This is a wonderful business plan about setting up a state of the art, unique and innovative hotel services to people visiting to China. The project is named as the Ancient China Hotel as the hotel will not only serve as the providers of high quality accommodations for tourists, but also aim to bring the tourists and visitors to travel through time space to experience the different cultures and lifestyles of the 21 dynasties of ancient China in the past 5000 years. The hotel will be separated into 21 sections, whereby different sections will be designed to demonstrate the different dynasties in China. The foods and beverages serves will also designed in accordance to the ancient foods and beverages consumed by the people in the different dynasties. Besides, the much information about the different dynasties will also be presented around the hotels. This is a truly outstanding and first of its kind of tourism products to be delivered in the world. This business plan is written to raise funds from both the private equity or venture capitalists, or from the banking or financial institutions. The basic details of the business plan are provided. The information provided include the management team, the basic ideas of the business ventures, the business mission and vision, the marketing mixes, the operations, financial calculation as well as the risks of the business venture.
The new start-up venture presented in this exciting business plan is the Ancient China Hotel project that has a bright prospect for fast growth and remarkable profitability in the next decades. Ancient China Hotel is not another normal or conventional hotel designed or builds to serve tourists or customers in the conventional ways. Generally speaking, the hotel is to be built on the Ancient China concepts, targeted to become at least a five stars hotel for tourists in both China as well as people from other part of the world. The hotel is special in which different parts of the hotel will be designed to fit the different style of the respective dynasty in China. As China has a total of 21 Dynasty in the history, the different architecture and the costumes of the waiters, waitress, hotel assistants and other related workers will have the different costume and uniform, designed to deliver a sense cultural richness and heritage of the respective dynasties. The hotel room will be designed to fit the designs of the many different dynasties as well. The Ancient China Hotel will be located in Beijing, due to the popularity of Beijing among tourists from all over the world (Brown, 2008). The new concepts of the Ancient China Hotel are the first of its kind in the world, whereby no hotel has such a theme before. The Hotel can serve as a one stop solution for tourist to understand, and yet to deeply experience the comprehensive culture and historical development of China for the past 5000 years. Besides the accommodation and the services provided to the tourist, the hotel will also be designed to display the sample of historical items used by people in the different dynasties. The television program in the hotel will also be suited to provide abundance of information to the customers about China. As long as the tourists are going to stay for more than 21 days, they can experience the different dynasties, by staying in each room of different designs each of the day. Such an innovative concept will surely generate massive words of mouth and serve as the highly attractive destination for tourists from other nations.
Ancient China Hotel is not purely imagination or new business venture based on speculative ideas or concepts. Indeed, proper and comprehensive research on the business environment as well as the macro trend in the external environment had been performed. There are many statistics as well as well observed trends supporting the ideas that such a venture will be a profitable and exciting one. Overall, Ancient China Hotel is a concept designed to capitalize on the boom of tourism activities and trends around the world in the recent years. The increasing trends and booming of the tourism industry is brought forward by the ever globalized world (Sigala et. al., 2003). As the world become more integrated, people get to know each other, and are attracted to understand the cultural differences between the people around. The globalization era has enhance people experiences, widen their exposure and leading to more people travelling to foreign nations for entertainment, business or any other reasons. Apart from the trend of globalization, the rising trend of tourism is also proliferated by the rising living of standard of people around the world (Canarella et. al., 2010). As economy grows, people enjoy higher purchasing power, and have more disposable income. One of the best ways to spend the money, in a highly memorable and valuable way is to travel to other places for different experiences and exposure. Thus, as people enjoy higher living standards, they are more likely to travel around the world. Not only is that, as the airline industry is becoming more competitive, due to the emergence of low cost no frills airline model, the many airline operators are forced to reduce the airfares selling prices (Law, 2005). As such, to travel around the world through airline has been becoming more affordable. Thus, the frequencies of people traveling around the world have been increasing in the recent decades.
The new trend of people travelling around the world can be observed from the statistical evidences provided by World Tourism Organization (WTO). As shown in Figure 1, the world tourism activities are observed to be increasing from year 2004 to 2009. The growth statistics are as follow: Asia-Pacific +29%; Middle East + 20%; Americas + 10%; Africa + 7%; and Europe +4%.
