Business Plan.docx 3-Star Hospitality and Tourism Devt Centre in Mbarara - Uganda

7/29/2019 Business Plan.docx 3-Star Hospitality and Tourism Devt Centre in Mbarara - Uganda

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

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1.0 PROJECT EXECUTIVE SUMMARY1.1 Project Brief

This document is being prepared for the establishment of a three-star tourist facility in

Mbarara town. The object of establishing a three-star hotel and tourist centre is to

facilitate the internal and external tourist and provide them with the best boarding and

lodging facilities in Mbarara area.

The hotel will provide accommodation facilities for 150+ guests at any time. Apart from

the usual guest entertainment facilities and the banquet halls; restaurants and club

facilities would also be available to non-occupants. The facility will also include a mini-

zoo featuring local Ugandan fauna which will provide both tourism and educational

opportunities for the visitors and for the local community, while also serving as a

conservation centre for locally-endangered animal species. The greater the variety of

animals that will be stocked in the mini-zoo, the more attractive it will become to

domestic and international tourists and in the process generate more traffic. The

competitive advantage of the current project would be its prime location ,unique

natural features and provision of excellent and competitive services to occupants and

non-occupants.

The project is proposed to be located at Mbarara town in Katete Ward, Rwemirinzi

Cell along the River Rwizi and is specially designed to provide comfortable facilities to

the tourist and donor community. Mbarara town is considered a gate way for all thetourist activities in the Western region of Uganda. The region has access to all public

amenities including water electricity and telecommunication facilities. The completion

time for the project is one year and six months.

The capital cost is US$ 1,062,600 (UGX 2,704,850,000); the hotel use items would

require US$ 252,200 (UGX 641,975,000); while the initial working capital required

would be US$ 293,000 (UGX 745,832,000), thus the Total Cost would be US$ 1,607,800

(UGX 4,092,650,000). The sale at full occupancy i.e.150 double rooms and allied services

isUS$ 3,700,825 (UGX 9,442,950,000)

. The human resource requirement is 119 personnelin the managerial, skilled and semi-skilled level. There will also be numerous jobs

created indirectly. There is no problem of entry into the market as the people here are

known to be very friendly and there are no monopolies in this area of the economy.


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1.2 MissionThe LA-SCAB VALLEY PARK intends to provide a serene setting for our

guests to enjoy the much splendour of the touristic and scenic Mbarara

area. Each guest will be treated with the kind of attention that is reserved

for family. When our guests arrive we want them to leave their troubles at

the door and step into a world of luxury and rest. As owners we intend to

see that attention to detail and service will be followed by a staff

dedicated to each guest.

1.3 VisionThe vision of LA-SCAB VALLEY PARK is to turn the Mbarara area into one of the

most attractive and top tourist destinations in the Western Uganda tourism circuit.

1.4 ObjectivesOverall Business Management Objectives

1. To provide employment and avert the negative effects of unemploymentespecially by the Youth.

2. To provide an alternative economic base of Mbarara and Greater Ankole Region.3. To preserve the ecosystem and wildlife in Mbarara and Greater Ankole Region.4. To generate a stream of income for Local Government and Central Government

through taxation receipts.

5. To promote Tourism and attract Tourists in Mbarara and Greater Ankole Region.Marketing Objectives

1. Maintain positive, steady growth each quarter.2. Experience a growth in new customers who are turned into long-term customers.3. Realize an increase in occupancy each subsequent year.4. Generate a customer satisfaction rate above 90%.

Financial Objectives

1. A double digit growth rate for each future year.2. Reduce the variable costs per guest.3. Continue to decrease the fixed costs.


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1.5 Business Legal AspectsLA-SCAB VALLEY PARK comes into this tourism development project with an equitycapital base of UGShs 500 million (approx. US$ 200,000). The Company has 4 principalshareholders with share ownership as follows:

Table 1: The Company ShareholdersShareholder Shares held (%age)

1. Mr. Nuwagaba Johnas Zed 375,000,000 75%2. Mr. Emma Barigye Kiremire 25,000,000 5%3. Ms. Viola Nabaasa 25,000,000 5%4. Ms. Treasure Nuwagaba 25,000,000 5%5. Unissued 50,000,000 10%

Total 500,000,000 100%

1.6 Financial Highlights Sales in Project Year 5 (2019): USD 3,330,745 Gross Profit Margin in Project Year 5 (2019): 87.32% Net Profit Margin in Project Year 5 (2019): 42.28% Payback period for Equity: 1.31 Years Payback period for Total Investment: 3.13 Years Capital: Output Ratio in Project Year 5 (2019): 1: 1.36 Break-Even Analysis in Project Year 5 (2019): 15.68% Value Added/Contribution to GDP in Project Year 5 (2019): USD 2,769,595

(83.15%)

Table 2: Type of Development Assistance being sought

Development assistance

sought

oJoint Ventureo Loano Public/Private Partnershipo Development Financing by

Government Guarantee

o Market accesso Sub-contractingo Buy-back arrangemento Equipment purchase

o Management expertiseo Technical expertiseo Marketing expertiseo Technology transfero Joint R&Do Other:-Franchise

Studies Available o Business Plano Other Specify

o Project descriptionDate: 02 September 2013


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Figure 1: Projected Financial Performance Highlights (In US$)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

20152016

20172018

2019

Sales Gross Margin Net Profit


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2.0 PROJECT RATIONALEMbarara is the gateway to some of the most scenic and traditional beauty spots in

Western Uganda, namely: Lake Mburo National Park, Queen Elizabeth National Park,

Mgahinga and Bwindi Impenetrable Forest National Parks, Kibale National Park, River

Rwizi, Lake Nakivale, Kyambura Game Reserve, and a string of other local tourism

attractions within the Greater Ankole Region. Among the fresh food delights, the

matooke, millet bread (akaro), dairy-based food products (e.g. eshabwe), beef and local

tilapia fish in this area are considered to be the best in the country.

This area has an established tourist market in which the number of internal tourists

shows increasing trends over the past five years. The occupancy and visits show some

decreases at times, however the overall availability of the guests is constant in the

market throughout the year.

There is a fair presence of internal and external tourists and guests flowing to the area.

This is due to the fact that this Mbarara town is gateway to all tourist sites of the

Western Uganda area. This area is renowned for its natural beauty and friendliness of

the residents that makes the market for the proposed LA-SCAB VALLEY PARK

favourable for this type of project.

The competitive forces on the project are not very strong at the moment; the

government policies are inclined towards foreign investments and inflow of funds in

the economy. There is a big gap in the tourist market in our identified location. Thelarge capital requirement of the project raises significant barriers to entry which

constrains new entrants into the market. However, since there is a presence of

alternative accommodation providers in the area, there will still need to be a focus on

capturing a substantive market share, particularly when vying for external tourists.

There are very few other 3-star standard hotel facilities available in the market, so the

project is differentiated on the basis of services, costs, facilities, linkages with the

international chains and market standing. As most of the services are being provided by

the hotel itself, therefore, the dependence on subcontractors is reduced. Furthermore,

the raw materials required for the operations of the project are widely available in themarket and there is no need to be dependent on any particular supplier or

manufacturer of a commodity.

Because of planned inclusion and linkage with the international chain of hotels LA-

SCAB VALLEY PARK project will enjoy the privileges of the international market by


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itself. To attract the local market there is a need of strong personnel to take charge of the

marketing activities and attract the local and internal customers through good

relationships, extra value added services and discounts. The employees should be

treated as the main assets of the project. The policies and incentives for the employees

will be set in such a way that the retention will be easier for the organization. The

management will be in an advantageous position as they will get maximum support in

their strategies and policies from the international chain. The project should be able to

fully leverage its international linkage of the project, thereby providing its service

quality image and ranking in the market as a distinct advantage.

