capbudgetingcurrent - CAPITAL BUDGETING A.J.Singh What is...

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CAPITAL BUDGETING A.J.Singh
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What is Capital Expenditure? Expenditure on fixed assets that are large in nature and yield returns beyond one year Expenditure on replacing furniture Expenditure on replacing carpeting Expenditure on replacing computers Expenditure on renovating rooms Expenditure on expansion of hotel Expenditure on providing safety features on property Expenditure on complying with environmental regulations Expenditure to update technology YOU GET THE IDEA! YOU GET THE IDEA!
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A more systematic categorization would be as follows: FIVE MAJOR SECTORS IN A HOTEL 1. GUEST ROOM OR SUITE Sleeping area Bath area Televisions 2. PUBLIC AREAS Area A: Corridors,Lobby/Front Desk, Public restrooms Area B: Meeting areas,Board room, Pre function areas Area C :Restaurant, Lounge Lobby bar
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A more systematic categorization would be as follows: FIVE MAJOR SECTORS IN A HOTEL 3. BUILDING GENERAL Office and administration Parking Pool and Spa Exterior painting Laundry and housekeeping Kitchen Exterior elements
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A more systematic categorization would be as follows: FIVE MAJOR SECTORS IN A HOTEL 4. BUILDING SYSTEMS Roof Elevators Plumbing system and related equipment Electrical HVAC 5. TECHNOLOGY Front office system Accounting system Point of sale system Telecommunication/Internet
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COMP CAP EXP 1983-93 FULL SERVICE HOTELS 40% ADA 3% BLDG 15% TECH 5% OTHER 7% OTH PUB 15% 15%
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CAP EXPENDITURE 1988-1998 33% OTH PUB 19% BLDG 16% 13% TECH 9% ADA 6% OTHER 4% OTH PUB BLDG TECH ADA OTHER FULL SERVICE HOTELS
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CAP EX 1983-1993 LIMITED SERVICE HOTELS Rooms and Corridor 52% Building 30% Technology 8% Other 6% Other Public space 4%
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CAP EXPENDITURE 1988-1998 29% OTH PUB 13% BLDG 24% 10% TECH 8% ADA 5% OTHER 11% OTH PUB BLDG TECH ADA OTHER LIMITED SERVICE HOTELS
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Summary of Significant Findings: CapEx Studies 1. Strong Correlation between property age and CapEx as a percentage of revenue. 0-10 years:2 to 7% of total revenue CapEx 20-25 years: as high as 15% 2. Average CapEx for Limited Service hotels: 5.5% of total revenue. 3. Average CapEx for Full Service hotels: 6.1%
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IMPORTANCE OF CAPITAL EXPENDITURE DECISIONS Lodging Investment is fixed asset intensive Consumer tastes and preferences changing and updating periodically is vital to keep product fresh and competitive Fixed assets have limited life span Technology is a new factor that will impact capital expenditure in hotels Require large investment of capital Safety issues and government regulations
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BEVERLY HILLS, Calif., Sep 24, 2001 (BUSINESS WIRE) -- As part of its ongoing commitment to "managing for recovery," Hilton Hotels Corp.
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This note was uploaded on 09/10/2010 for the course IAH 001 taught by Professor Wang during the Spring '10 term at Michigan State University.

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capbudgetingcurrent - CAPITAL BUDGETING A.J.Singh What is...

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