Hospitality is the business of entertaining guests and visitors. It is a business that involves selling accomodations like hotels or hotel apartments (of different stars ranging from 1 star to 5 star or beyond), or food serving services (like restaurants, bakeries, pasteries etc) or entertainment (like event halls etc). Many a times it comes in combinations. Today the hospitality business model is so complex that you might want to include shopping malls and business parks as well into this sector!
In a beautiful state like Kerala, there is, no doubt, scope for hospitality from Kasargode in the north to Trivandrum in the south. In fact every district in Kerala has scope for hospitality. But what kind of hotels, restaurants, events actually work out in the place where you wish to start, is a totally challenging question. It needs to be planned properly. It should begin with a business model and a feasibility study.
First you have to understand, not all hospitality business will be successful everywhere, you have to customize it. Targeting everybody, as your potential customer, is a recipe to failure.
You may either have your own land or you may be planning to buy one.
If you already have a land, then assess the amount of capital that you can invest (alone or as a group into that project). Based on the possible capital, you can decide if it’s a restaurant or a hotel or a star hotel that you wish to start. It is to be noted that, its not just about capital. Its also about your passion. That also has to be factored in.
Then do the market feasibility. The market feasibility study should be aimed at studying the competitors (that is how many are there, what do they all provide in general, what do they provide individually that makes them different from others, how much do they charge, how are customers responding to them, etc). Once you know the competitors, you know their strenght and weakness. Their weakness is the gap that you have to fill, if it is a profitable gap.
Now study the customers. This is a difficult part, as customers are scattered across the place and they will never really tell you what they want. Since doing a survey is an expensive and not so effective method of knowing the customers, the most practical option is to use your business acumen to decide what the customers might be lacking. This is a tricky part, and you need lot of business experience to do this. Because if your assumption is wrong, you are starting a business that nobody wants. If you get it right, your business will succeed. One way to hack this, or to improve your acumen is to attend seminars, conventions, journals and read industry books related to your area and industry. If it is available. Or engage professional consultants to do it.
Now once you have studied the location, its strategic importance and potential, the competitors (strenght and weakness) and the possible gaps that needs to be filled for the customers, your market feasibility study is ready.
Then you can develop a business model to it. That is design your business model to target a specific group of customers, customize solutions/services for them that make them happy. Set your business wholy to achieve this target.
But you are still not ready to go. You need to know if your selected target customers, the expected business volume, is profitable. That’s why you should prepare the financial feasibility study.
The financial feasibility study, should assess the capital required to set the business up and running. It should assess the operation cost components, the variable and fixed costs involved, tax matters etc and based on all these prepare the projected balance sheets, profit loss projections and cash flow projections for 5, 10 or 15 years or more (depending on the nature of the project). Then evaluate the ratios to know if the profit meets your Return on Investment expectation.
Financial consultants, who usually prepared financial feasibility studies make a mistake of preparing projections without knowing the business model. Knowing the business model affects the cost and revenue inputs in a projection. It is very crucial. In preparing financial reports, understanding the business to the minute level is important.
Once the market and financial feasibility studies are done, you will know if you should proceed with the project or not. If its positive, you should move to the next step of drafting your “Strategy Report”, that is a report that will list how you are going to achieve your ideal business model.It will involve your Branding, Marketing, HR, Investor Management, Operations, MIS etc strategies, budgets and action plan.
If you have the time, expertise and knowledge to do all these tasks, then you are good to go. But if you don’t have the time, expertise or knowledge, then you should engage experts who have experience to bring you a good study report.
At Ameen Ahsan Strategy Consulting (AASC), we are experienced in preparing feasibility studies, project reports, strategy reports, business model development and general business consulting for businesses that aspire to grow. AASC has worked on several project studies across Kerala over the last few years.