The external factors usually applicable to a project are political pressures. Since, the

project is of a non-political in nature in the local market; therefore, no negative effects

are perceived on its viability due to this aspect. As the project will be providing

employment opportunities for the local people, therefore, its risks are considered as

further reduced. The trends in the local economy and the government and internationalcommunity efforts of revival and recovery further provide a favorable environment for

such an initiative.


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3.0 VISION AND POSITIONINGLA-SCAB VALLEY PARK will be a place for people to relax and recharge their inner

batteries. We will offer our guests silence, recovery, well-being, and pleasure. Business

travellers, drive-through tourists and long-range drivers will find the right place to

recover. The site for the proposed LA-SCAB VALLEY PARK Hotel is conveniently-

located in the Katete Ward of Nyamitanga Division in Mbarara Municipality and can

be reached easily by car. The special features of this site area are its scenic natural water

falls, rocks and the meandering River Rwizi below it.

The existing competition in the hotel industry, especially in the three star segment, is

very tense and therefore expectations of customers are on a high level. We are ready to

face this challenge. LA-SCAB VALLEY PARK will therefore compete on an optimal

price-performance ratio and attract numerous customers.

The hotel will offer simple bed and breakfast service in its hotel rooms and tourist-

themed cottages. Additionally, several conference rooms will be available to business

customers. If requested we will offer meals prepared through an external catering firm.

With a sufficient number of parking lots we will ensure that the customers park their

cars safely and closely.

3.1 Facts and Figures

The size of the land in Mbarara accounts for 40,000 m2

(i.e. 10 Acres). In this lot of landwe plan to construct a three floor building with 120 standardized rooms and 15 double-

room tourist-themed cottages. All bedrooms will have a size of 21m2 including a

bathroom. According to the project promoter, the price range should be USD 50 per

person and night. As LA-SCAB VALLEY PARK will be offering breakfast, we will need

a breakfast room and a kitchen to prepare food. Daily cleaning processors require

additional facilities and rooms in order to store the particular material. Additionally,

laundry rooms and lingerie stores are needed. Several administrative offices are

included in the planning as well as personnel rooms.

3.2 Definition of a 3-Star HotelA 3-star hotel is a middle-class hotel with a Multilanguage and a fully functional

reception. In general, all rooms do have a toilet with a bath or shower. The rooms are

comfortably equipped with a colour television and radio as well as a telephone. The


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accommodation facilities need to be neat and visually appealing. The hotel has to offer a

breakfast buffet. There is no need for a fully operational restaurant. The range of service

offered according middle demand and covers the elementary requirements in the

domain reception and service. The difference to the two star segments is that the three

star hotels offer higher quality such as material, more generous rooms, and an enlarged

service offer.


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4.0 UTILITYIn this section the project team describes the specific utilities the customer can expect,

who the customers are and what their needs are.

4.1 Customer UtilityWe position LA-SCAB VALLEY PARK as a leading lifestyle and business

hotel/tourism facility in the area of Mbarara in Western Uganda. Furthermore, the

optimal use of the synergies of the region such as catering service, local community and

cultural tourism, entertainment as well as adventures will maximize our customers

utility. This idea will be linked to international tourism platforms and car-trip internet

websites. In order to improve co-operations with other parties we shall provide our

partners with special offers. We shall focus on as many partners as possible.

Nevertheless, it is crucial to choose specific partners who match to our customer

segment as well as the idea of a modern three star hotel.

A clear organizational structure will ensure that there is very little space for conflicts.

Conflict free course of action is the most important aspect in regard to our long-term

reputation. Additionally, customer utility should always remain on the same high level

and therefore, quality fluctuations must be avoided and kept to a minimum. Motivated

and qualified people from the gastronomy and other industries willing to make a

difference should find a place in the hotel.

Customer demands or expectation is closely related to its utilities and as customer

demands and needs change over time, the management should create an innovative

environment in order to generate constantly new ideas.

4.1.1 Customer SegmentOur concept will attract mainly business people who demand good quality without any

complications. We want to attract over-night-stayers as well as business people who

intend to organize a conference or a meeting at our hotel.

LA-SCAB VALLEY PARK will also offer accommodation to tourists who are on their

way through the Mbarara area and want to stay overnight. LA-SCAB VALLEY PARK

will also provide special family-friendly hotel rooms or facilities.


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4.1.2 Customer NeedsWe expect part of our guest list to include those people looking primarily for passive

regeneration or a possibility to disconnect after a hard business or congress day in order

to start well into the next day. LA-SCAB VALLEY PARK will offer this in an exclusive

ambience.

Also the need for conferences or meeting can be satisfied by our conference rooms and

the top of the art equipment promises every event to be a success.

4.2 Product and Service UtilityLA-SCAB VALLEY PARK will offer120 standardized rooms and 15 double-room

tourist-themed cottages. Customers will have the possibility to enjoy a breakfast if

needed. We will offer a simple bed and breakfast service. Breakfast offer will be a tasty,

healthy, enjoyable menu for all tastes. The hotel will offer 150 parking lots in front of the

facility. Additionally, congress and seminar rooms are a must with the purpose of

attracting companies and their external clients. If companies plan a congress event, they

have the opportunity to have lunch and dinner which will be organized by a selected

catering company. Other services on offer will include laundry and bar and restaurant

service for guests.


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5.0 SWOT ANALYSIS5.1 Strengths

1. Dynamism in the Tourism and Hospitality industries.2. Continuous inflow of Tourists in the country.3. Ugandas rich cultural heritage.4. Average labour costs as against the world standards.5. Unique natural features such as water falls, rocks, and river meander

5.2 Weaknesses1. Regional imbalance of hotels.2. Capital intensive.3. Labour intensive.4. High taxes and tariffs for every service.5. Disparity in taxes charged by State.6. Lack of aggressive and effective marketing and promotional strategies.7. Release of land at prime locations is difficult because large tracts of land in such

locations come under the Governments control.

8. The prohibitive cost of power in Uganda.9. High government duty on power tariffs.

5.3 Opportunities1. Increased demand for the hotel.2. Declaration of the Hotel Industry as a High Priority Industry.3.

Government policy of positioning hotel and other tourism related activities in thegovernment sector.

4. Various incentives/concessions extended by the Government.5. Approval of the hotel by the local urban authority. This approval constitutes a certificate

of suitability of the hotel for occupancy by tourists, both foreign and domestic.

6. Higher interest subsidy for hotel projects that are set up in special areas and specifieddestinations as per the Government.

7. Declaration of the hotel and tourism industry as a high priority industry for foreigninvestment.

5.4 Threats1. Government taxation policies.2. Significant over capacity in hotel industry.3. Competitors.4. Higher safety standards.5. Educated and highly paid staff.


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6.0 UGANDA HOTEL MARKET STUDYCommercial tourism in Uganda began in the 1950s, though significant growth was only

registered between 1962 and 1971. During this period, the tourism industry experienced

a 34% annual growth rate (Ministry of Wildlife Tourism and Antiquities (MWTA), 1996)

with 1970 recording the highest earnings of Uganda shillings: 132.3 million (US$ 18

million). At that time, average per capita spending was US$ 2,306 and the industry was

Ugandas third largest foreign exchange earner after coffee and cotton. However, due to

the political instability of 1971-1986, the industry declined by 13.8% annually. In 1980

only 1,000 tourists were received down from 85,000 in 1969. During this period, wildlife

conservation areas were heavily poached to the extent that some species of wildlife

became extinct and others came to near extinction. Hotels, infrastructures and most

facilities were destroyed as government neglect of the sector was at its peak.

Following attainment of political peace by the current National Resistance Movement

government in 1987, Uganda adopted a structural adjustment programme that

revamped the tourism industry. The Tourism Master Plan of 1993 had projected that

tourism would grow at an annual rate of 13%, but a 53% annual growth rate was

registered by 1996. Compared to 1980, when only US$ 0.125 million were earned, the

1995 earnings had reached a level of US$ 90 million. Despite some setbacks over the last

few years, resulting from the political instability in the Great Lakes Region, tourism has

remained one of the fastest growing sectors of the economy with an annual growth rate

of 21% over the years 1992 2000. In 2010 Uganda recorded a total of more than 946,000

tourists, spending over US$ 662 million (Uganda Bureau of Statistics, 2011).

