FINANCIAL FEASIBILITY ANALYSIS OF XYZ HOTEL’S INVESTMENT ON CORPORATE CATERING BUSINESS IN TIMES OF PANDEMIC

• Main Author: Joshina Wantah, Vannesa
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/57743
• Institution: Institut Teknologi Bandung

Since the emergence of COVID-19 pandemic, the hospitality industry is one of the industries that has been significantly affected in terms of revenue which is caused by the decrease in visitors. Considering travel restrictions & borders policy that have been applied by most countries, it is predicted that this industry will take longer to recover compared to the others. Affected by this, XYZ Hotel which is a hotel located in Bandung, decided to focus on developing the hotel's food service, namely the corporate catering business, which is considered more potential at this time compared to its main business. However, XYZ Hotel was unable to maximize the potential of this business because of the limitation of the available cooking equipment. Moreover, there are companies that are interested in subscribing to XYZ Hotel’s corporate catering, but XYZ Hotel had to postpone these requests since their production capacity has reached its maximum. Thus, to enter this market prospective and to maximize the production quantity, the owners plan to invest in a new kitchen specifically made for the corporate catering business. This investment will be fully financed by equity of Rp217,080,000. Given the fact that this is XYZ Hotel’s new operating business, especially in times of pandemic, the owners believe they must proceed with caution in making the investment as it will have an extensive impact on the business. Therefore, financial feasibility and risk analysis of this investment is carried out to give investment recommendations to XYZ Hotel owners. After the calculations are made, the results show a payback period of 1.79 years, NPV of Rp318,777,944, profitability index of 2.38, and IRR of 53.50% that is greater than 10.98% which is the company's cost of capital. Since all of the results exceed the acceptance standard, this investment project is regarded as feasible. As for the risk analysis, 7 sensitive variables are identified using sensitivity analysis. Monte Carlo simulation were also carried out on these sensitive variables, where the outcomes showed 66.90% probability of success of this investment project although it still has risks that should be taken into account. To incorporate a variable that represents the pandemic condition, sensitivity analysis using a decision tree is also carried out. The result shows that the NPV if the investment is made is higher than when the investment is not made, meaning that XYZ Hotel should invest in this business.