Feasibility Study Of KSA Sports and Leisure Club Report

Executive Summary

This feasibility report is prepared for the information and knowledge of the promoters of KSA Sports and Leisure Club, proposed to venture into the activity of sports and leisure in the outskirts of Jeddah, in the country of Kingdom of Saudi Arabia. The proposed venture will offer the facilities of four indoor sports stadiums, two soccer fields, multipurpose halls, health and fitness club and swimming pool. A food and beverage kiosk will provide service to members and non-members in the club premises.

The demand for the various service offerings was estimated using telephone surveys and interviews with local sporting organizations. Other information like the demographic details of the city of Jeddah and the estimated population growth helped the compilation of the estimated demand.

This feasibility report provides detailed information on the design, concept of the facilities, marketing strategy, target customer groups, programs and services and financial details of the project.

The report discusses the implementation plan for the proposed project and the details of the capital cost along with the management and organization structure of the organization. The study extended to the technical evaluation of the proposed facilities and actions required to be taken by the club to become environmentally, economically, and socially and culturally sustainable.

The estimated capital costs of the project are SAR 38.9 million of which the promoters propose to provide for SAR 25 million with a shortfall in the funding of SAR 13.9 million.

Based on the current pricing and cost structures, the project generates cash of SAR 497,000 in the first year after charging SAR 500,000 out of the total licensing fee of SAR 2,500,000 being the licensing fee payable to Nike for a period of 5 years. The licensing is expected to promote the club as a premium club, which will add to the revenues and reputation of the proposed venture.

The estimated demand and the quality of the proposed facilities, as revealed by the design and concept outlined in this study will make the project a grand success and this is evidenced by the financials presented as a part of the report. Any organization or individuals interested in investing in the project are sure to be serviced by the good returns that can be expected from this prestigious Club.

Apart from the financial partnership, the person/organization can expect to have association with one of the prestigious sports club of the Kingdom. There will be drastic increase in the number of members within a short time necessitating the expansion of the proposed facilities.

Introduction

This report elaborates on the feasibility of KSA Sports and Recreation Club, proposed to be located very near the outskirts of Jeddah, which is the second largest city in the Kingdom of Saudi Arabia next to the capital Riyadh. The city has a population of more than one and a half million people and it is an active industrial and commercial center. The objective of this chapter is to provide the background information, the objectives of this feasibility study and the methodology engaged for drafting the study.

Background

The health club and resort business industry is showing an upward trend in the Kingdom of Saudi Arabia, with few of the fitness and recreation club taking advantage of the boom in the market. In order to take advantage the favorable market conditions, the promoters of KSA Sports and Recreation Club have embarked upon the formation of a ultra modern club housing, sports theater, gymnasium, boxing ring, swimming pool and soccer filed with world-class quality and up to date technological equipments.

Since clubs of this type housing all facilities under one roof is rare around Jeddah area, the promoters are confident about the membership of the club and its feasibility. Moreover, there is good market potential with more percentage of youngsters in the Saudi Arabian population.

The propose project includes building a multi court sports theater, outdoor swimming complex, soccer playing fields, boxing ring, health and fitness gymnasium and a multi cuisine food and beverage club. This report was prepared using the approach of estimating the demand accurately to determine the major market segments. “In aquatic facilities this includes lap and fitness swimming, recreation and aquatic play, aquatic education and therapeutic recreation” (Simply Great Leisure).

A careful assessment of the existing competition and forecasted market demand for “weights based fitness, cardio suite and group fitness classes” was made to study the feasibility of heath, and fitness club membership. The report took into consideration the number of teams and range of sports, which are keen in using the facilities for assessing the demand for indoor sports.

After the estimation of the demand for the facilities, the appropriate designs are to be developed. Based on the proposed concept and design, the report has estimated the likely capital costs for the project. The concept, design and capital cost estimates provide the basis for the preparation of detailed management and marketing strategies to run the club successfully. A financial model prepared based on the estimated revenue and expenditure will provide the information on the long-term feasibility of the proposed project.

Study Aim and Scope

The feasibility report aims to determine the feasibility of KSA Sports and Recreation Club project covering the proposed sports and recreation facilities of

• Multi court sports theater
• Swimming complex
• Boxing ring
• Soccer playing field
• Health and fitness gymnasium
• Multi cuisine food and beverage club

In addition to the outcomes and recommendations, the report will provide the readers and investors critical information concerning the concept, design, capital costs, facility, and asset management considerations. The feasibility study will provide the basis for approaching potential investors and institutions to raise necessary funding for implementing the projects.

