BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

1.0 PROJECT EXECUTIVE SUMMARY 1.1 Project Brief

This document is being prepared for the establishment of a three-star tourist facility in Mbarara town. The object of establishing a three-star hotel and tourist centre is to facilitate the internal and external tourist and provide them with the best boarding and lodging facilities in Mbarara area. The hotel will provide accommodation facilities for 150+ guests at any time. Apart from the usual guest entertainment facilities and the banquet halls; restaurants and club facilities would also be available to non-occupants. The facility will also include a minizoo featuring local Ugandan fauna which will provide both tourism and educational opportunities for the visitors and for the local community, while also serving as a conservation centre for locally-endangered animal species. The greater the variety of animals that will be stocked in the mini-zoo, the more attractive it will become to domestic and international tourists and in the process generate more traffic. The competitive advantage of the current project would be its prime location ,unique natural features and provision of excellent and competitive services to occupants and non-occupants. The project is proposed to be located at Mbarara town in Katete Ward, Rwemirinzi Cell along the River Rwizi and is specially designed to provide comfortable facilities to the tourist and donor community. Mbarara town is considered a gate way for all the tourist activities in the Western region of Uganda. The region has access to all public amenities including water electricity and telecommunication facilities. The completion time for the project is one year and six months. The capital cost is US$ 1,062,600 (UGX 2,704,850,000); the hotel use items would require US$ 252,200 (UGX 641,975,000); while the initial working capital required would be US$ 293,000 (UGX 745,832,000), thus the Total Cost would be US$ 1,607,800 (UGX 4,092,650,000). The sale at full occupancy i.e.150 double rooms and allied services is US$ 3,700,825 (UGX 9,442,950,000). The human resource requirement is 119 personnel in the managerial, skilled and semi-skilled level. There will also be numerous jobs created indirectly. There is no problem of entry into the market as the people here are known to be very friendly and there are no monopolies in this area of the economy.

BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

1.2 Mission The LA-SCAB VALLEY PARK intends to provide a serene setting for our guests to enjoy the much splendour of the touristic and scenic Mbarara area. Each guest will be treated with the kind of attention that is reserved for family. When our guests arrive we want them to leave their troubles at the door and step into a world of luxury and rest. As owners we intend to see that attention to detail and service will be followed by a staff dedicated to each guest. Vision

1.3

The vision of LA-SCAB VALLEY PARK is to turn the Mbarara area into one of the most attractive and top tourist destinations in the Western Uganda tourism circuit. 1.4 Objectives

Overall Business Management Objectives 1. To provide employment and avert the negative effects of unemployment especially by the Youth. 2. To provide an alternative economic base of Mbarara and Greater Ankole Region. 3. To preserve the ecosystem and wildlife in Mbarara and Greater Ankole Region. 4. To generate a stream of income for Local Government and Central Government through taxation receipts. 5. To promote Tourism and attract Tourists in Mbarara and Greater Ankole Region. Marketing Objectives 1. 2. 3. 4. Maintain positive, steady growth each quarter. Experience a growth in new customers who are turned into long-term customers. Realize an increase in occupancy each subsequent year. Generate a customer satisfaction rate above 90%.

Financial Objectives 1. A double digit growth rate for each future year. 2. Reduce the variable costs per guest. 3. Continue to decrease the fixed costs.

BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

1.5 Business Legal Aspects

LA-SCAB VALLEY PARK comes into this tourism development project with an equity capital base of UGShs 500 million (approx. US$ 200,000). The Company has 4 principal shareholders with share ownership as follows: Table 1: The Company Shareholders Shareholder 1. Mr. Nuwagaba Johnas Zed 2. Mr. Emma Barigye Kiremire 3. Ms. Viola Nabaasa 4. Ms. Treasure Nuwagaba 5. Unissued Total

Shares held 375,000,000 25,000,000 25,000,000 25,000,000 50,000,000 500,000,000

(%age) 75% 5% 5% 5% 10% 100%

1.6 Financial Highlights Sales in Project Year 5 (2019): USD 3,330,745 Gross Profit Margin in Project Year 5 (2019): 87.32% Net Profit Margin in Project Year 5 (2019): 42.28% Payback period for Equity: 1.31 Years Payback period for Total Investment: 3.13 Years Capital: Output Ratio in Project Year 5 (2019): 1: 1.36 Break-Even Analysis in Project Year 5 (2019): 15.68% Value Added/Contribution to GDP in Project Year 5 (2019): USD 2,769,595 (83.15%)

Table 2: Type of Development Assistance being sought

Development sought assistance o o o o Joint Venture Loan Public/Private Partnership Development Financing by Government Guarantee o Market access o Sub-contracting o Buy-back arrangement o Equipment purchase o Business Plan o Other Specify 02 September 2013 o o o o o o Management expertise Technical expertise Marketing expertise Technology transfer Joint R&D Other:-Franchise

Studies Available Date:

o Project description

BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

Figure 1: Projected Financial Performance Highlights (In US$)
Sales 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2015 2016 2017 Gross Margin Net Profit

2018

2019

BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

2.0 PROJECT RATIONALE

Mbarara is the gateway to some of the most scenic and traditional beauty spots in Western Uganda, namely: Lake Mburo National Park, Queen Elizabeth National Park, Mgahinga and Bwindi Impenetrable Forest National Parks, Kibale National Park, River Rwizi, Lake Nakivale, Kyambura Game Reserve, and a string of other local tourism attractions within the Greater Ankole Region. Among the fresh food delights, the matooke, millet bread (akaro), dairy-based food products (e.g. eshabwe), beef and local tilapia fish in this area are considered to be the best in the country. This area has an established tourist market in which the number of internal tourists shows increasing trends over the past five years. The occupancy and visits show some decreases at times, however the overall availability of the guests is constant in the market throughout the year. There is a fair presence of internal and external tourists and guests flowing to the area. This is due to the fact that this Mbarara town is gateway to all tourist sites of the Western Uganda area. This area is renowned for its natural beauty and friendliness of the residents that makes the market for the proposed LA-SCAB VALLEY PARK favourable for this type of project. The competitive forces on the project are not very strong at the moment; the government policies are inclined towards foreign investments and inflow of funds in the economy. There is a big gap in the tourist market in our identified location. The large capital requirement of the project raises significant barriers to entry which constrains new entrants into the market. However, since there is a presence of alternative accommodation providers in the area, there will still need to be a focus on capturing a substantive market share, particularly when vying for external tourists. There are very few other 3-star standard hotel facilities available in the market, so the project is differentiated on the basis of services, costs, facilities, linkages with the international chains and market standing. As most of the services are being provided by the hotel itself, therefore, the dependence on subcontractors is reduced. Furthermore, the raw materials required for the operations of the project are widely available in the market and there is no need to be dependent on any particular supplier or manufacturer of a commodity. Because of planned inclusion and linkage with the international chain of hotels LASCAB VALLEY PARK project will enjoy the privileges of the international market by

BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

itself. To attract the local market there is a need of strong personnel to take charge of the marketing activities and attract the local and internal customers through good relationships, extra value added services and discounts. The employees should be treated as the main assets of the project. The policies and incentives for the employees will be set in such a way that the retention will be easier for the organization. The management will be in an advantageous position as they will get maximum support in their strategies and policies from the international chain. The project should be able to fully leverage its international linkage of the project, thereby providing its service quality image and ranking in the market as a distinct advantage. The external factors usually applicable to a project are political pressures. Since, the project is of a non-political in nature in the local market; therefore, no negative effects are perceived on its viability due to this aspect. As the project will be providing employment opportunities for the local people, therefore, its risks are considered as further reduced. The trends in the local economy and the government and international community efforts of revival and recovery further provide a favorable environment for such an initiative.

BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

3.0 VISION AND POSITIONING

LA-SCAB VALLEY PARK will be a place for people to relax and recharge their inner batteries. We will offer our guests silence, recovery, well-being, and pleasure. Business travellers, drive-through tourists and long-range drivers will find the right place to recover. The site for the proposed LA-SCAB VALLEY PARK Hotel is convenientlylocated in the Katete Ward of Nyamitanga Division in Mbarara Municipality and can be reached easily by car. The special features of this site area are its scenic natural water falls, rocks and the meandering River Rwizi below it. The existing competition in the hotel industry, especially in the three star segment, is very tense and therefore expectations of customers are on a high level. We are ready to face this challenge. LA-SCAB VALLEY PARK will therefore compete on an optimal price-performance ratio and attract numerous customers. The hotel will offer simple bed and breakfast service in its hotel rooms and touristthemed cottages. Additionally, several conference rooms will be available to business customers. If requested we will offer meals prepared through an external catering firm. With a sufficient number of parking lots we will ensure that the customers park their cars safely and closely. 3.1 Facts and Figures

The size of the land in Mbarara accounts for 40,000 m2 (i.e. 10 Acres). In this lot of land we plan to construct a three floor building with 120 standardized rooms and 15 doubleroom tourist-themed cottages. All bedrooms will have a size of 21m2 including a bathroom. According to the project promoter, the price range should be USD 50 per person and night. As LA-SCAB VALLEY PARK will be offering breakfast, we will need a breakfast room and a kitchen to prepare food. Daily cleaning processors require additional facilities and rooms in order to store the particular material. Additionally, laundry rooms and lingerie stores are needed. Several administrative offices are included in the planning as well as personnel rooms. 3.2 Definition of a 3-Star Hotel

A 3-star hotel is a middle-class hotel with a Multilanguage and a fully functional reception. In general, all rooms do have a toilet with a bath or shower. The rooms are comfortably equipped with a colour television and radio as well as a telephone. The

BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

accommodation facilities need to be neat and visually appealing. The hotel has to offer a breakfast buffet. There is no need for a fully operational restaurant. The range of service offered according middle demand and covers the elementary requirements in the domain reception and service. The difference to the two star segments is that the three star hotels offer higher quality such as material, more generous rooms, and an enlarged service offer.

BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

4.0 UTILITY

In this section the project team describes the specific utilities the customer can expect, who the customers are and what their needs are. 4.1 Customer Utility

We position LA-SCAB VALLEY PARK as a leading lifestyle and business hotel/tourism facility in the area of Mbarara in Western Uganda. Furthermore, the optimal use of the synergies of the region such as catering service, local community and cultural tourism, entertainment as well as adventures will maximize our customers utility. This idea will be linked to international tourism platforms and car-trip internet websites. In order to improve co-operations with other parties we shall provide our partners with special offers. We shall focus on as many partners as possible. Nevertheless, it is crucial to choose specific partners who match to our customer segment as well as the idea of a modern three star hotel. A clear organizational structure will ensure that there is very little space for conflicts. Conflict free course of action is the most important aspect in regard to our long-term reputation. Additionally, customer utility should always remain on the same high level and therefore, quality fluctuations must be avoided and kept to a minimum. Motivated and qualified people from the gastronomy and other industries willing to make a difference should find a place in the hotel. Customer demands or expectation is closely related to its utilities and as customer demands and needs change over time, the management should create an innovative environment in order to generate constantly new ideas. 4.1.1 Customer Segment

Our concept will attract mainly business people who demand good quality without any complications. We want to attract over-night-stayers as well as business people who intend to organize a conference or a meeting at our hotel. LA-SCAB VALLEY PARK will also offer accommodation to tourists who are on their way through the Mbarara area and want to stay overnight. LA-SCAB VALLEY PARK will also provide special family-friendly hotel rooms or facilities.

BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

4.1.2 Customer Needs

We expect part of our guest list to include those people looking primarily for passive regeneration or a possibility to disconnect after a hard business or congress day in order to start well into the next day. LA-SCAB VALLEY PARK will offer this in an exclusive ambience. Also the need for conferences or meeting can be satisfied by our conference rooms and the top of the art equipment promises every event to be a success. 4.2 Product and Service Utility

LA-SCAB VALLEY PARK will offer120 standardized rooms and 15 double-room tourist-themed cottages. Customers will have the possibility to enjoy a breakfast if needed. We will offer a simple bed and breakfast service. Breakfast offer will be a tasty, healthy, enjoyable menu for all tastes. The hotel will offer 150 parking lots in front of the facility. Additionally, congress and seminar rooms are a must with the purpose of attracting companies and their external clients. If companies plan a congress event, they have the opportunity to have lunch and dinner which will be organized by a selected catering company. Other services on offer will include laundry and bar and restaurant service for guests.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

5.0 SWOT ANALYSIS 5.1
1. 2. 3. 4. 5.

Strengths

Dynamism in the Tourism and Hospitality industries. Continuous inflow of Tourists in the country. Ugandas rich cultural heritage. Average labour costs as against the world standards. Unique natural features such as water falls, rocks, and river meander

5.2
1. 2. 3. 4. 5. 6. 7.

Weaknesses

Regional imbalance of hotels. Capital intensive. Labour intensive. High taxes and tariffs for every service. Disparity in taxes charged by State. Lack of aggressive and effective marketing and promotional strategies. Release of land at prime locations is difficult because large tracts of land in such locations come under the Governments control. 8. The prohibitive cost of power in Uganda. 9. High government duty on power tariffs.

5.3

Opportunities

1. Increased demand for the hotel. 2. Declaration of the Hotel Industry as a High Priority Industry. 3. Government policy of positioning hotel and other tourism related activities in the government sector. 4. Various incentives/concessions extended by the Government. 5. Approval of the hotel by the local urban authority. This approval constitutes a certificate of suitability of the hotel for occupancy by tourists, both foreign and domestic. 6. Higher interest subsidy for hotel projects that are set up in special areas and specified destinations as per the Government. 7. Declaration of the hotel and tourism industry as a high priority industry for foreign investment.

5.4
1. 2. 3. 4. 5.

Threats

Government taxation policies. Significant over capacity in hotel industry. Competitors. Higher safety standards. Educated and highly paid staff.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

6.0 UGANDA HOTEL MARKET STUDY

Commercial tourism in Uganda began in the 1950s, though significant growth was only registered between 1962 and 1971. During this period, the tourism industry experienced a 34% annual growth rate (Ministry of Wildlife Tourism and Antiquities (MWTA), 1996) with 1970 recording the highest earnings of Uganda shillings: 132.3 million (US$ 18 million). At that time, average per capita spending was US$ 2,306 and the industry was Ugandas third largest foreign exchange earner after coffee and cotton. However, due to the political instability of 1971-1986, the industry declined by 13.8% annually. In 1980 only 1,000 tourists were received down from 85,000 in 1969. During this period, wildlife conservation areas were heavily poached to the extent that some species of wildlife became extinct and others came to near extinction. Hotels, infrastructures and most facilities were destroyed as government neglect of the sector was at its peak. Following attainment of political peace by the current National Resistance Movement government in 1987, Uganda adopted a structural adjustment programme that revamped the tourism industry. The Tourism Master Plan of 1993 had projected that tourism would grow at an annual rate of 13%, but a 53% annual growth rate was registered by 1996. Compared to 1980, when only US$ 0.125 million were earned, the 1995 earnings had reached a level of US$ 90 million. Despite some setbacks over the last few years, resulting from the political instability in the Great Lakes Region, tourism has remained one of the fastest growing sectors of the economy with an annual growth rate of 21% over the years 1992 2000. In 2010 Uganda recorded a total of more than 946,000 tourists, spending over US$ 662 million (Uganda Bureau of Statistics, 2011). 6.1 Key Touristic Resources and Attractions

