Free-Plan

Red Roof Inn, Biloxi

RED ROOF INNHotel Project Proposal

Biloxi, Mississippi

Table Of Contents

Section I: Introduction. 1Section II: Executive Summary... 2Section III: Market Area Analysis.. 3Section IV: Operational Strategies 10SectionV: Franshise Comparison.. 13Section VI: Product And Service Analysis17Section VII: Operational Plans...23Section VIII: Market Strategies and Sales Plans..25Section IX: Management Organization.... 28Section X: Project Construction Costs...... 30Section XI: Project Management Action Plan..34Section XII: Sustainability Approaches...38Section XIII: Financial Statements41Section XIV: Conclusion.....45Section XV: Appendices..46Red Rood Inn, BiloxiHotel Project Proposal

Introduction

This document outlines a proposal for a 120 room Red Roof Inn Hotel located in the lovely and historic Biloxi, Mississippi. There are many local attractions within the vicinity of our hotel that attracts many people, especially over the summer. There are plentiful of beaches as well as historical sites such as Ship Island and multiple casinos. The hotel will market towards a younger crowd, but guests any age are welcomed. The hotel will offer several different amenities to cater to our guests such as a complimentary continental breakfast, free Wi-Fi, outdoor swimming pool, and a fitness center. The Red Roof Inn, Biloxi will be an economy brand hotel with ocean-front views, with proximity to restaurants and other attractions.A team was put together to complete this proposal with the intent to enlarge the market in Biloxi. This proposal was completed in the beginning of the 2015 fiscal year. The information presented in this document mirrors the views of all members of this group. For more information, or permission to use this document, please contact:Andrew Spera36 E. Cleveland Ave.Newark, DE 19711516 - 459 - 7016Dylan Nunn37 East Park PlaceNewark, DE 19711202 - 607 - 9156Erin Raphael 132 E. Delaware Ave.Newark, DE 19711516 - 375 - 7254Tosh Chareton123 E. Main StreetNewark, DE 19711914 - 621 - 8849

Confidentiality Agreement:This document is confidential and is only available to the individual to whom it is directly addressed strictly on the agreement that the contents will not be discussed with any third parties except with the individuals that have permission to do so.Investment in new and small businesses carries high risk, with the possibility of high reward. Potential investors should be aware that no established market exists for the trading of shares in private companies. Prospective investors are advised to verify all material and take professional advice before entering into any commitments. This plan is strictly for information only and does not constitute a prospectus nor an invitation to subscribe for shares. Projections in the plan have been compiled by the promoters for illustrative purposes and do not constitute profit forecasts. The eventual outcome may be more or less favorable than that portrayed.Executive SummaryThe Red Roof Inn, Biloxi is a 120-room economy property that will aim to attract a primary market of leisure travelers and secondary group and business travelers. The hotel will strive to provide the best experience towards our guests based on our location, amenities, and employees. It will emphasize high quality standards in all hotel departments. The Red Roof Inn, Biloxi will provide guests with a clean, relaxing, and enjoyable smoke-free property, in a home away from home atmosphere. In addition, the hotel service will constantly change according to the specific needs and requests of its guests. The following sections in this proposal will explain a more in-depth look as to the feasibility of this hotel. Biloxi, Mississippi is a historic city known for its Gulf coastline, gaming attractions and professional golf courses. The demand drivers and a detailed list of the attractions in the area will be discussed in the market analysis section of our report. Red Roof Inn, as an economy brand aims to provide a budget option for guests of any age to enjoy the attractions. The franchise comparison section will spend time comparing Red Roof Inn Biloxi to Howard Johnson Hotel. Both hotels are 120 room economy hotels. This comparison will reveal the advantages that the Red Roof Inn has over other hotels in the area as well. The competitive set in this area are Motel 6 Biloxi, Super 8 Biloxi Coliseum Area, Super 8 Ocean Springs, and Suburban Extended Stay Hotel Diberville. This section will also address the hotels layout and the amenities offered. Red Roof Inn will offer guests two types of rooms. Guests will have the choice of a general king room, or a double room. Some of the amenities included are continental breakfast every morning, a swimming pool, well-furnished fitness center, a pet friendly environment, and spacious rooms.The market strategies and sales section both aim to explain different ways the hotel will attract more guests to the property. Red Roof Inn is an affordable property with government discounts available as well as military discounts. Our property uses effective marketing campaign strategies to attract guests such as save 10% on the first two nights or 20% on three or more nights. Also, book and save 22% Sunday through Thursday. The rest of this section will show the projections of the hotels ADR, and the forecast for average rate as well as revenue forecast.Market Area AnalysisHistory

Biloxi is one of the most historic cities in America tracing its roots back to 1699. Pierre Le Moyne, a Frenchman found the Native American settlement and named the newfound city after the Biloxi tribe. The French and Native Americans got along well, and it was at one point the capital of French Louisiana, before losing that title to New Orleans. By the turn of the 20th century, Biloxi became known as the Seafood Capital of the World. Forty seafood factories operated in the city during the 1920s. Gulf Coast shrimp are still known as the finest in the world. In 1927, Biloxis historic hotels included the Edgewater Gulf Hotel, White House Hotel, Tivoli Hotel, Buena Vista Biloxi Hotel, Kennedy Hotel, Park Hotel, Avelez Hotel, and Rivera Hotel. A new era began in the city in 1992 with the opening of the first Las Vegas-style gambling casino. The resort casinos with their 24-hour entertainment availability spurred a tremendous growth in both local and tourist populations, and restaurants and other businesses grew accordingly. The new city of Biloxi has risen from the rubble of Hurricane Katrina and is one of the premier destinations on the Gulf Coast. Recently, the Biloxi Gulf Coast was impacted by the 2010 BP Deep Water Horizon oil spill.

While this was a detrimental event, the community attempts to stay resilient. The area combines scenic beauty and history with local cuisine, hotels, casinos, and golf courses. Geography Biloxi is located on a small peninsula between Biloxi Bay and the Mississippi Sound on the Gulf of Mexico. Located just 70 miles north of New Orleans, and 150 miles west from Jacksonville this semitropical climate and sunny days are the perfect vacation destination. The months May through September are full of wonderful warm temperatures with cool breezes. Winter is primarily warm, clear weather with occasional cold spills only lasting for a few days. Climate

As you can see from the accompanying graphs above, Biloxis temperature ranges from a low 40F in the winter months, to a high of 90F. Biloxis occupancys percentages tends to be affected by temperature variances as a majority of our guests like to visit Biloxi towards the summer months.

Population and Demographics

Biloxi adjoins with the bigger city of Gulfport. Gulfport is the second largest city in Mississippi with an estimated population of 71,012. According to 2013 census data, Biloxi, Mississippi has an estimated population of 44,820. Biloxi is home to Keesler Air Force base and 19.8% of the population are veterans. Caucasians makeup 71.4% of the population, and African Americans make up just 19%. The census data shows that in 20 years the Mississippi Gulf Coast region could see an increase of 450,000 people. This is promising data for the region and will result in increased revenues for the service industry. Adults between the ages of 25-34 make up most of the population. Second to that are adults between the ages of 18-24. Retail SalesAccording to the U.S. Census, the retail sales in Biloxi were $573,389 for 2007, while the sales for the state were $33,751,407. The retail sales per capita for that same year for Biloxi were $12,399. We were unable to attain data after 2007 because the cities numbers have not been updated since. WorkforceBiloxis principal property taxpayers are the Beau Rivage Resort and Casino paying 12.83% of the total taxes. Casinos are the top three principal property taxpayers in Biloxi. Casinos are also ranked second and third in top employers for Biloxi. Hospitality and leisure related jobs have the greatest employment because there are so many different jobs in these departments. In 2005-2009 for the employed population 16 years and older, the leading industry in Biloxi was hospitality.