The scope of the feasibility study includes

1. Preparation of a report on the feasibility of the proposed sports and recreation facilities; this report will include the description of the proposed facilities and rough estimates of the floor space and finish of the floors
2. Review and analysis of the background information and planning undertaken until the date of preparation of this report
3. Preparation of a comprehensive report presenting the recommendations for determining the feasibility of the project including suggested management models
4. Preparation of a concept plan including the design of the facilities
5. Preparation of financial reports to support future funding requests for implementation of the project

This feasibility report relates to KSA Sports and Recreation Club project.

Methodology

For compiling the feasibility study, a multi-disciplinary consultant team was formed with people having skill and experience in their respective fields as members. There were different phases adopted in the preparation of this final feasibility study. They were:

Phase 1: Appointment of consultants and project inception meeting

In this phase, the consultants for studying the feasibility of the proposed club project were appointed and a meeting to appraise the members on the project outline.

Phase 2: Planning for the feasibility Study

Planning involved a review of the relevant studies and reports and meeting of the project members to discuss the planning for the preparation of the study.

Phase 3: Consultation and draft feasibility study

During this phase, an operational review of the existing facilities in the proposed site was undertaken, followed by interviews with key informants. A market research was undertaken and focus group interviews conducted to estimate the likely demand.

A demographic analysis was done based on the information obtained from government authorities on population and demography of Jeddah. The team made a comparative assessment of the industry trends over the past three years and based on the information gathered a demand analysis report was prepared and presented to the promoters.

Phase 4: Consultation on draft feasibility study

Elements of design brief, concept design, cost estimates and preparation of financial information formed part of this phase. A pre-final draft feasibility report was the outcome of this phase.

Phase 5: Finalization of feasibility study

In this phase, the feasibility study was finalized for presentation to the promoters after shaping it presentable to the prospective investors. Suitable modifications were made to the pre-final report.

Organizational Philosophy

The organizational philosophy encourages initiative, leadership and responsibility among the members. The club will provide an “environment designed to teach both the physical skills of the sport as well as emphasizing the teamwork, sportsmanship, discipline, sacrifice and leadership that are integral parts of participating in the sport and to also teach how these skills translate into lasting and valuable life skills beyond the sport itself” (Seattle Asian Sports Club).

The activities of the club are entirely athletic and recreational in nature. The Club will determine and devise its own rules for membership from the public, who are willing to participate in achieving the aims of the Club. However, the Club will not make any discrimination based on gender, race, or disability.

The fundamental purpose of KSA Sports and Leisure Club is to function as a sporting organization, within which “the members can actively participate in promoting self-esteem, discipline, friendship, cooperation, contribution, and sportsmanship” In order to support the main purpose, the Club will strive to achieve the following purposes.

• The club will apply its quality values to all levels of sports and leisure programs and to the membership including “directors, board members, administrators, program coordinators, coaches, program participants, and general membership.”
• The club will design and implement activities that will support the communities of Saudi Arabia.
• The club will design all the sports programs and its other endeavors as a means of developing the skills levels and for providing continued opportunities for contributing to community development,

The feasibility study is structured to present different chapters dealing with the

proposed activities of the club. While Chapter One laid down the aim and scope of this study, the market analysis is presented in the Chapter Two. Chapter Three, deals with justification for the proposed activity.

Chapter Four presents a detailed description of the design and the concept on which the proposed club facilities will be constructed. Chapter Five presents the draft management plan including the organization structure, financial model and estimated costs and revenue from the project. Target groups, programmes and services, marketing strategies and pricing form part of the Chapter Five.

Chapter Six discusses the capital costs of the project and the proposed sources of funding for the project. Chapter Seven deals with the sustainability aspects and the actions that the Club needs to take to achieve environmental, economic, and social and cultural sustainability. Chapter Eight summarizes the salient aspects of the study and makes the recommendations for the potential investors and lenders.

Market Analysis

Kingdom of Saudi Arabia, although distinct in terms of its culture, has a different orientation towards sports, recreation and leisure than other GCC countries.

While Dubai has spearheaded the development of leisure industry, the industry is proliferating in the Kingdom also. Even though the cultural boundaries of the country might place some restraint on the development, the growth will be slow and steady and the industry is sure to sustain over time. According to the CEO of Gold’s Gym, a multinational organization “KSA is one of the top 20 countries in the world in terms of foreign investment; it is very much opening the market for investment.”

