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THE HOTEL RECOVERY ANALYSIS

Constants Variables 2014 2015 2016


Minimum cash required NA $ 3,000,000.00 $ 3,000,000.00
Number of rooms in hotel NA 750 750
Interest rate on working capital debt owed NA 2% 2%
Income tax rate NA 35% 35%
Expected occupancy rate NA 60% 60%
Rent offered for 50 rooms by local college NA $ 3,000,000 $ 3,100,000
Expected sale price of a time-share unit NA $ 100,000 $ 103,000
Average daily amenity revenue per room rental NA $ 30 $ 31
Expected operating expense NA $ 33,500,000 $ 33,750,000
Interest on construction loan NA $ 773,534 $ 716,177
Construction loan principal payment NA $ 1,433,918 $ 1,491,275

Inputs Variables 2014 2015 2016


Rent fifty rooms to college? (Y/N) NA Yes No
Number of rooms sold to time-share NA 6 5
Inflation rate NA 3% 3%

Calculations 2014 2015 2016


Average daily room rate $ 170.00 175.10 180.35
Complete hotel room rental revenue in year NA $ 28,760,175.00 $ 29,622,980.25
Hotel room rental lost to sold time-shares NA 230,081.40 197,486.54
Hotel room rental lost to college NA 1,917,345.00 1,974,865.35
Revenue from sale of time-share units NA $ 600,000 $ 515,000
Number of hotel rooms available NA 694 695
Number of hotel room rentals in year NA 151,986.00 152,205.00
Amenity revenue in year NA 4,559,580.00 4,718,355.00
Maintenance revenue NA 560,000.00 550,000.00
College remodeling expense NA 200,000.00 $0.00
Time-share remodeling expense NA 6000 5000

Income and Cash Flow Statements 2014 2015 2016


Beginning-of-year cash on hand NA $ 3,000,000 $ 3,000,000
Revenue:
Hotel room rental NA $ 26,612,748.60 $ 27,450,628.37
Amenity revenue NA 4,559,580.00 4,718,355.00
Maintenance revenue NA 560,000.00 550,000.00
Rent from college for 50 rooms NA 3,000,000.00 3,100,000.00
Sale of time-share units NA $ 600,000 $ 515,000
Total Revenue NA $ 35,332,328.60 $ 36,333,983.37
Operating expenses:
Operating expense NA $ 33,500,000 $ 33,750,000
College remodeling expense NA 200,000.00 $0.00
Time-share remodeling expense NA 6000 5000
Total operating expense NA $ 33,706,000 $ 33,755,000
Income before interest expense NA $ 1,626,328.60 $ 2,578,983.37
Interest expense: NA
Construction loan NA $ 773,534 $ 716,177
Working capital loan NA 300,000.00 321,492.03
Total interest expense NA $ 1,073,534 $ 1,037,669
Income before taxes NA $ 552,794.60 $ 1,541,314.33
Income tax expense NA 193478.11 539460.01718
Net income (loss) after taxes NA $ 359,316.49 $ 1,001,854.32

Construction loan principal payment NA $ 1,433,918 $ 1,491,275

Net cash position (NCP) NA $ 1,925,398.49 $ 2,510,579.32


Borrowing from city government in year NA 1074601.51 489420.68238
Repayment to city government in year NA 0 0
End-of-year cash on hand $ 3,000,000 $ 3,000,000.00 $ 3,000,000.00

Working Capital Debt Owed 2014 2015 2016


Beginning-of-year debt owed NA 15,000,000.00 $ 16,074,601.51
Borrowing from city government NA 1074601.51 489420.68238
Repayment to city government NA 0 0
End-of-year debt owed to city government 15,000,000.00 $ 16,074,601.51 $ 16,564,022.19

Summary of Results 2014 2015 2016


Income before interest expense NA $ 1,626,328.60 $ 2,578,983.37
Net Income (Loss) in Year NA $ 359,316.49 $ 1,001,854.32
End-of-Year cash on hand NA $ 3,000,000 $ 3,000,000
End-of-year debt owed to city government NA 15,000,000.00 16,074,601.51
LYSIS
One Time Expense Amount
2017 2018 Maintanance fee 10,000.00
$ 3,000,000.00 $ 3,000,000.00 Remodeling Fee(Rented) 200,000.00
750 750 Time-share remodeling expense 1000
3% 3%
35% 35%
60% 60%
$ 3,200,000 $ 3,300,000
$ 105,000 $ 107,000
$ 32 $ 33
$ 34,000,000 $ 34,250,000
$ 656,526 $ 594,489
$ 1,550,926 $ 1,612,963