Transportation

The Mississippi Gulf is approximately an hours drive from New Orleans, Louisiana to the west and Mobile, Alabama to the east. You can take interstates I-55, I-65, or I-85 to I-10, then travel down I-110 or State Highway 49, which will bring you on to US Highway 90, which runs along the Gulf waters. By train, The Amtrak also provides a stop right on the Northern part of Biloxi. Located twenty-five minutes away from Biloxi is the second largest airport terminal in Mississippi known as the Gulfport Biloxi International Airport. There are several options available to get you from the airport to Biloxi as well as around the city once you arrive. To make your way to Biloxi from the airport, one would just have to get on I-10 East until you reach Biloxi: about twenty five to Downtown Biloxi. Once you arrive in Biloxi, several options are available as a means of transportation from one part of the city to another. There are also several tour buses/trolleys that would gladly show you around the historic city of Biloxi. Transportation methods such as by taxi, or by renting a car from Enterprise are just some of the many options available. As a means of touring and sightseeing the beautiful area of Biloxi, several trolley companies such as The Biloxi Tour Train. Rolling strong for 53 years, this open-air train has delighted visitors on a memorable historical journey through one the oldest settlements in America.. The "Shrimp Train" as local folks affectionately call it entertains all who board with a 90-minute tour through Biloxi's Historic District. More than a million passengers ride The Trolley each year.

76.6% of the population drove to work alone with the average commute of 18.8 minutes. Other methods of travel although not as common in Biloxi include carpooling and walking. According to the graph above, 29% of residents in Biloxi travel less than 15 minutes, while 47% of residents travel to work within the 15-29 minute range.AttractionsThe demand drivers for this area of Mississippi are the sandy beaches, calm waters perfect for jet skiing or deep-sea fishing. Although Biloxi suffered heavy damage from Hurricane Katrina in 2005 and the oil spill in 2010, the area is rebounding back with force. There are several large casinos and golf courses that bring tourists from all over the country. Every year in mid October Gulfport-Biloxi is the home of the Sun and Sand Film and Music Festival. The festival attracts film and movie enthusiasts from across the nation to attend indoor and outdoor concerts and screenings. Biloxi has a variety of attractions that can cater to a large array of people including:Hard Rock Casino Hard Rock Hotel & Casino Biloxi is a striking 12-story purple and white hotel tower announced by the world's largest Hard Rock Guitar sign. With its modern design, Hard Rock Biloxi boast high ceilings, an open casino floor, a sleek nightclub and boutique rooms with walk-in showers. Located in the heart of the Mississippi Gulf Coast, guest can easily access the beach as well as take in spectacular views of the Gulf of Mexico.Ship Island

Ship Island is an island owned by the National Park Service. It is a major attraction with beautiful beaches, which are more secluded because in order to get to them you must take a ferry. It is a protected island with local history. This pristine beach is a well-preserved Third System brick fort with significance during the Civil War. The fort there is also a very nice place to walk around.BeauvoirBeauvoir meaning beautiful view in French, is a wonderful historic sight. This was the home of Jefferson Davis. It was nearly destroyed by Katrina in 2005, but has been restored to its former condition. The trees, walls, and green front entrance have all been redone and restored. For a fee, one will be given an amazing tour of the house, entrance to the presidential library, and the ability to wander the beautiful grounds and cemetery of the Confederates. There are guided tours given by men dressed in costumes from that time period to really get that historic feel. Golf CoursesThe Mississippi Gulf Coast is known all over the world for its beautiful golf courses. The courses offered, especially in Biloxi, contain breathtaking views, professionally designed greens, and famous southern hospitality. Out of the several golf courses offered in the area, one of the most famous and renown courses is The Preserve Golf Club. Located just minutes away from Biloxi, The Preserve Golf Club offers eighteen holes of golf with unprecedented course conditions. Designed by U.S. Open champion and award winning golf course designer, Jerry Pate, The Preserve encompasses 245 pristine acres, surrounded by an additional 1800 acres of dedicated nature preserve.

Estimated Area DemandIn Biloxi, Mississippi the majority of its visitors travel in the summer for leisure. Biloxi is known for its beaches and casinos. Biloxi is ranked number 3 for the gaming industry. A handful of casinos are located right on the shore of Biloxi. Gambling is a huge draw. Each year, about sixteen million people visit these casinos. The pristine gulf beaches are also in high demand for tourists. In the 1820s Biloxi became a popular summer resort for New Orleanians wishing to escape their citys heat and yellow fever epidemic. Since then, the city has grown and more tourists come for the casinos. Biloxi has eight casinos open and running. Families wishing to visit Biloxi come for the Ship Island Cruise, the Biloxi Shrimping Trip, and Children Museums. Occupancy Demand Per SeasonHistoric Market Demand200920102011201220132014

Avg. Daily Room Count12,71313,04912,81512,99412,914

Occupancy62.4%67.6%60.6%63.7%57.8%56.0%

Change8.4%-10.4%5.1%-9.4%-3.0%

Average Rate$79.53$80.19$82.82$81.83$83.04$85.44

Change0.8%3.3%-1.2%1.5%2.9%

RevPAR$49.62$54.25$50.19$52.14$47.96$47.85

Change9.3%-7.5%3.9%-8.0%-0.2%

According to the STR Trends Report Data for Biloxi, Mississippi, the average daily rate has increased from $79.53 in 2009 to $85.44 in 2014. Average rate has increased over the years and can only be expected to continue to do so for the years ahead. Occupancy rates, on the other hand have not had so much luck. Occupancy rates have been on a decline from 2009-2014. RevPAR fluctuates from 2009-2014. There is no steady increase nor decrease, which makes it difficult to determine whether or not opening a new hotel would prove to be profitable.Construction TrendsIn the Economy segment there are currently 26 hotels, and a 2,222-room supply available. In the last 5 years there has been little movement in the supply of rooms. In fact, there has been a decline of 21 rooms. Looking ahead there are no new economy hotels in the pipeline. There are 13 hotels in the final planning stages and 3 in construction. These are mainly upper midscale hotels so they would not compete with our planned economy hotel. This data presents a huge opportunity for investors looking to construct a new project.

