Hotel18

June, 2018

Confidentiality Agreement

The undersigned reader acknowledges that the information provided by Pardes
Group International in this business plan is confidential; therefore, reader
agrees not to disclose it without the express written permission of the author.

It is acknowledged by reader that information to be furnished in this
business plan is in all respects confidential in nature, other than information
which is in the public domain through other means and that any disclosure or
use of same by reader, may cause serious harm or damage to the project and
proposal and will be considered in any process that will be installed by Pardes
Group about their rights and authorial rights .

Upon request, this document is to be immediately returned to sender or
destroyed in any digital or internet base, also hard disks and pen drives or
other data register means that can be used to maintain a copy of this project
or proposal.

This is a business plan. It does
not imply an offering of securities.

Table Of Contents

1.0  Executive Summary

1.1  Objectives

1.2  Mission

1.3  Keys to Success

2.0  Company Summary

2.1  Company Ownership

2.2  Start-up Summary

2.3  Company Locations and Facilities

3.0  Services

3.1  Service Description

3.2  Competitive Comparison

3.3  Sales Literature

3.4  Fulfillment

3.5  Technology

3.6  Future Services

4.0  Market Analysis Summary

4.1  Market Segmentation

4.2  Target Market Segment Strategy

4.2.1  Market Needs

4.2.2  Market Trends

4.2.3  Market Growth

4.3  Service Business Analysis

4.3.1  Business Participants

4.3.2  Distributing a Service

4.3.3  Competition and Buying Patterns

4.3.4  Main Competitors

5.0  Strategy and Implementation Summary

5.1  Strategy Pyramids

5.2  Value Proposition

5.3  Competitive Edge

5.4  Marketing Strategy

5.4.1  Positioning Statement

5.4.2  Pricing Strategy

5.4.3  Promotion Strategy

5.4.4  Distribution Strategy

5.4.5  Marketing Programs

5.5  Sales Strategy

5.5.1  Sales Forecast

5.5.2  Sales Programs

5.6  Strategic Alliances

5.7  Milestones

6.0  Management Summary

6.1  Organizational Structure

6.2  Management Team

6.3  Management Team Gaps

6.4  Personnel Plan

7.0  Financial Plan

7.1  Important Assumptions

7.2  Key Financial Indicators

7.3  Break-even Analysis

7.4  Projected Profit and Loss

7.5  Projected Cash Flow

7.6  Projected Balance Sheet

7.7  Business Ratios

7.8  Long-term Plan

1.0  Executive Summary

The reason of this paper is to introduce a new Pardes Group Investment
Program in hotel and hospitality support means.

This program was studied and developed along past three years through
Latin America Division of Pardes Group in their local office and with labor of
many experts in Brazil and nearby countries in South America.

Now, we are looking for financial institution, lender, partners or
otherwise of investor kind that can works together offering support for
financial resources to complete the program.

We are guarantying high profitable return of investment, over than 60 %
in comparison with US T Bond, real estate as collateral and issue of debentures,
as supplementary collateral, to guarantee and comfort, of the payment of
investment made in this program.

All acquisitions are working for a minimum of five years and are
profitable. Don´t exist new business that can be risk for investor.

We are looking for a thousand rooms in this initial stage, and we talked
about with one of most important and greatest hotel chain in south of Brazil
that is ready to be negotiated.

Initially we are looking for US$ 250 million to buy all properties and
trade mark.

This value will be returned to investor in twenty years, with one year
of grace period to adequate the hotel chain to new owners.

We accept payment annual or semiannual, since the value will be
compatible with the business.

In next pages you can see the study and report of this program. We are
knowing that your business is to increase your net profit, and we have the
certain that this program will achieve your goals.

1.1  Objectives

This
Strategic Business Plan was developed to offer a complete vision of the Pardes
Group investment pogram in hospitality and hotel for investors and investment
companies.

Our
objective is to show and demonstrate the profitable proposal that the Pardes
group Latin America has developed along the past three years.

To
be used as an international parameter, this SBP (Strategic Business Plan) used
international data and information that can be found in the "Lodging
Industry in Numbers- Brazil 2017" from JLL group (Jones Lang LaSalle); and
whose is one of most respectable companies and devoted to real estate and
hotel research around all world.

So,
using this information our team expect that the final reader, the investor and
their group and professionals, has a compete vision, geographic, economic and
financial of the program, and that this paper can be help the investment
decision in favor of our program along next decade.

1.2  Mission

Our
mission is search, study, select and buy hotel, resorts, apart-hotel and others
different kind of hospitality means, that can be converted in valuable assets
in the Pardes Group investment program.

1.3  Keys to Success

The
most important success key is the acknowledgement that our team has in Latin
America.

Living
in Brazil during last decades, all most part of our hired professionals have
excellent and important cultural knowledge, tendency and process in the country
that is one of most valuable point in our group.

Located
in the financial core of all Latin America, our commercial office is well
positioned in Paulista Avenue, and our partnership offices cover all Latin
America, in the most important countries, as Brazil, Uruguay, Paraguay,
Argentine, Chile and Peru.

In
all other countries of Latin America, including Mexico, our group have
associated offices or registered offices as local representing.

The acknowledgement, culture living, and local presence offer to us the
best opportunity and facilities that no other office can offer appropriately.

2.0  Company Summary

The
Pardes Group is an international organization composed by offices, owner or
partnership, associated and experts that works together to develop new
business, projects or to develop and implement proposal for third party.

Founded
in 1986 as a consulting group, and named Business Consultant Sao Paulo, the
company start their business in assistance of accountants and management of
small and medium companies.

In
1990 years the structure of company is changed and the Pardes Group appear by
the first time as an investment advisor company.

Along
the 90´s years the company have their structure increased and turns a
consultant group, expand their business around the world and begin their
intelligence division to offer support for offices that need help in their
business.

Today
Pardes Group is a worldwide company, and have more than 3.000 registered
persons and experts to support their works covering all world.

Registered
in Dacon - Data Consult Bank - DG Market and in the Project Management
Institute, the Pardes Group works in business intelligence and integrated
solutions for industry and companies that have interest in a high-level
assistance.

The
proposed program will be developed according our international rules, and will
be independent of Pardes Group, but under the control and development of one
(or more) of associated offices.

This program will be developed according local and international culture and
law.

A SPE (special purposes enterprise) will be created in each acquisition,
according the next rules:

1) Each investor will receive the totality shares of new company to be used as
guarantee of their investment.

2) After the acquisition, the shares of company will be swap by the hotel
shares.

3) The SPE will issue debentures to pay back the investment made by investor or
lender.

4) This debentures can be sold in market after 90 days (local CVM-SEC rules)

5) After the payment of the investment made, the shares of hotel will be transferred
to Pardes Group.

2.1  Company Ownership

Dr. Ailton J Garcia,is owner of the Pardes
Group and he is it´s founder in 90´s years.

Today
the Pardes Group is an international organization of associated offices, in
that each one office proposes projects and business and take part of this
profitable market.

So,
each project is an independent enterprise in that have the Pardes Group, the
local office, the project promoter and the investor as their director board.

All
of their developers receive their profit along the time and at end of the
project.

2.2  Start‑up Summary

This
program is the result of two years of development and studies made by our south
america office.

The
program is devoted to buy and sell hotels, condo and hospitality services
around the world, and will begin in south america, starting in Brazil.

Brazil
have more than 537 thousands of hotel rooms in their territory and was
increased the numbers that had in more than 14 % in function of football world
cup and Olympic games that occurred in the country.

Today
the cost of UH in Brazil is very low, because the country has passed through a
financial crisis due their legal problems with their governors.

This
situation is benefic to us because show that the legal system in Brazil works
and reduces the risk for investor.

At
the other side, the low cost is not permanent, because their economy is
recovering, the industry is growing, and the people has returned to their
ordinary life.

In
Brazil, today, the average cost of one hotel room to be sale is from US$ 46
thousand to US$ 125 thousand (4 star to 5 star; according the EMBRATUR - a
local touristic governmental agency).

This
value is very low if compared to other places; in that can exist the same
possibility to gain the same value by hotel room.

So,
this is the best opportunity to begin our investment program and to buy great
hotel chain to startup this proposal.

Start-up Plan

Start-up Expenses

Legal

$87.500

Stationery etc.

