School of Social Sciences
Master in Business Administration MBA
Postgraduate Dissertation
Business Plan for a Bungalow Complex in Chalkidiki, Greece
Stavroula Gatsou
Supervisor: Lyda Kyrgidou
Patras, Greece, July 2019
© Hellenic Open University, 2017 The content of this thesis/dissertation along with its results is owned by the Hellenic Open University and his/her author, where each of them has the sole and exclusive right to use, reproduce, and publish it (totally or partially) for educational or research purposes, with the obligation to make reference to the thesis’s title, the author’s name and to the Hellenic Open University where the thesis / dissertation was written.
Business Plan for a Bungalow Complex in Chalkidiki, Greece
Stavroula Gatsou
Supervising Committee
Supervisor: Co-Supervisor:
Dr. Lyda Kyrgidou Dr. Maria Fotaki
Hellenic Open University Hellenic Open University
Patras, Greece, July 2019 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
“I would like to express my gratitude to my supervisor, Dr. Lyda Kyrgidou, for her guidance throughout the writing process. I am also highly indebted to Halkidiki Tourism Organization and Mr. Emmanouil Lagarias for the useful information that they kindly provided. I could not omit to mention the contribution of Mr. Leonidas Sakkas to the collection of significant data.
Finally, this dissertation would not have been finished without the tremendous support of my parents and the valuable help of my sister.
A special thank you to my man, who has supported and encouraged me in all stages of my professional career.”
Postgraduate Dissertation Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
Abstract
The purpose of this master thesis is to present the business plan for the establishment and operation of a bungalow complex in Chalkidiki, Greece. Specifically, the study examines all essential scopes for the successful implementation of this investment project in a highly competitive environment in the touristic region of Kassandra. The proposed business is assumed to utilize private capital and be managed by its own stakeholders.
From interviews with owners of the hotel industry to sources available in published or electronic databases, the data collected in this dissertation originate from both primary and secondary research. Their evaluation follows the principle of comparative analysis, by utilizing them to develop a realistic scale for the estimation of the entire project.
In the first part of the dissertation, the historical background and theoretical framework of business planning are described. The theoretical study is completed by collecting statistical information for the tourism sector at a global, national and regional scale in order to recognize the external environment of the project.
The second and main part of the study consists of the presentation of the business plan. In particular, all key perspectives of the investment project are examined within this context, starting with determining the specific location of the complex and defining the architectural concept and facilities , continuing with the selection of effective marketing strategies and the analysis of the competitive environment in combination with a SWOT- Analysis, and ending with the financial performance evaluation of the proposed business. As there are no specified cost benchmarks for construction in hotel industry in Greece, the initial investment budget is based on the preliminary designs developed in this study.
Finally, a general timeline for the implementation of this investment project is developed in order to present the milestones and critical stages of the project process.
Keywords:
Business Plan, Bungalow Complex, Chalkidiki, Greece
Postgraduate Dissertation Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
Περίληψη
Στόχος της παρούσας διπλωματικής εργασίας είναι η παρουσίαση του επιχειρηματικού σχεδίου για την ίδρυση και λειτουργία ενός συγκροτήματος μπάνγκαλοου στη Χαλκιδική. Ειδικότερα η μελέτη εξετάζει όλους τους βασικούς τομείς για την επιτυχή υλοποίηση αυτού του επενδυτικού έργου σε ένα ιδιαίτερα ανταγωνιστικό περιβάλλον στην τουριστική περιοχή της Κασσάνδρας. Η προτεινόμενη επιχείρηση θεωρείται ότι θα χρηματοδοτηθεί από ιδιωτικό κεφάλαιο και η διαχείρισή της θα εκτελείται από τους ίδιους επενδυτές.
Τα δεδομένα που συλλέγονται σε αυτή τη διατριβή προέρχονται από πρωτογενή και δευτερογενή έρευνα, χρησιμοποιώντας από συνεντεύξεις με ιδιοκτήτες ξενοδοχείων ως δημοσιευμένες ή ηλεκτρονικές βάσεις δεδομένων. Η αξιολόγησή τους ακολουθεί την αρχή της συγκριτικής ανάλυσης, καθώς με την αξιοποίησή τους αναπτύσσεται μια ρεαλιστική κλίμακα ή βάση για την εκτίμηση του συνόλου του έργου.
Στο πρώτο μέρος της διατριβής περιγράφεται το ιστορικό υπόβαθρο και το θεωρητικό πλαίσιο των επιχειρηματικών σχεδίων. Η θεωρητική μελέτη ολοκληρώνεται με τη συλλογή στατιστικών στοιχείων για τον τουριστικό τομέα σε παγκόσμια, εθνική και περιφερειακή κλίμακα, προκειμένου να αναγνωριστεί το μακροπεριβάλλον του έργου.
Το δεύτερο και κύριο μέρος της μελέτης αποτελείται από την παρουσίαση του επιχειρηματικού σχεδίου. Συγκεκριμένα εξετάζονται όλες οι βασικές παράμετροι του επενδυτικού σχεδίου, ξεκινώντας από τον προσδιορισμό της τοποθεσίας του συγκροτήματος και τον καθορισμό της αρχιτεκτονικής και των εγκαταστάσεων, συνεχίζοντας με την επιλογή αποτελεσματικών στρατηγικών μάρκετινγκ και την ανάλυση του ανταγωνιστικού περιβάλλοντος σε συνδυασμό με ανάλυση SWOT, και τελειώνει με την αξιολόγηση της οικονομικής απόδοσης της προτεινόμενης επιχείρησης. Δεδομένου ότι δεν υπάρχουν καθορισμένα κριτήρια αναφοράς για το κόστος κατασκευής ενός ξενοδοχείου στην Ελλάδα, ο προϋπολογισμός της αρχικής επένδυσης βασίζεται στα προκαταρκτικά σχέδια που αναπτύχθηκαν στη μελέτη αυτή.
Postgraduate Dissertation Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
Τέλος, αναπτύσσεται ένα γενικό χρονοδιάγραμμα για την υλοποίηση αυτού του επενδυτικού σχεδίου προκειμένου να παρουσιαστούν τυχόν ορόσημα και κρίσιμα στάδια.
Λέξεις – Κλειδιά
Επιχειρηματικό σχέδιο, Συγκρότημα μπάνγκαλοου, Χαλκιδική, Ελλάδα
Postgraduate Dissertation Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
Table of Contents
List of Figures ...... 1
List of Tables ...... 3
List of Abbreviations & Acronyms ...... 5
1. Theory of Business Planning ...... 6
1.1. Theoretical Background ...... 6
1.2. Theoretical Framework ...... 8
1.3. Success and Risk Factors ...... 9
2. The Global Tourism Product ...... 11
3. Macro-environmental Analysis ...... 15
3.1. Tourism in Greece ...... 15
3.2. Central Macedonia as a destination ...... 17
3.2.1. Tourism in Chalkidiki ...... 22
4. Microanalysis – The Business Plan ...... 28
4.1. Executive Summary ...... 28
4.2. Company Description ...... 30
4.2.1. The Business Idea ...... 30
4.2.2. Location and Architectural Concept ...... 31
4.3. Marketing Plan ...... 42
4.3.1. Market positioning ...... 42
4.3.2. Product policy ...... 42
4.3.3. Pricing Policy ...... 43
4.3.4. Distribution Policy ...... 43
4.4. Competitive Analysis ...... 47
4.5. SWOT Analysis...... 49
Postgraduate Dissertation Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
4.6. Financial Plan ...... 51
4.6.1. Investment planning ...... 52
4.6.1.1. Land purchase ...... 52
4.6.1.2. Construction costs ...... 53
4.6.2. Financial planning ...... 56
4.6.2.1. Total revenues ...... 56
4.6.2.2. Cost of Goods Sold ...... 62
4.6.2.3. Depreciation expenses ...... 64
4.6.2.4. Selling expenses ...... 64
4.6.2.5. Administrative expenses ...... 64
4.6.2.6. Insurance costs ...... 64
4.6.2.7. Income Tax ...... 65
4.6.2.8. Income Statement ...... 65
4.6.2.9. Cost of Equity ...... 67
4.6.2.10. Incremental Annual Cash Flow ...... 67
4.7. Timeline ...... 72
5. Conclusions ...... 74
6. Theoretical and Managerial Implications ...... 77
7. Recommendations for Further Research ...... 80
Bibliography ...... 82
Appendix A: Halkidiki Survey 2018 ...... 87
Appendix B: Preliminary Designs of the Bungalow Complex ...... 101
Appendix C: Quantities and Costs of Structural Elements ...... 103
Postgraduate Dissertation Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
List of Figures
Figure 1. 1: Article published at The New York Times about Competition for Best Business Idea ...... 7 Figure 1. 2: The 7 Key Elements of a Business Plan ...... 9 Figure 2. 1: Number of international arrivals in 2017 published at (The World Bank Group, 2017) ...... 11 Figure 2. 2: Total Contribution of Travel & Tourism to GDP (WORLD TRAVEL & TOURISM COUNCIL, 2018) ...... 12 Figure 2. 3: Contribution of Travel & Tourism to Employment (WORLD TRAVEL & TOURISM COUNCIL, 2018) ...... 13 Figure 3. 1: Total Contribution of Travel & Tourism to Greek GPD (WORLD TRAVEL & TOURISM COUNCIL, 2018) ...... 15 Figure 3. 2: Contribution of Travel & Tourism to Greek Employment (WORLD TRAVEL & TOURISM COUNCIL, 2018) ...... 16 Figure 3. 3: Origin of international visitors per Region in 2017 (Lamprou & Ikkos, 2018) ...... 19 Figure 3. 4: Number of receipts of international visitors per Region in 2017 (Lamprou & Ikkos, 2018) ...... 20 Figure 3. 5: Spend per Visit or Overnight Stay for 3 of the most important markets ...... 21 Figure 3. 6: Map of Chalkidiki (Google Maps, n.d.) ...... 22 Figure 3. 7: Traveler type and age (American College of Thessaloniki, 2019) ...... 23 Figure 3. 8: Countries of region of Chalkidiki’s tourists (American College of Thessaloniki, 2019) ...... 24 Figure 3. 9: Number of receipts per visit of tourists in Chalkidiki (American College of Thessaloniki, 2019) ...... 25 Figure 3. 10: Satisfaction measurement factors of tourists in Chalkidiki (American College of Thessaloniki, 2019) ...... 26 Figure 4. 1: Lot Coverage in Kallithea, Chalkidiki (e-ΠΟΛΕΟΔΟΜΙΑ Γεωγραφική Αναζήτηση Πληροφοριών, 2019) ...... 32 Figure 4. 2: Visualization of the bungalow complex ...... 41
Postgraduate Dissertation 1 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
Figure 4. 3: Project timeline ...... 73
Postgraduate Dissertation 2 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
List of Tables
Table 3.1: Distribution of Visits, Overnights and Receipts of Inbound Tourists per Region, 2017 ...... 18 Table 4. 1: Potential land and its main properties in Afitos (Google Maps, n.d.) ...... 34 Table 4. 2: Advantages and disadvantages of this specific land in Afitos ...... 34 Table 4. 3: Potential land and its main properties in Kallithea (Google Maps, n.d.) ...... 35 Table 4. 4: Advantages and disadvantages of this specific land in Kallithea ...... 36 Table 4. 5: Potential land and its main properties in Kryopigi (Google Maps, n.d.) ...... 36 Table 4. 6: Advantages and disadvantages of this specific land in Kryopigi ...... 37 Table 4. 7: Potential land and its main properties in Polychrono (Google Maps, n.d.) ...... 38 Table 4. 8: Advantages and disadvantages of this specific land in Polychrono ...... 38 Table 4. 9: Potential land and its main properties in Pefkochori (Google Maps, n.d.) ...... 39 Table 4. 10: Advantages and disadvantages of this specific land in Polychrono ...... 40 Table 4. 11: Overview of main competitors and their services ...... 48 Table 4. 12: SWOT-Analysis ...... 50 Table 4. 13: Investment Cost ...... 55 Table 4. 14: Monthly occupancy rate in Central Macedonia (Trade and Services Statistics Division, 2017) ...... 56 Table 4. 15: Average Occupancy in hotel facilities in Kassandra in 2008 – 2017 (Trade and Services Statistics Division, 2017) ...... 56 Table 4. 16: Estimated occupancy rates during 2015 - 2034 ...... 57 Table 4. 17: Sales revenues during 2025 - 2034 ...... 58 Table 4. 18: Total revenues during 2025 - 2034 ...... 58 Table 4. 19: Cost of Goods Sold during 2025 - 2034 ...... 59 Table 4. 20: Electricity monthly costs during 2025 - 2034 ...... 59 Table 4. 21: Water monthly costs during 2025 - 2034 ...... 60 Table 4. 22: Annual Operation costs during 2025 - 2034 ...... 60 Table 4. 23: Food and Beverage costs during 2025 - 2034 ...... 61 Table 4. 24: Depreciation value per year ...... 64 Table 4. 25: Income Statement during 2025 - 2034 ...... 66 Table 4. 26: Net Working Capital during 2025 - 2034 ...... 69
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Table 4. 27: Net Cash Flows during 2025 - 2034 ...... 69
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List of Abbreviations & Acronyms
CAPM Capital Asset Pricing Model CGS Cost of Goods Sold DDM Dividend Discount Model ESPA Europe Strategy Partnership Agreement GDP Gross Domestic Product GIS Geographic Information System GP General Partnership HTO Halkidiki Tourism Organization IRR Internal Rate of Return NPV Net Present Value NWC Net Working Capital PD Presidential Degree PI Profitability Index SETE Association of Greek Tourism Enterprises (Greek: Σύνδεσμος Ελληνικών Τουριστικών Επιχειρήσεων) SWOT Strengths / Weaknesses / Opportunities / Threats URL Uniform Resource Locator USP Unique Selling Proposition WEF World Economic Forum
Postgraduate Dissertation 5 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
1. Theory of Business Planning
1.1. Theoretical Background
Business planning can be defined as a process used by companies in order to define the financial consequences of a business or a project, identify any possible risk factors and assess their chances of success more accurately. Combined with thorough analysis of these aspects, a brief description of all marketing, financial and operational measures aimed at achieving all strategic goals constitute the overall Business Plan.