6.1 Key Touristic Resources and AttractionsFor the government of Uganda, the current Ugandan tourist products are nature-based

and centred on distinct geographic areas. Several of these are linked to national parks,

rivers, wildlife reserves, forest reserves or specific attractions, and activities such as

white water rafting at the source of the Nile in Jinja. Other attractions include Eco-

Tourism, Cultural Heritage, Faith-Based Tourism, Community Development Tourism

and Meetings, Incentives, Conferences and Events (MICE).

Game viewing: Likely to be the main reason for visiting Uganda for a majority ofleisure tourists. Uganda comprises 10 national parks in which the big five mammals

of Africa can be found (lion, leopard, elephant, rhino and buffalo) and several

natural reserves. A majority of the parks are in the western part of the country.


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Eco-tourism: The greatest unique attractions in the so-called area of eco-tourism include: gorilla tracking, viewing chimpanzees, golden monkeys and

Patas monkeys, (nature) guided walks, community walks, butterfly viewing and

bird watching. Additionally, Ugandas position as a plateau astride the equator

has given it a niche in the variety of bird life with over 1060 bird species.

Cultural Heritage: Uganda is endowed with diverse heritage and culturaltreasures that attract both foreign and domestic visitors. The archaeological

treasures which open a window into the beginning of mankind, the monarchical

leadership that predated the early explorers, the living culture and the history

manifested in Idi Amins leadership, are all touristic products that Uganda can

capitalize on (see annex 5). However, Ugandas tangible cultural heritage is

vanishing fast.

Faith-Based Tourism: In Uganda, the Namugongo Martyrs Shrine stands out asa site of pilgrimage, as do the hills housing the important symbols of Catholic,

Anglican, Bahai, Pentecostal and Islamic faiths. The National Development Plan

states that the current policy and practice has however not integrated tourism in

the development and promotion of these sites.

Community and Development Tourism: Thanks to the efforts of someindividuals and/or organizations, community-based tourism is slowly

expanding in Uganda but efforts from the private sector to include community

based activities remain limited. This is a growing source market that has notbeen specifically targeted through policy and practice.

Meetings, Incentives, Conferences and Events (MICE): It is estimated that thegrowth of the urban hotel industry in Kampala, Entebbe and Jinja is largely

attributed to this segment. With 20% of visitors officially travelling to Uganda for

business purposes, the MICE market represents a growing source of income at

each level of the tourism value chain.

6.2 The Hotel Industry in UgandaIn the early days of the industry, the government spearheaded the development of

hotels with minimal private sector participation. However the privatization and

liberalization of the economy since 1987 have attracted private companies to invest in

new hotels, resorts, lodges and other tourist accommodations. The hotel and restaurant


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businesses output grew from 6.5% to 10.7% between 2004 and 2008. In 2001, Uganda

had about 60 hotels with about 1789 rooms and 50 wildlife accommodation facilities,

with a combined capacity of 972 rooms. In 2009, 1138 accommodation establishments

were registered in Uganda (see figure below). Today the sector contributes about 4.3%

to GDP and employs about 7% (430,000) of the total non-farm workforce.

Figure 2: Number and types of businesses in the accommodation sector

According to the Uganda Bureau of Statistics and the Private Sector Foundation current

Business Register (2007), there is a total of 3,411 registered businesses in the category of hotelsand camping sites, as well as bars and restaurants in Uganda. The register is restricted mainly to

businesses employing 5 or more persons. The register indicates that 65% (2,228) of the

enterprises in the sector are restaurants and bars, compared to only 35% (1,183) of hotels and

camping sites. Among the enterprises in the hotel and restaurant sub-sector, 180 enterprises

employ fewer than 4 people, 2365 enterprises employ 5-9 people, 647 employ 10-19 people, 186

employ 20-49 people and only 33 enterprises employ more than 50 people. A regional

distribution of businesses in the hotels and restaurants sector shows that close to 40% (1315) of

the businesses are found in Kampala, as shown in the table below:

Table 3: Distribution of hotels and restaurants by region in UgandaKampala Central East North West Total

Hotels & camping sites 344 178 199 224 238 1,183

Bars and restaurants 971 397 343 175 342 2,228

Total 1,315 575 542 399 580 3,411

Source: Business Register Update 2006/07, (UBOS & PSFU).

0

100

200

300

400

500

600

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Boarding

and

lodging

Hotels Guest

Houses

Inns Motels Lodges Campsites Cottages

Rooms Establishments


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In Kampala, 74% of the businesses are restaurants and bars, and only 26 % are hotels

and camping sites. The western and northern regions each have 20% of the hotels and

camping sites. Furthermore, a majority of businesses (77%) are owned by Sole

Proprietors. Out of the 180 enterprises with fewer than 5 employees, women own about

66% (119) of the enterprises in that sub-category, and the annual turn-over of most of

these firms is less than UGX 50 million. Women also own 15% of enterprises that

employ over 50 employees.

Table 4: Employment in hotels and restaurantsBusinesses Male Female Total Average

Hotels & camping sites 1,183 7,771 6,925 14,696 12

Bars and restaurants 2,228 7,383 10,737 18,100 8

Total 3,411 15,134 17,662 32,796 10

Percentage 46.1 53.9

Source: Business Register Update 2006/07, (UBOS & PSFU).

According to the table above, the hotel and restaurant sub-sector employs more women

(53.9%) than males (46.1%) and, on average, a hotel employs 12 people while a

restaurant employs 8 people. In any given restaurant or hotel, one would expect at least

10 employees.


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Table 5: Accommodation capacity for selected hotels in Uganda, occupancy rates and guest nights in 2003/2005/2008

Year Accommodation

capacities

Room occupancy Guest nights Occupancy rates Bed/room

occupancy

ration

# Rooms # Bed

spaces

Room

nights sold

Bed nights

sold

Foreign Domestic Room Bed

2003 534,117 788,614 251,990 284,857 136,724 148,139 44.6 33.1 1.13

2005 801,176 946,337 282,931 314,812 146,554 168,258 35.3 33.3 1.11

2008 1,255,175 1,656,089 377,241 475,366 229,437 245,929 30.1 28.7 1.26


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The information in the table above was based respectively on 51, 72 and 72 hotels in

2005, 2005 and 2008 information compiled by the Uganda Bureau of Statistics. The

table shows that the accommodation sector has been growing rapidly over the years.

However, while the number of rooms available for sale has grown from about 534,000

in 2005 to over 1,255,000 in 2008, and as bed spaces have correspondingly increased,

room occupancy has fallen from 44.6 % in 2005 to 30 % in 2008. Bed occupancy also fell

from 33 % in 2005 to 28.7 % in 2008.

These negative relationships between room, bed space growth and occupancy levels are

indicative of a lack of information on the investment climate. Without statistically

significant data on the sector but with a growing trend in visitor arrivals, investors can

consider the Ugandan tourist sector as very healthy. However, Uganda is still receiving

a low proportion of leisure tourists. We can however observe that the recent

investments in the tourism sector are more associated with small tourism investors than

linked with one of the major international tourism brands.

Table 6: Contribution of hotels and restaurants subsector to Ugandas GDP

2006 2007 2008 2009 2010

Hotels & restaurants (GDP,

billion shs) 818 954 1,149 1,486 1,666

Air transport (GDP, billion shs) 125 166 210 203 217

Hotels monthly earnings (000

shs) 3,411 212 275 283

Tour operators (employment) 3,424Source: UBOS, 2011; MTTI, 2009

In the table above, we may observe that the contribution of the hotels and restaurants

subsector to Ugandas GDP has doubled from UGX 818 billion in 2006 to UGX 1,666

billion in 2010. Also the contribution of air transport has increased from UGX 125 billion

to UGX 217 billion over the same period. Tour operators in Uganda employ

approximately 3424 people.