2017 2018
No No Since the college only needs 50 Rooms there will not be another rent on the next year.
8 10
3% 3%
the base for the rest of other average rate
2017 2018
185.76 191.34
$ 30,511,669.66 $ 31,427,019.75
325,457.81 419,026.93
2,034,111.31 2,095,134.65
$ 840,000 $ 1,070,000
692 690
151,548.00 151,110.00
4,849,536.00 4,986,630.00
580,000.00 600,000.00
$0.00 $0.00
8000 10000

2017 2018
$ 3,000,000 $ 3,000,000

$ 28,152,100.54 $ 28,912,858.17
4,849,536.00 4,986,630.00
580,000.00 600,000.00
3,200,000.00 3,300,000.00
$ 840,000 $ 1,070,000
$ 37,621,636.54 $ 38,869,488.17

$ 34,000,000 $ 34,250,000
$0.00 $0.00
8000 10000
$ 34,008,000 $ 34,260,000
$ 3,613,636.54 $ 4,609,488.17

$ 656,526 $ 594,489
496,920.67 495,474.74
$ 1,153,447 $ 1,089,964
$ 2,460,189.87 $ 3,519,524.42
861066.455042 1231833.54846
$ 1,599,123.42 $ 2,287,690.88

$ 1,550,926 $ 1,612,963

$ 3,048,197.42 $ 3,674,727.88
0 0
$48,197.42 $674,727.88
$ 3,000,000.00 $ 3,000,000.00

2017 2018
$ 16,564,022.19 $ 16,515,824.78
0 0
$ 48,197.42 $ 674,727.88
$ 16,515,824.78 $ 15,841,096.90

2017 2018
$ 3,613,636.54 $ 4,609,488.17
$ 1,599,123.42 $ 2,287,690.88
$ 3,000,000 $ 3,000,000
16,564,022.19 16,515,824.78
another rent on the next year.
THE HOTEL RECOVERY ANALYSIS

Constants Variables 2014 2015 2016

Minimum cash required NA $ 3,000,000.00 $ 3,000,000.00

Number of rooms in hotel NA 750 750


Interest rate on working capital debt owed NA 2% 2%
Income tax rate NA 35% 35%
Expected occupancy rate NA 60% 60%
Rent offered for 50 rooms by local college NA $ 3,000,000 $ 3,100,000
Expected sale price of a time-share unit NA $ 100,000 $ 103,000
Average daily amenity revenue per room rental NA $ 30 $ 31
Expected operating expense NA $ 33,500,000 $ 33,750,000
Interest on construction loan NA $ 773,534 $ 716,177
Construction loan principal payment NA $ 1,433,918 $ 1,491,275

Inputs Variables 2014 2015 2016


Rent fifty rooms to college? (Y/N) NA Yes No
Number of rooms sold to time-share NA 10 10
Inflation rate NA 3% 3%

Calculations 2014 2015 2016


Average daily room rate $ 170.00 175.10 180.35
Complete hotel room rental revenue in year NA $ 28,760,175.00 $ 29,622,980.25
Hotel room rental lost to sold time-shares NA 383,469.00 394,973.07
Hotel room rental lost to college NA 1,917,345.00 1,974,865.35
Revenue from sale of time-share units NA $ 1,000,000 $ 1,030,000
Number of hotel rooms available NA 690 690
Number of hotel room rentals in year NA 151,110.00 151,110.00
Amenity revenue in year NA 4,533,300.00 4,684,410.00
Maintenance revenue NA 600,000.00 600,000.00
College remodeling expense NA 200,000.00 $0.00
Time-share remodeling expense NA 10000 10000