$18.200

Brochures

$8.000

Consultants

$375.000

Insurance

$137.500

Rent

$52.830

Research and development

$48.000

Expensed equipment

$35.000

Other

$24.000

Total Start-up Expense

$786.030

Start-up Assets Needed

Cash Requirements

$230.000

Start-up inventory

$0

Other Short-term Assets

$38.000

Total Short-term Assets

$268.000

Long-term Assets

$230.000.000

Total Assets

$230.268.000

Total Start-up Requirements:

$231.054.030

Left to finance:

$80.056.530

Start-up Funding Plan

Investment

Pardes Group

$475.000

Investor

$0

Equity or lender

Total investment

$475.000

Short-term Liabilities

Unpaid Expenses

$0

Short-term Loans

$475.000

Interest-free Short-term Loans

$47.500

Subtotal Short-term Liabilities

$522.500

Long-term Liabilities

$150.000.000

Total Liabilities

$150.522.500

Loss at Start-up

$79.270.500

Total Capital

$79.745.500

Total Capital and Liabilities

$230.268.000

Checkline

$0

2.3  Company Locations and
Facilities

The
main office is located on Avenida Paulista, the financial heart of Latin
America, located in the financial center of São Paulo city.

São
Paulo ( Portuguese pronunciation: [saw 'pawlu] ) is a municipality in the
southeast region of Brazil.

The
metropolis is an alpha global city (as listed by the GaWC) and the most populous
city in Brazil, the Western Hemisphere and the Southern Hemisphere. The
municipality is also the Earth's 13th largest city proper by population. The
city is the capital of the surrounding state of São Paulo, one of 26
constituent states of the republic. It is the most populous and wealthiest city
in Brazil. It exerts strong international influences in commerce, finance, arts
and entertainment. The name of the city honors the Apostle, Saint Paul of
Tarsus. The city's metropolitan area of Greater São Paulo ranks as the most
populous in Brazil, the 11th most populous on Earth, and largest
Portuguese-speaking city in the world.

Having the largest economy by GDP in Latin
America and the Southern Hemisphere, the city is home to the São Paulo Stock
Exchange. Paulista Avenue is the economic core of São Paulo.

The
city has the 11th largest GDP in the world, representing alone 10.7% of all
Brazilian GDP and 36% of the production of goods and services in the state of
São Paulo, being home to 63% of established multinationals in Brazil, and has
been responsible for 28% of the national scientific production. With a GDP of
US$477 billion, the São Paulo city alone could be ranked 24th globally compared
with countries.

The metropolis is also home to several of the
tallest skyscraper buildings in Brazil, including the Mirante do Vale, Edifício
Itália, Banespa, North Tower and many others. The city has cultural, economic
and political influence both nationally and internationally. It is home to
monuments, parks and museums such as the Latin American Memorial, the
Ibirapuera Park, Museum of Ipiranga, São Paulo Museum of Art, and the Museum of
the Portuguese Language. The city holds events like the São Paulo Jazz
Festival, São Paulo Art Biennial, the Brazilian Grand Prix, São Paulo Fashion
Week and the ATP Brasil Open. The São Paulo Gay Pride Parade rivals the New
York City Pride March as the largest gay pride parade in the world. It is
headquarters of the Brazilian television networks Band, Gazeta and RecordTV.

São Paulo is a cosmopolitan, melting pot city,
home to the largest Arab, Italian, and Japanese diasporas, with examples
including ethnic neighborhoods of Mercado, Bixiga, and Liberdade respectively.
São Paulo is also home to the largest Jewish population in the country and one
of the largest urban Jewish populations in the world. In 2018, inhabitants of
the city were native to 196 different countries.

People
from the city are known as paulistanos, while paulistas designates anyone from
the state, including the paulistanos. The city's Latin motto, which it has
shared with the battleship and the aircraft carrier named after it, is Non
ducor, duco, which translates as "I am not led, I lead." The city,
which is also colloquially known as Sampa or Terra da Garoa (Land of Drizzle),
is known for its unreliable weather, the size of its helicopter fleet, its
architecture, gastronomy, severe traffic congestion and skyscrapers. São Paulo
was one of the host cities of the 1950 and the 2014 FIFA World Cup.
Additionally, the city hosted the IV Pan American Games and the São Paulo Indy
300. São Paulo is the second best city in Brazil to invest in, after the city
of Curitiba. The city attracts numerous immigrants from all over Brazil and
even from foreign countries, due to the vibrant economy and for being the hub
of most Brazilian companies.

3.0  Services

Hospitality in services is
therefore the art of valuing relationships and through the training policy the
development of the humanization of services.

But often the human side of
hospitality is little seen if we compare its importance to the process of
customer loyalty in hotels.

The hostelry had the initial basic function
of housing those who, because they were outside their homes, needed a room, a
bed and a good bath.

With the evolution of the area, the
new hotel developments sought to understand all the needs of people in transit
and to attract the population of the micro-region to consume their products and
services.

At the beginning of the first
trips, the hospitality was not organized or linked to lodging, gastronomy and
tourism or business, as is known today. The search for the consolidation of
tourism and business trip as a social and economic activity, structured, has
the sense to professionalize, in a way that can attribute, add and gather
conditions for the demonstration of quality in terms of services and
"welcome":

The "welcome" is closely
related to the quality of the goods and services offered in travel. This is
equivalent to saying that the quality offered in the costumer´s destination can
directly influence the service. In this sense, it is important that business
trip hospitality is present in all activities related to the planned activity.

Since hospitality in services can
be seen as the art of valuing interpersonal relationships, the spontaneity of
gestures, attitudes, behaviors in dealing with people, transforming them with
the development of the humanization of services. "[...] hospitality
activities help in the development of social ties with third parties and the
subsequent satisfaction of social needs.

We can define the hospitality means
as a set of goods and services that aim to satisfy the customer: goods are made
up of tangible products such as apartments, meals, etc. and the services are
constituted by the set of actions (intangible) that allow the client to enjoy
the goods.

So, selecting the best structures, training
the people and offering an expected services, with quality and support, the
costumer will be satisfied and return all travel possible to the same hotel in
that he was well received and welcomed.

3.1  Service Description

In
the hotel industry, as in many other segments, being able to adapt to a new
market and make its processes more flexible is not only a question of
innovation, but also of survival.

Our
program was developed to buy hotels, in those we can install our business
model.

Our
program aims to buy hotel whose vocation is business trip and offer the best
support for these costumers.

Today
over than 60 % of travelers are business man that are travelling because their
works. They don´t travel to do tourism, and don´t need tourism support, they
travel to do business and need a business support.

Our
hotel chain will focus in this people and their industry that need offer comfort,
support and facilities for these people to produces more and with quality their
services and products.

3.2  Competitive Comparison

Leveraging
its proprietary databases, data from other specialized websites and market
information, We identified the hotels that are affiliated with national or
international hotel chains and then estimated the number of independent hotels.

The hotels affiliated with national chains with fewer than 600 rooms
were considered to be independent hotels.

The
percentage of chain-affiliated hotels is still low comprising only 10.9% of
rooms, but when expressed by number of rooms, branded hotels make up a more significant
35.4% of rooms available in Brazil, underscoring the relatively large
individual unit size of the average branded hotel - especially among those
affiliated with international chains.

3.3  Sales Literature

The
business will begin with a general corporate brochure establishing the
positioning. This brochure will be developed as part of the start-up expenses.

Literature
and mailings for the initial market forums will be very important, with the
need to establish a high-quality look and feel in order to create and fulfill
the right sense of professionalism.

We
also need a generalized template for project proposals, with two-color page
design for title pages, interior pages, etc.

To
supply our investment program, investors and lenders, we will produce month
reports, summary of each acquisition proposal and detailed instrument to be
offer comfort to investor.

We will maintain an internet home page too, that can offer a complete
vision of the proposal project inside the Pardes Group Investment Program.

3.4  Fulfillment

The
proposed program will be fulfilled through the selection of hotel acquisition,
management and reduction of maintenance costs through technology and good
practices.

So,
the low cost of acquisition of hotel that are working or in good conditions to
works with few investments will grants the profitability of this investment
program.

As in Brazil the cost of money is very high, the spread that we can
obtain using low cost money (from USA or Europe investor) and the Brazilian
national cost of money can turn this program a great profitable at present
time.

3.5  Technology

The
technology is another important thing in that we need to take care. Using
correct technology, we can reduces maintenance cost, reduces energy cost and
increase our net profit in all hotels.

The
Pardes Group have in their networks and in the supportive network, important
elements to offer in this case.

International
offices can offer knowledges and technology from their countries that can be
used by our hotel chain.

Pardes Group can offer solar panel technology from their suppliers in
china, hotel management from their offices in Europe and capital to be invested
from their worldwide investment network.

3.6  Future Services

In
near future, the Pardes Group hotel chain will offer new technologies for their
customers, as a complete virtual back office, in that the costumer can do
anything related to their works.

They
can use printers that will located in smart spaces in hotel, communication
facilities, mega-data information analysis, local room computers and other
facilities that they can uses all time in hotel.

The
recognition face and personal (customized) that will made adjusts for their
needs and services that is offered by hotel is another important tips in that
the technology will offer a differential in hotel of our property.

4.0  Market Analysis Summary

For
a second consecutive year Brazil’s lodging industry performed poorly, largely
attributable to the worst and longest economic recession the country has faced.

