Eco Hotel Business Plan
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Published: Wed, 04 Jul 2018
ECO-REST Non-Profit Hotel
The current hospitality and tourism market finds itself under threat, almost as a direct result of the heightened awareness of the impact that is being Imposed by the relatively new phenomenon that is know as climate change.
As an industry the hotel and hospitality sectors have an abundance of establishments, particularly in the Greater Miami areas. In essence it could therefore be argued that there is no need for yet another hotel. The answer to this viewpoint is that the proposed ECO-REST hotel project has two distinctive and unique features and benefits that provide it with a potentially new business model that, to a large extent, will enable the hotel to create its own niche marketplace. Further, the diversification into the non-profit arena, with the objective of feeding excess income out to support community based environmentally positive projects, does show that the non-profit hotel organisation can bring about change in an effective manner and one that involves every member of the local community.
Research has shown that the business and leisure traveller are becoming more discerning; In particular this reveals itself in the concerns that are being expressed relating to business response to climate change. The overwhelming majority of consumers now believe that it is the duty of the hotel operator to encompass the improvement and changes needed to combat global warming and they are prepared to pay a premium to those establishment that can prove they have adopted eco-friendly systems and structures within their operational procedures and methods of trading. With 80% of travellers being of in favour of this position it is clear that there is a need for the hospitality organisations to adapt their objectives to a set of rules that takes into account the demands of the consumer and face the environmental issue. Alternatively, they face the risk of the loss of competitive advantage and market share, neither of which options would be received positively by shareholders who are the major investors in the hotel sector.
The features that are being included within the design and build of ECO-REST are intended to include all the latest technology and design that is being used and recommended as a template for reducing the impact that hotels have upon the environment. These include energy saving systems, methods by which the maximum benefit is gained from the use of daylight; solar and wind-power and the recycling of all basic discarded and waster material. The green features also extend beyond the needs of the building to address environmentally friendly systems in the garden and grounds belonging to the business. In fact the whole ethos of the business is to approach every aspect of the business operation of the basis of “how green can it be.” Research has shown that this approach not only provides a competitive advantage when seeking to increase market share but also has a positive affect upon the profitability of the business as well.
ECO-REST has a philosophy that is specifically designed based on giving back to the customer, which is the reason why it was decided that this project should be styled as a non profit making charitable organisation. This allows the business to have the extra flexibility to be able to donate to organisations of its choice that will be of positive use to the community and its environment.
There is little doubt that as the warning relating to climate change becomes more vocal people are going to become more strident in their demands for the traditional systems of commerce. It will not be acceptable in the future to react with cosmetic measures designed to appease. In the future consumers will want to proof of improvements. Hotels such as ECO-REST are examples of structures and establishments that contain that proof. Therefore there is little doubt that the opportunity exists to be able to take this business model and replicate it, not only in other areas of the US but also to the international community.
Contents (Jump to)
It is extremely rare to find a hotel establishment within the commercial market that operates on a non-profit making basis, with all excess revenue earned during the year being used for charitable purposes rather than to enhance shareholder/owner value. Similarly, few hotels have taken full advantage of all the green and eco-friendly and sustainable measures that are available to this sector of the hospitality industry. The ECO-REST hotel project is designed to fit within both of these criteria. ECO-REST Hotel, an establishment that will have 120 rooms and be based in Greater Miami, Florida, will make full use of all currently available environmentally friendly practices and partner with environmental organisations to donate all profits to help fund local green and sustainable projects. This report contains the proposed business plan for ECO-REST Hotel and will outline the research that has been conducted into the market, its competitors, the anticipated financial performance and requirements for the project.
Research has shown there is an increasing demand from tourists and business travellers for hotel establishments that took the incorporation of environmentally measures within their establishments seriously and were prepared to pay a premium for accommodation that fulfilled these requirements.