Income and Cash Flow Statements 2014 2015 2016


Beginning-of-year cash on hand NA $ 3,000,000 $ 3,000,000
Revenue:
Hotel room rental NA $ 26,459,361.00 $ 27,253,141.83
Amenity revenue NA 4,533,300.00 4,684,410.00
Maintenance revenue NA 600,000.00 600,000.00
Rent from college for 50 rooms NA 3,000,000.00 3,100,000.00
Sale of time-share units NA $ 1,000,000 $ 1,030,000
Total Revenue NA $ 35,592,661.00 $ 36,667,551.83
Operating expenses:
Operating expense NA $ 33,500,000 $ 33,750,000
College remodeling expense NA 200,000.00 $0.00
Time-share remodeling expense NA 10000 10000
Total operating expense NA $ 33,710,000 $ 33,760,000
Income before interest expense NA $ 1,882,661.00 $ 2,907,551.83
Interest expense: NA
Construction loan NA $ 773,534 $ 716,177
Working capital loan NA 300,000.00 318,159.71
Total interest expense NA $ 1,073,534 $ 1,034,337
Income before taxes NA $ 809,127.00 $ 1,873,215.12
Income tax expense NA 283194.45 655625.29235
Net income (loss) after taxes NA $ 525,932.55 $ 1,217,589.83

Construction loan principal payment NA $ 1,433,918 $ 1,491,275

Net cash position (NCP) NA $ 2,092,014.55 $ 2,726,314.83


Borrowing from city government in year NA 907985.45 273685.17135
Repayment to city government in year NA $0.00 $0.00
End-of-year cash on hand $ 3,000,000 $ 3,000,000.00 $ 3,000,000.00

Working Capital Debt Owed 2014 2015 2016


Beginning-of-year debt owed NA 15,000,000.00 $ 15,907,985.45
Borrowing from city government NA 907985.45 273685.17135
Repayment to city government NA 0 0
End-of-year debt owed to city government 15,000,000.00 $ 15,907,985.45 $ 16,181,670.62

Summary of Results 2014 2015 2016


Income before interest expense NA $ 1,882,661.00 $ 2,907,551.83
Net Income (Loss) in Year NA $ 525,932.55 $ 1,217,589.83
End-of-Year cash on hand NA $ 3,000,000 $ 3,000,000
End-of-year debt owed to city government NA 15,000,000.00 15,907,985.45
LYSIS
One Time Expense Amount

2017 2018 Maintanance fee 10,000.00


Remodeling
$ 3,000,000.00 $ 3,000,000.00 Fee(Rented) 200,000.00

Time-share
remodeling
750 750 expense 1000
3% 3%
35% 35%
60% 60%
$ 3,200,000 $ 3,300,000
$ 105,000 $ 107,000
$ 32 $ 33
$ 34,000,000 $ 34,250,000
$ 656,526 $ 594,489
$ 1,550,926 $ 1,612,963 Data Base for decision

2017 2018 2015 2016 2017


No No Orginal Data $1,626,328.60 $2,578,983.37 $3,613,636.54
10 10 $359,316.49 $1,001,854.32 $1,599,123.42
3% 3% $3,000,000.00 $3,000,000.00 $3,000,000.00
$15,000,000.00 $16,074,601.51 $16,564,022.19
2017 2018 No Change 2015 2016 2017
185.76 191.34 $187,675.00 $964,730.25 $1,767,669.66
$ 30,511,669.66 $ 31,427,019.75 -$885,859.00 -$97,842.29 $353,519.94
406,822.26 419,026.93 $3,000,000.00 $3,000,000.00 $3,000,000.00
2,034,111.31 2,095,134.65 $15,000,000.00 $17,319,777.00 $18,908,894.29
$ 1,050,000 $ 1,070,000
690 690 Rent Rooms 2015 2016 2017
151,110.00 151,110.00 $1,241,830.00 $2,250,414.90 $3,083,158.35
4,835,520.00 4,986,630.00 $109,392.40 $785,035.80 $1,245,211.11
600,000.00 600,000.00 $3,000,000.00 $3,000,000.00 $3,000,000.00
$0.00 $0.00 $15,000,000.00 $16,324,525.60 $17,030,764.80
10000 10000 SaleTime-shares 2015 2016 2017
$828,506.00 $1,621,867.18 $2,430,767.40
2017 2018 -$245,028.00 $371,872.32 $806,189.11
$ 3,000,000 $ 3,000,000 $3,000,000.00 $3,000,000.00 $3,000,000.00
$15,000,000.00 $16,678,946.00 $17,798,348.68
$ 28,070,736.08 $ 28,912,858.17 Do Both
4,835,520.00 4,986,630.00 2015 2016 2017
600,000.00 600,000.00 $1,882,661.00 $2,907,551.83 $3,746,256.08
3,200,000.00 3,300,000.00 $525,932.55 $1,217,589.83 $1,692,781.98
$ 1,050,000 $ 1,070,000 $3,000,000.00 $3,000,000.00 $3,000,000.00
$ 37,756,256.08 $ 38,869,488.17 $15,000,000.00 $15,907,985.45 $16,181,670.62

