1.0 Executive Summary
The purpose of this business plan is to secure $2 million for the acquisition of two properties that will be used to provide short term rentals through Airbnb as well as VRBO. Deutsch Hospitality Group (“the Company”) was founded by Matthew Deutsch, and it is based in Miami Florida. Full scale revenue generating operations are expected to commence in the fourth quarter of this year
Operations
As noted above, Deutsch Hospitality Group will be actively involved in providing exceptional hospitality services through two single-family properties in South Florida. Management anticipates a nightly rental fee of $450 to $700 depending on the season. The business will also generate moderate fees related cleanup as well as ancillary hospitality services that will be offered on site. At both locations, the business will have jet skis that are available for rent as a value-added benefit.
In addition to using Airbnb and VRBO, the Company will maintain a proprietary website to showcase the two properties that the business is acquiring. This will further ensure near 100% capacity at all times. The website will have functionality that that automatically link to the Company’s property management suite.
The third section of the business plan will further discuss the operations of the business.
The Financing
The $2 million of sought in this document will be holy used for the acquisition of two properties. Matthew Deutsch will contribute $300,000 towards the venture. The terms of this financing art determined during negotiation. However, this document assumes that the company will receive a 25-year loan carrying a 7.5% interest rate. The entirety of this financing will be used for the acquisition of real estate.
The Future
Over the next five years, the Company intends to acquire additional properties for its short-term rental portfolio. Given the substantial contribution margins and profits that are going to be generated on nightly basis, the Company will be able to reinvest a substantial portion of it after tax profit into new property purchases. It should be noted, that the business may also acquire properties that will be used for long-term renters with leases of twelve months or more.
Revenue Forecasts
2.0 The Financing
2.1 Funds Required
The business is seeking $2 million for the development of its operations. The entirety of this funding will be used for acquisition or real estate. The $300,000 provided by the Founder will be used for down payment and working capital purposes. The total breakdown is as follows:
2.2 Management and Investor Equity
Matthew Deutsch retains a 100% ownership interest in the business.
2.3 Exit Strategies
In the event that Mr. Deutsch wishes to retire or relocate, he intends to sell the entirety of the Company and its underlying assets to an individual that is seeking to enter this industry. A real estate broker will be hired for this purpose. There is also the possibility that properties within the portfolio would be sold individually if it is financially prudent to do so.
3.0 Operations
The Company has sourced two 4,000 square-foot properties that will be used to provide exceptional short-term rentals. These properties will each feature three bathrooms and three bedrooms. They’ll have a maximum capacity to comfortably house six people at any given time.
In regards to revenue generation, this will be principally accomplished through the use of Airbnb, VRBO, as well as other short-term rental booking sites that will ensure that the business is operating at near 100% capacity at all times.
The Company will manage these properties in house. This will include maintaining staff that will clean after each client engagement. The Company will also have a team of outsourced repair professionals that can address any emergency or routine repairs on an ongoing basis.
4.0 Overview of the Organization
4.1 Registered Name
Deutsch Hospitality Group LLC. The business is registered as a limited liability company in the State of Florida.
4.2 Commencement of Operations
Revenue generating operations will commence in the fourth quarter of this year.
4.3 Mission Statement
To provide outstanding short-term rentals to visitors within South Florida.
4.4 Vision Statement
Management expects that Deutsch Hospitality Group will generate $556,000 of revenue by the fifth year of operations.
4.5 Organizational Objectives
• Provide exceptional homes that people will enjoy while on vacation in South Florida.
• Properly list and showcase the properties on VRBO and Airbnb.
• Maintain a proprietary website that will also showcase available of rentals.
• Remain within the letter of the law regarding hospitality services within the State of Florida.
• Provide value added amenities for guests that will further provide a memorable experience.
• Maintain referral relationships with area restaurants, bars, nighttime entertainment venues, and related hospitality businesses.
• Leverage multiple forms of online advertising to promote rentals (including targeted advertisements across multiple social media platforms).
• Foster relationships with regional real estate brokers in the event that long-term tenants need to be placed at the properties.
• Implement proper fiscal controls so that Deutsch Hospitality Group can remain profitable in any economic climate.
5.0 Market and Industry Analysis
5.1 External Environmental Analysis
This section analysis will focus on the current economic climate, The competition at the business will face moving forward, and the industry.
Currently, the economic climate the United States is moderate. As a result of evolving trade policies, there has been a moderate degree of volatility introduced to the market. However, the Federal Reserve and global central banks are taking appropriate measures to keep inflation and check while also fostering economic growth.
However, any challenges with the economy will have a moderate impact on the Company’s ability to generate revenue and remain profitable. Miami and South Florida are highly trafficked areas. They receive tens of millions of visitors on a yearly basis. The demand for vacation rentals in this market is substantial. As such, the business will be able to remain profitable while satisfying all underlying obligations.
5.2 Industry Analysis
The demand for short-term rentals in a home environment is substantial since the advent of Airbnb, VRBO, and related booking platforms. As of this year, approximately 19.2% of people use these platforms when sourcing rentals for their vacation or travel needs. The industry currently generates $68 billion per annum. The anticipated CAGR of the industry is expected to remain at 7.4% in the coming years.
5.3 Customer Profile
The demographics of people that will use the Company’s two locations are exceptionally broad. Any person that is traveling to South Florida is a potential customer of the business. As has been one of the central themes throughout this document, the Company will use Airbnb as well as VRBO in order to principal secure its nightly rentals. From time to time, the company may also work with corporations that have staff that need to rain in the South Florida area for a significant period of time.
5.4 Competitive Analysis
The ongoing competition at the business will faces moderate. Platforms like Airbnb and VRBO are able to provide property owners with access to a wide range of potential customers that will stay at the properties. As such, there are thousands of other operators within the greater South Florida market that use these platforms to generate revenue from their real estate. It should be noted that as this business plan is being developed as a sample, no formal competitive analysis has been completed. If this document was created specifically for a client engagement, then there would be an analysis of the number of Airbnb operators specific for this market as well as hospitality businesses that operate in a competing capacity.
6.0 Key Strategic Issues
6.1 Sustainable Operations
Deutsch Hospitality Group will have sustainable operations as a result of the following:
• Immense demand for affordable short-term rentals in South Florida.
• The business is offering a number of complementary amenities that will ensure substantial occupancy.
• Properly showcase all properties on Airbnb and VRBO with numerous images.
• The business is taking a limited capital risk through the acquisition of these properties, which will produce a substantial ROI.
6.2 Basis of Growth
The Company will expand via the following methods:
• Continue to expand the scope of the Company’s proprietary marketing operations which will complement the use of Airbnb and VRBO.
• Acquire additional properties for the portfolio.
• Development of operations in other economically viable markets in Florida.
• Acquire portfolios of properties (single-family homes and condos) that can be used for short-term rentals.
7.0 Marketing Plan
7.1 Marketing Objectives
• Leverage the immense market reach of VRBO and Airbnb.
• Maintain a SEO friendly website to further ensure 100% occupancy.
• Maintain strong relationships with real estate brokers and agents in the event that long-term tenant placement is required.
7.2 Revenue Forecasts
7.3 Revenue Assumptions
Year 1
• First year revenue will reach $409,000.
• Gross profits will reach $368,000.
Year 2
• Through greater marketing efforts, revenue will reach $441,000.
• Gross profits will reach $397,000.
• Total income will increase by 8%.
Years 3-5
• By the fifth year of operation, total revenue will reach $556,000.
• Gross profits will reach $500,000.
7.4 Marketing Strategies
The ongoing marketing that the company will require is relatively low. On the Company’s Airbnb and VRBO profiles – the business will have numerous images of each property, as well as outlining the amenities that are available, including rental jet skis. This will provide a significant differentiating factor for the business as this type of water sport is extremely popular in the south Florida market.
To complement the company’s presence on third-party platforms, the business will also maintain proprietary website that showcases these properties. E-commerce functionality will be integrated into the platforms so that people can make direct reservations. This is important because individuals that make direct reservations will not incur the fees that are associated with booking platforms. This website will undergoing a moderate amount of search and optimization specific for the Miami and South Florida market.
