clarion sandusky ohio

Sandusky, OhioHotel Feasibility Study

Team Members:John Bozick

Meghan CarlsonAlex Girasole

Brooke Solomon

Table of Contents

Section 1: Introduction..................................................................3Section 2: Executive Summary..........................................................5Section 3: Market Analysis..............................................................6

Geographic Analysis..........................................................................7Economic & Demographic Review...........................................................7Workforce Characteristics....................................................................8The Market..................................................................................10Segment Breakdown.........................................................................11Attractions...................................................................................12Transportation...............................................................................15Construction Trends........................................................................16Estimated Demand..........................................................................17Estimated Area Occupancy.................................................................19Current Lodging Supply in Sandusky......................................................20SWOT Analysis..............................................................................20

Section 4: Operational Strategies.........................................22Vision.........................................................................................23Mission.....................................................................................23Values........................................................................................23Goals........................................................................................23Introduction.................................................................................25Background of Franchise Options..........................................................26Selected Franchise...........................................................................26Competitive Set Identification & Analysis.................................................28Room Types & Respective Rates (Year 1: 2018)..........................29Projected Average Yearly Room Rates by Market Segment..............................29Projected Occupancy........................................................................30Projected Number of Rooms Sold per Year by Market Segment.........................31Projected Rooms Revenue..................................................................31

Section 6: Product and Service Analysis................................32Introduction.................................................................................33Comparative Analysis of Current Lodging Supply Situation..........33Competitive Set Identification and Analysis...............................................33Competitive Set..............................................................................34Comparative Analysis of Projected Services to Targeted Market Segments.............40

Section 7: Operational Plans...........................................................41Guest Room Layout...................................................................41Lobby Design and Hotel Services/Amenities...............................42Activity and Fitness Centers......................................................43Dining......................................................................................43Meeting and Event Facilities......................................................44Off-Site Services.......................................................................44

Section 8: Market Strategies and Sales Plans.........................................45Packages..................................................................................45Sales Support................................................................................46Competitive Nature of The Clarion Hotel..................................................47Year 1 Projections...........................................................................48

Clarion - Sandusky, Ohio 2

Forecast of Average Rate...................................................................49Forecast of Average Revenue...............................................................50Estimating Occupancy and ADR Penetration.............................................50

Section 9: Management Organization...................................51Section 10: Project Construction Costs.................................53Section 11: Project Management Action Plan........................................56Section 12: Project Management Action Plan Matrix..............59Section 13: Sustainability Approaches................................................61Section 14: Financial Statements.........................................65

Introduction.................................................................................65Total Revenue...........................................................................65Total Revenue Per Available Room.............................................66Total Departmental Income.................................................................67Net Operating Income...............................................................68Gross Operating Profit...............................................................69Total Rooms Revenue.......................................................................70

Section 15: Conclusion.........................................................71Section 16: Appendices.................................................................72

Section 1: Introduction


This document serves to propose the construction of a 125 room, upper midscale, Clarion Hotel in the city of Sandusky, Ohio. The city of Sandusky, though small, has a lot to offer and attracts tourists for its’ abundance of outdoor activities including Cedar Point Amusement Park, Norwalk Raceway Park and Kalahari Water Park. After much research and consideration if has been decided that building a Clarion Hotel in Sandusky, Ohio would not only be feasible but also be a fantastic addition to the Clarion and Choice Hotels brand. The following sections of this document will include Clarion Hotel’s opertational strategies such as the vision, mission statement, goals and objectives, franchise comparisons, analysis and comparisons to other hotels in the area, financial feasability information, operational plans and the organization of management.

The information presented in this document is based on research and analysis by Brooke Solomon, Meghan Carlson, Alexander Girasole and Connor Bozick after being prompted by UD-SHG Hospitality Company, LLC to develop a business proposal for a new hotel. The information reflects the ideas and views of all group members. For any further information please contact:

Confidentiality Agreement This document is confidential and has been made available to the individual to whom it is addressed strictly on the understanding that its contents will not be disclosed or discussed with any third parties except for the individual's own professional advisers.

Investment in new and small businesses carries high risks as well as the possibility of high rewards. It is highly speculative and 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 facts and to take advice from a professional adviser 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

Clarion - Sandusky, Ohio

Alexander Girasole19 Amstel Ave.Newark, DE [email protected]

Meghan Carlson123 East Main St. Newark, DE [email protected]

John Bozick 408 Hamlet Way Newark, DE [email protected]

Brooke Solomon108 East Main St. Newark, DE [email protected]

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promoters for illustrative purposes and do not constitute profit forecasts. The eventual outcome may be more or less favorable than that portrayed.

Section 2: Executive Summary

After thoroughly analyzing and researching the Sandusky, Ohio market as well as surrounding area markets, the research shows that the construction of a new, 125 key Clarion Hotel is not feasible at this time. Due to the high construction cost of a 125 room Clarion Hotel, the newly constructed property would only begin to generate a positive NOI after six years of operation. Because of this, it is advisable to purchase and renovate an existing property, as opposed to constructing an entirely new hotel. The construction cost for a new Clarion property would be $144,496 per key, for a total of $18,062,062. In order to renovate and give an existing property a Clarion “makeover,” total cost of the project cannot exceed $4,000,000 or about $32,000 per key.

Sandusky, Ohio and its surrounding area are home to a wide variety of tourist attractions such as amusement parks, historic sites and of course, Lake Erie. The activities associated with these attractions are highly marketable and have the ability to entice consumers to visit the Sandusky area. Cedar Point Amusement Park and waterpark has been ranked “Best Amusement Park and best roller coasters in the world” for 16 consecutive years. The Clarion Hotel will be conveniently located less than 5 miles to the park entrance, an extreme convenience for families and thrill seekers visiting Cedar Point. In addition, Lake Erie has an abundance of outdoor activities to take part in such as dinner cruises aboard the Good Time Cruise and a number of watersports easily accessible from many local shore points. Lake Erie attracts many families as well as couples looking for a romantic getaway. Summer is the most popular season to visit, but the spring and autumn months offer beautiful scenery and nature to experience. The renovated hotel will mainly target leisure travelers, but there will also be a focus on attracting business travelers in order to increase occupancy. During the peak summer months, occupancy percentages reaches a high point of 86.6% in 2014, composed mostly of leisure travelers. However, the occupancy during the off months reaches a low of 22.4%, comprised of mostly business travelers. The average annual occupancy is was 48% in 2014, and we hope to increase this percentage by increasing business travelers during the off months.

There are a large number of hotels located in the Sandusky area. Most of these locations, however, are in the economy class, and there are no locations operating under the Clarion flag. The majority of the economy hotels are independent facilities without a name brand flag, deterring many customers from visiting due to lack of knowledge of the property


and its offerings. In addition, a lot of the properties are outdated and far behind on the growing technology race. Clarion Hotel is going to be the newest, most technologically advanced hotel in the region, giving the new property a huge competitive advantage. Not only will this location be the only Clarion Hotel, but also it will be one of the few upper-midscale properties in the area, bringing more upper-midscale amenities with it. A newer hotel will be able to offer amenities that can satisfy the needs of a new era of travelers, such as transportation, technology, and systems. This location will also include business amenities such as meeting spaces, a component that the majority of the properties in the area do not posses. Furthermore, the area does not contain many restaurants, and offers even fewer chains. The only chain restaurant located in the area is an Applebee’s, and many travelers are left with little options and knowledge as to where to consume their meals. This Clarion Hotel will also contain an on-site restaurant, which is another component unique to this hotel as well as a large revenue generator.

The Clarion Hotel in Sandusky hopes to gain an optimal competitive advantage amongst its competitive set, as well as the surrounding area markets. Clarion will strive to be the upper mid-scale hotel in the region in terms of customer service, amenities, revenue management, profits, and drawing in the highest occupancy percentages within its first 6 years of opening. The hotel is going to be constructed in an excellent location, being a short drive away from one of the world’s greatest amusement parks and one of the beautiful Great Lakes in the United States. The Clarion Hotel hopes to provide the ultimate guest experience and draw in a multitude of customers from around the country and world.


Section 3: Market Analysis

Geographic Analysis

Sandusky, Ohio is a part of Erie County located in the far north part of the state between the major cities of Cleveland and Toledo. Cleveland is 62 miles east of Sandusky and Toledo is 62 miles west. Columbus is farther away (115 miles) and even farther is Cincinnati, which is 231 miles from Sandusky. Other surrounding areas include: Essex County, Ontario; Lorain County; Huron County; and Ottawa County. The city of Sandusky is only 21.91 square miles, and borders one of the Great Lakes, Lake Erie. Cedar Point, home of one of the world’s best ranked amusement parks, is located only 3.4 miles off of the mainland in Sandusky. I-90 and I-80 are two of the major interstates that run through the city and allow for easy access to surrounding areas.

Sandusky is an area that thrives seasonally, as much of the tourism is driven by outdoor activities such as the amusement and water parks as well as activities on Lake Erie. The winter months are much quieter and business slows down significantly, but there are historical buildings in the city that still attract guests such as the historical county jails that can be toured year round.


Economic & Demographic Review

Population Population Trends

2010: 60,944 Sandusky: -1.4% April 1, 2010- July 1, 20132013: 60, 098 Ohio: .3% April 1, 2010- July 1, 2013

Per Capita Personal Income

Sandusky (2011): $22,045Sandusky (2012): $22,449Sandusky (2013): $22,975Ohio (2011): $24,750Ohio (2012): $25,395Ohio (2013): $25,020

Median Household Income

Sandusky 2009-2013 (in 2013 dollars): $46,140Ohio 2009-2013 (in 2013 dollars): $48,308

Total Retail Sales

Retail Sales Statistics for 2007

Accommodation & Food $70,868,000

Retail $282,362,000


In 2011, Sandusky was rated as the best city in America to “live cheaply” by Forbes. Income per capita from 2011-2013 saw a slight incline each year, while income per capita for the state of Ohio raised almost $1,000 from 2011-2012 and dropped from 2012-2013 by a small margin. Median household income in Sandusky was close to the median household income for the state of Ohio at $2,168 less than the state average.