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Biloxi attracts its tourists from the casino, golf courses, fishing, its historical attractions, and from the gulf coast. Considering the whole city is situated on the gulf coast, its hospitality-based economy has to do with the beach and providing affordable rates for casino goers. The fishing industry is also a large attraction. The largest revenue generating attraction Biloxi has to offer is its casino and gambling industries. Some of the many large casinos include Hard Rock, New Palace, & IP casino resort.SummarySitting along the shores of Mississippi's Gulf Coast, the city of Biloxi has been a favorite vacation destination for decades, with sandy beaches and calm waters, perfect for jet skiing or deep-sea fishing. The months of May through September are full of wonderful warm temperatures with cool breezes. Having suffered heavy damage during Hurricane Katrina, Biloxi is bouncing back. The casinos (currently ranked 3rd in the gaming industry) and resorts are back in action, offering championship golf and live entertainment. The city has restored many historic sites, including Beauvoir, the home of Confederate president, Jefferson Davis. Hotels located in the city of Biloxi are an area of particular interest that should be considered. In the Economy market segment, there are currently 26 hotels, and a 2,222-room supply available. With an increase in area demand due to many factors that we have previously discussed, and relatively little movement in the supply of rooms offered, the idea of implementing a hotel development plan in the area might be an idea worth considering.Operational StrategiesVision

Red Roof Inn in Biloxi, Mississippi envisions itself to be able to continue to provide comfortable and affordable rooms to all of its guests in the future. Our target market is focused towards leisure travelers. Our secondary target market is group and business travelers who will appreciate the hotels excellent accommodations. Hotel service will change according to the specific needs and requests of its guests.Mission

The mission of Red Roof Inn is to provide economical lodging facilities and services to all of its guests by creating a relaxing and enjoyable home away from home atmosphere. The hotel will focus on individual business and leisure travel along with providing comfortable rooms. It will emphasize high quality standards in all of its rooms and amenities. In addition, it will hopefully provide a fair return on its investment for its owners. This goal can only be achieved with the help of well-trained, motivated, and enthusiastic employees.Values

The Red Roof Inn will try to uphold high values for achieving an excellent guest experience along with providing sufficient financial benefits for its stockholders, owners, managers, employees, and suppliers. It will communicate with everyone in a very professional and friendly manner. Strengths, Weaknesses, Opportunities, ThreatsStrengths

The Red Roof Inn will provide affordable rates to all of its guests. It will also have a wide variety of room choices and bed sizes for guests to choose. In addition, it will provide free Internet access along with a free continental breakfast to all of its guests. An outdoor swimming pool along with gym facilities will also be available for recreational activities.

Weaknesses

The main weakness that the Red Roof Inn will have to deal with is that according to STR data, occupancy percentages in hotels in the Biloxi, Mississippi area have been on a slow decline from 2009-2014. The hotel will try to correct this weakness through a widespread advertising campaign in which it promotes its affordable rates and excellent amenities. Another weakness is that the revenue per available room (RevPar) may fluctuate from year to year in this area. As a result, it may be difficult to determine the long-term financial success of this hotel in the area. The hotel will attempt to maintain affordable prices along with a high occupancy rate at all times.

Opportunities

Being a Red Roof Inn branded hotel, many guests are already aware of the name and what the brand values the most; a caring and confortable environment for all guests. The development of the Red Roof Inn, Biloxi Mississippi will encourage construction of hospitality related services such as restaurants as well as retail locations. The property will also provide excellent and profitable employment opportunities for people who live in the area. During operations, employees careers will be valued and they will be encouraged to stay with the organization. Promotion within will be an important motivator for employees to provide better service to our guests. Equally important to employee satisfaction is the happiness of our guests. Guests will be able to enjoy many attractions and recreational activities in the area, including clean beaches, excellent fishing, fantastic casinos and golf courses, and a wide variety of music and food festivals. ThreatsA major threat to this hotel may be a significant weather event such as a hurricane or tornado. Hurricane Katrina previously devastated this area, but the area is continuing to improve its overall appearance. The hotel will be built to withstand extreme weather conditions. Another threat might be the possibility of a low occupancy rate due to a poor economy or horrible weather conditions. The hotel will respond to this threat by continuing to offer affordable rates and room availabilities during these times. Goals, Objectives, and StrategiesGoal 1: To ensure the greatest possible guest experience at all timesObjective:To strive for a greater than 90% customer satisfaction rate over the first two years of operationStrategies: Hotel employees welcome every guest in a friendly and professional manner The hotel provides excellent room accommodations Hotel employees always assist guests who require individual needs Quick, accurate, and pleasant check-in and check-out experience for every guest To allow every guest to provide feedback as to how to improve guest experience for future visits Goal 2: Profit for hotel owner/managerObjective:

Attempt to achieve 2 million dollars in total revenue by the fourth year of operationStrategies: Continuous monitoring of hotel occupancy rates to ensure that the hotel isfunctioning up to its capacity Hotel controller should constantly monitor hotel costs and expenses and tryto minimize hotel spending without affecting a guests hotel experience in anegative wayGoal 3: To train employees so that they are respectful towards guests and can work well in a team environmentObjective: The Red Roof Inn, Biloxi will train all employees so that they have the ability to succeed. This includes educating all employees so they can do their best

Strategies: Train employees to have well rounded skills Expose and educate employees to all different types of situations Reward employees for proper perfomranceFranchise Comparison

The market of Biloxi, Mississippi is generally summer based leisure travelers. Most of the demand comes from the casinos. As analysts, we have compared a 120 room Red Roof Inn economy hotel and a 120 room Howard Johnson economy hotel. Currently there are 103 hotels in Biloxi and the market is dominated by independent hotels controlling 36% of the supply. Economy hotels make up 25% of the market. There are no luxury hotels in Biloxi and only one upper midscale property. There have not been any recent construction of economy hotels according to the pipeline data. The most recent to open was a Motel 6 in 2009. This lack in development presents ample opportunity for an economy hotel. Background of Franchise Options

The Howard Johnson brand is under the parent company Wyndham Worldwide. With more than 500 locations in 14 countries, Howard Johnson is an iconic American Brand. The brand originally started in 1925 as a restaurant chain and began franchising hotels in 1954. The brand has 4 tiers of hotels, Howard Johnson Plaza Hotel, Howard Johnson Hotel, Howard Johnson Inn and Howard Johnson Express Inn. All tiers offer continental breakfast, are pet friendly, and have free WIFI. Select locations also offer swimming pools and exercises rooms. J. D. Power and Associates reports Howard Johnson Express/Inns a ranking of 691/1000 customer satisfaction and a 4/5 J.D. Power circle rating. The average ADR at Howard Johnson hotels in 2014 was $69.13. Howard Johnson is committed to keeping its guests happy through convenience, cleanliness andcomfortability.

Red Roof Inn is a private company with over 400 locations in 40 states and growing rapidly. The brand was started in 1973 and is based in Springfield Ohio. Red Roof Inn, like Howard Johnson, has multiple tiers of hotels. These include Red Roof Inn, Red Roof Plus+, and Red Roof Plus+ and Suites. Previously the brand was owned by Accor, a French hotel group. Accor acquired Red Roof Inn in 1991 for $1.1 billion and added 324 properties to the franchise. In 2007 Accor sold the franchise to Citigroup Global Special Situations Group and Westbridge Hospitality Fund LP for $1.3 billion. All locations of Red Roof Inn serve continental breakfast, are pet friendly and have free WIFI. Select locations have swimming pools, exercise rooms, meeting rooms and business centers. J. D. Power and Associates reports Red Roof Inn a ranking of 709/1000customer satisfaction and a 4/5 J.D power circle rating. Red Roof Inn boasts that its brand is more like an upscale economy experience offering guests a comfortable caring environment. Franchise FeesCost/ServiceRed Roof InnHoward Johnson

