A hotel economic feasibility study : Monsignor O'Brien Highway, Cambridge, Massachusetts

Abstract

A hotel economic feasibility study was carried out for an assemblage of four (4) parcels located on Monsignor O'Brien Highway in Cambridge, Massachusetts. The primary objective of this economic feasibility study was to assess the supply and demand factors affecting the market for transient accommodations in the East Cambridge area for the purpose of recommending the size and type of hotel which is most logical for this assembled site. Once these perimeters were determined, an economic feasibility study was performed to evaluate the anticipated economic benefits and probable total project cost. The financial analysis undertaken was utilized to determine whether the return on investment makes the proposed project economically feasible. It was determined in the initial stages of the study that the assemblage of parcels was flawed. After reconfiguring the assembled site, further analysis continued. In the end, the study validated the economic feasibility of a 250 key lifestyle brand type hotel. The hotel is conceived to be in operation as of January 1, 2011. The planning and entitlement process is expected to last approximately sixteen months. Construction is scheduled to take an additional two years time. The development will be have both mortgage and equity components. The internal rate of return based on the economic valuation of the property value of $68,431,191 is 8.37%. The mortgage component of $55,622,501 represents an IRR of 7%. The equity component is valued at $12,808,690 which represents an IRR of 12.4%