The construction of a spa in a Maltese five star hotel : a feasibility study

Abstract

Tourism has been one of the major industries in Malta for many decades, but unfortunately over the past years Malta has suffered a decline in revenues generated from this industry, particularly because it has lost its ability to compete with other European and Northern African countries which offer tourists better quality at more reasonable prices. Although Malta is losing its touch in the package holiday sector, the five star sector which attracts the more upmarket tourist, as well as the corporate guest seems to have gained popularity over recent years. The objective of this feasibility study is that of assessing whether there is a financial case in constructing a spa complex on the unutilised grounds belonging to Le Meridien Phoenicia which is situated right outside the Valletta city gates. Thus, the capital expenditure required to convert the hotel’s unutilised laundry building into a spa was calculated, together with the operating revenue and expenditure derived from this project over an initial five-year period. The financial projections were then prepared, and these included the Profit and Loss Account, Tax Computation and Cash Flow Forecast. Subsequently the financial appraisal was carried out using both traditional and discounted cash flow techniques, and this was followed by a sensitivity analysis. A conclusion was then arrived at based on the specific assumptions made throughout the dissertation. The limitations of this project were pinpointed, and recommendations for further study were made.