Marketing Strategy, Financial Risk and Sensitivity Analysis, business and finance homework help

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timer Asked: Apr 9th, 2017
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Question Description

Hello!
I am currently working on a project, but need help in only three sections of it as mentioned above; (see chapters 9, 10, 11 in the reference provided)
marketing strategy,
financial risk
sensitivity analysis.


To be more specific, I require, in report form;
-calculations to be done,
-the steps taken
-explaining the rationale behind the derivation in full paragraphs,
-graphs/tables/charts to support the above


I have attached an example on how it should be done and will provide more information (to fit the context of my report) after a tutor is found.

Will tip if work is fast and good.


Unformatted Attachment Preview

TABLE OF CONTENT 7.1.5 Joint Expertise 7.1.6 Long-term Association 7.2 Proposed Joint Venture Structure 16 16 16 CHAPTER 8: REDEVELOPMENT PROPOSAL 8.1 Design and Architect Management 8.2 Site Plan 8.2.1 Podium 8.2.2 Sheltered Plaza 8.2.3 Hotel Tower 8.3 Development Phase 18 18 18 18 19 19 19 CHAPTER 9: MARKETING STRATEGIES 9.1 Marketing Targeting 9.1.1 Business Travel Market 9.1.2 Luxury Leisure Market 9.2 Market Positioning 9.3 Marketing Mix 9.3.1 Product Strategies 9.3.1.1 Physical Aesthetics and Interior Furnishings 9.3.1.2 Product Branding 9.3.1.3 Unique Features 9.3.2 Pricing Strategies 9.3.2.1 Premium Pricing 9.3.2.2 Time-based Pricing 9.3.3 Place (Distribution) Strategies 9.3.4 Promotion Strategies 9.3.4.1 Advertising 9.3.4.2 Public Relations 20 20 20 20 21 22 22 22 22 22 22 22 23 23 23 23 23 CHAPTER 10: FINANCIAL ANALYSIS 10.1 Key Assumptions 10.2 Determining Weighted Average Cost of Capital (WACC) 10.3 Open Market Valuation (OMV) 10.4 Holding Period of the Project 10.5 Investment Analysis and Monte Carlo Simulation 10.5.1 Optimal Capital Structure & Equity Returns 10.5.1.1 80% Loan-to-Value (LTV) 10.6 Exit Strategy 24 24 24 25 25 26 26 26 27 CHAPTER 11: SENSITIVITY AND RISK ANALYSIS 11.1 Sensitivity and Correlation Analysis 11.2 Identification of Risk 11.2.1 Development Phase Risks 11.2.1.1 Construction Cost Risk 11.2.1.2 Time Risk 11.2.1.3 Approval and Regulatory Risk 11.2.2 Post-Development Phase 11.2.2.1 Vacancy Risk 11.2.2.2 Revenue Volatility Risk 28 28 28 28 28 28 29 29 29 29 TABLE OF CONTENT 11.2.2.3 Earthquake Risk 11.3 Risk Mitigation Strategies 11.3.1 Employ Construction and Project Management Expertise 11.3.2 Advance Co-pitching of Redevelopment Proposal 11.3.3 Combined Corporate Synergies 11.3.4 Flexible Room Configuration and Rental Leases BIBLIOGRAPHY APPENDIX 29 29 29 30 30 30 Page. Page. 21 20 9. Marketing Strategies 9.1 Marketing Targeting 9.1.1 Business Travel Market According to the statistics of International Congress and Convention Association (ICCA), the number of international conferences held worldwide has been growing over the years. This rise is especially significant in the Asia region, where increased globalisation converges with rapid economic growth. In 2013, Tokyo was ranked the 7 most popular city for international conferences in the Asiapacific and Middle-east regions. This indicates Figure 22: Number of International Conferences held in the rapidly growing Meetings, Incentives, Asia-Pacific/Middle East Cities (2013) Conferences and Exhibition (MICE) industry, bringing about vast opportunities in the hospitality industry. Hotels are crucial stakeholders in the MICE industry as they provide venues for conferences and accommodations for corporate guests. By capitalising on Mitsui Grand Millennium Hotel Yaesu’s prime location in the center of business districts, CDL would be able to target the business travellers from Tokyo’s MICE industry. th 9.1.2 Luxury Leisure Market In 2013, Tokyo has pulled ahead of Osaka and Kyoto as the most appealing destination for both foreign and inbound visitors in Japan. This is partly due to Tokyo being the most renowned metropolitan city in Japan, as well as the presence of its unique indigenous culture and various appealing tourist attractions in the region. Furthermore, with Tokyo being awarded the honour to host the 2020 Olympic and Paralympic Games, promotions and advertisements were initiated by the government to further develop and Figure 23: Japan’s Real Inbound Guests/ Tourism boost the tourism industry in Tokyo (Kodera, Spending by Prefecture (2013) 2014). These efforts to attract inbound and domestic tourists from both the private and public sectors have proved successful as there has been a significant increase in the number of tourists to Tokyo in recent years. Fueled by the strong purchasing power of domestic tourists, the sales of Tokyo retailers especially in the luxury retail sector, experienced a significant surge of approximately 30% in 2015 (World Property Journal, 2016). This has prompted global luxury brand companies to sharpen their focuses on Tokyo due to its reemergence as a popular shopping hub for luxury brands. Being surrounded by several luxury shopping districts, Mitsui Grand Millennium Hotel Yaesu would be able to attract the extravagant tourists. Page. 21 9.2 Market Positioning Based on the data collected from Japan Tourism Agency (JTA) Accommodation Survey, business and city hotels achieved high occupancy rates of 81.7% and 82.7% respectively in 2013. This suggests that the hospitality industry in the capital city is experiencing a strong and stable performance. Mitsui Grand Millennium Hotel Yaesu, which targets the business travel as well as luxury leisure market would position itself as a 5-star luxury hotel catering to business executives and high-end travelers. This is intended to capture the growing demand in the high-end hospitality industry. Figure 24: Japan’s Guestroom Occupancy Rates by Prefecture and Accommodation (2013) MARKET POSITIONING: CDL VS FOUR SEASON Location Intensive Competition Number of rooms Attractiveness Room price Security and Safety Aesthetics Accessibiity Affordability Service and Quality The new hotel development is faced with intensive competition in the vicinity due to the availability of various hotels providing a range of service levels, from world-class to mid-range and budget. Four Seasons, Shangri-La and The Peninsula are amongst the five-star hotels in the area, which hold dominant positions in the highest-end spectrum of luxury hospitality industry by capitalising on their internationally-acclaimed hotel brands that are steep in heritage. The high-end hospitality industry is highly competitive partly due to the Figure 25: Market Positioning between CDL’s Hotel and Four Season lack of product differentiation, often Hotel leading to pricing pressure. Therefore, CDL should reinforce its product differentiation and pricing strategies so as to acquire the dominant position at the forefront of the five-star hotel business. With the hotel rooms being priced at a considerably lower rate as compared to the other dominant high-end luxury hotels, Mitsui Grand Millennium Hotel Yaesu would be able to attract a larger pool of clientele which include travellers ranging from the high-end to the highest-end of the market. Iconic aesthetic appeal at the tangible level in terms of architecture and interior furnishing, complemented by the first-class ambience at intangible level, would help to further amplify the attractiveness of Mitsui Grand Millennium Hotel Yaesu. The ability to remain fairly affordable while providing excellent services at the same time would allow the establishment of an enduring competitive advantage for Mitsui Grand Millennium Hotel Yaesu, by creating a unique position which appeals to the luxury clientele more than its existing dominant competitors. CDL FOUR SEASONS Page. 22 9.3 Marketing Mix 9.3.1 Product Strategies 9.3.1.1 Physical Aesthetics and Interior Furnishings Located in the center of the business district and near the luxury shopping area in Tokyo, Mitsui Grand Millennium Hotel Yaesu would be designed to reshape and enhance the city skyline by introducing an aesthetically unique and appealing physical façade. As mentioned earlier, CDL is encouraged to collaborate with well-known architecture firm, KPF, to design the hotel development according to its targeted market and position. In addition, KPF would also be in charge of Mitsui Grand Millennium Hotel Yaesu’s interior design, providing guests with unique experiences during their stays through alluring guestroom configurations. 9.3.1.2 Product Branding Being branded under Grand Millennium, the proposed hotel development would benefit on the positive spillover effect of customers’ perceptions and attitudes, generated through the exceptional image and high status the brand possessed. With Grand Millennium’s international reputation in extending five-star as well as deluxe quality hospitality services, the hotel and consumers could derive values through the reduction of perceived risk and providence of quality assurance. By attaching a strong hotel brand on Mitsui Grand Millennium Hotel Yaesu, CDL would be able to differentiate its hospitality services from competitors and establish a distinct identity. 9.3.1.3 Unique Features Mitsui Grand Millennium Hotel Yaesu will provide an extensive range of amenities to cater for its business and leisure travellers. These include bars, restaurants, pool and gym facilities, conference rooms and ballrooms. A full range of pampering services such as babysitting services, family pool, spa and manicure services for families as well as female visitors are also offered to bring an indulging experience. Last but not least, the hotel will also incorporate “Onsen” - hot springs facilities which allow visitors to encounter sensual Japanese rituals of relaxation amidst the hustle and bustle of the inner city of Tokyo 9.3.2 Pricing Strategies 9.3.2.1 Premium Pricing Figure 26: Pricing Strategy Matrix Based on the framework of Pricing Strategy Matrix, hotel businesses’ pricing system can be divided into four broad strategies based on two variables - quality and price. Since Mitsui Grand Millennium Hotel Yaesu targets the luxurymarket who demands for high quality services and fittings, it can be categorised under “premium” according to the matrix. Premium pricing strategy involves charging high rates for superior