The occupancy rate of city hotels (hotels + flats) declined by more than
7.0% in relation to 2015, reaching an average of 55% for the year. Similar to
2015, the decrease in hotel occupancy rates has been significantly deeper than
the decrease the country’s GDP has observed.

The
average daily rate (ADR) performance of city hotels has been more resilient as
compared to occupancy, observing a more modest decrease of 1.6% in 2016 as
compared to 2015. ADR integrity was somewhat preserved in 2016 as a result of
the higher rates hotels in Rio de Janeiro commanded during the Olympic Games.

Additionally,
hotels with a large foreign demand base were able to command higher price
points as the devaluation of the Real led to an influx of international demand.

The country’s average RevPAR fell by approximately 9.0% compared to
2015. Despite experiencing another decrease, the decline in RevPAR in 2016 was
significantly lower than in 2015, which was almost 15%. This trend suggests the
market is bottoming and may be poised for some level of performance improvement
in the near future.

Additional hotel supply grew more slowly in 2016 at a rate of 3.0% as
compared to 4.2% in 2015. The majority of the ne w rooms supply occurred in Rio
de Janeiro in anticipation of the Olympic Games. The slowing growth in hotel
supply should bode well for improvement in lodging performance this year and
next.

As aforementioned, the weak economic conditions in the country have
influenced market performance across the entire country. Nearly all of the
analyzed markets exhibited poor RevPAR performance, with decreases ranging from
6.2% in Porto Alegre to 23.5% in Curitiba. São Paulo presented a reduction of
9.6%, representing the second market with the lowest negative variation.

That being said, there were two exceptions, those being Rio de Janeiro
and Salvador both of which experienced modest increases in RevPAR.

Rio de Janeiro grew by 3.6%, primarily due to the extraordinary ADR
levels achieved during the Olympic Games. Salvador’s RevPAR grew minimally at
1.2% but still represented a reversal to the negative performance witness in
the year prior.

As
in 2015, hotel profit margins were negatively impacted in 2016 by the decrease
in RevPAR and high inflation. The GOP in 2016 fell four percentage points
compared to 2015, reaching a level of 25% over total revenue. Nonetheless, this
decrease was less that that observed from 2014 to 2015.

Resort
performance continued to improve in 2016. Despite a slight decrease in
occupancy rate to 56% as compared to 57% in 2015, hotel average revenues grew
17.5% over 2015.

In
2017 we have a growth over than 18 % in sector in Brazil, due the economy recovers
and the industry production that was increased along last year.

4.1  Market Segmentation

We
will focus in the guest from business trip and industry costumer that need
voyage to do their deals and business.

In
almost everyone greatest city of country, the industry uses over than 60 % of
all room units that are available in region. For their directors in visit,
technicians and other professionals that need attention and qualified
accommodation.

According
JLL research over than 63 % of all guest in Brazil are from business trip, training
and for commercial purposes.

Market Analysis

Potential Customers

Growth

2018

2019

2020

2021

2022

CAGR

Business

8%

338.608

364.004

391.304

420.652

452.201

7,50%

Leisure & Groups

6%

149.417

158.382

167.885

177.958

188.635

6,00%

Crew & Others

3%

37.086

38.199

39.345

40.525

41.741

3,00%

Total

6,78%

525.111

560.585

598.534

639.135

682.577

6,78%

4.2  Target Market Segment
Strategy

The
most important strategy adopted by our team is the aggressive and massive
publicity in commercial channels, radio, TV, internet, and offering advantages
for touristic agency Airbnb and other services providers for hospitality
services.

Focused in business man and industries that need regular use of hotel
and hospitality means, we will offer the best opportunity to grant comfort and
support for their clients, professionals and hired people that need hotel
services.

4.2.1  Market Needs

Today,
the business man has not a specific hotel that can offer support for their
working day.

Almost
everyone hotel that exist in world is devoted to touristic support, family
support and leisure.

They
are not prepared to offer business support, they have not back office to be
offered to client and costumers need find their suppliers out of hotel.

One
common tip is that when a guest need copy or use of a computer, the hotel offers
a basic desktop use or indicates another copy bureau in that the client can do
all that is need.

offering
a virtual office in their room, the hotel can supply all costumer needs and he
don´t need go away of hotel do works in their free time during their stay in
hotel.

This vision is one of most important that comes to supply the market
need in this segment.

4.2.2  Market Trends

Today
the costumer has been more conscious in their choice than he was in the past.

The
information and facilities of internet big data can offer more details about
any hotel that was can possible few years ago.

The
number of hotels and possibilities was increased in last ten years more than
all history of this segment.

So,
the market need be focused in results, the costumer need hotel that offer
exactly that he need and no more that the hotel chain wants to offer for
clients.

This specify, and details made the difference between the success and
the bankrupt.

4.2.3  Market Growth

The
south American market in hotel and accommodations are increased year after year
by great hotel chain that view the market as the most important and the
greatest opportunity to invest for many years along.

The
growing of opportunities and the possibilities of great return of the
investment show us the way to acquire great and profitable properties that have
future and in that the investment will be minor than the construction of new
buildings.

Acquiring
properties and ready to use hotel we can enter in the segment with few
investment and receiving great return over the capital invested.

Observing the growing of the segment and market the last years we observe
that the growing of the business segment is over than 8 % by year, in front of
the tourism growing that was under 1 % by year.

4.3  Service Business Analysis

The
accommodation and hospitality services are composed by structure (hotel room,
internet services, parking space, etc...) food and beverage (according the
region and client) and facilities (meeting room, back office support etc...)

Almost
hotel chain has their services and facilities focused in tourism services and
offer few more facilities than a room and internet services.

4.3.1  Business Participants

4.3.2  Distributing a Service

The
more you distribute the rooms and services offered by your hotel, the more
guests will attract more to your hotel.

The
distribution strategy is critical, and implementation is an even more important
step.

The
main steps for installing a hotel distribution strategy are successful:

Marketing
compound optimization:

Understand
the different types of marketing that reserve your credit cards in a
diversified way to your marketing and optimize your distribution strategy.

The
various cases, which can be distributed in two different groups: segments of
lower income and higher segments of higher income. The lower income segments
generally derive from touristic wholesalers.

Rooms
are reserved for their rooms in advance but can also be reserved for their
rooms all year round. High-yield segments are usually generated by the OTA and
even by the hotel's own reservation system.

Booking
cheap prices before arrival, and longer prices pay higher prices for rooms due
to their last-minute approach.

Opportunity
to do a few days before you arrive and may have a tendency during high season
in your region.

Overview
of online and offline channels:

A
strategy has been in the line from off line. This allows the hotel to be the
largest possible number of guests around the world.

Online
services include OTA, its own booking system through the website and social
media platforms. Offline channels that can be considered as partners can be consulted
by telephone as well as wholesalers and tour users.

With
online channels, marketing campaigns can reach every corner of the planet. An
increasing number of reliable online sites for prices, opportunities and
activities for the upcoming trips.

Without
online channels, it will be left behind in the past while the rest of the
industry moves forward into the future.

While
online channels are critical, offline channels are not obsolete. Offline
portfolios have a capacity to attract local people as well as older guests who
may not feel more compelling to use Internet services.

Technology
for everything

Pricing
strategy and distribution channels are an important part of your overall
distribution strategy, but they are not complete to engage the Internet with
certain features to transport these devices seamlessly.

A business solution designed for the relationship sites with their
respective distribution channels, which updates their price based on market
needs and consumption trends, and maximize how their bookings

4.3.3  Competition and Buying
Patterns

Hotel
branding and franchising is quite different today than in the 1950s, when
Kemmons Wilson began franchising the Holiday Inn brand across the United States
to ensure quality and consistency throughout a family’s summer road trip.

The
strength of a hotel brand—its importance and what it means to traveling
consumers—has ebbed and flowed since. While the power of a brand remains
debatable throughout the years, one thing is certain: Many hotel franchising
companies have adapted their business models, becoming less hoteliers and more
so branding, sales and marketing experts.

“It’s
a different competitive landscape and hotel companies …. are different animals
than they were before,” said Angela Roper, professor and director of the
International Centre for Hotel and Resort Management at the University of West
London.

Because
hotel brands own less real estate, operate fewer hotels and instead have chosen
to develop their fee-based business models, the barriers to entry for becoming
a successful hotel brand are left wide open, Roper said. A company completely
unrelated to the hotel business could come in and set up shop, as long as
they’ve got solid system development and a unique technology platform.

Hotel
brands have had at least operating experience in the past, Roper said.

“Marriott
(International) and Wyndham (Hotel Group) have always been credible,” she
added, but now you could create a brand without any operating experience at
all.

Fewer
owners and operators

Many large hotel brands have moved from real estate-based business models to
fee-based business models. Many argue the trend began in October 1992 when
then-Marriott Corporation split its ownership and management platforms,
creating Marriott International to operate and franchise hotels and Host
Marriott to retain ownership of all properties.

