Transcript regeneration strategy for the ga-rankuwa hotel school
REGENERATION STRATEGY FOR THE GA-RANKUWA HOTEL SCHOOL
Contents 1.
2.
3.
Introduction Policy and Strategy context Situation Analysis, Physical Facilities and Key Issues 4.
5.
6.
7.
8.
9.
Training in the tourism sector Skills Gaps Best practices – hotel schools and related physical facilities Regeneration Strategy Marketing Plan Financial Model 10. Implementation Roadmap 11. DED Vision 12. Conclusions
Introduction
Background
• The Ga-Rankuwa Hotel School (GRHS), located in Ga-Rankuwa township of the Gauteng Province, is currently a campus of the hotel division of the North West Parks and Tourism Board (NWPTB) and is in the process of being transferred to Department of Economic Development of the Gauteng Provincial Government (GDED) • The DED resolved as follows: • Conduct a due diligence that will inform the acquisition transaction of the Ga-Rankuwa Hotel School (GRHS) for valuation purposes • Develop a Regeneration Strategy and Marketing Plan with the aim of repositioning the school to be a
“Leading
world class training and leisure facility in Africa” –
this project
Introduction (cont’d)
Scope of the Project
• The scope of the project
inter alia
following: included a review of the – Policy and Strategy context; – A Situation Analysis with respect to: • GRHS; • Training in the tourism and hospitality sector; • Industry skills gaps; and • Best practices in the tourism industry – benchmarking both local and international.
Introduction (cont’d)
•
Scope of the Project
The scope further required a development of the following: • Business model for the new hotel school; • Alignment of the school to government strategies for the tourism industry; and • Implementation Roadmap.
FOCUS: This presentation is structured as per the scope of work of the project, and it further details the Regeneration Strategy and Marketing Plan
Tourism Policy
The White Policy (1996) is considered the overarching tourism policy. With regards tourism education, it emphasised the following: • Deficiency in tourism education; • The need to access an affordable tourism education for the previously neglected groups; • The need for a tourism awareness programme; • The school curriculum to include a tourism subject; and • Basic skills such as communication and customer service to compliment tourism technical skills.
Tourism Sector Strategies
Cognisance is taken of various strategies in place. For the purpose of this presentation, we focus only the National Tourism Sector Strategy (NTSS) and the Gauteng Tourism Sector Strategy (GTSS). These strategies set the targets illustrated below: Foreign visitor arrivals Domestic tourists
Total est tourist National Tourism Sector Strategy
15 million 18 million
33 million Gauteng Tourism Sector Strategy
8.25 million 10.26 million
18.51 milliom
Direct jobs 461,700 *258,972
* Extrapolated based on NTSS direct jobs to be created
The GTSS states that the number of jobs is still to be determined, and we thus extrapolated to estimate that about 3
2,000 learners
must be trained and given decent jobs, based on the tourism growth rate with regard to the envisaged number of tourists to South Africa
Situation Analysis
• Management and organisation – The rector manages the school and hotel operations with a 23 staff compliment, eligible for corporate benefits • GRHS operations – The school has capacity to enrol 100 students, and currently enrols about 40%, using 2 academic staff members ; – The hotel school is accredited with CATHSSETA and offers one year certificate and two year diploma courses in professional cookery ; – The hotel, currently not graded, has ten (10) rooms and utilises about 7 staff members; – The GRHS shared services, namely, HR, IT and financial management are based in Mafikeng; and
require urgent refurbishment.
GRHS Physical Facilities - Buildings
GRHS Physical Facilities - Kitchens
GRHS Physical Facilities - Library
• • • •
Situation Analysis – strategic decisions
Transfer.
The finalisation of the transactional arrangements, which are recommended to deal with: – the nature of the transaction-which should be an asset transfer/acquisition; – a management agreement concluded with the NWPTB to manage the school on behalf of DED during the transitional phase
Improvements.
The timing of the refurbishment of the physical facilities
Expansion
. Raising of investment capital and related funding options
Institutional capacity.
Formalisation of relationships with industry players
Training in the tourism sector
The South African education system comprises these bands: • Basic Education – tourism courses offered at school • Further Education and Training (FET) • Higher Education – University of Technology and University • Sector Education and Training Authority (SETA) The GRHS is accredited by CATHSSETA, one of the SETAs. The universities offer mainly diplomas and degrees in tourism and hospitality studies.
