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MMS-B
GNIMS 2012-13

International Business
Prof. Harvinder Singh Chawla

Challenges in International
Business:
DisneyLand...
About Disney
• The Walt Disney company
– Founded in1921.
– Produces and “unparalleled entertainment experience based
on th...
Cont..
• Want to get accustomed to European style
• Per capita GDP and Economic growth not an issue due to
target market o...
DISNEYLAND OVERVIEW
• A theme park located in Anaheim, California
• opened on July 18, 1955
• operated by the Walt Disney ...
PESTEL analysis
• Political :
– Increasing Government Restraints
– Indigenous Innovations
– Change in Government Official
...
Cont..
• Social :
– English as official language (3.1% speaks as first
language)
– 97.1% are literacy

• Technological :
–...
STP
•

Segmentation - Local as well as international tourists

• Target Group - High income group families
•

Positioning ...
SWOT analysis
Strengths:
1. This is the oldest amusement park
2. This is the world’s most popular brand in the
category of...
Cont..
Weaknesses :
1. It has a very diverse product portfolio with several different theme
parks and hotels, which makes ...
Threats :
1. Local competitor, Universal Studios is gaining huge popularity.
2. The various theme parks opening throughout...
Why Disney in China?
•
•
•
•
•

Largest Population in the world.
1.3 Billion people
3rd largest country
3.7 million sq. mi...
Background: Why Shanghai?
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0

• Shanghai leads in GDP and FDI in
China
– G...
Park Location is Key
Expo Site
and
Universal
Property

Significant infrastructure
development is occurring to
support the ...
Comparative ratings on the basis of
Geert Hofstede theory
•
•
•
•
•

Power Distance Index (PDI)
Individualism (IDV)
Uncert...
Power Distance Index
• At 80 China sits in the higher rankings of PDI – i.e. a society
that believes that inequalities amo...
Individuality
• At a score of 20 China is a highly collectivist culture where
people act in the interests of the group and...
Masculinity
• At 66 China is a masculine society –success oriented and
driven.
• The need to ensure success can be exempli...
Uncertainty Avoidance
• At 30 China has a low score on uncertainty avoidance.
• Truth may be relative though in the immedi...
Long Term Orientation
• With a score of 118 China is a highly long term oriented
society in which persistence and persever...
Porter's Five Forces
1.Rivalry
•Few competitors due to the high cost of infrastructure, capital and
reputation.
•Rivalry i...
3.

Buying Power

Consumer buying power is relatively low due to
differentiated strategy.
4. Supplier Power
low supplier p...
5. Barriers to Enter
The infrastructure and other assets
needed are very high.
Business strategy -Diversification
• Began very Early
 First Cartoon Mickey mouse – 1928
 Pencil Tablet – 1929
 Mickey ...
PLACE
Disneyland - California, USA (1955)
Walt Disney World Resort - Florida, USA (1971)
Tokyo Disney Resort – Japan (1983...
DIFFERENTIATING FACTOR
Customer’s decision to buy is made first with emotion and
second with logic
Disney has masterful un...
The driving force behind success is the understanding of
customer engagement.
Customer engagement is comprised of how the
...
Disney’s Interest in China
• Long-term
– Consistently searching for areas of expansion
where there are un-captured markets...
Target Market
Target Local Market

(million)

By Income Level (yuan)
30,000 – 60,000

2.44

60,000 – 90,000

1.62

> 100,0...
Modes of Entry
• Disneyland Shanghai will be a joint venture between
Disney and the Shanghai Shendi Group,100% stateowned ...
Project Structure
• 1.27 Billion US$ total capital investment
• 60% Debt
– 80% Government
– 20% Commercial

• 40% Equity
–...
Operating Cash Flows
Revenues
• Admissions (50%)
• Food and beverage
(24.5%)
• Merchandise (24.5%)
• Main entrance (1%)

C...
Risk Analysis - Sovereign
• Currency risk is not mitigated by this project since the
majority of cash inflows and outflows...
Risk Analysis – Operating
and Financial

• The technology for this project will be provided by Disney
and is proven in oth...
Cost of Capital
• ICCRC
16.10%
– U.S. Risk Free
4.00%
– U.S. Risk Premium
4.00%
– China’s Country Credit Rating
58.9
– Anc...
Cash Flow Analysis
2003