Total Initial fee30,00071,000

Total royalty fee689,5551,961,401

Total reservation fee612,9381,975,004

Total marketing fee0980,701

Total Misc. fee226,660187,845

Total 1,559,153 5,175,951

*data from Hotel Franchise Fee Guide 2013 Selected Franchise

As analysts, we have decided that the franchise development of a Red Roof Inn would be the best option for the Biloxi, Mississippi marketplace. Red Roof Inn, being the one and only brand of the company, means that they are entirely focused on promoting that one brand and not overcrowding the economy market. Red Roof Inn has been voted the #1 economy hotel for the last five years by ReviewMetrix CSI Benchmark. The brand has received the highest customer satisfaction score according to ReviewMetrix. Red Roof Inn is also dedicated to sustainability. Their efforts include energy-saving fluorescent lighting, water-saving toilets and showerheads, environmentally sensitive Ecolab Laundry and cleaning products, and go green select housekeeping service. The average ADR for the Red Roof Inn brand is $71.93. This number is higher than Howard Johnsons ADR. The average occupancy for Red Roof Inn is 71.1%. Red Roof Inn also consistently has one of the highest RevPar of any hotel in the economy market. Along with superior performance, Red Roof Inn will provide a 24/7 help desk that utilizes sophisticated problem-tracking system to ensure closure to all problems and to escalate any emergencies that may need immediate attention. Overall the amenities, sustainability efforts, and reputation make Red Roof Inn a premier franchising option.

Projected Revenue and OccupancyProjected Occupancy Using a linear regression model we found our forecasted occupancy for the next four years. Due to current market trends in Biloxi, Mississippi and our competitive set performance, occupancy is beginning to increase at a slow and steady pace and then evens out at 62.4%. A majority of our customers will be leisure travelers which will make up 70% of our customer base. The remaining 30% of customers will be split up into group and business clientele with each estimated to be 15% respectively. As seen by the accompanying chart, the amount of rooms sold each year to each of our different types of customers is calculated based on a 120 room hotel and projected occupancy for that year. Number of rooms sold to our clientele (by year)2018201920202021

Leisure 70% 16,64817,78320,35820,358

Business 15%3,5683,8114,3624,362

Group 15%3,5683,8114,3624,362

Total Available Room Nights43,80043,80043,80043,800

Projected occupancy 54.3%58.0%66.4%66.4%

Room Rates

Our average ADR can be shown in the chart below. We suspect that in the first year of operation, ADR will be $66 per night. ADR is expected to increase each year at 8% the first two years until it levels off at 3% for the next 4 years. Leisure travelers will pay a slightly higher premium compared to ADR each year while our group and business clientele will pay a lower ADR compared to average ADR because of return business over time. 2018201920202021

ADR$66$72$77$80

Leisure 70%$68$74$79$82

Business 15%$65$71$76$79

Group 15%$65$71$76$79

Total Revenue

To find total revenue, we multiplied our 120 available rooms to our 365 days of operation. From there we multiplied our expected occupancy for that year as well as our average ADR to come up with our expected total. Our percent change of total revenue from year 1 to year 2 is 15.72%. From year 2 to year 3 revenue increases 23.7% to $2,249,804. Finally, in year 4 revenue increases 3% to $2,317,298. Occupancy %Room Nights SoldADRTotal Revenue

2018(Year 1)54.3%23,783$66.01$1,571,151

2019(Year 2)58.0%25,404$71.57$1,818,192

2020(Year 3)66.4%29,083$77.40$2,249,804

2021(Year 4)66.4% 29,083$79.73$2,317,298

Product and Service AnalysisBiloxi, Mississippi receives most of its business from customers searching for leisure activities. The city of Biloxi has been a favorite vacation destination for decades, with sandy beaches and calm waters perfect for jet skiing or deep-sea fishing. The casinos are a big factor when tourists visit the city of Biloxi. Families enjoy along Biloxis historical attractions such as The Beauvoir, the home of Confederate president, Jefferson Davis as well as the pristine beaches. The Red Roof Inn, Biloxi will offer a perfect stay to our adventurous, or laid back guests looking for welcoming hospitality. We aim to accommodate the younger age group of 25-35 years of age, travelers who are interested in enjoying the casinos. At The Red Roof Inn Biloxi, guests will be able to enjoy the numerous amenities offered at a reasonable price, such as the in-room coffee, microwaves and mini-refrigerators. Our guests can enjoy all that Biloxi has to offer while also enjoying free Wi-Fi, free Continental Breakfast, a non-smoking environment, complimentary coffee and tea in our lobby, coin laundry, flat screen televisions and a seasonal pool, among other amenities. We believe that along with our location, amenities, and service, Red Roof Inn, Biloxi will be perfect for a leisure hotel.Comparative Analysis of Current Lodging Supply

Currently, there are a variety of economy hotels located in the Biloxi area. The main goal of hotels is to differentiate themselves from their competition. Being that our competitors are similar, we must set ourselves apart from them through amenities and service. The Red Roof Inn will always be one step ahead of their guests in maintaining high levels of satisfaction and comfort.HotelNumber of Rooms

Motel 6 Biloxi112

Super 8 Biloxi Coliseum Area200

Super 8 Ocean Springs80

Suburban Extended Stay Hotel131

*Red Roof Inn Biloxi120

Motel 6 Biloxi2476 Beach Blvd, Biloxi, MS 39531Motel 6 Biloxi is an economy hotel located in Biloxi. It is equipped with 112 rooms. Motel 6 Biloxi is located off I-10, near shopping, dining and entertainment. All guest rooms have a modern look and Wi-Fi available for $2.99 per 24 hours. Amenities include an outdoor pool open all year, guest laundry, and kitchens in selected rooms. Additional amenities include a beach within 10 miles, pet friendly, and kids stay free. Parking is available and the coffee is fresh, hot, and free in the morning.

Super 8 Biloxi1870 Beach Boulevard, Biloxi, MS 39531For value and convenient access to attractions, Super 8 Biloxi hotel near Kessler Air Force Base is an economy hotel equipped with a hefty 200 rooms. The convenient location off Highway 90 makes it easy to come and go. There is a free 8-item SuperStart breakfast bonanza which helps guests get ready to go each morning. Cooling down after a day of sightseeing is easy with the outdoor pool, and the kids are able to splash around in the kiddie pool. Each hotel room features free Wi-Fi Internet access, a microwave and a refrigerator. Kids 17 and under stay free with an adult at this Biloxi hotel. Waffle House and CQ are within a quarter mile of the hotel while Snapper Seafood features local favorites less than two miles away. Hunan Chinese Restaurant and Mr. Greek, which feature authentic Mediterranean dishes, are both five minutes away. This Biloxi hotel features a 2,500-square-foot conference and meeting room.

Super 8 Ocean Springs13838 Wilfred Seymour Rd, Ocean Springs, MS 39565 USThe Super 8 Ocean Springs falls in the economy market with a capacity of 80 rooms. This straightforward budget hotel is off Interstate 10, 3.7 miles from Ocean Springs and 7.8 miles from Downtown Biloxi. Mississippi Sandhill Crane National Wildlife Refuge is 6.4 miles away and Super 8 is only 8 miles from the Mardi Gras Museum in Biloxi. For more outdoor activities, De Soto National Forest allows you to fish or paddle canoes in its Black Creek. The forest also offers more than 60 miles of hiking trails. Tee off at Gulf Hills Golf Club and one can enjoy a day at one of the most beautiful and challenging 18-hole courses in the area. All rooms include en suite bathrooms, TVs, desks, coffeemakers, minifridges and microwaves. There is also free WiFi in every room and kids 17 and under stay free with an adult. Amenities include complimentary continental breakfast and parking, plus an outdoor pool, business center, and laundry facilities.