It was extremely difficult to find statistics relating to retail sales in Ohio for later than 2007. However, data was found for the United States total retail sales per capita and in 2007 the national average was $12,990. This is about $2,000 higher than the average for the state of Ohio. It’s important to make note that the numbers included in the chart were taken just before the stock market crashed. The economy is much stronger in today’s market, which is a

Figure 1

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Retail Sales per Capita $10,943

Workforce Characteristics

In 2013, the total workforce for ages 16 and older was 64.2% of Sandusky’s total population. Of this total percentage, 59.4% were females aged 16 and older. The state of Ohio’s total workforce ages 16 and older in 2013 fell slightly behind Sandusky at 63.8% and of the 63.8%, 59.5% of the workforce ages 16 and older was female.

Unemployment

(As of December 2014)Sandusky: 5.4%Cincinnati: 4.4%Ohio: 4.8%

Workforce Sample for Major Employers in Sandusky


It was extremely difficult to find statistics relating to retail sales in Ohio for later than 2007. However, data was found for the United States total retail sales per capita and in 2007 the national average was $12,990. This is about $2,000 higher than the average for the state of Ohio. It’s important to make note that the numbers included in the chart were taken just before the stock market crashed. The economy is much stronger in today’s market, which is a

Figure 2

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Major manufacturing operations in Erie County: Automotive Component Holdings; Kyklos Bearing International; International Automotive Components; Freudenberg-NOK (packaging facility); J H Routh Packing; PPG Industries (chemical coatings); JBT Corp. (conveyors); CertainTeed Corp. (roofing materials); Bettcher Industries, Inc. (meat processing equipment); US Tsubaki Inc. (chains); Sandusky Newspapers; Sandusky International (Centrifugal Castings); Industrial Nut Corp.

Major NON manufacturing operations in Erie County: Cedar Point Amusement Park; Firelands Regional Medical Center; County of Erie; Ohio Veterans Home; Sandusky City Schools; Meijer Department Store; Walmart; Great Wolf Lodge; Perkins School System; Providence care centers

The Market

The economy hotel class dominates Sandusky, and more specifically, makes up 43% of the hotel market in the city. Since the hotels were built in the 60’ s-90s, not much new construction in the area has surfaced. This is important because technology has evolved so drastically that consumers are looking for the “latest and greatest” when traveling, and much of the Sandusky market does not offer that. The construction of a new brand name upper midscale hotel can potentially attract a whole new market to the Sandusky area and expand tourism around Cedar Point and Lake Erie.

What makes Sandusky an attractive location?In 2011, Forbes ranked Sandusky as the best city in America to live cheaply. Cheap living in the area can potentially bring locals to the hotel as they are saving money on housing. This gives travelers the idea that the cheaper it is to live, the more money there is to spend on leisure activities. In addition, Sandusky has plenty to offer during the spring, summer, and autumn seasons. Located just on the border of one of America’s great lakes, Lake Erie, families and people of all ages have the opportunity to enjoy recreational use of the lake, water sports, and excursions such as Erie Lake boat cruises. If you’re more of a thrill seeker, hop over to Cedar Point Island, home of Cedar Point amusement park that’s been ranked “best amusement park in the world” for 16 consecutive years.

Why Sandusky?The city of Sandusky’s geographical location is in perfect, close proximity to one of America’s 5 great lakes, historic buildings with interactive tours for all ages, and some of America’s (and the world’s) greatest amusement parks to date. When travelers visit a destination for leisure purposes, they expect to stay in a quality hotel with reasonable prices and plenty of amenities to make their experience a memorable one. Our hotel will


attract a new market because of the brand name, reasonable prices, exceptional quality, and extra amenities that guests love such as a pool and fitness center and even continental breakfast. The lack of competition for upper midscale hotels in the area, and even more so, the lack of renovations and innovations to existing hotels is going to give our hotel a competitive advantage.

Segment Breakdown

Upon analyzing the Sandusky, Ohio CVB, it’s been concluded that marketing efforts in the area focus mainly on the leisure transient, rather than business. The bureau predominantly markets visits to the amusement and water parks, historical and ghost tours, and outdoor activities on or near Lake Erie. Dining options in the area are limited, with the choice of Applebee’s and some other local “hole-in-the-wall eateries.”

Targeted SegmentsThe proposed hotel will first and foremost target families. The majority, if not all of the activities and attractions in the area are family oriented and offer fun for everyone on the trip. There are options to seek a high level of thrill on some of the world’s fastest and tallest roller coasters or to relax and enjoy the natural beauty of Lake Erie. Second to families, the hotel will target the younger demographic from approximately ages 20-30 years. The younger demographic has the tendency to be more price-conscious and Sandusky offers plenty of options to enjoy the area while keeping spending to a reasonable amount.

Distribution ChannelTo be able to grab the attention of the target market, e-commerce and intermediaries such as third party booking websites (i.e. Expedia, Travelocity, Priceline, etc.) are going to be of key importance. In today’s market, 148.3 million travel bookings are made online. Since 2007, annual online travel sales have nearly doubled from $93.8 billion to $162.4 billion in 2012. The steady increase in sales over the past 5 years indicates that use of online travel bookings will continue to rise and our hotel needs to take full advantage of these distribution channels to show up on travelers’ radar and book reservations.


Lodging TrendsIt’s no secret that technology has been rapidly evolving and becoming more efficient over the years. Nationally and worldwide, the travel and tourism industry is adapting to the technological advancements and utilizing its benefits to expand throughout markets and maximize profit. In Sandusky’s market, technology and e-commerce are extremely important, as technology offers the most effective and efficient way to put Sandusky on the consumer radar map as a desirable travel destination. In general, Ohio is not a top ranked state for tourism, but the Internet and new technologies allow for opportunities to expand and reach out to leisure travels to come stay in Ohio, and more importantly, Sandusky.

EvolutionAccording to statistical data from the STR report, the majorities of the hotels in Sandusky were built over 25 years ago and have become more outdated each year. Any renovations and affiliations to these hotels happened mostly in the early 2000’s, causing a competitive disadvantage for Sandusky lodging options. Of all the hotel classes in the area, the upper midscale and upper upscale have been given the most attention in renovations and being able to keep up with the evolving consumer desires. Construction trends show that the number of new hotels built in the past 15 years in Sandusky is almost non- existent. The city underutilizes its tourism and if marketing is done correctly, building a new upper midscale class hotel near the tourist attractions has the ability to bring in brand new markets and larger numbers visitors each year.


Attractions

Not many travelers are familiar with everything that Sandusky has to offer. Attractions range anywhere from amusement and water parks, to haunted house tours and wine dinners aboard a Lake Erie dinner cruise. Some of the most popular attractions in the area include visitation to Cedar Point amusement park, Goodtime Lake Erie Cruise, and the Ghostly Manor Thrill Center. Other tourist hot spots include Cedar Point Soak City water park, Kalahari water park, Great Wolf Lodge, Skateworld amusements, Sandusky county Jail Dungeon tours, and plenty of options to rent boats on Lake Erie.

*All ratings below are courtesy of TripAdvisor*

Goodtime Lake Erie Cruise (4.5 stars)The Goodtime Lake Erie cruise has a number of options to choose from to explore the Great Lake. During the day, guests can board the cruise for a fun filled day of island hopping and exploration across the beautiful waters. They even offer plenty of specialty cruising options, to accommodate guests of all kinds. On Tuesday nights, customers can tour the Sandusky Bay and enjoy the peaceful atmosphere of the lake during nighttime. For all the couples looking for a romantic evening, come aboard for delicious food and wine on the wine tasting dinner cruise. Not your cup of tea? Goodtime Cruise will let groups rent the boat out for private events! Lastly, Goodtime loves hosting the “famous Friday night party cruise” where guests have the opportunity to party their hearts out aboard a beautiful boat.


Cedar Point Amusement Park (4.5 stars/ 3,628 reviews)Cedar Point, just outside of Sandusky is home to some of the tallest, fastest roller coasters in the entire world. As a matter of fact, readers of Amusement Today, have ranked Cedar Point as the “Best Amusement Park in the World” for 16 consecutive years. In addition, Cedar Point is historically the 2nd oldest amusement park in the United States. Guests can seek out optimal thrill on roller coasters like Top Thrill Dragster and Raptor, or take it easy on the family friendly rides. Regardless of personal taste in rides, there are options to ensure happiness of all guests.


Ghostly Manor Thrill Center (4.5 stars/173 reviews)What better place to take your family than a haunted house tour that’s been featured on the Travel Channel. Ghostly Manor Thrill Center and Haunted House has been rated one of “the best haunts” in the United States and offers a thrilling, interactive experience through spooky dungeons and creepy tunnels. Tickets for families are extremely affordable, which is all the more reason to spend the extra cash you tucked away for the trip on arcade games for kids of all ages.


Transportation

Cleveland Hopkins International Airport Toledo Express Airport


This airport, located approximately 60 miles east from the heart of Sandusky, is the largest airport in the state of Ohio. Driving distance from CHIA to Sandusky is roughly an hour to an hour and a half. There is an off-site rental car facility just off the airport grounds. In 2014, CHIA accommodated 7.6 million passengers and every day the airport sees hundreds of departures and arrivals.

Toledo Express Airport is located approximately 60 miles west of Sandusky and significantly smaller than Cleveland International with only 2 runways. The airport is domestic only and uses American Airlines & American Eagle. If guests are trying to avoid road traffic, Toledo is the better choice but there are far more flight options at Cleveland International Airport.

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Sandusky Amtrak Train Station

Sandusky Transit System (STS)

Construction Trends


The Amtrak Station is located at 1200 North Depot Street, Sandusky and serves passengers going to Cleveland for just $10-$15 one way. The Cleveland Amtrak

Station is located just 15 miles from the airport, a huge convenience for passengers traveling from Sandusky back to the airport.

STS is conveniently located right next to the Sandusky Amtrak Station. This form of transportation is an on demand, curb-to-curb, advance reservation ride transportation system. The service also extends to most of Perkins Township as well as the City of Huron. For guests that choose not to rent a car during their stay, STS offers a cheap

alternative to get travelers to and from their desired destinations.

