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What kind of feasibility studies are conducted?


Feasibility studies are conducted for different purposes and audiences.  They depend on the current stage of the project, the level of detail required, and its users.

Prior to the preliminary feasibility study, a landowner or leasehold owner may conduct a highest and best use study (HBU study) to determine the most appropriate use of vacant land or an improved property.  Its purpose is to establish what is legally allowed, physically possible, financially feasible and maximally productive.  A location and market analysis is a short assessment of the general suitability of location and market for a hotel.

After concept refinement but prior to a comprehensive feasibility study, a preliminary feasibility analysis is often conducted by the developer.  This high-level market research and analysis and investment appraisal is based on financial modeling for client-internal "go/no-go" decision whether to further pursue the project development concept.  It establishes the business case required to make an informed decision, enables exploration of future options potentially available before making a decision, and is used to determine whether to proceed with a comprehensive feasibility study and the areas within the project that require more attention.

A market and financial feasibility study (MFFS) is the most comprehensive type of feasibility study, comprising a supply and demand analysis, site characteristics and a SWOT assessment, positioning/facilities recommendation and estimated cash flow projections to determine the projected return on investment.  It is used mainly to support the internal decision-making process and accepted by operators, banks and investors for their basic due diligence.

Basic Feasibility Studies
This image illustrates when the basic types of feasibility analysis (higher & best use, preliminary, and market & financial) are conducted and the principal users of the studies (landowner and leasehold owners, property developers, and operators, lenders and investors).

The market feasibility study (MFS) typically comprises macro and micro market research, supply and demand analysis, benchmarking and a SWOT assessment and findings and is conducted primarily in order to assess or reconfirm if a development concept is supported by current and future market dynamics.  The financial feasibility study (FFS) includes financial and scenario analysis and an investment appraisal and is conducted with the aim to determine if or confirm that a project is potentially profitable.

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