At
the time, Marriott Corporation owned 136 hotels, managed 415 and franchised 195
hotels. As of March 2013, Marriott International owned six hotels, leased 38
hotels, managed 1,021 hotels and franchised 2,571 hotels.

Most
other major hotel brand companies have since followed suit.

“We
have moved from investing heavily in hotel properties to return to our roots as
a hotel franchise and management company, and reducing the capital intensity of
the business,” reads a statement on InterContinental Hotels Group’s investor
relations page. As of December 2012, IHG—the parent company of Holiday Inn and
Crowne Plaza, among other brands—owned 4,192 rooms, managed 170,998 and franchised
500,792 hotel rooms.

Starwood
Hotels & Resorts Worldwide executives have not been shy about plans to up
the company’s fee-based business. This includes increasing revenues from
managed-and-franchised hotels. Currently, managed-and-franchised hotels represent
around 90% of the company's total portfolio, compared with 21% in 2004.
Starwood's long-term goal is to generate 80% of revenues from its fee-based
business.

“It’s
not meant to be negative, it’s just a different landscape today,” Roper said.
“The online travel agencies, they are pretty close to the customers. They’re on
top of computer literacy, where people want to go next and purchasing behavior.
The hotel companies have to catch up.”

More
branding choices

Despite franchisors focusing less on real estate and more on branding and
distribution, Steve Joyce, CEO of Choice Hotels International, said hotel
brands today are “more important than ever.” The reason, he said, is one of
technology.

“At
the introduction of the Internet it gave independent hotels the opportunity to
be out there for people to find them like they hadn’t done before. So there was
this sense that I can be independent and get a lot of the advantages that I
didn’t get before unless I joined the system because I didn’t have reach. There
was a sense that the Internet provided that reach,” Joyce said recently during
a break at Choice’s annual convention. “The difficulty with that now is that
the consumer is on such a rapidly moving trend in terms of how they reach the
Internet that if you’re an independent hotel you can’t match it.”

Joyce
pointed to technological advances Choice has made as an example of why joining
its franchise system keeps hotels on the forefront and drives additional
revenue.

“We
were the first one that had the iPhone app, and we were downloaded in a million
phones before anyone else had one,” he said. “We realized within six months
that we were getting a lot of non-PC-based bookings that weren’t coming from
the iPhone, they were coming from the iPad. So, we had to run and do an iPad
app.

“And
so, it’s a lot money,” Joyce continued. “They’re expensive applications, and
you can’t do it as an independent hotel.”

However,
Choice also was one of the first companies to introduce a quasi-brand, which
gives hotel owners the opportunity to keep their independent name and feel but
pay monthly fees to receive sales, marketing and distribution support from a
major hotel franchisor. Choice introduced the Ascend Collection in 2008, and
several other franchisors followed, including Marriott with its Autograph
Collection and Red Lion with its Leo Collection. Ascend recently reached the
100-hotel mark.

“We
were the first ones out there that did just a distribution sale,” Joyce said.
“We don’t want to tell you what color carpet you need. As long as your hotel is
well conditioned, well run, it’s none of our business. You’re just buying
distribution from us, and that’s what we’re selling you.

“That
is an example of what the future may be for that independent hotel,” he continued.
“You buy a set of services from a large brand company that has the ability and
the resources to keep up with that rapid moving technology.”

But
Joyce will admit he’s not quite sure what the future of hotel branding will be.
“If you ask our guys—they’re knee deep in this space—we’re making three or four
bets because it could be any one of them,” he said. “The advantages that you
get from being part of a large system and the scale that creates is important
on the technology side and then it’s critical on the distribution side. You
have to have, in this arena, scale and influence to be able to get the right
pricing from channels you need to play with.”

Choice
recently took a step closer to becoming purely a hotel supplier when it
introduced SkyTouch, the outside sale of its previously proprietary cloud-based
property management system. Franchisees questioned whether the release of
SkyTouch made Choice’s “secret sauce” available to the public, Joyce said.

“You
don’t get the distribution, you just get the platform,” he explained. “You
don’t get the 40% of revenues that we drive into a hotel. What you get is a
terrific technology platform that allows you to manage your property
efficiently, allows you check people in and out, allows you to access reservation
platforms, but you don’t get ours.”

Brands
and financing

Most developers and lenders say hotels attached to brands are much easier to
get financed because it takes much of the risk out of generating demand.

“If
you plug into one of the big-brand engines, the debt financing is going to be
cheaper and the equity more attainable,” said John Rutledge, president and CEO
of Oxford Capital Group, in a recent panel discussion. Rutledge’s team has a
hotel in New York City called the Metropolitan hotel, which was allowed to keep
its name but connected to Hilton World wide’s DoubleTree franchise system.

“We
felt that we could have our cake and eat it too; we could operate it more
entrepreneurial and flexibly as a certain entrepreneurial management team and
ownership team, but also plug into that engine,” he said.

In
Chicago, Rutledge point to the success of TheWit, where owner ECD Company also
teamed with DoubleTree.

“It
may have been, literally, ‘The only way we’re going to finance you is if you go
with one of the big brand engines’ on the debt side or equity side,” Rutledge
said.

“I
sit right next to our head debt guy here in Chicago, and if it’s something
that’s not branded, he immediately comes into my office and says, ‘What does
this even mean?’” added Justin Epps, VP of the hotel group for Cornerstone Real
Estate Advisers. “It’s a lot about education and stuff like that.”

Jerry
Cataldo, president and CEO of Hostmark Hospitality Group said resorts in many
resort markets operate better independently.

“You
can’t justify the expenses of the brand. It’s a very seasonal marketplace,
Memorial Day to Labor Day,” he said. “You just can’t overcome the fees that are
associated with it. So absolutely the marketplace dictates the brand.”

Roper
said the decision by hotel brands to change their DNA ultimately leads owners
to question the value and return on investment of adding a major flag.

“What business are they really in?” she said. “If they’re just
specialists in branding and technology, they’re very different beasts to how they
were years ago. They aren’t interacting with the customer as much.”

In Brazil, the most important competitors are small
hotel, with under than 20 rooms, that offer vacancy for low prices.

Considering our program, we don´t have, or will be,
contestant with this kind o hotel services, because our customers are
industrial management, technician, experts and high-grade professionals that
are looking for reasonable cost and comfort for their guest period.

The greatest hotel chain, present in the country, have
not the core business and focus like us, because we are centered in business
trip and support for industry and commerce, and they are focused in touristic
trip and family.

4.3.4  Main Competitors

5.0  Strategy and Implementation
Summary

1.
Defining the Actual Portfolio

An
analysis of the assignment provisions is critical to defining the target’s
actual portfolio as well as uncovering potential obstacles to completing the
deal. For example, if third parties (such as the hotel owner, the lender, or
the third party operator in a franchise context) have approval rights over the
assignment of the agreement to a potential acquirer, consideration needs to be
given to the strength of those approval rights and, thus, whether such rights
could result in (a) certain hotels not being included in the acquisition, (b) a
delay in completing the acquisition and/or (c) unintended costs to complete the
acquisition.

2.
Sensitivity analysis of discounted
present value of the fee stream

There
could be threats to the “fee prong” of the basic value equation noted above if
(a) the hotel owner has a priority return or guaranteed return ahead of the
hotel operator’s right to its management fees or (b) there is any subordination
of the hotel operator’s fees to hotel debt service. In addition, calibrating
any performance thresholds that must be met in order for the hotel operator to
receive all or any portion of its fees could also represent a further threat to
the “fee prong.” A review of these items will improve the precision of the
value being placed on the estimated fees of an agreement.

3.
Security of Tenure

There
could be, and likely are, threats to the “term prong” of the basic value
equation noted above. Understanding the presence and intensity level of these
threats requires a thorough review of the hotel owner’s termination rights. For
example, is there a performance termination right and, if so, on what terms:

Is
it a single prong market test or a two-prong market and budget test and then
what are the actual thresholds of the prong(s)?

Does
the hotel operator have a right to “cure” a failure of the performance test?

Are
there any circumstances that would excuse the hotel operator from satisfying
the performance test such as force majeure events or other circumstances
outside the control of the hotel operator?

Beyond
an analysis of the performance test, are there any other unilateral rights of
hotel owner to terminate the agreement? Once the initial analysis is completed
on the nature and scope of the termination rights of the hotel owner, specific
consideration should be given as to whether any of the agreements are actually
“at risk” of being terminated. Furthermore, a review of the non-disturbance
protections vis-à-vis third party lenders is critical as this could represent a
further threat to the “term prong.” An understanding of these provisions will
improve the precision of the estimated term assigned to each agreement and,
together with the fee analysis noted above,
will sharpen the value (e.g. the discount rate) being placed on the
agreement.