2004

2005

2006

2007

2008

2009

Admissions
Merchandise
Food & Beverage
Main Entrance
Hotel Re...
Real Options
• Option to wait until Universal Studios opens
– Already losing any first mover advantage
– Universal’s track...
Recommendation
• Begin negotiations with Chinese government
– Government equity stake and debt provisions
– Land and infra...
Ticket Price Projection
Source: http://www.time.com/time/europe/magazine/article/0,13005,901020325-218398,00.html
All Curr...
Demand Projections
Captured 2008 Market (million)
30000 - 60000
60000 - 90000
>100,000
Captured Market Based on Income Lev...
Revenue Projections
Revenue Assumptions

Year
Expected Demand (Mil)
Admissions ($ Mil)
Merchandise ($ Mil)
Food and Bevera...
Operating Costs
Operating Expenses
Park Labor (Salaried & Hourly)
Costs Associ. w/ Park Labor
Maintenance
Entertainment
F&...
Capital Structure
Capital Structure Assumptions
Investment Schedule
Park Investment
Hotel Investment
Total Investment
% De...
Depreciation
Year
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024...
THANKYOU
Ib   disneyland in shanghai
Ib   disneyland in shanghai
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Ib disneyland in shanghai

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Ib disneyland in shanghai

  1. 1. MMS-B GNIMS 2012-13 International Business Prof. Harvinder Singh Chawla Challenges in International Business: DisneyLand entering China Group MeMbers Charusheela Pawar Jagjeet Kaur Saini 38 Rohit Ramnarayan 39 Shokin Salim Darshan Shetty 48
  2. 2. About Disney • The Walt Disney company – Founded in1921. – Produces and “unparalleled entertainment experience based on the rich legacy of quality creative content and exceptional storytelling” • Company Financials – G.P in the year 2010 of $ 6.73 billion and – Total Assets of $ 70.95 billion
  3. 3. Cont.. • Want to get accustomed to European style • Per capita GDP and Economic growth not an issue due to target market of rich consumers. • China is a leading destination in Asia and many people anticipated that Disney would perform well and also move forward its economy.
  4. 4. DISNEYLAND OVERVIEW • A theme park located in Anaheim, California • opened on July 18, 1955 • operated by the Walt Disney Parks and Resorts • re-branded in 1998
  5. 5. PESTEL analysis • Political : – Increasing Government Restraints – Indigenous Innovations – Change in Government Official • Economical : – Fastest Growing Economy – Rising Labor Cost – Trade Barriers – Inability to gain access
  6. 6. Cont.. • Social : – English as official language (3.1% speaks as first language) – 97.1% are literacy • Technological : – Good Infrastructure • Legal : Licensing • Environmental : – Seems to be viable choice
  7. 7. STP • Segmentation - Local as well as international tourists • Target Group - High income group families • Positioning - Amusement Park for children as well as adults
  8. 8. SWOT analysis Strengths: 1. This is the oldest amusement park 2. This is the world’s most popular brand in the category of amusement parks 3. It has a larger cumulative attendance than any other theme park in the world (approx 16mil/yr) 4. Has a very wide range of offerings suitable for all age groups 5. Strong brand equity and visibility, and strong brand backing of Walt Disney
  9. 9. Cont.. Weaknesses : 1. It has a very diverse product portfolio with several different theme parks and hotels, which makes centralized management and monitoring very difficult. 2. Incidents and accidents over the years have been problematic Opportunities : 1.Special offerings to tap tourists specially from the emerging economies 2.The company’s ability to leverage on the huge popularity of the brand also offers an excellent opportunity 3.A huge opportunity exists in the company’s ability to build innovative new attractions
  10. 10. Threats : 1. Local competitor, Universal Studios is gaining huge popularity. 2. The various theme parks opening throughout the world have the potential to steal away visitors. (eg. SeaWorld Park-USA, Genting Highlands-Malaysia) 3. In the absence of constant innovation and up gradation, the Disneyland runs the risk of losing its charm.
