FEASIBILITY STUDY FOR THE PROPOSED SPA RESORT
DEVELOPMENT AT ANGSERI, TABANAN, BALI
THE SITE
The site is located at Angseri, North of Tabanan Regency, on the northwest of Denpasar. The traveling time from the airport to the site is about 1.5 hours. The site offers interesting land contour and is endowed with natural hot springs
The site covers an area of approximately 12 hectares, 39% of which is freehold ”HGB” land, while the balance is on 30 + 30 years leasehold land.
THE PROPOSED DEVELOPMENT
The proposed design is intended to be luxurious and elegant with the use of local Balinese material resources while preserving the natural beauty of the site and the Balinese way of life.
Guests will enjoy soothing lighting, colors and sounds, lush vegetation/landscape and vivid mountain views from walking path to see the land-a reunion with nature.
The resort will offer comprehensive spa facilities with a global menu of treatments and water therapies utilizing herb & spices, flowers & fruits and mud & clays of Bali and the archipelago. For example, services may include aromatherapy massage, volcanic mud and mineral spring bath soak, traditional massage and spice & flowers facials. Facilities will include village style linked relaxation, treatment and exercise pavilions, water features, wholesome F & B, varied-temperature pools, gardens & outdoor adventure.
DEVELOPMENT COST
The development cost has been estimated as follows:
US$
A. Land 12 hectares 3,000,000
B. Bungalows/Villas 50 villas 2,250,000
C. Spa 1,038,500
D. Amenities & Recreational 1,785,000
E. Support Services 660,000
F. Infrastructure 250,000
G. F, F & E 952,500
H. VAT 633,600
I. Contingency Cost 529,872
J. Professional Fees 837,690
K. Pre-Opening 567,376
L. Interest During Construction 337,622
Total Development Cost 12,842,160
ESTIMATED ANNUAL OPERATING RESULTS
The following is a summary of major revenue and expenses items. For further details and clarification, please refer to attached spreadsheets.
Room Departmental Revenue & Expense
The room revenue is based on the stabilized occupancy of 65% from the 4th year onwards and average daily room rate of US$ 125.00
The room expense is estimated to be 24% of room revenue. This percentage is higher than the industry average of 17% as the proposed resort is of luxurious quality hence requiring better services.
F & B Departmental Revenue & Expense
The F & B revenue is derived from sales the restaurant, lounge and mini bar. The F & B expenditure per person is estimated to range from US$ 6.00 for mini bar to US$ 22.50 for dinner. In line with the hotel industry average, the F & B expense is estimated to be 60% of F & B revenue.
Other Departmental Revenue & Expense
The other departmental revenue comes from guest laundry, transport telephone services. The average expenditure per person per day for the above services is estimated to be US$10.00, USS$12.00 and US$5.00 respectively.
Their related expenses of between 60% and 70% are based on the industry average.
Spa Treatment Revenue & Expense
The spa treatment revenue is based on the assumption that 80% of hotel guests are on spa packages. The average charge per person on spa package is worked out of to be US$73.00, comprising of 2 or 3 treatments per day, while the single treatment is charged at US$60.00.
The bulk of the expenses are staff-related cost and purchase of products used for treatments. These expenses are estimated to be 40% of the revenue.
Spa Meal Revenue & Expense
The spa meal revenue is derived from the average charge per person of US$60.00 for 3 meals per day.
The spa meal expense comprises direct F & B cost, staff-related cost and other expenses, which works out to 60% of spa meal revenue.
Other Revenue & Expense
This revenue comes from the sales of merchandise and health products. The revenue is estimated based on the average expenditure per person of US$15.00 per day.
Undistributed Operating Expenses
These expenses comprise those that are common to the various operating departments and cannot be directly charged to the respective departments. In accordance with the hotel industry practice, these expenses have been estimated as a percentage of the total revenue and their breakdown is as follows:
Hotel Spa
(as a percentage of total revenue)
Administrative & General 8.0% 5.0%
Marketing 6.0% 5.0%
Property Operation 4.0% 3.0%
Energy 6.0% 5.0%
Base Management Fee 3.5% 2.5%
Total Undistributed Exp. 27.5% 20.5%
Fixed Charges
These comprise incentive management fees, buildings & contents insurance and depreciation & amortization.
As in accordance with the normal industry practice, the incentive management fees are charged at the rate of 5% of income before fixed charges.
The insurance premium for hotel is based on US$1.00 per available room per year and for the spa building is 0.5% of total revenue.
The depreciation & amortization expense is based on the useful life of various assets of between 5 years and 20 years.
Income Tax
The Indonesian corporate income tax is levied at 35% of net income.
Profit & Loss
The profit & loss statement indicating the estimated operating results of the proposed spa resort development in Angseri from 2001 to 2010 is attached.
It shows the net after tax profit margin ranging from 10% in 2002 (second year of operation) to 20% in 2010.
INVESTMENT STRUCTURE
The proposed investment structure for the project is as follows:
Equity to be committed : US$ 5,778,972 45%
Debt financing (*) : US$ 7,063,188 55%
Total Investment : US$ 12,684,750 100%
(*) The debt financing is assumed to be for the tenor of 5 years at an interest rate of 6% per annum.
EQUITY SHAREHOLDINGS
The equity share holdings structure is proposed to be as follows:
Foreign Investor : US$ 4,237,913 60%
Domestic Investor : US$ 2,118,956 30%
US$ 7,063,188 100%
FINANCIAL ANALYSIS
We set out below the summary of financial results based on the estimated operating performance of the proposed spa resort development in Angseri.
Internal Rate of Return
(w/terminal value on the 10th year) : 23.3%
Internal Rate of Return in 20 years : 20.8%
Payback Period : 8.5 years
Based on the projected financial performance of the proposed Spa Resort development at Angseri, the project will start generating positive cash flows starting from 2nd year of operation.
