) Promotional expense Insurance expense Professional fees (legal, audit, etc.) Depreciation expense Amortization expense Miscellaneous expense Subtotal Operating Income Income from Kitchen Theka and Hall Rental Earnings Before Interest & Taxes Interest expense Earnings Before Tax Tax NET PROFIT/(LOSS) AFTER TAX Balance brought forward Total profit available for appropriation Owner's Withdrawals Balance carried forward

4,032,000 1,174,800 2,857,200

506,760 15,000 73,800 19,680 403,200 39,300 40,320 507,990 17,866 1,623,916 1,233,284 660,000 1,893,284 442,826 1,450,458 319,101 1,131,357

557,436 15,900 81,180 21,648 633,600 35,370 63,360 507,990 17,866 1,934,350 2,914,790 726,000 3,640,790 377,148 3,263,642 718,001 2,545,641 565,679 3,111,320 1,555,660 1,555,660

613,180 16,854 89,298 23,813 696,960 31,440 69,696 507,990 17,866 2,067,097 3,299,777 798,600 4,098,377 301,618 3,796,759 835,287 2,961,472 1,555,660 4,517,132 2,258,566 2,258,566

674,498 17,865 98,228 26,194 766,656 27,510 76,666 507,990 17,866 2,213,472 3,724,678 878,460 4,603,138 214,759 4,388,379 965,443 3,422,936 2,258,566 5,681,502 2,840,751 2,840,751

741,947 18,937 108,051 28,813 843,322 23,580 84,332 507,990 17,866 2,374,838 4,193,585 966,306 5,159,891 114,871 5,045,020 1,109,904 3,935,115 2,840,751 6,775,866 3,387,933 3,387,933

816,142 20,073 118,856 31,695 927,654 19,650 92,765 507,990 2,534,825 4,728,866 1,062,937 5,791,803 5,791,803 1,274,197 4,517,606 3,387,933 7,905,539 3,952,770 3,952,770

897,756 21,278 130,741 34,864 1,020,419 15,720 102,042 507,990 2,730,811 5,299,751 1,169,230 6,468,982 6,468,982 1,423,176 5,045,806 3,952,770 8,998,575 4,499,288 4,499,288

987,532 22,554 143,815 38,351 1,122,461 11,790 112,246 507,990 2,946,740 5,929,569 1,286,153 7,215,722 7,215,722 1,587,459 5,628,263 4,499,288 10,127,551 5,063,776 5,063,776

1,086,285 23,908 158,197 42,186 1,234,707 7,860 123,471 507,990 3,184,603 6,624,335 1,414,769 8,039,103 8,039,103 1,768,603 6,270,501 5,063,776 11,334,276 5,667,138 5,667,138

1,194,914 25,342 174,017 46,404 1,358,178 3,930 135,818 507,990 3,446,592 7,390,672 1,556,245 8,946,918 8,946,918 1,968,322 6,978,596 5,667,138 12,645,734 6,322,867 6,322,867

1,131,357 565,679 565,679

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9. 2

Projected Balance Sheet

SMEDA
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Rs. in actuals Year 10

Statement Summaries
Balance Sheet

Assets Current assets Cash & Bank Accounts receivable Raw material inventory Pre-paid insurance Total Current Assets Fixed assets Land Building/Infrastructure Machinery & equipment Furniture & fixtures Office equipment Total Fixed Assets Intangible assets Pre-operation costs Total Intangible Assets TOTAL ASSETS Liabilities & Shareholders' Equity Current liabilities Accounts payable Other liabilities Total Current Liabilities Other liabilities Deferred tax Long term debt Total Long Term Liabilities