Skills Gap
The GRHS offers learners career opportunities to become Chefs. The table below illustrates tremendous skills gap in the hospitality sector:
Employee Qualification Level NQF 5-8 NQF 2-4 NQF 1 & LESS HOSPITALITY TOURISM & TRAVEL GAMING & LOTTERIES CONSERVATION & TOURIST GUIDING
18% 74% 53% 22% 28% 18% 40% 50% 54% 7% 5% 28% The table indicates that 82% of employees in the hospitality sector have obtained qualifications at or lower than NQF4, which is equivalent to Matric.
Best Practices – hotel schools
• Highly ranked schools are private – GRHS may utilise an outsourced management company, with the land and physical facilities being leased to an institution/operator to run academic programs, with clearly set out targets contained in the business plan; – The benefits of such a model are clear • Location – in the city centre or nearby a tourist attraction – GRHS is on the outskirts of City of Tshwane, but may remain a campus of a bigger school; • Physical facilities including the library – state-of-the-art; • Fees are generally expensive – a subsidy may be needed for the new GRHS; and • Limited revenue models – GRHS may explore hosting a restaurant at its facility instead of providing hotel operations, whereby the conference facility becomes a dining room
World Class - Facilities
City centre building
Palace in a resort Well-equipped library Computer room
World Class - Facilities
Typical classroom
Residential corridors
En-suite rooms with TV
Double-room
Regeneration Strategy
• Institutional Arrangements – Appoint, in the interim, a senior official to facilitate and conclude the transfer transaction – Establish a section 21 company to warehouse the current GRHS and formulate its related business plan; – Appoint the board to establish a Project Programme Office for the feasibility study and construction of a new tourism centre of excellence and supporting hotel facilities • Vision and Mission – Make it easy to remember , and refine it into, “ to be a centre of excellence in tourism education” – Similarly to the Vision, the mission can be refined to read, “to provide tourism education and professionalise the tourism market”
Regeneration Strategy
• Accreditation – Upon official name change, register the school with CATHSSETA – Register the school with industry relevant associations, e.g., CASA and RASA • Internship – Appoint a full-time person and an assistant to fully co ordinate internships and placements • Refurbishment Programme – Implement quick-wins
Marketing Plan
• Formulate a generic brand of the Gauteng Institute of Tourism Education (GITE), and also the brand for the school of culinary arts; • Register a website, www.gite.gov.za
; • Compile a new prospectus for the GITE; • Advertise nationally, and local media including the DED online; • Launch the new GITE following completion of the upgrades.
Financial Model
Value Drivers for the Financial Model Input Variable
Total target students Boarding students ratio
Amount 1,500 0.25
Day students ratio Correspondence students ratio
0.58 0.17 The number of students that the expanded facility will accommodate will have an impact on the extent of the investment in the infrastructure which will further impact on the operating expenses of the school. The ratio of boarding v/s day students will also impact on the infrastructure with regard to number of rooms to be developed.
Financial Model Revenue Model
Input Variable Base Case Amount/Rate Base school fees for boarding students Base school fees for day students Correspondence fees Base conferencing fee rate (per delegate) Restaurant average price per meal Base government subsidy
R29,700 R16,100 R8,250 R240 R30 R4,943,253
Average annual increase
10% 9% 8% 8% 8% 10% The fees structure is based on the existing fee structure. The correspondence students fee is an estimate. The conference rate is based on a similar facility in Randburg. The restaurant price per meal is influenced by average food price in the locality of the school and the potential target market of the school. The government subsidy is per the due diligence report.