Figure 3

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The majority of hotels in Sandusky were built in the early to mid 1900’s. Even then, the market wasn’t very diverse. Because only one hotel was built from 2006-2014, all of the existing hotels are old and in need of renovations and updates to tend to today’s traveler expectations. It would be a good idea to put our new hotel in the area because it will offer an updated facility to guests, compared to the older hotels. It will have more amenities and options to personalize guest stays and attract a lot of marketing attention in the area. In addition, the majority of the existing hotels fall under the economy class and there are almost no existing upper mid-scale facilities in the area. The hotels in the upper mid-scale class are outdated and our hotel will be the new best commodity to touch down in Sandusky.

Estimated Demand


Figure 4

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The estimated demand chart is based off of information from Smith Travel Research data. From 2009-2014, the average daily room count in Sandusky stayed pretty constant, ranging from 5433 (2011) rooms- 5,681 (2009) rooms. This number only varied a small amount due to new construction as well as the closings of a small number of properties during those 6 years. The occupied room nights generally increased with each passing year. In 2009, the Sandusky market saw 955,975 occupied room nights and by 2014, there were 979,076 occupied room nights. This increase is most likely due to a recovering economy from the 2008 stock market crash. While the occupied nights have increased between 2009 and 2014, the highest amount was in 2012. Customer demand was highest in 2012 accounting for the 984,350 rooms and after 2012, the demand leveled out. In addition, the demand most likely decreased in 2014 due to a higher ADR at about $94 versus $89 in 2012. Although in 2014, Sandusky didn’t have the highest occupied room nights, it still saw the highest amount of RevPAR due to a more stable, thriving economy.


Estimated Area Occupancy

The estimated area occupancy was found using data from Smith Travel Research reports. Sandusky’s main attractions are open and operating during summer months, which is why the summer season occupancy is drastically higher than winter and spring in figure 1.10. Autumn falls just over 10% behind summer at an occupancy of 59.1% (which is most likely due to a manageable climate for guests to still enjoy the outdoors and Cedar Point amusement park). Figure 1.11 breaks the seasonal occupancy down further by weekday, weekend, and overall. Summer once again has the highest occupancy, and the highest during the weekend at 89.51% occupancy. Winter weekday and weekend have consistently low occupancy rates at 30.47% (weekday) and 35.54% (weekend). During winter seasons, the majority of guests are business travelers because Sandusky is known for its abundance of manufacturing plants around the area.


Figure 5

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Current Lodging Supply in Sandusky

The data for the current lodging supply was gathered from STR reports. The majority of hotels in Sandusky are economy class, followed by midscale. We want to market the proposed hotel towards families seeking to stay in a nice lodging facility during vacation. Upper midscale makes the most sense for this particular market segment, as an upper midscale hotel would provide plenty of room types to choose from, an abundance of amenities, and an on-site restaurant for guests to enjoy during their stay. Because there aren’t many upper midscale-upscale hotels in Sandusky, the new hotel will look much more attractive to travelers than the older hotels that haven’t been updated in a decade or longer.

SWOT Analysis


Figure 6

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Strengths

The biggest strength of building a new, upper-midscale hotel in Sandusky stems from customer loyalty to a brand, but also the simple fact that the entire facility and all its components will be brand new. Today, consumers are seeking the latest and greatest facility at a decent price, and the lack of new facilities (especially those with a popular brand name) in Sandusky will attract that many more people to our hotel. Another strength that will increase visitation to the new hotel is the concentration of tourist attractions in the area. Cedar Point Amusement Park has been rated the best amusement park in the world for 16 consecutive years and possesses some of the fastest, tallest roller coasters in the world. In addition to the amusement park, there are a number of indoor and outdoor waterparks in the vicinity. One brand name that consumers love, The Great Wolf Lodge hotel and indoor waterpark, is in Sandusky. Lake Erie is only 3 miles from the city and people are able to use the lake and explore at any time.

Weaknesses

Although Sandusky and Cedar Point have many strengths, the city is recognized as a cheap, low-income area. This particular weakness can potentially hurt the hotel’s business if people cannot overcome the stereotypical perception of what the city has (or doesn’t have) to offer. Another weakness is that Sandusky is about an hour away from the nearest international airport (Cleveland). This eliminates part of the convenience factor for guests to reach their vacation destination after long travels.

Opportunities


The weaknesses also pave a way for opportunity in Sandusky. The hotel market is very small and lacking new, innovative facilities to stay at. There are enough visitors each year to be able to reroute them to the new hotel and build a new market segment based off of attracting them through cleanliness, new technologies, and a more upscale environment than the competition. The Clarion Hotel will have the ability and opportunity to attract a larger leisure market and tailor needs to that particular segment. In addition, the hotel will be affordable. As of now, the affordable hotels are mainly a part of the economy hotel class, and those hotels offer much less to the guest and have a reputation for not always being clean or safe. The Clarion sees this as an opportunity to lure guests in with affordable prices for staying at a quality facility. The affordable price will not just include basic amenities, but also an abundance and variety of amenities that the competition does not offer. For example, Clarion Sandusky will have a swimming pool, free shuttle service, continental breakfast, and an on-site restaurant. Lastly, due to the lack of renovations and/or new construction of hotel properties in the Sandusky market, Clarion has the opportunity to jump- start its facility towards a more efficient, sustainable future.

Threats

A major threat to the hotel market in Sandusky is the seasonal aspect of business. While the summer months offer high occupancy, the spring and winter offer very low occupancy and business on whole. Partner the seasonal market with a very low local economy; it can lead to a major issue for businesses all around the area. One other threat includes the luxury, themed resorts on the Cedar Point properties. These resorts lure in many families as they offer an abundance of amenities, themes for family fun, and located just steps away from the park entrances.

Section 4: Operational Strategies


Vision

The vision for the Clarion Hotel Sandusky is to be the market leader in the highest occupancy and revenue per available room out of our competitors, while delivering exceptional service in the top grade facility. Business in the summer months is sure to be the most profitable time of year, and with proper revenue management, the Clarion can withstand the relatively weak winter and spring months. The hotels main focus will be targeting families traveling to the amusement park Cedar Point. Choice Hotels has a strong brand that projects quality with affordability.

MissionOur brand motto “get together” provoked our mission statement; which is to provide a friendly, comfortable environment for our guests to get away and enjoy time with their friends, families and loved ones. The Clarion plans to follow our this mission by keeping the facilities clean at all times, and providing a care-free, personalized stay for all our guests.

Values

“You are what you repeatedly do. So excellence, by that measure, is a habit, not an act.” –Aristotle

At Clarion Sandusky we will hold the highest standard of business ethics and personal respect. Regardless of dealings with a guests or vendors, we will treat every person that contacts Clarion Sandusky with the dignity and respect they deserve. We will keep stockholders happy, and take into account any of their goals and objectives. Our staff will be trained to the standards of Choice Hotels, while raising the standard for the best experience possible for guests at any Choice Hotel. Another value the Clarion will pride itself on is the extreme measures of customer service. Customer loyalty will be extremely high due to the measures the Clarion will take to ensure that their stay is flawless.


GoalsGoal # 1: Meet and exceed consumer expectations. Objectives: Be ranked as the number 1 hotel (out of 34) in Sandusky on TripAdvisor in the area within the first 2 years of opening.

Strategies: Ask guests to write reviews (on multiple occasions such leaving comment cards in

the rooms and reminding them at check out) and give rewards to those who consistently review the property.

Wow the guest by providing amenities that other properties in the area lack such as rentable towels and sundries for a day out in Sandusky.

Train all employees to have a “whatever it takes” attitude and go to great lengths to satisfy the guest. This also includes knowing how to properly handle a dissatisfied guest.

Send out post-check out surveys to ensure that guests have been satisfied with their stay at our property, and take any suggestions to make the operation run more smoothly and sufficiently.

Reply to all negative, and as many positive Trip Advisor ratings as possible to ensure the guest that the Clarion is listening to what they have to say.

Goal # 2: Retain employees through a favorable work environment. Objectives: Maintain a high level of employee satisfaction, eliciting a low employee turnover rate of no more than 20% per fiscal year (specifically voluntary and dysfunctional turnovers)

Strategies: Interview candidates carefully before employment to ensure they have proper

skills, are interested in long term growth within the company and they will fit in with the environment.

Offer flexible work schedules, bonuses and benefits to employees. Recognize and reward employees when they have consistently worked hard and

when they do good things. Educate employees of harassment policies and ensure that all employees are being

treated well, not only by management but by other employees.

Goal # 3: Make a profit. Objectives: Generate a full return on investment and start generating additional revenue within the first three years of opening. This will be achieved by operating at a minimum of 70% occupancy during the summer months and 40% during the off-season with 1.5% growth per year.


Strategies: Upon opening run daily advertisements on Television, the Internet and social

media to spread awareness of the opening. Offer deals such as free breakfast and market item to those who book early,

creating urgency in the guest to make reservations. Offer incentives such as points to guests who are returning to the property to

increase customer loyalty. Offer special discounts and rates to attract a different market such as the AARP

discount and Government and Military rates to attract a larger market.

Section 5: Franchise Comparison

Introduction

Sandusky is a small city in Northern Ohio with a great deal of charm and character that has the potential to draw in a higher amount of tourist activity with the construction of a new hotel. From natural attractions such as the picturesque Lake Erie, to man-made marvels such as Kalahari resort, home of America's largest indoor water park, Sandusky has a large variety of features to draw in tourists from all over the country. After conducting extensive research on the area, it is clear that the construction of an upper midscale hotel will prove to be the most profitable. Sandusky receives the majority of its tourism during the summer months, during which the occupancy percentage of the hotels in the area reaches around 83%. The majority of these travelers are leisure travelers who are visiting Sandusky with their families. These guests have a strong desire to get out of the hotel and see what the city of Sandusky has to offer. Throughout the remainder of the year, occupancy percentages for Sandusky hotels fall into the mid 20s. The majorities of travelers are visiting Sandusky on business and are interested in the corporate and factory plants located in the area. These two critical pieces of traveler data are what we used to begin our research on what franchise tag would best suit a new hotel. It was important to select a franchise that can accommodate the summertime leisure travelers, while also attracting a business crowd during the slow periods throughout the rest of the year. Based on amenities, cost of construction, and benefits of flying the selected flag, the best two franchise options were determined to be Wyndham Garden and Clarion.