Although there are various forms of tourism in the context of the ECO-REST project the concentration will be focused upon Ecotourism and sustainable tourism. In these two areas there are significant indicators that these forms are the future growth sectors of the industry, as can be evidenced from the following: –
- From the beginning of the last decade it has been estimated that ecotourism has been growing at an annual rate of between 20% and 34%
- Eco and sustainable tourism numbers in 2004 was outpacing the overall tourism industry growth by three times
- Produces economic benefit for the local community, in terms of increased employment
- 62% of Americans consider it important to learn about other cultures when they travel
- 80% of Americans consider hotels should take steps to protect the environment and an increasing number base their accommodation selection upon these factors
In addition to the above most research has indicated that these forms of tourism have economic benefits for the hotels and destinations.
The corporate market is also becoming increasingly involved with environmental and sustainable issues. This has occurred both because of the increasing national and international legislation that is being introduced to tackle the effects of climate change and is being influenced by the changing demands of their consumers. An integral part of annual reporting for the majority of corporations today is the inclusion of a corporate and social responsibility report (CSR). Within this document is included an overview of the business response and performance upon issues such as steps to make the corporation processes and operations more environmentally friendly and its contribution towards sustainability within the local community. Reducing the corporate carbon footprint is as essential element of these CSR performances and therefore the importance of the environmental impact of business travel, which hotel and hospitality accommodation is an element of, is becoming increasingly important for the business brand.
The US travel industry is one of the economy’s largest sectors and produces revenues in excess of $100 billion per annum, of which 70% is spent on domestic travel. Of this domestic travel element approximately 45% is related to business travel and accommodation requirements.
Based upon the fact that 80% of the US population believes that hotels should take a protective approach to the environment, it therefore is apparent that there is a considerable potential for revenue growth to be generated by offering corporate hospitality, with the product being enhanced to include the environmental and sustainable factor that are becoming increasingly important.
As can be seen from the following graph (figure 1), the visitor numbers to Florida as a state has experienced a year on year growth of domestic, overseas, and Canadian visitor numbers since the turn of the century. These numbers include both the business and tourism sectors. As can be seen from this graph, although the numbers of overseas an Canadian visitors have remained relatively flat for the period, the significant rise in domestic tourists has increased by nearly thirty percent as more US citizens are taking domestic vacations. In addition, the same research indicates that, of this number, approximately 44.3% uses hotels and other paid accommodation, which in 2007 equates to around 37.4 million guests to be accommodated.
In terms of the hotel market specifically related to Miami, a recent report indicated that occupancy rates for the Greater Miami area for the first four months of 2008 were up to 80.5% with room rates averaging $196.61. However, this position is expected to have slowed during the final part of the year and is likely to remain static for 2009 due to the global economic downturn. Nevertheless, as will be shown later within this report, these rates are considerably higher than the business plan for this project envisages.
ECO-REST hotel has set its target occupancy rate for the business at 70% with an average room rate, taking into account discounts and special offers, of $170. To achieve the targets set, a strategic marketing programme has been designed, which will concentrate upon the following three areas.
Although a number of eco-tourists and business travellers tend to book and compile the component parts of their visits to Florida and Miami via the Internet, a large number still rely upon the services of external agencies. These include travel agents and tour operators. It is the intention of the business to create relationships with these organisations, particularly those that have an interest in eco and sustainable tourism and hospitality.
To cement these relationships, the hotel will offer discounts at certain times and also provide evaluation and inspection visits, particularly at times of low occupancy, to enable representatives from these organisations to have a better understanding of the facilities offered by the hotel and its aims and objectives.
It is important part of the strategic marketing programme for the business to promote the unique selling points (USP’s) of its business. Therefore, the focus of promotional material will be the environmentally friendly aspects of the business accommodation and the charitable support it provides to local and regional organisations directly involved with projects that address these issues.
Furthermore, it will be necessary to ensure that the promotional message is directed to the most appropriate market segment. To achieve this objective the business intends to take a threefold approach.