Financial Model Revenue Model
Year TOTAL INCOME 1 8 157 500 Boarding Student fees
Number of boarding students Fees per student
Estimated Sales Turnover Day Student fees
Number of Day students Fees per student
Estimated Sales Turnover Correspondence Student fees
Number of Day students Fees per student
Estimated Sales Turnover Restaurant Revenues
Esimtated number of meals sold Average price per meal
Estimated Sales Turnover 2 227 500
75 29 700.00
2 227 500
2 817 500
175 16 100.00
2 817 500
412 500
50 8 250.00
412 500
2 700 000
90 000 30.00
2 700 000
2 10 072 855 2 951 438
94 31,482 2 951 438
3 733 188
219 17,066 3 733 188
472 230
53 8 910.00
472 230
2 916 000
90 000 32.40
2 916 000
3 13 159 043 4 242 691
117 36,204 4 242 691
5 226 463
273 19,114 5 226 463
540 609
56 9 622.80
540 609
3 149 280
90 000 34.99
3 149 280
4 17 436 028 6 098 869
146 41,635 6 098 869
7 317 048
342 21,408 7 317 048
618 889
60 10 392.62
618 889
3 401 222
90 000 37.79
3 401 222
5 22 828 709 8 385 945
183 45,798 8 385 945
10 060 940
427 23,548 10 060 940
708 504
63 11 224.03
708 504
3 673 320
90 000 40.81
3 673 320
6 54 200 554 22 692 366
450 50,378 22 692 366
26 729 906
1 051 25,432 26 729 906
811 096
67 12 121.96
811 096
3 967 186
90 000 44.08
3 967 186
Financial Model Direct Cost Model
1 2 3 4 Year Total direct student costs Average Cost per Student Total Number of Students Boarding students
Number of boarding students Cost of kitchen training set Student training costs Boarding lodge charges Student ICT costs Direct foobd & beverages costs Kitchen equipment amortisation costs
Total Dau Students
Number of Day students Cost of kitchen training set Student training costs Direct foobd & beverages costs Student ICT costs Kitchen equipment amortisation costs
5 578 088
18 593.63
300 75 2 500.00
11 270.00
9 100.00
129.00
4,583
2 068 676
175 2 500.00
11 270.00
4 583.35
129.00
-
6 880 112
18 823.84
313 94 2 650.00
11 946.20
9 646.00
136.74
4 858.35
2 285 526
219 2 650.00
11 946.20
4 858.35
136.74
-
9 053 916
20 263.69
391 117 2 809.00
12 662.97
10 224.76
144.94
5 149.86
3 028 321
273 2 809.00
12 662.97
5 149.86
144.94
-
11 926 518
21 770.39
488 146 2 977.54
13 422.75
10 838.25
153.64
5 458.85
4 012 526
342 2 977.54
13 422.75
5 458.85
153.64
-
Total Correspondence students
Number of correspondence students Distance training administration costs
Total 3 234 412
50 5 500.00
275 000 4 285 596
53 5 830.00
308 990 5 678 414
56 6 179.80
347 181 7 523 899
60 6 550.59
390 093 5 15 724 071
23 347.65
610 183 3 156.19
14 228.12
11 488.54
162.86
5 786.38
5 316 597
427 3 156.19
14 228.12
5 786.38
162.86
-
9 969 166
63 6 943.62
438 308 6 40 351 638
25 728.29
1,501 450 3 345.56
15 081.80
12 177.85
172.63
6 133.56
13 863 558
1 051 3 345.56
15 081.80
6 133.56
172.63
-
25 995 597
67 7 360.24
492 483
The key direct cost drivers were arrived at by applying a 70% factor on the student fee structure, thus assuming a 30% gross margin. Other costs include a culinary tool kit per student, food & beverage cost per student and internet connectivity
Financial Model Revenue based expenses
Input variable Water & electricity charges Percentage of revenue
2.25%
Usage based expenses
Input variable Communications Telecommunications month per employee per Cleaning services
1.25%
Internet connectivity per month Building maintenance
1.5%
Courier services (base usage -300 times) Equipment maintenance
2%
Landscape services
0.5%
Transport costs for administrative staff per month Stationery use per month per employee Marketing & sales
2.5%
Computer month consumables per employee per Security services
3.5%
Rate
R484 R129 R125 R3,300 R55 R75
Financial Model Job implications
Direct Employees Rector Deputy Rector Finance Officer Lecturers Programme coordinator Student registrar General Office Adminsitration Administration Staff Total Staff 1 2 1 9 6 6 17 9 52 Indirect Jobs Security services Professional consulting Contruction (short term) Supplies Total Staff 50 10 130 10 200
Financial Model Projected Income Statement
Year 1
R
Income
- Revenue 13 615 000