The major benefit for choosing to operate an upper midscale hotel under a franchise flag is the characteristics of the typical person who travels to Sandusky. Those who travel to Sandusky tend to be more psychocentric, meaning they enjoy things they


are familiar with, such as chains. Travelers to Sandusky want to stay in hotels they have previously stayed in and they want to partake in activities that they have some experience with, such as relaxing by a lake or visiting a water park. The two franchises selected, Wyndham Garden and Clarion, have proven to be able to accommodate both leisure and business travelers.

Background of Franchise Options

WYNDHAM GARDEN HOTEL

Wyndham Garden is a franchise that is owned by the Wyndham Hotel Group, the largest hotel company in the world. With approximately 7,650 hotels and over 661,000 rooms, Wyndham hotels are recognizable throughout the country, so much so that is has been called the McDonald’s of the hospitality industry. With the desire to reach the upper-midscale market, the Wyndham hotel group developed Wyndham garden in 2008. Wyndham Worldwide hotels were typically known for their business accommodations, such as conference rooms and meeting centers. The Wyndham Garden brand was designed to contain more leisurely accommodations, such as pool areas, restaurants, and more scenic views, while still containing amenities to accommodate the typical business traveler. These added leisure amenities makes the Wyndham Garden brand an ideal franchise for a new hotel in Sandusky, OH.

CLARION HOTEL

Clarion hotel is a hotel franchise owned by Choice Hotels. In 1982, when Choice Hotels was known as Quality Inns, the Quality Royale was created in order to compete in the upper-midscale market. In 1987, Quality Royale became Clarion Hotel, and that name has stuck to present day. Clarion Hotel is known for it wide range of amenities. From pools, restaurants, and entertainment centers, to lounges, banquet rooms, and conference centers, Clarion Hotel can provide for a wide variety of guest needs. Clarion hotel has also proven to be successful in multiple tracts such as city centers, airports, and resorts. Clarion Hotel has been an established franchise dating back to 1987, making it one of the more recognizable franchises un Choice Hotels. All of these reasons make the Clarion Hotel franchise an ideal candidate for the chain used for this new hotel.


Selected Franchise

After careful, diligent research, it is clear that Clarion Hotel is the ideal choice for Sandusky, OH. Both hotels have strong brand recognition and offer amenities to provide for family leisure travel as well as the occasion business travel. The key factors that set these two franchises apart are the initial investment cost and the cost per room. Although both hotels are associated with similar costs, the initial investment for a Clarion Hotel is slightly cheaper than Wyndham Garden Hotel. Clarion Hotel's operation cost and cost per room is also cheaper. Although Wyndham Garden Hotel does provide more business amenities, as well as a slightly more recognizable brand, the costs associated with both franchises makes Clarion the more viable option. Any existing hotel or hotel under construction in the Sandusky area is forced to generate the majority of its revenue during the summer months of May-August. During this time, all upper-midscale hotels in the Sandusky area are able to charge the very high rate of around $300 per night. The average daily rate for a Wyndham Garden and a Clarion Hotel during this time would be very similar, so each hotel would generate a similar revenue based on sale of rooms. The key factor for a hotel in this area is the ability survive during the slow, eight-month period following the summer months, in which the occupancy percentage drops to approximately 30%. In a time period in which every dollar counts, a Wyndham Garden Hotel requires slightly more revenue to stay afloat, and our research shows that it would be more difficult for a hotel like this to survive a lengthy low period. However, our research shows that Clarion will be able to generate sufficient revenue during the summer months to stay afloat during the lengthy down period, while still generating a significant annual net-profit. It terms of off moth business travel, Wyndham Garden offers a higher amount of business related amenities compared to Clarion Hotel. However, those amenities are geared for business travelers that prefer to conduct a large portion of their business within the hotel, while Clarion Hotel's business amenities accommodate those who prefer to conduct their business outside of their hotel, a characteristic that most business travelers to the Sandusky area share. Based on initial investment costs, cost per room, operation costs, and travel reports, Clarion hotel seems to be the best fit for a hotel project in Sandusky, OH.


Franchise Options

Figure 7

Costs/ Service Wyndham Garden

Annualized Clarion Annualized

Application/ Initial Fee

$37,000 $37,000 $40,000 $40,000

Royalties

System Fees

$112,976

$56,488

$112,976

$56,488

$96,030

$73,435

$96,030

$73,435

Training NO YESTraining Fees N/A $1,299 (HOST) $1,299Cost per room $95,000 $95,000 $90,000 $90,000Total Initial Investment Cost

$11,078,970- $17,384,170

$11,078,970- $17,384,170

$10,515,549-$14,573,099

$10,515,549-$14,573,099

*Application fee is based off a 125 room hotel Wyndham: 5% royaltiesClarion: 4.25% royalties

Competitive Set Identification & Analysis

Application/Initial Fees, Training & Training Fees, and Total Initial Investment Cost (estimated) are found directly in the Franchise Disclosure Document.

Royalties for the Wyndham Garden Hotel are calculated by multiplying the hotel’s preceding month’s Gross Room Revenue by 5%.

Royalties for the Clarion are calculated by multiplying the hotel’s preceding month’s Gross Room Revenue by 4.25%.

System Fees for Wyndham are calculated by multiplying the preceding month’s gross room revenue by 2.5%.

System Fees for Clarion, which include ongoing development & maintenance, upgrading of management and reservations systems, etc. are calculated by multiplying the preceding month’s gross room revenue by 3.25%.


Conclusion from Figure #Upon analyzing and comparing the 2 franchise options, Clarion Hotel and the Wyndham Garden, our group carefully decided to choose Clarion over Wyndham. Although Clarion’s application fee is $3,000 greater than Wyndham’s, the total estimated initial investment is about 1 million dollars less for Clarion than for Wyndham. All of this information is based off of a 125 room hotel. The Clarion in Sandusky will have 125 rooms. In addition, the cost per room is $5,000 less for Clarion. Looking at the greater picture, the hotel will save another $625,000 based off of a $5,000 savings for 125 rooms.

Room Types & Respective Rates (Year 1: 2018)

Type of Room Number of Rooms Rate

Standard Double Queen + Pullout Sofa

60 $120

Standard King 40 $115

Standard 2 Double Beds 25 $110.50

*The projected ADR above is based off of the penetration rate from the Competitive Set projected ADR*

Because the majority of the guests visiting Clarion will be families and leisure travelers, it’s important that a standard double queen room with a pullout sofa is given priority for most amount of that specific room type. Most of the time, it’s estimated that families with children will be staying at Clarion Sandusky and therefore a room that can hold up to 6 guests should be made most available. A standard king room will have the second most amount of rooms due to anticipation that couples will be staying at Clarion for a romantic getaway. Lastly, 2 standard double beds will be an option for families that do not want to spend too much money but still want to travel and stay close to the amusement parks and Lake Erie. The rates were determined from STR data and projections made through the financial statements. The lowest rack rate projected was $110.50, given to the standard 2 double bed room type. The price was then raised for a king room to compete with the competitive set hotel rack rates. Estimating the demand for families choosing the standard double queen room type, we’ve consciously decided to raise the rate to $120 (which is still comporable to our competitive set rack rates). We will see an increase in ADR for each room type as the hotel remains open.


Figure 8

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Projected Average Yearly Room Rates by Market Segment

*Data used for all charts and graphs in section 5 were found using 3 year weighted averages in the STR Reports*

Segment 2018 2019 2020 2021 2022 2023Leisure $110.5

0$110.50

$110.50

$110.50

$110.50

$110.50

Business $100 $100 $100 $100 $100 $100Meetings/Events

$95.50 $95.50 $95.50 $95.50 $95.50 $95.50

Average $102 $102 $102 $102 $102 $102

This chart reflexes the average room rate for the first six years of operation, without accounting for inflation. Because of Sandusky, Ohio’s static occupancy percentage, it is likely that the room rates will remain fairly constant if inflation is not accounted for. Sandusky has a large volume of leisure travelers, so a hotel in this location is forced to charge leisure travelers a higher rate in order to make an overall profit. In order to attract more business travelers, a hotel in this area should charge a lower rate business travels in order to generate a higher occupancy. There are very few meeting and events located in the Sandusky area throughout the year, so these travelers receive the lowest rate.

Projected Occupancy


Figure 9

Figure 10

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Trend reports for the Sandusky area show that travel to the area is highly seasonal. STR data shows that occupancy reaches the high 80s to the low 90s in the summer months, then drops as low as 22% in the remaining months. The reason for this dramatic shift is the high volume of tourist attractions available during the summer and the lack there of during the remainder of the year. These trends lead to a static average annual occupancy percentage of around 48%. An advisable goal for this hotel would be to increase the average annual occupancy by increasing occupancy during the off months. The best way for this hotel to do so would be by offering more business amenities than those in its competitive set. A Clarion hotel in this area would have a competitive advantage in doing so because it contains business amenities such as technology equipped meeting rooms, an amenity that most hotels in the Sandusky area do not have.

Projected Number of Rooms Sold per Year by Market Segment


2018 2019 2020 2021 2022 202348.40%

48.41%

48.42%

48.43%

Projected Occupancy Percentage

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Total Sold Leisure Business Meetings/Events

2018 22087 17670 3313 11042019 22094 17675 3314 11052020 22094 17675 3314 11052021 22093 17674 3314 11052022 22093 17674 3314 11052023 22093 17674 3314 1105

Other than the deconstruction or unavailability of previously offered rooms, the projected number of rooms sold directly correlates with projected occupancy percentage. As previously stated, do the seasonal travel trend of the Sandusky area, the average annual occupancy of hotels in the area remains static at around 48%. This renders the projected number of rooms sold at a static amount of about 22,090. If more hotels are constructed in the area, the average annual occupancy may drop, but the number of rooms sold should remain constant as long as there are no new attractions added to the area. An advisable strategy for a new Clarion hotel in the area to increase number of rooms sold is to use their business amenities to increase business travel during the off months

Projected Rooms Revenue


2018 2019 2020 2021 2022 2023$2,258,000.00$2,258,500.00$2,259,000.00$2,259,500.00$2,260,000.00$2,260,500.00$2,261,000.00$2,261,500.00$2,262,000.00


Projected Rooms Revenue for the first 6 years after Clarion Hotel opens is based off of STR data and 3 year weighted averages. These numbers exhibit a $500 increase each year. The room revenue is relatively high, but not high enough to offset the $18M construction costs. In order to increase room revenue even more, Clarion Sandusky will offer enticing in-room amenities such as water bottles, alcoholic beverages placed in the mini fridge, and pay-per-view TV options to increase guest folios and in turn, room revenue.