6.3

Exploited and Potential Tourist Attractions in the Greater Mbarara Area

Location: The Greater Mbarara Area is located in Western Uganda. It borders

the Districts of Lyantonde and Sembabule to the East,

Buhweju, Sheema and Ntungamo to the West, Kamwenge to the North and the

Republic of Tanzania to the South.


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Population: The District has a population of about 1,089,000 people.

Main Town: Mbarara town is the main town of the Greater Mbarara Area.

Area: 10,020.8 Km2.

Land and vegetation: 0.8 percent of the Greater Mbarara Area is open water, 2.1 percent

is wetland and 18,707 hectares is forest.

The key tourist attractions of the Greater Mbarara Area are given below:-

1. Lake Mburo National ParkLake Mburo National Park is located about 300 kilometers south-west of Kampala, 30

kilometers east of Mbarara town. The Park is famous for birding and viewing of Zebras,

Impala, Buffalos and Waterbucks. Lake Mburo, which occupies 20 percent of the Park,

has potential for development of a number of water sports such as angling, boat cruises

and canoeing.

Easy proximity from the main Kampala-Mbarara-Kabale/Kasese routes gives the Park

advantage for stop-overnight stays and day excursions.

Tourism activities in the Park are fairly well developed. The infrastructure includes

UWAs Rwonyo Campsite and the Lake Mburo Conservation Education Centre and theMantana Campsite.

2. Lake NakivaleThe Lake is located about 40 kilometers south-east of Mbarara town. The water body,

the lakes sandy beaches and the expansive open grounds around the lake could in

future be exploited for tourism. There were temporary refugee settlements in the areas

around the Lake.

3. River RwiziRiver Rwizi flows from the highlands in Buhweju/Sheema districts through Lake Kachera in

Rakai district, then into Lake Victoria. Some canoeing is possible on the river, bird watching,

monkey viewing, rock climbing and provides some primate viewing along it.


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Down the river, near the Safariland Park, is a spot that is a habitat for cobra snakes that

are a popular site for visitors to the Park.

4. Lake KacheraLake Kachera is found in both Kiruhura and Rakai districts. The southern part of the

lake lies next to the Lake Mburo National Park. The Lakes location by the Park with a

considerable concentration of wild game offers opportunity for development of a

tourist campsite at the hill overlooking Lwanga fish landing site.

5. Sanga Cultural VillageThis is a cultural centre for the Hima tribe, located at the Sanga junction leading to the

Lake Mburo National Park. Traditional ornaments and regalia of the tribe are also

found at the centre. Upon payment of a small token fee, it is possible to learn about the

cultural ways, particularly of the Hima women.

6. Crafts and Souvenirs IndustryThere was no independent crafts and souvenirs shop that was operational in Mbarara

town at the time of the survey. This was in contrast to the town being a transit one for

traffic to and from the main tourism activity centers of the Rwenzori National Park and

Queen Elizabeth National Park.

7. Hotel and Catering IndustryThe hotel and catering industry in the district comprised 59 accommodation

establishments and 28 non-accommodation tourism related establishments at the time

of the survey. The industry employed 815 people. The total bed capacity was 2,732 beds.

The main accommodation establishments in the district were: Lake View Hotel,

Mantana Luxury Tented Camp,Hotel Classic among others.


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7.0 HOTEL INDUSTRY AND COMPETITION ANALYSIS7.1 Analysis and Potential of the Market

7.1.1 CustomersPrice Sensitivity

Based on the conducted on-site visits, we conclude that most customers are business

people. Therefore, we believe that there is certain flexibility in the price sensitivity for

this customer segment due to the fact that most customers stay one or two nights and

the company usually covers the expenses. Hence, the average business traveller is less

price-sensitive. On the other side, we think that the average tourist customer travelling

through Uganda prefers low or moderate prices. Therefore, the average tourist is rather

price sensitive.

Customer Power

The relative high supply of hotels in the Mbarara area implies a high customer power.

This results in tense competition and price pressure. Nevertheless, this is most likely

only true in low demand periods such as Christmas holidays. Most interviewees stated

that during expositions and similar events most hotels are fully booked and therefore

customer power is lowered.

Conclusively, the customer power in the hotel business depends to a certain extent on

seasonal events. Though the customer power for tourists is relatively high, since they

are not bound to a certain location and do not mind driving a few miles further. As

mentioned the majority of customers are expected to be business people and therefore

the tourists do not have a big influence on the customer power.

7.1.2 CompetitorsThe threat of entry of new competitors is low since the entry barriers as well as the exit

barriers are relatively high. Capital requirements are high, it is very costly to build anew hotel. Meaning the facility itself as well as the establishment of a brand and

creating a customer loyalty. In case of a business failure it is difficult to sell the building

or make new use of it because it is built only for the purpose of a hotel with closeness to

a highway, this increases exit or possible switching costs. It is hard to create brand

equity due to the opportunistic nature of the business where customers do not attach


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big importance to loyalty to a certain brand. The profitability of the industry is not very

attractive since the whole gastronomy business is known for its toughness to survive.

The intensity of competition is high in this region and numerous hotels of a similar type

can be found in the Mbarara municipality area. It is hard to create a competitive

advantage since the concept of a hotel does not leave too much room for innovation.

The requirements of the customer are clear and simple and that is exactly what this

projects intends to offer.

7.1.3 SuppliersWe assume that due to the high availability of suppliers for almost all respects, the

power of suppliers is believed to be relatively low or at maximum moderate. There are

no suppliers specialized only in the hotel industry.

7.1.4 SubstitutesAfter intensive thinking and research we conclude that there is no real substitute for a

hotel or motel. One might argue rest areas where truck drivers sleep could be used as a

substitute to hotels but we highly doubt business people would choose this option.

Neither campings place nor hostels fully reflect the service and comfort of a hotel or

motel.

7.2 Competitive SituationTypically in this industry the consumer is someone who is not just looking for a room to

sleep in, but a facility that provides a homespun touch and a place that is unique and

offers more personalized customer service. Because each hotel is offering something

unique to the guest, customer service and quality to the facilities are at the forefront

of importance. Location is also important and those hotels with an expansive country or

river view have an advantage, but with the limited number of room at hotels in the

Mbarara area there are enough customers to match the supply. LA-SCAB VALLEY

PARK will therefore be competing on price and quality. Guests at LA-SCAB VALLEY

PARK will be paying for more than just a room; they will be paying for an oasis away

from their hectic world.


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8.0 MARKETING STRATEGYMarketing and related promotional activities will require a well thought out strategy

and full advantage of international chain of hotels may be taken. Although, the

promotional activities should start from the first year of the project, the main sales pitch

will be taken from the second year of establishment. This may include awareness-

raising among the potential internal tourists, linkage with international chain of hotels,

discount campaigns, and provision of various added attractions to increase the (hotels)

customer value.

8.1 Target Market Segment StrategyOur target market strategy is based on becoming a destination for people who are

looking to get away for a few days, on the beautiful Banff. Our marketing strategy is

based on superior performance in the following areas:

Quality facilities. Beautiful location. Customer service.

The target markets are separated into six segments;"Business Class/Donor

Community," "Seasonal Tourists/Vacationers," "Honeymooners,""Drop-ins,"

"Travellers" and, "Students". The primary marketing opportunity is selling to these

accessible target market segments that focus on business travel, vacation and

recreational needs.

8.1.1 Business Class/Donor CommunityThis segment of the market includes mainly business people who demand good quality

without any complications. Other prospective customers in this particular segment

include people within the donor community and trade organizations who may have

intentions of organizing a conference or a meeting at our hotel (the MICE market

segment) which represents a steadily growing revenue stream at each level of the

tourism chain.

It will be important for LA-SCAB VALLEY PARK to have in place well-facilitated and

organized conference rooms and state-of-the-art equipment to attract and retain this

growing and increasingly influential segment of the Uganda tourism value chain.