For the government of Uganda, the current Ugandan tourist products are nature-based and centred on distinct geographic areas. Several of these are linked to national parks, rivers, wildlife reserves, forest reserves or specific attractions, and activities such as white water rafting at the source of the Nile in Jinja. Other attractions include EcoTourism, Cultural Heritage, Faith-Based Tourism, Community Development Tourism and Meetings, Incentives, Conferences and Events (MICE). Game viewing: Likely to be the main reason for visiting Uganda for a majority of leisure tourists. Uganda comprises 10 national parks in which the big five mammals of Africa can be found (lion, leopard, elephant, rhino and buffalo) and several natural reserves. A majority of the parks are in the western part of the country.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

Eco-tourism: The greatest unique attractions in the so-called area of ecotourism include: gorilla tracking, viewing chimpanzees, golden monkeys and Patas monkeys, (nature) guided walks, community walks, butterfly viewing and bird watching. Additionally, Ugandas position as a plateau astride the equator has given it a niche in the variety of bird life with over 1060 bird species. Cultural Heritage: Uganda is endowed with diverse heritage and cultural treasures that attract both foreign and domestic visitors. The archaeological treasures which open a window into the beginning of mankind, the monarchical leadership that predated the early explorers, the living culture and the history manifested in Idi Amins leadership, are all touristic products that Uganda can capitalize on (see annex 5). However, Ugandas tangible cultural heritage is vanishing fast. Faith-Based Tourism: In Uganda, the Namugongo Martyrs Shrine stands out as a site of pilgrimage, as do the hills housing the important symbols of Catholic, Anglican, Bahai, Pentecostal and Islamic faiths. The National Development Plan states that the current policy and practice has however not integrated tourism in the development and promotion of these sites. Community and Development Tourism: Thanks to the efforts of some individuals and/or organizations, community-based tourism is slowly expanding in Uganda but efforts from the private sector to include community based activities remain limited. This is a growing source market that has not been specifically targeted through policy and practice. Meetings, Incentives, Conferences and Events (MICE): It is estimated that the growth of the urban hotel industry in Kampala, Entebbe and Jinja is largely attributed to this segment. With 20% of visitors officially travelling to Uganda for business purposes, the MICE market represents a growing source of income at each level of the tourism value chain. 6.2 The Hotel Industry in Uganda

In the early days of the industry, the government spearheaded the development of hotels with minimal private sector participation. However the privatization and liberalization of the economy since 1987 have attracted private companies to invest in new hotels, resorts, lodges and other tourist accommodations. The hotel and restaurant

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

businesses output grew from 6.5% to 10.7% between 2004 and 2008. In 2001, Uganda had about 60 hotels with about 1789 rooms and 50 wildlife accommodation facilities, with a combined capacity of 972 rooms. In 2009, 1138 accommodation establishments were registered in Uganda (see figure below). Today the sector contributes about 4.3% to GDP and employs about 7% (430,000) of the total non-farm workforce. Figure 2: Number and types of businesses in the accommodation sector
Rooms 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Boarding and lodging Hotels Guest Houses Inns Motels Lodges Campsites Cottages 0 200 100 300 500 400 Establishments 600

According to the Uganda Bureau of Statistics and the Private Sector Foundation current Business Register (2007), there is a total of 3,411 registered businesses in the category of hotels and camping sites, as well as bars and restaurants in Uganda. The register is restricted mainly to businesses employing 5 or more persons. The register indicates that 65% (2,228) of the enterprises in the sector are restaurants and bars, compared to only 35% (1,183) of hotels and camping sites. Among the enterprises in the hotel and restaurant sub-sector, 180 enterprises employ fewer than 4 people, 2365 enterprises employ 5-9 people, 647 employ 10-19 people, 186 employ 20-49 people and only 33 enterprises employ more than 50 people. A regional distribution of businesses in the hotels and restaurants sector shows that close to 40% (1315) of the businesses are found in Kampala, as shown in the table below:

Table 3: Distribution of hotels and restaurants by region in Uganda

Kampala Central East North West Total

Hotels & camping sites Bars and restaurants Total

344 971 1,315

178 397 575

199 343 542

224 175 399

238 342 580

1,183 2,228 3,411

Source: Business Register Update 2006/07, (UBOS & PSFU). 14

BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

In Kampala, 74% of the businesses are restaurants and bars, and only 26 % are hotels and camping sites. The western and northern regions each have 20% of the hotels and camping sites. Furthermore, a majority of businesses (77%) are owned by Sole Proprietors. Out of the 180 enterprises with fewer than 5 employees, women own about 66% (119) of the enterprises in that sub-category, and the annual turn-over of most of these firms is less than UGX 50 million. Women also own 15% of enterprises that employ over 50 employees. Table 4: Employment in hotels and restaurants
Businesses Male Female Total Average

Hotels & camping sites Bars and restaurants Total Percentage

1,183 2,228 3,411

7,771 7,383 15,134 46.1

6,925 10,737 17,662 53.9

14,696 18,100 32,796

12 8 10

Source: Business Register Update 2006/07, (UBOS & PSFU).

According to the table above, the hotel and restaurant sub-sector employs more women (53.9%) than males (46.1%) and, on average, a hotel employs 12 people while a restaurant employs 8 people. In any given restaurant or hotel, one would expect at least 10 employees.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA-SCAB VALLEY PARK

Table 5: Accommodation capacity for selected hotels in Uganda, occupancy rates and guest nights in 2003/2005/2008 Year Accommodation Room occupancy Guest nights Occupancy rates Bed/room capacities occupancy ration
# Rooms # Bed spaces 788,614 946,337 1,656,089 Room nights sold 251,990 282,931 377,241 Bed nights sold 284,857 314,812 475,366 Foreign 136,724 146,554 229,437 Domestic 148,139 168,258 245,929 Room 44.6 35.3 30.1 Bed 33.1 33.3 28.7 1.13 1.11 1.26

2003 2005 2008

534,117 801,176 1,255,175

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

The information in the table above was based respectively on 51, 72 and 72 hotels in 2005, 2005 and 2008 information compiled by the Uganda Bureau of Statistics. The table shows that the accommodation sector has been growing rapidly over the years. However, while the number of rooms available for sale has grown from about 534,000 in 2005 to over 1,255,000 in 2008, and as bed spaces have correspondingly increased, room occupancy has fallen from 44.6 % in 2005 to 30 % in 2008. Bed occupancy also fell from 33 % in 2005 to 28.7 % in 2008. These negative relationships between room, bed space growth and occupancy levels are indicative of a lack of information on the investment climate. Without statistically significant data on the sector but with a growing trend in visitor arrivals, investors can consider the Ugandan tourist sector as very healthy. However, Uganda is still receiving a low proportion of leisure tourists. We can however observe that the recent investments in the tourism sector are more associated with small tourism investors than linked with one of the major international tourism brands. Table 6: Contribution of hotels and restaurants subsector to Ugandas GDP
2006 Hotels & billion shs) restaurants (GDP, 2007 2008 2009 2010

Air transport (GDP, billion shs) Hotels monthly earnings (000 shs) Tour operators (employment) Source: UBOS, 2011; MTTI, 2009

818 125 3,411

954 166

1,149 210 212

1,486 203 275 3,424

1,666 217 283

In the table above, we may observe that the contribution of the hotels and restaurants subsector to Ugandas GDP has doubled from UGX 818 billion in 2006 to UGX 1 ,666 billion in 2010. Also the contribution of air transport has increased from UGX 125 billion to UGX 217 billion over the same period. Tour operators in Uganda employ approximately 3424 people. 6.3 Exploited and Potential Tourist Attractions in the Greater Mbarara Area

