Resort and tourism developments represent some of the most exciting — and most risky — investment opportunities available. The appeal is compelling: iconic locations, strong global travel demand, premium pricing, and the potential for exceptional returns. The risk is equally real: massive capital requirements, seasonal revenue volatility, destination dependency, and the longest payback periods of almost any business type.
A resort feasibility study evaluates whether a proposed tourism development can generate sufficient returns to justify the investment, accounting for the unique challenges of destination-dependent, seasonally-driven hospitality businesses.
What Makes Resort Feasibility Unique
Resorts differ from city hotels in several critical ways that the feasibility study must address.
Extreme Seasonality: A city hotel might see 10–20% occupancy variation between peak and off-season. A resort can see 40–70% variation. A Maldivian resort might achieve 90% occupancy in the dry season (December–April) and 40% in the wet season (May–October). The feasibility study must model revenue monthly, not annually, to capture this seasonality accurately. Destination Dependency: A resort's success is tied to the destination's attractiveness, accessibility, and safety. Political instability, natural disasters, airline route changes, or negative media coverage can devastate demand overnight. This destination risk must be quantified. Higher CAPEX: Resort development typically costs significantly more than equivalent city hotels due to remote locations, infrastructure requirements (water, power, waste treatment), premium design expectations, and logistics costs for materials and equipment. Longer Ramp-Up: Resorts often take 2–4 years to reach stabilised occupancy, longer than city hotels, because they depend on building destination awareness, travel agent relationships, and online reputation.Core Feasibility Components
1. Destination Market Analysis
Tourism Trends: Is the destination growing or declining? What are the arrival statistics over the past 5–10 years? What's driving tourism — beach holidays, adventure, wellness, cultural tourism, or business events? Source Markets: Where do tourists come from? A Maldives resort draws primarily from China, India, Europe, and the Middle East — each with different spending patterns, length of stay, and seasonal preferences. Understanding your source markets shapes everything from design to marketing. Accessibility: How do tourists reach the destination? Are there direct flights from key source markets? Is the journey complex (multiple connections, seaplane transfers)? Accessibility directly affects demand — destinations that require 20+ hours of travel attract a narrower market. Government Policy: Tourism taxes, visa requirements, foreign investment rules, and land lease structures all affect feasibility. In the Maldives, for example, resort islands are leased from the government on 25–50 year terms with rental payments that must be factored into the financial model.2. Competitive Analysis
Competitive Set: Identify resorts of similar quality, positioning, and price point in the destination and in competing destinations. A luxury resort in the Maldives competes not just with other Maldivian resorts but with luxury properties in Seychelles, Bali, Mauritius, and the Caribbean. Pricing Intelligence: What are comparable resorts charging? ADR, all-inclusive rates, and ancillary revenue per guest provide the benchmarks for your revenue projections. Use a mix of OTA data, published rack rates, and industry reports. Occupancy Benchmarks: What occupancy rates do comparable resorts achieve, by month? This is the most critical input for your revenue model. Industry data from STR, destination tourism boards, and resort management companies provides these benchmarks.3. Development Cost Estimation
Resort CAPEX varies enormously by destination, type, and quality level:
| Component | Budget (per room) |
|---|---|
| Land/lease costs | $20,000–$200,000+ |
| Infrastructure (water, power, waste) | $30,000–$100,000 |
| Construction (buildings) | $100,000–$500,000 |
| FF&E (furniture, fixtures, equipment) | $30,000–$150,000 |
| Landscaping and common areas | $15,000–$50,000 |
| Pre-opening expenses | $5,000–$25,000 |
| Soft costs and contingency | $25,000–$80,000 |
| Total per room | $225,000–$1,105,000 |
A 50-room boutique resort might cost $15–25 million. A 120-room luxury resort with overwater villas could exceed $80 million. These numbers must be location-specific — building in the Maldives (where everything is imported by sea) costs significantly more than building in Bali (where local labour and materials are available).
4. Revenue Model with Seasonal Detail
Resort revenue must be modelled monthly to capture seasonal patterns:
Room Revenue: Rooms available × occupancy rate × ADR, calculated for each month. Peak season months should use peak rates and higher occupancy; shoulder and off-season months should use discounted rates and lower occupancy. F&B Revenue: Resorts generate substantially more F&B revenue per guest than city hotels because guests eat all meals on-site. F&B revenue is typically 30–50% of total resort revenue, compared to 15–25% for city hotels. Ancillary Revenue: Spa, water sports, excursions, retail, transfers, and other activities. For luxury resorts, ancillary revenue can add 15–25% on top of room and F&B revenue. Revenue Per Available Room (RevPAR) by month is the key metric that drives the entire financial model.5. Operating Cost Structure
Resorts have a different cost structure than city hotels due to their remote locations:
Higher Utility Costs: Many resorts must generate their own power (diesel or solar), desalinate water, and manage waste treatment. These costs can be 2–3x higher than mainland utilities. Staff Accommodation and Transport: Resort staff often live on-site or in nearby accommodation provided by the resort. Housing, feeding, and transporting staff adds significantly to labour costs. Supply Chain Costs: Food, beverages, and supplies must be transported to remote locations, adding logistics costs of 10–30% above mainland pricing. Management Fees: Many resorts are operated by management companies (Marriott, Hilton, IHG, etc.) that charge 3–5% of gross revenue as a base fee plus 8–12% of GOP as an incentive fee. These fees must be modelled in the feasibility study.6. Financial Returns
NPV and IRR: Resort developments are high-risk, high-reward investments. IRR expectations typically range from 12–18% for established destinations with strong demand and proven operators, to 18–25% for new destinations or unproven concepts. Payback Period: Resort payback periods are among the longest of any business type — typically 5–8 years. Investors must be prepared for a long holding period before seeing positive returns. Cash Flow Profile: Resorts typically generate negative cash flow for 2–4 years (construction period + ramp-up), followed by growing positive cash flow as occupancy and rates stabilise.7. Sensitivity Analysis
Resort feasibility is highly sensitive to:
- Occupancy: A 5% reduction in average occupancy can reduce NPV by 20–30%
- ADR: Pricing pressure from new competitors or economic downturns
- Construction costs: Remote locations are particularly vulnerable to cost escalation
- Exchange rates: Revenue is often in USD/EUR while costs may be in local currency
- Seasonality shifts: Climate change is altering traditional peak seasons in some destinations
The Bottom Line
Resort development is a long-term investment that rewards thorough analysis and punishes optimism. The feasibility study must be rigorous about seasonal revenue modelling, realistic about ramp-up timelines, and honest about the unique cost challenges of remote tourism destinations.
For investors evaluating resort opportunities — whether in the Maldives, Southeast Asia, the Pacific Islands, or emerging destinations — the feasibility study is the document that separates informed investment from speculation.
SimpleFeasibility generates resort and tourism feasibility studies with destination-specific market data, seasonal revenue modelling, detailed CAPEX estimation, multi-year NPV/IRR analysis, and interactive What-If scenarios to test occupancy, pricing, and cost assumptions. Evaluate Your Resort Investment →Related Articles: