Financial Feasibility Analysis of XYZ Hotel's Investment on Corporate Catering Business in Times of Pandemic

Abstract

Due to the financial impact of COVID-19 on the hotel industry, XYZ Hotel which is located in Bandung is planning on developing the hotel's food service, namely the corporate catering business which is considered more potential compared to the main business at this time. The investment will cost Rp217,080,000 and will be funded using equity. Given the current condition, this amount of investment is significant for the owners. Thus, they need to know the financial feasibility and risks of this investment. The results show a payback period of 1.79 years, NPV of Rp346,712,470, PI of 2.50 and IRR of 53.50% that is greater than 9.17%, the cost of capital. Using sensitivity analysis, 7 sensitive variables are identified and Monte Carlo simulations show a 67.10% probability of success of the project. Since all of the results exceed the acceptance standard, this project is feasible to be conducted in times of pandemic as it will implicate positively on the company’s financial although it still has risks that should be taken into account.

Keywords: Capital Budgeting, Feasibility Study, Corporate Catering, Covid-19 Pandemic.