Suburban Extended Stay Hotel10221 Rodriguez Street, DIberville, MS 39540The Suburban Extended Stay Hotel near Biloxi is an economy hotel with 131 rooms. At this Suburban Extended Stay Hotel in D'lberville, MS, guests will be near the Mississippi Gulf Coast and the city of Biloxi. They are located less than four miles away from nearby Keesler Air Force Base. This D'lberville hotel is right off Interstate 110 and accessible within five miles of attractions such as Beau Rivage Casino, Hard Rock Casino Biloxi, Mardi Gras Museum, and Grand Biloxi Casino. Although the Suburban Extended Stay Hotel in D'lberville is located near many chain restaurants, guests can prepare their meals in their rooms well-equipped kitchen. Other extended-stay amenities that let guests work and feel at home include free WiFi, a Fitness room, copy and fax services, and weekly housekeeping service. This is a pet friendly hotel. In each spacious room guests will find a hair dryer, iron, ironing board and 32-inch flat-screen TV.

Competitive Set Room Rates1 King Bed Room7/25-7/263/3-3/411/14-11/15

Motel 6 Biloxi$129.99$59.99$59.99

Super 8 Biloxi Coliseum Area$109.00$59.99$89.99

Super 8 Ocean Springs$89.00$89.00$89.00

Suburban Extended Stay Hotel DIberville$89.00$59.95$94.99

*Red Roof Inn Biloxi$104.99$59.95$79.99

Competitive Set Identification and AnalysisThe four existing hotels in our proposed propertys competitive set include Motel 6 Biloxi, Super 8 Biloxi Coliseum Area, Super 8 Ocean Springs, and Suburban Extended Stay Hotel. These hotels are all in the economy market, with rooms varying from a low of $80 per night to a high of $200 per night. These hotels are similar to our Red Roof Inn Biloxi, which is also within the economy market.Comparative Analysis of Services to Target Marget Segments

Each of these hotels is similar in the sense that they have a rather small amount of rooms, and are appealing to leisure travelers. They also all offer similar amenities, services, and overall products. Most of Red Roof Inn, Biloxis visitors are traveling for tourism or leisure. Potential guests will be looking for a hotel that is a relaxing place to return to after a long day of adventure and tourism. The overall ambiance we will have at our hotel is going to be comforting, yet exciting to cater to our guests.Our amenities include complimentary breakfast daily, an outdoor pool, an exercise room, flat-screen TVs, and rooms featuring balconies with an ocean-front view. Our Red Roof Inn customers will feel welcome when they enter, and satisfied when they leave.AmenitiesMotel 6 BiloxiSuper 8 Biloxi Coliseum AreaSuper 8 Ocean SpringsSuburban Extended Stay Hotel*Red Roof Inn Biloxi

BreakfastNoYesYesYesYes

Free Wi-FiNoYesYesYesYes

PoolYesYesYesNoYes

Pet FriendlyYesNoYesYesYes

Non SmokingYesYesYesYesYes

Laundry ServicesYesNoYesYesYes

Shuttle-ServiceNoNoNoNoNo

Meeting SpaceNoYesYesYesNo

Exercise RoomNoNoNoYesYes

Flat-Screen TVYesYes (King)/No (Doubles)NoYesYes

Kids Stay FreeYesYesYesNoYes

Operational Plans

Red Roof Inn Biloxi will provide multiple amenities such as an outdoor pool, a fitness center, onsite laundry, and pet friendly rooms. In addition, five of our rooms will ADA assessable. Further specification for the different aspects of the hotel will be outlined in the subsections. Guest RoomsOur hotel will have a total of 120 rooms. All guest rooms will be equipped with several amenities such as free Wi-Fi, flat screen TVs, refrigerators, microwaves, and in-room coffee. For convenience, laundry machines will be located on each floor. A select number of our rooms have balconies and outside sitting space with a view of the ocean. Our hotel has two different room sizes offered. Guests will have the choice of either a general king room, or a double room. Room TypeNumber in Property

Ocean View60

Pet Friendly10

Handicapped Assessable 5

Double 80

General King40

DoubleOur double rooms are the primary set rooms for our guests to stay in. These are our general rooms with two queen beds. These rooms will consist of custom furniture in oak finishes, a 32-inch LCD flat screen TV, refrigerator, and microwave.

A Double Bedroom with 2 queen bedsGeneral KingOur general king rooms have one king sized bed with enough room for a cot. These rooms also are furnished with custom-built furniture with an oak finish. Included is a 32-inch LCD TV, refrigerator, and microwave.

A General King Bedroom

Several amenities available to all guests found in any room type

A full bathroom found in any room typeMarketing StrategiesPackagesLocal PackageFor those guests that are looking for a simple getaway, but do not want to stay too far from home, this is the package for you! The local package offered by our property, is for guests who live within a 20 mile radius from the hotel. We will offer guests 15% off the rack room rate. This package is offered all year round.Golf Package Our golf package is offered to any guest staying at our hotel interested in playing golf, staying for a minimum of three nights. This package includes 20% off 18 rounds of golf, a free golf cart rental, and 15% off any one item in the pro shop at the The Preserve Golf Club. This course is public so being a member is not required in order to play. Must stay a minimum of 3 nights to qualify. This package is offered all year round. Casino PackageThe casino package is for anyone looking to gamble in the beautiful Hard Rock Hotel and Casino Biloxi. This package includes $25 resort credit and two complimentary drinks at the bar. Must stay a minimum of 3 nights to qualify. This package is offered all year round.Fishing PackageStunning Biloxi, Mississippi is home to some of the best fishing ports in the country. We will have a partnership with Fish-Finder Charters, which provides professionally guided fishing tours; either deep sea fishing, or inshore fishing. Fish-Finder is a fully rigged 38' topaz Charter Boat powered by dependable twin caterpillar diesels. She is also equipped with air conditioning, satellite TV, latest electronics and a restroom. Fish-Finder is docked in one of the finest marinas in Biloxi, Mississippi, which is conveniently located on the Gulf Coast. Come aboard with Captain Mike and enjoy some of the finest Deep Sea Fishing or trolling the Mississippi Gulf Coast has to offer. This package includes a 10% discount and free rentals on all fishing equipment. Must stay a minimum of 3 nights to qualify. This package will be offered all year round.Sales Support Through the help of the general manager, the staff will effectively market the Red Roof Inn, Biloxi. They will attract locals as well as tourists from all over. It is important that our property has strong relationships with the Hard Rock Hotel and Casino, Fish Finder Charters and The Preserve Golf Club. The general manager will also go to other local businesses in hopes to create new stronger partnerships throughout Biloxi, Mississippi.Biloxis main attractions are the Hard Rock Casino, golf courses, and magnificent and historic beaches. We found that targeting our packages towards the award winning Preserve Golf Club and the biggest casino in Biloxi would be a good sales strategy that will attract many guests from all over. Whether one is looking to gamble or just to relax and play a relaxing round of golf, we have the package for them. Fishing is also a popular activity in Biloxi so we also offer a fishing package available for guests. The packages are one of the best ways to set our hotel apart from all the other economy hotels in the surrounding areas. They also help to bring the local attractions to our property. We hope that our guests will recommend our hotel property to others and continue to return to our property after enjoying these promotions. Since local partnerships are very important for our hotels success. Our general manager will make sure the public is fully aware of our sales and packaged promotions. For example, promoting on our hotel website will be a useful communication channel to implement. Keeping our website up to date is imperative. The content, structure, navigation, visual design, interactivity and functionality are also very important to keep in mind. Our website will contain our packaged deals as well as our normal room rates. Any promotions will be put up on the website as well. Our general hotel information will also be provided such as location and directions. The website will also have the capabilities to easily book a hotel room directly. The guest will have to provide general information such as name of guests staying, requested date of reservation, length of stay, hotel room type, contact information, and billing information.