The Business Plan is regarded as a valuable management tool for both start-up companies as well as established firms. In the former, it states the route which needs to be followed; in the latter, it is subject to continuous evaluation and adaptation based on market trends (BusinessDictionary, 2019). Its significance should not be underestimated, as bank institutes often require thorough documentation of the business nature and objectives prior to approving any funding programs.
Although business planning could originally have occurred around the time when the first companies started being established- many of which dated earlier than the 9th century- there is, in fact, no written evidence that a certain development study took place in advance of a firm’s inception. Documented history of business planning began later, in the 18th century, when Pierre Samuel, Sieur du Pont de Nemours, decided to leave France with his family in 1800s due to the French Revolution. His plan to construct a gunpowder mill in North America could only be supported by external capital, which motivated him to write letters to potential investors in order to provide them with information about investment payoffs. The DuPont company was founded in July 1802, underwent a rapid expansion and by 1850 had managed to own the largest share of gunpowder suppliers to the U.S. military (Wikipedia, 2005).
On the 19th century, business plans gained ground in the enterprise world mainly as an innovative concept rather than methodical planning. Competitions for the best ideas (i.e. in terms of cost effectiveness) became very common during the 1800’s (Hal, 2017). The
Postgraduate Dissertation 6 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece following article, published in June 1874 in New York Times, is a typical case of inventing a plan which guarantees high quality of butter at the lowest price possible (The New York Times, 1874).
Figure 1. 1: Article published at The New York Times about Competition for Best Business Idea
The popularity of such competitions has not decayed throughout the centuries. On the contrary, several entrepreneurial organizations promote business plans of startups almost on a yearly basis and provide not only cash prizes but also guidance, infrastructure and general support. The most well-known contemporary contest is the „Rice Business Plan Competition“, which is initiated by the Rice Alliance for Technology and Entrepreneurship and offers the highest award of $ 1,500,000 (Rice, 2018).
Notably, the form of a business plan has been influenced by the tools available in each century. From the typewriter - essays and schemes designed by hand, to specialized applications or software which automatically produce plan layouts, tools have incurred
Postgraduate Dissertation 7 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece significant amendments to certain features of business planning, such as level of detail, simplified supervision of target accomplishment (Hal, 2017).
Entrepreneurs acknowledge the importance of careful planning and invest time and money on developing a solid but also adjustable plan. Moreover, a brand-new business sector has arisen precisely because there has been an increasing focus on strategic planning. There are companies which offer consulting services not only for newcoming or newly-found but also for established organizations. In management study programs, students are encouraged to structure their own business plans so as to assess the fundamental strategic aspects of an investment, i.e. cost, risk and chances, marketing.
Even for a single-person firm this „preparatory“ plan can prove extremely insightful, substantially contributing to its future success. In other words, business plans, regardless of their extent, have become a necessity in any competitive environment.
1.2. Theoretical Framework
Definition and analysis of the business concept and the business strategy to accomplish long-term objectives are the main aspects of business planning. A solid strategic plan requires a number of assessments and thorough study of different parameters, such as size and development rate of the market and its business competition, environmental analysis or evaluation of chances and limitations. In addition, a carefully designed concept should illustrate business goals, points which make it stand out from its competitors (USPs), and benefits procured for its customers.
The business plan spans a certain time frame, normally three to five years, and can be used not only as a monitoring tool for managers, but also as a means of tracking information for potential business partners, shareholders or investors.
The structure of a business plan depends heavily on the business sector and the requirements of each organization. However, there is a common framework, which applies to almost any business plan and consists of the following key elements (Alejandro, 2018):
Postgraduate Dissertation 8 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
Figure 1. 2: The 7 Key Elements of a Business Plan
The Executive Summary provides a brief description of all elements in order to present the general idea and purpose of the business plan. Each element then individually discusses the fundamentals of the new organization, the enterprise goals, the implementation and defense strategy against competitors, the financial planning along the timeline in question, the marketing policy, and the measures to minimize risks and enhance benefits.
1.3. Success and Risk Factors
A company’s success is determined by several subjective, measurable factors - from financial or market-related growth rates to return on equity. In addition, non-financial factors, such as personal qualities developed through experience, can play a significant role to a company’s future. In general, however, a company can only be successful if the concepts “business idea” and “feasibility” coexist.
In his Model of Entrepreneurship Timmons argues that interaction of three main factors in a harmonized and balanced environment can be critical to success or failure (Timmons, 1999).
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Recognizing and evaluating opportunities, or in other words a market “gap”, and their possible profitability is the first step of the entrepreneurial process. It precedes any business planning ingredients, such as the idea, the strategy and capital financing. A realistic estimation of the market gap can be provided by venture opportunity screening, which analyses the existing risk market structure and potential barriers to entry (Timmons, 1999).
The term “resources” refers not only to materials and equipment but also to employees. Organizing the way resources are utilized and keeping them to a minimum in the early stages is of high importance, according to Timmons. This opposes the principle of “maximize and own”, which is preferred by a significant proportion in all business sectors. For Timmons, limited resources can prove much more creative in minimizing market cost and keeping it more disciplined or easier to control (Timmons, 1999).
The team is commonly divided into a "Lead Entrepreneur" and the "Management Team". A qualified team which is motivated by the market opportunity and committed to support the founders’ endeavor, can prove invaluable in a company’s success (Timmons, 1999).
Misjudgment of the market opportunity, overload of resources or inadequate leadership of the team members may impose certain risks to a company’s establishment. Moreover, it should be taken into consideration that these three factors continuously change, or rather adjust to the market environment, making quick respond to these changes essential to future success.
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2. The Global Tourism Product
The Tourism Sector has undergone rapid growth over the last 20 years and is recognized as one of the largest and fastest growing economies worldwide. Its contribution in generating jobs, improving infrastructure, and increasing export revenue and domestic value is reflected in investment policies followed by most countries in order to promote and develop their tourist attractions.
Depending on travelers’ point of departure and arrival, we can define tourism as domestic or international. Inbound (arrivals) and outbound (departures) tourism refer both to international range. Especially, inbound tourism plays a key role to foreign exchange income and exports, creating employment and development opportunities (WORLD TRAVEL & TOURISM COUNCIL, 2018).
According to statistics of the World Tourism Organization, the number of arrivals in international traveling has increased by about 150% between 1995 and 2017, rising in 2017 to around 1.3 billion of inbound tourists, about 39% of whom departing from European Union Countries (The World Bank Group, 2017).
Figure 2. 1: Number of international arrivals in 2017 published at (The World Bank Group, 2017)
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In its annual report about the economic impact of Travel & Tourism in 2018, the World Travel & Tourism Council estimated that the sector’s GDP in 2017 accounts for 10.4% of the global GPD- roughly estimated at US$8.27 trillion. Moreover, an average annual increase of 3.8% is expected in the coming decade (WORLD TRAVEL & TOURISM COUNCIL, 2018).
Figure 2. 2: Total Contribution of Travel & Tourism to GDP (WORLD TRAVEL & TOURISM COUNCIL, 2018)
With regard to the impact Travel & Tourism have had in employment during 2017, it has been recorded that almost one in ten employees is in this field. This positive contribution of the sector to job opportunities is expected to rise by 2.5% annually until 2028 (WORLD TRAVEL & TOURISM COUNCIL, 2018).
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Figure 2. 3: Contribution of Travel & Tourism to Employment (WORLD TRAVEL & TOURISM COUNCIL, 2018)
In the above diagrams the contribution of Travel & Tourism is given in terms of indirect, direct and induced influence.
Direct contribution can be defined as the investment or expenses made by residents and tourists of a particular country for business and leisure purposes. Government services in the tourism industry, such as operation of national cultural attractions, generates expenses also classified as direct.
Indirect contributions, on the other hand, include investments linked with goods and services provided to the firms and organizations which directly influence the sector. These are for example, construction firms, their suppliers, as well as catering companies in hotels. Also, collective government activity related to a larger scale of required expenses,
Postgraduate Dissertation 13 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece such as tourism marketing, promotion and sanitation services, has an indirect influence on the sector’s economy.
Last but not least, investments made by employees of both direct and indirect employers in the Travel & Tourism industry are considered induced contribution. In conclusion, Travel & Tourism affects a wider range of branches, which explains the essential role of the sector in a country’s prosperity. After all, a careful observation of the above statistics shows that the growth rate of Travel & Tourism is one of the fastest developed in today’s economy.
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3. Macro-environmental Analysis
3.1. Tourism in Greece
Greece is a popular tourist destination which attracts millions of visitors from all continents each year. A characteristic number of international arrivals was reported by the World Tourism Organization in 2017- up to 27.2 million (The World Bank Group, 2017)! Unsurprisingly, although no official data has yet been published, it is estimated that the number of tourists increased to about 33 million in 2018.
Tourism is generally regarded as one of the most important economic factors in Greece, with a significant influence in the country’s employment levels. According to the annual economic report published by the World Public & Tourism Council (WORLD TRAVEL & TOURISM COUNCIL, 2018). Tourism’s total contribution to the Greek GDP in 2017 amounted to 19.7%- if indirect and induced impact is considered- with direct contribution featuring as the most significant component:
Figure 3. 1: Total Contribution of Travel & Tourism to Greek GPD (WORLD TRAVEL & TOURISM COUNCIL, 2018)
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During the same period, the employment rate in the tourism sector peaked since the implementation of austerity measures to a 24.8% of the total employment percentage in Greece; notably, that equals about 934,500 jobs in a descending economy. An ongoing upward trend during the past 30 years intensified even further in 2014, making Greek Tourism a significant source for direct job creation:
Figure 3. 2: Contribution of Travel & Tourism to Greek Employment (WORLD TRAVEL & TOURISM COUNCIL, 2018)
Until 2028, the Greek Travel & Tourism sector is forecast to present an increase of 2.5% each year (WORLD TRAVEL & TOURISM COUNCIL, 2018).
On a worldwide scale, Greece seems to gain in popularity amongst its competitors, as reported by the World Economic Forum (WEF). Especially, in 2017 Greece made an impressive improvement in the Travel and Tourism Competitiveness Index, climbing to
Postgraduate Dissertation 16 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece the 24th position. This is a result of successful sustaining policies (i.e. environmental protection) and marketing promotion of the country’s natural wealth. The declining prices related to accommodation and transfer costs (i.e. renting cars or airport taxes) played also a significant role to attracting more international visitors (World Economic Forum, 2017).
However, the legislative system restrains possible investments in the tourism business, as high taxation on profits and strict visa policies discourage any new entrants to the sector. In order to counteract that, development of an orderly spatial planning framework for tourist destinations, combined with supply of basic infrastructures and services (i.e. continuous water and power supply) can provide a vital boost to the tourist product quality.
After all, as Mr. George Vernicos, Secretary General of SETE, said: „The quality of life of the people who live at a place is directly linked to the satisfaction that tourists derive from visiting that place.“ (SETE, 2018).
Greece also needs to immediately adapt to emerging trends, such as the short-term rentals, and to establish proper constitutional rules. Tourism businesses should also follow technological breakthroughs and implement them for business-to-business and business- to-customer transactions, something which of course requires the legislative arrangements.
Finally, since Tourism is exceptionally significant to the country’s prosperity, the government should adopt appropriate measures to protect it from demonstrations of social escalation (i.e. strikes) especially during the high season.
3.2. Central Macedonia as a destination
Central Macedonia is located in the central part of Northern Greece and constitutes the most visited region in Greece, with its capital city, Thessaloniki, as well as the region of Chalkidiki counting the largest incoming passenger traffic.
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As shown in the following table Central Macedonia accounts for 23.4% of the total tourist flow in the country, with about 7.2 million tourists in 2017. However, based on the number of receipts given out by businesses, Central Macedonia is average in comparison with Southern Aegean and Crete- which indicates different visitor profiles (Lamprou & Ikkos, 2018).