$ 34,000,000 $ 34,250,000
$0.00 $0.00
10000 10000
$ 34,010,000 $ 34,260,000
$ 3,746,256.08 $ 4,609,488.17

$ 656,526 $ 594,489
485,450.12 481,194.44
$ 1,141,976 $ 1,075,683
$ 2,604,279.97 $ 3,533,804.73
911497.9881908 1236831.654852
$ 1,692,781.98 $ 2,296,973.07

$ 1,550,926 $ 1,612,963

$ 3,141,855.98 $ 3,684,010.07
0 0
$141,855.98 $684,010.07
$ 3,000,000.00 $ 3,000,000.00

2017 2018
$ 16,181,670.62 $ 16,039,814.64
0 0
$141,855.98 $ 684,010.07
$ 16,039,814.64 $ 15,355,804.57

2017 2018
$ 3,746,256.08 $ 4,609,488.17
$ 1,692,781.98 $ 2,296,973.07
$ 3,000,000 $ 3,000,000
16,181,670.62 16,039,814.64
cision

2018
$4,609,488.17
$2,287,690.88
$3,000,000.00
$16,515,824.78
2018
$2,597,269.75
$909,734.63
$3,000,000.00
$20,106,300.35

2018
$3,940,785.10
$1,837,031.11
$3,000,000.00
$17,336,479.69
2018
$3,265,972.82
$1,374,874.31
$3,000,000.00
$18,543,085.57

2018
$4,609,488.17
$2,296,973.07
$3,000,000.00
$16,039,814.64
Variables 2015 2016 2017
Income before interest expense $187,675.00 $964,730.25 $1,767,669.66
Net Income (Loss) in Year -$885,859.00 -$97,842.29 $353,519.94
End-of-Year cash on hand $3,000,000.00 $3,000,000.00 $3,000,000.00
End-of-year debt owed to city government $15,000,000.00 $17,319,777.00 $18,908,894.29

Short Analysis Sumary


As we can see from the graph, the hotel net income is negative during the year 2015 and even less in
the rest of the year. from this we can infer, the hotel will not servive with status quo decision. Thefore,
the hotel should look another solution to stay in the market.
2018 No Change Decision
$2,597,269.75
$909,734.63 $25,000,000.00

$3,000,000.00
$20,106,300.35
$20,000,000.00

2015 and even less in


uo decision. Thefore,
$15,000,000.00

$10,000,000.00

$5,000,000.00

$0.00
2015 2016 2017 2018

-$5,000,000.00

Income before i nterest expens e Net Income (Los s ) i n Yea r


End-of-Year cas h on hand End-of-yea r debt owed to ci ty government
2018

nt
Variables 2015 2016 2017 2018
Income before interest expense $828,506.00 $1,621,867.18 $2,430,767.40 $3,265,972.82
Net Income (Loss) in Year -$245,028.00 $371,872.32 $806,189.11 $1,374,874.31
End-of-Year cash on hand $3,000,000.00 $3,000,000.00 $3,000,000.00 $3,000,000.00
End-of-year debt owed to city government $15,000,000.00 $16,678,946.00 $17,798,348.68 $18,543,085.57

Sell Time shares Decision Anayisis

When selling rooms to the time-share company, the hotel’s Net Income after Taxes is negative in 2015 with
the ballance of $245,028.00. In addition the income is still low to cover the debt or to have the 3 million cash
positions at the end of each year. Therfore, the Hotel shouldnt take this decison as a guarantee to stay in the
market this the net income will not cover the demand.
Sell Time-Shares Scenario

$20,000,000.00

$15,000,000.00

$10,000,000.00
015 with
illion cash
stay in the $5,000,000.00

$0.00
2015 2016 2017 2018

-$5,000,000.00
Income before i nterest expens e Net Income (Los s ) i n Year
End-of-Year cas h on ha nd End-of-year debt owed to ci ty government
Decistion Variables 2015 2016 2017 2018
Income before interest expense $1,241,830.00 $2,250,414.90 $3,083,158.35 $3,940,785.10
Net Income (Loss) in Year $109,392.40 $785,035.80 $1,245,211.11 $1,837,031.11
End-of-Year cash on hand $3,000,000.00 $3,000,000.00 $3,000,000.00 $3,000,000.00
End-of-year debt owed to city government $15,000,000.00 $16,324,525.60 $17,030,764.80 $17,336,479.69