200,000 9,450 39,300 248,750

803,171 165,699 14,884 35,370 1,019,123

1,788,799 213,041 16,409 31,440 2,049,689

2,389,416 273,403 18,091 27,510 2,708,420

2,815,399 300,743 19,946 23,580 3,159,667

3,103,667 330,817 21,990 19,650 3,476,125

4,137,129 363,899 24,244 15,720 4,540,993

5,148,847 400,289 26,729 11,790 5,587,655

6,174,762 440,318 29,469 7,860 6,652,408

7,235,394 484,350 32,489 3,930 7,756,163

8,376,690 532,785 8,909,474

60,000 7,812,800 786,000 660,000 115,000 9,433,800

60,000 7,422,160 707,400 627,000 109,250 8,925,810

60,000 7,031,520 628,800 594,000 103,500 8,417,820

60,000 6,640,880 550,200 561,000 97,750 7,909,830

60,000 6,250,240 471,600 528,000 92,000 7,401,840

60,000 5,859,600 393,000 495,000 86,250 6,893,850

60,000 5,468,960 314,400 462,000 80,500 6,385,860

60,000 5,078,320 235,800 429,000 74,750 5,877,870

60,000 4,687,680 157,200 396,000 69,000 5,369,880

60,000 4,297,040 78,600 363,000 63,250 4,861,890

60,000 3,906,400 330,000 57,500 4,353,900

89,331 89,331 9,771,881

71,465 71,465 10,016,398

53,598 53,598 10,521,108

35,732 35,732 10,653,983

17,866 17,866 10,579,373

10,369,975

10,926,853

11,465,525

12,022,288

12,618,053

13,263,374

22,971 22,971

33,971 33,971

35,740 35,740

37,605 37,605

39,571 39,571

41,645 41,645

43,832 43,832

46,139 46,139

48,573 48,573

48,197 48,197

2,952,171 2,952,171

93,720 2,514,318 2,608,038

100,980 2,010,787 2,111,767

108,240 1,431,727 1,539,967

115,500 765,807 881,307

122,760 122,760

112,728 112,728

102,696 102,696

92,664 92,664

82,632 82,632

72,600 72,600

Shareholders' equity Paid-up capital 6,819,710 Retained earnings Total Equity 6,819,710 TOTAL CAPITAL AND LIABILITIES 9,771,881

6,819,710 565,679 7,385,389 10,016,398

6,819,710 1,555,660 8,375,370 10,521,108

6,819,710 2,258,566 9,078,276 10,653,983

6,819,710 2,840,751 9,660,461 10,579,373

6,819,710 3,387,933 10,207,643 10,369,975

6,819,710 3,952,770 10,772,480 10,926,853

6,819,710 4,499,288 11,318,998 11,465,525

6,819,710 5,063,776 11,883,486 12,022,288

6,819,710 5,667,138 12,486,848 12,618,053

6,819,710 6,322,867 13,142,577 13,263,374

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9. 3

Projected Cash Flow Statement

SMEDA
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Rs. in actuals Year 10

Statement Summaries
Cash Flow Statement

Operating activities Net profit Add: depreciation expense amortization expense Deferred income tax Accounts receivable Raw material inventory Advance insurance premium Accounts payable Other liabilities Cash provided by operations

(9,450) (39,300) (48,750)

1,131,357 507,990 17,866 93,720 (165,699) (5,434) 3,930 22,971 1,606,702

2,545,641 507,990 17,866 7,260 (47,342) (1,526) 3,930 10,999 3,044,818

2,961,472 507,990 17,866 7,260 (60,362) (1,682) 3,930 1,769 3,438,244

3,422,936 507,990 17,866 7,260 (27,340) (1,854) 3,930 1,865 3,932,653

3,935,115 507,990 17,866 7,260 (30,074) (2,044) 3,930 1,966 4,442,009

4,517,606 507,990 (10,032) (33,082) (2,254) 3,930 2,073 4,986,232

5,045,806 507,990 (10,032) (36,390) (2,485) 3,930 2,187 5,511,006

5,628,263 507,990 (10,032) (40,029) (2,740) 3,930 2,307 6,089,690

6,270,501 507,990 (10,032) (44,032) (3,021) 3,930 2,434 6,727,770

6,978,596 507,990 (10,032) (48,435) 32,489 3,930 (375) 7,464,163

Financing activities Change in long term debt 2,952,171 Issuance of shares 6,819,710 Purchase of (treasury) shares Cash provided by / (used for) financing activities 9,771,881 Investing activities Capital expenditure (9,523,131) Acquisitions Cash (used for) / provided by investing activities (9,523,131) NET CASH Cash balance brought forward Cash available for appropriation Owner's Withdrawals Cash carried forward 200,000