Figure 12

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Section 6: Product and Service Analysis

Introduction

Due to its close proximity to Cedar Point Amusement Park, Sandusky hotels see a lot of business from families and leisure groups. Other nearby attractions include Kalahari Water Park, Sandusky State Theater, and Norwalk Raceway Park. The Wyndham Garden Hotel Sandusky would be an energetic, family-friendly, upper midscale hotel to serve the market. With amenities such as free wifi, a pool and hot tub, a full kitchen with cookwear, 24 hour business and fitness centers, and an on-site restaurant, our guests will have as much fun in the hotel, as they will at the nearby attractions.

Comparative Analysis of Current Lodging Supply Situation


Projected Rooms Revenue for the first 6 years after Clarion Hotel opens is based off of STR data and 3 year weighted averages. These numbers exhibit a $500 increase each year. The room revenue is relatively high, but not high enough to offset the $18M construction costs. In order to increase room revenue even more, Clarion Sandusky will offer enticing in-room amenities such as water bottles, alcoholic beverages placed in the mini fridge, and pay-per-view TV options to increase guest folios and in turn, room revenue.

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The economy hotel class dominates Sandusky, and more specifically, makes up 43% of the hotel market in the city. Since the hotels were built in the 60’s-90’s, not much new construction in the area has surfaced. This is important because technology has evolved so drastically that consumers are looking for the “latest and greatest” when traveling, and much of the Sandusky market does not offer that. The construction of a new brand name upper midscale hotel can potentially attract a whole new market to the Sandusky area and expand tourism around Cedar Point and Lake Erie. Construction trends show that the number of new hotels built in the past 15 years in Sandusky is almost non-existent. The city underutilizes its tourism and if marketing is done correctly, building a new upper midscale class hotel near the tourist attractions has the ability to bring in brand new markets and larger numbers visitors each year.

As technology continues to expand, the attractions in the Sandusky area expand with it. The older properties that occupy the Sandusky area are struggling to adapt to the increase in demand for technology. One of our property’s goals is to increase the presence of technology in the hotel, and benefits of constructing a new property will assist us in doing so. The average customer’s use of technology has also led them to desire more out of attractions when they travel. Travelers are no longer “ok” with simply going to Lake Erie, a beach, or an amusement park. Instead, they want to be taken there in style with beach gear and a fast pass. The construction of a new hotel with the basis of satisfying a new age of demands will better accommodate those traveling to the Sandusky area, as well assist in the achievement of the property’s goals.

Competitive Set Identification and Analysis

After analyzing other hotels in the Sandusky area, we have identified a select set of competitors. These are the hotels that are the most similar to what we are offering in price, proximity to attractions, amenities, services and other variables. The four hotels that will be the Clarion Hotel’s biggest competitors are the Comfort Inn Sandusky, Best & Suites Sandusky. All of these hotels are in the upper midscale market and pose thus pose as our top competitors, since we will be attracting the same market. Taking our target market into consideration, the amenities that will be provided at Clarion will mostly cater to families and leisure travelers. This includes a pool, a television, a fitness center, and an on-site restaurant with kid-friendly food. These amenities and characteristics will set apart the Clarion Hotel from its competition allowing it to rise to the top in occupancy. Western Plus Sandusky Hotel & Suites, Hampton Inn Sandusky Central, and Fairfield Inn & Suites Sandusky. All of these hotels are in the upper midscale market and pose thus pose as our top competitors, since we will be


attracting the same market. Taking our target market into consideration, the amenities that will be provided at Clarion will mostly cater to families and leisure travelers. This includes a pool, a television, a fitness center, and an on-site restaurant with kid-friendly food. These amenities and characteristics will set apart the Clarion Hotel from its competition allowing it to rise to the top in occupancy.

Figure 13 - Competitive Set Number of Keys

Hotel Number of Rooms

Comfort Inn Sandusky 207Best Western Plus Sandusky Hotel & Suites 70

Hampton Inn Sandusky Central 50Fairfield Inn & Suites Sandusky 88*Clarion Hotel Sandusky 125

Competitive Set


Comfort Inn Hotel5909 Milan Rd. US 2 & US 250, Sandusky, OH, US,

36


The Comfort Inn is a 207 room upper midscale hotel located off US-250. Similar to the Clarion, they offer an on-site restaurant. This is the biggest competition to the Clarion because off of the amenities are very similar. They do not offer an on-site fitness center or business center. They have pool and hot tub and a game room for the young travelers. They pride themselves on their delicious free breakfast and family-oriented business.

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Best Western Plus Sandusky Hotel & Suites6011 Milan Road, Sandusky, OH 44870-5869

Hampton Inn Sandusky Central6100 Milan Road, Sandusky, Ohio, 44870, USA

The Best Western Plus is an affordable upper midscale hotel, which also attracts families. There are 70 rooms in this hotel, which are all equipped with a television, microwave, refrigerator and safe. They also offer a complimentary breakfast, exercise facility, business center, game room and laundry services. The hotel does not provide any sort of restaurant on site. The Best Western is a smoke-free property and is not pet friendly.

Hampton Inn Sandusky is located just minutes from the Comfort Inn, Best Western Plus and Fairfield Inn. They are all located right off US-250 on Milan Road. The Hampton Inn has only 50 rooms. Some of their amenities include free breakfast, and breakfast bags to go, free Internet access in all guest rooms, a pool and a fitness room. The Hampton Inn does not have a

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Figure 14 - Competitive Set Room Rates

1 Kind Bed Room 07/12/16

09/24/16

02/26/16

Comfort Inn Sandusky $119.00 $89.00 $229.00

Best Western Plus Sandusky Hotel & Suites $169.00 $109.00 $109.0

0

Hampton Inn Sandusky Central $109.00 $149.00 $169.00

Fairfield Inn & Suites Sandusky $179.00 $179.00 $119.00

Competition Hotel Locations


Fairfield Inn & Suites Sandusky6220 Milan Road Sandusky, Ohio 44870 USA

Hampton Inn Sandusky is located just minutes from the Comfort Inn, Best Western Plus and Fairfield Inn. They are all located right off US-250 on Milan Road. The Hampton Inn has only 50 rooms. Some of their amenities include free breakfast, and breakfast bags to go, free Internet access in all guest rooms, a pool and a fitness room. The Hampton Inn does not have a

The Fairfield Inn and suites has 88 guest rooms. This hotel attracts both business and leisure travelers, unlike many of the other hotels the Clarion Hotel will compete with. They offer free high speed Internet, complimentary breakfast, a fitness center, a heated indoor pool and a flat screen television. All rooms are equipped with mini fridges and microwaves and HD TV. This property is also smoke free and does not allow pets.

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Figure 15 Competitive Set Amenities


Comparative Analysis of Projected Services to Targeted Market Segments

It is clear that all of these hotels will serve as serious competition for the Clarion Hotel. The product, services, and amenities offered are all


Amenities Comfort Inn

Best Western

PlusHampto

n InnFairfield Inn

*Clarion

Hotel

Access to Wifi ✔ ✔ ✔ ✔ ✔Free

Breakfast ✔ ✔ ✔ ✔ ✔

Television ✔ ✔ ✔ ✔ ✔Adjustable

HVAC ✔ ✔ ✔ ✔Laundry Services ✔ ✔ ✔ ✔ ✔

Safe ✔ ✔ ✔

Pool ✔ ✔ ✔ ✔

Hot Tub ✔ ✔ ✔Business Center ✔ ✔ ✔ ✔Fitness Center ✔ ✔ ✔ ✔Game Room ✔ ✔

On-site Restaurant ✔ ✔

rather similar and thus make it impossible to see one hotel that stands out more than the others. Upon analyzing Sandusky, Ohio CVB, it’s been concluded that marketing efforts in the area focus mainly on the leisure transient, rather than business. The bureau predominantly markets visits to the amusement and water parks, historical and ghost tours, and outdoor activities on or near Lake Erie. Because of this target market, the amenities the Clarion Hotel will offer will be fun for the whole family. Dining options in the area are limited, which will make the proposed on-site restaurant set apart the Clarion Hotel from it’s competition.The targeted market segment is families and young leisure travelers. The Clarion Hotel is sure to beat the competition because of its strategic amenities and services provided. A safe is one thing that the Clarion has that the other hotels do not offer. Families often travel with a lot of money and valuables. They will be more inclined to pick a hotel that will protect their goods. The Clarion also offers a pool and hot tub for families and young leisure travelers to relax in after a fun day out in Sandusky. This is an activity that all ages can enjoy. The main differentiation between the Clarion Hotel and the competition is the on-site restaurant. This is perfect for the target market because there will be options for the whole family to enjoy and is a low-key, cheap, easy, alternative to going out to a nearby restaurant.


Section 7: Operational Plans

Guest Room Layout

The Clarion Hotel will consist of 125 rooms varying between 3 different room types: 1 king size, 2 queen size with the option of a pullout sofa, and 2 double beds. There will not be any suites in the hotel. Room amenities will include:

Flat screen television Air conditioning Free Wi-Fi Easily accessible power outlets Coffee/tea maker Compact refrigerator Microwave Hair dryer Iron/ Iron board Safe Work desk Bath amenities Bath towels Shower assist bar


Standard Double Queen Room for Clarion Hotel

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Lobby Design and Hotel Services/Amenities

Upon entry to the Clarion Hotel, guests will be greeted by a doorman who will offer assistance with any additional luggage. A beautiful, contemporary lounge will be in the center of the lobby where guests can relax and grab a cup of 24- hour complementary coffee and tea. The front desk will offer mail and laundry services, as well as an abundance of extra hotel room toiletries that guests can have readily available. There will also be a separate space for complimentary computer use with printing capabilities, and an onsite ATM. The entire lobby will be equipped with free Wi-Fi to ensure that the Clarion has created a unique and positive impression during the first few minutes of the guests’ stay.