  11. 11. Why Disney in China? • • • • • Largest Population in the world. 1.3 Billion people 3rd largest country 3.7 million sq. miles Amazing terrain – Forest – Mountains – Deserts – Coastlines
  12. 12. Background: Why Shanghai? $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 • Shanghai leads in GDP and FDI in China – GDP US$4,512 (2001) – 9% of total FDI in China Urban Rural Urban Rural Disposable Income Per Capita (US$) Average Consumption Expenditure (US$) * 2000 figures • Shanghai residents (2002) – 18.4 M, including floating population Shanghai China – Average household size is 2.9 • Tourist population (2000) – 64.7 mainland domestic – 1.5 million foreign overseas – 0.5 million
  13. 13. Park Location is Key Expo Site and Universal Property Significant infrastructure development is occurring to support the 2010 Expo
  14. 14. Comparative ratings on the basis of Geert Hofstede theory • • • • • Power Distance Index (PDI) Individualism (IDV) Uncertainty Avoidance Index (UAI) Masculinity (MAS) Long Term Orientation (LTO)
  15. 15. Power Distance Index • At 80 China sits in the higher rankings of PDI – i.e. a society that believes that inequalities amongst people are acceptable. • The subordinate-superior relationship tends to be polarized and there is no defence against power abuse by superiors. • Individuals are influenced by formal authority and sanctions and are in general optimistic about people’s capacity for leadership and initiative. • People should not have aspirations beyond their rank.
  16. 16. Individuality • At a score of 20 China is a highly collectivist culture where people act in the interests of the group and not necessarily of themselves. • In-group considerations affect hiring and promotions with closer in-groups (such as family) are getting preferential treatment. • Employee commitment to the organization (but not necessarily to the people in the organization) is low. • Whereas relationships with colleagues are cooperative for in-groups they are cold or even hostile to out-groups. • Personal relationships prevail over task and company.
  17. 17. Masculinity • At 66 China is a masculine society –success oriented and driven. • The need to ensure success can be exemplified by the fact that many Chinese will sacrifice family and leisure priorities to work. • Service people (such as hairdressers) will provide services until very late at night. • Leisure time is not so important. • The migrated farmer workers will leave their families behind in faraway places in order to obtain better work and pay in the cities. • Another example is that Chinese students care very much about their exam scores and ranking as this is the main criteria to achieve success or not.
  18. 18. Uncertainty Avoidance • At 30 China has a low score on uncertainty avoidance. • Truth may be relative though in the immediate social circles there is concern for Truth with a capital T and rules (but not necessarily laws) abound. • None the less, adherence to laws and rules may be flexible to suit the actual situation and pragmatism is a fact of life. • The Chinese are comfortable with ambiguity; the Chinese language is full of ambiguous meanings that can be difficult for Western people to follow. • Chinese are adaptable and entrepreneurial. • At the time of writing the majority (70% -80%) of Chinese businesses tend to be small to medium sized and family owned.
  19. 19. Long Term Orientation • With a score of 118 China is a highly long term oriented society in which persistence and perseverance are normal. • Relationships are ordered by status and the order is observed. • Nice people are thrifty and sparing with resources and investment tends to be in long term projects such as real estate. • Traditions can be adapted to suit new conditions. • Chinese people recognize that government is by men rather than as in the Low LTO countries by an external influence such as God or the law. • Thinking ways focus on the full or no confidence, contrasting with low LTO countries that think in probabilistic ways.
  20. 20. Porter's Five Forces 1.Rivalry •Few competitors due to the high cost of infrastructure, capital and reputation. •Rivalry in the media and studios segment is high •The rivalry for the theme park and product segments are low. 2. Threats of Substitutes High threat of substitutes for the media, consumer products, and studios segment. Low threat of substitutes for the Disney experience at the theme parks.
