July 20, 2022
If you’re thinking of starting your own hotel business, hopefully, you’ve already got some experience in the industry and you have at least a loose plan forming around where and when you want to do it.
There are loads of perks to running your own hotel business, but there’s also a lot of work and plenty to consider, especially at the early stages. One of the earliest steps in a hotel business model is writing up the business plan.
For this, you’ll need to conduct detailed research, gather accurate data, and form precise predictions. This hotel business plan will be the framework for your company to grow into a successful enterprise. In this article, we’re going to go over the general steps required to form a business plan for a hotel, from conception to gathering your clientele,
The whole process begins with an understanding of what it means to run your own business in the hotel industry.
Considerations of the Hotel Business Model
Before embarking on any business venture, it’s important to know the whys and why-nots. Without thoroughly weighing the pros and cons against one another you’re likely to be taken by surprise somewhere down the line when your romantic notion turns out to be harder or more boring than you expected.
Before you get to work on your hotel business plan, consider the following reasons you might want to open a hotel of your own:
- Starting any new company will come with the perks of running things the way you want to, and a hotel business is no different. There are plenty of drawbacks to being self-employed, too, and we’ll go over those in the next section but a lot of the motivations for being your own boss are in the freedom to make decisions and the creative liberty you’ll have over the direction of the company as a whole.
- You’ll also likely be able to work on your own schedule for the most part, and not be tied down to office hours and the daily commute.
- Another obvious perk of opening a hotel is the money. While the average profitability of hotels might seem low, the industry has the potential to create billionaires, so there is a large range of opportunities there in terms of money-making if you’re good enough.
- The hotel industry is the service industry, and if you’re a fan of making people feel welcome and comfortable, you should get a lot of value out of running a hotel. Hospitality is an opportunity to create a nice experience for customers, and with a hotel, you can sleep comfortably in the knowledge that you’ve spread positivity.
- It’s also not a particularly complicated job to get your head around. While there are a number of moving parts, if you’re thinking of starting a hotel business, you’ve likely got extensive experience in the industry already, so starting small and simple shouldn’t be much of a challenge.
- Hotels are relatively immune to market fluctuations, too, and aside from the recent covid intervention, they tend to survive crashes where other businesses fail. The hospitality industry as a whole is bouncing back well.
Before you jump in though, it’s a good idea to get a reality check on some of the drawbacks of opening a hotel.
- Starting with the hassles that come to any business owner, running a hotel means that you’re the one who will ultimately be responsible if things go south. Creative freedom is one thing, but you’re also going to have to take full charge of the venture and make sure it’s running as intended.
- This can sometimes feel overwhelming, and if there’s too much to do, you’re likely to be unable to take breaks or risk leaving it up to management to handle, especially early on. Running a business of any kind takes strong leadership and you’ll need to set examples and spread the message of your business direction clearly and effectively to make sure everyone’s on board.
- You might also be limited by the whims of the shareholders. If you have taken on significant investment to start the business, you won’t be the sole director of the company. This means that you’ll maybe have to sacrifice some of your dreams to please those whose money is invested in it. Starting an Airbnb has lower startups costs than a full service hotel.
- On that note, your salary will have to come from what’s left when everything is paid off. If your business isn’t profitable, you’ll still have to pay your staff and cover the bills; it’s your salary that will need to suffer.
Once these considerations have been taken into account, if you are confident that you want to proceed, it’s time to start forming your hotel business.
Before Writing a Business Plan for a Hotel
For your hotel business plan, it’s better if you’ve at least got an idea of how you’re going to set up and source the necessities for your company before you start. There are some things you’ll need to know before getting started, and these will play a role in your financial projections and marketing strategies later on.
- Funding – Starting a company costs money and doesn’t usually make a return for the first few years. This means you’re going to have to cover the running costs from elsewhere. This is the first and most basic rule of entrepreneurship. Finding the building, covering the staff and utility costs, ad campaigns, insurance, and rent are just some of the costs you’ll have to calculate in order to source the correct funding.
From here, identify the type of funding you need, whether that’s going to be angel investment or venture capital, or even bootstrapping using profits from your other ventures, you’ll need to establish how much equity you need to exchange and where all the money will be going.
- Equipment – Furniture, meeting room equipment, computers for the main desk, barkeeping equipment, and any entertainment systems and fire extinguishers for the rooms and the lobby all need to be listed and accounted for.
- Licenses – Subscriptions for cable, insurance, and licensing of various kinds come as part of the package when opening a hotel, so make sure you’re legal and legitimate. Health and Safety, including fire safety specs, need to be met throughout the building. You’ll need to make sure you’re covered for customer damage, and that your customers and staff are safe.
Different locations will have different licensing laws, so make sure you’re compliant in your area.
- Staff – These are the people who will be interacting directly with your customers, so pick wisely. They’re the lifeblood of the hotel industry, and you’ll need a lot of them. A strong cleaning crew, a welcoming reception, competent kitchen staff, and management teams are some of the main roles that need to be filled well, so make sure you know how to go about this.
- Marketing Strategies – How will you be reaching your customers? This section is expanded upon below, but you’ll need to have a plan for where to advertise and how, how much it’ll cost, and what sort of promotions you’ll be running to get your first hotel customers in the door.
Hotel Business Plan
For your hotel business plan, you’re going to need to establish your business model. Simply setting up or buying a building and expecting it to fill itself probably isn’t going to work, and you’ll need to do your market research to establish exactly whom you will be serving, and how to attract them.