Location: The Greater Mbarara Area is located in Western Uganda. It borders the Districts of Lyantonde and Sembabule to the East, Buhweju, Sheema and Ntungamo to the West, Kamwenge to the North and the Republic of Tanzania to the South.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

Population: The District has a population of about 1,089,000 people. Main Town: Mbarara town is the main town of the Greater Mbarara Area. Area: 10,020.8 Km2. Land and vegetation: 0.8 percent of the Greater Mbarara Area is open water, 2.1 percent is wetland and 18,707 hectares is forest. The key tourist attractions of the Greater Mbarara Area are given below:1. Lake Mburo National Park Lake Mburo National Park is located about 300 kilometers south-west of Kampala, 30 kilometers east of Mbarara town. The Park is famous for birding and viewing of Zebras, Impala, Buffalos and Waterbucks. Lake Mburo, which occupies 20 percent of the Park, has potential for development of a number of water sports such as angling, boat cruises and canoeing. Easy proximity from the main Kampala-Mbarara-Kabale/Kasese routes gives the Park advantage for stop-overnight stays and day excursions. Tourism activities in the Park are fairly well developed. The infrastructure includes UWAs Rwonyo Campsite and the Lake Mburo Conservation Education Centre and the Mantana Campsite. 2. Lake Nakivale The Lake is located about 40 kilometers south-east of Mbarara town. The water body, the lakes sandy beaches and the expansive open grounds around the lake could in future be exploited for tourism. There were temporary refugee settlements in the areas around the Lake. 3. River Rwizi River Rwizi flows from the highlands in Buhweju/Sheema districts through Lake Kachera in Rakai district, then into Lake Victoria. Some canoeing is possible on the river, bird watching, monkey viewing, rock climbing and provides some primate viewing along it.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

Down the river, near the Safariland Park, is a spot that is a habitat for cobra snakes that are a popular site for visitors to the Park. 4. Lake Kachera Lake Kachera is found in both Kiruhura and Rakai districts. The southern part of the lake lies next to the Lake Mburo National Park. The Lakes location by the Park with a considerable concentration of wild game offers opportunity for development of a tourist campsite at the hill overlooking Lwanga fish landing site. 5. Sanga Cultural Village This is a cultural centre for the Hima tribe, located at the Sanga junction leading to the Lake Mburo National Park. Traditional ornaments and regalia of the tribe are also found at the centre. Upon payment of a small token fee, it is possible to learn about the cultural ways, particularly of the Hima women. 6. Crafts and Souvenirs Industry There was no independent crafts and souvenirs shop that was operational in Mbarara town at the time of the survey. This was in contrast to the town being a transit one for traffic to and from the main tourism activity centers of the Rwenzori National Park and Queen Elizabeth National Park. 7. Hotel and Catering Industry The hotel and catering industry in the district comprised 59 accommodation establishments and 28 non-accommodation tourism related establishments at the time of the survey. The industry employed 815 people. The total bed capacity was 2,732 beds. The main accommodation establishments in the district were: Lake View Hotel, Mantana Luxury Tented Camp, Hotel Classic among others.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

7.0 HOTEL INDUSTRY AND COMPETITION ANALYSIS 7.1 Analysis and Potential of the Market 7.1.1 Price Sensitivity Based on the conducted on-site visits, we conclude that most customers are business people. Therefore, we believe that there is certain flexibility in the price sensitivity for this customer segment due to the fact that most customers stay one or two nights and the company usually covers the expenses. Hence, the average business traveller is less price-sensitive. On the other side, we think that the average tourist customer travelling through Uganda prefers low or moderate prices. Therefore, the average tourist is rather price sensitive. Customer Power The relative high supply of hotels in the Mbarara area implies a high customer power. This results in tense competition and price pressure. Nevertheless, this is most likely only true in low demand periods such as Christmas holidays. Most interviewees stated that during expositions and similar events most hotels are fully booked and therefore customer power is lowered. Conclusively, the customer power in the hotel business depends to a certain extent on seasonal events. Though the customer power for tourists is relatively high, since they are not bound to a certain location and do not mind driving a few miles further. As mentioned the majority of customers are expected to be business people and therefore the tourists do not have a big influence on the customer power. 7.1.2 Competitors Customers

The threat of entry of new competitors is low since the entry barriers as well as the exit barriers are relatively high. Capital requirements are high, it is very costly to build a new hotel. Meaning the facility itself as well as the establishment of a brand and creating a customer loyalty. In case of a business failure it is difficult to sell the building or make new use of it because it is built only for the purpose of a hotel with closeness to a highway, this increases exit or possible switching costs. It is hard to create brand equity due to the opportunistic nature of the business where customers do not attach
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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

big importance to loyalty to a certain brand. The profitability of the industry is not very attractive since the whole gastronomy business is known for its toughness to survive. The intensity of competition is high in this region and numerous hotels of a similar type can be found in the Mbarara municipality area. It is hard to create a competitive advantage since the concept of a hotel does not leave too much room for innovation. The requirements of the customer are clear and simple and that is exactly what this projects intends to offer. 7.1.3 Suppliers

We assume that due to the high availability of suppliers for almost all respects, the power of suppliers is believed to be relatively low or at maximum moderate. There are no suppliers specialized only in the hotel industry. 7.1.4 Substitutes

After intensive thinking and research we conclude that there is no real substitute for a hotel or motel. One might argue rest areas where truck drivers sleep could be used as a substitute to hotels but we highly doubt business people would choose this option. Neither campings place nor hostels fully reflect the service and comfort of a hotel or motel. 7.2 Competitive Situation

Typically in this industry the consumer is someone who is not just looking for a room to sleep in, but a facility that provides a homespun touch and a place that is unique and offers more personalized customer service. Because each hotel is offering something unique to the guest, customer service and quality to the facilities are at the forefront of importance. Location is also important and those hotels with an expansive country or river view have an advantage, but with the limited number of room at hotels in the Mbarara area there are enough customers to match the supply. LA-SCAB VALLEY PARK will therefore be competing on price and quality. Guests at LA-SCAB VALLEY PARK will be paying for more than just a room; they will be paying for an oasis away from their hectic world.

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8.0 MARKETING STRATEGY

Marketing and related promotional activities will require a well thought out strategy and full advantage of international chain of hotels may be taken. Although, the promotional activities should start from the first year of the project, the main sales pitch will be taken from the second year of establishment. This may include awarenessraising among the potential internal tourists, linkage with international chain of hotels, discount campaigns, and provision of various added attractions to increase the (hotels) customer value. 8.1 Target Market Segment Strategy

Our target market strategy is based on becoming a destination for people who are looking to get away for a few days, on the beautiful Banff. Our marketing strategy is based on superior performance in the following areas: Quality facilities. Beautiful location. Customer service. The target markets are separated into six segments;"Business Class/Donor Community," "Seasonal Tourists/Vacationers," "Honeymooners,""Drop-ins," "Travellers" and, "Students". The primary marketing opportunity is selling to these accessible target market segments that focus on business travel, vacation and recreational needs. 8.1.1 Business Class/Donor Community

This segment of the market includes mainly business people who demand good quality without any complications. Other prospective customers in this particular segment include people within the donor community and trade organizations who may have intentions of organizing a conference or a meeting at our hotel (the MICE market segment) which represents a steadily growing revenue stream at each level of the tourism chain. It will be important for LA-SCAB VALLEY PARK to have in place well-facilitated and organized conference rooms and state-of-the-art equipment to attract and retain this growing and increasingly influential segment of the Uganda tourism value chain.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

8.1.2 Seasonal Tourists/Vacationers

This segment of the market consists of international adventure tourists who will be traveling to or transiting through Mbarara town on game-viewing, eco-tourism or cultural heritage trips and need a comfortable place top rest, dine and refresh themselves. LA-SCAB VALLEY PARK estimates this segment to be the second most important revenue generator after the Business Class/Donor Community segment and is expected to attract a steady stream of both international and domestic tourists moving to or through Mbarara town. 8.1.3 Honeymooners

Because of the beauty and location of LA-SCAB VALLEY PARK, we will be a very attractive choice for people looking for a honeymoon location. 8.1.4 Drop-ins

When rooms are available we will welcome the drop-in customer who is looking for a place to stay for the night. We shall place a sign that can easily be seen from the highways into and out of Mbarara town and we expect quite a few drop-ins. 8.1.5 Travellers

These are people who will be transiting through Mbarara town and prefer to stay in a hotel/motel. 8.1.6 Students

Mbarara town hosts one of the biggest universities in Uganda the Mbarara University of Science and Technology (MUST), Makerere University Business School Mbarara Branch, Bishop Stuart University Kakoba, Uganda Martyrs University Nyamitanga Diocese Branch and Uganda Management Institute Mbarara Branch. Mbarara town is also home to some of the prominent schools in Uganda such Ntare School, Mbarara High School, Mary Hill High School, and many other private-run secondary schools in town. MUST and the afore-mentioned universities and secondary schools often bring a large number of students to Mbarara town who believe that a good portion of their road trips will be from the universities or from their respective schools of attendance. Occasions include parents weekend, orientation, parents visiting, and graduation. Lastly, universities will often setup rooms for administrative visitors.
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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

Figure 3: Market Segmentation Market Segmentation
Business Class/Donor Community Tourists/Vacationers Travellers Honeymooners Drop-ins Students

8.2

Strategy and Implementation Summary

The primary sales and marketing strategy for LA-SCAB VALLEY PARK includes these factors: To offer a bed and breakfast facility that will appeal to the busy professional. To provide unmatched customer service to our guests. To concentrate our marketing in the greater Mbarara area. 8.3 Sales Forecast

The sales forecast table is broken down into four main revenue streams: Accommodation; Foods and Beverage service; Shop license fees; and revenue from other operational departments of the hotel facility (e.g. mini-zoo receipts, laundry services, etc.). The sales forecast for the upcoming year is based on a 10% growth rate for direct sales. LA-SCAB VALLEY PARK will have 150+ rooms to offer its guests at a rate of US$ 50.00 per night. We expect the rate of rooms occupied to increase as the year progresses. In spite of the economic unpredictability we are experiencing, these projections appear attainable and take the increasing base into consideration. Annual growth rates are based on 10% per year.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

Table 7: 12 Months Sales Forecast (at Full Capacity) Accommodation
Per Double bed room

Price 50 10 5 20 500 300

Reservations Amount

54,750 10,950 7,665 21,900 365 365

Rooms Days in Yr. 150 365 2,737,500 109,500 38,325 438,000 182,500 109,500 877,825 27,375 18,250 27,375 73,000 12,500 12,500 3,700,825

Food and Beverages Room Service Room Refreshments Restaurants Parties Outside Service Other Operation Departments Mini-zoo receipts Laundry Pool, club and others Shop License Fees Number of Shops

Parties 60 365 1 365 1 365

3 2 3

9,125 9,125 9,125

1,250

10

Total Sales 8.4 Market Segmentation

The profile of our customer consists of the following geographic and demographic information. 8.4.1 Geographics

Our immediate geographic market is the Mbarara Municipality area with a population of over 200,000 people. A 200-mile geographic area/radius would want to use the kind of services we offer. The total target area population is estimated at two million people. 8.4.2 Demographics

Male and female. Married and single. Age range of 25 to 65 years with a median age of 40. Work in a professional business setting.
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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

8.5 Marketing Mix

The LA-SCAB VALLEY PARKs marketing mix is comprised of the following approach to pricing, distribution, advertising and promotion, and customer service. 8.5.1 Pricing

The pricing scheme is based on a room rate. The rate is arrived at in terms of by its market value. 8.5.2 Distribution

All services will be provided at LA-SCAB VALLEY PARK. Figure 4: The Four P Components of the Marketing Mix

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

8.6 Advertising and Promotion Figure 5: Marketing Channel Selection
Consumer Characteristics

Characteristics of Intermediaries

Product Attributes

MARKETING CHANNEL SELECTION

Marketing environmental forces

Type of organization

Competition

Generally there are many marketing channels but we decided to select some of them to make our plan work and practical. Personalize method of marketing and promotion of our facilities we select direct and email marketing method. The most successful traditional advertising will be with the LA-SCAB VALLEY PARK association. Developing strategic alliances with universities and other prominent secondary schools in Mbarara town will be a non-traditional method of marketing, but it will be quite efficient. The website will also be used in marketing activities. 8.7 Customer Service

Obsessive customer attention is the mantra. LA-SCAB VALLEY PARKs philosophy is whatever needs to be done to make the customer happy must occur, even at the expense of short-term profits. In the long run, this investment will pay off with fierce customer loyalty. 27

BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

9.0 TECHNICAL ASPECTS 9.1 Location

The Western Uganda town of Mbarara has been chosen as the prime location for the proposed LA-SCAB VALLEY PARK 3-star hotel. There are five primary motivations that have inspired the project promoters of LA-SCAB VALLEY PARK to make this decision: 1. Mbarara town is the gateway to the Western Uganda tourism circuit that captures by far the largest share of Ugandas tourist traffic. 2. The project promoters have a sizeable piece of land in Mbarara town along the famous River Rwizi that is naturally endowed, attractive and suitable for development of the proposed 3-star hotel and cultural tourism facility. 3. The project promoters are born and raised in the Mbarara area that they understand the social, economic and cultural aspects of the area quite well to make this project a resounding success. 4. Mbarara is the fastest growing town in Uganda after Kampala with quite a number of commercial, industrial, community development, educational and government institutional facilities coming up that make it a highly convenient location for positioning a 3-star rating hotel facility to cater for the growing traffic that are using such facilities. 5. Tourist facilities that combine a scenic natural beauty, 3-star hotel rating status, and a mini-zoo are hard to get anywhere within Uganda or East Africa for that matter. That LA-SCAB VALLEY PARK will be the first of its kind in Uganda offering such facilities and amenities will put it in a strong and favourable position to grow its tourism market potential quite fast. 9.2 Design of the Facility

We consider an alignment of the basic thought of simplicity, elegance and modern spirit of the hotel with the design of the facility as adequate. Leading and latest technologies are underpinning the features to commune modernity. The hotel design therefore would be a mixture of timeless and simple elegance communicating warmness and style to potential customers. As the design of the hotel the name and logo will be in the same style created to build brand recognition.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

9.3 Raw Materials

The basic requirements for running the proposed LA-SCAB VALLEY PARK hotel business are the amenities, water and utilities. All the requirements are easily available at low costs. Furthermore, the raw materials required for the operations of the project are widely available in the market and there is no need to be dependent on any particular supplier or manufacturer of a commodity. 9.4 Special Features of the Site

The area is endowed with natural water falls, rocks and river meandering. Waterfalls Expanse

Rows of Natural Rock Outcrops

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

Meandering River Rwizi

9.5 -

Current Developments

Unfinished Bar & Restaurant structure

Two Twin Cottages fully furnished

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Clean piped water and electricity in place Improved and enhanced vegetation in terms of trees and scrubs.