The Company will also maintain relationships with corporate travel specialists, especially when there are times when these entities require that their staff remain within the Miami area for significant period of time. The Company will work with major corporations as well as law firms that frequently conduct business or address litigation matters in this market. This will further ensure that each property maintains near 100% capacity at all times.
The business will also maintain relationships with area real estate brokerages in the event that a long-term client is placed at either property. Although this scenario is unlikely, it is still important to have this contingency plan in place.
8.0 Organizational Plan
8.1 Organizational Hierarchy
8.2 Personnel Costs
9.0 Financial Plan
9.1 Underlying Assumptions
• The business will have a compounded annual growth rate of 8%
• The Company will acquire $2 million (carrying a 25-year term and a 7.50% interest rate).
• The Owner will contribute $300,000 toward the venture.
9.2 Financial Highlights
• Substantial revenues produced on a year-round basis given the demand for short-term rentals in South Florida.
• The properties in the Company’s portfolio will appreciate substantially in the coming years.
• Deutsch Hospitality Group’s operations are highly scalable.
9.3 Sensitivity Analysis
The Company’s revenues are only modestly sensitive to negative changes in the economy. As discussed in the fifth section of this document, Miami in the greater South Florida metropolitan area are highly trafficked tourist markets. They receive tens of millions of visitors on a yearly basis. The business will operate with a lean infrastructure in order to ensure that the company is able to meet its financial obligations on a month-to-month basis.
9.4 Source of Funds
9.5 Financial Proformas
A) Profit and Loss Statement
B) Common Size Income Statement
C) Cash Flow Analysis
D) Balance Sheet
9.6 Breakeven Analysis
9.7 Business Ratios
Appendix A – SWOT Analysis
Strengths
• Substantial year-round demand will drive near 100% occupancy.
• Nearly all capital will be in real estate as well as furniture, fixtures, and equipment.
• An experienced real estate entrepreneur (Matthew Deutsch) who will be able to bring the operations of Deutsch Hospitality Group to profitability.
• Use of Airbnb and VRBO will allow for national visibility for the Company’s properties.
Weaknesses
• Ongoing competition among entities that own properties in South Florida and operate in the same capacity.
• Potential damage to properties can occur.
Opportunities
• Expansion of the Company’s property portfolio in South Florida.
• Development of operations in other markets.
• Hypothecation of properties to access additional capital for expansion.
• Integration of complementary services such as car rentals (which can be offered through platforms like Turo).
Threats
• Changes in the economy could impact demand for South Florida based short-term rentals.
• Inflation could cause the operating costs of the business to increase.
Appendix B – Critical Risks
Development Risk – Low
The properties that will be used during the course of operation have already been sourced. Matthew Deutsch is prepared to make the down payment for both properties as soon as the capital commitment for long-term mortgages are secured.
Financing Risk – Low/Moderate
As noted, business is seeking $2 million in order to acquire these two 4,000 square-foot properties. The risks relates is financing are significantly reduced by the fact that 100% of the capital will be collateralized with real estate. Furthermore, the highly predictable streams of high margin revenue produced from nightly rentals will further contribute to the economic stability of the business.
Marketing Risk – Low
The use of Airbnb and VRBO will ensure the business maintains near 100% occupancy for both properties. This will be complemented through the use of a proprietary website. This will further create awareness and availability for the Company.
Management Risk – Low
Matthew Deutsch is a highly experienced real estate professional. He will be able to properly manage the properties on a year-round basis while expanding the scope of operations in the coming years.
Valuation Risk – Low
The valuation risk is offset by:
• All capital will be invested in properties and FF&E.
• Strong demand given that South Florida is a major tourist destination.
• Deutsch Hospitality Group can place long-term renters if needed.
Exit Risk – Low
In the event that Mr. Deutsch wants to retire or if it is economically prudent to do so, the business will work with a qualified real estate overage in order two properties. It should be noted that the Company as a whole may also be divested given the fact that the business will have numerous positive reviews spanning a wide range of short-term rental websites. This event is not expected to a significant period of time given that Mr. Deutsch wants to expand the scope of the Company’s portfolio within the greater South Florida area.