Another positive factor in the KSA market is the demographic structure of the Kingdom, which consists of more than 60% of the people being under 25 years of age. This youth population provides for huge opportunities in the sports and leisure industry. This implies that the business developers in the industry have to focus on the residents rather than tourists.

Operating within the cultural barriers imposed on them, sports and leisure professionals have the opportunity to present tailor-made product and service offerings to meet massive existing demand of the youngsters who wish to do “something”. This trend is witnessed already among the health club and spa outlets opening up in major cities of the Kingdom, while for sports clubs, the opportunities are wide open.

When a PES T (Political, Economic, Societal and Technological factors) analysis of the leisure and sports industry is done, in the Saudi market, it evolves that the government appears to have not imposed any restriction on the running of such sports and leisure clubs so long as they are not against the cultural values of the country and the region.

Since Jeddah is a large and commercial city, there are number of youth belonging to rich and high income families live in the city. These young people become the target market for the proposed venture. In the absence of any other international or local organizations offering all the facilities under one roof, the existing demand would be sufficient to run the proposed venture successfully.

There is a huge potential in the Kingdom as the country is having the largest population in the Gulf region with 60% of the population in the age group of around 25 years. Riyadh and Jeddah are the two cities having large opportunities because of the population base and economic conditions of the people living in these cities. There are cultural restraints in attracting the women, as members, as the Kingdom has stricter regulations concerning the free movement of women in the society.

However, there are changes in the cultural perceptions of Saudi Arabian Women, in which some of the working-women look for facilities where they can work out, if there are facilities like “women’s only Spa.” The proposed venture by specifying certain hours of the day exclusively for women can cater to this demand from women and add them to its clientele.

Justification for the Proposed Facility

The sports and fitness industry is showing strong signs of growth. There are only few first class sports and fitness facilities, which provide a healthy trial for others to follow. However, for the industry to grow a major leap in the awareness among the people about the fitness is the top most requirement.

The general tendency among the youth to pursue the fitness trend shows a steady increase with the number of international fitness clubs opening in Riyadh and Jeddah with increasing number of members. The effect of internationally renowned Gold’s Gym will only help improve the awareness among the youth in Jeddah about fitness. With no other renowned facility to cater to the existing demand, the proposed venture is most likely to cease the increased demand.

With the increased participation of Saudi Arabia in the Olympics and other international sports events, there is an increasing tendency among the youth in the Kingdom to participate in different sports activities like soccer and swimming. With lesser recreational facilities in the country, the youth will be attracted towards the sports and fitness clubs.

Especially in a city like Jeddah, where there is large population of youngsters the target market seems to be large and this justifies the proposed venture. The absence of competition makes the proposed venture as the first mover to the industry, which provides great advantage to the Club in terms of market share and large contingent of membership. This ensures a sustained growth for the proposed club.

Concept Design

This chapter presents a brief description of the design features of the club, including the concept and staging sequence of the facilities.

Based on the market research done for the preparation of the feasibility study, there is an existing demand for

• Health and fitness center catering to 300 to 400 members. The capacity may have to be increased, as there is potential for the existing demand to grow in the future. Spaces will have to be provided for cardio equipments, weight exercise hall, group fitness and lockers and rest rooms
• Swimming pool complex catering to 200 to 300 members including dressing and changing rooms
• Indoor sports theater consisting of four different arena including boxing rings and the space should provide for other sports like table tennis, badminton and tennis courts

The design should be in such a way that there is a common entrance for health and fitness halls and swimming pool and a separate entrance for the indoor sports theaters. The sports halls should be at least 36.6 m x 40.25 m x 7 m to accommodate the courts for different indoor games and sports. There should be spectator accommodation in tiered seating along one side of court having three tiers. Dividing net to be installed between each court. There should be provision for the installation of boxing rings.

The health and fitness studio should consist of a gymnastics hall of the dimension of 600 square meters. The group fitness studio should have a floor space of approximately 250 square meters. Personal training and multipurpose area including personal lockers and rest rooms must be approximately 100 square meters.

The facility will house multipurpose rooms of approximately 800 square meters providing for

• Large meeting room for accommodating around 200 persons having an area of about 300 square meter
• Kitchen and dining area for the Kiosk having an area of about 200 square meter
• Multiple lockable storage area of about 100 square meters, two times for the two soccer fields
• Offices for manger and staff of approximately 100 square meters including reception area

Detailed floor plans showing the locations of each of the facility will be prepared in due course and presented for approval by local authorities.