finishes and services. Furthermore, premium pricing subtly embodies intangible qualities such as style, uniqueness, occasion and experience which present consumers a sense of prestige and luxury. Page. 23 9.3.2.2 Time-based Pricing Peak Season Off-Peak Season Cherry Blossom - Early April January to March Autumn foliage - Mid-November Golden Week - End April to early May Obon - Mid-August Year-End holidays - Mid-December to Early January The time-based pricing is widely used in the tourism industry, where prices are not permanently set and vary based on the demand during the period. The reference point of the pricing is set and controlled based on the different seasons - peak and off-peak. During peak period, demand exceeds the capacity, hence encouraging CDL to only sell the limited capacity to the most profitable mix of customers. In contrast during low demand periods, rooms should be priced at discounted rates, making it available for everyone. Figure 27: Peak & Off-peak Seasons 9.3.3 Place (Distribution) Strategies Distribution strategy is an essential part of Mitsui Grand Millennium Hotel Yaesu’s revenue management plan. Traditionally, companies will utilise tour agencies as their primary platforms to publicise to consumers who are keen on joining a tour. However in the age of information technology, most companies' distribution strategy has evolved to utilising internet platforms due to its convenience and efficiency. This allows customers to make their room reservations more efficiently. Mitsui Grand Millennium Hotel Yaesu’s official website will serve as an effective platform for service distribution, providing a wide range of user-friendly features as well as practical assistance to potential customers. Additionally, Mitsui Grand Millennium Hotel Yaesu should also be present on internet distribution channels such as Expedia, Bookings and TripAdvisor. These channels allow travellers who are in search of hotel recommendations, to book their rooms directly. Furthermore, CDL’s Millennium & Copthorne PLC has also an extensive network of reservation offices as well as global sales offices. These offices are able to address bookings made by leisure travellers as well as corporate reservations from business organisations. 9.3.4 Promotion Strategies 9.3.4.1 Advertising In order to capture the attention of potential customers, a strong advertising strategy has to be formulated to communicate the presence of Mitsui Grand Millennium Hotel Yaesu to the market. The marketing message can be relayed through various forms of platforms such as newspapers and magazines, which are popular among the senior management professionals to capture the MICE industry. These magazines include Forbes, Fortune, The Economist and Financial Times. Moreover, active online marketing through social media platforms and popular search engines for tourists will enable the new hotel development to capture a larger target audience. The social media platform provides visual and experiential sights of the hotel as travellers often use social networking to share their travel experiences. Mitsui Grand Millennium Hotel Yaesu can also ride on the testimonials made by its customers to improve and broadcast future promotions. 9.3.4.2 Public Relations Mitsui Grand Millennium Hotel Yaesu should establish and maintain goodwill with the public as well as organisations through good public relations efforts. Public relations with the selected target market should be sustained through issuing online and offline press release, in addition to communicating with organisational stakeholders through newsletters. Adopting an intensive public relations strategy is crucial in attracting the MICE industry as hotel reputation remains a determining factor in its choice of events locations. Besides engaging a third party consultant to manage public relations, Mitsui Grand Millennium Hotel Yaesu’s website could also serve as an effective platform for public relations. Investing for Growth Financial Analysis Page. 24 10. Financial Analysis 10.1 Key Assumptions This redevelopment project is predicated on several key assumptions. Firstly, it hinges on the fact that Mitsui Fudosan would have to be willing to enter into a conditional joint venture agreement with CDL on a 40:60 basis. Furthermore, it is essential that Mitsui Fudosan agrees to divests the Yaesu Mitsui Building to the joint venture Special Purpose Vehicle at a fair and open market value. Lastly, CDL Hospitality Trust will have to be given the first right of refusal to acquire the completed hotel asset at the end of a 10-year investment period as part of the exit strategy elaborated later on in the report. 