Figure 1: Growth of World Tourism Activities
Source: World Tourism Organization
In Figure 2 however, the details of the growths of tourism activities are separated into more details. The international tourism expenditures at the respective popularly visited countries around the world are recorded. It can be seen that China is one of the top five countries recording high tourism expenditure around the world. As China is a fast growing and has been increasing becoming more open to foreigners, it is reasonable to expect that more visitors will be attracted to China due to the remarkably different cultural setting in the nation. Thus, it is expected that the total tourism expenditure in China will be on a rising trend in the future. This is definitely a positive factor supporting the ideas of venturing into the hotel and tourism related industry as outlined in this business plan.
Figure 2: International Tourism Expenditures
Source: World Tourism Organization
Yet, as shown in Figure 3 below, the international tourist arrival to China has also been increasing. As at the year of 2009, China is the fourth largest countries in terms of tourist arrival. The statistics again support that China is a promising country for tourism related industry and activities. All of these long term trends will be beneficial to the new business venture of Ancient China Hotel as presented in this report.
Figure 3: The Total Tourist Arrival to Different Countries
Source: World Tourism Organization
Apart from the overall big promising trends presented above, the tourism industry will also be analyzed using the PESTLE concept. Under such as framework, the political, economic, social cultural, technological, legal as well as environmental factors, which will affect the tourism industry, will be briefly analyzed.
Political factors. Generally speaking, the political environment in China is stable, as the living of standards of people has been increasing. As people have proper work to do, and they have access to the basic demand in life, they are less likely to create troubles in the nations. Besides, the general public in China is also supporting the governmental ruling of the China Communist Party. Thus, it is reasonable to expect that political situation in China is stable in the foreseeable future. This is a positive point for the Ancient China Hotel venture as presented in this business plan.
Economic factors. In the western world, particularly in the United States and the Europe region, the economic environment remains gloomy and turbulent. The economy is expected to recover slowly. In contrast, the economy of China is growing fast and facing huge inflationary pressures due to its undervalued currency. Thus, it is reasonable to expect that the RMB may appreciate in the future, and that is a negative trend to the business venture; when people have lesser purchasing. However, from another point of view, economic integration around the many nations will become increasingly intense in the next few decades. Such a situation will bring more travelers to China, which is a positive factor benefiting the profitability of China Ancient Hotel.
Social cultural factors. The cultural differences between China and the rest of the world, particularly those from the west are highly different. Such a situation is advantageous to the tourism industry in China. As people are increasingly expose to the growth of China as well as materials related to the nation, they will be induced to travel to experience the cultural and distinctive different social phenomenon in the nation. As such, tourists will be likely to travel to China and experience the cultural and historical heritage in China (Butler, 2009). The Ancient China Hotel will serve as one stop solution for the foreigners to experience the complex culture of China throughout history, in only a single hotel.
Technological factors. Technological changes have been fast in the recent years. The more impactful changes that affect the tourism industry are the rise of information technologies (Siddiqui et. al., 2003). Today, internet marketing is required to promote a tourism destination to other people around the world. The ease of comparing tourism packages and prices online has also created new business environment to the tourism industry (Mircheska et. al., 2010). Intermediaries in the tourism industry are facing great challenges to stay relevant in the competitive market (Formica et. al., 2008), as tour operators are increasing competing based on pricing factors. Besides, the rise of social media is also expected to change the tourism landscape and marketing promotional strategies significantly in the future.
Legal factors. The relevant legal issues affecting the operation of tourism industry in China is the respective legal regulations for tourism in China. As long as the rules and legislation are fulfilled, there will not be serious legal issues affecting the tourism industry in the nation.
Environmental factors. People today are increasingly more environmentally conscious (Somerville, 2004). Consistent with the green movement, tourists are more likely to support tour operators that exhibit strong corporate social responsibilities to protect the environment. Such a trend may be creating huge demand for tourism products such as design of hotel in accordance to the green concepts (example, less waste gas emission and energy savings accommodation) (Agnew, 2001).
