Question 1a Hilite Hotel

TO: FINANCE DIRECTOR

FROM: SENIOR BUSINESS ANALYST

SUBJECT: KEY SUCCESS FACTORS

DATE: 25 June 2024

This briefing note discusses the key factors which have enabled HiLite to be successful in
its home country of Deeland

i) A well-developed tourism industry

With a well-developed tourism industry is likely to attract a significant number of
tourists coming into Deeland. Increase in tourism will directly increase the
demand for hotels, as visitors will need a place to stay. Hence, a well-developed
tourism industry in Deeland has contributed significantly in growth of our
revenues

ii) Pricing strategy

We adopted a competitive pricing strategy which can be likened to penetration
pricing. The lower competitive price attracts more clients compared to the
competitors thereby claiming the largest share of the market.

iii) Infrastructure
All the 46000 rooms are well equipped with ensuites, TV and free Wifi. These will
likely provide comfort for clients leading to repeat purchases as tourists often
prefer own bathrooms for hygienic reasons, Televisions for entertainment and
WIFI for potential researches and office work while on holiday. However, it is also
important to note that we do not currently have bars, restaurants and leisure
facilities at all hotels which may potentially take away a significant chunk of our
potential market especially for drinkers who would want to spend most of their
times in the bar in preference to hotels that offer the same.

iv) Strategic positioning

Our hotels are located at destination points for tourists and other domestic
consumers that are at airports, city centre and close to rail and road networks.
The positions limit the need for hotel clients to travel long distances in search of
accommodation and provides convenience and transport cost saving.

v) Investment in technology
The investment in web-based technologies for bookings have significantly
improved the clientele base for our hotels as bookings can be made from
anywhere in the world and to date 75% of bookings were made online. The
world has since become a global village where in access to services no longer has
to be physical.

vi) Cost leadership strategy

 The organisation works with a fewer trained and competent staff. This
significantly reduces cost of operation which potentially has led to the
exponential growth in business as profits will be channelled to growth.

vii) Exceptional customer services

The organisation is committed to staff development and all staff at our hotels are
well trained to provide premium customer service and this likely creates brand
loyalty potentially attracting more clients through references.

viii) Strong Government Support

Government’s continued investment in national infrastructure, particularly the
new airport recently opened in Boria, Deeland’s second largest city. This
generated an additional 2·5 million international visitors last year, approximately
80% of them visiting Deeland for leisure. The government has recently
announced further investment and tax breaks for employers offering job creation
schemes in a wide range of industries, including travel and tourism. A
favourable political condition in shape of strong support from government leads
to growth in overall industry and hence all players within the industry benefits in
form of higher revenues and profits.

Sincerely

Business Analyst
Question 1b

Using the factsheet referred to above and any other relevant information, prepare a
report for the finance director, which evaluates the proposal to acquire the Comfi Stay
hotel chain.

REPORT

TO: FINANCE DIRECTOR

FROM: SENIOR BUSINESS ANALYST

DATE: 25 June 2024

SUBJECT: PROPOSED ACQUISITION

INTRODUCTION:
This report evaluates the proposal to acquire the Comfi Stay hotel chain.

Shareholder acceptance
As a listed company it is feasible to seek approval from our shareholders. The projections
show a positive NPV of $10.5 million at a discounted rate of 12% it is likely that the
shareholders may approve the proposal to acquire Comfi Stay hotel. It is important to be
mindful of how this decision may affect our shareholders' perception of our reputation, as it
could ultimately impact their wealth. We need to ensure that we maintain effective and
consistent communication with our shareholders.

Financial analysis of Comfi Stay

The NPV of the project is $10.5 million, indicating its viability. The simple payback period,
before discounting, is less than 4 years. However, the revenue and operating cost
assumptions are unrealistic, with constant values for the first 2 years and then again for
years 3 onwards. This aspect requires further examination. It is essential to document and
thoroughly review the basis of various assumptions, including revenues, operating costs,
and discount factors. Additionally, the tax implications need to be taken into account for a
more accurate assessment. Conducting sensitivity analysis is necessary to identify the most
sensitive assumptions and potential what-if scenarios.

Finance resource
The initial investment required is $ 90 million. This will be arranged through a combination
of equity and debt finance. Our company has been consistently profitable, and our
shareholders are counting on us to sustain this growth. As a result, we anticipate their
support for our investment plans through both equity and debt financing.

Human resource / experience

Up to now, our growth has been entirely organic. We have not engaged in any acquisitions
in the past, which means we lack experience in this area. We may need to acquire the
necessary skills to ensure the success of the acquisition phase. Additionally, our experience
has been limited to Deeland, so we will need to familiarize ourselves with the external
environment in Veelandia. It is anticipated that some of our hotel managers will need to
temporarily relocate to Veelandia for 3-12 months to assist with training and staff
development in the first year of operations, and then continue with ongoing mentoring
activities for the following two years.

