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PHOENIX HOTELS Iconic, Aspirational Destinations for the Discerning Traveller.

Tuesday, 13 December 11


“Phoenix is the successor to the highly successful Malmaison Brand. It is based upon the original principal of the brand of value for money. It uses the same three pillars of ‘great service, great food and great value’ as the basis for success. Where things worked we leave them alone. Where we learned from our experience we have improved the process. Phoenix will offer a viable alternative to mainstream hotels and one you can trust.”

Tuesday, 13 December 11


BUYING INTO PHOENIX Beyond buying into the excitement of a new brand Phoenix offers owners/investors a viable alternative to mainstream large corporate offerings, whose arrangements are designed to extract maximum revenues through management contract or franchise. The following presentation demonstrates key areas and effective reasons for choosing Phoenix the Brand.

Tuesday, 13 December 11

Revenue driven business with strong top to bottom line conversion.

Attractive rate of return for investors.

Competitive fee structure against competitors.

Successor to highly a successful niche brand.


10 YEAR TRADING PROJECTION

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Sales

4,290,185

4,803,135

5,301,547

5,655,715

5,861,040

6,074,307

6,295,844

6,529,993

6,765,109

7,013,566

OCC

75.1%

80.0%

85.0%

87.0%

87.0%

87.0%

87.0%

87.0%

87.0%

87.0%

AHR

£84

£89

£94

£99

£102

£105

£108

£111

£114

£118

RevPar

£63

£71

£80

£86

£88

£91

£94

£97

£100

£103

Food Cost

29%

29%

29%

29%

29%

29%

29%

29%

29%

29%

Drink Cost

25%

25%

25%

25%

25%

25%

25%

25%

25%

25%

GOP

1,429,199

2,124,671

2,410,231

2,592,379

2,678,007

2,772,671

2,864,552

2,959,625

3,058,006

3,159,819

GOP%

33.3%

44.2%

45.5%

45.8%

45.7%

45.6%

45.5%

45.4%

45.2%

45.1%

EBITDA

938,250

1,396,016

1,582,707

1,719,532

1,776,694

1,841,196

1,902,615

1,966,185

2,031,987

2,100,105

EBITDA %

21.9%

29.1%

29.9%

30.4%

30.3%

30.3%

30.2%

30.1%

30%

29.9%

EBITDA excludes net effect of cost saving through hotel expansion.

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INVESTOR’S RATE OF RETURN EXIT (years)

3

4

5

6

7

1,234,430 2,299,183 4.7%

2,308,062 3,866,049 5.9%

3,517,352 5,568,573 6.8%

4,783,291 7,327,747 7.4%

6,113,174 9,150,864 8.0%

16

16

16

16

16

22,107,662 5,666,559 6,900,989

25,069,862 8,628,759 10,936,821

27,240,383 10,799,280 14,316,631

28,146,772 11,705,669 16,488,960

29,169,877 12,728,774 18,841,948

Sale Price (per available room)

184,231

208,916

227,003

234,556

243,082

ANNUAL RETURN ON TOTAL CAPITAL EMPLOYED (after interest)

14.0%

16.6%

17.4%

16.7%

16.4%

OPERATIONAL RETURN (inc. interest paid) OPERATIONAL EBITDA ANNUAL RETURN on operation EBITDA MULTIPLE SALE PRICE PROPERTY VALUE UPLIFT TOTAL RETURN (inc. interest paid)

EQUITY STAKE (% OF DEVELOPMENT COST) 50%

STAKE AT EXIT 90%

INITIAL INVESTMENT 1 8,220,551

VALUE OF BRANDCO STAKE TOTAL RETURN

668,750 7,303,650

ANNUAL EBITDA EBITDA MULTIPLE PROPERTY VALUE PROPERTY UPLIFT VALUE OPERATIONAL RETURN INC. INTEREST PAID

917,454 16 14,679,268 -1,761,835

OPERATOR'S PROPERTY UPLIFT INCENTIVE

10%

SENIOR DEBT

50%

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2 6,634,900

8,220,551

8,220,551

VALUE BY INVESTMENT YEAR 3 4 13,320,455 18,294,496 1,003,125 14,323,579

1,381,729 16 22,107,662 5,666,559

8,220,551

1,504,687 19,799,183

5 21,457,255 21.2% 2,257,030 23,714,285 23.6%

1,566,866 16 25,069,862 8,628,759 2,308,062

1,702,524 16 27,240,383 10,799,280 3,517,352

862,876

1,079,928

8,220,551

8,220,551

ANNUALISED ROI ON 50% EQUITY INVESTMENT (PROPCO) ANNUALISED ROI ON 50% EQUITY INVESTMENT (PROPCO + STAKE IN BRANDCO)


Starwood Management Contract Comparison Programme Name

Cost

Aloft Bundle

4% of Gross Room Revenue

Sales and Marketing Contribution

Included in the 4% bundle

Reservations charge

Included in the 4% bundle

Communications & Connectivity Fee

Included in the 4% bundle

Guest Satisfaction Index (GSI)

Included in the 4% bundle

Smith Travel Research

Included in the 4% bundle

Brand Experience Fee

Included in the 4% bundle

Sales & Marketing Starwood Preferred Planner (SPP)

1 Starpoint per $3.00 of qualified charges x $0.0160 (cost of Starpoint). Maximum $320 per booking.

TeamHOT

5% of room revenue on group or group and Catering definites and 5% of catering revenue on catering only to definites.

