The hotel industry is the essential component of a destination’s tourism offerings; thus, it is the availability of lodging and hotel services that determines whether a destination is considered a tourist destination or not, based on the volume of lodging and the extent to which those services are utilized, since it is the primary driver of the tourism economy.
A business model is the way a hotel creates, delivers, and captures value. To create our business model, we start by asking whether this project will be profitable for us. Entrepreneurs themselves need training, financing, investors…and a great team to support us across all departments.
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What is the business model for a new hotel’s success?
Keep the following in mind:
Industry Data
Given the strategic importance of tourism, one of the best-known indicators is hotel occupancy. In this business plan, we have considered opening a traditional hotel; therefore, the data we are interested in does not include hostels or rural inns.
Market Research
Before considering opening a new hotel, it is essential to analyze the competition in the area. The data provided offers interesting insights into the most suitable provinces for a new establishment.
Differentiating factors
Hotels have many opportunities to differentiate themselves from their competitors. They can offer innovative and practical services, implement low-cost or, conversely, luxury strategies, focus on excellent cuisine or a unique view; the key is to offer something different from what is already available, and of course, something valuable that makes customers prefer this establishment to any other in the same area.
Sales Forecast
To get an idea of a hotel project’s revenue, it is important to distinguish between three major categories of income: room rentals, food and beverage, and additional services.
Revenue from room rentals can be estimated by calculating an occupancy rate, which in turn gives us the number of guests; this number can then be multiplied by the average room rate per person.
For food and beverage services, if breakfast is not included in the room rates, it would be necessary to estimate the percentage of guests who would have breakfast. Ancillary services can be estimated based on a percentage of guest consumption.
Investment and Financing
A hotel typically represents a very significant investment, and external financing may be necessary. You have the option to rent or buy, but in general, this is such a specialized business—and one that requires so much investment in renovations to prepare the rooms—that it makes sense to enter into a very long-term lease or simply purchase the building outright. It’s also important to include all the operational equipment for the various departments as part of this initial investment.
The amount of the investment varies widely, depending on real estate prices in the area and, above all, on the size of the establishment. In addition to the building, you must factor in the cost of furniture and computer equipment, not to mention cleaning supplies and other necessary items.
Estimated Expenses and Costs
Aside from depreciation on the facilities, a hotel’s main expenses are personnel (reception, housekeeping, bar, restaurant), rent (if the building is not owned), utilities (electricity, water), and external services (insurance, administrative services, laundry for towels and sheets, etc.). Obviously, at the outset, you’ll need to factor in start-up costs such as licenses, advertising campaigns, etc., in addition to all operational supplies.
You must also take into account all costs associated with the sale of food and beverage products and services.
Other aspects to consider
When it comes to tourism, it is important to recognize that online visibility is strategic, since, by definition, people who stay at a hotel do not live there, and their main source of information is the Internet.
So, if you’re thinking about designing your business model and need help bringing your hotel project to life, we can help you.
Feel free to contact us at info@ihcshotelconsulting.com.
