Free Wivenhoe House Hotel Essay Example

Foundation Course –

Luxury hotels are a very lucrative business in Central London. Between the tourists, business events, and local consumers, the potential for revenue is endless. The need for a new luxury hotel located in Central London is growing. The cost associated with starting a hotel from scratch is significant. In researching alternative, the opportunity for a merger presented itself. The new hotel, Wivenhoe House Hotel, will be a merger from the two successful hotels, Wivenhoe House Hotel, and St James Court, A Taj Hotel will merge. The extensive cost reduction and ability to take the successful practices that these two hotels have established will ensure that profitability it maximized. The details of mergers were profoundly analyzed, and it was determined that the best method for moving forward with the plans. Wivenhoe House Hotel will be the newly merged hotel located in Central London, which is projected to profitable within the first year of business.
The merger of Wivenhoe House Hotel and St James Court, A Taj Hotel will merge and expand to Central London. Holding 60% of the merger provides controlling interest of the newly merged hotel. My merging it provides the opportunity to take existing practices, equipment, and staff and utilize them in the new project. The newly merged hotel will be named the Wivenhoe House Hotel. The financial consideration provides far less capital necessary to start the new hotel. In addition, the existing reputation of both hotels will be utilized in promoting the new establishment. It provides a basis for guests who have had successful experiences at the other hotels to choose to stay at the new Wivenhoe House Hotel. It also aids in the operational guidance for success that is traditionally missing when new hotels are formed.
The Wivenhoe House Hotel is a hotel in Colchester, Essex, which has established itself as a highly reputable hotel. It provides a significant amount of luxury and opportunity under one roof. Individuals choose the Wivenhoe for weddings, banquets, events, and a place to conduct business. The four-star hotel is surrounded by beautiful parkland and the ambiance of romance in the eighteenth-century charm. The rooms offer luxury suites, suites, deluxe rooms, and standard accommodations. The hotel has spent significant time building its philosophy for a modern brasserie, which is award-winning, excellent food, as well as providing traditional afternoon tea to the guest in the elegant lounges. The hotel’s success has been based heavily on the amenities and the methods that they employ for conducting business.
St James Court, A Taj Hotel, is a luxury hotel that operates with 338 guest rooms, of different luxury statuses. St. James Court is one of Britain’s finest hotel, and it provides a significant amount of English classic charm. The customs that St James Court, a Taj Hotel offers is very distinctive in its charm and services provided to the guest. The pedigree of employees has been created for over a century, and it is distinguishing. Providing a discreet Victorian masterpiece with its Shakespearean Courtyard, which is centrally located between the House of Parliament and Buckingham Palace. It is the center of the power of London. The elegant and crisp charm is reserved for the guests to ensure they have a memorable and pleasurable visit. The historical value of St James Court A Taj Hotel is reserved for the guest and served to them on a contemporary platter on each and every visit.
Mergers create synergy, which is where both parties benefit from the combined efforts, more so than the individual ones. The potential value associated with mergers provides a certain level of cash flow forms the operating structures. It provides the opportunity for an increase in the wealth of the shareholders. The value of the merger is dependent upon the expected synergistic benefits that will occur when Wivenhoe House Hotel and St James Court, A Taj Hotel merge. Sirower (1997) argued that the intended synergy will be realized when cash flows are increased, through either increased sales or reduced costs, or when the lowered discount rate on projected cash flows is reflected in the firms' pre-acquisition stock prices. The potential for synergistic benefits as presented is significant.
There are several types of mergers available. According to Napier (1989), there are three types of mergers to consider. “The first is an extension merger, where the acquirer allows the target to maintain its independent position as usual, even after the deal is completed. The second is a collaborative merger, where both the acquirer and the target mix their operations, assets, and cultures to achieve anticipated synergistic benefits. The final is a redesign merger, where the acquiring firm makes significant changes in the target's overall operational and managerial practices” (Napier, 1989). The merger of Wivenhoe House Hotel and St James Court, A Taj Hotel will consist of the first merger. It will allow the new hotel, Wivenhoe House Hotel to maintain its independent position as usual. The merger has been agreed upon to consist of 60% ownership which carries the controlling interest and the majority of the profitability. It creates less financial risk and a much higher probability of success as well as a faster potential profit.

