Converting a hotel into a home for the elderly : an evaluation of its financial implications

Abstract

Malta is being faced by growing numbers of elderly people. The proportion of persons over 60 is expected to increase to 21.6% of the Maltese population by the year 2010 and 31.2% by the year 2050. In the mean time during the past few years, the number of tourists visiting our shores has not grown in numbers in proportion to the increase in hotel beds. Thus, this study investigated the local hospitality industry and looked into the financial implications of converting a hotel into a home for the elderly. The potential market for the home for the elderly was researched in order to judge the feasibility of the project to be ascertained. The research involved conducting interviews with various home administrators as well as data obtained in order to analyse the potential market using demographic data. The hospitality market was also examined and a hotel was earmarked for conversion. Conversion was conducted in collaboration with an architect, who helped in estimating the capital expenditure involved. The financial analysis of the conversion into a home for the elderly was built using the information gathered and a positive net present value for the project was achieved using the data in this dissertation. Thus the study concluded that the conversion from a hotel into a home for the aged is financially feasible and it is recommended that the project begins within the next 5 years. This dissertation makes the following recommendations: • Investors should also consider the possibility of converting hotels into apartments. • Turnover should not only be limited to fees paid by residents, but a long-term care insurance policy could be offered.