The opening of a capsule hotel in New York City

Table of content

Table of content

List of illustrati

List of abbreviation

1 Executive Summar

2 Business Id
2.1 Vision
2.2 Mission
2.3 Internal & external Analysis (SWOT)
2.4 Competitive Analysis
2.5 Strategy
2.5.1 Short-term goals
2.5.2 Mid-term goals
2.5.3 Long-term goals

3 Structure of the company
3.1 Legal form
3.2 Entrepreneurial team
3.3 Organization
3.4 Milestones

4 Marketing P
4.1 Pricing
4.2 Communication
4.3 Distribution

5 Financials
5.1 Framework
5.2 Revenue
5.3 Cost
5.4 Financial plan
5.5 Plan-/Scenario-Calculation
5.6 Break even analysis

List of referenc

Illustration Page

Figure 1: Organization Chart

Figure 2: Logo Capsule York

Figure 3: Framework conditions

Figure 4: Revenue planning

Figure 5: Cost planning

Figure 6: Plan-/Scenario-Calculation

Figure 7: Chart Break-even-analysis

Figure 8: Details Break-even-analysis

List of abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1 Executive Summary

The way to rest during your stay in New York City (NYC) has just been redefined. With opening the first capsule hotel in Manhattan, resting and recharging one's batteries will become more convenient than it ever has.

On grounds of our vision “A New York City trip for an affordable budget” we want to cheapen and regenerate the way of staying in NYC. Our capsule hotel offers the most enjoyable sleepover in terms of price, comfort, amenities and flair.

Global trends such as minimalism, globalization, urbanization and shared economy offer the best preconditions a capsule hotel could possibly have. By opening our capsule hotel in the middle of the touristic center of New York City, we satisfy everything a NYC traveler on a budget would need.

Our short-term goals are 75% utilization of overnight capsules, a recommendation score of 8/10 and to offer one of the most economic places to stay in the area. Our long-term goals are increasing our profitability, being an attractive employer and a popular player in the local tourism industry.

The founding team consists of four highly educated people with international expe­rience from the most important sectors of the economy such as controlling, finance, purchasing, management and IT. Besides, multicultural experience, what is needed for the tourism industry is also available in the teams' competences.

In general, the hotel industry in NYC is already on a high level in terms of availa­bility and luxurious accommodation. What is still missing, is an affordable but still pleasant and modern place to stay. With our capsule hotel, we fulfill this need. The other target group we pursue are business women and men who need a space to rest during their work break. Therefore, in the meantime, while our regular customers are out to explore the city, we offer napping capsules for those who require an extra boost of energy during their stressful day at work.

Capsules are next generation bunk beds that come with the economic benefit of a bunk bed for both investors and visitors because little space is needed. Less space results in relatively little capital intensity because only 1.5m2 is needed per person compared to a regular hotel where approximately 15m2 per person is the average. The benefit of the economic use of space can, in parts, be directly forwarded to the customer to make it a win-win for both clients and investors. On the other side, compared to a general hostel, a capsule hotel provides way more privacy, comfort and style.

We have 60 capsules for our customers to offer. The price for spending a night in a capsule depends on the season but will cost between 60 and 80€ whereas napping will be possible for 15 to 35€.

Since we expect 75% utilization of nightly capsule stays and on average 37.5% utilization of nap capsules in the first year, our total expected revenue in 2020 is 1,876,000 €. Less utilization will of course also reduce our costs so that as a result we anticipate an EBIT of 1,509€ in the first year.

For initial investment we plan to invest about 2.6 million €. The whole loan is given by the German business development bank Kreditanstalt für Wiederaufbau (KfW). Within the next years, due to our expected growth of utilization because of intensive marketing investments, the capsule hotel will become more profitable so that the EBIT of the following years will be approximately 80,000€ in 2021, 266,000€ in 2022, 416,000€ in 2023 and 613,000€ in 2024.

As soon as our business runs stable and we achieve sustainable profitability, we dream of expanding to other districts of NYC as well as other cities in the western world.

2 Business Idea

We would like to establish a capsule hotel in New York City, United States of America.

New York City is a place with very high rents and little space. The tourism industry has been a major growth driver over the past six years, with total visitation increas­ing by approximately 20.1% since 2013. NYC & Company, the NYC's official convention and visitor's bureau, witnessed a 5.5% increase in total visitation in 2018. 65.2 million tourists are a new record. In 2017, only 61.8 million tourists went to NYC. This demonstrates the strength and stability of New York City as a global financial, media, entertainment, and cultural hub, which generates high lev­els of hotel room night demand (see Melendes-Lluch 2019).