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8.1.2 Seasonal Tourists/VacationersThis segment of the market consists of international adventure tourists who will be

traveling to or transiting through Mbarara town on game-viewing, eco-tourism or

cultural heritage trips and need a comfortable place top rest, dine and refresh

themselves. LA-SCAB VALLEY PARK estimates this segment to be the second most

important revenue generator after the Business Class/Donor Community segment and

is expected to attract a steady stream of both international and domestic tourists

moving to or through Mbarara town.

8.1.3 HoneymoonersBecause of the beauty and location of LA-SCAB VALLEY PARK, we will be a very

attractive choice for people looking for a honeymoon location.

8.1.4 Drop-insWhen rooms are available we will welcome the drop-in customer who is looking for

a place to stay for the night. We shall place a sign that can easily be seen from the

highways into and out of Mbarara town and we expect quite a few drop-ins.

8.1.5 TravellersThese are people who will be transiting through Mbarara town and prefer to stay in a

hotel/motel.

8.1.6 StudentsMbarara town hosts one of the biggest universities in Uganda the Mbarara University

of Science and Technology (MUST), Makerere University Business School Mbarara

Branch, Bishop Stuart University Kakoba, Uganda Martyrs University Nyamitanga

Diocese Branch and Uganda Management Institute Mbarara Branch. Mbarara town is

also home to some of the prominent schools in Uganda such Ntare School, Mbarara

High School, Mary Hill High School, and many other private-run secondary schools in

town. MUST and the afore-mentioned universities and secondary schools often bring a

large number of students to Mbarara town who believe that a good portion of their road

trips will be from the universities or from their respective schools of attendance.

Occasions include parents weekend, orientation, parents visiting, and graduation.

Lastly, universities will often setup rooms for administrative visitors.


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Figure 3: Market Segmentation

8.2 Strategy and Implementation SummaryThe primary sales and marketing strategy for LA-SCAB VALLEY PARK includes these

factors:

To offer a bed and breakfast facility that will appeal to the busy professional. To provide unmatched customer service to our guests. To concentrate our marketing in the greater Mbarara area.

8.3 Sales ForecastThe sales forecast table is broken down into four main revenue streams:

Accommodation; Foods and Beverage service; Shop license fees; and revenue from

other operational departments of the hotel facility (e.g. mini-zoo receipts, laundry

services, etc.). The sales forecast for the upcoming year is based on a 10% growth rate

for direct sales. LA-SCAB VALLEY PARK will have 150+ rooms to offer its guests at a

rate of US$ 50.00 per night. We expect the rate of rooms occupied to increase as the year

progresses. In spite of the economic unpredictability we are experiencing, these

projections appear attainable and take the increasing base into consideration. Annual

growth rates are based on 10% per year.

Market Segmentation

Business Class/Donor

Community

Tourists/Vacationers

Travellers

Honeymooners

Drop-ins

Students


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Table 7: 12 Months Sales Forecast (at Full Capacity)

Accommodation Price Reservations Amount Rooms Days in Yr.

Per Double bed room 50 54,750 2,737,500 150 365

Food and Beverages

Room Service 10 10,950 109,500

Room Refreshments 5 7,665 38,325 Parties

Restaurants 20 21,900 438,000 60 365

Parties 500 365 182,500 1 365

Outside Service 300 365 109,500 1 365

877,825

Other Operation Departments

Mini-zoo receipts 3 9,125 27,375

Laundry 2 9,125 18,250

Pool, club and others 3 9,125 27,375

73,000

Shop License FeesNumber of Shops 1,250 10 12,500

12,500

Total Sales 3,700,825

8.4 Market SegmentationThe profile of our customer consists of the following geographic and demographic

information.

8.4.1 Geographics Our immediate geographic market is the Mbarara Municipality area with

a population of over 200,000 people.

A 200-mile geographic area/radius would want to use the kind of services we offer. The total target area population is estimated at two million people.

8.4.2 Demographics Male and female. Married and single. Age range of 25 to 65 years with a median age of 40. Work in a professional business setting.


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8.5 Marketing MixThe LA-SCAB VALLEY PARKs marketing mix is comprised of the following approach

to pricing, distribution, advertising and promotion, and customer service.

8.5.1 PricingThe pricing scheme is based on a room rate. The rate is arrived at in terms of by its

market value.

8.5.2 DistributionAll services will be provided at LA-SCAB VALLEY PARK.

Figure 4: The Four P Components of the Marketing Mix


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8.6 Advertising and PromotionFigure 5: Marketing Channel Selection

Generally there are many marketing channels but we decided to select some of them to make

our plan work and practical. Personalize method of marketing and promotion of our facilities

we select direct and email marketing method.

The most successful traditional advertising will be with the LA-SCAB VALLEY PARK

association. Developing strategic alliances with universities and other prominent secondary

schools in Mbarara town will be a non-traditional method of marketing, but it will be quite

efficient. The website will also be used in marketing activities.

8.7 Customer ServiceObsessive customer attention is the mantra. LA-SCAB VALLEY PARKs philosophy is

whatever needs to be done to make the customer happy must occur, even at the expense of

short-term profits. In the long run, this investment will pay off with fierce customer loyalty.

MARKETING

CHANNEL

SELECTION

Consumer

Characteristics

Product

Attributes

Type of

organization

Competition

Marketing

environmental

forces

Characteristics

of

Intermediaries


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9.0 TECHNICAL ASPECTS9.1 Location

The Western Uganda town of Mbarara has been chosen as the prime location for the

proposed LA-SCAB VALLEY PARK 3-star hotel. There are five primary motivations

that have inspired the project promoters of LA-SCAB VALLEY PARK to make this

decision:

1. Mbarara town is the gateway to the Western Uganda tourism circuit thatcaptures by far the largest share of Ugandas tourist traffic.

2. The project promoters have a sizeable piece of land in Mbarara town along thefamous River Rwizi that is naturally endowed, attractive and suitable for

development of the proposed 3-star hotel and cultural tourism facility.

3. The project promoters are born and raised in the Mbarara area that theyunderstand the social, economic and cultural aspects of the area quite well to

make this project a resounding success.

4. Mbarara is the fastest growing town in Uganda after Kampala with quite anumber of commercial, industrial, community development, educational and

government institutional facilities coming up that make it a highly convenient

location for positioning a 3-star rating hotel facility to cater for the growing

traffic that are using such facilities.

5. Tourist facilities that combine a scenic natural beauty, 3-star hotel rating status,and a mini-zoo are hard to get anywhere within Uganda or East Africa for thatmatter. That LA-SCAB VALLEY PARK will be the first of its kind in Uganda

offering such facilities and amenities will put it in a strong and favourable

position to grow its tourism market potential quite fast.

9.2 Design of the FacilityWe consider an alignment of the basic thought of simplicity, elegance and modern spirit

of the hotel with the design of the facility as adequate. Leading and latest technologies

are underpinning the features to commune modernity. The hotel design thereforewould be a mixture of timeless and simple elegance communicating warmness and

style to potential customers. As the design of the hotel the name and logo will be in the

same style created to build brand recognition.


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9.3 Raw MaterialsThe basic requirements for running the proposed LA-SCAB VALLEY PARK hotel

business are the amenities, water and utilities. All the requirements are easily available

at low costs. Furthermore, the raw materials required for the operations of the project

are widely available in the market and there is no need to be dependent on any

particular supplier or manufacturer of a commodity.

9.4 Special Features of the SiteThe area is endowed with natural water falls, rocks and river meandering.

Waterfalls Expanse

Rows of Natural Rock Outcrops


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Meandering River Rwizi

9.5 Current Developments- Unfinished Bar & Restaurant structure

-----

- Two Twin Cottages fully furnished


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- Clean piped water and electricity in place- Improved and enhanced vegetation in terms of trees and scrubs.


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10.0 MANAGEMENT & HUMAN RESOURCE PLAN10.1 Corporate Governance

It is important to establish clear and direct ways of communication. It should reflect the

simplicity and modern style of the hotel. Clear structures must be established to reduce

room for conflicts.