Here are the initial seven stages for setting up your hotel business plan, and the essential pages it will contain:
1. Executive Summary
Although this is the first page of the hotel business plan as a document, it’ll typically be filled in last, as a way of summarizing the subsequent categories of the plan itself. This is by far the easiest stage of the plan to complete!
2. Company Description
This is a product of your extensive market research and involves a thorough understanding of who you are and what you’re about. If this stage seems difficult to complete, it’s a good sign that you’re not ready to start, and you need to do more reflecting on the specifics of your dream. Begin the company description with a pitch, as this will be one of the first things a prospective investor sees. Use this section to communicate your excitement and passion for the company.
3. Products and Services
Here’s where you’ll lay out the range of services you’ll be offering. Suites, singles, doubles, twins, and everything in-between need to be itemized and set along with their rates across the different seasons. You can show your awareness of the competition in this stage too, by referring to their rates in comparison to yours. If you’ll be selling any products as well, this is the section to list and describe them.
4. Market Research
This section will need to cover an accurate depiction of your market data. It needs to be detailed and complete and should lay out all the specifics of your ideal customers. The market research you’ve done should show you exactly what your customers’ pain points are and how and where you’ll find them to solve their problems. A weak or poorly-researched market data section will be an immediate turn-off for potential investors and demonstrate that you’re unqualified as a partner.
5. Business Strategy
Once you know who your customers are, the logical progression is to explain how you’re going to reach them. This section should list your sales and marketing strategies, demonstrating a thorough grip on the sales funnel and customer journey from their perspective. Make sure the path to conversions is clear in this section.
You don’t need to list every employee in the company, but a demonstration of your management team, possibly with their photos included, and a short blurb identifying their experience and contribution to your company is very useful. It’s important not to go overboard on the descriptions and let their talent speak for itself. Focus primarily on the aspects of each member of the team that contribute to the direction of your company.
7. Financial Documents
Your hotel business plan is nothing without precise financial documents. These are likely to be the first part of the entire hotel business model that investors will scrutinize. That means they need to be accurate projections, based on real financial reports that don’t paint an unrealistically optimistic picture of your financial future. Financial papers are essentially a test of how objective and honest you are about your chances, and investors will pay close attention to them for this purpose.
It can be useful to get help with these. For specialized, professional templates specifically designed for hotels, take a look at our hotel financial model, boutique hotel and Airbnb financial templates here at ProjectionHub. These templates cover five years and are entirely customizable to your needs. They also come with free support, should you need advice on how to work with them.
Once you’ve got all your paperwork and research in order, you’ll be ready to welcome your first customers. Of course, you should have a plan for this already, and we’ve got some ideas to help you along with that below.
Your market research should strongly indicate which path you want to follow when it comes to finding your customers. There are several approaches to this, and a strong customer acquisition plan that makes use of strengths from multiple strategies is fundamental to the overall hotel business model.
Here are the main ways to bring people into your new hotel business, many of which apply to businesses of any size and scale:
- Offer discounts – discounts on rooms are a fast way to draw people in and get them familiar with your service. Loyalty programs and rewards for return customers can also be woven into this strategy, helping promote repeat customers. Your main goal for attracting customers should always be to have them return and to bring people with them or refer them directly.
- Be present online – Have a social media page that presents your promotions in places where you’ve established your ideal customers will be looking. Comment on industry-related topics and establish yourself as a voice of authority. Share information and take part in customer education, so that you become trusted by your clientele before they even set foot in your hotel.
- Have a website – Your social media should lead people to your website, which will provide booking options and a wider range of information on the services you offer. Provide a menu, room rates, and easy access to the information your customers want to know and make sure the booking process is effortless.
- Have a landing page – One way to boost bookings is to have a landing page on the website. This should present the promotional offers, and maybe have a video or high-quality photos presenting the value of your service in a visually appealing way to draw people in.
- Advertise – From your market research, it should be possible to target tasteful ads and spread your presence around your market. People need to know you exist, and how to reach you, so the exact way to advertise will depend on whom you’re trying to reach, but common cheap forms are Google Ads and flyers.
Intelligently targeting is the key here. For a good return on ad spend, it’s important not to just throw your message around at random hoping to reach someone. Put the groundwork in to identify your customers and reach them where they spend their time.
- Work with other hotels – Your market may be quite different from neighboring hotels, meaning you can work together to hand off bad-fit customers to one another should they be suitable. For example, if your hotel is cheaper than the one nearby, they might send people your way when they decide they can’t afford a room there, and vice versa. This collaboration can form a mutually-beneficial relationship that makes use of both companies’ marketing efforts.
Keeping up the high service will lead to customers returning regularly, so always think of the long run when you’re reaching out to people. The specifics of this guide will vary, depending on your specific business model and the scale of your project, as well as the location and the market you’re approaching, but most of these points are generally applicable under any circumstances.
Running a hotel can be a profitable and satisfying endeavor, but it does come with a lot to consider. A hotel business model involves a huge amount of research both inside and outside of the company, and putting all of this into a detailed business plan is the only way you’re likely to get financial support from investors, should you need it.
But there’s more to a hotel business plan than simply looking for investment; it’s a cross-section of the entire company, and the process of forming one involves learning and understanding your project in new ways. For this reason, it’s a useful exercise in building the company, and with this guide, hopefully, you’re one step closer to achieving that.