(437,853) (437,853)

(503,531) (503,531)

(579,060) (579,060)

(665,919) (665,919)

(765,807) (765,807)

1,168,850 200,000 1,368,850 565,679 803,171

2,541,288 803,171 3,344,459 1,555,660 1,788,799

2,859,183 1,788,799 4,647,982 2,258,566 2,389,416

3,266,733 2,389,416 5,656,150 2,840,751 2,815,399

3,676,202 2,815,399 6,491,600 3,387,933 3,103,667

4,986,232 3,103,667 8,089,899 3,952,770 4,137,129

5,511,006 4,137,129 9,648,135 4,499,288 5,148,847

6,089,690 5,148,847 11,238,537 5,063,776 6,174,762

6,727,770 6,174,762 12,902,532 5,667,138 7,235,394

7,464,163 7,235,394 14,699,557 6,322,867 8,376,690

200,000 200,000

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10 KEY ASSUMPTIONS
10. 1 Project Capacity Assumptions Calculation 08 180 (6 months) 08 * 180 = 1,440 Units 70% 30% 100%

Description Number of Huts Assumed total No. of Business Days Total Assumed Capacity Capacity Utilization 1st Year Growth in Capacity Utilization Maximum Attainable Capacity 10. 2 Revenue Assumptions

Description Hut Rent / Night Rent Growth Rate / Year Yearly Income from Kitchen Theka Yearly Income from Hall Rental 1st Year Revenue from Hut Rentals 1 Year Total Additional Income 10. 3 Economic Assumptions 6% 6% 6% 10%
st

Calculation Rs. 4,000 10% Rs. 420,000 (Rs. 35,000/month) Rs. 240,000 (24 events, Rs. 10,000 rent / event) 4,000 * (1,440*0.70) = Rs. 4,032,000 420,000 + 240,000 = Rs. 660,000

Electricity Price Growth Rate Gas Price Growth Rate Water Price Growth Rate Salary Growth Rate 10. 4 Expense Assumptions

Communication Expense Office Expense Promotional Expense Professional Fee (Legal, Audit etc) Administration Benefit Expense
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15% of administration expense 4% of administration expense 10% of revenue 1% of revenue 3% of administration expense

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Operating Cost Growth Rate Machinery & Equipment Insurance Rate 10. 5 Depreciation Expense Assumptions

5% 5%

Depreciation Method Building & Infrastructure Machinery & Equipment Furniture & Fixtures Office Equipment 10. 6 Cost of Goods Sold

Straight Line 5% 10% 5% 5%

All the direct costs that directly affect the revenue of any project are called Cost of Goods Sold (COGS). For a beach resort, following are the components and estimated value of COGS in the first year: Description Daily Hut Makeup Cost Direct Labor Cost Equipment Maintenance Direct Electricity Cost Direct Water Cost Total COGS 10. 7 Cash flow Assumptions 15 30 200,000 Daily Cost 225 * 8 =1,800 Total Yearly Cost (6 months) Rs. 1,800 * (180*.70) = 226,800 696,000 37,800 189,000 25,200 1,174,800

Accounts Receivables Cycle (In Days) Accounts Payable Cycle (In Days) Initial Cash in Bank 10. 8 Debt Equity Long Term Debt Interest Rate Tax Treatment Discount Rate for NPV (WACC) Financing Assumptions

30% 70% 15% Sole proprietorship 12

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