- Promotion to destination organisations, such as cultural and nature attractions, including seeking to have the hotel advertised on their advertising literature
- Linking with members of such organisations through newsletters or other advertising based upon their membership lists
- Appropriate advertising targeted at the publications and media events relating to the issues that are relevant to the hotel’s aims and objectives
In addition to these methods, it is intended to design an attractive website that displays and promotes all the important aspect of the hotel and its facilities. This will include visual and video images of the hotel and audio as well as written data and an interactive booking facility.
The online promotion programme will also include a significant element of networking. This will be achieved by the creating of a corporate blog, interactive links with relevant organisations and charities and involvement with appropriate social networking sites, such as “You-tube”.
The third aspect of the marketing strategy for the business is to create strategic alliances with organisations and corporations that provide a fit for ECO-REST hotel’s USPs. Included amongst this selection will be the state tourist and environment offices, local NGO’s such as Friends of the Everglades and historical and cultural destination operators.
To access the corporate market alliances will be formed local and regional trade and commerce associations supported by personal invitations to local corporations to visit the hotel and experience its facilities with the objective of securing occupancy from the out of areas suppliers and sales personnel that visit these businesses.
It is anticipated that a targeted and disciplined marketing and promotional programme that incorporates the above described elements will enable the business to achieve its occupancy target within the first year of operations.
There are a considerable number of hotels and similar establishment in Florida and in the Greater Miami district. A reasonable segment of these hotels, due to their small sizes and limited facilities, would not present a competitive threat the ECO-REST’s project.
Furthermore, in terms of specific comparisons, whilst most of the hotels have made certain attempts at becoming eco-friendly, many still have areas in this regard that require improvement. Evidence of this can be found at a website called Best Green Hotels, which reviews hotels and accommodation by a set of environmental indicators. An example of this criterion can be found in appendix 2. The scoring system, based upon a “green” tree badge system, works in the following manner.
- 1 tree=1-4 ticks on the list
- 2 trees=5-9 ticks
- 3 trees=10-15 ticks
- 4 green trees=16-22 ticks
- 5 trees=27-29 trees
- 6 trees= 27-28 ticks
- 7 trees=29 ticks (maximum)
A review of the 224 hotels listed for Florida and the six specific to a Miami search shows that none of these establishments have so far achieved a position of more than four stars. The aim for ECO-REST hotel is to create an environment that will enable the establishment to fulfil all of the stated criteria, thus achieving the highest award level offered by this listing. The intention therefore is to use this criterion as a guide to ensure that the environmental objectives of the business are achieved.
Addressing the hotel market in the Greater Miami area by using the five forces strategy developed by Michael Porter it is anticipated that, whilst there are some concerns, the objective discussed earlier should place ECO-REST in a strong position to be able to gain a competitive advantage.
Figure 2 Porter’s five forces
Due to its location and brand awareness in the tourism and hospitality industry, the supply of hotel rooms in the Miami area is reasonably high, with a number of establishments that the tourist and business traveller. With the ECO-REST project involving the razing and rebuilding of an existing establishment it is unlikely that there will be any appreciable increase in the supply of room nights available in the area. Similarly, as the business average rate determinate is in line with current market rates it is considered unlikely that rivalry based upon price will be an immediate issue.
It is further anticipated that the strategy being adopted by the ECO-REST hotel has a sufficient level of product differentiation to reduce the influence that rivalry might have upon its establishment. In addition, research undertaken to date, mainly web based, has revealed few hospitality establishments operating on a non-profit basis apart from those directly aimed at the social service market, for example, those dealing with issues such as homelessness and persons experiencing social deprivation for a number of reasons.