According to the preliminary proposal, the development of the club will take place in stages, depending on the availability of funds and the extent of demand for the product and service offerings. The staging of the construction and the provision of facilities will be determined by the promoters depending on the funds availability and estimates of demand.

Demand for soccer fields, health and fitness club and indoor stadiums including boxing rings currently exist and it will be profitable to work on the development of these facilities in the first stage. In the second stage, the swimming pool complex and the food and beverages kiosk can be developed. Space for support services and administration may have to be provided at each stage of development. For example, storage areas with lockable space will be constructed at each stage of development.

Technical Evaluation

The following are some of the technical points, which need to be considered in the development of various facilities offered by the club.

• All indoor sports theaters need to be air-conditioned, as they have to meet the humid climate of the Kingdom. There should be adequate flow of ventilation.
• The surface of the floor space must be made suitable for games like volley ball, tennis and other indoor court sports
• The floor of the boxing ring has to made according to international standards
• The lighting arrangement should meet lux standards prescribed by each sport for national and international level competitions
• Provision for natural lighting is to be made in such a way that it does not act as a disturbance to the conduct of the respective games
• The areas for health and fitness club is to be air-conditioned and the area should have sufficient flow through ventilation
• There must be a provision for raised stage for conducting group fitness programs
• Floor area for weights area must be concreted with heavy rubber matting to absorb the sound of the weights dropping down
• Floor area for conducting group fitness programs should “have a timber, sprung floor or flooring with similar characteristics.”
• Swimming pool should have mechanical heating facility
• The swimming pool is to be provided with air handling system to circulate air in the pool to minimize the water getting condense during winter
• There should be water treatment plant of required quality to meet the international guidelines for water quality in swimming pools
• “All plant, equipment and electrical fittings and fixtures to be energy efficient”
• The possibility for recycling of backwash water and use for gardening purposes is to be examined
• All areas in the multipurpose area need to be air-conditioned and there should be provision for adequate ventilation
• Wall dividers must be provided in the meeting rooms to make them flexible
• All office areas, support and service areas need to be air-conditioned with provision for adequate ventilation. In these areas, also it is essential that all equipments and power devices are energy efficient.

Implementation Plan

In order to achieve the goals of this project and to progress from this feasibility study stage to the operational stage, it requires a careful approach to be carried out step-by-step. At each step of the project, the promoters have to consider the risks involved in proceeding to the next step and make intelligent decisions based on information collected on the progress and the likely course of future events.

The first step is to review this draft feasibility study, makes comments and suggests revisions to finalize a presentable business case for securing the shortfall in funds. The next step is to enter into contracts with professionals like architect, planning consultant and agronomist for preparing the licensing application to the government.

Simultaneously the application for building approval from the local authorities needs to be prepared with all supporting documents. The agreement with government for obtaining long-term lease of the land or for acquiring the land outright needs to be entered. If private parties own the land, legal professionals have to be contacted for preparing the agreement for buying the land. The promoters need to finalize their funding arrangements as the next step.

The next step in the implementation plan is the preparation of detailed plans and building specifications. The advertisements calling for tenders for the construction of the first stage of buildings and facilities need to be drafted and released. A detailed evaluation of the proposals received for building contracts is to be undertaken to decide on the specific firm to which the contracts need to be awarded. Advertisement for recruiting the manager and few other administrative staff needs to be finalized and released.

Once the club starts functioning the operating performance needs to be monitored and sources for funding the second stage needs to be identified for finalizing the funding arrangements for the next stage of building and construction. Once the second stage is developed, the promoters have to monitor the performance of the club at each stage as it develops and the activities grow over time.

Draft Management Plan

This chapter presents a preliminary management plan for the proposed venture of KSA Sports and Leisure Club. This chapter addresses the management structure, staffing, marketing strategy, financial plan and strategies for implementing the project.

The draft management plan assumes that the facility will be operated to its full capacity and it will extend all the facilities to the prospective members.

Management Structure

The facility will be managed as an independent body, with a single entry and reception area for all the proposed facilities. For the purpose of this feasibility report, a thorough analysis of the management models was undertaken. Considering the lack of sophistication in the legal aspects of management/leasing contracts, it is proposed not to offer any management or leasing contract to outsiders.