Table 3.1: Distribution of Visits, Overnights and Receipts of Inbound Tourists per Region, 2017 Percentage Distribution of Visits, Overnights and Receipts of Inbound Tourists per Region, 2017 Visits Overnight Stays Receipts Southern Aegean 19% 22% 26% Central Macedonia 23% 19% 13% Crete 15% 19% 23% Attica 17% 14% 15% Ionian Islands 10% 12% 12% Eastern Macedonia & Thrace 4% 3% 2% Peloponnese 2% 2% 2% Thessaly 2% 2% 2% Epirus 2% 2% 2% Northern Aegean 1% 2% 1% Western Greece 2% 1% 1% Central Greece 1% 1% 1% Western Macedonia 1% 0% 0%
More specifically, Central Macedonia attracts mostly visitors from Balkan countries, with the top three being Bulgaria, the Republic of North Macedonia and Serbia (Lamprou & Ikkos, 2018).
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Figure 3. 3: Origin of international visitors per Region in 2017 (Lamprou & Ikkos, 2018)
The reduced purchasing power of these countries is reflected in the number of receipts reported in 2017 in Central Macedonia, with the German market emerging in first place.
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Figure 3. 4: Number of receipts of international visitors per Region in 2017 (Lamprou & Ikkos, 2018)
A detailed analysis of the five most important tourist markets of Greece as a whole, i.e. Germany, United Kingdom, France, Italy, USA, plus the Russian market due to its significance to the regions preferred by Russian citizens, revealed that the Russian market’s contribution to the region of Central Macedonia is indeed of high importance (Lamprou & Ikkos, 2018).
As presented below, Russians tend to spend more money than British and Germans in terms of single visits or overnight stays. This conclusion deviates from the total receipts recorded because of the fact that the number of German and British tourists exceed by far the number of Russian visitors.
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Spend per visit
Russian € 719,00
British € 576,00
German € 563,00
€ - € 100,00 € 200,00 € 300,00 € 400,00 € 500,00 € 600,00 € 700,00 € 800,00
Spend per Overnight Stay
Russian € 84,00
British € 75,00
German € 46,00
€ - € 10,00 € 20,00 € 30,00 € 40,00 € 50,00 € 60,00 € 70,00 € 80,00 € 90,00
Figure 3. 5: Spend per Visit or Overnight Stay for 3 of the most important markets
It should be noted that the average values in the region of Central Macedonia in terms of expenditure per visit and per overnight stay come up to €215.00 and €45.00 respectively.
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Since Chalkidiki is the most popular tourist destination in Central Macedonia during the summer season, comprehensive information on the region will be supplied prior to the micro-environmental analysis to present a more linear flow.
3.2.1. Tourism in Chalkidiki Chalkidiki has a wide coastline on the west, south and east side, while it borders the region of Thessaloniki on the north side. It consists of three “half-islands” that resemble fingers or legs, as they are known in Greece, named from west to east as follows: Kassandra, Sithonia and Agion Oros.
Figure 3. 6: Map of Chalkidiki (Google Maps, n.d.)
While Kassandra and Sithonia house popular holiday resorts, Agion Oros with its Mount Athos homes monasteries of Eastern Orthodox and is regarded as an autonomous province by the Greek Government. As stipulated by the Monastic State, Agion Oros is only accessible to male visitors (Wikipedia, 2005).
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Chalkidiki began to flourish in the late 1950s, when residents of Thessaloniki started visiting the area during the summer. By the 1960s, European tourists- mainly Austrian and German- chose Chalkidiki for their summer holidays. The big tourist boom, however, took place a decade later in the 1970s. Today Chalkidiki attracts more than 1.2 million tourists annually (Wikipedia, 2005).
In order to gather specific statistical data in terms of visitor satisfaction and preferences in Chalkidiki, the American College of Thessaloniki in collaboration with the Halkidiki Tourism Organization (HTO) conducted a wide-scale survey in 2018. They interviewed a focus group comprising approximately 1,300 persons who had spent their summer vacation in local hotels during July and October (Appendix A). It should be noted that, due to the low number of participants, the results are not 100% representative; but they certainly supply a clear enough image. To begin with, the study revealed that the majority of tourists consists of couples or families covering an age range of 25-50:
Figure 3. 7: Traveler type and age (American College of Thessaloniki, 2019)
Moreover, regarding people’s backgrounds, the study indicates that one in five persons who came to Chalkidiki in 2018 is British, followed by people of German origin (10.8%), Romanians (9.9%) and Italians (7.6%). Chalkidiki is also popular among Western European countries, like France, Belgium and the Netherlands. On the other hand, American or Asian visitors preferred other destinations.
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Figure 3. 8: Countries of region of Chalkidiki’s tourists (American College of Thessaloniki, 2019)
Considering the number of receipts, the Russian Market seemed to overtake by far the European Markets and proved the most important inflow source, with expenditure of almost €465 per visit. The German and British Market follow- extremely close to each other- with payments per visit ranging between €300 - €350, while French tourists spend less than €300 on each trip to Chalkidiki.
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Figure 3. 9: Number of receipts per visit of tourists in Chalkidiki (American College of Thessaloniki, 2019)
Tourist satisfaction was measured on a scale from 0 to 5, against the following nine factors that are known to influence returning customers: - Accommodation facilities - Accommodation services - Food in hotels - Food in Chalkidiki - Airport - Public Roads - Cleanliness of the region - Beaches / Nature - Culture / History
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Figure 3. 10: Satisfaction measurement factors of tourists in Chalkidiki (American College of Thessaloniki, 2019)
Although in general all factors met the tourists’ expectations to a satisfying point, there is still room for improvement in the region’s infrastructure and cleanliness.
In terms of transportation to and from the area, the airport of Thessaloniki serves a continuously increasing number of airline connections; although investments in the expansion of the existing infrastructure were frozen during the financial crisis. With the concession of the airport’s operation to Fraport AG, effective from April 17, 2017 and for the next 40 years, an upgrade project of 1 billion euros has been initiated, including the expansion of the existing terminal (Fraport AG, n.d.). This can contribute to a higher rate of satisfaction in the next years. Nevertheless, this endeavor should be supported by government funds to restore the road network and establish appropriate waste management in this touristic region. The need to improve infrastructure is also highlighted by a representative of a four-star hotel in Pefkochori, who was interviewed as part of this dissertation and whose name will not be mentioned for privacy reasons, as an important factor to the development of the region (Interviewee, 2019).
The hotel facilities and services in Chalkidiki seem to fall in line with the natural beauty of the region, as they correspond to the high expectations of its visitors. In other words,
Postgraduate Dissertation 26 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece tourists can enjoy an exceptional quality of accommodation combined with some of the most wonderful beaches in the world. Both the CEO of Lagaria Hotel in Afitos, Mr. Emmanouil Lagarias, as well as the anonymous interviewee mentioned above, confirmed that the satisfaction standards of the tourists have increased the last years in terms of quality of services. However, the opinions of the interviewed hotel representatives seem to diverge about the future development of tourist demand. Mr. Lagarias claims that hotel sector may experience depression in the next years (Lagarias, 2019), while his competitor in Pefkochori suggests an increasing tourist demand (Interviewee, 2019).
Taking both possible directions into consideration, HTO aims to expand existing marketing programs by collaborating with new travel trade, online operators and media in order to promote the region of Chalkidiki in other European countries as an ideal holiday destination. As part of this project, for example, the HTO together with Irish travel agencies and the Organization Press & Fam trips are laying the foundations of an incoming Irish market. This will be achieved by a new airline connection between Dublin and Chalkidiki expected to operate by Spring 2019 (Voria.gr, 2019).
Long-term objective, however, should be an overseas promotion program to attract more American and Asian visitors, who usually tend to provide higher expenditure. This would increase the tourism revenue of Chalkidiki significantly and could contribute to the region’s development of an identity similar to the reputation of Greek Islands. After all, Chalkidiki’s natural wealth resembles exotic places and the fact that it is accessible by both road and air makes it the perfect summer destination.
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4. Microanalysis – The Business Plan
4.1. Executive Summary
Tourism experts forecast a steady annual development for the tourism market in Chalkidiki. Despite the period of stagnation in 2008 and 2009 caused by the global financial crisis, the expected arrivals in Chalkidiki seem to increase continuously (Halkidiki Tourism Organization, 2018).
What attracts these tourists is the highly diverse landscape molded by the Mediterranean Sea, a combination of sandy and gravel coasts and mountains, and the pleasantly mild climate. May to September is its peak time; indeed, hotel businesses which operate year- round are limited. Notably, activity holidays (i.e. Hiking, cycling) are becoming more and popular in the area, slowly increasing the region’s footfall over March, April and October.
Encouragingly, cost-effective investment programs financed by ESPA promoting travel and tourism businesses, a stable political situation, the increasing demand from Balkan visitors, as well as Chalkidiki’s proximity to Thessaloniki can greatly foster investments in a hotel start-up there. The concept of a luxurious bungalow complex, in particular, will fill in a market gap currently occupied by small companies offering upmarket accommodation options.
The proposed bungalow complex will be located in the Kassandra region of Chalkidiki, in a ca. 3,000 m2 building lot inside or outside the town planning zone. The compound will consist of five independent two-story bungalows 85 m2 each. The company will offer breakfast and airport transfer as well as a variety of leisure or adventure activities. The magnificent sea view, unique open architecture design and modern decoration will make this bungalow complex both distinct and memorable.
The quiet ambience not far away from the best beach bars in the region and the cosmopolitan town of Kallithea is expected to appeal to both national and international guests of 20+ years old, who either want to relax, rest and forget their daily routine, or seek a combination of luxurious accommodation and bustling nightlife.
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The forecast of this bungalow business includes an increasing occupancy rate throughout April – September, with a minimum 25% estimated in April as well as a 5% increase per year following brand building. An effective marketing strategy oriented towards high- quality services, the breathtaking surrounding landscape and the warm climate of the area is expected to greatly boost the project’s potential for success.
Besides low demand, possible risk factors for the proposed start-up company are errors in management, shortage of skilled workers and imitation of the corporate concept from competitors.
In addition to risk avoidance, the company’s managers are primarily responsible for all economic, social and legal aspects of the bungalows’ operation. Last but not least, careful planning of all resources also appertains to the managerial duties. Since the business is orientated towards international customers, multilingual and properly qualified staff plays a significant role to customer satisfaction. Most importantly, the staff’s interpersonal skills can have a positive influence to the guests’ overall experience.
The investment capital will amount to approximately € 0.92 million. This sum includes the land acquisition costs, the construction costs, the equipment and furnishing costs as well as the preparation costs. The investment utilizes 100% Equity resulting from private capital. Total revenues range from € 116,000 to 137,000 with an annual increase of 1.8%. The payback period of the investment is calculated at 8.45 operative years for an estimated cost of equity of 5%.
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4.2. Company Description
4.2.1. The Business Idea
The purpose of the company is the operation of a bungalow complex in Kassandra, Chalkidiki, which for revenue and legal reasons will be registered as General Partnership (GP) (more information can be found in section 4.6).
With its exclusive design, high-quality equipment and facilities and a variety of services and offers, this bed and breakfast will become one of the most luxurious options in its category. The service portfolio of the complex includes on the one hand the checking in and out of customers and on the other hand partial catering and transport services. Collaboration with local businesses in the wellness and sports sectors will generate special offers to all guests and form, ideally, a synergetic success tool.
This business aims to establish a different kind of bed and breakfast- one which promotes a luxurious lifestyle usually met only in big hotel chains. Each bungalow villa comes with high-tech appliances, modern furniture and an external private pool with a view of the endless blue waters of Toroneos Kolpos. The visitors also have the opportunity to enjoy on demand basic wellness services, such as massages and beauty treatments, as well as physical and mental wellness programs with various relaxation techniques, such as yoga or more powerful ground exercises. For those wishing to explore the region, more adventurous activities, such as hiking, mountain biking, surfing, sailing and diving, are offered in the service package of the company. Lastly, customers who seek a quiet environment in which to spend quality time with their family can find great appeal in the spacious rooms, outdoor sitting areas and splendid beaches.
All in all, the customer benefit focuses on the following features: - Comfort amenities of the highest level accompanied with welcome drinks and flowers - Quiet location with beautiful sea view and private pools - Wide range of wellness and fitness services on demand - Varied tourist offers - on request organized excursions
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- Transport services to and from the airport - Delicious Mediterranean breakfast and further catering on demand
4.2.2. Location and Architectural Concept The feasibility of the architectural concept depends heavily on the existing legal and structural regulations. More specifically, since January 2019 a GIS-platform has been activated by the urban planning commission, where spatial data for the whole country are available online to its users. The “Electronic Urban Planning” as it is called provides: - A web portal accessible to the public on www.epoleodomia.gov.gr in which spatial planning procedures are distinguished into Services and Subsystems of the System. - Network services for the search, visualization, downloading, transformation and invocation of the urban data, according to article 8 Law 3882/2010. - Informative material, user manuals, answers to frequently asked questions of operators and citizens and all necessary information to facilitate the operators when joining the system and its applications (Texnodasiki, 2019).
