FINANCIAL FEASIBILITY STUDY FOR POST PANDEMIC RENOVATION PROJECT AT HOTEL VUE PALACE BANDUNG

• Main Author: Emir R. Susanto, Nolan
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/75734
• Institution: Institut Teknologi Bandung

The research presents a comprehensive analysis on the business issues faced by Vue Palace Hotel, including its underwhelming performance, inability to compete with rivals and slow post-pandemic recovery. The business issues are identified and substantiated by utilizing hotel management, financial and SWOT analysis. It is found to revolve around the poor condition of Vue Palace Hotel and its rooms in particular which has resulted in significant decrease in room rate compared to its competitors. Considering room sales to be a substantial portion of a hotel’s revenue in most cases, Vue Palace’s struggle comes as no surprise. Consequently, the hotel plans to undertake a long overdue renovation to tackle the problem. Despite Vue Palace’s current assets positioned well below its current liabilities, its primary lender, which is responsible for 90% of its short-term debt, has consistently extended the loan term by a year, with only interest payments required until the hotel’s current assets exceed its current liabilities. This presents Vue Palace an opportunity to realize its renovation plan. The investment on the renovation is expected to be IDR 15,704,915,000 with a capital structure of 70% loan and 30% equity with WACC of 8.28%. Using a 15-year timeframe, a financial projection is conducted for the renovation project with several assumptions incorporated. The result of the projection demonstrates an NPV of IDR 30,502,032,130.85, IRR of 49%, payback period of 2.75 years, ROI of 21.11%, ROE of 26.45%, PI of 3.08x and a cumulative cash flow of the renovated hotel 17% higher than that of the nonrenovated hotel. Based on these findings, the renovation proves to be profitable and worthy of consideration.