A capsule hotel is a hotel with optimized space. Every guest has a cabin for sleep. The cabins are separated and closable with a curtain. They are stringed up in a cor­ridor on two stages on both sides of the corridor so you can walk in the middle. A capsule hotel has a separate locker room for suitcases and personal belongings. Close to the lockers, there are also changing rooms available.

In hostels guests share their bedroom with 16 to 20 people. They keep their things close to their beds in a locker in the bedroom. It is annoying for the sleeping guests if someone departures in the night. In comparison, in the capsule hotel nobody will be disturbed during the night because of the separate locker room and the beds are more private.

Because of the efficient usage of space, it is compared with other hotels quite cheap to offer a place to sleep in a capsule hotel. These low costs can be forwarded to our guests. The main target audience are students, backpackers and low budget travel­ers.

A bar is also included in the capsule hotel. The guests are able to relax after a long journey and get in touch with other guests, if they would like to. The prices are reasonable and the facility is modern and simple.

An additional offer of the capsule hotel is the possibility to nap. Scientists have pointed out that a nap raises the productivity considerably (see MITTAGSCHLAF 1999). For example, local employees have the possibility to book a capsule for 30 minutes. This is the right duration to sleep in the lunch time for an extra boost of energy for the rest of the day. For our team it is a possibility to raise the use of the capacity.

In a later period, our team could imagine more high-class proposals like a premium capsule with more space and an additional service. However, we want to start with simple offers, low prices and modern facilities.

2.1 Vision

Our slogan is: “A New York City trip for an affordable budget!” The primary aim of our team is the price leadership. It is possible for us to offer the best price on the market because of the efficient usage of space. Our Vision is to allow everyone a trip to the very impressive “Big Apple”. Besides, the location is also very important for both travelers and employees, so we want to be very central. In the long run we can imagine to build capsule hotels in several districts of New York City.

2.2 Mission

Our mission follows the vision. The slogan is:” We are the hotel with the best price on the market & with high comfort for everyone!” Like our slogan says, we want to be the hotel with the best price on the market. Our facilities are modern and simple. Our guests can relax in a feel-good atmosphere. Our location is very central. We work sustainable, we pay good salaries and save water by washing the laundry by an efficient method.

2.3 Internal & external Analysis (SWOT)

We like to identify our options, understand the market and figure out our strengths. The result is a SWOT-Analysis. We limit the points to four per class.

At first, we start with our strengths:

- Our location is very central. Our address is: 226 W 52nd St, New York, NY 10019, USA. We are in the main part of Manhattan. We are very close to the central park, the Times Square, the Museum of Modern Art and Madame Tussauds for example. Near the hotel the guests find a lot of restaurants, bars and attractions NYC offers.
- The next strength of our hotel is the price. The price leadership is our aim. We are able to reach this goal by using less space per person.
- Customers these days do not want to stay in a flophouse. Our style is mod­ern. This is the reason why our facilities are modern but simple. The furni­ture is mostly grey with less decoration.
- The last but not the least strength is our sustainability. We save water and energy by washing the laundry in a great wash house with sustainable tech­nics and we take responsibility for our staff. This is why we are paying a fair salary.

In the next part, we would like to examine are the weaknesses.

- To build a capsule hotel we have to invest a lot of money. This project is very capital-intensive. We have to buy the beds, build the bar, furnish the changing room and install sanitary rooms.
- Because of our excellent location, we have to pay a high rent. This raises our fix costs per month and it is harder for us to gain a profit.
- Our business is very dependent on the utilization. The location will help us to ensure a high utilization but if we have not enough reservations, we will lose money with our investment.
- Not a big problem for the most customers but for a few: Our capsules are standardized. Big guests higher than 2m might have less space in their bed.

This was the inner view. Now we like to identify the external circumstances. We start with the opportunities.

- From our perspective, there is a movement in minimalism in the world. Some people live in tiny houses to save resources. The movement is a criti­cal reflection on consumerism. People choose consciously less space for living to save the resources of the planet.
- The next opportunity is the globalization. The number of travelers raised in the last few years to 65.2 Million in 2018 to New York City (see USA Tipps 2019). This is a huge market potential.
- An also rising trend is the urbanization. People like to live in towns, sell their car and have all their shopping possibilities in a radius of 500m. A capsule hotel is an excellent option for people to explore the city in a central location
- We have found that shared economy is more important for most people. For example, people start to share their car. It is not anymore important for eve­ryone to own the car. This trend raises the chance of a good acceptance of our capsule hotel in New York City.

