HOLIDAY INN EXPRESS HOTEL & SUITES
ST. PAUL SQUARE
Corner of East Commerce & North Swiss
San Antonio, Texas 78205
This study has been prepared to determine the feasibility and the financial
result of building a 91 unit, interior-corridor Holiday Inn Express
Hotel & Suites. The project will be made up of 24 standard
hotel rooms and 67 mini-suites. Parking will be on-site. Importantly,
the site is within easy walking distance of the Riverwalk,
the Alamo, the Alamodome, Ruth's
Chris Steakhouse and Sunset Station nightclub
complex at the Southern Pacific RR Station, the Rivercenter
and the new Convention Center. It is easily accessible
from Interstate 37, and from downtown and Interstate
10 via Commerce Street. Project quality is set
to meet the standards of the Holiday Inn Express brand
name, including a majority of mini-suites of 426 square feet and all amenities;
revenue and cost performance estimates are based on Holiday Express
current market performance and standard costs for the product type.
Key Finding:
It is financially attractive to open the 91
unit Holiday Inn Express Hotel & Suites St. Paul Square. The project's
discounted cash flow yields a 20% pre-tax return on total invested capital.
Assuming a total investment of $5,200,000, with debt at 79% of the total,
return on equity should exceed 50% (pre-tax basis).
This finding is based on a conservative market projection,
where predicted new supply out-paces demand growth and average market
occupancy declines
from 69% currently to 67% over the next ten years. Additionally, this
project is particularly attractive in that it benefits from:
- Having the Holiday Inn reservation system.
- Being
relatively small at 91 units.
- Being the under-supplied 'mini-suite'
product type.
- Opening just after the new Convention Center opens.
With a total investment of $5,200,000, with debt of $4,100,000, return
on equity would exceed 50% (pre-tax basis), as follows:
Investment
| Estimated Land Investment |
$ 500,000 |
| Improvements |
$ 4,700,000 at $51,648 per room |
| Total Investment |
$ 5,200,000 |
| Pre Tax Project Return* |
20.00% |
| Pre Tax Return on Equity** |
57.62% |
* after reserves for renovations,
** assuming 21% equity and 79% debt at a 10.0% pre-tax debt cost; calculated
weighted average.
Annual cash flow for the project, before-tax and after renovation reserves,
would be available for debt service, income tax, and dividends as follows:
| |
% Average
Occupancy |
$ Rate |
REVPAR |
Total Revenue |
$Cash Flow** |
|
| Year 1 |
64.5% |
$84.21* |
$54.34 |
$1,913,258 |
743,691 |
|
| Year 2 |
69.9% |
$92.55 |
$64.67 |
$2,276,814 |
968,877 |
|
| Year 3 |
72.2% |
$96.08 |
$69.32 |
$2,440,684 |
1,039,923 |
|
| Year 4 |
72.0% |
$99.44 |
$71.61 |
$2,521,226 |
1,102,022 |
|
| Year 5 |
71.9% |
$102.92 |
$73.97 |
$2,604,426 |
1,064,369 |
|
| Year 6 |
70.9% |
$106.01 |
$75.14 |
$2,645,443 |
1,064,906 |
|
| Year 7 |
69.9% |
$109.19 |
$76.32 |
$2,687,106 |
729,252 |
|
| Year 8 |
69.6% |
$111.37 |
$77.52 |
$2,729,425 |
907,508 |
|
| Year 9 |
69.3% |
$113.60 |
$78.74 |
$2,772,411 |
1,021,815 |
|
| Year X |
68.8% |
$115.86 |
$79.76 |
$2,808,012 |
8,513,536 |
*** |
* $82 in today's dollars.
** Before Income Tax & Financing
expense, but reflecting $1,394,171 reserves for renovation ($15,321 per
unit)
*** Includes valuing property at Year 10 cash flow at a 12.5% return-to-buyer,
less 4% expense of sale, plus year 10 cash flow.
|