In order to stimulate innovation a creative workplace will be established. Space for the

staffs own initiative should increase identification with the company. Each member has

to feel valued on a daily routine. Big importance has to be attached to team spirit and to

create and warm and helpful atmosphere. The well trained staff adds additional value

to the price-performance ratio for our guests.

Internal formation will deepen the knowledge of the employees and motivate them to

ensure the quality demand of the guest as well as attract employees. Job rotation can

enhance the skills and convey the corporate thinking.

The Head Office is directly placed in the hotel. It allows the clients and the management

to collaborate effectively. Therefore every workday is closely followed by the staff.

Current issues can be solved immediately. It is highly required to establish a close

relationship between all the employees, from the director to the cleaning staff. The

know-how of the staff should contribute to the overall development which creates

synergies and finally results in best service for our guests.

10.2 Human Resource RequirementsThe Human resource requirement directly associated with the hotel is listed below.

Table 8: Human Resource Emolument Structure

Description/Designation Number Monthly Total Monthly

Salary (USD) Salary (USD)

Operating Management 8 600 4,800

Cooking Staff 20 160 3,200

Waiters, Bell Boys 50 120 6,000

Drivers 6 150 900

Janitors 20 100 2,000

Guards and others 15 100 1,500

Total 119 18,400


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11.0 ESTIMATED COSTS OF CONSTRUCTION, DESIGN AND MANAGEMENTSERVICES

Construction costs of the entire complex are estimated at approximately US$ 55,000 for

the infrastructure and US$ 800,000 for the building works, including all built

components of the 3-star hotel complex, landscaping and parking facilities. With a

contingency factor of 5% brought into the estimate, the total construction costs are

estimated in the order of US$ 846,000.

Depending on the Design, Management and Construction approach selected, as well as

the conditions and scope that agreed upon, design and management services will be:

Design services (Architectural and Engineering) : 5-7% of construction costs Management Services (Design and Construction): 2.5-3% of construction costs

These figures are rough and provide an initial framework only for understanding the

breadth of scope possible. Final figures will be dependent on the precise services and

terms agreed.

At this stage, taking the higher bracket fees for a conservative estimate, the fees will run

in the order of US$ 96,600.

In total, the cost of construction bringing the project to point of handover to operations

is estimated at US$ 1,062,600. This scenario assumes completion of all works before thestart of operations. As mentioned earlier, other possibilities will be considered at

detailed design and projection stage, such as phase by phase building, with operations

beginning with as few as 80 beds in the hotel, and revenue from initial operations

returned to provide for further construction costs.


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Table 9: Estimated Construction Costs

Infrastructure Cost (USD)

Roads 20,000

Water, electricity, telephone 10,000

On site roads + mains + electricity transformer 10,000

Perimeter Fencing 15,000

Total Infrastructure 55,000

Buildings

Hotel 720,000

Mini-zoo 80,000

Pool, cafeteria, bar & restaurant, surroundings 60,000

Tennis court and amenities 30,000

Landscaping and car park 30,000

Total Buildings 920,000

Contingency 46,000

Sub-Total 966,000

Design Fee 7% 67,620

Project Management Fee 3% 28,980

Total Construction Costs 1,062,600

Table 10: Hotel/Facility Use Items Costs

Item Description Cost (USD)Furniture, Fixtures and Computers 150,000

Vehicles (1 unit) 20,000

Crockery, Linen and Others 32,200

Zoo stocking 50,000

Total Items Costs 252,200


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12.0 PROJECT ECONOMICSThe total project cost for setting up the proposed LA-SCAB VALLEY PARK tourism

and hospitality development facility is USD 2,448,500. The capital cost incurred is USD

2,155,500and the working capital is USD 293,000. The total cost and financing plan are

given in Tables 11-1 to 11-2 below.

Table 11-1: Total Project Cost

Account Head Total Cost (US$)

Land 785,700

Infrastructure 55,000

Buildings 920,000

Contingency 46,000

Design Fee 67,620

Project Management Fee 28,980Hospitality Facility Use Items 252,200

Initial Working Capital 293,000

Total Project Cost 2,448,500

Table 11-2: Financing Planning

Financing Ratio USD

Equity (Project Promoter) 32.09% 785,700

Development Funding/PPP 67.91% 1,662,800

Total Project Cost 100.00% 2,448,500


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13.0 PROJECT IMPLEMENTATION TIMETABLEThe breakdown of project phases will be as follows:

Design Phase 34 months

Bid Phase 12 months

Construction Phase 12 months

Project Closeout 12 months

In some circumstances, these phases may overlap. The intention is to achieve as much

work in parallel as possible. The Cash Flow presented in Section 14.0 below illustrates

an integrated timeframe with assumptions of overlap in certain areas. Local

architectural and engineering firms will be used to ensure speedy statutory approval by

the local authorities, which will occur during the Design and Bid phases.


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14.0 PROJECT FINANCIAL EVALUATIONThe limited availability of three star hotels in the Mbarara Municipality area creates a

profitability margin window for the first time investor. If clean and comfortable stay is

provided to the customers, then with a very conservative estimate, the first year of the

projects expected occupancy would be 50% room occupancy with annual growth

increments of at least 10% anticipated.

This section evaluates various financial aspects of the project (cost of project, earnings

forecast, rates of return, payback period, cash flow, balance sheet, etc.).

14.1 Capital Cost of ProjectTotal project cost is estimated at US$ 2,448,500 as shown below in Table 12 in

summarized form.

Table 12: Cost of Project (In USD)

Description Local

Currency

Foreign

Currency

Total

Land 785,700 _ 785,700

Infrastructure 55,000 _ 55,000

Buildings 920,000 _ 920,000

Design Fee 67,620 _ 67,620

Project Management Fee 28,980 _ 28,980Hospitality Facility Use Items 252,200 _ 252,200

Physical Contingencies 46,000 _ 46,000

Fixed Cost 2,155,500 0 2,155,500

Initial Working Capital 293,000 _ 293,000

TOTAL PROJECT COST 2,448,500 0 2,448,500

Funds are being solicited for use in putting up the requisite 3-star hotel infrastructure

and buildings at the designated site in Nyamitanga Division of Mbarara Municipality.

Since the site land for the proposed tourism and hospitality development facility isreadily available with a few cottage structures already in place, the rest of the financing

facility will be applied to other core project investment components including the

purchase of hotel facility use items (i.e. furniture, fixtures, computers and one vehicle

unit), covering project management fees and design fees, and defraying the initial

working capital expenses.


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Land:

The plot of land having an area of 10 acres in Mbarara town has been proposed,

justification for location of plant has been established in the Technical Aspects (Section

9.0) of this Business Plan. The present value of this plot of land in Mbarara town is

estimated at US$ 78,570 per acre.

Infrastructure:

Infrastructures costs include expenses incurred under this item include roads,

installation of utilities and electricity transformer plus perimeter fencing around the

facility. The total cost of infrastructure has been estimated at US$ 55,000.

Building & Construction:

The building and civil works for the proposed LA-SCAB VALLEY PARK tourism and

hospitality development facility will include construction of the 3-star hotel, putting up

the mini zoo, construction of the pool, cafeteria, bar & restaurant, the tennis court and

additional sports/recreation amenities, and landscaping and the car park. The total cost

of the building and civil works has been estimated at US$ 920,000.

Hotel Use Items:

These will include crockery, linen, cooking appliances and utensils, etc. These items are

collectively estimated to cost US$ 32,200 for the start.

Vehicles:

The proposed LA-SCAB VALLEY PARK tourism and hospitality development facility

will require the services of a van to start off business. The van will be used for

transportation of hotel-use groceries, supplies and other routine-use items from town to

the hotel in an effort to save on transportation expenses that would be incurred in

outsourcing transport hire services to external transport service providers. The vehicle

cost for 1 unit is estimated at US$ 20,000.

