Most owners commission a feasibility study once the land is under contract and the architect already has a sketch. By then the study is often asked to confirm a decision rather than test one. The result is a polished document that reads well in a lender pack and says very little about whether the hotel will earn its capital back.
A real feasibility study is a decision tool. It should be able to change the project: the key count, the F&B offer, the operating model — or the decision to build at all. Here is what it needs to contain to do that job.
1. A demand case built on the right comp set
Generic studies benchmark against whatever hotels sit within a few kilometres. For a boutique or lifestyle property that is usually the wrong peer group. Your guest is cross-shopping by experience and price point, often across a region — a design-led resort on one coast against another three hours away.
- Define a competitive set of five to eight properties your target guest would genuinely consider, with their positioning, key counts and F&B offers documented.
- Track occupancy, ADR and RevPAR for that set across seasons — not just annual averages. Boutique demand is often sharply seasonal.
- Estimate your fair share and the penetration you can realistically reach in years one to three, using MPI, ARI and RGI as the language for it.
- Separate demand segments: leisure transient, groups and buy-outs, weddings, corporate, and local F&B trade. Each behaves differently and is priced differently.
2. A facility program, not just a key count
The facility program is the bridge between concept and P&L: number and mix of keys, room sizes, F&B outlets and covers, wellness, meeting space, and back-of-house. This is where boutique projects most often go wrong, because each element carries a fixed operating cost regardless of how many guests use it.
- Test two or three key-count scenarios, not one. The difference in GOP margin is often larger than owners expect.
- Size F&B to the demand that will actually use it — in-house guests, outside covers and events — not to the ambition of the renderings.
- Program BOH, staff facilities and, in remote locations, staff housing from day one. They are expensive to add later and impossible to ignore.
3. An honest view of F&B economics
Rooms typically produce the highest departmental margin in a hotel; restaurants and bars produce far less, and in many boutique properties F&B is a deliberate amenity rather than a profit centre. That can be the right decision — a strong restaurant drives rate, length of stay and brand — but it should be a decision, modelled explicitly, not an accident discovered in year two.
A good study states whether each outlet is expected to make money, break even or be carried by rooms, and compares self-operating against leasing or partnering with an established restaurant operator.
4. A pro forma that survives stress testing
The pro forma should follow USALI structure so it can later be compared line-by-line with actual operating statements. Then it should be broken on purpose.
| Scenario | What changes | What it reveals |
|---|---|---|
| Base case | Expected ramp-up and stabilized ADR and occupancy | Whether the concept works as designed |
| Slow ramp | Stabilization one to two years later than planned | Working-capital needs and covenant risk |
| Rate pressure | ADR below target after the opening period | How dependent returns are on premium pricing |
| Cost overrun | Development budget above plan | Equity exposure and return sensitivity |
| Downturn | Demand shock in a stabilized year | Debt service coverage and the floor case |
Include a realistic FF&E reserve, pre-opening budget and working capital — three items often left thin in early models. And show both unlevered and levered returns so owners and lenders are reading the same story.
5. The operating structure
Feasibility should recommend how the hotel will be run: an independent operator, a branded management agreement, a franchise with a third-party manager, or owner-operated with advisory support. Each changes the fee load, distribution cost, control over design and staffing, and the property's exit value. These are commercial terms that belong in the model, not a negotiation left until after construction starts.
6. A clear recommendation
The final section should say what the evidence supports: proceed as planned, proceed with a changed program, or stop. The most valuable feasibility work we have been part of changed the project — fewer, larger keys; a smaller restaurant and a stronger bar; a phased opening. Occasionally the right answer is not to build. That conclusion is worth far more before the first construction draw than after it.
“A feasibility study earns its fee when it changes a decision. If it could never have said no, it was not a feasibility study.”
This work sits within our strategy & concept services, led directly by Gabriel Holt-Rusmore.