10.2 Determining Weighted Average Cost of Capital (WACC) WACC of the project can be determined by computing the weighted average cost of equity and debt. The average cost of equity is derived through the use of Capital Asset Pricing Model (CAPM) and the average cost of debt can be determine using the weighted average cost of debt reported in CDL annual report 2014. CAPM equation is as follows: KM = Rf + βM(Rm – Rf) Where, KM = Project’s cost of equity Rf = Risk-Free Rate of Japan 3-Month Bond Yield βM = Project’s Beta RM = Average Market Return based on 3 listed real estate company* in Nikkei 225 *Companies include Mitsui Fudosan, Mitsubishi Estate and Sumitomo Realty & Development Co. Rf of Japan 3-Month Bond Yield 0.09% 12.00% ΒM 0.93 LTVM 81% D/E RatioM 416% 10.28% 9.35% 10.00% 8.42% 7.49% 8.00% Cost of Capital RM of 10.15% 6.56% 5.63% 6.00% 3.59% 3.55% 3.32% 3.09% 2.85% 2.72% 4.00% 1.88% 2.00%0.54% 0.54% 0.54% 0.80% 1.23% 0.00% 40% 50% 60% 70% 80% 90% 100% Loan to Value Cost of Debt Cost of Equity D/E Ratio LTV Beta 205% 257% 308% 359% 410% 416% 462% 40% 50% 60% 70% 80% 81% 90% 0.55 0.64 0.74 0.83 0.92 0.93 1.01 WACC Figure 28: WACC of different gearing ratios The cost of equity, cost of debt and project’s beta will vary based on the percentage of debts used. Figure 28 summarises the traditional weighted average cost of capital for different gearing ratios. The resulting WACC for different LTV values shall serve as an input for scenario analysis for discounted cash flow later. Page. 25 10.3 Open Market Valuation (OMV) A standard discounted cash flow (DCF) model was created and the income approach was used to determine the open market valuation of the Yaesu Mitsui Building as seen in Appendix I. Based on the DCF analysis the Yaesu Mitsui Building is valued at ¥ 65,600,000,000. This fair value will be the assumed acquisition price paid by the CDL and Mitsui Fudosan joint venture consortium. 10.4 Holding Period of the Project At the end of the year 3, the period where the hotel development is expected to be completed, an investor will be in the position to consider the whether to hold or divest the stakes of the development. Divesting 100% stakes of the hotel development is expected to generate a before tax equity reversion (BTER) of ¥ 37,336,000,000. In order to determine the optimal holding period, the opportunity cost of tying down this equity sum to the hotel investment needs to be considered for an additional 10 years first. The opportunity cost of holding the investment for 10 years is calculated to be 16.0%. This will serve as a hurdle rate to evaluate the minimum before tax internal rate of return (BTIRR) that would have to be earned for an alternative investment to be deemed as financially viable. As holding the hotel development for another year is considered an alternative investment decision, the Marginal Rate of Return (MRR) is calculated for each additional year the development is held. The below graph displays the MRR from year 4 to year 13 of the hotel development, compared against the hurdle rate. Marginal Rate of Return Considering the opportunity cost utilising this equity to upkeep the investment for an additional 10 more years, one will have forgo the opportunity to use the equity on other investment. The opportunity cost of holding the investment for 10 more years is 16.0%. This will serve as a hurdle rate to evaluate the minimum before tax internal rate of return (BTIRR) that would have to be earned for an alternative investment. The alternative form of investment in this case shall be the return on investment for holding one more additional year, or Marginal Rate of Return (MRR). The below graph displays the MRR from year 4 to year year 13 of the hotel development, compared against the hurdle rate. 40.00% 30.00% 20.00% 10.00% 0.00% 4 6 8 10 12 Holding Period MRR Hurdle Rate Figure 29: Marginal Rate of Return from year 4 to 12 Figure 30: Investment Timeline Base on figure 29, the MRR from year 4 to year 10 remains higher than the hurdle rate while the MRR from year 11 onwards is lower than the hurdle rate. This suggest that the investor should hold the investment for additional 7 years upon the completion of the development, or a total period of 10 years. Therefore, our DCF model is based on the derived optimal 10-year holding period. Page. 26 10.5 Investment Analysis and Monte Carlo Simulation In order to determine the financial feasibility of the redevelopment project, an investment analysis of the proposed project using a DCF model was conducted. The DCF analysis for this project is illustrated in Appendix III. To create a more rigorous analysis, a Monte Carlo Simulation was run on the standard DCF model to establish the worst and best scenarios. This ensures that the whole spectrum of possible outcomes have been duly considered. This process also helps developers to validate or correct any preconceived notion that they may have previously hypothesised with regards to how each critical input variable may impact the analysis. The assumptions for the DCF model and Monte Carlo Simulation annexed in Appendix II and IV are determined by the market analysis. 10.5.1 Optimal Capital Structure & Equity Returns Developers might be interested to use debt financing in exchange for being able to raise the tender price without undermining profit margins when undertaking a real estate development project. The following scenarios provide an analysis on the level of debt a developer should use to finance the site development. As mentioned earlier, 100,000 simulations of the DCF model was performed for the following scenari ...
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Tutor Answer