At the last point of the SWOT-Analysis we like to introduce the threats of our en­vironment.

- The hotel industry is highly dependent on the economic situation. If people earn less money, they will travel less. This will affect a reduced profit for our hotel.
- The next challenge is the political situation. In 2001 we have seen a crash of two planes with the World Trade Center. New York City is one of the most important cities of the United States. In this case it is an interesting aim for terrorism.
- We are as well dependent on the airfare rate. High flight prices reducing the number of travelers. But the number of travelers is important for our utili­zation.
- The last point of our threats is the development of our market. The prices for properties are the highest in the world. This could be affected fast rising rents for our hotel.

2.4 Competitive Analysis

For the competitive analysis, we used the website booking.com. To find out the competitors in our area we looked for hotels in a radius of one kilometer. The result is, our potential competitors in this radius are 127 hotels. The next step is sorting the hotels from the lowest price to the highest price. We concentrate our analysis on the first five offers with the lowest price. We list the hotels in the same way to enable the reader to compare the hotels.

The hotel with the lowest price is the “West Side YMCA”. It is a hostel. The eval­uation by 6,666 reviews is 7.4. It is listed with three stars. You get a single room with a bath to share. It is 900m away from our capsule hotel. The price per night and person in January 2020 is 65 Euro. You get an air conditioner, the entry to a gym, an elevator and Wi-Fi.

The second hotel on the list is the “Washington Jefferson at Times Square”. The evaluation by 1,894 reviews is a 7.8. It is listed with three stars. You get a single room with your own bath. It is 300m away from our capsule hotel. The price per night and person in January 2020 is 91 Euro. You get an air conditioner, the entry to a gym, room service and private parking space.

The third hotel on the list is the “City Rooms NYC - Times Square”. The evaluation by 2,070 reviews is an 8.9. It is listed with two stars. You get a small room with your own bath and a bunk bed. It is 400m away from our capsule hotel. The price per night and person in January 2020 is 93 Euro. You get an air conditioner, flat screens, left-luggage office and daily clothes cleaning service.

The fourth hotel on the list is the “Da Vinci Hotel”. The evaluation by 1,322 re­views is a 7.7. It is listed with three stars. You get a single room with your own bath and a queen-size-bed. It is 400m away from our capsule hotel. The price per night and person in January 2020 is 98 Euro. You get an air conditioner, flat screens, an own bar and Wi-Fi.

The fifth and last hotel on our list is the “Pod Times Square”. The evaluation by 15,215 reviews is an 8.5. It is listed with four stars. You get a single room with your own bath and a bunk bed. It is 900m away from our capsule hotel. The price per night and person in January 2020 is 98 Euro. You get an air conditioner, flat screens, an own bar and private parking space.

In conclusion, the cheapest competitors on the market have prices from 65 to 98 Euros. The evaluations are good in a range of 7.4 to 8.9. Some have their own bath in the room. Some have a single room with only one bed. Because of this the pro­posals of this hotels are more private than our capsule hotel. In this case we have to concentrate on an unbeatable price, modern furniture and a good atmosphere.

2.5 Strategy

Our idea comes from the Japanese market. Capsule hotels are well-established and very successful. Our plan is transferring this success to another market, through market development. We take the basic idea and adjust it for the New York City tourists and their requirements.

We split our goals into three categories. There are short term goals, which we try to achieve within one year, mid-term goals within the next 2-3 years and long-term goals within the next 4-5 years.

2.5.1 Short-term goals

In the first year our aim is to have an average utilization of min. 75% for the nights, 45% for napping 0,5h and 30% for napping 2h. We need this utilization on the one side to keep our work cost-covering, to reach an EBIT of 0% and on the other side to generate a lot of people to promote our capsule hotel and have a base for our further goals.

We compare ourselves to our competitors on booking.com, therefore it is necessary to have an evaluation of at least 8.0 on this website. The range of the evaluation of booking is from 1 to 10, whereby 10 stands for exceptional. The guests can evaluate the six categories position, cleanliness, comfort, price-performance ratio, equip­ment and employees. They could give a separate evaluation for all these categories and an additional overall evaluation, it’s not calculated from the evaluation of the categories (see Booking 2019) Our goal is based on the overall evaluation, 8 stands for very good and is the limit for the two highest filter criteria when possible cus­tomer are searching for a hotel on booking.de. The separate category evaluation allows us to get the detailed information on what we have to work on to get a better evaluation and satisfied customers.