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10.0 MANAGEMENT & HUMAN RESOURCE PLAN 10.1 Corporate Governance

It is important to establish clear and direct ways of communication. It should reflect the simplicity and modern style of the hotel. Clear structures must be established to reduce room for conflicts. In order to stimulate innovation a creative workplace will be established. Space for the staffs own initiative should increase identification with the company. Each member has to feel valued on a daily routine. Big importance has to be attached to team spirit and to create and warm and helpful atmosphere. The well trained staff adds additional value to the price-performance ratio for our guests. Internal formation will deepen the knowledge of the employees and motivate them to ensure the quality demand of the guest as well as attract employees. Job rotation can enhance the skills and convey the corporate thinking. The Head Office is directly placed in the hotel. It allows the clients and the management to collaborate effectively. Therefore every workday is closely followed by the staff. Current issues can be solved immediately. It is highly required to establish a close relationship between all the employees, from the director to the cleaning staff. The know-how of the staff should contribute to the overall development which creates synergies and finally results in best service for our guests. 10.2 Human Resource Requirements

The Human resource requirement directly associated with the hotel is listed below. Table 8: Human Resource Emolument Structure
Description/Designation Operating Management Cooking Staff Waiters, Bell Boys Drivers Janitors Guards and others Total Number 8 20 50 6 20 15 119 32
Monthly Salary (USD) Total Monthly Salary (USD)

600 160 120 150 100 100

4,800 3,200 6,000 900 2,000 1,500 18,400

BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

11.0 ESTIMATED COSTS OF CONSTRUCTION, DESIGN AND MANAGEMENT SERVICES

Construction costs of the entire complex are estimated at approximately US$ 55,000 for the infrastructure and US$ 800,000 for the building works, including all built components of the 3-star hotel complex, landscaping and parking facilities. With a contingency factor of 5% brought into the estimate, the total construction costs are estimated in the order of US$ 846,000. Depending on the Design, Management and Construction approach selected, as well as the conditions and scope that agreed upon, design and management services will be: Design services (Architectural and Engineering) : 5-7% of construction costs Management Services (Design and Construction): 2.5-3% of construction costs

These figures are rough and provide an initial framework only for understanding the breadth of scope possible. Final figures will be dependent on the precise services and terms agreed. At this stage, taking the higher bracket fees for a conservative estimate, the fees will run in the order of US$ 96,600. In total, the cost of construction bringing the project to point of handover to operations is estimated at US$ 1,062,600. This scenario assumes completion of all works before the start of operations. As mentioned earlier, other possibilities will be considered at detailed design and projection stage, such as phase by phase building, with operations beginning with as few as 80 beds in the hotel, and revenue from initial operations returned to provide for further construction costs.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

Table 9: Estimated Construction Costs Infrastructure Roads Water, electricity, telephone On site roads + mains + electricity transformer Perimeter Fencing Total Infrastructure Buildings Hotel Mini-zoo Pool, cafeteria, bar & restaurant, surroundings Tennis court and amenities Landscaping and car park Total Buildings Contingency Sub-Total Design Fee 7% Project Management Fee 3% Total Construction Costs Table 10: Hotel/Facility Use Items Costs Item Description Furniture, Fixtures and Computers Vehicles (1 unit) Crockery, Linen and Others Zoo stocking Total Items Costs Cost (USD) 150,000 20,000 32,200 50,000 252,200 Cost (USD) 20,000 10,000 10,000 15,000 55,000

720,000 80,000 60,000 30,000 30,000 920,000 46,000 966,000 67,620 28,980 1,062,600

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

12.0 PROJECT ECONOMICS

The total project cost for setting up the proposed LA-SCAB VALLEY PARK tourism and hospitality development facility is USD 2,448,500. The capital cost incurred is USD 2,155,500and the working capital is USD 293,000. The total cost and financing plan are given in Tables 11-1 to 11-2 below. Table 11-1: Total Project Cost Account Head Land Infrastructure Buildings Contingency Design Fee Project Management Fee Hospitality Facility Use Items Initial Working Capital Total Project Cost Table 11-2: Financing Planning Financing Equity (Project Promoter) Development Funding/PPP Total Project Cost

Total Cost (US$) 785,700 55,000 920,000 46,000 67,620 28,980 252,200 293,000 2,448,500 Ratio 32.09% 67.91% 100.00% USD 785,700 1,662,800 2,448,500

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

13.0 PROJECT IMPLEMENTATION TIMETABLE

The breakdown of project phases will be as follows: Design Phase Bid Phase Construction Phase Project Closeout 34 months 12 months 12 months 12 months

In some circumstances, these phases may overlap. The intention is to achieve as much work in parallel as possible. The Cash Flow presented in Section 14.0 below illustrates an integrated timeframe with assumptions of overlap in certain areas. Local architectural and engineering firms will be used to ensure speedy statutory approval by the local authorities, which will occur during the Design and Bid phases.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

14.0 PROJECT FINANCIAL EVALUATION

The limited availability of three star hotels in the Mbarara Municipality area creates a profitability margin window for the first time investor. If clean and comfortable stay is provided to the customers, then with a very conservative estimate, the first year of the projects expected occupancy would be 50% room occupancy with annual growth increments of at least 10% anticipated. This section evaluates various financial aspects of the project (cost of project, earnings forecast, rates of return, payback period, cash flow, balance sheet, etc.). 14.1 Capital Cost of Project

Total project cost is estimated at US$ 2,448,500 as shown below in Table 12 in summarized form. Table 12: Cost of Project (In USD) Description Land Infrastructure Buildings Design Fee Project Management Fee Hospitality Facility Use Items Physical Contingencies Fixed Cost Initial Working Capital TOTAL PROJECT COST

Local Currency 785,700 55,000 920,000 67,620 28,980 252,200 46,000 2,155,500 293,000 2,448,500

Foreign Currency _ _ _ _ _ _ _ 0 _ 0

Total 785,700 55,000 920,000 67,620 28,980 252,200 46,000 2,155,500 293,000 2,448,500

Funds are being solicited for use in putting up the requisite 3-star hotel infrastructure and buildings at the designated site in Nyamitanga Division of Mbarara Municipality. Since the site land for the proposed tourism and hospitality development facility is readily available with a few cottage structures already in place, the rest of the financing facility will be applied to other core project investment components including the purchase of hotel facility use items (i.e. furniture, fixtures, computers and one vehicle unit), covering project management fees and design fees, and defraying the initial working capital expenses.
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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

Land: The plot of land having an area of 10 acres in Mbarara town has been proposed, justification for location of plant has been established in the Technical Aspects (Section 9.0) of this Business Plan. The present value of this plot of land in Mbarara town is estimated at US$ 78,570 per acre. Infrastructure: Infrastructures costs include expenses incurred under this item include roads, installation of utilities and electricity transformer plus perimeter fencing around the facility. The total cost of infrastructure has been estimated at US$ 55,000. Building & Construction: The building and civil works for the proposed LA-SCAB VALLEY PARK tourism and hospitality development facility will include construction of the 3-star hotel, putting up the mini zoo, construction of the pool, cafeteria, bar & restaurant, the tennis court and additional sports/recreation amenities, and landscaping and the car park. The total cost of the building and civil works has been estimated at US$ 920,000. Hotel Use Items: These will include crockery, linen, cooking appliances and utensils, etc. These items are collectively estimated to cost US$ 32,200 for the start. Vehicles: The proposed LA-SCAB VALLEY PARK tourism and hospitality development facility will require the services of a van to start off business. The van will be used for transportation of hotel-use groceries, supplies and other routine-use items from town to the hotel in an effort to save on transportation expenses that would be incurred in outsourcing transport hire services to external transport service providers. The vehicle cost for 1 unit is estimated at US$ 20,000. Zoo stocking: Stocking of the zoo will include the sourcing, capture, transportation, and acquisition of the necessary Licenses from the Uganda Wildlife Authority (UWA) for the local area animals that will be kept at the mini-zoo. The cost is estimated at US$ 50,000. Furniture & Fixtures: This will include office furniture and fixtures as well as office equipment like computers, operational software etc. The total cost is estimated at US$ 150,000.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