Lot Coverage, which is defined as the ratio of the „covered“ area with buildings and impervious surfaces (i.e. parking spaces, pools) to the total lot area, as well as House Size Limitations and Setback Requirements are significant factors that should be taken into consideration when choosing location (Stillwater dwellings, 2019). Building Lots in Kassandra are characterized by Building Coefficiency between 0.4 and 0.8. Especially in the case of Kallithea, which is considered to be the center of Kassandra most popular with the majority of tourists, the above factor ranges between 0.6 and 0.8, as shown in the following figure:
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Figure 4. 1: Lot Coverage in Kallithea, Chalkidiki (e-ΠΟΛΕΟΔΟΜΙΑ Γεωγραφική Αναζήτηση Πληροφοριών, 2019)
With the interest of foreign investors rising over the last years, the local real estate market has known a great development and the lot prices have remained stable since 2009. Interestingly, that happened despite major financial measures undertaken during the crisis which had a significantly negative impact on the purchasing power of Greek investors. Depending on the location, the value of building lots currently ranges from € 130 to € 250 / m2.
However, Greek Government’s Presidential Decree (PD) 24.4/3.5.1985the use of land lots not included in urban planning or located outside a settlement’s boundaries is allowed for building purposes, on condition that:
A) The lot features a minimum area of four thousand (4,000) sq.
B) One side of the lot is flat with a public road for at least 25 meters (Greek Government, 1985).
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The second limitation applies only to land lots created after 2004. Until then, a minimum surface of 4,000 sqm would suffice. Naturally, Greek legislation accommodates plenty of exceptions to these regulations, which are not within the scope of this dissertation.
The prices of such buildable land lots range from € 15 to € 50 / m2. Admittedly, their greatest disadvantage is that the constructed surface must not exceed 200 m2, making this option less attractive for businesses interested in expansion opportunities.
A quiet but central location is considered the most important feature for the success of the company, so our land search was narrowed down to properties close (maximum distance of 5,000 m) or inside the three biggest cities in Chalkidiki: Kallithea, Polyxrono and Pefkochori. Moreover, criteria such as proximity to public transportation stations, site suitability for the specific project and accessibility to public roads produced five potential locations, which were assessed as presented in the following tables. It should be noted, that for privacy reasons the exact properties are not illustrated.
1) Afitos
The village of Afitos (or as known locally Athitos) counts at least 5,000 years of existence, as it has occupied in the same area since 3,000 BC. It is renowned for a stunning view of the Toroneo, its architecture, and its cultural character. Ancient Afitos was an important city of Pallini and has been mentioned in the works of many historians (Herodotus, Thucydides, Xenophon, Aristotle, Pausanias, Strabo, etc.). In the center of the village square the church of Agios Dimitrios, a three-aisled wooden-roofed basilica with a dome, dominates the space. It was built in 1859 and is famous for its peculiar architecture, the old icons it houses and the stone reliefs attached on the outside of the southern wall. The church is harmoniously surrounded by old stone-built houses with their landmark inscriptions and stone carvings, as well as a museum of folklore. From the square the road leads to Vrachos, the “balcony” of the village, from where one can enjoy the breathtaking view of Toroneos, Sithonia and Cassandra. Koutsomylos, the winding acropolis of Afitos, also offers a splendid panoramic view. Numerous cultural events throughout the summer make Afitos a key reference point for the tourists arriving in Chalkidiki (Halkidiki Properties, 2019).
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Table 4. 1: Potential land and its main properties in Afitos (Google Maps, n.d.)
Location
Area 2,500 m2 Price 300,000 € Distance from sea ca. 250 m Infrastructure available Allowed building surface 500 m2
Table 4. 2: Advantages and disadvantages of this specific land in Afitos
PROS CONS
Appropriate for 5 bungalows with private pools Medium to high price Quiet location near see
Unhindered sea view Near village center (650 m) Attaches at asphalt road Near bus station (800 m) Electricity and water infrastructure available Expansion possibility Near City of Kallithea (3.0 km) Near Airport of Thessaloniki (73.0 km)
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2) Kallithea
One of the most popular regions of the beautiful peninsula of Kassandra, where the pine trees adorn the golden sand beach, Kallithea makes a modern commercial and cosmopolitan resort, dotted with large hotel complexes and traditional guesthouses. Kallithea is a tourist attraction for thousands of visitors who seek to enjoy wonderful beaches and unique archaeological sites, the most important of which include the Doric temple of Ammon Zeus, the temple of Dionysos and the Nymphs, and the small chapel of Agios Panteleimonas. Undoubtedly, Kallithea is the best destination for one-day excursions across the peninsula, especially for those wishing not only to visit the impressive archaeological and historical monuments that it offers, but also to experience the life of its traditional villages. In combination with an impressive nightlife, Kallithea is able to satisfy even the most demanding tourists who seek a pleasant and fun holiday at a place with a unique natural and historical heritage (Halkidiki Properties, 2019).
Table 4. 3: Potential land and its main properties in Kallithea (Google Maps, n.d.)
Location
Area 5,000 m2 Price 300,000 € Distance from sea ca. 1,500 m Infrastructure available Allowed building surface 500 m2
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Table 4. 4: Advantages and disadvantages of this specific land in Kallithea
PROS CONS
Appropriate for 5 bungalows with private pools Medium to high price Quiet location Far from sea Near City of Kallithea (0.5 m) Limited sea view Electricity and water infrastructure available Far from central road Expansion possibility Road connection required Near Airport of Thessaloniki (78.0 km) Walking distance from bus stop ca. 1.0 km
3) Kryopigi
The village of Kryopigi is built amphitheatrically on the slope of a pine-covered hill overlooking the bay of Kassandra. The region has been inhabited since ancient times and today Kryopigi is located between the old cities of Neapoli and Flegra. The excellent climate, the combination of verdant mountains and crystal-clear sea (two blue flags in 1991) along with high-quality hospitality services make Kryopigi the most remarkable resort in the region. Kryopigi is also known for the "PEDAGOGICAL CENTER FOR RESEARCH AND EDUCATION" founded by Dr. Erhart and Sofia Ziegler. This centre is a meeting place for educators attending seminars and conferences all year round (Halkidiki Properties, 2019).
Table 4. 5: Potential land and its main properties in Kryopigi (Google Maps, n.d.)
Location
Area 2,700 m2 Price 200,000 € Distance from sea ca. 400 m Infrastructure available Allowed building surface 800 m2
Postgraduate Dissertation 36 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
Table 4. 6: Advantages and disadvantages of this specific land in Kryopigi
PROS CONS
Appropriate for 5 bungalows with private pools Attaches at rural road possible extension required Low price Inside settlement possible architectural limitations Quiet location near see Far from central road Relatively far from the Airport of Thessaloniki (83.0 Near village center (800 m) km) Sea view Walking distance from bus stop ca. 1.0 km Near City of Polychrono (5.0 km) Electricity and water infrastructure available Expansion possibility Near Airport of Thessaloniki (83.0 km)
4) Polychrono
The story of Polychrono begins in 650 BC as part of the ancient colony Neapolis, which, despite all the barbaric raids it had experienced, managed to survive until 540 AD, when it was completely destroyed by the Huns. In the 11th century, farmers in the area gathered and built the village "Polychrono" (i.e. meaning “colorful” in ancient Greek), which they named after the many colorful flowers found in the region. The village was heavily influenced by the Turkish yoke and finally torpedoed and completely destroyed by the Turks during the War at 1821. A few years later, a group of survivors returned and rebuilt the village, which was established as Polychrono. Today it is one of the most famous tourist destinations in Chalkidiki attracting thousands of visitors each season who are keen for a stroll along the beach spreading for miles along its settlements (Halkidiki Properties, 2019).
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Table 4. 7: Potential land and its main properties in Polychrono (Google Maps, n.d.)
Location
Area 6,300 m2 Price 250,000 € Distance from sea ca. 450 m Infrastructure Not available Allowed building surface 300 m2
Table 4. 8: Advantages and disadvantages of this specific land in Polychrono
PROS CONS
Unhindered sea view Appropriate for only 3 bungalows with private pools Medium price Road connection required Quiet location near see (450 m) Electricity and water infrastructure not available Near City of Polychrono (2.5 km) Far from central road Electricity and water infrastructure available No expansion possibility Far from the Airport of Thessaloniki (90.0 km) No bus stop in a perimeter of 1.0 km
5) Pefkochori
Pefkochori is located in an exquisite area that could rightly be described as an ecological paradise. The first tourists who arrived here in the early 1970s were thrilled by the region’s natural beauty and mild climate, as well as the amazing beaches and the locals’ hospitality. Since then, Pefkochori has been established as one of the most remarkable resorts in Europe.
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Today, the area combines modern tourist facilities with traditional color. Its local market provides a wide variety of shops for all needs and tastes, while the classic traditional Greek taverns or the luxurious restaurants with their incredible tastes and the wonderful local wine are a great culinary temptation. The harmonious coexistence of nature with design and organization offers guests a wide range of summer activities. Walking in the fresh air through the alleys of the old village with neoclassical buildings, roses and lemon trees, has proved to be a delightful and refreshing experience. In the summer Pefkochori hosts the famous ITENBA sailing races that start from the Glarokavos marina. From this spot yachts and flying dolphins also leave for daily excursions around Chalkidiki and the islands of the North Aegean. Moreover, one can rent boats for small private cruises. However, what distinguishes Pefkochori is its unique nightlife with a wide variety of suggestions for all tastes that offer unforgettable evenings (Halkidiki Properties, 2019).
Table 4. 9: Potential land and its main properties in Pefkochori (Google Maps, n.d.)
Location
Area 4,300 m2 Price 500,000 € Distance from sea ca. 150 m Infrastructure Available Allowed building surface 220 m2
Postgraduate Dissertation 39 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
Table 4. 10: Advantages and disadvantages of this specific land in Polychrono
PROS CONS
Quiet location near see High price
Unhindered sea view Appropriate for only 3 bungalows with private pools Near City of Pefkochori (1.5 km) Attaches at rural road possible extension requires Electricity and water infrastructure available No expansion possibility Walking distance from bus stop ca. 1.7 km Far from the Airport of Thessaloniki (97.0 km)
After careful consideration of the above advantages and disadvantages of each location, the plot of land that best fits the profile of the bungalow complex despite its relatively high price is in Afitos. The location is quiet, directly above the sea and offers a spectacular view. The main advantage is that the building lot is located on a cliff, so future investments are unlikely to impair the stunning landscape. Moreover, there is no need for extra road or electricity or road connections. The center of the village is accessible on foot, while Kallithea’s bars and clubs are only 3.0 km away.
From an architectural point of view, the bungalows will stand out from the competition due to their unique modern design. By combining basic materials such as glass and wood in the exterior and by setting a high value on a minimalistic interior design, an atmosphere that matches the surrounding nature can create the perfect harmony. Moreover, the strategic orientation of the villas in an unsymmetrical grid offers a breathtaking view of the sea and the opposite half-island of Sithonia from all five houses. Last but not least, the exclusive location above the sea with the private pools ensures a high recreational value and a holiday tourist atmosphere.
The accommodation capacity will be limited to 5 double store bungalows, each with a net total surface of 85 m2. Each house contains 2 bedrooms, one bathroom, one WC, one living room and a kitchen. The terrace is formed by a large wooden surface and a private pool tangent to the house. Beside the property entrance there is a parking lot for two vehicles as well as a wooden path leading to the front door.
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In order to provide a visualization of the complex, preliminary designs were developed, as presented in the following figure:
Figure 4. 2: Visualization of the bungalow complex
More designs can be found in Appendix B.
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4.3. Marketing Plan
4.3.1. Market positioning The bungalow complex is positioning itself as an innovative business with luxurious villas combined with a wide spectrum of services in the segments of wellness and adventurous vacation as well as through its unique modern design on the rather traditional hotel market in Chalkidiki. The focus lies particularly on the benefits for the guests by providing them with a holistic program of physical and mental activities that completes their comfortable stay at the bungalows. Unlike big hotels, the guests can profit not only from total privacy but also from their own “concierge” service, as each bungalow operates individually and there are no common waiting lounges or a reception. The guests are welcomed by one of the managers, who are available 24 hours to provide service of the highest quality. Through an online app accessible by tablets installed in the bungalows the guests can skip the queue and flexibly tailor their own package by adding on services even at a 24-hour’s notice.
4.3.2. Product policy The product and service policy of the bungalow complex aims primarily to reach a high guest satisfaction rate by providing them with a varied range of offers. The main focus lies on the development and design of individual products and services.
The management implements a strategy of added value by extending the standard benefits expected in a typical bed and breakfast with additional services. The property and its facilities are characterized by exquisite aesthetics. The entrance of the complex predisposes the guests to a minimalistic, luxurious design with a mixture of natural elements, like glass and wood, and colorful, odorous lemon trees placed along the path to the villas. This design line is also reflected in the interior of the bungalows.
In order to offer an intimate atmosphere to the guests, each bungalow extends to a total surface of 85 m2 in two stories. All kind of amenities, like toiletries, bathrobes and guest shoes are included in the price. The rooms are decorated with modern, high-quality furniture and contemporary pictures of Greek artists. The kitchen is equipped with high- tech appliances for all needs. TV programs from around the world, internet access, free
Postgraduate Dissertation 42 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece international telephone and tablets intend to keep the guests in contact with worldwide news and their families or friends back home.