Finance

In efforts to fund the merger and creation of the Wivenhoe House Hotel in Central London, the choice of a business angel will be utilized. There are advantages and disadvantages of doing business with the business angel funding. The advantages according to (Nibusinessinfo.co.uk)

Include the following:

• BAs are free to make investment decisions quickly
• no need for collateral - i.e. personal assets

• access to your investor's sector knowledge and contacts

• better discipline due to outside scrutiny
• access to BA mentoring or management skills
• no repayments or interest
The disadvantages according to (Nibusinessinfo.co.uk) include:

• not suitable for investments below £10,000 or more than £500,000

• takes longer to find a suitable BA investor
• giving up a share of your business
• less structural support available from a BA than from an investing company
Having weighed the potential positive and negative factors associated with the plans, it has been determined that the best option for Wivenhoe House Hotel in Central London is to utilize the opportunities that business angels provide.
The average cost per room at a luxury hotel is £127 a night. Having over 300 rooms available in the new facility will produce an average of £10,160 daily based upon 80% occupancy. In addition, the two banquet halls and three meeting rooms will generate additional revenue on a daily basis. The food available at the restaurant comes with an average of £20 a meal for lunch and dinner. The immediate revenue potential based upon 80% occupancy is £21,260. It presents the potential for a minimal £7,759,900 yearly revenue. This is a minimal expected revenue; the hotel is expecting to be far over 80% occupancy as soon as the doors open.
The hotel will utilize a business angel to obtain $5 million in our dollars to fund the new hotel merger. “Typically angel investor groups look for less than $5 million pre-money valuation and as low as $500,000; however the investment range varies by groups. Many times the different investment opportunities available to the investors at a given time are taken into consideration. That is, all other factors equal, $500,000 invested on a pre-money of $1.5 million is a more attractive percentage ownership for an investor than $500,000 invested on a pre-money of $3.5 million” (Koss). The Angel expects this return to be made over a five-year period with the interest and profits of $1 million. Therefore, the agreed return on investment is 1.2 million dollars over the next five years, starting in January 2017 and finishing in January 2021.
Looking at the first-class hotel cost and profits provides a basis for seeing the profitability potential of the Wivenhoe House Hotel. The franchising fees are similar to the yearly fees to pay for the business angel’s investment.
(Capital Sources and Financing)
Selecting the hotels for the merger of Wivenhoe House Hotel and St James Court, A Taj Hotel was determined strongly on what these two hotels represent in their market. The hotel affiliations were the best selection for creating a name for the new merger. The key to choosing the best use of the new property is completed with an appraisal and extensive market study. The appraisal is the evaluation of potential revenue and opportunity within the subject area. “Based on the locational and competitive factors determined to be influencing the subject property, recommendations are made in the study regarding market orientation, types of facilities required to cater to this orientation, and the appropriate class or level of quality for the facility” (Capital Sources and Financing). The characteristics determined in the financial consideration of this merger were created based on the success that Wivenhoe House Hotel and St James Court, A Taj Hotel has had independently. They provide equipment, expertise, and staff that will significantly aid in the merger process.
The merger of Wivenhoe House Hotel and St James Court, A Taj Hotel was a decision that was made after extensive research on the market for opening a hotel in central London. By choosing a merger, it provided significant savings in the initial startup cost as well as creating a basis for expertise and material. Starting a hotel from scratch requires that one builds the hotel name and during this process the potential for profitability is extremely unlikely. The Wivenhoe House Hotel will open its doors resting on the success and reputability of the other two hotels. In addition, it will have the staff expertise and equipment that Wivenhoe House Hotel and St James Court, A Taj Hotel has spent centuries building. It provides a strong basis for turning a profit immediately and finding the success they are striving for. The luxury hotel and amenities will sell themselves, and provide the necessary revenues to repay the business angel that was utilized for funding this merger. The expected success of the Wivenhoe House Hotel will require hard work, long hours, and dedication, but the revenue potential is endless and will be well worth the risk of the investment.

Work Cited

Capital Sources and Financing. HVS. 1995. Print.
Koss, Ann-Marie. “Best Practice Guidance for Angel Groups – Deal Structure and Negotiation.” New York University. 2007. Print.
Nibusinessinfo.co.uk,. 'Advantages And Disadvantages Of Business Angel Funding'. N.p., 2015. Web. 17 Mar. 2015.
Napier, N. K. “Mergers and acquisitions, human resource issues and outcomes: a review and suggested typology”. Journal of Management Studies, 1989, 26(3), 271-289. Print.
Sirower, M. L. “The Synergy Trap: How Companies Lose the Acquisition Game” New York: Free Press. 1997. Print.