Working Capital: Tourism and hospitality management is a business in which cash flow is very high and companies in the industry tend to generate cash surpluses on a regular basis, most of the hotel supplies are purchased on a 1-week cash basis and the finished product is sold on cash. Working capital is mostly required for paying for the regular purchase of hotel use items, for payment of staff wages and salaries, for paying of utility bills, petrol for vehicles and for spares. The Working Capital requirements have been estimated at US$ 293,000 for the first months of operation. Physical Contingences: Physical contingences for the first year have been estimated at US$ 46,000. 14.2 Operational Data

The capacity of the hotel is 150 rooms and allied services. It is expected that the room occupancy would be 50% in the first year and will increase gradually; the allied services are expected to increase likewise. 14.3 Overhead Costs

In the first year, the following overhead cost are estimated (@ 50% capacity): Table 13: Overhead Costs Item Admin and marketing salary Heat, Light and Power Communications Printing and Stationery Travelling and Conveyance Entertainment Office Supplies Repair and Maintenance TOTAL 14.4 Financial Plan

Cost (USD) 7,300 3,300 4,970 3,300 14,650 1,680 1,900 1,730 38,800

The project is proposed to be financed through a combination of equity and institutional development financing in the ratio of 68:32 respectively. We assume that the institutional development loan will carry a profit markup rate of 10 percent per annum payable over a period of ten years.
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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

Table 14: Financial Plan (In USD) Source of Finance/Component 1) Financial Assistance Medium-Term Development Facilities Infrastructure Buildings Design Fee Project Management Fee Hospitality Facility Use Items Physical Contingencies Initial Working Capital Sub-Total (1) 2) Equity Project Sponsors Land Sub-Total (2) TOTAL (1) + (2) 14.5 Share Local Currency Foreign Currency Total

2.25% 37.57% 2.76% 1.18% 10.30% 1.88% 11.97% 67.91%

55,000 920,000 67,620 28,980 252,200 46,000 293,000 1,662,800

_ _ _ _ _ _ _ 0

55,000 920,000 67,620 28,980 252,200 46,000 293,000 1,662,800

32.09% 32.09% 100.00%

785,700 785,700 2,448,500

_ 0 0

785,700 785,700 2,448,500

Profit & Loss Account

The projected income statement for the proposed LA-SCAB VALLEY PARK tourism and hospitality development facility is given in Table 15 below.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

Table 15: Summary Profit & Loss Account for First Five Years of the Project (In USD)
ITEM/YEAR Sales Direct Cost of Sales Other Production Expenses Total Cost of Sales Gross Margin Gross Margin % Expenses Payroll
Sales & Marketing & other Expenses

2015 1,850,410 207,800 0 207,800 1,642,610 88.77% 220,800 60,000 68,970 35,500 3,300 12,270 0 33,120 0 433,960 1,208,650 1,277,620 332,560 166,280 233,634 545,146 29.46%

2016 2,220,495 245,140 0 245,140 1,975,355 88.96% 231,840 80,000 68,970 42,600 3,960 12,270 0 34,776 0 474,416 1,500,939 1,569,909 332,560 133,024 331,298 773,028 34.81%

2017 2,590,580 324,340 0 324,340 2,266,240 87.48% 243,432 100,000 68,970 49,700 4,620 12,270 0 36,515 0 515,507 1,750,733 1,819,703 332,560 99,768 416,213 971,163 37.49%

2018 2,960,660 360,000 0 360,000 2,600,660 87.84% 255,604 120,000 68,970 56,800 5,280 12,270 0 38,341 0 557,264 2,043,396 2,112,366 332,560 66,512 513,988 1,199,306 40.51%

2019 3,330,745 422,340 0 422,340 2,908,405 87.32% 268,384 140,000 68,970 63,900 5,940 12,270 0 40,258 0 599,721 2,308,684 2,377,654 332,560 33,256 603,551 1,408,286 42.28%

Depreciation Overhead Costs Heat, Light and Power Insurance Lease Payroll Taxes Other Total Operating Expenses Profit Before Interest and Taxes EBITDA Loans Repayment Interest Expense Taxes Incurred Net Profit Net Profit/Sales

14.6

Rates of Return

On the basis of the projected income statements and related projections, rates of return for the project are calculated and shown in Table 16: Table 16: Rates of Return (In Percentages) Description 2015 2016 Gross Profit to Sales 88.77 88.96 Operating Profit to Sales 65.32 67.59 Net Profit to Sales 29.46 34.81 Net Profit to Investment 22.26 31.57

2017 87.48 67.58 37.49 39.66

2018 87.84 69.02 40.51 48.98

2019 87.32 69.31 42.28 57.52

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

14.7 Payback Period

Payback period for the project, both in terms of owners equity and total investment, is calculated below: Total Investment Promoters Equity Profits = = = US$ 2,448,500 US$ 785,700 Net Profit + Interest + Depreciation

Table 17: Calculation of Payback Period for Equity and Total Investment Year Amount paid back from Balance of Total Balance of Total Profits Investment Equity 1 545,146 -1,903,354 -240,554 2 773,028 -1,130,326 532,474 3 971,163 -159,163 1,503,637 4 1,199,306 1,040,143 5 1,408,286 2,448,429 Payback period for Equity Payback period for Total Investment 14.8 Capital: Output Ratio = = 1.31 Years 3.13 Years

Capital output ratios, representing the production potential of the project in relation to the investment involved in its establishment, are calculated in Table 18: Table 18: Capital: Output Ratios (In USD) Description 2015 2016 2,448,500 _ Total Investment Sales (Output) 1,850,410 2,220,495 1: 0.76 1: 0.91 Capital: Output Ratio 14.9 Cash Flow

2017
_ 2,590,580 1: 1.06

2018
_ 2,960,660 1: 1.21

2019
_ 3,330,745 1: 1.36

The projected cash flow for the first five years of the project is shown hereunder:

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

Table 19: Projected Cash Flows (In USD)
ITEM/YEAR CASH RECEIVED Cash from Operations Cash Sales Cash from Receivables Sub-Total Cash from Operations Additional Cash Received VAT Received New Current Borrowing
New Other Liabilities (Interest-free)

2015

2016

2017

2018

2019

1,850,410 0 1,850,410 0 0 0 0 0 0 0 1,850,410

2,220,495 0 2,220,495 0 0 0 0 0 0 0 2,220,495

2,590,580 0 2,590,580 0 0 0 0 0 0 0 2,590,580

2,960,660 0 2,960,660 0 0 0 0 0 0 0 2,960,660

3,330,745 0 3,330,745 0 0 0 0 0 0 0 3,330,745

New Long-term Liabilities Sales of Other Current Assets Sales of Long-term Assets New Investment Received Sub-Total Cash Received EXPENDITURES Expenditures from Operations Cash Spending Bill Payments Sub-Total Spent on Operations Additional Cash Spent VAT Paid Out
Principal Repayment of Current Borrowing Other Liabilities Principal Repayment Long-term Liabilities Principal Repayment

768,845 559,564 1,328,409 0 0 0 332,560 35,000 0 0 1,695,969 154,441 182,717

782,724 617,298 1,400,022 0 0 0 332,560 51,000 60,000 0 1,843,582 376,913 559,630