In addition, guests will be able to opt for additional services such as transport from / to the airport, complementary welcome drinks and snacks (for example a fruit basket), 24-hour service, laundry service. During their vacation the guests may also enjoy a variety of extra services from a comprehensive package of physical or relaxing outdoor or indoor activities, like diving or private massage. Through the constant development of offers the business strives to provide guests with a constant guarantee of high-quality services.
4.3.3. Pricing Policy
The decision regarding pricing policy has a major impact on the financial success of the bungalow complex. As guests become more price sensitive, the challenge of each company is to balance the price-performance ratio. It is assumed that different booking behaviors prevail in different target groups, which in turn must be taken into account when defining the price level.
During the introductory phase, pricing will be based on the desired return on capital, expected costs and complex utilization. Consequently, pricing will be based on yield management strategy, aiming primarily on achieving the right hotel capacity from the right target group at the right time and the right price. In this case, an optimal use of capacity which satisfies tourist demand expectations is of high importance for continuous occupancy.
In addition, the price appeal is increased by various package offers, early bird bonuses and discounts for regulars. Payment can be made on invoice with deposit or with advance payment, credit card or in cash.
4.3.4. Distribution Policy In order to promote the business services offered to the right target group at the right time and the right place, a suitable distribution policy needs to be pursued.
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Due to the different booking behavior of the guests, the management uses both direct and indirect distribution.
In the introductory phase, the chances of the bungalow complex to sell the offered products and services to the end client are relatively low due to the lack of brand awareness. Only through the wide internet presence of the hotel with its multilingual booking platform and the connection to different booking engines can direct distribution be influenced. In the next phase, the bungalows and any additional services will be booked through telephone contact, hotel guides and leaflets as well as direct mails to former guests.
In order to increase the brand awareness of the business and to approach better potential guests, intermediaries will be employed These will be travel agencies, tour operators, local tourism offices and global electronic distribution systems. The inside and outside presentation of the desired image of the company as a unique and top-quality holiday accommodation should definitely be reflected by the company philosophy in terms of behavior and communication with collaborators.
Within the framework of the communication policy, the following goals are prioritized: the positioning and advertising in the international market as well as the promotion of any sale offers provided for new or former customers. In order to achieve a satisfying average capacity utilization of 50% at the first operation year of the bungalow complex, an efficient marketing strategy is necessary in the pre-launch phase. To this end, the management allocated an advertising budget of € 10,000.00.
Due to the different target groups with different media usage behavior, the communication concept is aligned to various advertising media:
Print press With advertisements in national magazines as well as in specific travel magazines, opening offers can be promoted in order to introduce the new highlight of luxurious
Postgraduate Dissertation 44 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece accommodations in Chalkidiki. Moreover, the distribution of information brochures to tourism organizations, travel offices or other tourist facilities, can prove useful to the promotion of the bungalow complex. The message of this advertising medium mainly addresses new local customers. Therefore, the advertising design will be undertaken by professional graphic designers, so as to create advertisements that can draw customers’ attention.
Online media Since the business also aims to attract potential guests abroad, the creation of a website is a low-cost, efficient solution to promoting the bungalow complex and its services. The introduction of the website can be enhanced not only by registrations at various online search engines and links with tourist partners or associations, hotel guides, wellness, etc., but also by imprinting the URL on printed media, such as in magazine advertisements, hotel brochures, leaflets, etc. The website is intended to present the villas with their amenities and extra services, and at the same time provide tourists with general information about Chalkidiki and suggest some tourist attractions in the area, in order to achieve a year-round utilization.
Social media Approximately 2 billion people regularly use social media, such as Facebook, Instagram, Twitter or Pinterest nowadays (Statista, 2019). With the increasing use of mobile phones, the number of social network users is expected to rise annually, as no other medium can have such a range at a minimum cost. This is why social media advertising is becoming increasingly important for companies. It is particularly promising for advertisers, as it uses algorithms to identify protentional users interested in the advertising product according to their preferences in any online search engine. Through a specific selection, it is possible to define exactly the user groups to which an advertisement is subsequently displayed. Demographic data as well as certain information about interests, connections to companies and many other criteria, can be used to sort out compatible users. By these means, the advertising effort is reduced to a minimum, while the efficiency of advertising campaigns is affected reversely.
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The company intends to successfully implement social media advertising by developing a profile individually tailored to each respective platform and target group, and set advertisements in variable formats, depending on the season. Advertising on Facebook will be prioritized, as it remains the most powerful platform used by 2.3 billion people in a month, of which more than 1.3 billion people log in at least once a day. This volume is a clear indication of the relevance of the social network and explains the power that reach Ads on Facebook contain. In addition to the opportunity to approach new customers, Facebook ads are also suitable for promoting new products or offers, any summer events taking place in Chalkidiki or presenting the company to influencers and opinion leaders.
Location data of mobile users will be exploited meaningfully, by advertising last minute booking offers to tourists within Chalkidiki’s vicinity, looking to enjoy relaxing vacation at a fair price. In this way, online and offline worlds can be optimally combined and sales and profits significantly increased.
Direct Advertising Because the impersonalized approach does not attract all people, guests will also be addressed through the old-fashioned but more personal direct means. This includes thank- you letters for their stay in the bungalow complex, birthday greetings to former guests, information letters about changes in the hotel, special offers to package weeks as well as invitations to cultural or other special events.
Also, direct advertising by the intermediate contact with the guests during their stay or the provision of services is of great importance. Oral communication is one of the oldest but important forms of advertising and can ensure the success or failure of the business. That is why the managers must demonstrate excellent communication and interpersonal skills. In order to create a higher level of differentiation from the competition, thus attracting potential guests and at the same time achieving customer loyalty, additional direct and indirect sales promotion measures are implemented, as explained below.
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Direct sales promotion via the hotel management This form is chosen to promote the sale of overnight stays and the extra services offered using following techniques: - Reward before booking by offering, for instance, guest discounts on a variety of services or vouchers for a diving course at half-price or for a five-course dinner free of charge. - A guest club card with a surprise gift in the form of additional services of the hotel with each additional visit, but also bonus and discount systems: With the registration in the hotel club, the contact data are already available in the system and certain procedures like check-in can be completed more efficiently. Moreover, feedback on preferences or complaints have proved to be very helpful for further direct marketing measures. - Gifts as a reward after the hotel stay or reward or bonus vouchers for the next visit. - A discount on the room rate or a bonus card for private spa treatments.
Indirect sales promotion via the sales intermediaries In order for the selected sales agents to better promote the bungalow complex or to ensure better sales success, they will be supported by following measures: - Sales premiums and commissions - Involvement of the company in the advertising costs - Information trips to get to know the complex and the destination better.
4.4. Competitive Analysis
The highest hotel concentration in Kassandra is found in Pefkochori, followed by Kallithea and Afitos. There are four direct competitors offering bungalows with additional services throughout Kassandra region. For privacy reasons, the exact names of the hotels will not be included.
Table 4. 11 provides an overview of the competitors, examining features such as location, room rates, hotel facilities and service offerings (Booking Holdings Inc., 2019).
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Table 4. 11: Overview of main competitors and their services Bungalow A Bungalow B Bungalow C in Bungalow D Bungalow in Afitos in Kryopigi Pefkochori in Kallithea Location City X X Precinct of the city X Beach X Price in Euro per Season High season 1000 230 160 90 Low season 600 120 80 40 Hotel facilities Number of rooms 1 3 13 14 Size of room 200 m2 65 m2 35 m2 45 m2 Room service X X X X Reception X X Childcare X Airport transfer X X Free parking X X X X Free Internet X X X X Garden X X X Terrace X X X No smoking room X X X X Soundproof room X X Safe X X X X Heating X X Air Condition X X X X Hotel furnishings Classic X Modern X X Luxurious X Activities Massage X Outdoor activities X X Fitness facilities X Outdoor pool X X X
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This competitor sample reveals that, although there are bungalows with different service packages, there are still no spacious bungalows to accommodate an average number of three to four guests, with luxurious furnishings and high-quality equipment at affordable prices.
4.5. SWOT Analysis
SWOT Analysis is defined as a brief overview of not only the most important capabilities of a company in terms of Strengths or Weaknesses but also of external environmental factors that have a direct impact on it, presented as Opportunities and Threats. This analysis aims to determine the effect of the marketing position of a product (Mihiotis, 2005).
The location determined in chapter 4.2.2 was indeed evaluated as the most appropriate for the bungalow complex, however a thorough analysis can unveil factors which could have a negative impact and had previously not been considered.
The SWOT analysis provides a precise illustration and comparison of all advantages and disadvantages that such an investment may involve. More specifically, the following table compares the strengths and weaknesses as well as the opportunities and risks associated with the opening of a bungalow complex in Chalkidiki in order to list the possibilities; at the same time, it can identify the risks that must be taken into account when preparing the business and clarify blurry areas in the corporate concept of the proposed hotel .
The broader region of Chalkidiki offers many accommodation options, which until now have been limited to big hotels with relatively small rooms, the majority of which dates back to four decades ago, or rent rooms equipped with basic amenities. Following the trend developed in the last years for furnished and fully equipped houses to rent, especially through the expansion of Airbnb, this type of operation will fill a gap in the market that only a few hotels occupy at the moment.
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It should be noted, that the effect of Airbnb in existing hotel businesses in Chalkidiki is controversial considering the different experiences of the interviewed hotel representatives in Afitos and Pefkochori. Mr. Lagarias points out the massive influence of this new trend (Lagarias, 2019), whereas the interviewee of the four-star hotel in Pefkochori believes that big hotels remained almost unaffected from Airbnb “phenomenon” (Interviewee, 2019). In each case, however, the higher demand of summer residences to the detriment of rent rooms is undoubtable.
Table 4. 12: SWOT-Analysis Strengths Weaknesses - Corresponds to requests for luxurious - Low-budget tourism strongly represented houses to rent - The region is not preferred by many - Exclusive location European tourists - Low personal costs - Unattractive picture due to insufficient - Low construction costs waste management - All suppliers inside a perimeter of 100 - Politically unstable country (for example, km strikes in airports or public transport are a - Euro as a means of payment – no common occurrence) monetary exchange costs - High tax and insurance rates compared to - New road infrastructure other countries12 - Manifold nature - Constantly changing tax rates in hotel - Many possibilities of leisure activities sector 1 - Exquisite beaches (Chalkidiki is the area - Complex bureaucracy procedures for the with most blue flags in Greece, including establishment of new companies compared 89 of total 519 beaches in the whole to other countries 1 2 country with this qualification in 2018, while Greece took the second place worldwide!) (Geogreece, 2018). - Comfortable climatic conditions
1 According to CEO of three-star Lagaria Hotel in Afitos, Mr. Emmanouil Lagarias (Lagarias, 2019) 2 According to anonymous interviewee, who represents a four-star hotel in Pefkochori (Interviewee, 2019)
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- Easy accessibility by car, bus, ship or plane - Many attractions - No supply problems with water and electricity like in islands
Opportunities Threats - A rare accommodation offer combined - Risk of being copied by the competition with services provided mainly in big hotels - Highly competitive environment with - Creating new jobs / cooperation with more affordable solutions Risk of local firms lowering quality - Promotion of local services - Wrong positioning - International and national Marketing - Not enough qualified staff available - Expansion possibility by integrating - New tourist trends more services - International competition - No acceptance in the market - New competitors
4.6. Financial Plan
The aim of investment and financial planning is to evaluate the financial projections of the bungalow complex. At the first phase of investment planning the capital requirements will be determined. Subsequently, financial planning of a ten-year basis will be conducted, consisting of income statement from the first operational year (set on 2025) to 2034, as well as the cash flow analysis and calculation of certain evaluation factors.
In the case of a start-up, investment and financial planning can generally be based on external market data and estimates derived from primary and secondary information. The primary data was collected from personal sources (i.e. designs, personal bills from media suppliers in Afitos, etc.).
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4.6.1. Investment planning The bungalow complex will be developed through new infrastructure. The construction will start in 2024 during spring and is estimated to be completed till October of the same year. The investment plan includes the primary capital requirements for the construction of the villas.
4.6.1.1. Land purchase The selected plot as presented in chapter 4.2.2 amounts to 300,000 €. However, some additional costs related to land purchase apply that also need to be considered, such as:
Land transfer tax According to the Greek tax law, the purchase of a commercial property is subject to a land transfer tax of 3 % for transactions since 01.01.2014. Exemptions apply if the buyers meet certain preconditions regarding their marital status, nationality and homeland (ASTbooks, 2013-2019). In our case, the investors are discharged a taxable amount of 100,000 €.
Land registry The land registry demand is calculated as 4.5‰ of the property value according to the contract and is charged to the buyer.
Brokerage commission The commission amounts to 2% of the real value of the property and is also subject to 24% value added tax (VAT) (Καραγιάννης, n.d.).
Notary expenses The notary costs are usually paid by the buyer and are calculated at 1.2% for a contract value of over 130€.
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Lawyer expenses For real estate transactions, it is required that both parties (i.e. the seller and the buyer) are represented by their lawyers. The minimum legal fee for each of them is 1% for the first 44,020 € and 0,5% for the amount up to 1,467,351 €.
