9 Steps to open a hotel business
If you are opening a hotel, there are several things that you must be careful about. First and foremost, you need to keep up with the new hotel industry trends.
Do you know the necessary steps to open a hotel business? If you are opening a hotel, there are several things that you must be careful about. First and foremost, you need to keep up with the new hotel industry trends. The truth is that opening a new hotel is challenging, as there are many things you need to take care of.
One of the most demanding phases is the pre-opening of the hotel. When you hire an expert hotel consultant, such as IHCS, you will have the help you need to choose an efficient prioritization strategy to design a hotel opening plan.
There are many factors, such as marketing and distribution, that you need to plan during the pre-opening phase. Keep in mind that in each step of the process, you can encounter many obstacles as well. It would therefore be prudent to take help of business advisors like Dua &Co. (dua.co.uk). The expertise and knowhow possessed by professionals of such firms might help in finding creative solutions to challenges related to growing efficient business strategies, accounting issues and tax issues.
So, what is a hotel?
A hotel is a commercial property where travelers who need room to spend the night pay a fee to stay there. Last year, the hotel industry generated under $200 billion in revenue. There are four main things you need to consider before attempting to open a hotel:
- You have the capital or access to financing
- You have limited hotel experience
- You have realistic expectations. You know opening a hotel is not a rich-quick scheme.
- If this is your first hotel and you don’t have real estate development experience, your best option is to acquire an existing hotel.
Get A Hotel Consultant
If you are inexperienced with the hotel industry, the wiser decision you can make is to hire a professional hotel consultant that can give you the expertise to build a reliable business.
A hotel consultant, such as IHCS Hotel Consulting, will take care of everything that needs to be done to open the hotel.
Having a professional team by your side with outstanding experience in operations, marketing, and financing could increase your ROI and revenue from the beginning. To open a hotel, you must follow nine steps.
1. Make Your Business Plan
The first step is to develop your business plan. Your business plan should describe how you are going to achieve your goals. Business plans are not only essential to attract investment but also to keep you on track moving forward. Even though no two business plans are the same, they all cover the same areas, including:
- Products and services. Here, you will describe the products and services your hotel will offer. Don’t forget to include:
- Benefits to the consumer
- Market analysis. This part will talk about the competition, including:
- Marketing strategy. This area explains how your hotel will attract and keep its customer. You need to describe a straightforward distribution channel.
- Financial planning. This part is crucial as it where you include all your financial statements, balance sheets, and other vital financial information. You should include your goals for the first few years. The idea is to attract investors and lenders. You may want to take a look at the business banking services available from the likes of Atlantic Union Bank, found here – https://www.atlanticunionbank.com/.
- Budget. Any new business needs to have a budget. It should include:
- Any other expenses related to the business
Luckily for you, IHCS has done a lot of this research for many hotels, so you don’t have to do it alone.
If you are considering opening a hotel, you should know that the costs to get started can be considerable. Some of the most expensive costs include:
- Licences and Permits
So you should expect a meaningful investment to get started. It is challenging to give an industry average since the costs range extensively on the price of the property and the type of construction you preferred.
Besides the opening costs, you should consider the ongoing expenses for a hotel business, whether these be back-office necessities you could find from Office Monster and elsewhere, or you’re needing more refined touches added to your hotel rooms. These costs include:
- Facility maintenance
- Office supplies
- High-speed internet
- Cable TV
Besides, you should expect to spend hundreds of dollars per month, replacing beds, furniture, mattresses, shower curtains, carpets, etc. How much money you pay will depend on the number of rooms your hotel has and the quality.
It is essential to establish an FF&E Reserve. An FF&E Reserve is a replacement fund that should be set aside for the periodic replacement of hotel components, like furniture, fittings, and equipment, that wear out quicker than the hotel.
Establishing this fund can be challenging, as it is hard to calculate how much you will need. The good news is that IHCS Consulting Service can help you set the right amount for your needs.
IHCS can also help you establish all of the operating supplies and equipment (OS&E) your guests might need. Things such as hairdryer, iron, hangers, towels, dishes, and glassware.
Remember, a successful hotel project should include both FF&E and OS&E.
Another high cost is staff salaries and wages. Employees can earn between:
- Low-level employees – $8 and $15 per hour
- Hotel professionals such as manager, accountant, marketing professionals – $2,500 and 5,000 per month
- Maintenance team – $12 and $25 an hour
For office supplies, you can budget between $50 to $100 per month; and high-speed internet and TV cable for the entire hotel will be around $150 to $300 or even more per month. You may want to check out some AT&T bundles to see what would be best. You can get more info over at att-bundles.com.
3. Target Market
The main job of a hotel is to offer a room to spend the night to any person looking for one. It doesn’t matter if the person is coming from overseas or across the street.
However, to run a successful hotel business, you need to create your target demographic customer. Once you know who your target customer is, you will know which amenities to include and the hotel’s location.
As an entrepreneur, you might be wondering, “How does a hotel business make money?“ The answer is simple; with the profits of the hotel. An excellent strategy is to pay yourself an amount per year and then invest your earnings into the property.
How much you can charge will depend on the type of hotel you have. Keep in mind that the average price for a hotel room is around $130 a room. Your price strategy should be based on demand.
During the high season (holidays and summer), the hotel room can increase, so always set your prices on what people are willing to pay.
Creating a price strategy to increase revenue can be challenging. You should consult IHCS Consulting Service as they have the expertise to help you run a successful business.
If you want to make your venture more cost-effective, consider expanding, and even creating a franchise. IHCS can help you succeed in a competitive industry, so contact them if you want to increase your earnings and grow your business.
5. Business Name
Choosing the right name for your hotel is critical. IHCS recommends you to follow these rules:
- Pick a name that is meaningful to your hotel
- Try not to change your hotel name once you open. Remember, your hotel name could give you a competitive edge over similar hotels in your area
- Avoid Long Names
It is a wiser strategy to choose a business name that is available as a web domain, as you will need to promote your hotel online to be successful.
6. Establishing A Legal Business Entity
One of the first steps to open a hotel is to establish a legal business entity such as an LLC. A limited liability company (LLC) is a business form that can protect you from being personally liable for your hotel debts or liabilities. Other business structures include sole proprietorship, partnership, and corporation.
Before you establish a business structure, make sure to talk with a hotel consultant as each structure has different tax, income, and liability implications for business owners.
7. Permits and Licences
Before you can open your hotel, you will need to obtain the necessary permits and licences. If you fail to obey, it can result in substantial fines, or even cause your hotel to be closed.
IHCS Consulting Services works worldwide, so make sure to consult them as they know what types of permits and licences are required in your country.
8. Hotel Insurance
This is one of the key steps to open a hotel business. Whether you are running a 5-star hotel or bed and breakfast, your hotel business is not exempt from risks. It is crucial to protect your business and guests with hotel insurance.
Fortunately, IHCS is here to eliminate all the confusion of searching by your insurance policy that will cover both your business and your employees.
You have to keep in mind that the hospitality industry faces high profile lawsuits each year. Protect yourself and your business with a proper insurance policy.
9. Create Your Web Strategy
If you want your hotel business to be successful, you need to create your web strategy. You need to build your website and have a presence on major social media platforms such as Facebook, Instagram, Pinterest, LinkedIn, and Twitter.
Having an online strategy is vital to promote and market your business and to keep customers coming back. Besides, it will help you define a strong brand, which is key to be profitable.
Need help with the process and steps to open a hotel business? Contact IHCS Consulting Service and request your free consultation.