Zoo stocking:

Stocking of the zoo will include the sourcing, capture, transportation, and acquisition of

the necessary Licenses from the Uganda Wildlife Authority (UWA) for the local area

animals that will be kept at the mini-zoo. The cost is estimated at US$ 50,000.

Furniture & Fixtures:

This will include office furniture and fixtures as well as office equipment like

computers, operational software etc. The total cost is estimated at US$ 150,000.


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Working Capital:

Tourism and hospitality management is a business in which cash flow is very high and

companies in the industry tend to generate cash surpluses on a regular basis, most of

the hotel supplies are purchased on a 1-week cash basis and the finished product is sold

on cash. Working capital is mostly required for paying for the regular purchase of hotel

use items, for payment of staff wages and salaries, for paying of utility bills, petrol for

vehicles and for spares. The Working Capital requirements have been estimated at US$

293,000 for the first months of operation.

Physical Contingences:

Physical contingences for the first year have been estimated at US$ 46,000.

14.2 Operational DataThe capacity of the hotel is 150 rooms and allied services. It is expected that the room

occupancy would be 50% in the first year and will increase gradually; the allied servicesare expected to increase likewise.

14.3 Overhead CostsIn the first year, the following overhead cost are estimated (@ 50% capacity):

Table 13: Overhead Costs

Item Cost (USD)

Admin and marketing salary 7,300

Heat, Light and Power 3,300

Communications 4,970

Printing and Stationery 3,300

Travelling and Conveyance 14,650

Entertainment 1,680

Office Supplies 1,900

Repair and Maintenance 1,730

TOTAL 38,800

14.4 Financial PlanThe project is proposed to be financed through a combination of equity and institutional

development financing in the ratio of 68:32 respectively. We assume that the

institutional development loan will carry a profit markup rate of 10 percent per annum

payable over a period of ten years.


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Table 14: Financial Plan (In USD)

Source of Finance/Component Share Local

Currency

Foreign

Currency

Total

1) Financial AssistanceMedium-TermDevelopment Facilities

Infrastructure 2.25% 55,000 _ 55,000Buildings 37.57% 920,000 _ 920,000

Design Fee 2.76% 67,620 _ 67,620

Project Management Fee 1.18% 28,980 _ 28,980

Hospitality Facility Use Items 10.30% 252,200 _ 252,200

Physical Contingencies 1.88% 46,000 _ 46,000

Initial Working Capital 11.97% 293,000 _ 293,000

Sub-Total (1) 67.91% 1,662,800 0 1,662,800

2) EquityProject Sponsors

Land 32.09% 785,700 _ 785,700

Sub-Total (2) 32.09% 785,700 0 785,700

TOTAL (1) + (2) 100.00% 2,448,500 0 2,448,500

14.5 Profit & Loss AccountThe projected income statement for the proposed LA-SCAB VALLEY PARK tourism

and hospitality development facility is given in Table 15 below.


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Table 15: Summary Profit & Loss Account for First Five Years of the Project (In USD)

ITEM/YEAR 2015 2016 2017 2018 2019

Sales 1,850,410 2,220,495 2,590,580 2,960,660 3,330,745

Direct Cost of Sales 207,800 245,140 324,340 360,000 422,340

Other Production Expenses 0 0 0 0 0

Total Cost of Sales 207,800 245,140 324,340 360,000 422,340

Gross Margin 1,642,610 1,975,355 2,266,240 2,600,660 2,908,405

Gross Margin % 88.77% 88.96% 87.48% 87.84% 87.32%

Expenses

Payroll 220,800 231,840 243,432 255,604 268,384

Sales & Marketing & other Expenses 60,000 80,000 100,000 120,000 140,000

Depreciation 68,970 68,970 68,970 68,970 68,970

Overhead Costs 35,500 42,600 49,700 56,800 63,900

Heat, Light and Power 3,300 3,960 4,620 5,280 5,940

Insurance 12,270 12,270 12,270 12,270 12,270

Lease 0 0 0 0 0Payroll Taxes 33,120 34,776 36,515 38,341 40,258

Other 0 0 0 0 0

Total Operating Expenses 433,960 474,416 515,507 557,264 599,721

Profit Before Interest and Taxes 1,208,650 1,500,939 1,750,733 2,043,396 2,308,684

EBITDA 1,277,620 1,569,909 1,819,703 2,112,366 2,377,654

Loans Repayment 332,560 332,560 332,560 332,560 332,560

Interest Expense 166,280 133,024 99,768 66,512 33,256

Taxes Incurred 233,634 331,298 416,213 513,988 603,551

Net Profit 545,146 773,028 971,163 1,199,306 1,408,286Net Profit/Sales 29.46% 34.81% 37.49% 40.51% 42.28%

14.6 Rates of ReturnOn the basis of the projected income statements and related projections, rates of return

for the project are calculated and shown in Table 16:

Table 16: Rates of Return (In Percentages)

Description 2015 2016 2017 2018 2019Gross Profit to Sales 88.77 88.96 87.48 87.84 87.32

Operating Profit to Sales 65.32 67.59 67.58 69.02 69.31

Net Profit to Sales 29.46 34.81 37.49 40.51 42.28

Net Profit to Investment 22.26 31.57 39.66 48.98 57.52


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14.7 Payback PeriodPayback period for the project, both in terms of owners equity and total investment, is

calculated below:

Total Investment = US$ 2,448,500

Promoters Equity = US$ 785,700

Profits = Net Profit + Interest + Depreciation

Table 17: Calculation of Payback Period for Equity and Total Investment

Year Amount paid back from

Profits

Balance of Total

Investment

Balance of Total

Equity

1 545,146 -1,903,354 -240,554

2 773,028 -1,130,326 532,474

3 971,163 -159,163 1,503,637

4 1,199,306 1,040,143

5 1,408,286 2,448,429

Payback period for Equity = 1.31 Years

Payback period for Total Investment = 3.13 Years

14.8 Capital: Output RatioCapital output ratios, representing the production potential of the project in relation to

the investment involved in its establishment, are calculated in Table 18:

Table 18: Capital: Output Ratios (In USD)

Description 2015 2016 2017 2018 2019

Total Investment 2,448,500 _ _ _ _

Sales (Output) 1,850,410 2,220,495 2,590,580 2,960,660 3,330,745Capital: Output Ratio 1: 0.76 1: 0.91 1: 1.06 1: 1.21 1: 1.36

14.9 Cash FlowThe projected cash flow for the first five years of the project is shown hereunder:


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Table 19: Projected Cash Flows (In USD)

ITEM/YEAR 2015 2016 2017 2018 2019

CASH RECEIVED

Cash from Operations

Cash Sales 1,850,410 2,220,495 2,590,580 2,960,660 3,330,745

Cash from Receivables 0 0 0 0 0

Sub-Total Cash from Operations 1,850,410 2,220,495 2,590,580 2,960,660 3,330,745

Additional Cash Received

VAT Received 0 0 0 0 0

New Current Borrowing 0 0 0 0 0

New Other Liabilities (Interest-free) 0 0 0 0 0

New Long-term Liabilities 0 0 0 0 0

Sales of Other Current Assets 0 0 0 0 0

Sales of Long-term Assets 0 0 0 0 0

New Investment Received 0 0 0 0 0

Sub-Total Cash Received 1,850,410 2,220,495 2,590,580 2,960,660 3,330,745EXPENDITURES

Expenditures from Operations

Cash Spending 768,845 782,724 851,265 903,297 937,938

Bill Payments 559,564 617,298 820,696 865,697 892,640

Sub-Total Spent on Operations 1,328,409 1,400,022 1,671,960 1,768,994 1,830,577

Additional Cash Spent

VAT Paid Out 0 0 0 0 0

Principal Repayment of Current Borrowing 0 0 0 0 0

Other Liabilities Principal Repayment 0 0 0 0 0Long-term Liabilities Principal Repayment 332,560 332,560 332,560 332,560 332,560

