Feasibility Studies
Hotel Feasibility Study
A strong tourism market does not by itself make a hotel project feasible. Investors need to know whether the proposed location, positioning, room mix, competitive set, operator, development cost and operating structure can produce acceptable returns at realistic occupancy and room-rate assumptions.
A hotel feasibility study tests that investment case before land, design, brand, operator or financing commitments constrain the available options.
The decision the study should support
The central question is whether a defined hotel or resort concept can attract enough demand, at an achievable average daily rate, to support operating costs, fixed charges and the required return on development or acquisition capital.
The answer may be to proceed, change the room count, reposition the hotel, select a different segment, renegotiate an operator arrangement, alter the food-and-beverage offer, revise capex, phase the development or stop.
The study is relevant for new hotels and resorts, acquisitions, conversions, repositioning, extensions, operator or brand selection and lender or investment-committee review.
Demand is segmented, seasonal and location-specific
Hotel demand should be split into the segments that actually drive room nights: leisure, corporate, groups and meetings, long-stay, government-related demand, airline or crew business, and other project-specific sources. Each segment can have different booking windows, length of stay, rate sensitivity and seasonal patterns.
Source markets also matter. A property dependent on a narrow group of international markets carries a different demand risk from one with diversified regional, domestic and corporate demand. Air connectivity, events, school calendars, climate and business travel can alter the monthly pattern.
Dubai's 2025 performance illustrates why market-level evidence should be used as context rather than copied into a project forecast. DET reported 19.59 million international overnight visitors, average hotel occupancy of 80.7%, an ADR of AED579 and RevPAR of AED467 for 2025. A proposed hotel still needs its own competitive set, segmentation and stabilisation assumptions; citywide averages do not establish what a new property can achieve.
Competitive set and positioning
The competitive set should reflect hotels that compete for the same guest, location, price point and occasion rather than a list of nearby properties.
Benchmarking should consider room inventory, quality, amenities, brand, opening date, location, room size, food and beverage, meeting space, leisure facilities, distribution, pricing and observed occupancy or market-share data where available. Future supply must also be mapped because a project may open into a different competitive environment from the one observed at feasibility stage.
The study should explain why the proposed hotel would win demand. If the investment case relies on a rate premium, that premium needs a proposition capable of supporting it.
Occupancy, ADR and RevPAR
Occupancy, average daily rate (ADR) and revenue per available room (RevPAR) should be built from the demand model, not inserted as independent targets.
The forecast normally starts with available rooms, segment demand, seasonality and market penetration. Rate assumptions are then developed by segment and period, allowing for weekday/weekend patterns, peak events, low season, contracted corporate rates, group pricing and distribution mix.
RevPAR combines occupancy and ADR, but it is not the full hotel economics. The study should also model food-and-beverage revenue, meetings and events, spa or leisure income, other operated departments and any rental or ancillary income relevant to the property.
A sensitivity model should show what happens if stabilised occupancy takes longer, ADR is weaker, market supply grows faster or distribution costs increase.
Operator, brand and commercial structure
Operator and brand choices can affect demand generation, distribution, standards, fees, capex and owner control. The feasibility study should identify which assumptions are attributable to the brand or operator and which belong to the market or asset.
Management fees, incentive fees, reservation and marketing charges, loyalty costs, technical-service requirements and brand-standard capex should be included where applicable. For franchise or independent structures, the alternative cost and capability requirements should also be considered.
The analysis should not assume that a recognised brand automatically produces a premium. Any premium should be tied to distribution strength, target segments, positioning and evidence from the relevant competitive market.
Development and operating economics
Hotel development economics include more than cost per room. Land, construction, professional fees, furniture, fixtures and equipment, operating supplies and equipment, pre-opening expenses, working capital, finance costs, contingencies and owner costs can all affect the investment.
The operating model should translate departmental revenues into payroll, cost of sales, utilities, maintenance, sales and marketing, administration and other operating expenses. Fixed charges, reserve requirements, insurance and property-level obligations should then be separated to show cash flow available to the owner.
For acquisitions or repositioning, the model may also include refurbishment, closure or disruption during works, transition costs and the time required to achieve the revised positioning.
Speak with an adviser
Defined mandates on fixed fees, ongoing counsel on retainer, and customised scopes for complex requirements.
Methodology and evidence base
A hotel feasibility study typically:
- defines the site, concept and investment decision;
- analyses tourism, corporate and project-specific demand generators;
- establishes the relevant competitive set and future supply;
- segments demand and models seasonality;
- forecasts occupancy, ADR and RevPAR;
- models departmental revenue and operating costs;
- tests operator, brand and development assumptions;
- builds investment returns and funding requirements; and
- runs base, upside and downside scenarios.
Current official tourism data, hotel performance data, operator information, site evidence and development-cost advice should be dated and reconciled. Historical citywide performance should never be treated as a guaranteed stabilised result for a new hotel.
What the client receives
Depending on scope, outputs can include an executive decision memo, demand and competitive-set assessment, occupancy/ADR/RevPAR forecast, room and ancillary revenue model, operator or brand scenario analysis, development and operating economics, financial model, sensitivities, risk register and recommendation.
Go, revise or no-go
A go conclusion should identify the occupancy, ADR, cost and capital conditions required to meet the investment criteria. A revise conclusion may change positioning, room count, facilities, operator, brand, capex or phasing. A no-go conclusion should show which demand or economic assumptions are not supported.
The purpose is to understand whether the hotel can earn its required return after the market, operating structure and capital intensity are tested together.
Why EXMC
Evidence EXMC already publishes about its own work, used here only within its documented scope.
Representative examples published by EXMC. Client identities are generalised to maintain confidentiality. Published work does not by itself establish permission to perform activities that require specific regulatory authorisation.
Frequently asked questions
What does a hotel feasibility study include?
It normally includes demand segmentation, source markets, seasonality, the competitive set and pipeline, occupancy, ADR, RevPAR, room and ancillary revenues, operating costs, operator or brand assumptions, development cost, cash flow, returns and downside scenarios.
How are demand, seasonality and the competitive hotel set assessed?
Demand is split by the segments and source markets relevant to the location and concept, then mapped across the year. The competitive set is selected based on guest, positioning, price and location, with future hotel openings included where they can affect the proposed property's trading period.
How are occupancy, ADR and RevPAR assumptions developed?
Occupancy is derived from room supply, segmented demand and expected market penetration. ADR is built by segment and season using comparable pricing and positioning. RevPAR is then calculated from occupancy and ADR and tested under slower stabilisation and weaker-rate scenarios.
How do operator, brand and development-cost choices affect returns?
They can change demand generation, fee structures, standards, distribution, capex and owner control. The financial model should compare the relevant alternatives and include the full cost of the proposed operating and brand structure rather than assuming a brand premium.
Discuss your project
If you are evaluating a hotel, resort, acquisition, conversion or repositioning in the UAE, arrange a confidential discussion about the assumptions the feasibility study needs to test.