4.
Potential Growth Inhibiters

Beyond
the basic value equation, does the agreement have other terms that could harm
value? For example, a broad and restrictive radius restriction could serve to
frustrate or inhibit future growth of the acquired brand as well as the legacy
brands of the buyer. So while an agreement acquired through an M&A
transaction could have the intended consequence of “unlocking” certain key strategic
markets that same agreement, via the radius restriction, could have the
unintended consequence of “knocking out” other key strategic markets and/or
impairing future growth in the newly “unlocked” strategic market. A clear
understanding of the radius restriction provisions is, therefore, an important
component to the valuation exercise.

5.
Ensuring Product Quality

Again,
beyond the basic value equation, does the agreement have provisions to ensure
product integrity over the entire term of the agreement, including ongoing
obligations of the hotel owner to fund capital projects and maintain a funded
FF&E reserve? If not, a higher discount rate should be applied to the
future fee stream, particularly with a long term agreement where several capital
expenditures programs will be required over the agreement term.

As
noted above, the initial value of an agreement can be quickly determined by
calculating the discounted present value of the fees expected to be generated
over the term of the agreement. A detailed review of the agreements, in the
manner outlined above, will (a) likely result in agreements not being valued
equally notwithstanding possible equivalency in the basic fee levels and stated
contract terms and (b) ultimately yield greater precision in the valuation
exercise.

Closing
Considerations

Consolidation
in the hotel brand sector will likely continue as the pressure on hotel
companies to drive earnings growth and gain global market share continues to
intensify in the face of growing competition and increasing threats from online
travel agents and alternative lodging companies. A thorough and early stage
consideration of the key value drivers of a target hotel brand will establish a
strong foundation for success in valuing, structuring and completing a hotel
brand acquisition.

5.1  Strategy Pyramids

5.2  Value Proposition

Hotel
Revenue management is a data-driven technique consisting of three
interdependent components: customer, product, and price. In order to maximize
the hotel revenue in the hospitality sector, it is important to sell the right
space at the right price and at the right time. This is the selling mantra of
the hospitality sector.

The
four ingredients of the recipe to maximize revenue are Segmentation,
Forecasting, Pricing, Distribution.

The
traditional hotel revenue management model that was in practice until a few
years ago focused only on keeping the maximum number of rooms occupied by the
guests. With developments in technology and customer behavior now, the focus
has shifted to demand-based pricing or dynamic pricing. This concept has moved
to not just hotels but also other hospitality establishments also like
amusement parks, theatre, etc. and across travel sectors like airlines,
cruises, car rental, etc. They charge a surged price for the tickets during
peak hours or high demand. This helps them ensure more profit when the demands
are high and cover up for the losses during low demand.

A
revenue manager must take many factors into consideration, such as changes in
consumer buying behavior, the roles of various online
distribution channels, and the activities of the competitive set.

A
modern revenue manager’s job now is not limited to monitoring room rates, it
has stretched beyond this extending to revenue strategy to analyze all
available data to determine the tactics that will produce the greatest revenue
and optimize room inventory.

We
are now at a stage where big data is quickly generated and collected.
Additionally, data has become increasingly sophisticated in terms of variety,
volume, and type. But while revenue management relies on huge piles of data,
data alone is not enough. Revenue managers also need to churn that data and
provide required insights and actions to be taken.

For
profitability to increase in the hospitality sector, forecasting the demand
much ahead is really important. Next, gather competition price intelligence;
advance level price intelligence tools support tracking price based on
geography, booking device and member-only rates. Then set the price of the
rooms in the hotel accordingly.

You
also need to consider the fact that products like a hotel room and a flight
ticket are perishable items, which means that if they are not sold within a
stipulated time period, they lose their usefulness and any profitability that
will come from them. If a room remains unoccupied for a night, the revenue for
that night is lost.

Therefore,
it is utmost important that the price of the room or flight tickets etc. is set
dynamically based on real-time updates from market and competition behavior.

Guest
segmentation is one of the key factors that are at the core of hotel revenue
management. From marketing and sales to loyalty management, the segmentation
approach lets you support all these efforts.

Segmentation
of guests based on their demography, geographic
placement, privileged membership status and the device
they have used for booking the hotel, makes it possible to target them
better for price sensitivity. Segmentation of the guests is also done on the
basis of the purpose of the travel, like business or leisure. Business
travelers have different requirements as compared to leisure travelers. There
is a rise of a new segment also called “Leisure”, making it challenging for
hotels to meet the expectation of this category of travelers. This segment
majorly includes Millennials.

A
hotel room tariff is fixed based on different factors, including the advance
reservation period of the hotels as well as the price charged by the
competitors, etc. Length of Stay (LoS) or the duration of the guests’ stay is
also an important factor that affects the price decision by revenue managers.

Apart
from this, hoteliers are increasingly focusing on ways to increase revenue from
guests while they stay on your property. For example, the hotels are devising
strategies like enhancing their revenue by encouraging the guests to utilize
services like spa, clubs, games, business conference rooms, restaurants, and
other activities in the hotel premise. A smart and holistic revenue management
approach takes into account every service that the hotel offers in addition to
the room and also the auxiliary revenue streams that contribute to the profits.
All these assets contribute largely to the overall revenue of the hotel from
each guest.

The
revenue management of a hotel is no longer
possible by estimating all the factors in an unplanned manner. Current market
dynamics need the accuracy of data and real-time insights and hence new
generation and advanced revenue management solutions are now increasingly used
to help the hoteliers understand the market pattern, anticipate the demand and
regulate the price accordingly.

From
the ROI perspective, it is imperative that a hotel business relies on a robust
and automated revenue management system for all daily mundane manual jobs.

An efficient and a cutting-edge Hotel Revenue Management Solution not
only increase the revenue and profitability, but also ups the efficiency of
sales and marketing efforts. This directly leads to improvement of market
insight, demography of the guests and current trends in the occupancy of the
hotel inventory. In this day and age, where competition is quite intense in the
hospitality sector and the customer very demanding, it is the time that you
must manage your revenue smartly to ensure success.

5.3  Competitive Edge

Our
company is different from others hospitality companies because we are not a
hospitality group. We are financial group that view an opportunity in the
hospitality segment, and that can obtain great returns in the sector.

All
other companies, be hotel and hospitality company or a resort, think like a
hotel management, but if they begin to think like financial manager, they can
find many different ways to increase their profit.

This
is exactly that we will do. Thinking like a financial administrator, we will
delegate the hotel management for people that know how it works, but at same
time we will take care of the property and financial administration. Using our
marketing team to develop and create the best marketing program for each hotel
we will obtain more rentability and net profit from all money that will enter
in the hotel cash.

Using our network (and the crowdsourcing for support in resources and
know-how) we will be different from all others hospitality companies.

5.4  Marketing Strategy

Our
marketing strategy will focus in companies, sales representatives, managers and
all staff company that are looking for comfort, well located hotel, back office
support and all facilities to do business in their time of hotel accommodation.

We
will maintain a complete site in that the customer can find any information,
support and apps for their business development and work.

We know that the business travel is not focused in leisure, but it´s
focused in work, money and in the needs for next day. We will offer all that a
business man need for their day to day in the hotel.

5.4.1  Positioning Statement

For
hospitality and hotel services, who local market needs, the facilities, back
office support and the expertise in business that the hotel will offer can be
the difference between our hotel chain and the others.

All
others hotel chains are focused in tourism and leisure travel. So, when a sales
representative, or an industrial manager comes to hotel, what they find?
Support for tourism, and leisure suggestions.

So,
considering the difference, we are focused in the business needs.

All
other hotels are working in the green ocean, we will navigate in the blue
ocean, in that no exist competitors.

We
will do different and so, our client can find in our hotel chain the best
support for their business travel. Also, the companies, that need space for
training, meeting and are looking for on space in that their managers and
visitors can be well receipted will find in our accommodations, the adequate
room, services, quality and comfort that are looking for.

5.4.2  Pricing Strategy

At Pardes Group and their
associated offices, we understand how complex and how important it is to
determine the right hotel pricing strategy.

That is why we prepare this simple
step to help the pricing strategy for each hotel in the group.

What do my guests need?

Since your guests are fundamental
to keeping your business running, it’s important to adapt your pricing strategy
to each market and guest type.

Most hotels use dynamic pricing, but so do many OTAs and metasearch
engines. That’s why it’s fundamental to analyze your market and guest mix to
understand your guests before pricing rooms.

What pricing strategy
best complements my business mix?

To optimize revenue, it’s important
to select the right strategy for your hotel’s business portfolio.

What factors should you consider?
The two main considerations are your hotel’s business model and your guests’
average length of stay. Hotels focused on airport guests will have a lower
average stay than destination hotels. Thus, services associated with different
guests will have varying pricing strategies.

How does my direct
booking pricing policy affect the rest of my hotel’s distribution channels in
terms of contracted technology?

Hoteliers should evaluate any potential impacts on direct channels and
on the following tools:

· Property management systems (PMS).