13 615 000
Less Direct costs of education provision
(5 578 088) Gross Profit 8 036 912 2
R 17 229 710
17 229 710 (6 880 112) 10 349 598 3
R 23 168 806
23 168 806 (9 053 916) 14 114 889 Government subsidy
Expenses
Net Profit Before Interest
Less Interest Paid Add Intrest Earned
Net Profit Before Tax 4 943 253
(8 640 373) 4,339,792 -
4 339 792 5 437 578
(8 743 485) 7,043,691 -
7 043 691 5 981 336
(9 971 252) 10,124,973 -
10 124 973 4
R 31 470 833
31 470 833 (11 926 518) 19 544 316 6 579 469
(12 118 001) 14,005,784 -
(15 724 071) 26 260 027 7 237 416
(15 104 462) 18,392,982 -
(40 351 638) 64 082 284 7 961 158
(32 971 748) 39,071,695 -
14 005 784 5
R 41 984 099
41 984 099 18 392 982 6
R 104 433 922
104 433 922 39 071 695
Taxation
Profit after Tax
Dividends Retained Income (1 215 142)
3 124 650
-
3 124 650
(1 972 234)
5 071 458
-
5 071 458
(2 834 992)
7 289 981
-
7 289 981
(3 921 620)
10 084 165
-
10 084 165
(5 150 035)
13 242 947
-
13 242 947
(10 940 074)
28 131 620
-
28 131 620
Financial Model Investment Implications
Description Number of units Administrative block Kitchens Hostel Accommodation Student dining room Linen rooms Classrooms
1 8 168 1 4 16
Library Computer labs
6 6
Maintenance offices
5
Project management fees
VAT thereon the estimated costs
TOTAL DEVELOPMENT COSTS Sqm/unit
2,782 112.37
40 462 21.43
45.53
41.86
41.86
84.97
Indicative costs
R24,619,743.24
R7,955,796.00
R59,372,783.20
R3,606,733.20
R627,539.30
R5,653,557 R2,222,766.00
R2,222,766.00
R3,759,923.00
R20,517,231.81
R18,398,965.35
R149,820,146.46
The estimated capital investment is based on the number of students and the resultant facility that is required. The conservative development cost is at R8,850 per square meter.
Implementation Roadmap
ACTIVITIES/ACTION POINTS DEPARTMENT OF ECONOMIC DEVELOPMENT ACTIVITIES
Finalise the DED's Strategic Implementation Road Map (SIRM) Approval of the SIRM Develop the TOR for the PMO Issue a Request for Proposals for the PMO Appoint a Service Provider (PMO)
PMO ACTIVITIES
Conclude the Transaction between DED and NWTBP Restructure the operations of GRHS Develop a business plan for GRHS Conduct architenctural design, costings for the refurbsihments of the GRHS Determine the funding requirements and design funding structures for GRHS Develop specifications for the management of GRHS and call RFP
Apr-12 May-12 Jun-12
Conclude transaction with land owner for the new school Conduct geotechnical, land survey, EIA on the land earmarked for the school Submit applications for development and obtain all regulatory approvals for development of the new school Design the school's infrastructure, lay-out of kitchens etc Call for proposals for the Development of the new School Project Manage the development of the school
Jul-12 Aug-12 INDICATIVE TIMELINES FOR THE PMO-NEW SCHOOL HOTEL Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 2013-2015
DED Vision
A reception to reflect a School in hospitality GITE Culinary Learners provided with right tools, books and uniform GITE Culinary A conference centre converted into a restaurant Access to internet, including in corridors
DED Vision
Demo kitchen for foundation phase levels Optimal use of space – advanced kitchens Enclosed kitchens, pastry (wooden tables) and cookery (stainless steel)
DED Vision Proper computer room Proper library
Conclusion
• The GRHS has been severely under-funded over the past five (5) years and certain facilities require urgent attention and funding estimated at
R150 million
• The international bench marking trip further confirmed hotel schools best practices • The GRHS must consider to substantially increase its student intake to support envisaged phenomenal growth in tourism; • The GITE must evaluate which of priority and critical skills courses it wants to offer initially within the hospitality industry • Optimal institutional arrangement is that the GRHS is warehoused in a section 21 company with the aim to ring-fence the tourism institute, and renamed the existing school the Ga Rankuwa School of Culinary Arts