By Emma Davey
Buying the right professional advice can be tricky for individual investors embarking in a new locations or markets.
TRI Hospitality Consulting’s Emma Davey looks at the different forms of advice investors may seek at different stages of the investment and development cycle, and the benefits of each type.
Buying the right professional advice can be tricky, particularly for individual investors embarking in a new geographic location or market segment. The myriad of potential studies on offer from consulting companies often appear to provide similar information which can lead to further confusion.
Although the information can be alike, it is applied differently to give guidance to the specific problem or question that currently needs to be addressed. The tendency can be for the investor to request specific services, without necessarily understanding the life cycle of his project and the potential for benefiting from professional advice at each stage.
Trusting a consulting company to pick the right path and approach to solving your problem, and paying the fee attached to it, can be a giant step for the new investor.
The project lifecycle for hotel development will move through four key stages; firstly conceptualisation, planning and initiation; secondly feasibility; thirdly commitment, design and construction; and finally management and operation.
Consultancy companies, like TRI Hospitality Consulting, can assist with all stages of development but find that a substantial amount of advice is sought during the feasibility stage. Depending on the status of the project and the progress in terms of concept, there are a number of potential areas of assistance and advice that can be provided during the feasibility stage.
Business plan vs feasibility study
You may notice that a business plan does not appear on the list of suggested advice. The confusion between feasibility studies and business plans is common. During the feasibility stage the feasibility study is used to determine the viability of the project; its purpose is to investigate and test potential development options.
Finally it assists the investor to identify the optimum development scenario, for their project.
Do you need a feasibility study?
Even if you are in the fortunate position to be able to fund your project with 100 per cent equity, a feasibility study is always recommended. It can give you confidence in the decisions you have made, allow you to amend your decisions based upon independent advice and detailed market information not previously available to you and provide evidence that the business opportunity has been thoroughly researched.
A study may have already been conducted on the potential investment project, but if the study was conducted more than six months ago or if any of the components of the study have changed, an update would be advisable.
The market can be subject to changes in performance, supply/demand dynamics and legislation over relatively short periods of time, particularly in the rapidly growing hospitality and real estate markets in the Middle East region.
Current market performance is not the only measure of success for a future development. A similar hotel development operating near to your proposed location does not guarantee similar performance and returns. A feasibility study will be able to provide quality information for decision making, identify any areas of concern or propose more appropriate alternatives.
TRI has assisted and advised on hotel management company selections for numerous hotels on behalf of independent hotel owners and institutional owners across the MENA region. TRI Hospitality Consulting is one of the world's leading management consultancies in the fields of hotels, tourism, leisure and real estate.