Instead, a management team consisting of the representatives of the promoters and professional managers will manage the club to take care of the running of the club efficiently. The management of the day-to-day operations will be entrusted to a manager, who will be assisted by an assistant. In addition to the manager, the following staff will be appointed to run the club.

• Facility Supervisors – 3 Nos
• Trainers for Gymnasium – 4 Nos
• Boxing Trainers – 2 Nos
• Receptionists – 5 Nos
• Life Guards for Swimming Pools – 2 Nos
• Soccer field Operators – 2 Nos

Other operational staff like cleaners and administrative staff will be appointed on casual basis as and when need arises. While the manager and other administrative staff is likely to be on the permanent rolls of the club, many operational staff including instructors and trainers will be appointed on casual basis.

Use Estimates

This study used a variety of techniques to assess the use of the proposed facility. The techniques included the results of telephone survey, proposed use projected based on interviews with local sporting organizations, expected use based on use of similar facilities in other GCC countries, demographic details of the city of Jeddah and population projections.

While these projections have been developed based on the best available details, the projections have to be considered as best estimates. “Competent, professional or volunteer management will be required to ensure that these estimates are met” (Simply Great Leisure).

The telephone survey revealed that 24% of the respondents had played an indoor sport in the past 12 months. The participation by respondents of age less than 30 years was more than those aged above 30 years are. The most popular sport event was soccer followed by volleyball. Seventy two percent of the respondents were positive that they would like to use the proposed facility of KSA Sports and Leisure Club.

Out of the 120 sporting organizations functioning in the Kingdom, around 67% of the organizations expressed interest for using the facilities of the proposed venture. Even though they were keen on the pricing, the idea of licensing by Nike has gone well with them and majority of the respondents received the licensing idea enthusiastically.

This shows significant demand for the proposed services.

The household telephone survey found that 12% of the respondents only had been using or member of a health and fitness club during the past 12 months. The telephone survey was conducted in Arabic and only with prospective male members. No contacts were made to any female members.

Further analysis of the respondents revealed that respondents under the age of 25 constituted 57% of the total people contacted and the remaining 43% of the people belonged to the age group of more than 25 years. About 17% of the people contacted replied that they are not interested in the idea of joining any health and fitness club. Seventy six percent of the respondents expressed interest in taking up the membership of the club.

A similar telephonic survey conducted with prospective members for the swimming pool received a good response. There were only 8% of the people, who have been members of some type of a swimming club during the past 12 months.

Majority of the respondents (63%) were interested in taking up the membership for them and their male children. The number of respondents constituted 34% of the age group of above 35 years and remaining 66% represented below 35 years. Twenty two percent of the respondents were not interested in the idea of membership of a swimming pool.

No specific demand could be identified for specific community festivals and social gatherings. However, there have been problems in finding suitable places to celebrate social functions like wedding receptions and children’s birthday parties, as the hotel charge exorbitant prices.

The multipurpose rooms proposed in the venture will cater to the demand of this type. It is highly likely that a well-designed and equipped community space will be well received, if appropriately priced. Such gatherings will increase the sales for the food and beverage kiosk also.

Target Groups

The primary market for indoor sports and boxing is expected to be the suburbs of Jeddah, although sports events and sponsored programs will attract a large number of people from the other parts of the city. With this target segment, the main groups will be young people in junior sports programs aged from about 10 to 18 years and adults competing in other sports including boxing.

The clientele may include schools who would like to use the courts for lessons or for competition with other schools. Sporting associations who would hire court space to conduct sports training and to conduct sports competitions.

For the health and fitness center, the target customers are generation x and generation y adults and high-income earning individuals. For the swimming pool, the Club may expect to have school and college students and adults in transition stage from school and college to employment. Young people belonging to royal families and rich members of the community are the main target groups for the swimming pool.

Programs and Services

The sport and recreation programs for the target customer groups will be organized as below:

The indoor sports program will be offered to the members between 8.00 am and 10.00 am and 4.00 pm and 6.00 pm on all working days. On Thursdays, the evening time will be extended until 9.00 pm. Training programs will be organized based on demand during hours when there are no competitions are organized. Events and tournaments will be organized as and when they are programmed and are likely to be placed at the weekends. School use will be programmed between 9.00 am and 1.00 pm on school days.

Activities in the health and fitness center will include weight training including the use of cardio equipments, group exercises, personal training and specific programs to meet the demands of young teenagers and older people.

Boxing training and tournaments will follow the same schedule as the indoor sports programs and soccer training and tournaments will be organized based on the requirements from other clubs and young members desirous of receiving training.