The business mission of the Ancient China Hotel is to deliver a one-stop solution for the customers to experience the vast and complex culture of China, by going through the lifestyle and living in the specially design hotels and services in accordance to the 21 dynasties in China. The services of the very best quality will be provided to the customers and at least five star ratings for the hotel is to be achieved. The objective of the business is to leave wonderful and unforgettable experiences to the customers, as well as to educate the visitors in the deep cultural heritage of ancient China. By bringing the customers back to the ancient China, the hotel will deliver new exposure to the customers and allow them to enjoy the quality of services that would only be enjoyed by the kings or emperors in the various dynasties.
On the other hand, the business vision of the Ancient China Hotel is to become the world class tourism destination in a period of five years. The remarkable different services provided to the customers will leave wonderful experiences to the visitors, and the visitors will likely to promote the excellent services and hotel design to their friends and relatives. Thus, the Ancient China Hotel will be the destination of travelers, tourists as well as for corporations to hold their meetings and corporate events. The ultimate grand vision of the Ancient China Hotel is to become a tourism destination by itself, and to become the representation of China to the other countries.
At the current stage, the management team consisted of various key leaders with complementary skills. The complementary and mutually supportive skill sets of the management team are the key asset of the business venture, and will be proven crucial to the success of the Ancient China Hotel. The management team is introduced in the following paragraphs.
Mr. Huang, Managing Director. Mr. Huang is a creative and innovative entrepreneur in the past five years. He graduated from one of the top university in United Kingdom. Many of his business ventures had been achieving remarkable success, due to his accurate insights assessment on the consumers’ needs and market trends. Previously, he involved in setting up a tuition company, restaurant, as well as publishing newsletter for tourism industry in China. Thanks to his vast experiences in the tourism industry, he able to provide accurate market judgment on the potential of the Ancient China Hotel venture outlined in this paper.
Mr. Tan, Marketing Director. Mr. Tan has been working as the marketing manager in one of the listed company in China, namely Haier. His performance can be witnessed from the fast growing and profitability track record of Haier. He is specialized in marketing research, use of internet marketing, social media marketing as well as crafting of impressive and effective marketing campaigns to the consumers. Due to his vast experiences in venturing into the foreign market for Haier, he has great knowledge on the culture and consumer behaviors of people from other part of the world.
Mr. Alex Yong, Operation Manager. Mr. Alex Young is one of the very successful operation managers in the famous five start hotel in Shanghai, China. He has been serving as a highly effective operation manager for a period of 15 years. He is a strict, and yet caring managers. Under his supervision, the hotel being managed able to achieve a track record of cleanest hotel and best services provided to customers in Shanghai.
Professor Ling, Consultant for China History. Professor Ling is a full time academicians teaching in University of Beijing in China. He has vast knowledge about history of China, and will support the new venture in providing necessary knowledge and assistance on the culture and architecture of the different dynasties in China for the past 5000 years. He has strong network with other historians in the nations, and has close relationships with the major museum in China. Thus, the realization of a hotel designed to deliver experiences of different dynasties in China to consumers is never an issue.
Richard Ng, Well-known Interior Designer. Richard Ng is a famous and sought after interior designer from Singapore. He has vast experiences in interior designing for world class building and hotels. He has a total of 20 years experiences in the tourism industry – responsible for the interiors and decoration of the many resorts of his clients.
Overall, it can be seen that the management team has the required people and talents to ensure the success of the Ancient China Hotel. Most of the management team has vast experience in the tourism industry. They have also fantastic track records of success in the respective field. They bring forward the necessary expertise and talents that will be crucial for the success of the venture.
Currently, the business venture is still at a business planning stage. However, a strategic location for the hotel is already being secured. The layout of the hotel, as well as the approval from the Chinese authorities is already obtained. The undone parts of the business venture are as follow:
- Securing strong financing from venture capitalists as well as the banks.
- Construction of the hotel according to the highest standards and quality possible.
- Hiring of relevant staffs to kick start the hotel operations once the building is completed.
- Promoting the hotel to people around the world.
- Delivering the value proposition promised to the consumers with great passion, commitment and care.
The consumers travelling to the hotel has the desires to experience different culture and lifestyles of China. Besides, they seek different exposure and many of them would like to enhance their understanding on China as well as to feel the different situation and environment of the different dynasties in China. It is also expected that many of the consumers may visit the hotel out of curiosity, due to the first of its kind of hotel to be designed in such a manner.
The various elements of marketing mixes, primarily from the products, price, and promotion and place dimensions will be discussed as follow.