Analysis of Renting 50 Rooms to the College


The second scenario is renting 50 rooms to the college. This is the best second scenario. The average End-of-
year debt owed to the city government is $1.7 million. Only in the long run will the hotel be able to report
favorable Net Income after Taxes if Inflation Rate(s) maintain at 1%, 2%, 3%, and 4% respectively for each year.
The hotel has 700 remaining rooms. This will help the hotel in the long run to cover fixed costs. As per the
analysis of this data, the hotel should rent the 50 rooms to the college to stay in the market. Lastly, the hotel
can cover 3 million dollars that they needs to have at end of each year. Eventhough the net income is positive it
is not number one solution to the hotel since renting and selling share decisions outshine this scenarios.
Therefore, this scenario is the second best solution to the hotel to pay debt and have some cash positions.
Rent Room Senario
$20,000,000.00

$18,000,000.00

$16,000,000.00

$14,000,000.00

verage End-of- $12,000,000.00


able to report
for each year. $10,000,000.00
ts. As per the
astly, the hotel $8,000,000.00
me is positive it
arios. $6,000,000.00
ositions.
$4,000,000.00

$2,000,000.00

$0.00
2015 2016 2017 2018

Income before i nterest expens e Net Income (Los s ) i n Year


End-of-Year cas h on ha nd End-of-year debt owed to ci ty government
rio

2017 2018

e (Los s ) i n Year
r debt owed to ci ty government
Scenario Summary - The City Hotel Recovery Analysis
Cell
Refere No
nce Change
Changing Cells:
Rent fifty rooms to college? Y- Yes, N-No $D17$ No
Number of rooms sold to time-share 2015 $D18$ 0
Number of rooms sold to time-share 2016 $E18$ 0
Number of rooms sold to time-share 2017 $F18$ 0
Number of rooms sold to time-share 2018 $G18$ 0
Inflation rate 2015 $D19$ 1%
Inflation rate 2016 $E19$ 2%
Inflation rate 2017 $F19$ 3%
Inflation rate 2018 $G19$ 4%
Result Cells:
End-of-year debt owed to city government 2015 $D75$ $15,000,000.00
End-of-year debt owed to city government 2016 $E75$ $17,319,777.00
End-of-year debt owed to city government 2017 $F75$ $18,908,894.29
End-of-year debt owed to city government 2018 $G75$ $20,106,300.35

References are orginated from the data analysis part


covery Analysis
Rent Sell Do
Rooms Time-Shares Both

Yes No Yes
0 10 10
0 10 10
0 10 10
0 10 10
1% 1% 1%
2% 2% 2%
3% 3% 3%
4% 4% 4%

$15,000,000.00 $15,000,000.00 $15,000,000.00


$16,324,525.60 $16,678,946.00 $15,907,985.45
$17,030,764.80 $17,798,348.68 $16,181,670.62
$17,336,479.69 $18,543,085.57 $16,039,814.64
Variables 2015 2016 2017 2018
Income before interest expense $1,882,661.00 $2,907,551.83 $3,746,256.08 $4,609,488.17
Net Income (Loss) in Year $525,932.55 $1,217,589.83 $1,692,781.98 $2,296,973.07
End-of-Year cash on hand $3,000,000.00 $3,000,000.00 $3,000,000.00 $3,000,000.00
End-of-year debt owed to city government $15,000,000.00 $15,907,985.45 $16,181,670.62 $16,039,814.64

Do Both Analysis

Out of all the scenarios, selling shares and renting to the college allows the hotel to report gains in its
Net Income after Taxes each year. As we can see from the graph, the net income is increasing each year.
The other scenarios ran in negative Net Income after Taxes at least one year, and therefore such
scenarios did not decrease End-of-year debt owed to city government. Therefore, this scenario is the
best decision to the owner of the hotel followed by renting 50 rooms. This also helps the hotel to
diversify its portfolio.
Do Both Scenario
$18,000,000.00

$16,000,000.00

$14,000,000.00

$12,000,000.00

$10,000,000.00

$8,000,000.00

$6,000,000.00

$4,000,000.00

$2,000,000.00

$0.00
2015 2016 2017 2018

Income before i nterest expens e Net Income (Los s ) i n Year


End-of-Yea r cas h on hand End-of-year debt owed to ci ty government
2018