Swimming pool facilities will be open for use on all working days from 8.00 am to 1.00 pm and from 4.00 pm until 7.00 pm.; Guards will be available during these hours. Training for children will be provided on payment of the prescribed fee to the club. The pool will be open on holidays during the same timings as above, subject to government restrictions applicable to the commercial and leisure establishments.

Marketing Strategy

At the feasibility report stage, it is not realistic to prepare and present a promotion strategy for the facilities of the proposed club. The following sections present some of the programming and pricing for the facilities.

Programming

Indoor sports theater is expected to have three major types of activities – “competitions conducted by sports associations, competitions conducted by management and special events, functions and tournaments.”

The functions and tournaments category will include national, regional and local sports championships and non-sporting events. The non-sporting events include festivals and exhibitions. Experience from the various sporting associations indicates that sporting clubs and associations will occupy considerable proportion of available indoor theater hours.

It is rather difficult to estimate the precise demand for special events, as they are often awarded through tenders or they are organized by the promoters and sponsoring organizations. During the weekends, the club will conduct sports training programs for junior members. Competitions will be conducted for members of various age groups depending on the members joining such programs.

Group fitness classes will be conducted by the Club on three time bands: Morning 8.00 am, Mid-morning 11.00 am and Evening 6pm to 8 pm. Personal training will be extended to members to meet the demands from them and will be offered at any time when the weights and cardio facilities are open.

General weights and cardio sessions are available all time the health and fitness studios are open. It is ideal to supervise this area at all times. However, it is more likely to be supervised only during peak periods because of lesser number members only will use the facilities during non-peak hours.

Soccer training will be provided on all weekdays from 4.00 pm to 6.00 pm and competitions will be held on Thursday evenings, and other public holidays based on the demand from other clubs and sports associations.

Swimming pool will be in use as per the timings indicated earlier. There will be extended hours on Thursdays when the pool will be open until 9.00 pm instead of 7.00 pm. Children below 12 years of age are to be accompanied by an adult member. Training will be provided by the instructors appointed by the club on the member making the extra payment to the club.

Pricing

A review of the prices of the competing clubs has led to the proposal of the following prices. The prices are subject to review, based on the volume of demand and can be reviewed after a period of six months depending on the patronage from different age groups of members.

Indoor Sports Theater

Indoor sports-theater is charged on either hourly basis or per participant basis. The following prices are the current prices in similar facilities of high quality sports hall.

• Fees for team games SAR 225
• Other sport/hour SAR 100
• Other sport training/hour SAR 120
• Major events SAR 200

Health and Fitness

Health and fitness studio services are charged based on a range of entry prices. The main price categories are indicated below:

• Annual Membership fees SAR 2500
• Monthly Membership fees SAR 250
• Casual Group fitness SAR 60
• Concession Group fitness SAR 50

Swimming Pool

Swimming pool prices are charged for annual and monthly membership apart from per hour charges. Training is charged extra for a fixed number of classes.

• Annual Membership fees SAR 1500
• Monthly Membership fees SAR 150
• Casual entry/hour SAR 20
• Training for 8 classes of 8 hours SAR 200

Soccer Field

Use of soccer field is charged per team basis and per hour of usage basis for other sporting clubs and associations.

• Fees for team games SAR 1500
• Major events SAR 2500

In some cases, the pricing may appear to be relatively high. However, the objective of the Club is to offer facilities of the world standards and for maintaining the standards, the Club may have to charge a premium.

Financial Viability

A financial model is constructed to assess the financial implications of the proposed venture, which indicates the likely net revenue over the expenditure for the club. The financial model is prepared based on the following broad assumptions.