· Web booking engines.

· Channel managers.

· Customer relationship management systems (CRM)

· Revenue management systems (RMS).

Some questions you may come across
are:

Which pricing strategies are best
for specific production volume? What is required to integrate a new tool? What
is the cost and potential ROI? Prior to contracting new tools that can greatly
condition booking costs, it’s important to ask questions

Which pricing approaches and
strategies are best for my direct channels?

One goal of your pricing strategy
is to analyze the guest acquisition cost and attract as many prospects as
possible to your website. Without entering into problems caused by parity
pricing, the more direct bookings you drive at a lower cost per acquisition and
the more value you provide to your guests, the better.

Price is the most important
influencing factor when guests book a hotel room. That’s why it’s important to
provide incentives for guests to book directly with you. Guests are generally
willing to pay more if they feel like they are getting more value. Perceived
value is more important than actual value. For example, you create a win-win
scenario when a guest feels like the “extra” you are offering is worth more
than what it actually costs you.

5.4.3  Promotion Strategy

Competition
within hospitality industry has become tougher over the years. The rapid
development of new hotels makes competition to get market share more difficult
than in the past.

This
condition even gets more complicated because of the dynamic changes of
travelers behavior; which now heavily depends on technology.

To
cope with this condition, hoteliers need to be more creative in running their
business. They need to come out with correct hotel promotion strategy to be
able to keep their property survive over the competition. But how to create
one?

Promotion
is an essential part of your hotel marketing activity. There are many kinds of
hotel promotion strategy that you can explore for your property. The most
important thing when you plan promotion for your hotel is to understand the
goal of the promotion itself.

Seasonal
promotion is hotel promotion strategy that aims to increase number of occupancy
during low season. There are several things that you can do for this kind of
promotion. The most common way is giving lower price or discount during low
season period. While this method sounds simple, you need to really think about
it. To some extent, lowering price is risky because this can drag you into

Therefore,
when you decide to make discount or lower you room rate, you need to make sure
that it is not below your basic room rate structure. There is no point when
your hotel is fully booked but your revenue is below your expense, right?

You
can also make your hotel promotion more specialized for specific market target.
For example, your hotel occupancy rate is low on weekdays, then you can try to
attract business travelers.  You can
promote your hotel by offering discount during weekdays. This promotion can be
combined with other hotel promotion strategy to make it more appealing and
offer more values for customers. For example, you can offer free transfer
service for second reservation within a month. This surely will attract
customers as long as you understand their needs.

When
you want to promote your hotel in internet, the best place to put your
promotion is your website. Even if you have been connected with several OTAs,
direct booking should be your priority when you want to generate a perfect
hotel promotion strategy. Make promotion in your own website will not only give
you opportunity to attract customer but also a good way to develop your website
as main distribution channel for your hotel.

Direct
booking promotion does not need to be a complicated promotion model. It can be
as simple as giving discount or offer free service if customer book directly
from your website.

For
example, you can give special 20% off discount for every reservation that made
from your website. You can also offer free breakfast for guest who books from
your website. Furthermore, you can promote direct booking from your website by
offering more flexibility on your reservation policy. For example, you can
apply more flexible cancellation policy for reservation from your website.
Although it might not be the main factor that attracts guest, but it might make
them to consider booking from your website instead of OTA’s.

While
most hotels tend to acquire new customers from their hotel promotion strategy,
maintaining repeated customer should also be your focus. Repeated guests are
very important for your hotel business. As a regular customer, they will also
be a good publication for your business from the word-of-mouth. Although today
it is more difficult to attract customer through loyalty program, but there is
still a chance to attract guest from this hotel promotion strategy.

Easy
and simple program should be the first thing that you should consider. Today,
guest will not be interested in loyalty program that require them to collect
points for long time to get benefit that actually can be immediately received. So,
it is important for you to make it easier for them to get and claim their
benefit.

For
example, free one-night stay after five nights stay at your hotel will not
attract customer. Instead, you can use the idea to give 30% discount for second
night stay. In addition, you should also give relevant benefit for your loyalty
program, like special discount, free stay, or free meal at your hotel.

Another
great way to attract guest to your hotel is by offering unique package. This
package promotion will be a good hotel promotion strategy to attract specific
segment of travelers.

The
most important thing when creating package promotion is understanding the customer’s
needs.

In
order to get understanding of our guest preference, we can regularly check and
review your guest history. It will be easier for we can determine which market
segment that mostly stay at our hotel and what are their preferences. For
example, after reviewing our guest history we can see that most of them are
young business man with age ranging from 25 to 35 years old. As this market
segment mostly looking for business and gastronomic experience during their
hotel stay period, you can offer special package for him.

It might be as simple as free late check out, special decorated room
with back office support, or one dinner experience in your hotel restaurant
partnership with local restaurants. You can combine all these special services
and offer it for them as unique package to give special experience for them.

5.4.4  Distribution Strategy

Our
works will cover two great spaces in media.

One:
We will turn our hotel chain one of most viewed in all local industry, that are
one of our big customers.

Two:
We will create a big marketing show, for customers and high class of business
man that are frequently using hotel for their day to day works.

This
situation will increase the profit because the management team of an industry,
when travel, looks for comfort, support and facilities, all that we will offer
for they, turn each one in a frequent customer when well worked for and well
received by the hotel.

Sales
directly by hotel site, travel agencies and others distribution ways can offer
the selected opportunity for our customers along all world.

5.4.5  Marketing Programs

Our
marketing program will be very aggressive, like our customers. In business has
not space for weaknesses.

In
the hotel and hospitality market the weaknesses is a big signal that the hotel
will done and close their door.

Using
all space and ways to market and publicity we will cover all industry, travel
agencies and people that need the service that we can offer.

5.5  Sales Strategy

Each
hotel must implement a sales strategy that works best for its own target market
as well as for its destination.

All
of our units will do their homework and produces their own sales strategy
because not exist only one costumer group, the industrial costumer is different
from the agribusiness costumer, they have different needs and expectations,
being necessary to adapt each hotel to the regional need for which it is being
aimed.

Ultimately,
it is up to the hotelier to create a customized sales strategy to drive most of
the sales of rooms in their own establishment, but these are some of the key
strategies to consider when selling rooms:

Direct
booking sales strategy for hotels

With this sales strategy, the priority is to get direct reservations online
from as many customers as possible. Direct reservations are the most
advantageous for hoteliers because they generate more revenue. There are no
agents or other distribution partners to whom you have to pay a commission when
a guest book directly online.

To
implement a direct booking strategy, hoteliers should invest in an online
reservation system that synchronizes with their existing website and hotel
management system. Hoteliers should also prioritize their social media strategy
by focusing on increasing direct reservations.

Destination
Marketing Sales Strategy

This sales strategy requires a hotelier to work with other tourism
professionals at their destination to promote the region as a whole. Through a
destination marketing campaign, local businesses unite to reach the most
powerful tourist destination markets and drive more traffic to the general
area.

Cross-promotion
sales strategy

With this sales strategy, hoteliers need to identify and evaluate several major
events that take place in the local region throughout the calendar year. Then,
the hotelier must plan a promotion that may coincide with the event, which will
ultimately allow him to obtain an influx of reserves that would otherwise not
have occurred. The ideal opportunities for a cross-promotion sales strategy
include a sector conference, a concert or a major sporting event.

Reward
sales strategy for guests

Many today's travelers, in particular the important generation of millennials,
value the opportunity to win prizes with the companies with which they do
business. Hotels in particular have great success with rewards programs. In a
rewarding sales strategy, the hotelier must develop a system that rewards
frequent guests who buy upgrades and recommend them to friends and family. A
rewarding sales strategy often generates repeated reservations, which are
particularly profitable for hoteliers.

Sales strategy with revenue management

This type of sales strategy aims to maximize the number of rooms booked at any
time of the year, regardless of the typical travel traffic at that time.
Typically, a revenue management plan requires hoteliers to lower room prices
during the off-season to encourage reservations while raising prices during
periods of high traffic. During these times, guests will be willing to pay
higher prices for a room, so it is worth raising them to generate more revenue
per available room.

5.5.1  Sales Forecast

The
sales forecast table show us that the program has great opportunity to growth
more than most of the investments possible around the world.

This
is possible because Brazil is coming out of an institutional crisis that harmed
the entire country, but that is over and that this is showing as an opportunity
to acquire properties that have suffered from this crisis.