  21. 21. 3. Buying Power Consumer buying power is relatively low due to differentiated strategy. 4. Supplier Power low supplier power.
  22. 22. 5. Barriers to Enter The infrastructure and other assets needed are very high.
  23. 23. Business strategy -Diversification • Began very Early  First Cartoon Mickey mouse – 1928  Pencil Tablet – 1929  Mickey Mouse Club – 1932  Film Production – During the war  Diversification to music – 1949   Diversified towards Television
  24. 24. PLACE Disneyland - California, USA (1955) Walt Disney World Resort - Florida, USA (1971) Tokyo Disney Resort – Japan (1983) Disneyland Resort Paris - France (1992) Hong Kong Disneyland Resort – (2005)
  25. 25. DIFFERENTIATING FACTOR Customer’s decision to buy is made first with emotion and second with logic Disney has masterful understanding of the emotional connection between its products and customers Customer’s family would spend hundreds of dollars for the pleasure of spending time in Disneyland where they will most certainly face hour long lines for the most popular rides and additional expenses on food.
  26. 26. The driving force behind success is the understanding of customer engagement. Customer engagement is comprised of how the company makes the customer feel. In Disneyland customers definitely feel that they are valued If an issue arises, customer believes that Disneyland will work diligently to satisfy them
  27. 27. Disney’s Interest in China • Long-term – Consistently searching for areas of expansion where there are un-captured markets • Current – Government relations established through the Hong Kong Disneyland project indicate easier entry into the mainland • Competitive – Universal-Vivendi’s land purchase in Shanghai and proposed expansion into Beijing
  28. 28. Target Market Target Local Market (million) By Income Level (yuan) 30,000 – 60,000 2.44 60,000 – 90,000 1.62 > 100,000 1.14 Total Local Market (based on income) Tourist Market Domestic (Mainland) Overseas - Foreign Overseas - Domestic Total Target Market * Based on 2008F Population numbers 5.20 (million) 64.7 1.5 0.50 71.90
  29. 29. Modes of Entry • Disneyland Shanghai will be a joint venture between Disney and the Shanghai Shendi Group,100% stateowned Chinese company. • As part of the agreement, Shanghai Shendi Group will hold 57% of the shares and Disney the remaining 43%. •Although it is mandatory by law to enter the Chinese market with a joint venture with a local company, the selection of a JV makes sense from several perspectives given the great differences between both cultures.
  30. 30. Project Structure • 1.27 Billion US$ total capital investment • 60% Debt – 80% Government – 20% Commercial • 40% Equity – 43% Disney – 57% Government •10.6 Million Visitors in its first full operating year and average annual growth of 1.5% •Corporate tax rate of 30%, with tax loss carryforwards permitted for five years
  31. 31. Operating Cash Flows Revenues • Admissions (50%) • Food and beverage (24.5%) • Merchandise (24.5%) • Main entrance (1%) Costs • Park labor and overhead • Maintenance materials • Entertainment (costuming, labor, etc.) • Food and beverage COGS • Merchandise COGS • Support labor • Miscellaneous
  32. 32. Risk Analysis - Sovereign • Currency risk is not mitigated by this project since the majority of cash inflows and outflows are in local currency • Expropriation risk is mitigated some with the government taking a controlling equity stake • No other commercial or multi-lateral agency partners are involved in the project •Because the project is in the tourism industry and involves an American cultural icon, the susceptibility to strikes or terrorism is slightly higher than average •The project’s location in Shanghai reduces the overall risk of natural disasters when compared to country averages
  33. 33. Risk Analysis – Operating and Financial • The technology for this project will be provided by Disney and is proven in other locations • Potentially lengthy negotiations with the Chinese government increases start-up risks slightly • Given the project is very service oriented, there is some risk associated with the level of control assumed by the government, but this is difficult to quantify •There are no financial mitigating factors ― rather, this project is closely tied to the government •Real option: A minor amount of cannibalization from the Hong Kong property may be expected
  34. 34. Cost of Capital • ICCRC 16.10% – U.S. Risk Free 4.00% – U.S. Risk Premium 4.00% – China’s Country Credit Rating 58.9 – Anchored to U.S. cost of equity • Adjustments – Industry beta adjustment
  35. 35. Cash Flow Analysis 2003 2004 2005 2006 2007 2008 2009 Admissions Merchandise Food & Beverage Main Entrance Hotel Revenues Total Revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $283,179,483 $53,532,494 $53,532,494 $500,000 $13,687,500 $404,431,972 $296,060,956 $55,967,619 $55,967,619 $515,000 $14,098,125 $422,609,319 Park Operating Expenses Hotel Operating Expenses Start Up Costs Royalty Expenses Total Opertaing Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $133,951,636 $8,896,875 $20,000,000 $20,221,599 $183,070,109 $138,405,572 $9,163,781 $0 $21,130,466 $168,699,819 EBIT Depreciation EBITDA $0 $0 $0 $0 $6,350,000 ($6,350,000) $0 $20,637,500 ($20,637,500) $0 $42,862,500 ($42,862,500) $0 $57,150,000 ($57,150,000) $221,361,863 $63,500,000 $157,861,863 $253,909,500 $63,500,000 $190,409,500 Interest on Debt Taxable Income Adjusted Taxable Income $0 $0 $0 $0 ($6,350,000) $0 $0 ($20,637,500) $0 $0 ($42,862,500) $0 $0 ($57,150,000) $0 $46,908,093 $110,953,769 $0 $50,028,135 $140,381,366 $124,335,135 Less: Taxes Less: Debt Principal Less: Capital Expenditures Plus: Depreciation Free Cash Flow $0 $0 $0 $0 $0 $0 $0 $0 ($50,800,000) $6,350,000 $0 ($50,800,000) $0 $0 ($114,300,000) $20,637,500 $0 ($114,300,000) $0 $0 ($177,800,000) $42,862,500 $0 ($177,800,000) $0 $0 ($114,300,000) $57,150,000 $0 ($114,300,000) $0 ($75,679,404) ($50,800,000) $63,500,000 $0 $47,974,365 ($37,300,540) ($72,559,362) ($38,520,000) $63,500,000 $0 $55,501,463 PV FCF $0 ($43,759,152) ($84,811,864) ($113,644,212) ($62,931,341) $22,752,817 $22,674,387 Less: NWC through 2029 NPV * Cash flows analyzed $19,242,097 (per Disney, typical 20-25 year financial analysis time horizon) IRR 17%
  36. 36. Real Options • Option to wait until Universal Studios opens – Already losing any first mover advantage – Universal’s track record at opening resorts is not on par with Disney’s ― lessons learned from Universal may be minimal • Build a resort hotel in conjunction with the park • Build a “Downtown Disney” entertainment center adjacent to park •Build another gate after several years of operation (double park size)
  37. 37. Recommendation • Begin negotiations with Chinese government – Government equity stake and debt provisions – Land and infrastructure provisions • Disney must make the argument that a Shanghai Park would not substantially damage Hong Kong •Escalating political tensions on the Korean peninsula could change the risk assessment
  38. 38. Ticket Price Projection Source: http://www.time.com/time/europe/magazine/article/0,13005,901020325-218398,00.html All Currency in USD Ave Annual Temperature (F) Population (2000) in Millions 2002 Attendance in Millions % of Attendance vs. Local Ticket Price (1 Day 1 Park Adult) No Tax Included Ticket Price Base MultiDay Ticket Price Premium MultiDay Ticket Price (Annual Pass) No Percentage of 1D1P to Annual Annual Income (2000) Annual Disposable Income DI % of Annual Income 1D1P % of Disposable Income Annual Pass % of Disponsable Orlando 72.4 0.185984 33 17743% $ $ $ $ $ $ 50 192 307 369 14% 42,148 25,939 61.54% 0.19% 1.42% Paris 67 2.1 12 571% $ $ $ $ $ Anaheim/Los Angeles 73 3.7 39.7 1073% 39 $ 106 $ $ 248 $ 16% 32,660 $ 5,128 $ 15.70% 0.76% 4.84% 47 119 166 225 21% 42,148 25,939 61.54% 0.18% 0.87% Tokyo Hong Kong Shanghai 60.1 73 60 28 7.116 13.216 0 0% 0% 0% $ $ $ $ $ $ Potential 1D1P Price Potential Annual Park Price Potential Attendance (in Millions) Average Attendance Per Day 46 81 143 332 14% 37,661 $ 3,924 $ 10.42% 1.17% 8.46% 20,832 $ 5,542 13,244 $ 1,400 63.58% 25.26% 155.25 1,120.44 0.00 0 16.41 118.45 7 19178
