Opening your hotel or entering the hospitality industry is a decision that can completely change your financial life. Well, starting out in the hospitality sector is a process that can be very profitable. However, like any new business it has its risks and threats. Therefore, you have to be careful and plan everything correctly regarding how to own your own hotel.
In this article, we will explain the reasons for making this choice and the essential steps to open your own hotel. Despite the challenges, the hospitality industry remains one of the fastest growing in the world, offering exciting opportunities for those willing to commit to exceptional service and meticulous planning.
WHY OPEN A HOTEL?
Opening your hotel can be the path to financial success, as you will enter one of the fastest growing industries in the world. On the other hand, it is true that the industry was quite affected by the Covid-19 pandemic in 2020 and 2021. However, the international tourism and hotel market has had a rapid recovery. To date, markets such as Europe have already fully recovered and are expected to continue growing.
For example, in Spain (the second most touristic country in the world) the data for the first months of 2023 confirm the good momentum of the hotel sector. Good hotel activity figures and increased profitability have boosted investment. In fact, in Spain some 1,390 million euros have been invested and transacted so far this year. These figures position the hotel sector as the second with the highest investment to date.
Furthermore, according to data published by the INE, the tourism sector in Spain has recorded record numbers. By the end of June 2023, the number of travelers was 50.7 million and overnight stays were 149.7 million. Compared to 2019, there is an increase of 1.8% in the number of travelers and 0.2% in overnight stays.
OTHER REASONS TO OPEN YOUR HOTEL
Other reasons, no less important than the previous ones, to open a hotel are the following:
- Hotels are the backbone of tourism. And everyone far from home is going to need one.
- It allows us to offer a variety of services such as a restaurant, Spa, bars, swimming pool, shops, gym, event rooms, among others. This generates greater income.
- They can attract a diversity of customers and markets. From business travelers to vacationing families and backpackers.
- Customer loyalty opportunities that benefit your business in the long term.
- Benefits of real estate ownership. A hotel is an asset that can increase in value over time.
- You collaborate with the economic growth of local communities. A successful hotel can have a positive impact by creating jobs and attracting tourists.
- Personal and professional satisfaction by providing rewarding experiences to your clients.
HOW TO OWN YOUR OWN HOTEL: OPENING IT
Opening a hotel can be an exciting and potentially lucrative activity, but it is also challenging. That’s because it requires careful planning and diligent execution, as it is a highly competitive market. Therefore, if you are inexperienced, it is best to hire a hotel consulting company. Well, a consulting firm, like IHCS, with extensive experience in the sector will guarantee the development of a successful hotel project.
On the other hand, when you are going to open a hotel establishment, there are many things that you have to think about. So here are some of the steps to follow:
1. MARKET STUDY AND SEGMENTATION
One of the first steps you should take to open a successful hotel is to conduct an exhaustive market study. This involves studying and analyzing both the supply and demand for accommodation in the region where you plan to develop your hotel. You must understand the behavior of the tourist and how the competition acts.
Furthermore, you need to understand that you will not be able to attract all the customers in the market. Therefore, you must segment the market. That is, you must divide the market into small groups and focus on one specific one. This will help you better develop and adapt your hotel services. Which in turn will positively impact the income of your business.
Now this is not an easy process either, since market segments still present different behaviors and characteristics. Therefore, having professional help from a hotel consulting firm would be ideal to do a correct market study.
2. CHOOSE A STRATEGIC LOCATION TO OPEN YOUR HOTEL
Another important element to opening your hotel is choosing the ideal location. Well, location will be essential to achieve positioning in the market. Which in turn will be vital to attract your target audience. There are certain aspects to take into account for the location. Among them, the characteristics of the area stand out such as tourist attractions, business centers, restaurants, bars, among others.
It is also important to evaluate accessibility by different routes and means of transportation such as airports, cruise ports, subways, bus lines, among others. All of these are demand generators that must be evaluated very well.
Finally, you should see if the location harmonizes with the concept of your hotel. If it will help your hotel to differentiate itself from the competition. A strategic location can make the difference between success and failure for your hotel.