Sales Forecast

Sales

FY2019

FY2020

FY2021

FY2022

FY2023

Room revenues

$18.608.928

$19.725.464

$20.711.737

$21.954.442

$23.152.164

Food and Beverage

$6.610.152

$7.006.762

$7.357.100

$7.798.526

$8.188.452

Total Sales

$25.219.080

$26.732.226

$28.068.837

$29.752.968

$31.340.616

Direct Cost of sales

FY2019

FY2020

FY2021

FY2022

FY2023

Room revenues

$5.018.472

$5.169.126

$5.375.787

$5.590.821

$5.814.452

Food and Beverage

$4.559.364

$4.741.739

$4.961.410

$5.128.664

$5.282.524

Subtotal Cost of Sales

$9.577.836

$9.910.865

$10.337.197

$10.719.485

$11.096.976

5.5.2  Sales Programs

Our
sales program includes OTA, Travel agencies, direct sales and industry
marketing for supply our customers.

Every
day a lot of people travel for business, training, sales or visit the company
or their associates.

This is our focus, and the sales program will work in the same space in
that these costumers are working.

5.6  Strategic Alliances

Developing strategic alliances with restaurants, suppliers and services
providers, the hotel chain can offer more than a room and food.

According the national researches center for hospitality and hotel
(EMBRATUR) the services providers, like taxy cab services, fast food services, florists
and other service providers and guest products, including tailoring, messenger
services, tech support and boutiques, can increase the quality of hotel
services, and the opportunity to be selected in next trip by the customer.

5.7  Milestones

Milestones

Milestone

Start Date

End Date

Budget

Manager

Department

Startup Program

1/7/2018

1/8/2019

$0

Pardes Group

Market Relationship

1/7/2018

1/8/2019

$0

Contracted

Investor Relationship

1/7/2018

1/8/2019

$0

Contracted

Quality Program

1/7/2018

1/8/2019

$0

Contracted

Acquisition Program

1/7/2018

1/8/2019

$0

Contracted

Financial Program

1/7/2018

1/8/2019

$0

Department

Development Program

1/7/2018

1/8/2019

$0

Pardes Group

Integration Program

1/7/2018

1/8/2019

$0

Department

Law and Contracts

1/7/2018

1/8/2019

$0

Contracted

Insurance and bonds

1/7/2018

1/8/2019

$0

Contracted

Totals

$0

6.0  Management Summary

The
management team will be composed by our principal staff team that will works
like a director’s board, ordering and choosing the best way to achieve our
goals.

The
local management team will be professionals selected from the market and the
maintenance team will be hired from the most expressive local suppliers.

So,
the unit management will be supervised by our team that will control all
procedures online, and with one of our representatives in each hotel as a local
supervision.

We
will hire only professionals with more than 10 years of hotel management
expertise, clean and clear, with no problems, process or convicted by law, and
that can offer more than just their labor.

Our
management team has more than 20 years of expertise in financial services e
management consulting services, that will be used to increase profit of each
one hotel in the program.

6.1  Organizational Structure

6.2  Management Team

Our
management team is composed by Mr. Ailton Garcia, CEO of Pardes Group and owner
of Pardes Consultant & Associated in Brazil.

Mr
Waldemar Figueiredo Junior, tax expert and lawyer, owner of National Tax
Council.

Mr.
Luiz Roberto Nascimento, economist, teacher in university of Sao Paulo city
Unisa and Unasa universities.

Mr.
Alexandre A Garcia, Technician, expert in quality and control of process by
Limeira Unicamp College.

Paulo
C Pelissari, lawyer and contract expert.

Mr.
Garcia Junior. Expert in Technology and materials, mechatronic Technician and
Physicist by Campinas Unicamp university.

Mr.
Sergio Fernandes, Office manager and Bank expert. More than 30 years of bank
management expertise.

JLL
Team Expert in hotel services.

Mr.
Jose Mario Lopes, Expert in hotel and tourism services.

6.3  Management Team Gaps

The
management team was selected from database of the Pardes Group, where we find
hundreds of professionals available to provide contract services with the
group.

So,
in each hotel, that will be buyer, a small team will be recruited to be the
local support and management staff in hotel. This will be one of our most
important gap, because all meeting will be done through the conference room of
Pardes Group internet services.

Also, will be used a lot of resources from the Pardes Group internet
services, like ERP, Video conference rooms, chat rooms, project management
programs, and others.

6.4  Personnel Plan

The
following table summarizes our personal expenditures.

We
are considering 0,47 persons by a group of 5 rooms in hotel, for maintenance,
and 0,17 persons by room services, 0,16 for the food and beverage services. All
others is for telephonic, reception and others hotel services.

Personnel Plan

Personnel

FY2019

FY2020

FY2021

FY2022

FY2023

Administrative and General

$415.320

$423.625

$432.098

$440.571

$449.380

Sales & Property maintenance

$376.776

$384.312

$391.998

$399.836

$407.835

Total Payroll

$792.096

$807.937

$824.096

$840.407

$857.215

Total Headcount

118

120

120

120

120

Payroll Burden

$118.814

$121.191

$123.614

$126.061

$128.582

Total Payroll Expenditures

$910.910

$929.128

$947.710

$966.468

$985.797

7.0  Financial Plan

The
leverage program showed in this business plan is an investment program from
Pardes Group Latin America (Pardes Consultant & Associates).

It
shows that is possible and profitable the investment program and that the
investor is guaranteed by real estate and properties, also receives debit title
backed by receivables in the future.

The
company (hotel) will issue a debit paper (like a debenture) to investor that
will sell back for the company, in appropriated time, receiving their invested
money and interest along the programmed time of investment.

We
can see that this business plan offers a complete vision of the program and
investment option, that will be used by investor for evaluation of options.

7.1  Important Assumptions

The
financial plan depends on important assumptions, and one of most important is
the growing tax of the market.

During
last year’s hotel was under valuated and with low index of occupancy because
the country was living on of most important crisis of all the history.

In
no other time the country viewed their government involved in corrupt cases and
the lot of money stolen by these political people that was governing the
country.

Now,
the situation is changed, all politician that were involved in illegal cases is
judged by the law, and if guilty they are condemned to prison.

Brasil
is one of few the countries in the world that arrested their president under
the local law system, because he was involved in elections corruption. But this
creates a situation in that the law is applied for everyone, that guarantee
rights of all investor that put their money in the country, offering comfort
and tranquility for everyone that invest in the country that they will receives
their money back.

General Assumptions

FY2019

FY2020

FY2021

FY2022

FY2023

Short-term Interest Rate %

8,00%

8,00%

8,00%

8,00%

8,00%

Long-term Interest Rate %

6,00%

6,00%

6,00%

6,00%

6,00%

Payment Days Estimator

28

28

28

28

28

Collection Days Estimator

45

45

45

45

45

Inventory Turnover Estimator

12,00

12,00

12,00

12,00

12,00

Tax Rate %

28,00%

28,00%

28,00%

28,00%

28,00%

Expenses in Cash %

0,00%

0,00%

0,00%

0,00%

0,00%

Sales on Credit %

0,00%

0,00%

0,00%

0,00%

0,00%

Personnel Burden %

15,00%

15,00%

15,00%

15,00%

15,00%

7.2  Key Financial Indicators

The
following chart indicates our key financial indicators for the initial years.

We are considering that will exist a great growing for next years
because the local industrial park is out of date in reason of the national
policies.

7.3  Break‑even Analysis

The
breakeven analysis shows us that each room need le located for fourteen days
(14) per month to be a profitable program.

So,
the Jll research show us that the occupancy rate is over 55 % (Brazil Average
Index) that turns possible the maintenance of this program, so, our project is
focused in hotel that have more than 120 units (rooms) and located in city that
have great need for hospitality services, like great industrial centers,
commerce or agribusiness concentration.

Break Even Analysis:

Monthly Units Break-even

14

Monthly Sales Break-even

$22.889

Assumptions:

Average Per-Unit Revenue

$1.664,00

Average Per-Unit Variable Cost

$649,00

Estimated Monthly Fixed Cost

$13.962

7.4  Projected Profit and Loss

The projected profit and loss show us that considering all cost and need
to maintenance and support, we can payback the invested value and increases the
value of the hotel chain.