Products. There are two main types of services provided to consumers. Firstly, it is about providing accommodation, and secondly, the food and beverages served in the cafeteria. Both the accommodation as well as the cafeteria will be served in 21 different styles and atmosphere, according to the different dynasty. For each of the dynasty, a total of 100 hotel rooms are provided, and a special cafeteria for that is also provided. Apart from that, depending on the style, at the various corners of the hotel, the ancient Chinese art, stuffs, and lifestyles will also be displayed. Pictures will be hanged around the lifts, walls besides the pathway as well as in the other relevant areas in the hotel. This will deliver truly different experiences for the consumers. Not only is that, the different costumes for the different dynasty will also be available for rent to the end users. Indeed, they are encouraged to wear the ancient attires to live in accordance to the ancient lifestyle.
Price. The price will be charged at a premium, as the hotel is to attract those famous and rich consumers to visit to the hotel. Consistent with the extra services, the unique theme provided to the consumers, as well as the one stop solution style of hotel provided to the customers, it is reasonable to charge the tourists 25% above market rate. Besides, due to the strategic location of the hotel, tourists are likely to walk into the hotel, as it is truly convenient to stay in the hotel and visit other historical places in China during the day time.
Promotion. At the first year, a discount of 20% will be provided to the customers. This is to entice the customers to try out the services in the hotel. As the services quality provided will ultimately be satisfactory, it is expected that these customers will spread the news around to their friends and relatives, and hence, further promoting the hotel to others. Strategic alliances will also be performed with other tour operators, so to encourage them to bring the tourists to the hotel. Commissions will be provided to the cooperative tour operators. Long term business partners, from wealthy country such as in the Europe and the United States, will also be formed. Apart from that, a total discount of 30% will be given to those who book the hotel early; as such a strategy will ease the revenue management program in the hotel.
Place. Firstly, the major experiences to be enjoyed by the consumers are the hotel itself. Thus, the decoration, as well as the services provided inside the hotel will be crucial. Attention to details is important to ensure the customers get what they truly want. Apart from the atmosphere in the hotel, the ‘place’ element can also be referred to the distribution channels to reach the prospects and potential consumers (Goi, 2009). In order to reach the consumers in the oversea markets, internet and digital marketing will be used. A focus on social media will be crucial to promote the hotel to others. For example, providing video on the attractiveness and the high service quality of that hotel to people around the world will be performed. Testimonials from famous and rich people will be obtained (Saperstein et. al., 2010). For the respective countries, different languages will be used to communicate better to the consumers. A web portal promoting the hotel will also be launched. Customers can book their accommodation online. Free e-book can be downloaded from the sites, and the specially designed newsletter about visiting to China will also be provided for customers who sign up in the web portal. The online web portal will be essential for customer relationship management in the future (Jacob et. al., 2010).
The Ancient China Hotel will be operating for a total of 24 hours a day; and 365 days every year. Customer care lines will be active all the time. The staffs will be separated for three shifts. It is expected a total of 500 employees will be required. From the many employees, a total of 250 employees will be required to serve in the restaurants. Layout of the hotel will also be designed to handle the necessary cleaning jobs properly. Besides, a total of 21 tour guides will be available at full time to the customers, to explain to the visitors on the various culture, history and dynasties of China. The other details of operation management for the Ancient China Hotel will be formulated in greater details after the funding process.
In order to achieve success for the new venture, a few critical success factors are identified. If these factors can be achieved, then the profitability and viability of the business venture can be ensured.
Extraordinary services quality. It is important to deliver professional, caring and attentive services to the customers, to that impactful and long lasting memories on the hotel can be left in their mind. This is crucial to enhance the customer satisfaction, loyalty as well as the intention to promote the place to their friends and relatives (McCartney et. al., 2009). Besides, when the visitors are happy, they are more likely to become repeat visitors in the future when they visit China again in the future.
Engaged, motivated and passionate employees. The Ancient China Hotel venture is essentially operating in the servicing industry. In this industry, the services provided by the workforce are very important. Thus, the key success factors are to engage the workforce, to adopt a customer orientation philosophy to serve the customers in the best possible manner.