One major advantage of our business offerings is that we strive to offer affordable rates for quality services. Our aggressive pricing strategies will penetrate the market especially when compared to our competitive set. In customizing our ADR prices towards our different target markets, (leisure group and business), we will be able to maximize RevPar. 2018201920202021

ADR$66$72$77$80

Leisure 70%$68$74$79$82

Business 15%$65$71$76$79

Group 15%$65$71$76$79

In the first year of operation we expect our occupancy percentages and ADR to have a 95% penetration rate when compared to our competitive set. Taking into account that the Red Roof Inn will be a new property that has not yet established its self in the market, a 95% penetration rate is reasonable. Over the next 4 years of operations our penetration rate will rise to 105% with our occupancy percentages staying static at 66.4%. Our ADR rates will also be penetrating the market at over 100% however these rates will continue to rise due to inflation. All in all, with penetration rates above 100% we will be leading the other 4 hotels in our competitive set. See chart below on the next page to evaluate in depth our penetration rates compared to our competitive set. The gragh shows property Occupancy, ADR, and RevPar and its accompanying penetration rates for the first 6 years of operation.

Management OrganizationManagement

General Manager: The purpose of a general manager is to oversee all of the activities involved with the hotel. The general manager will be in charge of all the departments including marketing and sales, human resources, food and beverage, and engineering. All departments will report directly to the general manager with any issues. Guest issues that arise will also be taken care of by the general manager. This manager will be in charge of ordering the food and beverages for the complimentary continental breakfast as well. The general manager possesses the highest level of leadership and the characteristics that come with it such as confidence and working well under pressure. Front Office Manager: The front office manager is responsible for all duties of the front desk operation. This is made up of staff training, inter-department communications, and staff scheduling. The front office manager is in charge of training not only front desk personnel, but also the night auditor. They must be available to work any shifts as needed since hotels are 24 hours, as well as the regularly scheduled shifts. This manager is also in charge of the food and beverages for the complimentary continental breakfast. They must make sure inventory is up to date and be in charge of the deliveries of the food. Strong communication skills and leadership abilities must be demonstrated in order to be a front office manager.Human Resources Director and Controller: The human resources director has an important role relating to all the finances involved with the hotel. They are in charge of reporting all the finances including projecting and forecasting our sales and budget strategies. New strategies are proposed by them relating to cash flow, and budgeting our money. Hiring potential employees and termination of current employees will be done by the human resource director as well as creating the necessary training programs for the employees. The director will also make sure that all codes are being followed for our property. Director of Housekeeping: The director of housekeeping will be in charge of all functions in relation to the cleanliness and maintenance of the hotel, more specifically the rooms. They will be in charge of hiring and training the housekeeping employees. All federal, state, and local guidelines must be adhered to by the director. Chief Engineer: The chief engineer will be in charge of maintaining the property. They will be in charge of the operation of the maintenance department, as well as up-keeping the propertys appearance, which includes preserving the exterior of the hotel, maintaining and upkeep of the pool, and maintaining equipment. The chief engineer must also make sure all repairs are completed when needed. The chief engineer will have one assistant. Summary: Along with the other employees we plan on hiring, we place confidence in our management team that they are imperative for the proper running of our property, Red Roof Inn, Biloxi. We feel that each departments break down is important in running a successful facility.