Engineering expenses In order to register correct land properties, an engineer must be hired for a new measurement of the lot. Considering empirical values, a bounty of 1,000 € is assumed.
All the above result in a total purchase price of about 320,000 €, as presented in Table 4. 13.
4.6.1.2. Construction costs Before construction begins, preparatory work for clearing the entire property from grass or trees must be performed. The fee is normally based on a price per square meter, which currently stands at 1€. However, the proposed land is relatively clean and does not require more than 1,000€ for the preparation of constructible surface.
The calculation of the building costs is based on the preliminary designs and the quantities derived from the design program ArchiCAD (Appendix C). These costs refer to only one bungalow and therefore are adjusted for the entire complex consisting of five bungalows when transferred to the investment costs.
Moreover, the necessary landscaping works ranges from 5% to 10% of the corresponding building costs according to Law 3908/2011 (Ministry of Development, Competitiveness, Infrastructure, Transport and Networks, 2011). This includes, for example, exterior parking space units with proper internal road, walking path to the villa, exterior decoration such as lighting and trees, gardening, fencing as well as exterior pools with integrated whirlpool unit and any necessary biological purification installation system. For the production of hot water solar energy is used. However, all electrical installations, such as lights, sockets and air conditioning, are calculated in the building cost segment. There will be no extra heating installation, as temperatures in the summer are extremely high and air
Postgraduate Dissertation 53 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece conditioning can also produce warm air if necessary. Although the infrastructure and landscaping measures are not as complex as in big hotel operations, a 10% of the construction costs is estimated as reasonable for this particular bed and breakfast, because the planned pools are the most expensive in their range.
Fine furniture and modern equipment in all rooms are estimated at 10,000 € for each bungalow. Tablets, televisions, sound and decoration are also included in this price. It should be noted, that all kitchen and bathroom closets and drawers are calculated in the construction costs.
The total cost of connecting water, electricity and telecommunications supply including excavation costs is estimated to be about 21,000 € for all bungalows. Moreover, an amount of 5,000 € for the issuance of the building permit is set.
The architect and engineer costs are about 5% of the construction costs. This may seem low compared to other countries, but bounties of engineer studies in the last years have declined rapidly. The same percentage is used to calculate reserve capital for unpredictable expenses related to whether conditions, problems with material delivering, etc.
All in all, for the construction of the bungalow complex an investment capital of 500,000 € is required (Table 4. 13). The investment costs are 100% equity, as they are covered completely by own capital.
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Table 4. 13: Investment Cost Land Purchase Tax / Percent Taxable amount Costs Building lot 300,000.00 € Land transfer tax 3.00% 200,000.00 € 6,000.00 € Land registry 0.045% 300,000.00 € 135.00 € Brokerage commission 2.48% 300,000.00 € 7,440.00 € Notary bounty 1.20% 299,870.00 € 3,598.44 € 1.00% 44,020.00 € 440.20 € Lawyer bounty 0.50% 255,980.00 € 1,279.90 € Engineer bounty 1,000.00 € 319,893.54 €
Construction Percent Costs Preparatory work 1,000.00 € Building facilities 425,918.25 € Infrastructure and landscaping works 10% 42,591.83 € Water and electricity supply 5% 21,295.91 € Building permit 5,000.00 € 495,805.99 €
Finishing / Decoration Furnishing / Equipment 50,000.00 € 50,000.00 €
Other Percent Of amount Costs Engineer bounty 5% 490,805.99 € 24,540.30 € Reserve 5% 490,805.99 € 24,540.30 € 49,080.60 €
Total Investment Costs 914,780.13 €
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4.6.2. Financial planning
4.6.2.1. Total revenues In order to estimate the total revenues for the ten first years of operation, the occupancy rate needs to be determined. As documented by the Hellenic Statistical Authority, the monthly occupancy rate in hotel facilities in the region of Central Macedonia in 2017 was:
Table 4. 14: Monthly occupancy rate in Central Macedonia (Trade and Services Statistics Division, 2017) Jan Feb March Apr May Jun Jul Aug Sep Oct Nov Dec 24.7% 28.8% 30.0% 28.2% 37.8% 62.4% 75.1% 76.2% 59.1% 35.6% 27.9% 33.6%
Especially for the municipality of Kassandra the average occupancy rate in 2017 was 60%. The development of this rate in the last ten years is shown in the following table:
Table 4. 15: Average Occupancy in hotel facilities in Kassandra in 2008 – 2017 (Trade and Services Statistics Division, 2017) 2017 2016 2015 2014 2013 2012 2011 2010 2009* 2008*
60% 56.3% 57.3% 63% 61.3% 58.1% 62.7% 61.0% 44.1% 46.2%
It should be mentioned, that for 2018 there are no available data yet. Moreover, the rates of 2008 and 2009 refer to occupancy in Afitos, and not the whole municipality of Kassandra.
Assuming that the bungalow complex will be operated mostly between April and September (6 months), and taking a year average of about 55% - 63% into account, following occupancy levels will realistically be achieved in the first decade:
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Table 4. 16: Estimated occupancy rates during 2015 - 2034
Year Month 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 April 25.00% 25.50% 26.01% 26.53% 27.06% 27.60% 28.15% 28.72% 29.29% 29.88% May 35.00% 35.70% 36.41% 37.14% 37.89% 38.64% 39.42% 40.20% 41.01% 41.83% June 55.00% 56.10% 57.22% 58.37% 59.53% 60.72% 61.94% 63.18% 64.44% 65.73%
July 70.00% 71.40% 72.83% 74.28% 75.77% 77.29% 78.83% 80.41% 82.02% 83.66% August 75.00% 76.50% 78.03% 79.59% 81.18% 82.81% 84.46% 86.15% 87.87% 89.63% September 55.00% 56.10% 57.22% 58.37% 59.53% 60.72% 61.94% 63.18% 64.44% 65.73% Average 52.50% 53.55% 54.62% 55.71% 56.83% 57.96% 59.12% 60.31% 61.51% 62.74%
The proposed rent rates differ between High and Low season. High season is considered to span from June to August, while Low season refers to the remaining months of operation.
The proposed rent rates take also the average pricing policy of its competitors into consideration, that is presented at Table 4. 11, of the present dissertation.
Each bungalow will be offered at a price of 250.00€ per night in High season and 170,00€ per night in Low season.
Based on the above information, Table 4. 17 presents the projected monthly and yearly total revenues of room sales during 2025-2034.
Last but not least, the company intends to collaborate with local firms that offer certain services, aiming to satisfy all of its customers’ needs. The exact demand of these services or the contract conditions with these firms and the possible profit can however not be forecast. Therefore, a general year revenue of 10,000 € is assumed.
The total revenue of each operation year in the first decade is calculated in Table 4. 18.
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Table 4. 17: Sales revenues during 2025 - 2034
Year Month 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
April 6’375.00 € 6’502.50 € 6’632.55 € 6’765.20 € 6’900.51 € 7’038.52 € 7’179.29 € 7’322.87 € 7’469.33 € 7’618.72 €
May 9’222.50 € 9’406.95 € 9’595.09 € 9’786.99 € 9’982.73 € 10’182.39 € 10’386.03 € 10’593.75 € 10’805.63 € 11’021.74 €
June 20’625.00 € 21’037.50 € 21’458.25 € 21’887.42 € 22’325.16 € 22’771.67 € 23’227.10 € 23’691.64 € 24’165.47 € 24’648.78 €
July 27’125.00 € 27’667.50 € 28’220.85 € 28’785.27 € 29’360.97 € 29’948.19 € 30’547.16 € 31’158.10 € 31’781.26 € 32’416.89 €
August 29’062.50 € 29’643.75 € 30’236.63 € 30’841.36 € 31’458.18 € 32’087.35 € 32’729.10 € 33’383.68 € 34’051.35 € 34’732.38 €
September 14’025.00 € 14’305.50 € 14’591.61 € 14’883.44 € 15’181.11 € 15’484.73 € 15’794.43 € 16’110.32 € 16’432.52 € 16’761.17 €
Total 106’435.00 € 108’563.70 € 110’734.97 € 112’949.67 € 115’208.67 € 117’512.84 € 119’863.10 € 122’260.36 € 124’705.57 € 127’199.68 €
Table 4. 18: Total revenues during 2025 - 2034
Year Category 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Bungalows sales revenues 106’435.00 € 108’563.70 € 110’734.97 € 112’949.67 € 115’208.67 € 117’512.84 € 119’863.10 € 122’260.36 € 124’705.57 € 127’199.68 €
Other revenues 10’000.00 € 10’000.00 € 10’000.00 € 10’000.00 € 10’000.00 € 10’000.00 € 10’000.00 € 10’000.00 € 10’000.00 € 10’000.00 €
Total 116’435.00 € 118’563.70 € 120’734.97 € 122’949.67 € 125’208.67 € 127’512.84 € 129’863.10 € 132’260.36 € 134’705.57 € 137’199.68 €
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Table 4. 19: Cost of Goods Sold during 2025 - 2034 Year Category 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Wage and salary 10’950.00 10’950.00 10’950.00 10’950.00 10’950.00 10’950.00 10’950.00 10’950.00 10’950.00 10’950.00 Operation 1’913.59 1’951.86 1’990.90 2’030.72 2’071.33 2’112.76 2’169.84 2’213.24 2’257.50 2’317.41 Cleaning and linen 5’321.75 5’428.19 5’536.75 5’647.48 5’760.43 5’875.64 5’993.15 6’113.02 6’235.28 6’359.98 Food and Beverage 4’622.40 4’714.85 4’809.14 4’905.33 5’003.43 5’103.50 5’205.57 5’309.68 5’415.88 5’524.20 Maintenance 1’164.35 1’185.64 1’207.35 1’229.50 1’252.09 1’275.13 1’298.63 1’322.60 1’347.06 1’372.00
Total 23’972.09 24’230.53 24’494.14 24’763.02 25’037.29 25’317.03 25’617.20 25’908.54 26’205.71 26’523.58
Table 4. 20: Electricity monthly costs during 2025 - 2034 Year Month 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 April 23,84 24,32 24,80 25,30 25,80 26,32 26,85 27,38 27,93 28,49 May 34,49 35,18 35,88 36,60 37,33 38,08 38,84 39,62 40,41 41,22 June 52,45 53,50 54,57 55,66 56,77 57,90 59,06 60,24 61,45 62,68 July 68,97 70,35 71,76 73,20 74,66 76,15 77,68 79,23 80,81 82,43 August 73,90 75,38 76,89 78,42 79,99 81,59 83,23 84,89 86,59 88,32 September 52,45 53,50 54,57 55,66 56,77 57,90 59,06 60,24 61,45 62,68
Total 306,10 312,22 318,46 324,83 331,33 337,95 344,71 351,61 358,64 365,81
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Table 4. 21: Water monthly costs during 2025 - 2034 Year Month 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 April 6,98 7,11 7,26 7,40 7,55 7,70 7,85 8,01 8,17 8,34 May 10,09 10,29 10,50 10,71 10,92 11,14 11,36 11,59 11,82 12,06 June 15,35 15,65 15,96 16,28 16,61 16,94 24,70 25,19 25,69 26,21 July 28,84 29,42 30,00 30,60 31,22 31,84 32,48 33,13 33,79 34,47 August 30,90 31,52 32,15 32,79 33,45 34,12 34,80 35,49 36,20 51,68 September 15,35 15,65 15,96 16,28 16,61 16,94 24,70 25,19 25,69 26,21
Total 107,49 109,64 111,84 114,07 116,36 118,68 135,88 138,60 141,37 158,96
Table 4. 22: Annual Operation costs during 2025 - 2034 Year Category 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Electricity 306.10 312.22 318.46 324.83 331.33 337.95 344.71 351.61 358.64 365.81 Water supply 107.49 109.64 111.84 114.07 116.36 118.68 135.88 138.60 141.37 158.96 Telecommunication 1500.00 1530.00 1560.60 1591.81 1623.65 1656.12 1689.24 1723.03 1757.49 1792.64
Total 1913.59 1951.86 1990.90 2030.72 2071.33 2112.76 2169.84 2213.24 2257.50 2317.41
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Table 4. 23: Food and Beverage costs during 2025 - 2034 Year Month 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 April 360.00 367.20 374.54 382.03 389.68 397.47 405.42 413.53 421.80 430.23 May 520.80 531.22 541.84 552.68 563.73 575.01 586.51 598.24 610.20 622.40 June 792.00 807.84 824.00 840.48 857.29 874.43 891.92 909.76 927.95 946.51 July 1041.60 1062.43 1083.68 1105.35 1127.46 1150.01 1173.01 1196.47 1220.40 1244.81 August 1116.00 1138.32 1161.09 1184.31 1207.99 1232.15 1256.80 1281.93 1307.57 1333.72 September 792.00 807.84 824.00 840.48 857.29 874.43 891.92 909.76 927.95 946.51
Total 4622.40 4714.85 4809.14 4905.33 5003.43 5103.50 5205.57 5309.68 5415.88 5524.20
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4.6.2.2. Cost of Goods Sold
The calculated Cost of Goods Sold (Table 4. 19) is consisted of following direct expenses:
Wage and salary Τhe complex is considered a family business and will be managed by its own investors. The managers will undertake all overhead, marketing and administration procedures, such as booking, checking in and out as well as the transport from or to the airport. Reception Personnel is not necessary, as all transactions can be booked online using tablets. A hotline number is certainly available for any emergences.