Another point is our price per night, our aim is to deviate not more than 10% from the price of our cheapest competitor. We think 10% is a range, that customer will accept and where the price is not a criterion to not choose us if they are fluctuating between us and the competitor.

2.5.2 Mid-term goals

The first mid-term goal is a high employee satisfaction, a low sick leave and less fluctuation. Our employees are one part of our image to the outside world and sat­isfied employees will convey our customer a better comfort factor. The other point is, that we can rely on our employees, which means less work for us and more time for focusing on other important things like our marketing, advertising or expansion. In the next 2-3 years we will increase our average utilization overall (nights and napping) by 3-5% per year and mainly through the utilization we want to increase our EBIT. Until 2024 our EBIT should increase up to min. 15%. This is important to repay our credit and to have a good base for our expansion.

2.5.3 Long-term goals

In 4 to 5 years, we want to be named in the most well-known travel guides of New York City like Marco Polo, Lonely Planet and the low budget trip advisor of loving New York. Marco Polo mostly is a basic trip advisor for all target groups, lonely planet rather is for backpackers and people who are interest in detailed information and local insider tips, while the low budget trip advisor is, as its name says, for low budget travelers, who are our target group.

Our home market New York City should not be our only market, we could imagine to establish more capsule hotels in New York City and also to expand to other cities. At the moment, it is not yet definite which cities, but the first expansion to other cities should have similar conditions like our home market.

To support this expansion, we could imagine to change our Organization from an LLC to a Corporation. On the one side, we get more capital for investments and on the other we give people, who are interested in our system and who like our mini­malistic lifestyle, a chance to support us.

3 Structure of the company

3.1 Legal form

The Capsule hotel will be founded as a Limited Liability Company (LLC). The primary point of this decision is the liability. The founding team is not personally liable for the company's debts and liabilities and is limited up to the capital contri­bution. The amount of the capital contribution can be adapted to the current situa­tion of the company. Capital contribution can be made in money or assets. The capsule hotel will start with a cash capital contribution of 20,000.00 Euro. Further advantages are:

- Taxation as a business partnership: no taxes of the company’s profit, tax will be filed in the tax return of the owners (personal income tax)
- Up to 20% tax allowance of the profit
- No restriction on the number of members.
- Full commitment and clarification of the owners due to articles of organiza­tion and operating agreement.
- Less annual paperwork as a corporation.
- Flexibility in sharing profits.

As a forecast: After the first successful years the LLC can be converted easily to a corporation. Due to this, the company could trade shares to generate capital for fur­ther expansions or investments.

3.2 Entrepreneurial team

The Capsule York will be founded by Svenja Withake, Carina Andree, Tim Kösling and Stefan Gagern. Everyone is highly educated through a Master of Business Ad­ministration and has experience for crucial areas of the business. Thus, an optimal combination of theoretical and practical skills is given.

The entire founding team are highly motivated and very successful in their current jobs. Through this business the founding team will reach a new level of personal success and motivation.

Svenja Withake is a senior controller and brings in many years of experience in corporate controlling and accounting.

Carina Andree's expertise is implementation and optimization of IT - Systems as well as multi-cultural experience.

Tim Kösling is a finance expert with high level knowledge of securities and share trading. He has been working for a savings bank for a long time.

Stefan Gagern as a Head of Purchasing of an industrial company has long term experience in procurement and negotiating.

The founding team covers almost all of the needed knowledge to start up a capsule hotel. There is a lack of special knowledge about the hotel branch. This issue will be solved through an external consultant within the first periods. In addition, market research will complete the preparation.

Due to the wide range of knowledge and experience of each member of the found­ing team there is only a small risk to lose knowledge and experience if a member will leave the company. In this case the remaining members will be capable to cover the lack during the transition period.

3.3 Organization

On basis of the founding team will work as an employee for the company the or­ganizational structure is strongly oriented to the skills and experience of the found­ing team. Therefore, the organization is split in four divisions: administration, op­erations, infrastructure and IT / Marketing (see Figure 1).

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Organization Chart

Administration manager will be responsible for all finance issues e.g. contract man­agement, loans, accounting and controlling of the company performance. HR con­tains mainly hires and administrative issues of the staff.

The day-to-day business is centralized in the operation division. It ensures that booking gets organized, guest will be received and cared for.

The procurement of all needed equipment and services as well as maintenance and cleaning of the facilities are elements of the infrastructure division.

IT and Marketing will work close together and thus it is combined in one division. Most of the marketing actions will be set online and a high online presence will be crucial for the success of the company. Finally, the division manager is in charge of the implementation of all IT - systems and - devices.

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