Opportunity Analysis: An Effective 3-Step Approach

By Jochen de Peuter

In the hospitality and travel industries, experts can perform an opportunity analysis of a hotel or property. This is a helpful tool that shows more about the value and risk of the property. Let’s take a look at what an opportunity analysis precisely entails and how to go about it through a three-step approach.

What is an Opportunity Analysis?

An opportunity analysis is an evaluation tool used when determining the viability and profitability of developing a new hotel or property, or expanding an existing one. It systematically looks at external environments with the goal of understanding demand, consumer needs, market acceptance and economic factors.

This evaluation helps to target the best business model to use in the situation. Investors can choose the most suitable available business model based on the desires of the owner, the realities of the market, future developments and possibilities of the land and buildings available for the property.

When experts are working with an existing property rather than the creation of a new one, the analysis helps to show the services that need to be part of growing a profitable business going forward. This includes detailed information such as the quality level, target audiences and seasonal factors related to services.

An opportunity analysis should include different options for investors. The range of business opportunities relate to different goals. The investors are able to choose from results based on profit alone, reputation alone or a combination of profit and reputation.

The 3-step approach of an Opportunity Analysis

A standard opportunity analysis of a hotel or property includes three steps:

• Visiting the site of the hotel or property
  Crafting the opportunity analysis
  Presenting and pitching the findings

Step 1: Visiting the site: The importance of doing your due diligence

Visiting the site is an essential step that makes it possible to create the first two to three business opportunities for the analysis. This step focuses on finding market data on location. While there, it’s important to carry out interviews with key local figures such as hospitality leaders, tourism boards, people who work on site and so on. This is a preparatory market analysis.

Then, hospitality operations and property redevelopment experts take this information collection to the next level. You would stay on site to gather information. During this time, you gain a visual perspective of the property and its location. You learn about its environment and factors that could impact the business or opportunity.

Your task includes gathering market data related to the direct location and the region. You gain an understanding of the services and attractions the destination offers, as well as what is offered in the surrounding area. This step even includes visiting competition in the area to further delve into the details of the services offered. It also includes learning more about the customers that visit the area and do business with the competition.

As part of this step, you meet with local experts. This includes a day of meetings with the architect’s representative. Together, you go through details of the site, including possibilities and costs of the property and infrastructure. Property development and hospitality operations specialists also spend time with local authorities, such as politicians and leaders in tourism development. These meetings help in the understanding of the region, its possibilities and its business challenges.

Step 2: Building your Opportunity Analysis

After visiting the site and collecting data, the next step involves analyzing that information and drafting the opportunity analysis document based on it. The opportunity analysis should include specific components.

It features a non-comprehensive market analysis of the area. This covers the main hospitality and tourism data for the area. It should include a summary of the attractions that currently exist and those that are planned for the direct area and/or region. It goes over the development or transformation possibilities of the property or current hotel with the related costs. The market analysis also includes how accessible the site is and lists unique selling proposals.

Another feature of the opportunity analysis is a SWOT analysis of the property and its area. A SWOT analysis gives a strategic planning method that is helpful for business or project development and growth. It covers the elements that the acronym SWOT stands for: strengths, weaknesses, opportunities, and threats.

The opportunity analysis also includes detailed information about the property or hotel possibilities. It should cover two to three business opportunity ideas with details on services and their pricing. In addition, this part of the analysis should go over conditions that would help the site be a destination throughout the year, a profit and loss statement on every opportunity idea within a stabilized year and investment number projections that would bring each business opportunity to fruition.

Step 3: Presenting and pitching your findings

After collecting and analyzing information to turn it into the opportunity analysis, the third and final step is to present your findings to potential investors. You pitch your recommendations, share the reasons behind your selections and present the path forward.

Generally, you recommend one to two preferred recommendations you have narrowed down based on the profitability analysis of a stabilized year. After you have presented your findings and backed them up with reasons, you and the investors will decide which recommendations to move forward with and whether to continue to study information in more detail.

The next step becomes more precise on the quotes for investments. There needs to be a clarification of the numbers and definitions, as they will be used for a full market study. This part targets the opportunity, the target customer, a profit and loss statement for 10 years and a net present value calculation. It also includes a manning table that shows the number of staff each department would need and a complete overview of the levels of service.

Next steps: Transform the Opportunity Analysis into a project

There are certain steps to follow after the opportunity analysis. The next project is to develop the concept, which incorporates definitions of the areas and their atmosphere. This project development should guide the architect on the guest experience in each area.

You develop a pre-opening plan with project coordination and hospitality services coordination for the construction phase. You create a business plan that includes the steps for bringing the business opportunity to life. This should include the pre-opening phase as well as recruitment, marketing and sales. Finally, this project will include finding candidates for an operator or moving forward with an owned management model.

Applying the three-step approach

Using the three-step approach to creating an opportunity analysis is helpful for a variety of situations and destination types. For example, it works in the context of the Greenfield projects where there are no buildings, and it equally works for the Brownfield projects where there can be remodelling or rebuilding of existing buildings.

Overall, it is essential to perform due diligence with an acquisition. Due diligence in this context includes creating the in-depth analysis of the property, buildings and business. This includes figuring out the necessary costs to developing the desired business opportunity.

Due diligence could result in a client turning down a certain project if it doesn’t have the best profit and cost analysis. In the end, good due diligence is a critical step to successful business development. It helps to ensure that instead of surprises, an owner knows what to expect from a business opportunity and exactly how to succeed.