The only salary expenses required are for daily cleaning service of the bungalows, the weekly maintenance and cleaning of the pool as well as gardening care when necessary. More specifically, pool maintenance includes:
- Control of engine room operation - Supply with disinfection products - Cleaning of the bottom and the walls - Control of overflow points - Control of the water level and its replenishment - Control of water clarity and quality - Internal filter cleaning - Immediate response to an emergency call
For the cleaning service a monthly expense of 700.00€ is estimated. The pool service would cost about 450.00 € for all five pools each month. The gardener monthly fee amounts to an average of 300.00 €. Gardening and pool maintenance apply however for a longer period than the actual operational time (9 months).
Operating expenses The Greek Government’s Presidential Decree (PD) 43/2002 defines the necessary water and electricity supply for each customer. In the case of a five-star hotel with apartments to
Postgraduate Dissertation 62 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece rent with less than 50 bed capacity, the minimum electricity power available to each customer at a daily basis must equal 2.8 kWh. Moreover, a five-star apartment complex must provide each guest with at least 450 liters of water daily (Greek Government, 2017).
The cost of each unity was derived from recent electricity and water bills of the region. It was found that one kWh costs 0,0946€ as applied by Greek Public Power Corporation S.A. The cost of water usage is calculated gradually using following scale: For 0-100 lit. 0.00031 €/lit. For 101-150 lit. 0.00043 €/lit. For 151-200 lit. 0.00062 €/lit. For more than 201 lit. 0.000797 €/lit.
Telecommunication payments (telephone and internet charges) are estimated at about 50,00€ per month for each bungalow (6 months of operation).
Based on an average number of three guests per month in each bungalow, the total operational expenses of the proposed bungalow complex, taking also a possible 2.00% annual increase into consideration, are presented in Table 4. 22.
Cleaning and Linen expenses As already mentioned, the payments for cleaning service are calculated in the “wage and salaries” section. However, the constant renewal of cleaning supplies as well as the daily or in some cases periodic cleaning of Linen (i.e. towels, bathrobes, sheets, pillowcases, etc.) are estimated at about 5% of the total annual room sales revenue of the bungalow complex.
Food & Beverage expenses The rent price also includes free breakfast for its customers. Assuming a daily consumption of breakfast from all customers, and a cost of 4€ per customer each day, Food & Beverage expenses are calculated separately for every month according to Table 4. 23.
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Maintenance costs All repair and maintenance expenses regarding the hotel’s facilities (buildings, mechanical equipment, etc.) are part of this category. These expenses will occur after the second operation year and amount to 1% of the total revenues.
4.6.2.3. Depreciation expenses Depreciation of fixed assets and equipment is estimated at 5% for land and buildings and at 10% for hotel and mechanical equipment according to Law 4172/2013, Article 24 (Greek Government, 2013 / 2019) and is calculated as followed:
Table 4. 24: Depreciation value per year Purchase value Depreciation Annual Depreciation value Building facilities 425’918.25 5% 21’295.91 Building lot 300’000.00 5% 15’000.00 Infrastructure and landscaping works 42’591.83 10% 4’259.18 Water and electricity supply 21’295.91 10% 2’129.59 Furnishing / Equipment 50’000.00 10% 5’000.00 47’684.69
4.6.2.4. Selling expenses This category includes all commissions for travel agencies and online operators that are estimated at 5% of the total annual revenue.
4.6.2.5. Administrative expenses The company’s executives in our case are its own investors, with the exception of the Accountant of the business. The administration expenses are therefore estimated at 2,000 € for the annual payment of the Accountant.
4.6.2.6. Insurance costs In addition to a public liability insurance against natural hazards such as flooding, fire and earthquakes for the bungalows, a property insurance on equipment against burglary and
Postgraduate Dissertation 64 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece theft is completed. This premium insurance requires an annual fee of 300 € for each bungalow (ΕΥΡΩΠΑΪΚΗ ΠΙΣΤΗ, n.d.).
4.6.2.7. Income Tax The company will be established as a general partnership, that is an association of at least two partners designated in a written agreement. These partners are equally responsible and liable for any business actions or business debts (Wikipedia, 2018).
The corporate income tax rate for General Partnerships equals 29%, according to Law 4172/2013 (Article 58) (Greek Government, 2013 / 2019).
4.6.2.8. Income Statement The compilation of the above data leads to the income statement for years 2025 to 2034 as follows:
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Table 4. 25: Income Statement during 2025 - 2034
Year
2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Sales 116’435.00 118’563.70 120’734.97 122’949.67 125’208.67 127’512.84 129’863.10 132’260.36 134’705.57 137’199.68 COGS 23’972.09 24’230.53 24’494.14 24’763.02 25’037.29 25’317.03 25’617.20 25’908.54 26’205.71 26’523.58 Gross Profit 92’462.91 94’333.17 96’240.83 98’186.65 100’171.38 102’195.81 104’245.90 106’351.82 108’499.85 110’676.09 Selling expenses 5’821.75 5’928.19 6’036.75 6’147.48 6’260.43 6’375.64 6’493.15 6’613.02 6’735.28 6’859.98 Administrative expenses 2’000.00 2’000.00 2’000.00 2’000.00 2’000.00 2’000.00 2’000.00 2’000.00 2’000.00 2’000.00 Insurance expenses 1’500.00 1’500.00 1’500.00 1’500.00 1’500.00 1’500.00 1’500.00 1’500.00 1’500.00 1’500.00 Depreciation 47’684.69 47’684.69 47’684.69 47’684.69 47’684.69 47’684.69 47’684.69 47’684.69 47’684.69 47’684.69 Profit before taxes 35’456.47 37’220.30 39’019.40 40’854.48 42’726.26 44’635.48 46’568.06 48’554.11 50’579.89 52’631.42 Income tax (29%) 10’282.38 10’793.89 11’315.63 11’847.80 12’390.62 12’944.29 13’504.74 14’080.69 14’668.17 15’263.11 Net profit 25’174.10 26’426.41 27’703.77 29’006.68 30’335.65 31’691.19 33’063.32 34’473.42 35’911.72 37’368.31
Postgraduate Dissertation 66 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
4.6.2.9. Cost of Equity The cost of common equity is usually estimated by using two different methods: 1) the Dividend Discount Model (DDM) or 2) the Capital Asset Pricing Model (CAPM). Both methods aim to measure the cost of common stock (Vasiliou, 2016). However, the proposed company will be not listed on the Greek Stock Exchange and therefore an alternative assessment must be examined.
As Bierman and Aldefer suggested, the cost of equity can in some cases be calculated taking the shareholders’ expectations into consideration, as there is an indirect connection to former financial data (Bierman & Alderfer, 1970). The required return rate, as otherwise called, is normally greater than the riskless rate, as the general formula of CAPM indicates:
푘 = 푅 + 푅 − 푅 훽 (4.1) where ks the required rate of return (or else cost of equity)
RM the expected rate of return on the market β the beta coefficient RF the risk-free rate of return. It also commonly refers to the return of 10-year government bonds. The value of Greek bonds amounts to about 3% (Fusion Media Limited, 2019). For this specific investment on the development of bungalow complex, a cost of equity of ca. 5% will be assumed.
Because the investment utilizes only private capital without extra financial support from banking institutes, the cost of capital equals the cost of equity and is also estimated at 5%.
4.6.2.10. Incremental Annual Cash Flow In order to calculate the annual cash flows, the net working capital (NWC = Current Assets – Short Term Liabilities) must be found under following preconditions:
1. The bungalows are available to rent from April to September every year and thus will operate 183 days annually.
Postgraduate Dissertation 67 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
2. Both inventory turnover and payment frequency of salaries and suppliers will be based on a 30-days routine.
The following Table 4. 26 and Table 4. 27 present the net working capital and the annual cash flows of the examined 10-year basis.
Postgraduate Dissertation 68 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
Table 4. 26: Net Working Capital during 2025 - 2034
2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Current Assets 3’108.39 3’133.72 3’159.57 3’185.92 3’212.81 3’240.23 3’270.67 3’299.25 3’328.41 3’360.60
Inventories 964.46 983.41 1’002.75 1’022.47 1’042.59 1’063.11 1’084.03 1’105.38 1’127.16 1’149.37
Food and Beverage 770.40 785.81 801.52 817.55 833.91 850.58 867.60 884.95 902.65 920.70
Cleaning and Linen 194.06 197.61 201.22 204.92 208.68 212.52 216.44 220.43 224.51 228.67
Cash and cash equivalents 2’143.93 2’150.31 2’156.82 2’163.45 2’170.22 2’177.13 2’186.64 2’193.87 2’201.25 2’211.23
Short-Term Liabilities 964.46 983.41 1’002.75 1’022.47 1’042.59 1’063.11 1’084.03 1’105.38 1’127.16 1’149.37
Suppliers of Food and Beverage 770.40 785.81 801.52 817.55 833.91 850.58 867.60 884.95 902.65 920.70
Suppliers of Cleaning and Linen 194.06 197.61 201.22 204.92 208.68 212.52 216.44 220.43 224.51 228.67
NWC 2’143.93 2’150.31 2’156.82 2’163.45 2’170.22 2’177.13 2’186.64 2’193.87 2’201.25 2’211.23
Table 4. 27: Net Cash Flows during 2025 - 2034 t= 0 1 2 3 4 5 6 7 8 9 10 Inflows 0.00 € 130’825.85 € 132’589.67 € 134’388.77 € 136’223.85 € 138’095.63 € 140’004.85 € 141’937.43 € 143’923.48 € 145’949.26 € 148’000.80 € Earnings before Taxes 83’141.16 € 84’904.98 € 86’704.08 € 88’539.17 € 90’410.95 € 92’320.17 € 94’252.74 € 96’238.80 € 98’264.57 € 100’316.11 € Depreciation Expenses 47’684.69 € 47’684.69 € 47’684.69 € 47’684.69 € 47’684.69 € 47’684.69 € 47’684.69 € 47’684.69 € 47’684.69 € 47’684.69 €
Outflows 914’780.13 € 2’143.93 € 2’150.31 € 2’156.82 € 2’163.45 € 2’170.22 € 2’177.13 € 2’186.64 € 2’193.87 € 2’201.25 € 2’211.23 € Initial investment 914’780.13 € NWC 2’143.93 € 2’150.31 € 2’156.82 € 2’163.45 € 2’170.22 € 2’177.13 € 2’186.64 € 2’193.87 € 2’201.25 € 2’211.23 €
Net Cash Flows -914’780.13 € 128’681.92 € 130’439.36 € 132’231.95 € 134’060.40 € 135’925.41 € 137’827.73 € 139’750.79 € 141’729.61 € 143’748.01 € 145’789.56 €
Present Value Factor 1 0.952380952 0.907029478 0.863837599 0.822702475 0.783526166 0.746215397 0.71068133 0.676839362 0.644608916 0.613913254 Present Value -914’780.13 € 122’554.21 € 118’312.34 € 114’226.93 € 110’291.82 € 106’501.12 € 102’849.17 € 99’318.28 € 95’928.18 € 92’661.25 € 89’502.14 € Net Present Value 137’365.32 €
IRR 7.920%
PI 1.15
Cumulative Cash Flows -914’780.13 € -792’225.92 € -673’913.58 € -559’686.64 € -449’394.82 € -342’893.70 € -240’044.53 € -140’726.26 € -44’798.08 € 47’863.17 € 137’365.32 € Payback Period 8.48
Postgraduate Dissertation 69 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
The incremental cash flows show the extra operative cash flows that are generated through an investment. These cash flows can be negative or positive and are added to the firm’s capital (Vasiliou, 2016) At the time of investment (t=0), when the land has already been purchased and the construction begins, the net cash flow is negative and a loss of 914,780 € will be generated. From that point on, the company experiences profit that increases through the fiscal years.
In order to evaluate the investment, the methods of Net Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI) and Payback Period are applied.
NPV
The Net Present Value represents the total discounted cash flows at the required rate of return (Vasiliou): 퐶퐹 푁푃푉 = (4.2) (1 + 푘)
The positive value of the proposed investment indicates a project worth of acceptance, as its cash flows result in a higher rate of return.
Internal Rate of Return
The IRR represents the actual return rate of an investment and can be calculated by equating the initial cash flow, or else investment cost, with the cash flows of the following fiscal years discounted by the IRR. 퐶퐹 퐶퐹 = (4.3) (1 + 퐼푅푅)
In the case of the examined bungalow complex the IRR is higher than the required rate of return defined in chapter 4.6.2.9, which means that the investment should be accepted.
Postgraduate Dissertation 70 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
Profitability Index (PI)
This index shows the ratio of a project’s net present value of only future cash flows to its initial investment cost: 퐶퐹 ∑ (1 + 푘) 푃퐼 = (4.4) 퐶퐹
A value higher than one, as in the proposed project, reveals an attractive investment.
Payback Period
This method calculates the recovery time of the initial cost of investment, or in other words the exact time at which a company makes a profit over the investment. The bungalow complex will reach the break-even point after 8.48 years of operation, which is considered an acceptable period for such a high investment.
