Professional Documents
Culture Documents
0 Case Summary
J.J. Kimani is the general manager of the Kenya Financial Service (KFS) branch in
Malindi. Currently J.J. Kimani has been visited by the owners of the Sapphire Beach Hotel
and they are expressing their dissatisfaction with the present banker which is West German
Bank because the bank refused to give additional fund for their project. Thus the three owners
had approached the KFS to request the loan to assist their project of Sapphire Beach Hotel
that was scheduled to be opened at the end of September.
Sapphire Beach Hotel Ltd. was the ideas of the three talented and A-1 businessmen to
be part of the hotels competitors in the Malindi area. The Sapphire Beach Hotel was designed
in the traditional, white stucco exterior architecture and classified as the three-star hotel. The
construction costs of the hotel at the first estimation by the owners was at Kshs 12.5 million,
however, there are setback that caused the project to delay four month behind it schedule and
this lead to the increasing in the cost of the constructions by Kshs 2.5 million.
Thus, to help the project of the Sapphire Beach Hotel, the owners asked for the loan
from KFS to fund their overrun costs as well as made the repayment to the West German
Bank for the present loan, since they have to make the repayment back to the bank after the
hotel start opened for business. J.J. Kimani was the person who was in charges in this case of
Sapphire Beach Hotel, hence he needs to evaluate all the relevant documents and analysis the
situations carefully to ensure he would not give the wrong decision as the general manager of
the KFS.
As stated in the case, during this case on 1980s the environment of Kenya is not
favourable for the tourist activities since there are economic problems that caused the effect
to the tourism industry in Kenya. Moreover, the governments rules and regulations was so
frustrated that mostly are not effectively performs by the Kenyans. J.J. Kimani also looking at
the political issues in the Kenya that draw a fear mind for every tourists.
Thus, it is depending on the J.J. Kimani decision whether to approve the loan
requested by the three owners or reject the loan. All of these assumptions need to be
evaluated correctly since the future of the Sapphire Beach Hotel Ltd and the KFS in the hand
of J.J. Kimani.
Sales
Accommodation 1,825,638.75 2,031,608.25 2,317,156.88
[47.5% (Occupancy Rate 108beds
365 days Rate/Bed)]
Restaurant 2,017,811.25 2,245,461.75 2,561,068.13
[52.5% (Occupancy Rate 108 beds
365 days Rate/Bed)]
Bar 1,369,229.06 1,523,706.19 1,737,867.66
[75% Accommodation Revenue]
Other 912,819.38 1,015,804.13 1,158,578.44
[50% Accommodation Revenue]
Sales
Accommodation 1,432,424.25 1,625,286.60 1,884,620.93
[47.5% (Occupancy Rate 108beds
365
days Rate/Bed)]
Restaurant 1,583,205.75 1,796,369.40 2,083,002.08
[52.5% (Occupancy Rate 108 beds
365 days Rate/Bed)]
Bar 1,074,318.19 1,218,964.95 1,413,465.69
[75% Accommodation Revenue]
Other 716,212.13 812,643.30 942,310.46
[50% Accommodation Revenue]
Total Sales 4,806,160.31 5,453,264.25 6,323,399.16
Less : Cost of Sales
Beverages 698,306.82 792,327.22 918,752.70
[65% Bar Revenue]
Food 870,763.16 988,003.17 1,145,651.14
[55% Restaurant Revenue]
Linens & Housekeeping supplies 114,593.94 130,022.93 150,769.67
[8% Accommodation Revenue]
Break-even point (in units) = other operating expenses unit contribution margin
Exhibit 3
Outstanding Interest
Principle (15%)
Y0 10,000,000 0
Y1 8,750,000 1,500,000
Y2 7,500,000 1,312,500
Y3 6,250,000 1,125,500
Y4 5,000,000 937,500
Y5 3,750,000 750,000
Y6 2,500,000 562,500
Y7 1,250,000 375,000
Y8 0 187,500
Net Operating Income = Net Profit/ (Loss) + Depreciation expenses + Bank Service Charge
Total Debt Service = Bank Service Charge + Loan Instalment
Exhibit 5
Exhibit 6