3. CREATE A BUSINESS PLAN TO OPEN YOUR HOTEL
The business plan is one of the most important steps, since it is a document that sets out the objectives that you want to achieve with the business. This document will help you create your hotel idea and determine the investment necessary to develop your project. It is like a route that guides you through each stage you need to complete and also tells you the reason for each process.
On the other hand, a business plan is key to opening your hotel, because it will always be required when you are looking for partners or sources of financing. Therefore, creating a perfect plan will be essential for the success of your project. At this point, seeking professional advice is a good idea. So do not hesitate to hire the services of a good hotel consultancy.
MAIN ELEMENTS OF THE BUSINESS PLAN
Below, we show you some of the essential elements that every business plan must have:
Executive Summary. This is the part where the objectives of your hotel project are explained briefly, clearly and concisely. Additionally, it includes aspects such as your company’s mission, vision, and values.
Business analysis. This part highlights the competitiveness of your hotel, that is, what makes your business different and unique.
Analysis of demand. This is where you show who your target audience will be and the services you want to develop to satisfy them.
Analysis of the competition. This section should show an exhaustive study of your competitors. It highlights what your strengths, opportunities, threats and weaknesses are in relation to them.
Marketing plan. This aspect highlights strategies and techniques to market your hotel. It is how you are going to capture, maintain and increase demand or customers.
Operations plan. This point shows how your hotel will work. For example, how many employees you will have, the jobs, the standard operating procedures you will use, the technology, among others.
The strategic plan. Every hotel should have a plan to maintain good revenue management. This is where strategies are established to maintain an adequate occupancy rate, pricing, online reputation, among others.
Financial plan. This is the most important part of all, since it is where you predict how much money you will need to open your hotel. You should start with the initial costs, whether they are acquisition, remodeling or building from scratch. Then you continue with the operating costs. And finally, what will be your financial projections for the next 10 years.
4. DEFINE THE CONCEPT OR THEME OF YOUR HOTEL
This step consists of developing the identity and personality of your hotel establishment. That is, what will give it value in the market. And this personality must be reflected in the architectural design, service offering, in the environment, decoration and in the gastronomy if it will have a restaurant.
Furthermore, the ideal conceptualization is one that also takes into account the preferences and tastes of customers. On the other hand, it is necessary that you take into account industry trends so that you develop a project that is adaptable.
Remember that when conceptualizing you must remember: what will be the purpose to be transmitted, the target client and the location of the hotel.
5. TAKE INTO ACCOUNT ALL LEGAL ASPECTS
To open your hotel you need to comply with a series of important legal considerations. Although these laws may vary depending on the country, in general you need:
Decide the legal structure of the business. That is, you must know if your hotel will be registered as a limited liability company (LLC), a public limited company (S.A.), a sole proprietorship or a partnership. Each structure has different legal and tax implications.
Register your company to obtain permits and licenses. In order to open your hotel, you must be legally registered and obtain the necessary permits and licenses. These may include construction, operation, safety, and food and beverage management permits and licenses. This may require paperwork at the local, state and federal level.
Comply with tax obligations. For the hotel to operate properly, you need to pay taxes related to your business.
Be aware of labor laws, including minimum wage laws, work hours, workplace safety, and other employee rights.
Likewise, it is important to consult with a lawyer specialized in commercial law and an accountant before opening your hotel. This way you can ensure you comply with all applicable laws and regulations in your area.
Opening your hotel is an exciting and promising challenge, but it requires extensive planning and completion of several steps. They include everything from market research for the right location to obtaining licenses and managing personnel.
However, completing each step is not an easy task, even more so if you do not have professional help. Having the guidance and experience of professionals in the hospitality industry can make all the difference. At IHCS, we have helped many entrepreneurs, transforming their dreams into successful hotels. Therefore, with us you can complete each of the steps that we mention, in order to have a fantastic hotel.
So, contact IHCS today and get the assistance you need. Together, we can build a bright future in the hospitality industry!.