HKPJ
School: Rice University

let me know f we need to address anything.

Running Head: KATONG SHOPPING CENTER

: Katong Shopping Center
Name
Professors Name
Course Title
Submission Date

1

KATONG SHOPPING CENTER

2

Table of Contents
1. Marketing Strategies ................................................................................................................... 3
1.1 Marketing Targeting ............................................................................................................. 3
1.1.1 Business Travel Market ................................................................................................. 3
1.1.2 Luxury Leisure Market .................................................................................................. 3
1.2 Market Positioning ................................................................................................................ 3
1.3 Marketing Mix ...................................................................................................................... 4
1.3.1 Product Strategies .......................................................................................................... 4
1.3.2 Pricing Strategies ........................................................................................................... 5
1.3.3 Place (Distribution) Strategies ....................................................................................... 5
1.3.4 Promotion Strategies ...................................................................................................... 6
2. Financial Analysis ....................................................................................................................... 6
2.1 Key Assumptions .................................................................................................................. 6
2.2 Determining Weighted Average Cost of Capital (WACC) .................................................. 6
2.3 Open Market Valuation (OMV)............................................................................................ 8
2.4 Holding Period of the Project ............................................................................................... 8
2.5 Investment Analysis and Monte Carlo Simulation ............................................................... 9
2.5.1 Optimal Capital Structure & Equity Returns ................................................................. 9
2.5.1.1 80% Loan-to-Value (LTV) ......................................................................................... 9
2.6 Exit Strategy........................................................................................................................ 10
3. Sensitive and Risk Analysis ...................................................................................................... 10
3.1 Sensitivity and Correlation Analysis .................................................................................. 10
3.2 Identification of Risk .......................................................................................................... 10
3.2.1 Development Phase Risks ............................................................................................ 10
3.2.2 Post-Development Phase ............................................................................................. 11
References ..................................................................................................................................... 13
Appendix ....................................................................................................................................... 14
Income Statement...................................................................................................................... 14
Katong Shopping Centre Building Plan .................................................................................... 15
Shop Directory .......................................................................................................................... 17

KATONG SHOPPING CENTER

3
1. Marketing Strategies
Katong Shopping Centre
865 Mountbatten Road
Singapore
437844
SG

1.1 Marketing Targeting
1.1.1 Business Travel Market
The targeted market that Katong Shopping Center functionally developed for is the
higher end shopper seeking expensive purchases by high-end retailers. The group of customers
that Katong Shopping Centre targets aim marketing efforts through their historical heritage of
Katong area offerings of a full range of well reputable luxurious retail brands and services
matching the entire families shopping budgets.
1.1.2 Luxury Leisure Market
Katong Shopping Center (Centre, 2017), located in Mountbatten Road Singapore
integrates a unique architectural design to accommodate beautiful complex displays. The
innovative architecture is an amazing shopping center surrounded by ultimate shopping
amenities with rich historical heritage. Katong Shopping Center is the first mall in Singapore
sporting an air-conditioned environment coupled with lavish and luxuriousness, which heightens
and entices shoppers to indulge in purchasing powers.
1.2 Market Positioning
Opening in 1973 with inspiring motives of delivering quality merchandise, Ka...

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Anonymous
Thanks, good work

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