Activity and Fitness Centers


Breakfast area in Standard Clarion Hotel

44

Because the Clarion Hotel wants to attract many markets, including families, an outdoor heated pool will be available for all guests. The outdoor pool area will include 1 heated swimming pool for all ages, as well as a children’s swimming pool with a maximum water depth of 2 feet and a whirlpool Jacuzzi. In addition to swimming facilities, the hotel will offer a fitness center with weightlifting, treadmills, and elliptical machines. All equipment will be state of the art to give the guest an ultimate fitness experience during his/ her stay.

Dining

The hotel will have a full service restaurant that serves breakfast, lunch, dinner for up to 50 guests at a time, and room service. In addition, the hotel will have an onsite bar for guests to enjoy from late afternoon through the evening. There is also going to be a complimentary 24-hour coffee and tea bar available in the lobby. Free, limited continental breakfast will be offered 7 days a week from 7am-10am.


Meeting and Event Facilities

Clarion Hotel will offer meeting spaces for events such as wedding rehearsals & receptions, business conferences and more. Amenities available will include a removable


Clarion Hotel Restaurant

46

dance floor, overhead projector and screen, round tables, and comfortable chairs. Our business meeting room will be fully equipped with a long rectangular table, leather swivel chairs, an overhead projector and screen, a white board, free Wi-Fi, and built-in power outlets disbursed evenly on the meeting table.

Off-Site Services

Due to the hotel’s close proximity to large amusement attractions in the area, we will offer van services at designated times throughout the day to shuttle guests to and from the desired attraction sites. We will create strong partnerships with Cedar Point Amusement Parks as well as some of the popular attractions along Lake Erie so that guests have easy and worry-free access to their destinations off the hotel property.

Section 8: Market Strategies and Sales Plans


Meeting Space in Clarion Hotel

47

Packages

Family Fun Package

The Clarion Sandusky is just a short drive away from the 16 consecutive year award winning amusement park, Cedar Point. Clarion will offer families that are staying in the hotel for 4 or more nights a discounted ticket bundle valid for 3 full days at the park for 2 adults and up to 3 children. Vacation is expensive, but by slashing tickets to Cedar Point, everyone wins!

Couples Retreat

Looking to spend quality time with someone special on a picturesque getaway? Look no farther! The couples’ retreat package is guaranteed to give you and that special someone an unforgettable escape from reality. This package will include a romantic dinner for two plus a bottle of wine at our on-site restaurant. It doesn’t stop there as this deal also includes 2 discounted tickets for a sunset cruise aboard the Good Time Cruise on Lake Erie where guests will take in breathtaking views of the sun setting. Complimentary shuttle service is provided to and from the Good Time Cruise.

Wedding Package

Wedding party and guests booking a block of 15 or more rooms will receive a 10% discount off the rack rate. In addition, complimentary late night snacks and beverages will be provided to wedding party guests in our meeting space after the wedding reception. Finally, a buffet style breakfast will be served the following morning for a great start to the new day.

Thrill seekers Package

For those who love a good adrenaline rush, this package is perfect for you. Start day 1 off on some of the worlds, yes! Worlds! tallest roller coasters with discounted one- day passes to Cedar Point. Haven’t had quite enough? Day 2 includes tickets to “Skydive Upper Sandusky” for the experience of a lifetime! Both excursions include complimentary hotel shuttle service to and from the venues.


“Race with Rusty” Package

Sandusky Speedway is just minutes away and while the races are exciting to watch from the stands, wouldn’t it be better to put yourself in the driver’s seat? This package offers a day with professional racecar driver, Rusty Wallace, who teaches you and let’s you drive the racecars around the ½ mile track at high speeds and high thrills. Nothing works up an appetite more than a day of racing cars on a Speedway, so this package also includes a picnic style lunch in the stadium!

Sales Support

In order to attract new customers and retain current guests, Clarion Sandusky must hire an expert sales team. The main goals of this sales team will be to maximize occupancy by gaining and retaining guest and to increase brand awareness as well as franchise awareness through various methods such as direct sales, telesales, sales blitzes and enhanced marketing efforts. The main message behind all of our advertisements (TV advertisements, online banners and videos, social media platforms, etc.) will be to book rooms through our central reservation system, choicehotels.com, in order to increase both occupancy and RevPAR. They will also focus on the unique benefits of the Clarion Brand encouraging customers to “Get Together” at our hotel.

A unique way we will maintain customer relationship is through the Choice Privileges Rewards Program. This program gives access to its members to extra points, gift cards, free nights and more promotions. Members also receive greater discounts, are eligible for express reservations, check-ins and free extended check-out times. The rewards program currently has over 18 million members and its purpose is to drive incremental reservations. Good-relationship customers see high value in our offers and thus are more likely to spend more with us overtime, are less costly to maintain and bring business through word-of-mouth marketing.

Our sales team will keep constant communication with members, guests, and partners through email and direct mail in order to encourage repeat visits, increase customer loyalty and general trial.


Lastly, Clarion Sandusky, along with the Clarion Brand and Choice Hotels Franchise, will maintain a large presence on social media platforms such as Facebook, Twitter, Instagram and Google Plus. This will increase awareness and alert users of ongoing promotions, incentives and special offers.

Competitive Nature of The Clarion Hotel

The Sandusky area has seen little development of hotels in years. All of the hotels in the area are extremely old and have not been renovated. There are many upper midscale hotels in the nearby area, but none of them offer all the same amenities and services as the Clarion Hotel that will attract our desired market segment, families and leisure travelers. Because of these reasons, the Clarion Hotel will take a demand-based approach in pricing. The expected demand for the newly developed, upper midscale hotel, will ensure that we are getting the highest RevPAR for our high occupancy percentages.

In addition to using a customer approach for our expected market segment, the Clarion Sandusky will also offer special rate programs to attract some other non-conventional travelers to stay at the Clarion, in order to maximize occupancy. Some of these rates include AAA and AARP Rate Discounts, Senior Rates, discounting rates and amenities to make travel more cost-effective for seniors, and Government and Militarty Hotel Rates.

The Clarion expects to have a high occupancy percentage not only due to the novelty of the hotel, but also due to the fantastic amenities and services offered. Some of these include an in-room safe to protect any money and valuables families may bring with them during their vacation adventures, a pool and hot tub for families and young leisure travelers to relax in after a fun day out in Sandusky, and an on-site restaurant for a low-key, cheap, easy, alternative to going out to a nearby restaurant. These amenities are sure to attract the target market to stay at the Clarion instead of the other competing hotels.

The marketing of the hotel will be sure to include pictures of all the great amenities that the hotel will thrive from, such as the hotel pool, and dining facilities. The advertisements will feature families laughing and having fun while on vacation, or a young leisure traveler taking a spontaneous trip to Sandusky for a great adventure. The marketing department will be sure to target the correct audience in their


development of the television and Internet ads. They will also use social media to offer sales and promotions as well as increase brand awareness, because young travelers are mostly using social media platforms and will best be reached in this method.

Year 1 Projections


In the first year of operation, the hotel is expected to be competitive in the market, compared to our competitive set. The Clarion can expect to get a static occupancy of 48%. The market generally demands a low occupancy, due to the slow off-season months. Since ADR and Occupancy are low, RevPAR numbers are also generally low. Hotels in this market must conduct superior revenue management since the profit margins are so low. Finally, because of traditionally slow Occupancy, the main ways to raise RevPAR numbers will be to increase ADR.

Figure 16

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Forecast of Average Rate


2018 2019 2020 2021 2022 2023$102.24

$102.26

$102.28

$102.30

$102.32

$102.34

$102.36Projected Average Yearly Room

RatesFigure 17

These projected average yearly room rates represent the ADR for the upper mid-scale hotels in the Sandusky market. For an upper mid-scale property, the numbers are relatively low and because Clarion Sandusky will be a new, advanced property, ADR can be higher than its market competition. Despite a steeper price, guests will still be drawn to stay at Clarion versus its competition because of its exceptional quality and “newness.”

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Forecast of Average Revenue

Room’s revenue is fairly static due to the travel patterns of the Sandusky area. Consumers continue to travel to Sandusky, Ohio in the summer months because of attractions such as Lake Erie, amusement parks, and historic sites. During the off months, these attractions are not available and occupancy drops to the low 20 percentage, comprised of mostly business travelers. This leaves total projected rooms revenue at a rather steady rate. The reason for the slight increase or decrease in certain years is due to unique local trends as well as inflation.

Estimating Occupancy and ADR Penetration

Years 2018 2019 2020 2021 2022 2023


2018 2019 2020 2021 2022 2023$2,258,000.00

$2,258,500.00

$2,259,000.00

$2,259,500.00

$2,260,000.00

$2,260,500.00

$2,261,000.00

$2,261,500.00

$2,262,000.00


Figure 18

Figure 19

53

Penetration Rate

95% 100% 105% 105% 105% 105%

Occupancy 41.4% 44.8% 48.1% 48.1% 48.1% 48.1%ADR 107.65 116.72 126.23 130.01 133.91 137.93

Our penetration rate for 2018 is only 95% because it will be our first year of operation and we do not anticipate being an immediate market leader. By our second year, 2019, we want to be equal to our competitive set, and we hope to be the leader of our competitive set from 2021 onward. Our occupancy is low at first during our first two years because of our low penetration percent. Once our penetration levels reach a higher point than those of our competitive, we hope to maintain a static ADR of over 48%. ADR is affected by the same age variable as our occupancy and penetration rate in the first two year, but it continues to rise during the following three years because of a 3% inflation rate.

Section 9: Management Organization

General Manager


The GM will be responsible for all of the operations of the hotel on a daily basis. He or she will present professionalism at all times and assist the financial controller, and aspects of revenue management at the Clarion Cedar Point Hotel.

Financial and Room Controller

The financial controller will project reports on business metrics and financial standing. This person needs to be talented with numbers and familiar with USALI. He or she will also be keeping track of rates and strive to keep room revenue competitive among the other hotels in the area. . This person must be extremely meticulous in his/her work, and leadership skills should exceed regular expectations. They must be well organized, exceptional with excel, and able to manipulate numbers to give the hotel opportunities for revenue boosts.

Sales Director

This person will be responsible for finding new ways to market the brand and bring in a variety of new market segments to the hotel. This person will also need to market hotel rooms, amenities, and hotel features that cause our hotel to stand out above the other hotels in Sandusky.

Activities/ Event Planner

This person will help guests to plan and manage their events and vacations that extend beyond the hotel (i.e. Cedar Point Amusement Park visit). Must be knowledgeable on all aspects of Sandusky as well as all nearby attractions that guests will be interested in visiting.

Front Desk Manager

This person will oversee the satisfaction of guests before, during, and after their stay. Must have outstanding communication skills. Must be proficient with computers and the PMS system used in Clarion hotels. Will be responsible for all reservations, group bookings, promotions, and room discounts.


Section 10: Project Construction Costs

Section 1: Investigatory

Travel and Miscellaneous $2,000.00Appraisals N/AEnvironmental Study $3,000.00Transportation Study $4,000.00Legal $2,000.00Market/ Feasibility $30,000.00 Subtotal $41,000.00

Section 2: Land

Land Cost $1,894,936.70Closing Cost $18,949.36Brokerage Fees $23,686.70Legal fees $6,000.00Survey $7,000.00Historic Review $1,000.00 Subtotal $1,951,572.76

Section 3: Initial Cost

Travel and Miscellaneous $4,000.00Soils $12,000.00Engineering Fees $28,646.63Architectural Fees $190,977.50Use Permit $18,000.00


Model/Renderings $2,000.00Ground Breaking Ceremony $3,000.00Signage $1,200.00Subtotal $259,824.13

Section 4: Intangibles

Accounting $10,000.00Permit Expediter $20,000.00Franchise Fee $45,000.00Consulting fee $20,000.00Liquor License $2,344.00Title insurance $12,000.00Construction financing- Points $190,977.50Permit Loan- Points $267,368.50Legal $30,000.00Mobilization $15,000.00Subtotal $612,690.00

Section 5: Construction Financing Fees

Interest $358,082.81Taxes $40,000.00Insurance $50,000.00Subtotal $448,082.81

Section 6: Project and Supervision Cost

Development Fee $200,000.00Travel, out of pocket $6,000.00Payroll $50,000.00Subtotal $256,000.00


Section 7: Professional Fees- Construction

Architects Fee $334,210.63Reimbursable $20,000.00Mechanical & Electrical Eng. Fees $167,105.31Structural Engineering Fees $95,488.75Civil Engineering Fees $71,616.56Landscape Architect Fees $9,000.00Subtotal $697,421.25

Section 8: Construction Cost

General Contract- Building (x Geo. Adjust of 1.00) $9,548,875.00Parking $348,000.00Demolition N/ABond $71,616.56Builder's Risk Insurance $50,000.00Plan Review $1,000.00Building Permit $19,097.75Utility Tap Fees $38,200.00Fire Marshall Review & Permit $1,500.00Board of Health R&P $2,000.00Subtotal $10,080,289.31

Section 9: Land Improvements

Landscaping, Exterior $30,000.00Landscaping, Interior $45,000.00Subtotal $75,000.00

Section 10: Professional Fees

Interior Design $71,616.56Kitchen Consultant $20,000.00Misc. Out of Pocket $12,000.00


Laundry Design Consultant $2,500.00Subtotal $106,116.56

Section 11: Other Costs

Furniture, Fixtures, and Equipment $1,450,000.00Equipment, Gen. Build. Systems $100,000.00Equipment, Operating $50,000.00Supplies $31,250.00Pre-Opening $75,000.00Working Capital $300,000.00Contingency $95,488.75Interest Reserve $1,432,331.25Subtotal $3,534,070.00

Project Total: $18,062,066.82

Section 11: Project Management Action Plan

Initial Investigation: Researching the proposed area, finding the right location, putting together the estimates for financial investments, figuring out the laws and other legal fees, and ensuring the projects feasibility (2 Months)


Project Proposal:Create and Present the Project Business Plan. The Business Plan will consist of construction design, property concepts, and projected financial statements. (3 months)

Property Acquisition:Purchase the desired land that was found in the Initial Investigation. (3 months)

Approval & Permits:Seek and receive the proper approvals and permits, for construction, from Sandusky and the State of Ohio. (3 months) *Necessary for design phase, 1 month during mobilization, and 1 month prior to pre-opening.

Design Phase:Architects and interior designers will be hired to create the blueprints for the property that fit the business plan concepts and Clarion standards in the FDD. (5 months)

Bidding Phase:We will seek out offers from local contractors and select the best bid based on price, timing, resources, and quality of past projects. (1 month)

Mobilization:The contractor will gather all resources needed for the construction process. (1 month)

Building Construction:We do not want to rush this portion of the project, in order to preserve long-term quality. We predict that the construction will be completed in 24 months. (24 months)

FF&E: Select, purchase, and install all furniture, fixtures, and equipment for the property. Delivery timing is key to activity completion. (5 months)

Set Up Telecommunications:Install all phone, Internet, and cable connections for maximum efficiency, and access for maintenance. (3 months)

Apply for LEED Certification:Make sure that the building is aligned with requirements for creating a sustainable hotel (1 month)

Hiring and Training of Employees:


Interview and Hire a General Manager. The General Manager will be responsible for the hiring of other upper management personnel. Begin extensive training for these positions. (5 months). Upper management will determine the job description and desirable qualities of front –line employees. They will interview and conduct background checks on all possible candidates. (3 months). (8 months total).

Install PMS, POS and Training System:Purchase a PMS and POS that fits into the Clarion brand. Train the staff members who may have to operate it, to properly use it (1 month)

Create Bank Accounts:Set up an account a local, trusted bank near project site (1 month)

Set Up Payroll Systems for Employees:Decide on Payroll Company, wage system and paycheck dates. W4 forms should be filled out and all employees should be inputted into the system (1 month)

Purchase Shuttle Vehicles and Obtain CDL:Purchase vehicles for the guest shuttle service and make sure drivers have a Certified Driver’s License (CDL). (2 months)

Purchase Supplies for All Departments:Make sure orders are placed for all necessary supplies for the hotel to operate properly. Make sure every department is fully stocked (2 months) Obtain Insurance Policies:Choose an insurance plan that suits our needs. Make sure we are covered in case anything should happen to guests, employees, equipment, etc. (1 month)

Select and Order Uniforms:Determine the type of uniforms we want and compile the sizes of hired employees so we can order them the correct size (1 month)

Advertisements/Marketing:Start creating anticipation of the property in the local area. Promote information about amenities, service, and other “selling points”. Make sure there is a steady following and mentioning of the property on Social Media. (6 months).

Create Website:Design a website specific to our hotel that can be hyperlinked to the Choice Brand website. Use the website as a destination of information, for consumers. Feature on the


website promotions, discounts, upcoming events, etc. We need to use the website as a reinforcement of other advertisements we have put out. (2 months)

Write Policies for Emergency Procedures:Outline written procedures for various emergencies like fires, guest illness, etc. For other emergencies that may not fall into one of the other categories, outline a code of conduct for all employees to follow in a state of emergency. (1 month)

Sales Blitz:Travel to local businesses to entice them to promote our new hotel. Focus should be on Cedar Point. People who go to Cedar point will be the largest segment to stay at our facility. (1 month)

Open Accounts with Vendors For Services:Form relationships with third party vendors in order to set up a “tab” (3 months)Pre-Opening:Make sure all preparations for the grand opening party are completed and check that the hotel is completely stocked and the staff is fully trained. (1 month).

Grand Opening:Plan and conduct the Grand Opening celebration. Use advertising and promotions to entice potential guests to want to stay here. The “Anticipation” of the property opening should be climaxing just around the time of opening. Open the Clarion Cedar Point to the public. (3 months)


Section 12: Project Management Action Plan MatrixSection 12: Project Management Action Plan Matrix


Figure 20

63

Section 13: Sustainability Approaches


CREE LED Lighting

LED lights reduce costs not only by longevity but also efficiency. LED lights use 10-15% less power and lasts almost 25 times longer than traditional bulbs. We will take advantage of the financial benefits by using them all over the hotel. If we utilize CREE LED lighting, we will see, during normal operation settings, throughout the year, almost $54,000 in energy savings. Also with these savings we will see the bulbs start paying fort themselves in about 9 months time.

This dimmable LED lamp (800 Lumens, 2700K Soft White, 120 Volt, 60 Watt Equal) is perfect for the hotel rooms. The cost is $9.97 and the Clarion would install 4 in each bedroom and 2 in the bathrooms. This would make the cost of these lamps $7477.50. This sounds like a lot of money, however compared to the usual 60 watt lamp, these bulbs would save 330876 kWh per year, $36,396.36 in energy cost savings per year, 2.5 months for payback investment and $104,156.25 in savings over the life of the lamp. (See appendix for calculations.)

Using Energy Efficient Brands on Appliances and fixtures

All lamps, laundry machines, kitchen appliances, etc. will use the lowest efficiency. Sink aerators and low flow toilet will be in all restrooms, lowering the water budget. If these highly sustainable appliances are erected when the building is first built, they will last longer and run more efficiently than having to renovate later on. These efficient appliances and fixtures could save countless energy, water, and money every day that they are operated.


These items tend to be costly, however the payoff in energy savings and heat, water, electricity savings is very beneficial. Sink aerators cost only $9 per unit. If there is one sink in each room that makes the cost $1125. The low flow toilets will be installed in each room as well. Each toilet reduces and recycles waste into compost and flushes with as little as one pint of water. The cost of there toilets is $2,202.45 each, making the total cost $275,625. The dishwasher for the bistro is the Champion Industries, Energy Star Quality, high temperature door-type with built-in booster. This machine costs $9175. In the laundry room, we will have Whirlpool energy efficient gas washer

and dryer. These machines are CEE Tier II and Energy Star qualified. They are $2,819 per piece and the Clarion will have 3 units making the total cost $8,457.