Wonderful and fantastic designed hotel and cafeteria atmosphere and environment. As the hotel is designed to be an attraction itself, the decoration, interior design and the atmosphere is crucial. It is important to deliver different experiences to the consumers staying in the different dynasty. The atmosphere will enable the customers to travel through time space to the ancient China.
Strong partnerships with the other tour operators from abroad. It is impossible to reach the customers from other part of the world through personal efforts. Instead, strong collaboration with other business partners from the other nations will be required. Thus, the business venture will have to identify already established tour operators in the other nations, and to leverage on their resources, reputation and network, to reach the many customers in the overseas.
Aggressive and effective marketing campaign through internet. Besides partnering with the established tour operators in other nations, proactive measures to penetrate the market through social media and internet marketing mechanism are necessary. This is important as internet has been creating new platform for businesses to compete, at a lower costs for more powerful results and performance.
In this section, the projected income statement, balance sheet and the respective Net Present Value, Return on Investment, Internal Rate of Return, as well as Payback Period will be provided. All these information can assist the potential investors to evaluate the attractiveness of the business venture.
Figure 4 presented the projected income statement for the business venture. The income statement is derived by assuming only a 60% occupancy rate. This is a conservative measures and assumptions. It is also assumed that as time pass by; the occupancy rate will increase gradually, due to promotions and marketing campaigns. At the end of the fifth year, it is expected that the occupancy rate will increase to 80%. Again, this is a conservative assumption, and if everything go well, it is reasonable to expect even a 95% occupancy rate throughout the year. Thus, in the presentation below, the income potential from this project is likely to be understated.
Figure 4: Projected Income Statement
Figure 5 presents the projected balance sheet for the Ancient China Hotel. As shown below, it is estimated that at least RMB 300,000,000 million is required for the construction of the hotel, as well as to support the working capital requirements of the hotel. Out from this initial investment outlay, RMB 200 million will be raised from long term liabilities, i.e., bank borrowing. The remaining can be raised from venture capitalist, angel funds, or other investors. However, the RM200 million to be raised from bank borrowing can be separated into two part. Half of that amount, RMB 100 million can be raised from the management team, as they are already rich and having strong financial support for the venture. When the management team able to contribute and commit their money in the venture, it is more likely that they are already confident on the profitability and viability of this business proposal. However, all of the details are to be concluded in a short time period, after negotiation with interested external investors, on the best possible capital structure for the new venture.
Figure 5: Projected Balance Sheet
From rough and conservative financial calculation presented above, some important financial metrics can be calculated. The project is expected to enhance shareholders value as it has a positive Net Present Value of RMB 500 million. The internal rate of return for the Ancient China Hotel is expected to be approximately 35% per annum. Besides, the expected return on investment at the end of five years, shall the conservative assumption and business targets are achieved, is computed to be 288%. All of these financial metrics computed suggest that the business venture is a profitable and attractive one for any potential investors.
It is simply unrealistic to assume that any single business venture will be without risk. The best practice will call for proper evaluation of relevant risks, and to set up measures and control system to manage the risk properly. Among the possible risks to our calculation, assumptions, estimates as well as the smooth execution of this business plan include the following items:
- Inability to raise sufficient funding from the banking or financial institutions, causing more capital is required from the private investors.
- Deterioration of economic situation in the developed country (for example, falling back into the Great Recession era, due to high and persistent unemployment rate), thereby putting huge pressures on the revenue of the business venture (Webber et. al., 2010).
- Inability of management to engage the staffs to serve the customers with the best possible service quality. This will cause the customer satisfaction d word of mouth effects to be reduced, and in the long run, will affect the profitability of the hotel operation adversely.
- One or more of the key talents that agreed to participate in this venture pull out from the Ancient China Hotel projects.
- Insufficient working capital causing liquidity issues in the new start up.
- Rise of new competitors after the hotel is proven a successful one. The rise of new competitors will create great challenge for the hotel to maintain relevant and the primary attraction in terms of hotel and accommodation in China.
- Inability of the marketing department to promote the Ancient China Hotel to people around the world, through internet marketing and the effective usage or leverage on the social media networks.
- Failure of the strategic partners to promote the hotel to people from their respective country.
