Feasibility study

What is a hotel feasibility study — and how should an owner read it?

A feasibility study is the independent test of whether a hospitality project makes sense. It looks at the market, estimates the demand the property could win, and turns both into a financial forecast set against what the project will cost. Its job is to answer one question honestly: should this be built, in this form, here?

What does it answer?

Three questions, in order. Is there a market: who would stay, eat or book here, and who already serves them? What could the property earn: likely occupancy, rates, covers and treatments, built from the comp set rather than from hope? And does it pay: the forecast income against the cost of building and running the place, over the years it will take to pay back.

Who writes it?

A specialist feasibility analyst — independent of the owner, the operator and the designers. That independence is the point: lenders, investors and operators read the study because nobody in the project wrote it to please themselves. The owner’s side appoints the analyst, agrees what the study must cover, and supplies the brief and the Area Program it is tested against.

A feasibility study written to please someone is worth nothing to anyone.

How should an owner read it?

Read the assumptions before the conclusion. Where do the rates come from? Which hotels were used as the comparison, and are they really the competition? How long does it take to reach stable trading? A study is only as good as its inputs — and the most useful pages are often the ones that show what happens if the assumptions turn out too optimistic.

When is it done?

Early, before design moves beyond a first sketch. A study done after the concept is fixed can only confirm or condemn a design that has already cost money. Done first, it shapes the design brief and the Area Program — the room count, the outlets and the size of the spa that the market will actually pay for.