1. All income and expenditure are arrived at based on the estimated usage of the facilities and the likely revenue on the indicated pricing mentioned above.
2. All components and facilities will be opened and operational at the same time as the club is available for use by the public. In reality, the facilities will be developed over a period as and when the funds become available for expanding the facilities. It is assumed that during the intervening period, the prices for the services and the costs will increase and balance each other out. However, over the time, there will be increased usage of the facilities by the people, as the Club becomes popular and this will lead to increased revenues.
3. The revenue generation is considered in respect of the following components and facilities offered by the club to the public and members:- Indoor sports theater for major indoor sports including boxing ring
   – Health and fitness club
   – Swimming pool complex
   – Soccer field
   – Food and Beverages Kiosk
4. Usage of the facilities are estimated based on the market survey and expected demand for the facilities. Kiosk sales is estimated to be 10% of the revenue of the turnover of indoor sports theater, swimming pool, health and fitness club and soccer field usage.
5. Health and fitness revenue is calculated at 300 members paying an annual membership of SAR 2500 and Swimming pool revenue is based on the 200 members paying annual membership of SAR 1500 each. This provides for revenue from Health and Fitness at SAR 750,000 and from Swimming pool SAR 300,000
6. Indoor sports theater usage is assumed at 2 hours per 4 stadiums per 6 days a week with extra 2 hours on Thursdays totaling to 4x2x6 = 48 + (2×4) = 56 hours. Total number of weeks for the calculation excluding the month of Holy Ramadan is taken at 44 weeks. Total number of hours works out to 44 x 56 = 2464 hours. With the assumed price of SAR 100 per hour the total revenue is 246,400
7. Soccer field usage is assumed at 200 events per year per filed from teams paying a total fee of 200 x SAR 1500 = 300,000. For 2 soccer fields the total revenue would be SAR 600,000
8. Salaries for staff is assumed as below:

1. It is expected that the indoor sports theater might be used for several other social events and programs including community events and cultural festivals. These are regarded as important events; but they are unreliable revenue sources. Therefore, the financial model does not take into account the revenue from these sources.
2. Operating expenses are assumed a percentage of total revenue, based on the average percentage of expenses incurred by similar facilities in the city.
3. Depreciation has been calculated at 10% of all equipments and at 2% on the investments in soccer fields.
4. Depreciation is calculated as below

Operating Income and Expenditure

The income and expenditure shows a net loss of SAR 20,960 after writing off the sponsorship of SAR 500,000 (calculated based on yearly writing off the total cost of SAR 2,500,000 over 5 years i.e. SAR 2,500,000 divided by 5 years = SAR 500,000). However, being the first year of operation and with the conservative revenue estimates the club is showing a net loss. If we add back the depreciation, which is a non-cash expense the financial model shows that the club has generated cash of SAR 476,040.

Net Loss SAR (20,960)

Add: Depreciation SAR 497,000

Cash Generated SAR 476,040

Capital Costs

The calculation of capital costs are based on the cost estimates provided by the quantity surveyor. The estimates include preliminary expenses and allowance for potential escalation in costs, contingency allowance and professional and technical service charges.

The cost estimates are based on the measured areas and quantities to which the current prices and costs as prevailing on the date of this feasibility report have been applied. The costs are arrived based on a competitively tendered project, offered to be bid by large sized contractors using the applicable form of procurement to the context of Saudi Arabia. Professional methods of cost estimation have been adopted in preparing the estimates.

It must be noted that the following are the exclusions from the capital cost estimates, which may have to be included at a later stage in the overall project feasibility.

• Costs for demolition and preparing the site for construction
• Other sporting equipments as may be required to supplement those already included in the estimates
• Legal and holding costs, which are normal to the proposed acquisitions
• Loose furniture, kiosk tables and chairs and other kitchen equipments, which have not been included in the report considering the brevity of the report
• Cost of murals, paintings, ethnic articles of value and other works of art for making the interior to have rich ambience
• Cost of civil, construction or cleaning works to be undertaken outside the boundaries
• Costs involved in staging or phasing the activities
• Statutory and government fees and charges
• Escalation in power costs announced by local authorities
• Escalation in cost of each class of assets beyond three months of this feasibility report
• Any applicable goods and services taxes or customs duty on items to be imported

This feasibility report assumes that all the proposed facilities will be taken up for

construction at the same time although a staging plan has been provided for in the report. The above table presents a summary of the estimated capital costs. The estimated capital costs including 10% contingency allowance works out to SAR 38,907,000.

License Fees payable to Nike

Nike offers a wide range of shoes, apparels and sports equipment, which have global market and competitive among the available brands. Nike as a brand command high levels of market premiums and the company provides sponsorships to soccer clubs for using its license to market their services. Using the Nike license is a prestigious affair for a club like the proposed KSA Sport and Leisure Club. However, the costs of such licenses are enormous and the Clubs using such licenses would be able to realize high market premium for its memberships.

The proposed venture contemplates to invest in the licensing of Nike, paying a cost of SAR 2,5 million for a period of 5 years. Even though the initial investment appears to be high, the resulting revenue benefits to the club will also be high, because of the market reputation of Nike. The cost of licensing of SAR 2.5 million, is proposed to be written off over the license period of 5 years in equal amounts of SAR 500,000 each year. This amount has been taken into account in the estimation of the net profits of the club.

