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What does the business model of a hotel look like?

What does the business model of a hotel look like?

Broadly speaking, a business model sets out how you are going to make money. That is, how the business will earn income. There are many options, from selling products to subscriptions or performing a service. In the case of a hotel business model, this could be very simple, guests, but in reality, it goes much […]

Broadly speaking, a business model sets out how you are going to make money. That is, how the business will earn income. There are many options, from selling products to subscriptions or performing a service.

In the case of a hotel business model, this could be very simple, guests, but in reality, it goes much further. That’s why here we will talk about how a hotel business model works and what the success of a hotel depends on.

 

What does a hotel business model look like?

Broadly speaking, the business model of a hotel depends on people. This is because it requires a constant flow of bookings and guests, which will leave income in the different sales channels of the accommodation.

We must know that the business model of a hotel has two main sources of income. The primary ones, which are logically the bookings, and the secondary ones, which can also represent a good figure for the hotel or the hotel chain.

Below, we will explain each of these sources in detail:

Main source of revenue

According to experts, guest bookings are considered the main source of revenue for two reasons. The first is that this is the essence of the business, selling a stay. Being in the hotel business, their product is guest nights.

Secondly, a guest may not buy anything inside your resort, have breakfast with you, enjoy your activities or subscribe to your membership. What they do have to pay for, however, in order to be there, is their accommodation.

Secondary sources of income

On the other hand, we have secondary revenue sources, which are just as important to a hotel’s business model as its rooms. Examples abound, as everything from a restaurant or a bar to memberships can work.

A good hotel business model goes beyond just selling stays. It should be complemented by offering the guest a complete experience, encouraging them to eat or have breakfast at the hotel, purchase tours, visit the shops, book a flight through the travel agency or sign up for a timeshare.

 

Types of hotel business models

It is important to note that the hotel business model varies depending on the type of hotel and the way it works. Some of the most common types of hotel business models are:

Simple hotel

A simple hotel is designed to provide a comfortable, safe and private stay for different kinds of travellers. Its facilities are usually not luxurious, but modern and functional.

All-inclusive resorts

Designed for family travel and tourism, resorts are complexes that include hotels, amusement parks, bars, restaurants and experiences. They aim to sell the all-inclusive package with food and activities, not just accommodation.

Hotel integrated with a travel agency

Within this business model of a hotel, the aim is for the traveller to purchase everything with the hotel. This is why we sell packages
packages that include flight, hotel, transfers and tours at a competitive price.

Business hotel

Focused on business travellers, this hotel offers a comfortable stay with facilities designed precisely for the professional environment, such as meeting rooms and convention halls.

Transit or express hotels

This type of hotel is only intended to be a transient hotel, offering very short stays. That is why their hotel business model is based on the simple and cheap.

Chain hotels

Finally, we have the hotel chains, which usually follow the same business model of a corporate hotel and standardised among all their business units.

cual es el modelo de negocio de un hotel

Key components of a hotel business model

For a hotel business model to work, it is necessary to identify the key components of the business model.

According to experts, guests will always be the cornerstone of any business model. You cannot expect to generate revenue if there are no people willing to pay for hotel nights or purchase the services and products you sell. Basically, it is the guest that fuels the hotel’s machinery.

But, in addition to the guest, you need to know how to develop an effective sales team, to tell them Look, we are your best choice for your holiday! This sales team must be able to make the hotel’s revenue grow, as well as out-position the competition.

On top of everything else, a hotel’s business model will depend a lot on the experience you provide to customers. You may have a great sales machine, but if the hotel is bad, guests will simply not return or recommend you. With these 3 elements you can expect your hotel business model to work.

 

Challenges a hotel business model faces

Of course, no hotel business model is exempt from challenges, challenges and threats. A perfect example was during the pandemic when, because of the quarantine, there were no travellers, tourists or guests in hotels. This caused a hotel’s business model to change from selling reservations to offering travel certificates, food and more.

Along with these kinds of external threats, we find a market challenge of our own, competition. Let’s be honest, with the real estate and tourism boom in many destinations, came the opening of more and more hotels. This has forced many independent hotels and chains to innovate or follow current hotel trends.

Finally, we have the market itself, which is becoming more and more demanding in terms of rates as well as in terms of value and experience. Add to this operating costs, and the threat can be even greater.

Fortunately, each of these challenges can be solved with proper planning, strategy and execution. This way you can have a healthy and, above all, profitable hotel business model, whether in the short, medium or long term. If you have any doubts on how to do this, do not hesitate to consult the IHCS team of experts; we will be happy to help you take your hotel to the next level.

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