Overall, the Ancient China Hotel is a wonderful business venture with huge potential profitability. The project is named as the Ancient China Hotel as the hotel will not only serve as the providers of high quality accommodations for tourists, but also aim to bring the tourists and visitors to travel through time space to experience the different cultures and lifestyles of the 21 dynasties of ancient China in the past 5000 years. The competitive advantage of such business venture is that it is a truly outstanding and first of its kind of tourism products to be delivered in the world. This business plan is written to raise funds from both the private equity or venture capitalists, or from the banking or financial institutions. The basic details of the business plan are provided. The information provided include the management team, the basic ideas of the business ventures, the business mission and vision, the marketing mixes, the operations, financial calculation as well as the risks of the business venture. It is a wonderful opportunity for the investors to participate in the exciting and yet highly profitable business ventures in the tourism industry in China.
Agnew, M. D., & Viner, D. (2001). Potential impacts of climate change on international tourism. Tourism and Hospitality Research, 3(1), 37-60.
Brown, F., & Hall, D. (2008). Tourism and Development in the Global South: the issues. Third World Quarterly, 29(5), 839.
Butler, R. (2009). Tourism in the future: Cycles, waves or wheels? Futures, 41(6), 346.
Canarella, G., Fang, W., Miller, S., & Pollard, S. (2010). Is the Great Moderation Ending?-UK and US Evidence. Modern Economy, 1(1), 17-42.
Cronin, A. (2010). Tourism sees growth online, in social media. McClatchy – Tribune Business News.
Doole, I., & Lowe, R. (2004).International Marketing Strategy 4th ed. Thomson Learning publisher, London.
Formica, S., & Kothari, T. (2008). Strategic Destination Planning: Analyzing the Future of Tourism. Journal of Travel Research, 46(4), 355.
Goi, C. (2009). A Review of Marketing Mix: 4Ps or More? International Journal of Marketing Studies, 1(1), 2-15.
Jacob, C., Guéguen, N., & Petr, C. (2010). Media richness and internet exploration. The International Journal of Tourism Research, 12(3), 303.
Law, R. (2005). Internet and Tourism – Part XVI: Opodo. Journal of Travel & Tourism Marketing, 18(1), 85-87.
Lin, T. W. (2006). Lessons from China. Strategic Finance, 88(4), 48-55.
McCartney, G., Butler, R., & Bennett, M. (2009). Positive tourism image perceptions attract travellers – fact or fiction? The case of Beijing visitors to Macao. Journal of Vacation Marketing, 15(2), 179-193.
Mircheska, I., & Hristovska, M. (2010). THE INTERNET MARKETING – A CHALLENGE FOR FAST TOURISM DEVELOPMENT. Faculty of Tourism and Hospitality Management in Opatija. Biennial International Congress. Tourism & Hospitality Industry,1086-1099.
Morrison, A. M., Taylor, J. S., & Douglas, A. (2004). Website Evaluation in Tourism and Hospitality: The Art Is Not Yet Stated. Journal of Travel & Tourism Marketing, 17(2,3), 233-251.
Park, Y. A., & Gretzel, U. (2007). Success Factors for Destination Marketing Web Sites: A Qualitative Meta-Analysis. Journal of Travel Research, 46(1), 46.
Saperstein, J., & Hastings, H. (2010). HOW SOCIAL MEDIA CAN BE USED TO DIALOGUE WITH THE CUSTOMER. Ivey Business Journal Online.
Schmidt-Hebbel, K. (2010). A gloomy outlook. Organisation for Economic Cooperation and Development. The OECD Observer, (270/271), 56-57.
Siddiqui, N., O’Malley, A., McColl, J. A., & Birtwistle, G. (2003). Retailer and consumer perceptions of online fashion retailers: Web site design issues. Journal of Fashion Marketing and Management, 7(4), 345-355.
Sigala, M., & Baum, T. (2003). Trends and issues in tourism and hospitality higher education: Visioning the future. Tourism and Hospitality Research, 4(4), 367-376.
Silbiger, S. (2005). The 10-day MBA: a step-by-step guide to mastering the skills taught in top business schools. Piatkus.
Somerville, H. (2004). Travel, tourism and the environmental challenges. Tourism and Hospitality Research, 5(1), 65-71.
Webber, D., Buccellato, T., & White, S. (2010). The global recession and its impact on tourists’ spending in the UK. Economic & Labour Market Review, 4(8), 65-73.