  39. 39. Demand Projections Captured 2008 Market (million) 30000 - 60000 60000 - 90000 >100,000 Captured Market Based on Income Level Market From Tourism Local - Domestic Tourists Overseas - Foreign Tourists Overseas - Domestic Tourists Total Captured 2008 Market for Disney-Shanghai 1.83 1.30 0.97 4.09 1.84 1.23 0.86 3.94 6.47 0.075 0.005 10.64 7.764 0.075 0.005 11.78 1.14 Total 2008 Market (million) 30000 - 60000 60000 - 90000 >100,000 Total Market Based on Income Level Market From Tourism Local - Domestic Tourists Overseas - Foreign Tourists Overseas - Domestic Tourists Total 2008 Market for Disney-Shanghai 2.44 1.62 1.14 5.20 64.7 1.5 0.50 71.90
  40. 40. Revenue Projections Revenue Assumptions Year Expected Demand (Mil) Admissions ($ Mil) Merchandise ($ Mil) Food and Beverage ($ Mil) Main Entrance ($ Mil) Total Revenue F&B Per Cap Merch Per Cap 2008 0 10.64 $283.18 $53.53 $53.53 $0.50 $390.74 2009 1 10.80 $296.05 $55.97 $55.97 $0.52 $408.50 2010 2 10.96 $305.49 $58.51 $58.51 $0.53 $423.04 2011 3 11.13 $315.31 $61.17 $61.17 $0.55 $438.19 2012 4 11.29 $325.50 $63.95 $63.95 $0.56 $453.96 2013 5 11.46 $336.10 $66.85 $66.85 $0.58 $470.39 2003 USD 2008 USD $4.34 $5.03 $4.34 $5.03 - Assume Expected Demand Grows 1.5% Annually (Based on Attendance Figures at Other Disney Parks)
  41. 41. Operating Costs Operating Expenses Park Labor (Salaried & Hourly) Costs Associ. w/ Park Labor Maintenance Entertainment F&B Merchandise Support Labor Miscellaneous Total Expenses Park Labor (Salaried & Hourly) Costs Associ. w/ Park Labor Maintenance Entertainment F&B Merchandise Support Labor Miscellaneous Total Expenses USD (Millions) Adjusted (2003 Dollars) Adjusted (2008 Dollars) % Revenue $50.00 $20.00 $23.19 $25.00 $25.00 $28.98 $15.00 $15.00 $17.39 $25.00 $24.30 $28.17 $10.62 $9.77 $11.33 21.16% $17.55 $14.48 $16.78 31.35% $5.00 $2.00 $2.32 $5.00 $5.00 $5.80 $153.17 $115.55 $133.95 2008 $23.19 $28.98 $17.39 $28.17 $11.33 $16.78 $2.32 $5.80 $133.95 2009 $23.88 $29.85 $17.91 $29.02 $11.84 $17.55 $2.39 $5.97 $138.41 2010 $24.60 $30.75 $18.45 $29.89 $12.38 $18.34 $2.46 $6.15 $143.01 2011 $25.34 $31.67 $19.00 $30.78 $12.94 $19.17 $2.53 $6.33 $147.76 2012 $26.10 $32.62 $19.57 $31.71 $13.53 $20.04 $2.61 $6.52 $152.70
  42. 42. Capital Structure Capital Structure Assumptions Investment Schedule Park Investment Hotel Investment Total Investment % Debt % Equity $1,200,000,000 $70,000,000 $1,270,000,000 60% 40% Debt $508,000,000 43% 57% Total $127,000,000 $285,750,000 $444,500,000 $285,750,000 $127,000,000 Debt $76,200,000 $171,450,000 $266,700,000 $171,450,000 $76,200,000 Equity $50,800,000 $114,300,000 $177,800,000 $114,300,000 $50,800,000 $762,000,000 Equity % Disney % Government Year Percent 2004 0.1 2005 0.225 2006 0.35 2007 0.225 2008 0.1 On-Going Capital Expenditures Assumptions: Disney Equity Government Equity $218,440,000 $289,560,000 -US Parks spend approximately $100 Million every 3 years for new attractions -Assume 10% is local labor -Labor costs are 1/3 of US -Estimate Shanghai Disneyland will spend approximately $93 Million every 3 years (Current Dollars) -With inflation, translates to $37.02 Million for 2009, Grow at rate of inflation -Assume hotel will have $1.5 Million in Cap Ex every year beginning in 2009, Grow at rate of inflation -Total Cap Ex in 2009 is $38.52 Million
  43. 43. Depreciation Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Cap Ex $120,000,000 $270,000,000 $420,000,000 $270,000,000 $120,000,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 2004 Cap Ex $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $0 $0 $0 $0 2005 Cap Ex $0 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $13,500,000 $0 $0 $0 Depreciation Expense 2006 Cap Ex 2007 Cap Ex $0 $0 $0 $0 $21,000,000 $0 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $21,000,000 $13,500,000 $0 $13,500,000 $0 $0 2008 Cap Ex $0 $0 $0 $0 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000 Total $6,000,000 $19,500,000 $40,500,000 $54,000,000 $60,000,000 $60,000,000 $60,000,000 $60,000,000 $60,000,000 $60,000,000 $60,000,000 $60,000,000 $60,000,000 $60,000,000 $60,000,000 $60,000,000 $60,000,000 $60,000,000 $60,000,000 $60,000,000 $54,000,000 $40,500,000 $19,500,000 $6,000,000
  44. 44. THANKYOU

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