Project Construction CostsSection 1 Investigatory

Travel and Miscellaneous $2,000

Appraisals N/A

Environmental Study $3,000

Transportation Study$4,000

Legal$2,000

Market/Feasibility Study$15,000

Sub Total $26,000

Section 2 Land

Land Cost 2.5 acres1,350,000

Closing Costs 13,500

Brokerage Fees 16,875

Legal Fees $6,000

Survey $8,000

Historic Review $1,000

Sub Total1,395,375

Section 3 Initial Costs

Travel and Miscellaneous $4,000

Soils $12,000

Engineering Fees 120.54

Architectural Fees803.6

Use Permit $18,000

Mode/ Renderings $2,000

Ground Breaking Ceremony $3,000

Signage $1,200

Sub Totel $41,124

Section 4 Intangibles

Accounting $5,000

Permit Expediter$15,000

Franchise Fee30,000

Consulting fee$20,000

Liquor license N/A

Title Insurance 12,000

Construction Financing-Points96432

Permit Loan-Points 135,004.80

Legal$30,000

Mobilization10,000

Sub Total$353,437

Section 5 Construction Financing Fees

Interest289,296

Taxes361,620

Insurance180,810

Sub Total831,726.00

Section 6 Project and Supervision Costs

Development Fee200,000

Travel, out of pocket6,000

Payroll50,000

Subtotal256,000

Section 7 Professional Fees - Construction

Architect's Fee168,756

Reimbursables20,000

Mechanical & Electrical Eng Fees84,378

Structural Engineering Fees48,216

Civil Engineering Fees36,162

Landscape Architect Fees9,000

Subtotal366,512.00

Section 8 Construction Costs

General Contact - Building4,821,600

Parking50,000

DemolitionN/A

Bond30,135

Builder's Risk Insurance50,000

Plan Review1,000

Building Permit80.36

Utility Tap Fees50,000

Fire Marshal Review and Permit1,500

Board of Health R & P2,000

Subtotal5,006,315

Section 9 Land Improvements

Landscaping, Exterior5,000

Landscaping, Interior3,000

Subtotal8,000

Section 10 Professional Fees

Interior Design36,132

Kitchen Consultant10,000

Misc. Out of Pocket79,162

Laundry Design Consultant25,000

Subtotal150,294.00

Section 11 Other Costs

Furniture, Fixtures, & Equipment972,000

Equipment, Gen. Build. Systems100,000

Equipment, Operating60,000

Supplies36,000

Pre-Opening69,600

Working Capital278,400

Contingency401.8

Interest Reserve723240

Subtotal2,239,642

Project Total$10,674,425

Project Management Action Plan

Initial Investment (3 months)This involves visiting our proposed property location, gathering all the financial and legal information, and making sure our project is feasible.Project Proposal (3 months)Presenting our proposed plan for construction, which includes all designs, blueprints, and predicted business costs.Property Acquisition (3 months) Involves purchasing the land needed in order to build our proposed hotel. Approvals and Permits (3 months)Obtaining required permits and approvals from the state of Mississippi in order to begin construction.Design Phase (4 months)Hiring designers and architects for our proposed property and making blueprints for the property we want to create including designs and dimensions. Bidding Phase (1 month)Involves selecting the most qualified contractor to complete the construction of the hotel in our proposed time frame. Mobilization (1 month)This is the process where our contractor will obtain all the necessary resources including equipment to begin construction for the property. Building Construction (12 months) This is the estimated completion time for our property. During this time our hotel will be built to our standards. FF&E- Furniture, Fixtures, & Equipment (5 months)This is the process of selecting, purchasing, and installing all of the furniture, fixtures, and equipment required for our hotel. Install PMS (2 months)This is the purchase and installation of our Property Management System.Setup Telecommunications (2 months)The installation of cable wires, Internet, and telephones that will be used throughout the hotel.Apply for LEED Certification (1 month)Making sure our hotel has all the requirements needed to establish a hotel that is sustainable. Hiring of Employees (5 months) This is the interview process associated with finding the most qualified individuals for each department. Background checks will also be done.Training of Employees (1 month)Select and train our recently hired individuals by coaching, teaching, and motivating. Provide training strategies that improve recipient's performance as well as helping him/her attain a required level of knowledge and skill. Create Bank Account(1 month)Set up a bank account for the hotel with a trusted bank in close proximity to the hotel. Set Up Payroll Systems for Employees (1 month)Choose a payroll company, payment dates, and appropriate wage system. W4 forms will be given to all employees to complete.Purchase Supplies Needed for All Departments (2 months)Purchase all the necessary supplies for our hotel in order to perform efficiently and properly. Obtain Insurance Policies (1 month)Choose an insurance policy that suits us. Insurance is needed in case anything should happen to employees, guests, equipment, etc. Choose and Order Uniforms (1 month)Select and purchase uniforms for all employees once hired.

Advertise and Market (6 months)Advertise hotel prior to opening date. Create brochures, posters, fliers, etc. Register with travel agencies and travel websites. Create Website (2 months)Design a website that is accessible and easy to for our potential guests to use. Include promotions, packages, and discounts. Obtain Pool License and Variable Frequency Filtration System (1 month)Get approved by Board of Health to reach qualification and receive proper licensing. Make Policy for Emergency Procedures (1 month)Outline written procedures for employees to know what to do in case of any emergency situation that may arise. Set Up Food & Beverage Contract (1 month)Find an outside party to work with Food and Beverage Director to assemble complimentary continental breakfast. Pre-Opening (1 month)Ensure all the necessary preparations are ready for the grand opening of the hotel. Grand Opening (3 months)Plan and execute grand opening celebration. Use advertising and promotions to attract potential guests to come and stay at the hotel.

Sustainability ApproachesStaying Red, Going Green is our belief that Red Roof will remain a leader in economy lodging and a good steward of the environment and the community.Reuse Linen Program in Guest Rooms Description We offer our guests the choice to "Go Green" every time they stay at Red Roof. This "select housekeeping" option lets each guest decide whether bed sheets are changed, towels are replenished and trash is removed. This reuse linen program in guest rooms will be a great opportunity as a company to promote that we are striving to become the leading innovator in sustainable practices for economy hotels. Projected Financial and Sustainable BenefitsImplementing this program will be very beneficial for our company. The main benefit of implementing this type of reuse program will be decreases in water, energy and chemical usage. As well as saving water, these programs mean less wear on fabrics, prolonging their life, and saving housekeeping staff time. Many hotels advertise a reuse program but often do not adhere to them, leaving guests cynical, exasperated by the fact that guests often think this is just a cost saving exercise for the hotel. Rather than imposing a structured program, the most successful policies are those that allow guests to opt out of having their linen changed on a daily basis.Variable Frequency Drivers For Pool Filtration

Description

Hotels spend an extra $350 more a month in electricity costs to power the pumps needed to filter their pools. Variable frequency drives are energy efficient pool filter attachments that operate at multiple speeds to maintain a water turnover rate consistent with minimal health department requirements. Most commercial pool filters operate using a two-speed or multi-speed pump. A variable frequency drive works in conjunction with a pool's existing pump system, adjusting the speed of the motor in response to changing pool conditions, allowing the pump to run at more precise speeds and adjust as needed. Projected Financial and Sustainable BenefitsThe installation of variable frequency will save the Red Roof Inn up to 50% in swimming pool running costs. Other benefits include a cleaner swimming pool, better climate controlled environment, reduced CO2 emissions, and lower maintenance cost over the life of the systems. Electrical Room Key Wall Slots

Description

Electrical room key wall slots are energy-saving technology for turning off the lights and power in a guest room. When one inserts their hotel room key card in the wall slot upon entering the room, the lights turn on. When the room key is removed the lights automatically go off. The technology would offer a 30 second grace phase before the lights automatically go off to ensure safe departure out of the room. If a guest wants the power to be left on during their departure, the extra key can be used to maintain electricity in the room. If there is a refrigerator in your room, the power stays on for this appliance regardless of whether there is a key in the wall slot or not. There is no need for guests to worry about food being cold, then warm, then cold again. In addition, emergency lighting in the room will also be not affected by implementing this room key device. Projected Financial and Sustainable Benefits

The electrical key wall slot is both financially and environmentally beneficial to the hotels operation. Electricity is costly in hotels, and if a guest is out of the room for the duration of the day, it isnt necessary for the TV or lights in the room to be activated. This technology allows the convenience of all electricity being turned off when the guest is away, reducing the electrical consumption of the hotel as a whole. It allows the hotel to be more sustainable off of less energy, reducing the negative effects associated with power plants that produce electricity. It is a great idea for energy-savings.Solar Panels

Description

Solar panels by definition are panels designed to absorb the suns rays as a source of energy for generating electricity or heating. Many commercial buildings are making the investment in solar panels because it is not only sustainable but it is renewable, meaning we will never run out of it. Once installed solar panels will not disturb the public and require little maintenance each year. Especially being located in the southern hemisphere, Biloxi is a perfect location for renewable solar energy. Projected Financial and Sustainable Benefits

Unfortunately Mississippi offers no tax credit for solar installation however the federal government offers a 30% tax credit when you install your system. With todays technology, solar panels have the capability to generate 100% of the hotels electricity. In the long run this will cut utility costs by up to 50%. Although solar panels are expensive at first it is expected that they will pay for themselves through savings in about 10 years. Heat and Power Plant CHP

Description

CHP can be an excellent solution for controlling energy costs while also improving the reliability of power supply for a hotel. This is known as cogeneration or combined heat and power. Cogeneration is the use of a heat engine or power station to generate electricity and useful heat at the same time. Combined Cooling, Heat and Power (CHP) refers to the simultaneous generation of electricity and useful heating and cooling from the combustion of a fuel or a solar heat controller. CHP uses waste heat, the energy discarded in some energy systems, and puts it to use. There are two configuration systems, either a topping or bottoming cycle. In a topping system, fuel is combusted in a prime mover like a gas turbine or reciprocating engine to generate electricity. The energy usually lost is recovered to provide heat for other purposes such as food processing, laundry, dishwashing, or for space heating, cooling, and dehumidification. In a bottoming cycle system, fuel is combusted to provide thermal input to a furnace and then the heat rejected is used for electricity production. CHP has high efficiency, which comes from recovering the heat normally lost in power generation. Projected Financial and Sustainable Benefits