Profit and Loss (Income Statement)

FY2019

FY2020

FY2021

FY2022

FY2023

Sales

$25.219.080

$26.732.226

$28.068.837

$29.752.968

$31.340.616

Direct Cost of Sales

$9.577.836

$9.910.865

$10.337.197

$10.719.485

$11.096.976

Other

$240.000

$240.000

$240.000

$240.000

$240.000

------------

------------

------------

------------

------------

Total Cost of Sales

$9.817.836

$10.150.865

$10.577.197

$10.959.485

$11.336.976

Gross Margin

$15.401.244

$16.581.361

$17.491.640

$18.793.483

$20.003.640

Gross Margin %

61,07%

62,03%

62,32%

63,17%

63,83%

Operating expenses:

Advertising/Promotion

$72.000

$72.000

$72.000

$72.000

$72.000

Travel

$36.000

$36.000

$36.000

$36.000

$36.000

Miscellaneous

$36.000

$36.000

$36.000

$36.000

$36.000

Payroll Expense

$792.096

$807.937

$824.096

$840.407

$857.215

Payroll Burden

$118.814

$121.191

$123.614

$126.061

$128.582

Depreciation

$0

$120.000

$120.000

$120.000

$120.000

Leased Equipment

$36.000

$36.000

$36.000

$36.000

$36.000

Utilities

$18.000

$18.000

$18.000

$18.000

$18.000

Insurance

$12.000

$12.000

$12.000

$12.000

$12.000

Rent

$60.000

$60.000

$60.000

$70.000

$70.000

Contract/Consultants

$180.000

$180.000

$180.000

$200.000

$200.000

------------

------------

------------

------------

------------

Total Operating Expenses

$1.360.910

$1.499.128

$1.517.710

$1.566.468

$1.585.797

Profit Before Interest and Taxes

$14.040.334

$15.082.233

$15.973.930

$17.227.015

$18.417.843

Interest Expense Short-term

$38.000

$38.000

$48.000

$68.000

$88.000

Interest Expense Long-term

$9.000.000

$9.000.000

$8.756.144

$8.268.432

$7.780.720

Taxes Incurred

$1.400.653

$1.692.385

$2.007.540

$2.489.363

$2.953.754

Net Profit

$3.601.680

$4.351.848

$5.162.246

$6.401.220

$7.595.368

Net Profit/Sales

14,28%

16,28%

18,39%

21,51%

24,23%

7.5  Projected Cash Flow

The projected cash flow indicates to us that the program is a successful
and that can payback the invested value in timeline between 10 and 20 years.

Pro-Forma Cash Flow

FY2019

FY2020

FY2021

FY2022

FY2023

Net Profit

$3.601.680

$4.351.848

$5.162.246

$6.401.220

$7.595.368

Plus:

Depreciation

$0

$120.000

$120.000

$120.000

$120.000

Change in Accounts Payable

$1.668.023

($850.491)

$130.609

$59.129

$60.862

Current Borrowing (repayment)

$0

$0

$250.000

$250.000

$250.000

Increase (decrease) Other Liabilities

$0

$0

($250.000)

($250.000)

($250.000)

Long-term Borrowing (repayment)

$0

$0

($8.128.534)

($8.128.534)

($8.128.534)

Capital Input

$0

$3.864.320

$3.864.320

$3.864.320

$3.864.320

Subtotal

$5.269.703

$7.485.677

$1.148.641

$2.316.135

$3.512.017

Less:

FY2019

FY2020

FY2021

FY2022

FY2023

Change in Accounts Receivable

$0

$0

$0

$0

$0

Change in Inventory

$798.153

$7.563

$14.790

$11.038

$10.432

Change in Other Short-term Assets

$0

$0

$0

$0

$0

Capital Expenditure

$0

$147.072

$231.716

$234.280

$236.790

Dividends

$0

$1.400.000

$1.400.000

$1.400.000

$1.400.000

Subtotal

$798.153

$1.554.635

$1.646.506

$1.645.318

$1.647.222

Net Cash Flow

$4.471.550

$5.931.042

($497.865)

$670.817

$1.864.795

Cash Balance

$4.701.550

$10.632.592

$10.134.727

$10.805.544

$12.670.339

7.6  Projected Balance Sheet

The
balance sheet in the following table shows managed but sufficient growth of network,
and sufficiently healthy financial position. The monthly estimative are
included in the appendices.

Pro-forma Balance Sheet

Assets

Short-term Assets

FY2019

FY2020

FY2021

FY2022

FY2023

Cash

$4.701.550

$10.632.592

$10.134.727

$10.805.544

$12.670.339

Accounts Receivable

$0

$0

$0

$0

$0

Inventory

$798.153

$805.716

$820.506

$831.544

$841.976

Other Short-term Assets

$38.000

$38.000

$38.000

$38.000

$38.000

Total Short-term Assets

$5.537.703

$11.476.308

$10.993.233

$11.675.088

$13.550.315

Long-term Assets

Capital Assets

$230.000.000

$230.147.072

$230.378.788

$230.613.068

$230.849.858

Accumulated Depreciation

$0

$120.000

$240.000

$360.000

$480.000

Total Long-term Assets

$230.000.000

$230.027.072

$230.138.788

$230.253.068

$230.369.858

Total Assets

$235.537.703

$241.503.380

$241.132.021

$241.928.156

$243.920.173

Liabilities and Capital

FY2019

FY2020

FY2021

FY2022

FY2023

Accounts Payable

$1.668.023

$817.532

$948.141

$1.007.270

$1.068.133

Short-term Notes

$475.000

$475.000

$725.000

$975.000

$1.225.000

Other Short-term Liabilities

$47.500

$47.500

($202.500)

($452.500)

($702.500)

Subtotal Short-term Liabilities

$2.190.523

$1.340.032

$1.470.641

$1.529.770

$1.590.633

Long-term Liabilities

$150.000.000

$150.000.000

$141.871.466

$133.742.932

$125.614.398

Total Liabilities

$152.190.523

$151.340.032

$143.342.107

$135.272.702

$127.205.031

Paid in Capital

$475.000

$4.339.320

$8.203.640

$12.067.960

$15.932.280

Retained Earnings

$79.270.500

$81.472.180

$84.424.028

$88.186.274

$93.187.494

Earnings

$3.601.680

$4.351.848

$5.162.246

$6.401.220

$7.595.368

Total Capital

$83.347.180

$90.163.348

$97.789.914

$106.655.454

$116.715.142

Total Liabilities and Capital

$235.537.703

$241.503.380

$241.132.021

$241.928.156

$243.920.173

Net Worth

$83.347.180

$90.163.348

$97.789.914

$106.655.454

$116.715.142

7.7  Business Ratios

Ratio Analysis

Profitability Ratios:

FY2019

FY2020

FY2021

FY2022

FY2023

RMA

Gross Margin

61,07%

62,03%

62,32%

63,17%

63,83%

0

Net Profit Margin

14,28%

16,28%

18,39%

21,51%

24,23%

0

Return on Assets

1,53%

1,80%

2,14%

2,65%

3,11%

0

Return on Equity

4,32%

4,83%

5,28%

6,00%

6,51%

0

Activity Ratios

FY2019

FY2020

FY2021

FY2022

FY2023

RMA

AR Turnover

0,00

0,00

0,00

0,00

0,00

0

Collection Days

0

0

0

0

0

0

Inventory Turnover

24,60

12,66

13,01

13,27

13,55

0

Accts Payable Turnover

12,89

12,89

12,89

12,89

12,89

0

Total Asset Turnover

0,11

0,11

0,12

0,12

0,13

0

Debt Ratios

FY2019

FY2020

FY2021

FY2022

FY2023

RMA

Debt to Net Worth

1,83

1,68

1,47

1,27

1,09

0

Short-term Liab. to Liab.

0,01

0,01

0,01

0,01

0,01

0

Liquidity Ratios

FY2019

FY2020

FY2021

FY2022

FY2023

RMA

Current Ratio

2,53

8,56

7,48

7,63

8,52

0

Quick Ratio

2,16

7,96

6,92

7,09

7,99

0

Net Working Capital

$3.347.180

$10.136.276

$9.522.592

$10.145.318

$11.959.682

0

Interest Coverage

1,55

1,67

1,81

2,07

2,34

0

Additional Ratios

FY2019

FY2020

FY2021

FY2022

FY2023

RMA

Assets to Sales

9,34

9,03

8,59

8,13

7,78

0

Debt/Assets

65%

63%

59%

56%

52%

0

Current Debt/Total Assets

1%

1%

1%

1%

1%

0

Acid Test

2,16

7,96

6,92

7,09

7,99

0

Asset Turnover

0,11

0,11

0,12

0,12

0,13

0

Sales/Net Worth

0,30

0,30

0,29

0,28

0,27

0

Dividend Payout

$0

0,32

0,27

0,22

0,18

0

7.8  Long‑term Plan

In long term Plan, the hotel chain will increase their
market share acquiring more hotel and rooms, offering variety of services and
support for all customer, and companies that are looking for a quality comfort
for their professionals that are in working trip.

Also, we are looking for new market shares, merger or
acquisition of new hotels, and in last case, the construction of new hotel in
some places that can be high profitable for investor and for hotel chain.

The natural expansion for the rest of Latin America is
one of our focus for the decade and next.

Another point is that our team are studying the
Hospital Services. In the nowadays vision, a hospital has two different
services inside it, one is the medical services, including surgery and personal
care and health, the other is the hospitality services for all that receives
surgical services or need to be under intensive care, in rooms and apartments
inside the hospital.

These people receive a service support that is closer
to hotel than to hospital and not only medical services, so, we are looking for
offer the hospitality services for hospital and health care clinics that are
our future focus as the hospitality services provider.

Besides that situation, our team are talking and
negotiating with our associated office in Paraguay, Uruguay and Chile to
install the same program in that country, focused in government needs and
industrial and commercial support.