Because the business is seeking to work through a number of strategic alliances within the travel industry and providing incentives from which these stakeholders will benefit, the level of supplier power will be reduced. An additional benefit in this respect will be accomplished by the fact that excess revenues from the ECO-REST project will be fed back to local environment and cultural project, thus leading to a level of competitive advantage that would not be achievable by the commercial hotel sector. With the requirement of creating “added value” for their shareholders, together with the cost of dividends, taxes and management benefit packages; these corporations will not be able to compete with the donation levels available to ECO-REST. Furthermore, the prospect of such funding will enhance the value of the relationship that ECO-REST will enjoy with local suppliers.
Buyer power is perhaps the most volatile element of the five forces framework to assess for two reasons. Firstly because the product has to match with the buyer’s or consumers purchasing determinates and demands and secondly because the experience has to match with their expectation in terms of satisfaction.
However, based upon the researched that has been outlined in sections 2.1 and 2.2 of this proposal it is considered that the product offered by ECO-REST hotels addresses the first of these issues in that the hotel environment matches the increased demands for an environmentally friendly product. In terms of the second aspect, it is considered that, with the degree of quality attached to the hotel establishment and the anticipated service quality, the physical experience should exceed the consumers’ expectations.
Existing hotel establishments will find it impossible to match the product that is being offered by ECO-REST hotels without a severe disruption to their current trading levels. The benefit for ECO-REST is that this project is commencing with a “clean sheet” approach. This approach allows for the incorporation of eco-friendly systems at the design and construction stage of the project (see more detail in section 5). These will be applied to the building itself, its utilities and the external landscape.
The cost of conversion or redevelopment of an existing hotel, particularly if undertaken by a commercially orientated organisation, would prove prohibitive to existing operators. Additionally, in the event that such organisations should decide to follow the lead set by ECO-REST hotel, the timescale for redevelopment provides this project with the benefit of being able to consolidate its market share and “first-mover” position in this niche sector of the hospitality market.
Barriers to entry
Barriers to entry into the niche market that is being anticipated within this project are considered to exist in the following areas: –
- Non-profit structure
The fact that the ECO-REST hotel is designed to be a non-profit organisation will reduce the numbers of new entrants by eliminating the commercial investor from this sector of the hospitality market as, if this model is followed; there is no commercial return on the investment made.
- Cost and timescale for development
To commence a development of the nature of ECO-REST hotels does require the outlay of a considerable cost. Moreover, the timescale to completion is anticipated to be in the region of nine months. These factors will have a deterrent effect upon new entrants in two ways, particularly if this entrant is a commercially minded organisation. Firstly, the return on the investment in the short term will influence the level of costs attributable to the project. Secondly, the time taken for completion will provide first movers and preceding entrants, such as ECO-REST with the ability to establish the Brand and gain competitive advantage
- Strategic alliances
The development of strong strategic alliances with the organisations as outlined in section 3.3 of this report, together with a programme that ensures continuing process of bi-directional and interactive communication between the ECO-REST business and these stakeholders will serve to reduce the potential of such organisations being tempted to change their allegiance to new entrants. Research has shown that, providing the right quality of service and commitment to stakeholders is maintained their inclination to change to a new promotional or revenue source will be reduced.
- Economic benefits
As will be evidenced in the financial details contained within section 7, the reduction and elimination of the commercial elements from an operation that is conducted within the non-profit sector does present certain advantages to the beneficiaries of the product. In particular, in the case of this specific project those beneficiaries exist within two main areas. In the first instance of the profits (or excess revenues) from the ECO-REST project are being returned to the local economy. Secondly, and of equal importance, the project is designed to attract a more affluent and discerning visitor to the locale, which will increase revenues enjoyed by other commercial organisations situated in the Greater Miami district.
- Community benefits
Finally, the project is designed to bring benefits to the local community. By increasing tax revenues to the district it enables the local authority to undertake more improvements to the community infrastructure and the environment in which its citizens dwell. Similarly, by increasing the funding available to local tourist natural and cultural destinations the project will improve the community’s enjoyment of their leisure facilities.
Within this section of the business proposal the strategy and operational principles and procedures for the ECO-REST hotel project are presented and discussed in further depth.
ECO-REST hotel is currently working closely with the WTO, a local architect and a US construction corporation renowned for their involvement with the construction of environmentally friendly buildings. With the increased levels of concerns relating to environmental issues and the desire to sustain local destinations and environments, it is anticipated that the planning application and approval stage of this development should be completed within two months of that application being lodged with the local authorities. Currently two sites are being evaluated and discussed concerning their suitability for the project.
The basis for continuation of the project has been agreed to concentrate around the following format. The construction company, taking advantage of the favourable grants and loans available for the construction of environmentally friendly structures, have agreed to fund the cost of the building works. In return for this advantage, the property, when completed, will be leased back to ECO-REST for a period of forty years at a rate that is commensurate with current market values.
Consideration is being given to extending this business model and concept throughout other US states in the future, thus increasing the funds available to local natural and cultural destinations and enhancing the lifestyle and economic wealth that attracts to the local community. This project will also serve the purpose of heightening the awareness of the population to the environmental issues and dangers currently being faced by the global community, whilst at the same time demonstrating that the solution to these issues does not always require the motivation of the profit or shareholder “added value” drivers. Furthermore, it will also show that, providing the desired relationships can be developed between social and environmental needs and the commercial ethos in a manner that merges the motivational needs and requirements of all of the stakeholders, each and every one of these stakeholders will benefit from the concerted effort required to complete and fulfil these projects.
The operating principles, or mission statement, that has been proven to be the driving force behind the ethos upon which this project has been developed is: –
“It is possible, by the building of a new and unique relationship between the varied objectives of numerous stakeholders, to create a vision for the future that satisfies the needs and aspirations of all of these parties.”
Furthermore, following the success of this project it will also show that, providing corporations within the tourism and hospitality sector fulfil the promises that are made to other stakeholders within the supply chain, .
To ensure that the ECO-REST project addresses the environmental issues being faced by the global community in the twenty-first century, and to set an example for the future, the following are some of the environmental systems of improvements will be used in the construction and design of the new building. These methods are also intended to enhance the comfort of the experience for the guests who stay at the hotel.
The basic structure will be circular in shape and all of the rooms will be build around a central core which will house on the ground floor the extra facilities such as the conferencing rooms, dining and lounge areas. A special glass central roofing section will be installed, enabled to warm the building in the winter and cool it during the summer. As many common areas as possible will be walled in glass (similar to the design on the book cover left).
The advantage of this design and roofing is that it will increase the amount of daylight that penetrates the building, thus reducing energy usage. Much of the structural work will make use of recyclable materials. It has also been noticed that in standard hotels one of the major sources of energy waste evolves from the fact that the bedrooms and accommodation areas are often quite dark, even during the course of the day. To reduce the use of lighting in these areas the bedroom windows will stretch the width of the room. Moreover, the main doors will be panelled with non-see-through toughened glass to improve daylight access to the rooms from the centre of the hotel.
Modern environmentally friendly energy systems will be incorporated into the building. This will include the use of Geo-thermal underground heating, solar panelling for water heating and other power supply purposes. In addition, miniature wind turbines will be strategically placed around the building structure to support the efforts to make the hotel free from reliance upon fossil fuels.
In terms of the water supply a grey water system will be installed to ensure that waste water is cleaned and recycled for use in such areas as the toilet system and for garden irrigation purposes. Additionally, modern water saving techniques will be used in the bathroom facilities and the central hotel laundry. Finally, water storage systems will be installed to ensure maximum usage of natural rainwater.
As much human waste as is possible will also be treated and recycled in the outdoor garden areas. Guests will also be encouraged to help in the recycling process through the provision of special bins in their rooms so that they can separate the waste paper etc that is left from their stay.
Garden and landscaping
It is intended to also extend the environmentally friendly and sustainable systems into the garden area with the designing and implementing of xeric gardens and, furthermore, one new tree will be planted in the grounds for each of the bedrooms and suites that the hotel offers in
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