IT / Brand
We have made a significant investment in web-based technology. Also, we are a leading
hotel brand in Deeland. We can use these internal resources and strength in Veelandia once
we acquire Comfi Stay Hotel

Cultural compatibility
An additional factor to take into account is the cultural compatibility of the Comfi Stay hotel
chain. Given that Veelandia is situated more than 5,000 miles away from Deeland and the
upscale nature of the hotels, potential cultural disparities should be carefully examined.
Moreover, being a family-owned enterprise could imply a strong family-oriented culture
that might pose challenges in aligning with our existing operational practices and
management approach.

In conclusion the acquisition of the Comfi Stay hotel chain presents several favourable
factors indicating that it is a feasible strategy for HiLite. Nevertheless, the board of directors
must determine the key aspects of the decision criteria that are crucial for the success of the
endeavour prior to reaching a final verdict.
Question 2a
PRESS RELEASE
SOCIAL & ENVIRONMENTAL IMPACT
HILITE HOTELS BERNIE VOKES - CEO
DATE: 25 JUNE 2024
We wish to share our perspective on the article featured in Deeland Daily News regarding
our proposed acquisition of Comfi Stay Hotel in Veelandia.

Social Impact
Hilite Hotel is dedicated to fostering a positive work environment, emphasizing equality and
diversity. We allocate approximately $10 million each year towards skills and development
initiatives within our Deeland branches. We have proactively adopted the new Deeland
National Living Wage Law six months ahead of schedule. Our turnover rate stands at just
48%, significantly lower than the industry average of 60%. Additionally, we intend to send
our top managers to Veelandia to provide training for Comfi Stay Hotel staff, and we are
planning to invest $10.5 million over the next six years in staff development and training
programs.

Environmental Impact
Comfi Stay was penalized by the government of Veelandia for contaminating the local
waterway in its primary coastal tourist town, primarily due to its outdated waste and toilet
facilities. Hilite remains dedicated to ongoing growth and investment in sustainability and
environmental management systems to lower our waste levels, reduce our CO2 emissions,
and strive towards becoming a carbon-neutral business. Currently, we are achieving a 2.4%
reduction in CO2 emissions and recycling 85% of waste in our Deeland operations. Hilite is
willing to allocate substantial funds at Comfi Stay to transform the hotel into an
environmentally sustainable establishment. We intend to allocate $6 million over the next
six years specifically for environmental initiatives.

FOR FURTHER INFORMATION, PLEASE CONTACT OUR COMMUNICATIONS DEPARTMENT

Question 2b. The finance director has asked you to provide her with briefing notes which
she will use to assist her in discussions with HiLite’s Board members, which assesses the
role and benefits of integrated reporting in assisting effective communication and in
building relationships with HiLite’s key stakeholders.

BRIEFING NOTES
TO: FINANCE DIRECTOR
FROM: SENIOR BUSINESS ANALYST
DATE: 25 JUNE 2024
SUBJECT: INTEGRATED REPORTING

This briefing note assesses the role and benefits of integrated reporting in assisting effective
communication and in building relationships with HiLite’s key stakeholders:

Role
An integrated report provides a succinct overview of how an organization's mission,
strategies, financial performance, and social and environmental initiatives are
interconnected, demonstrating how the organization generates value in the short, medium,
and long term.

Benefits
Effective communication
An integrated report facilitates enhanced communication with a broader range of
stakeholders by presenting a comprehensive overview of our business operations and future
strategic objectives. This enables stakeholders to grasp our major decisions more efficiently,
including our planned investment in Comfi Stay.

In contrast, a financial statement focuses more on historic financial information only.

Building relationship with stakeholders

An integrated report takes into account a diverse range of stakeholders, including
shareholders, employees, customers, government, banks, potential investors, and more.
Given the broad spectrum of stakeholders with varying interests in our business, effective
communication is essential for establishing strong relationships with them.

In contrast, financial statements just focus on shareholders only and not a wide range of
stakeholders.

Enhances reputation
As integrated reporting is a voluntary disclosure, it will enhance our reputation for integrity
and transparency.

Focus on social and environmental Activities

Hilite Hotel takes pride in its social and environmental initiatives, as it believes that properly
reporting these activities through integrated reporting would provide a strategic advantage.
An integrated report is dedicated to disclosing an organization's social and environmental
activities.
Unfortunately, financial statements do not emphasis on social and environmental initiatives
as much as integrated report does.

Six capitals
Integrated reporting focuses on six capitals which are financial, manufacturing, intellectual,
human, social and natural.
However, financial statements focus on one capital only i.e., share capital.

Confidential information
However, it should be noted that integrated reporting may disclose too much strategic
information and future plans which may not be appropriate from a competitive point of
view and competitors may try and take advantage.

Sincerely
Senior Business Analyst