Purchase Other Current Assets 35,000 51,000 53,000 60,000 72,000

Purchase Long-term Assets 0 60,000 120,000 180,000 240,000

Dividends 0 0 0 0 0

Sub-Total Cash Spent 1,695,969 1,843,582 2,177,520 2,341,554 2,475,137

Net Cash Flow 154,441 376,913 413,060 619,106 855,608

Cash Balance 182,717 559,630 972,690 1,591,795 2,447,403

14.10 Balance SheetProjected balance sheet for the first five years of operation is shown below:


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Table 20: Projected Balance Sheet (In USD)

ITEM/YEAR 2015 2016 2017 2018 2019

ASSETS

Current Assets

Cash 182,717 559,630 972,690 1,591,795 2,447,403

Other Current Assets 35,000 86,000 139,000 199,000 271,000

Total Current Assets 217,717 645,630 1,111,690 1,790,795 2,718,403

Long-term Assets

Long-term Assets 1,962,900 2,022,900 2,142,900 2,322,900 2,562,900

Accumulated Depreciation 68,970 137,940 206,910 275,880 344,850

Total Long-term Assets 2,031,870 2,160,840 2,349,810 2,598,780 2,907,750

Total Assets 2,249,587 2,806,470 3,461,500 4,389,575 5,626,153

LIABILITIES AND CAPITAL

Current Liabilities

Accounts Payable 9,900 126,315 142,742 204,071 364,923

Current Borrowing 0 0 0 0 0Other Current Liabilities 0 0 0 0 0

Sub-Total Current Liabilities 9,900 126,315 142,742 204,071 364,923

Long-term Liabilities 1,662,800 1,330,240 997,680 665,120 332,560

Total Liabilities 1,672,700 1,456,555 1,140,422 869,191 697,483

Paid-in Capital 200,000 200,000 200,000 200,000 200,000

Retained Earnings -168,259 376,887 1,149,915 2,121,078 3,320,384

Earnings 545,146 773,028 971,163 1,199,306 1,408,286

Total Capital 576,887 1,349,915 2,321,078 3,520,384 4,928,670

Total Liabilities and Capital 2,249,587 2,806,470 3,461,500 4,389,575 5,626,153

Net Worth 576,887 1,349,915 2,321,078 3,520,384 4,928,670

14.11 Break-Even AnalysisThe projects commercial break-even level (profitability break-even) in Project Year 5

(2019) is calculated below:


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Table 21: Break-Even Analysis in Project Year 5 (2019) (In USD)

Items Variable Cost Fixed Cost Total Cost

Direct Cost of Sales 422,340 _ 422,340

Payroll _ 268,384 268,384

Sales & Marketing & other Expenses 140,000 _ 140,000

Depreciation _ 68,970 68,970Overhead Costs 63,900 _ 63,900

Heat, Light and Power 5,940 _ 5,940

Insurance expenses _ 12,270 73,426

Payroll Taxes _ 40,258 851,827

Interest Expense _ 33,256 54,348

TOTAL 5,819,987 1,356,441 7,176,428

Sales Value of Production = US$ 3,330,745

Break-even Sales = 423,138 423,138 423,138

1 632,180 1 0.19 0.81

3,330,745

Break-even Sales = US$ 522,393

Capacity utilization required to Break-even = US$ 522,393 x 100 = 15.68%

US$ 3,330,745

Margin of Safety = 100% 15.68% = 84.32%

14.12 Value Added/Contribution to GDPImplementation of the project is expected to have a beneficial economic impact on

regional/national economic development. The projects contribution towards the

countrys Gross Domestic Product (GDP) is estimated below.


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Table 22: Value Added/Contribution to GDP (USD)

Description 2015 2016 2017 2018 2019

Value of Production (Sales) 1,850,410 2,220,495 2,590,580 2,960,660 3,330,745

Less Intermediate Inputs:

Direct Cost of Sales 207,800 245,140 324,340 360,000 422,340

Heat, Light and Power 3,300 3,960 4,620 5,280 5,940

Overhead Costs 35,500 42,600 49,700 56,800 63,900

Depreciation 68,970 68,970 68,970 68,970 68,970

Total Intermediate Inputs 315,570 360,670 447,630 491,050 561,150

Value Added 1,534,840 1,859,825 2,142,950 2,469,610 2,769,595

Value Added as % of Output 82.95% 83.76% 82.72% 83.41% 83.15%

Value Added per Worker (US$) 12,898 15,629 18,008 20,753 23,274


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15.0 PESTEL ANALYSISTo scan the environment of the proposed LA-SCAB VALLEY PARK tourism and

hospitality development facility, the Company used common sense and brainstorming

techniques in combination with the PESTEL-Analysis. The acronym PESTEL stands for

the political, environmental, social, technical, economic, and legal environment. Possible

risks were analyzed concerning likelihood of appearance, threat of endangering the

project, and the difficulty of minimizing or eliminating the risk.

15.1 PoliticalGovernmental influence at the central government level for the 3-star hotel is for now

irrelevant. Yet the importance on a community level has to be considered. Since the

major of the community is informed about this project and is supporting the project, the

likelihood of objections from a public side is low. Objections from a private person are

also very unlikely to occur. The 3-star hotel will be placed in a rather industrial

characterized zone of Mbarara Municipality and does neither affect the overall

appearance of the locality nor impacts the housing area.

15.2 EconomicDue to Ugandas stable economy economical risks are generally estimated as low. Cost

of capital is rather high and economic growth is low which bears some risk estimated as

low to medium. This means existing hotels in this area have to compete for a consistent

market share. In case the hotel should not be able to quickly establish a large market

share it might not be able to cover the operational costs which can threaten the whole

project. Additionally, the high price level in Uganda as well as the short travelling

season reduces the attractiveness for tourists. Yet the main customer is the business

traveller which reduces the risk of low occupation. Due to its location next to the

highway, risks in complications with the supply chain are low.

15.3 SocialSocial factors do hardly influence this project or bare risks which have to be considered.

Mentionable is the aging population which increases cost in labour due to higher

salaries for experienced workers. On the other hand, it offers an opportunity because of

higher income customers.


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15.4 TechnologicalTechnological aspects in general offer possibilities which are in the meantime risks or

challenges. The construction of a completely new building offers many possibilities for

a hotel to differentiate from its competitors and gain competitive advantages. Eco-

friendly buildings, alternative power sources, progressive management style, and a

modern functional facility are only a few sketched possibilities. Through obvious

competitive advantages the hotel can gain attractiveness to customers and increase

market share. Possible risks can appear in wrong or too high investment which

however can be minimized through careful analysis.

15.5 EnvironmentalEnvironmental risks are mainly short peak season for international travellers which

reduce the attractiveness for tourists and therefore the number of potential customers.

Increasing travel and transport costs bear some risk estimated as low to medium.

Higher transport costs affect prices for consumer goods offered by the hotel. High travel

costs increase the possibility that travellers switch to alternative traffic means. Though

the desired customer is the business traveller who depends strongly on individual

travelling, this risk is minimized. The increasing need to protect the environment might

bear further not yet revealed risks.

15.6 LegalSince Uganda has a well functioning and elaborated legal framework, the legalenvironment bears the highest risks concerning high costs in health and safety issues.

The strong laws which favour consumers and job-holders cause high costs for the

employer. With a carefully analyzed environment and legal advice all other risks

concerning legal issues can be eliminated.


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16.0 CONCLUSIONIt can be concluded from the foregoing business analysis and financial modelling that

the proposed full-scale establishment and operation of the LA-SCAB VALLEY PARK

tourism and hospitality development facility at Mbarara town in Western Uganda is

extremely viable from a financial and commercial point of view; and it is further

recommended that an early decision to facilitate it with the requisite line of credit be

expedited such that implementation of the project follows the fastest track possible for

the benefit of the project promoters, the Uganda tourism and hospitality industry and

market, and the Ugandan economy at large.

Documents

Business Plan.docx 3-Star Hospitality and Tourism Devt Centre in Mbarara - Uganda