Sustainability

This chapter presents a summary of the actions that the club needs to undertake to ensure that the facility is sustainable.

Environmental Sustainability

The facilities of the club can accomplish environmental sustainability taking the following actions.

• Design and concept has to take into account the advantages and account for the climatic condition of Saudi Arabia
• The plant, equipment, lighting, fittings and fixtures proposed to be installed must be energy efficient
• The facilities must be made to ensure optimum use of natural light and ventilation
• The facilities should provide for recycling of water from internal and external sources
• The building materials must be organized as energy efficient and wherever possible potential use of recycled building materials must be procured and used
• Proposed construction of buildings should be oriented to maximize natural lighting and ventilation to the extent possible considering the climatic conditions of the Kingdom and minimize the impact of the sun.
• The club can consider the substitution by solar energy wherever possible including the heating of the swimming pool and other lighting

Economic Sustainability

The club can take the following actions to achieve economic sustainability.

• The club has to consider the potential demand situation with respect to various facilities and service offerings and price them to ensure that the club takes maximum advantage of the first mover position. This calls for an extensive market survey on a continuous basis, as the industry will become competitive once the second and subsequent players enter the industry. Experience of the soccer clubs in the UK are the fitting example in this case. The club in order to remain competitive must review its pricing quite often.
• The capital mix is one of the important elements in deciding the economic sustainability of the club. The more the club funds its operations out of the revenue earned, the more is the chances of the club becoming sustainable. This implies that the club should reduce its exposure to debt funds and use only minimum of debt funds.
• The club has to manage the facilities in such a way that each one complements the other instead of competing with each other.
• The club should strive to find and appoint a competent manager having proven ability in managing large facilities like this.

Cultural and Social Sustainability

Since the Kingdom of Saudi Arabia has stricter social and cultural values, it is imperative that the club formulate its policies meeting these values. In this respect, the club should undertake the following actions.

• Develop and offer programs and services, which are commensurate with the social and cultural values of the local community
• Undertake promotional activities to encourage the youth belonging to local communities and sports organizations to use the facility by possessing higher cultural and quality values to respect the sentiments of the local communities
• The pricing policies of the club should not be prohibitively higher to exclude certain local communities. The club should adhere to its organizational philosophies in letter and spirit and earn a good reputation among the local residents and other sporting organizations.
• The club should evolve its own ethical policies, which need to be communicated to the management, staff and members of the club so that the club will be able to sustain culturally and socially.

Recommendations

The feasibility study has identified the potential demand for a range of sport, health and fitness facilities including swimming in the city of Jeddah in the Kingdom of Saudi Arabia. The feasibility report detailed the concept design and technical evaluation of the facilities including the estimated capital cost of the project.

The indicative cost of KSA Sports and Leisure Club project is about SAR 38.9 million including the license fee payable to Nike of SAR 2,500,000 for a period of 5 years. The promoters would be able to mobilize SAR 25 million from their own sources and there is the need for the remaining funds of SAR 13.9 million, which the promoters hope to secure through secured borrowing. The financials prepared based on current levels of prices and costs results in an estimated cash flow of SAR 476,000 in the first year of operation.

Despite the estimated demand for all the service offerings by the club, because of the shortfall in funding, the promoters propose to develop and bring in action the swimming pool complex and the food and beverages kiosk in the second stage. Land will be acquired to the extent possible with the own funds to be introduced by the promoters. By paying a holding cost, the promoters can retain the option to purchase the additional land within a period of six months, within which the club has to tie-up the shortfall in funds.

To sum up, existing and estimated demand for the service offerings by the club, and the excellent quality of the services will make the club function as one of the very successful sports organization in the Kingdom of Saudi Arabia. This is evidenced by the design of the facilities as outlined in the study and the financials projected and presented as a part of the study.

Therefore, this study recommends that any organization or individuals willing to take financial partnership in this club are sure to be serviced by the spectacular performance of the club and they will have association with one of the prestigious sports club in the Kingdom. The membership of the club will go up drastically in the years to come, necessitating the expansion of the proposed facilities.

Taking into account the possibilities for completing the project within conservative time estimates the following timeline for the implementation of the project milestones is presented.

Work Cited

Seattle Asian Sports Club, Member’s Handbook, 2006 Web.

Simply Great Leisure, Smithfield Sporting Precinct Feasibility Study, 2010 Web.