Star Choice program

$3 per room night

Starwood Preferred Guest (SPG)

5% of qualified charges, 0% for new hotel enrolment 1st stay. Average blended assessment of 4.2% based on current mix of new member and existing member stays. US$7 per clip (an average of 250 clips per hotel although this may vary quite considerably)

Cision – PR Monitoring & Measurement Program

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Reservations Reservations charge - CRO (CCC) Bookings.

$5.60 per CRO (CCC) gross booking.

Global Distribution System (GDS) and/or Pegasus Bookings, External Web sites.

$5.50 per net booking (3rd Party Websites powered by GDS and/or Pegasus) Includes Worldres which is partially owned by Starwood.

Expedia.

$1.50 per net booking.

Internet Bookings and Stargroups.

$2.65 per gross Internet booking (Branded Sites and Stargroups).

Starcom.

Transaction fee of $0.40 or US$ equivalent per financial transaction

System Support Enterprise messaging services.

the monthly user fee is $8 per month per user for email.

Starguest.

Base fee $800 per year + $8 per room per year. Capped at $4400.

IPS Support.

$245 per month (only if Hotel has IPS).

Operations Corporate customer Service Complaint & Takeover.

$25 per complaint and $150 per takeover. (plus any compensation to guest).

Brand Assurance - Standard Inspections (LRA).

$2660 for Europe and $2800 for Africa/Middle East including T&E.

Centralised Quality.

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â‚Ź60 per available room per year.


Operations Diligence

â‚Ź600 annual Licensing fee

Annual Hygiene & Safety Audit

â‚Ź1885 per audit + T&E

Training Service Culture Living the Brand

Euro 35 Per room in hotel per year

The preceding 5 pages show in detail the additional costs incurred, when employing a large corporate brand. On top of management fees of circa10-12% brands will add an additional fee for marketing plus variable charges for the use of brand standards, which are mandatory. Phoenix does not feature any of these costs.

Tuesday, 13 December 11


Management Contract Costs Comparison

Brand

Management Fee

Additional Fees

Phoenix

12% of GOP at GOP level to ensure NO ADDITIONAL FEES. strong return at this level driven primarily by sales not by over reliance on cost saving.

Starwood

4% of GOP for Sales & Marketing 9% Management Fee split between revenue & cost

ADDITIONAL FEES for use of the brand name resulting in up to and additional 1.75% cost to client.

Rezidor

2.5-4% of GOP for Sales & Marketing 10% Management Fee split between revenue & cost.

ADDITIONAL FEES for use of the brand name resulting in up to and additional 1.75% cost to client.

IHG

3-4% of GOP for Sales & Marketing 8-10 & Management Fee split between revenue & cost.

ADDITIONAL FEES for use of the brand name resulting in up to and additional 1.75% cost to client.

Large corporates offer both ‘management’ and ‘franchise’ options with franchise being preferred where scale of operation is not sufficient to guarantee sufficient additional revenues through contract size and additional charges. However franchise agreements leave the owner as employer for the bulk of staff and management.

Tuesday, 13 December 11


RETURN ON THE BRAND Our predecessor upon which our wealth of experience is based on, has been one of the most successful hotel brands ever. In 2000 the five operating hotels and two sites were sold to Marylebone Warwick Balfour for £92,000,000 (£35,000,000 for the brand) and started to take a different path converging with other mainstream corporate brands. This has left a gap in the market which Phoenix will fill. At sale, Malmaison outperformed the competitor set at every key level. The following passage was published in the sale document published by Warburg Dillon Read: OPERATIONAL OUTPERFORMANCE “Malmaison has consistently outperformed its peer group on all key parameters, as demonstrated by the independent study conducted by PKF in 1999. The peer group samples used in the PKF study comprise prime hotel properties in each city, implying that Malmaison has achieved its formidable leadership position through a consistently high quality, branded offering.” Malmaison has developed a successful pricing policy for the portfolio which offers an affordable rack rate with a simple rack rate structure. These rates are restricted to incremental increases, are perceived as competitive on local rack comparisons and usually are not discount driven but priced to sell. The strong brand and successful pricing policy have generated a loyal, yet diverse client base for Malmaison, with a high proportion paying rack rates, reflection the quality of the earnings profile.” Phoenix brings to the table key personnel from Malmaison with a wealth of hotel experience, based upon years of successful operation. (Full resumés available). THE MARKET “In difficult times, the first casualty tends to be mediocrity. The market is becoming increasingly aware, specified and sophisticated. Currently, the Hotel industry is under-demolished. The old buildings have to go and be replaced with better equipped, fresh, stylish and dynamic Hotel brands. This is the time for the specialists.” NICK VAN MARTEN Lead Partner Corporate Finance Tourism, Hospitality & Leisure Deloitte UK

Tuesday, 13 December 11


Phoenix Hotel Brand