Free Phuket Beach Hotel Case Analysis Report Sample
However, before accepting the deal, Phuket Beach Hotel need to evaluate several factors, which include; the payback period of the project, the SWOT analysis, and the rate of return. For this reason, Mike had first to meet with the hotel’s financial controller Kornkrit, for financial analysis of the project. The hotel should also consider the source of the finance of the project to enhance its continuity. Nevertheless, after the analysis on the figures provided, it is advisable for the hotel to sign the contract with the Karaoke pub because it would have more returns and a shorter payback period. After the evaluation of the SWOT analysis, the strengths of leasing the space were many, and with few weaknesses, and it the management needed to consider it as an added advantage to the hotel’s profitability levels. In addition, there was need to conduct adequate research on the Karaoke pub’s customer target for a better understanding in terms of the profits generated and the market segmentation.
Phuket Beach Hotel management is faced with a dilemma: to lease space to Planet Karaoke Pub or to build their own Beach Karaoke Pub. The finance department at Phuket Beach Hotel should evaluate the capital structure in order to give direction to the hotel’s management on whether to build or lease the karaoke pub. Nonetheless, the management should not rely very much on the financial estimates because they are prone to alterations. Nevertheless, the returns should always exceed the expenditure incurred in the renovation processes. They also needed to consider other factors like the security risks, and the legal processes.
Nonetheless, the current situation in the case is based on the terms and references used in the determination of the cost structure. For this reason, the financial controller and his assistant tend to differ in certain terms relating to the project’s estimates. For example, Wanida had an issue with the firm’s failure to review the budgetary system for a long time, thereby portraying some of the shortcomings of the project. Therefore, the use of the budgetary systems rendered the estimated incorrect due to the historic nature if the budgetary systems. Financial analysts should base the estimates on the recent information because it incorporates the changes and flexibility which occurs in the financial information. As a result, the financial information could give rise to massive financial losses.
On the other hand, there was an issue in the quantification of some of the investment decisions thereby leading to some inaccuracies in the reports provided. Additionally, other security issues like uncouth behavior could arise, hence keeping off the tourists from visiting the hotels. For instance, the people behave differently when drunk and their actions do not necessarily portray morality, therefore, pushing some other parents away because they would never want to expose their children to some of the behaviors. The pub could also bring in the unwelcomed guests leading to theft cases because no one gets to monitor the people who get into the clubs. Therefore, some people viewed the incorporation of the pub in the hotel as a disadvantage to the profitability levels of the firm. It is because it would drive away tourists resulting to a decline in the number of the visitors checking in the hotel. The management also feared that the action would have an added advantage over the rival competitors in the industry because the tourists would turn to other hotels to meet their demands.