Implementing this system in our hotel will be very beneficial to our property. Not only will it reduce operating costs and control rising energy costs, but this system will ensure the availability of reliable hot water and electricity supply. This will also increase energy efficiency and improve environmental performance. Fuel prices are at a record high and energy costs for hotels are not declining. To control spiraling energy costs CHP can be used. The hotel industry alone spends nearly $4 billion per year just on energy. Hotels in the 100-300 room range can use small CHP 60-250 kW systems. These systems have reciprocating engines, fuel cells, or microturbines. These turbines supply hot water for domestic hot water, space heating, and laundry needs. The Embassy Suites Hotel in San Luis Obispo, California installed CHP for their 196 room hotel. They have monthly savings of $900-$1,200 which overall will save them over $180,000 over the 15 year life of the contract. Starwoods Sheraton New York Hotel and Towers also set up CHP system. The implementation of CHP has saved this 1,750 room facility an estimated $70,000 in energy costs by the end of their contract. CHP is a best practice for energy efficiency in hotels and will reduce the propertys environmental impact through reduced electricity consumption. Financial StatementsOverviewThe analysis was constructed for a 120 room Red Roof Inn hotel in Biloxi, Mississippi. All of the calculations found below were calculated on Excel Pro Forma Financial Statements. Using our competitive set data for hotels located in Biloxi, that were found in the HOST Report, these financial projections were projected, calculated, and finalized.Occupancy %ADRRevPARRooms Revenue

Year 1 (2018)54.3%$66.01$35.87$1,571,151.

Year 2 (2019)58%$71.57$41.51$1,818,192

Year 3 (2020)66.4%$77.40$51.37$2,249,804

Year 4 (2021)66.4%$79.73$52.91$2,317,298

Year 5 (2022)66.4%$82.12$54.49$2,386,817

Year 6 (2023)66.4%$84.58$56.13$2,458,422

Room RevenueAll of the revenue generated by the hotel for a Red Roof Inn economy hotel will be from the sale of rooms. According to the accompanying chart below, we are expected for year 1 (2018) of operation to have 54.3% occupancy, with an average ADR and RevPar of $66.01 and $35.87 respectively. In order to calculate rooms revenue, we multiplied several variables including occupancy %, ADR, 365 days, and 120 hotel rooms. Rooms revenue is expected to increase year to year from $1,571,151 in year 1 to $2,458,422 in year 6. This projected increase in revenue is attributed to the gradual increase in ADR and occupancy throughout the first six years of operation.

OccupancyOccupancy percentage is a major sign that the market in Biloxi, Mississippi is underperforming compared to the rest of the country. Instead of using the competitive set occupancy data for the Red Roof Inn, we utilized the market data to achieve a more realistic prediction that a new economy hotel would fare better than other hotels in that market area. Over time most hotels occupancy percentages will level off as does ours at just above 66.4%. The graph below represents the occupancy percentage for the first six years of operation.

ADRThe average daily rates are projected to start from $66.01 in year 1 and grow to $84.58 (year 6. The ADR was calculated similar to occupancy % above. We looked at the percentage rate of change and determined an average that would give us a proper forecast for the following years based on our market data. Projected ADR is expected to increase at a gradual increase of around 7% in the first few years and later increase at an estimated 3% towards year 5 and 6. The graph below shows projected ADR for the first 6 years of business. ADR increases year to year can be attributed to the inflation factor.

RevParRevenue per available room is projected to increase year to year from $35.87 to $56.13. To calculate RevPar, one would multiply occupancy to ADR. The graph below shows annual averages of RevPar for the first 6 years of operation. RevPar is shown to increase at an average around 3% each year.

Total RevenueAs an economy hotel, Red Roof Inn Hotels only receives revenues from the sale of rooms. To calculate Total Revenues, please refer to the Room Revenue section (above) of the Financial Projection section. Gross Operating ProfitGross Operating Profit (GOP) was found by subtracting the total departmental expenses and total undistributed operating expenses from total revenue. Our GOP is expected to increase from $642,933 in the 2018 fiscal year to $1,191,672 in year 6. Our gross operating profits for all years are shown below. The total GOP for our first 6 years of operation is $5,980,095.

Net Operating IncomeNet operating income was found by subtracting management fees and fixed costs from gross operating profit. NOI includes all costs, excluding depreciation, amortization, interest expenses, and taxes. Our projected net operating income is found in the chart below. The total project net operating income across 6 years is $4,609,353.

Internal Rate of ReturnThe construction costs for the Red Roof Inn Biloxi, Mississippi are estimated to cost $10,674,425. Project construction costs include investigatory, land, initial costs, intangibles, construction financing fees, project and supervision costs, professional fees, land improvement, and all other costs. The internal rate of return was then calculated to be 4.9%. With an interest rate of 5.48%, our projected loan would be $276,509.79. The ADR of our proposed property are low. Since the hurdle rate is 12% and our rate is 4.9%, our IRR does not support new construction of a hotel at this time in Mississippi. Conclusion

After close examination, we believe that constructing a new 120 room economy Red Roof Inn Hotel at 1610 Beach Boulevard Biloxi, Mississippi will not be feasible based on the information provided above. Even with the implementation of a successful management team, as well as other successful policies and procedures, the costs to construct and operate the hotel will unfortunately be too high to receive enough cash inflows to the property to cover the costs and receive a profit. The historic location, along with several amazing tourist attractions will not attract the desired customer count from all over the country. The casinos (currently ranked 3rd in the gaming industry) and resorts are back in action after the impact of Hurricane Katrina, offering championship golf and live entertainment as well. The city has also restored many historic sites, including Beauvoir, the home of Confederate president, Jefferson Davis. However, even with this recent construction, the demand generators in our area will still not be able to provide the amount of guests needed to make the necessary revenues. After the events of Hurricane Katrina, major areas of the Gulf Coast was devastated by hurricanes and subsequent floods. The area that was significantly impacted by Katrina was the Gulf Coast of Louisiana. Due to this, a majority of relief efforts were sent into the Louisiana area. Biloxi, Mississippi was not one of the major areas affected and had very few relief efforts in the area. This caused occupancy to flourish in the Louisiana area while Mississippi was left with a disappointing amount of recovery efforts. Occupancy greatly declined in the Biloxi area after the affects of Hurricane Katrina. Implementing a new Red Roof Inn Hotel would bring something new to this market being that there has not been a new hotel opening in the past six years. Although this is true, a new economy hotel will not be the best choice for this market. This spot as a vacation destination is not strong enough to attract enough guests to fill the hotel at a steady rate. There are economy hotels whose occupancy rates have been steady, but not necessarily increasing. Occupancy percentage forecasts are not heading in the right direction for another hotel to be added to Biloxi. In conclusion, occupancy percentage forecasts seem to heading in a horizontal trend at 62.4%, which is not the optimal condition to start construction on a new hotel. Possibly rebuilding on one of the older economy hotels would be a better choice for our market. It is of utmost importance to keep in mind that Red Roof Inns number one goal is to satisfy all our guests as well as the idea of going above and beyond in terms of customer service, and this could best be achieved at a later date. The market is not strong enough at this time to construct a new property. AppendicesGeneral Assumptions

6 year pro forma Cont.

i