851,265 820,696 1,671,960 0 0 0 332,560 53,000 120,000 0 2,177,520 413,060 972,690

903,297 865,697 1,768,994 0 0 0 332,560 60,000 180,000 0 2,341,554 619,106 1,591,795

937,938 892,640 1,830,577 0 0 0 332,560 72,000 240,000 0 2,475,137 855,608 2,447,403

Purchase Other Current Assets Purchase Long-term Assets Dividends Sub-Total Cash Spent Net Cash Flow Cash Balance

14.10 Balance Sheet Projected balance sheet for the first five years of operation is shown below:

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

Table 20: Projected Balance Sheet (In USD)
ITEM/YEAR ASSETS Current Assets Cash Other Current Assets Total Current Assets Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets LIABILITIES AND CAPITAL Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Sub-Total Current Liabilities Long-term Liabilities Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital Net Worth 2015 2016 2017 2018 2019

182,717 35,000 217,717 1,962,900 68,970 2,031,870 2,249,587

559,630 86,000 645,630 2,022,900 137,940 2,160,840 2,806,470

972,690 139,000 1,111,690 2,142,900 206,910 2,349,810 3,461,500

1,591,795 199,000 1,790,795 2,322,900 275,880 2,598,780 4,389,575

2,447,403 271,000 2,718,403 2,562,900 344,850 2,907,750 5,626,153

9,900 0 0 9,900 1,662,800 1,672,700 200,000 -168,259 545,146 576,887 2,249,587 576,887

126,315 0 0 126,315 1,330,240 1,456,555 200,000 376,887 773,028 1,349,915 2,806,470 1,349,915

142,742 0 0 142,742 997,680 1,140,422 200,000 1,149,915 971,163 2,321,078 3,461,500 2,321,078

204,071 0 0 204,071 665,120 869,191 200,000 2,121,078 1,199,306 3,520,384 4,389,575 3,520,384

364,923 0 0 364,923 332,560 697,483 200,000 3,320,384 1,408,286 4,928,670 5,626,153 4,928,670

14.11 Break-Even Analysis The projects commercial break-even level (profitability break-even) in Project Year 5 (2019) is calculated below:

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

Table 21: Break-Even Analysis in Project Year 5 (2019) (In USD) Items Variable Cost Fixed Cost Direct Cost of Sales 422,340 _ _ Payroll 268,384 Sales & Marketing & other Expenses 140,000 _ Depreciation _ 68,970 Overhead Costs 63,900 _ Heat, Light and Power 5,940 _ Insurance expenses _ 12,270 Payroll Taxes _ 40,258 Interest Expense _ 33,256 TOTAL 5,819,987 1,356,441 Sales Value of Production Break-even Sales = 423,138 1 632,180 3,330,745 US$ 522,393 = US$ 3,330,745 423,138 1 0.19 423,138 0.81 Total Cost 422,340 268,384 140,000 68,970 63,900 5,940 73,426 851,827 54,348 7,176,428

Break-even Sales =

Capacity utilization required to Break-even = US$ 522,393 x 100 = 15.68% US$ 3,330,745 Margin of Safety = 100% 15.68% = 84.32% 14.12 Value Added/Contribution to GDP Implementation of the project is expected to have a beneficial economic impact on regional/national economic development. The projects contribution towards the countrys Gross Domestic Product (GDP) is estimated below.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

Table 22: Value Added/Contribution to GDP (USD)
Description Value of Production (Sales) Less Intermediate Inputs: Direct Cost of Sales Heat, Light and Power Overhead Costs Depreciation Total Intermediate Inputs Value Added Value Added as % of Output Value Added per Worker (US$) 207,800 3,300 35,500 68,970 315,570 1,534,840 82.95% 12,898 245,140 3,960 42,600 68,970 360,670 1,859,825 83.76% 15,629 324,340 4,620 49,700 68,970 447,630 2,142,950 82.72% 18,008 360,000 5,280 56,800 68,970 491,050 2,469,610 83.41% 20,753 422,340 5,940 63,900 68,970 561,150 2,769,595 83.15% 23,274 2015 1,850,410 2016 2,220,495 2017 2,590,580 2018 2,960,660 2019 3,330,745

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

15.0 PESTEL ANALYSIS

To scan the environment of the proposed LA-SCAB VALLEY PARK tourism and hospitality development facility, the Company used common sense and brainstorming techniques in combination with the PESTEL-Analysis. The acronym PESTEL stands for the political, environmental, social, technical, economic, and legal environment. Possible risks were analyzed concerning likelihood of appearance, threat of endangering the project, and the difficulty of minimizing or eliminating the risk. 15.1 Political

Governmental influence at the central government level for the 3-star hotel is for now irrelevant. Yet the importance on a community level has to be considered. Since the major of the community is informed about this project and is supporting the project, the likelihood of objections from a public side is low. Objections from a private person are also very unlikely to occur. The 3-star hotel will be placed in a rather industrial characterized zone of Mbarara Municipality and does neither affect the overall appearance of the locality nor impacts the housing area. 15.2 Economic

Due to Ugandas stable economy economical risks are generally estimated as low. Cost of capital is rather high and economic growth is low which bears some risk estimated as low to medium. This means existing hotels in this area have to compete for a consistent market share. In case the hotel should not be able to quickly establish a large market share it might not be able to cover the operational costs which can threaten the whole project. Additionally, the high price level in Uganda as well as the short travelling season reduces the attractiveness for tourists. Yet the main customer is the business traveller which reduces the risk of low occupation. Due to its location next to the highway, risks in complications with the supply chain are low. 15.3 Social

Social factors do hardly influence this project or bare risks which have to be considered. Mentionable is the aging population which increases cost in labour due to higher salaries for experienced workers. On the other hand, it offers an opportunity because of higher income customers.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

15.4 Technological

Technological aspects in general offer possibilities which are in the meantime risks or challenges. The construction of a completely new building offers many possibilities for a hotel to differentiate from its competitors and gain competitive advantages. Ecofriendly buildings, alternative power sources, progressive management style, and a modern functional facility are only a few sketched possibilities. Through obvious competitive advantages the hotel can gain attractiveness to customers and increase market share. Possible risks can appear in wrong or too high investment which however can be minimized through careful analysis. 15.5 Environmental

Environmental risks are mainly short peak season for international travellers which reduce the attractiveness for tourists and therefore the number of potential customers. Increasing travel and transport costs bear some risk estimated as low to medium. Higher transport costs affect prices for consumer goods offered by the hotel. High travel costs increase the possibility that travellers switch to alternative traffic means. Though the desired customer is the business traveller who depends strongly on individual travelling, this risk is minimized. The increasing need to protect the environment might bear further not yet revealed risks. 15.6 Legal

Since Uganda has a well functioning and elaborated legal framework, the legal environment bears the highest risks concerning high costs in health and safety issues. The strong laws which favour consumers and job-holders cause high costs for the employer. With a carefully analyzed environment and legal advice all other risks concerning legal issues can be eliminated.

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BUSINESS PLAN ESTABLISHMENT & OPERATION OF LA SCAB VALLEY PARK

16.0 CONCLUSION

It can be concluded from the foregoing business analysis and financial modelling that the proposed full-scale establishment and operation of the LA-SCAB VALLEY PARK tourism and hospitality development facility at Mbarara town in Western Uganda is extremely viable from a financial and commercial point of view; and it is further recommended that an early decision to facilitate it with the requisite line of credit be expedited such that implementation of the project follows the fastest track possible for the benefit of the project promoters, the Uganda tourism and hospitality industry and market, and the Ugandan economy at large.

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