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4.7. Timeline
It is expected that the land will be purchased in 2024 to avoid extra tax expenses. In the spring of the same year the construction will begin and its duration is estimated at eight months.
Starting in January of 2024 the management will hire an advertising agency to develop attractive advertisements for all types of media. At the same time, the managers will aim to seal collaborations with travel agencies, hotel booking websites, etc., as well as with local firms that provide all the extra services included in the hotel package.
In October of 2024, the complex will welcome its first guests to run a pilot weekend. The visitors will be chosen and invited by the managers and their mission will be to point out any points which are to improved.
Consequently, the hotel website will be designed by the management and the advertising agency as a consultant. The website will be activated until December 2024, ready to accept its first bookings from January 2025.
Figure 4. 3 illustrates the detailed timeline:
Postgraduate Dissertation 72 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
Figure 4. 3: Project timeline
Postgraduate Dissertation 73 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece
5. Conclusions
As aforementioned, there are currently limited accommodation types offered in the tourist market of Chalkidiki, such as smaller B&B hotels or big hotel chains. Across these options, the competition has long reached its saturation point. Customers are only offered a narrow range of options on where to stay, what to do or see and how much that would cost. Packages tend to include wellness offers, which do not necessarily appeal to all types of travellers, i.e. adventure travellers. Additionally, high-end options are restricted to big hotel chains, which are regularly more expensive.
Evidently, there is a clear niche with regard to further accommodation types, particularly of a premium nature. The deluxe bungalow complex developed in this business plan aims to start filling this niche. It is expected that it will emerge and thrive as the unique combination of staying in a luxurious private villa and being offered wide service packages, paving the way for future businesses and ultimately acquiring a vital role in the market and the community.
Viability of this business heavily depends on key factors already discussed, namely thorough market research and strategy, careful preparation of risk and cost management, a good location within the region, and others. In the present business plan, they have all been analysed, carefully considered and added together to reach conclusions and make informed decisions.
When it comes to location, for instance, the management thoroughly analysed all available options before selecting Afitos. As noted in chapter 4.7, the building lot is expected to be purchased five years from now, while the locations examined in chapter 4.2.2 correspond to current available offers. After careful consideration of all the variables, it has been determined that Afitos will still be the most suitable site for the bungalow complex, as it is undergoing development measures and the number of competitive businesses will remain small.
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Following this, operational decisions were based on risk and cost factors, as well as data gathered from national authorities. As such, it was determined that the bungalow complex would not operate year-round but seasonally between April and October, with an assumed realistic capacity ranging from 25% to 75% in the first year of operation. Here the term realistic finds its roots in the occupancy rates of Kassandra registered by the Hellenic Statistical Authority during 2008-2017, which indicate an average annual occupancy of at least 55%. In our case, in the first two operational years the average occupancy is lower than this statistical value, reaching up to 52-53%. Reaching, or perhaps exceeding, this goal is fundamentally rooted in the marketing strategy employed and the distribution techniques implemented. From the very beginning, the management is prepared to seek collaborators in the local market, namely intermediaries who will promote the business ahead of its opening. It is also going to establish an online presence through a premium website and online advertisements on social media and other platforms worldwide. This will all be completed long before launch day with a view to starting operations with an online reputation preceding it.
Part of this marketing campaign is selecting the right USPs. These need to clearly show what makes this bungalow complex different to its competitors and why the customers should opt for it. At the initial stages of outlining the advertising process, careful consideration will be given to shaping and phrasing these unique selling points into something a target customer immediately chooses. A good example is the premium environment of accommodation offered: an exquisite, minimalistic architectural concept coming to life by use of natural elements will create a luxurious atmosphere both outside and inside of each bungalow. This, in combination with an optimal size of 85 m2 to welcome groups or families up to four guests, while maintaining prices at affordable levels, can distinguish the proposed bungalow complex from its competitors. Naturally, all additional services that expand the service portfolio of a typical bed and breakfast will also be highlighted to gain the interest of potential customers.
As the SWOT-Analysis revealed, one of the factors which might affect the expected turnover is the country’s economy in the upcoming years. The fluctuating development rates along with an unstable political scene have in the past affected business operations,
Postgraduate Dissertation 75 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece mostly in harmful ways. There have been drastic changes in tax rates, more so in the private sector. While Chalkidiki has remained virtually untouched so far, that could easily change in the future. The management will remain vigilant for any potential adjustments needed in operational procedures, all the while committing to high quality levels and offering what the customers have been promised. It is the cornerstone of this business plan that customers should receive what they expected and paid for, and no less.
Lastly, in terms of profit, the financial appraisal in Chapter 4.6.2 revealed an investment with a higher rate of return than the required one. More specifically, as far as the Net Present Value is considered, the Cash Flow Analysis resulted in a positive value of about 137,365 €, setting the proposed project at the acceptable limit. The equivalent Internal Rate of Return ammounts to 7.92%, exceeding the assumed cost of equity of 5%. The Payback Period is estimated at about 8.5 years in a 10-year analysis. This may seem at first a relatively long period. Nonetheless, the calculation is based on the assumption that in the first decade no full capacity will be achieved, which is actually the worst-case scenario. This investment will conclusively be a successful and profitable one.
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6. Theoretical and Managerial Implications
Across literature, careful study of the history of models describing the establishment of companies, from the very starting point and onwards to their eventual success, can bring to surface a common framework. This consists of seven key elements for business planning, applicable to any point in time and place.
However, this study does not come without its hindrances, as there is currently not a single consolidated presentation of the whole history; in existing references it is fragmented, scattered and at times disjointed (Berry, 2011). Aside from presenting a solid, innovative business plan, the current paper aims to present a seamless timeline of historical facets, so that future researchers can readily source the information they need.
This applies even more to research on Greek tourism. Zooming in on the tourist market in Chalkidiki, we can see that, somehow, it has managed to remain unscathed by the financial crisis which almost eliminated the private sector since the first monetary measures in 2010. Despite the hardships, tourism has always thrived rather than decline there. As such, an investment in the hotel industry in a highly touristic region is considered a relatively safe option in a rather unstable political and economic environment. Yet, there have not been any well-rounded business plans presented for that area so far. The present business plan aims to change that, since it can be used as a model by future entrepreneurs interested in similar investments. For instance, analysing and assessing potential risk factors will become more valid with the precedent of a business plan already in place. Additionally, the robust components mentioned in chapter 1.2 can constitute a solid guideline for all kind of organizations regardless of their size or industry field.
By extension, Greek Universities- indeed the Open University itself- can make use of the present business plan as a model of future research. Whether it be part of a Strategic Management module or a paper to be sourced in future assignments, this plan will be available for everyone’s reference. Future generations can build on it and shape their own plans according to their individual targets.
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Bank institutions in Greece could also develop their own exemplars or templates of business plans on the basis of the proposed model, in order to provide their customers who are interested in investment loans with a solid guideline for the presentation of their projects. For example, UBS, the leading bank in Switzerland, offers an online application to build step by step a tailored business plan according to their customers needs (UBS, 2019).
As already mentioned, risk factors have been carefully considered for the present business plan despite, and perhaps even moreso, due to its innovative nature. It is expected that certain adjustments will be necessary along the way to ensure its smooth implementation, like countless businesses have had to do in the past. In the worldwide tourism market, adjustments are perpetually necessary as an integral part of the industry. Changes in customer needs, political developments, natural disasters and diseases, and other factors can have a ripple effect, especially in highly competitive environments. Nowadays, hotel management personnel should be prepared as ever for such occasions and react properly by taking appropriate measures. For instance, diversifying the service portfolio or changing pricing policies according to the demand are two of the numerous options available for consideration. However, the right course of action should be selected after determining the issues and researching current trends. This can be achieved through questionnaires which can elicit customers’ sincere opinion about the quality of different features or services and extensive market research; this way, the managers can evaluate feedback, cross-reference it against market trends and apply measures to meet future guests’ approval.
Last but not least, the whole concept of the proposed company is based on the principle of maintaining independence. Both the financing plan as well as the marketing strategy will be conducted by the managers, who will not be passive stakeholders but rather actively assuming directing duties. To this end, all administrative activities related to marketing strategy will stem from internal resources in order to avoid dependence on external operators. Only at the beginning of the promotion campaign will an advertising agency be hired to design advertisements and consult the managers through the development of the hotel website. It is understood that this type of organisation requires perfect coordination
Postgraduate Dissertation 78 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece and clear communication channels between the managers to nullify any risks of multiple delegation of tasks. The target is that this business is built on strong foundations of sovereignty and will ultimately pride itself on its autonomy.
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7. Recommendations for Further Research
This dissertation discusses the development of a bungalow complex consisting of five luxurious houses by utilizing private capital. The initial budget of about 915,000 € including 10% reserve required for this investment cannot not be exceeded, as the sources of capital are limited. Optimization potential must be examined as part of further research for following cases:
1) Different number of bungalows
Using the Excel-Tables developed for this study, it is possible to alter the number of bungalows in order to find the optimized cost-benefit model for this business. In other words, a cost-benefit analysis should be conducted to discover how a variation in investment costs can lead to analogically higher net cash flows. Obviously, this involves both directions of cost progression, that is increase or reduction of initial budget. Because a relatively tight timeline is presumed, with the first operational year lying only five years later, it is recommended to prioritize this analysis as the next step of this business plan.
2) Other capital sources
The Greek government has constituted the new development Law 4399/2016 for investment incentives. According to this Law, small and medium-sized enterprises in tourism industry are eligible for subsidization in a range from 25,000 € to 400,000 € as part of the partnership agreement (PA) 2014-2020 (Europe Strategy Partnership Agreement (ESPA), 2018). The proposal of this bungalow complex could be qualified for a grant as it meets the requirements regarding company form (General Partnerships are accepted), as well as the minimum number of three furnished villas, with a minimum surface area of 40 m2 each.
Therefore, it is advised to explore similar protentional funding programs before deciding for private capital. Both interviewed renowned entrepreneurs in Afitos and Pefkochori also highlighted the benefits of such grant opportunities (Lagarias, 2019) (Interviewee, 2019). It should however be noted, that the manager’s decision to finance their own company
Postgraduate Dissertation 80 Stavroula Gatsou, Business Plan for a Bungalow Complex in Chalkidiki, Greece exclusively with their own assets is based on the insecure political and economic situation in Greece which might cause the exit of the Greek State from the European Union, hence the termination of such subsidization models.
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33. Trade and Services Statistics Division, 2017. Hellenic Statistical Authority. [Online] Available at: https://www.statistics.gr/ [Accessed 23 May 2019]. 34. UBS, 2019. Business Plan. [Online] Available at: https://www.ubs.com/ [Accessed 16 July 2019]. 35. Vasiliou, D., 2016. Financial Management and Accounting - Corporate Finance. 2 ed. Patras: Hellenic Open University. 36. Voria.gr, 2019. Voria.gr. [Online] Available at: https://www.voria.gr/ [Accessed 10 May 2019]. 37. Wikipedia, 2005. Chalkidiki. [Online] Available at: https://en.wikipedia.org/ [Accessed 20 March 2019]. 38. Wikipedia, 2005. DuPont. [Online] Available at: https://en.wikipedia.org/wiki/DuPont [Accessed 01 February 2019]. 39. Wikipedia, 2018. General partnership. [Online] Available at: https://en.wikipedia.org/ [Accessed 29 May 2019]. 40. World Economic Forum, 2017. The Travel & Tourism Competitiveness Report 2017. [Online] Available at: https://www.weforum.org/ [Accessed 13 March 2019]. 41. WORLD TRAVEL & TOURISM COUNCIL, 2018. TRAVEL & TOURISM - ECONOMIC IMPACT 2018. [Online] Available at: https://www.wttc.org/ [Accessed 01 March 2019]. 42. WORLD TRAVEL & TOURISM COUNCIL, 2018. TRAVEL & TOURISM - ECONOMIC IMPACT 2018 - GREECE. [Online] [Accessed 13 March 2019].
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43. ΕΥΡΩΠΑΪΚΗ ΠΙΣΤΗ, n.d. 2019. [Online] Available at: https://www.europaikipisti.gr/ [Accessed 28 May 2019]. 44. Καραγιάννης, Δ. Χ., n.d. Έξοδα μεταβίβασης ακινήτου - έξοδα αγοραστή. [Online] Available at: https://www.karagiannislawfirm.gr/ [Accessed 21 May 2019]. 45. Μητάκης, Α., 2018. Οκτώ στους δέκα τουρίστες επιστρέφουν στη Χαλκιδική, s.l.: https://www.voria.gr.
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Appendix A: Halkidiki Survey 2018
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Appendix B: Preliminary Designs of the Bungalow Complex
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Appendix C: Quantities and Costs of Structural Elements
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Author’s Statement: I hereby declare that, in accordance with article 8 of Law 1599/1986 and article 2.4.6 par. 3 of Law 1256/1982, this thesis/dissertation is solely a product of personal work and does not infringe any intellectual property rights of third parties and is not the product of a partial or total plagiarism, and the sources used are strictly limited to the bibliographic references.
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