Efficient HVAC Systems

Most high-level LEED certified projects want at least 35% improved energy efficiency. In order to achieve this we will have LEED specialists install a heating system that is both energy efficient and improves indoor air quality.

The Clarion Sandusky will install a Goodman 14 SEER Horizontal Air Conditioner Package Unit. The unit features energy-efficient cooling and heating reducing the need for two separate systems. The system costs $2059.64, has a capacity of 4 tons and a Cooling BTU of 46,000. Compared to a 10 SEER system, the high efficiency unit will save $97 in annual energy costs and 864 kWH annually.


Electric Shuttles vs. Gas Shuttles (with electric charging station on site)

Almost all hotels offer a shuttle service. Whether it is strictly for taking guests to the airport or to restaurants, it consumes a lot of gas. The Clarion Shuttle will consume no gas and instead will run on electricity. The hotel expects to drive most of its guests to Cedar Point and other nearby attractions. The 12 miles there and back, driven countless times will undoubtedly be more sustainable when traveled in an electric shuttle. Electric buses are estimated to cut emissions by as much as 75 percent when compared to conventional diesel buses. The electric buses are expected to have lower maintenance costs due to reduced stress and maintenance on mechanical components such as brake linings, which may extend brake life by 50 – 100 percent. The electric buses also offer on average, a 37 percent improvement in fuel economy over standard diesel buses

The Clarion will offer a 15 passenger ADA wheelchair accessible electric shuttle. The shuttle can drive up to 25 MPH and 60 miles full capacity. It has steel framework and aluminum doors, a feature that many electric shuttles do not have. A regular 15-passenger gas-run shuttle bus would cost approximately $10,600, the electric shuttle will cost $29,995.

LEED certification 1st year, LEED Silver by 5th year

The Clarion Sandusky will surpass other hotels in the area by being LEED Certified within the first year and LEED Silver Certified by the 5th


year. This will not only be extremely helpful to the environment but will also drive sales and marketing techniques for our property. When the hotel is first built, we will install everything in our power to make the property LEED Certified so that within the first year we will be certified. This includes water efficiency, materials and resources, and innovations in operations. We will then, once we begin making profit, run the property efficiently and do whatever else it takes to move up into the LEED Silver ranking (40 points to 50 points).

Pella windows and doors Pella is a company that is one of the world’s leading manufacturers of premium-quality windows, entry door systems. Pella doors and windows help homes and buildings use less energy, saving money on monthly heating and cooling bills and reducing their carbon footprint. These will not only save energy by keeping the hotel insulated but will also lower the need for HVAC.

Clarion Sandusky will have windows from the Pella 350 series, the most energy-efficient vinyl winows and doors. These fixtures are Energy Star Rated. The triple pane windows are between 54% and 83% more efficient than single pane windows and the doors provide resistance to air and water infiltration, wind and outside noise, while increasing energy efficiency, security and ease of operation. A Pella 350 Single-Hung window costs approximately $210 per window (including installation). Assuming the each room will have 1 window this makes the total cost $26,250. The doors cost approximately $1079 with installation however the hotel will only have 10 of these doors making the cost $10,790.


Section 14: Financial Statements

Introduction

The following analyses are a 6 -year projection for the financials of Clarion Sandusky once it opens in 2017. The projections show that the hotel will make a gross operating profit beginning in year 3 but will not realize a Net Operating Income in within the 6 years that projections are given. We’ve concluded that the hotel will not be able to make a net operating income in the time span of the first 6 years in operations due to the high cost of construction to build the new property. Occupancy percentages are not high enough during the off seasons for the hotel to sustain a positive income within its first 6 years.

Total Revenue


To calculate total revenue, add up the room revenue, revenue from operating departments, revenue from rentals, and revenue from other incomes. In year one, Clarion in Sandusky is projected to earn total revenue of $3,169,319. In the years following, the hotel will continue to see a small increase in earnings. By year 6, the total revenue will be about $4,503,422. It’s a good sign that total revenue is increasing with each passing year. Part of this revenue will come from the hotel’s on-site restaurant and other departments such as telecommunications, premium Internet, and guest services that are not complimentary. However, looking at the larger picture, this revenue may not be enough to keep the hotel afloat since the cost of construction is over $18 Million and Clarion is in a market that generates the majority of its revenue during the 3 summer months.

Total Revenue Per Available Room


Year 1 Year 2 Year 3 Year 4 Year 5 Year 6$0

$500,000$1,000,000$1,500,000$2,000,000$2,500,000$3,000,000$3,500,000$4,000,000$4,500,000$5,000,000

Total Revenue

70

To find total revenue per available room, divide total rooms revenue by the total number of rooms sold. In the first year, one standard room generated just over $25,000 in revenue. In year 2, we see a $5,000 increase in revenue but years 3-6 see a much smaller increase. The positive aspect is that by year 6, each room is generating over $10,000 more than the revenue from year 1. If the economy continues to rise, we should continue to see a steady increase in rooms revenue in years past 2023

Total Departmental Income



$5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000

Total Revenue Per Available Room

Figure 2371

To find the total departmental income, subtract total departmental expenses from the total revenue. Fortunately, in year one the total departmental income is greater than expenses, but only by about $500,000. However, the gap between expenses and income increases with each passing year and by year 6 the total departmental income is $1,176,724 higher than the total departmental expenses. To increase departmental income and decrease expenses, Clarion will turn a large focus over to energy efficient practices and purchases, which in the long run will serve as a continuous money saver.

Net Operating Income


Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 $0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

Total Departmental Income

72

2018 2019 2020 2021 2022 2023$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Net Operating Income

Net operating income can be found by subtracting total fixed charges from income before fixed charges. During the first six years of operations, the net operating income is positive. Not only that, but the NOI jumps from just over $100,000 profit in year one (2018) to over six times that at about $650,000 by year 2023. While this is good to see for a new hotel, it’s important to remember that construction costs are still over $18 Million. The Clarion Sandusky will not see a satisfactory Internal Rate of Return until much farther into the future due to occupancy and ADR restrictions from the Sandusky area market. The hotel has to have an ADR complimentary to the occupancy in order to maintain a high enough influx of guests while being able to generate the highest ADR and not lose business. The maximum rack rate possible (while keeping a higher occupancy) is not enough to earn a substantial net operating income. Because of this, there are other options such as finding a hotel to renovate instead of beginning new construction. Costs to acquire and renovate an existing property would cost the company potentially 1/3 to ½ the cost of starting new construction for the proposed Clarion.

Gross Operating Profit


Figure 24

73

Total gross operating profit can be found by subtracting the total undistributed expenses from the total departmental income. In year one, the gross operating profit is at -$265,189. The negative profit is due to the high cost of constructing a new hotel. It isn’t until year 3 that the hotel will see a positive profit. After year 3 with a gross profit of $176,900, the hotel will see a steady increase but not large enough for comfort. In order for the NOI to become positive, gross operating profit needs to see a significant jump from the small increase we see in the 6- year projections.


2018 2019 2020 2021 2022 2023$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

Gross Operating Profit

Figure 25

74

Total Rooms Revenue

Clarion Sandusky’s total rooms revenue mirrors its Average Daily Rates from years 1-6. As seen in the graph, total revenue starts out at just above $200,000 and by year 6 increases an extra $100,000. Year 1 ADR begins at $107.65 and continues to grow each year. By year 6, the ADR will reach almost $138. Clarion’s competitive set hotels have a similar ADR, with some even higher than ours. Because the Clarion will be a brand new property, it’s possible to be able to increase our ADR by at least $10 more per year. Customers are generally willing to pay a small amount more for a newer, cleaner facility with better amenities.



$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

Total Rooms Revenue

Figure 26

75

Section 15: Conclusion

After close examination of Sandusky, Ohio, and its competitive set information, our team has concluded the construction of a 125-room Clarion Hotel is not feasible. Although the hotel would be able to operate at a profit, it would not be able to overcome its construction costs until after six years of operation. Clarion Hotels have a particularly high construction cost, and the average occupancy, ADR, and RevPAR that can be demanded in the Sandusky area would not be able to generate enough revenue to overcome the construction costs until a minimum of six years of operation have passed. Because our projections stopped after six years, it is difficult to say whether the hotel would make a positive income in the seventh year or not. Although the construction of this hotel is not feasible based on our team’s standards, it could be feasible if an investor chose to continue to operations for over six years before generating a sufficient ROI, or if an investor chose to purchase and renovate an existing hotel as opposed to constructing an entire new property. In order for a renovation investment to be feasible, a person would have to invest $4,000,000 into the property, or about $32,000 per key.

If a person chose to invest in a hotel, there is a very stable market in which to operate. Sandusky, Ohio has a strong, seasonal market, in which occupancy percentage reaches the low 90 percentile. Cedar Point, home of renowned amusement parks as well as historic attractions, and the picturesque Lake Erie are ideal demand generators for any hotel located in the Sandusky area. Sandusky, Ohio has consistently produced a high occupancy, ADR, and RevPAR percentages through recent years, and attractions such as these strongly suggest that the area will continue to do so.

Research shows that a Clarion Hotel would be able to differentiate itself from other hotels in the Sandusky area. Most hotels in the Sandusky area have not been renovated after 2005, and there hasn’t been a new property constructed in over 15 years. The age of the properties in the area would grant a newly renovated or constructed property a competitive advantage as well as an opportunity to be a market leader. This property would be “green;” a characteristic that has proven to allow hotels to charge higher rates. This property would be the most technologically advanced, making it equipped to handle the demands of a more contemporary set of travelers. A Clarion Hotel would contain an on-site restaurant, something that the majority of other properties do not posses, giving it more opportunities to generate revenue. With all the advantages that a new Clarion Hotel


possesses, it has the potential to be a long- term market leader, making it a plausible, long term investment if certain investment standards can be met.

Section 16: Appendices


Retail Sales Statistics for 2007

Accommodation & Food $70,868,000

Retail $282,362,000

Retail Sales per Capita $10,943


Figure 1

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Figure 6

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Figure 10

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Figure 18

Figure 19

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clarion sandusky ohio

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