How To Start Hotel Business? The Ultimate Step By Step Guide Help You Start Hotel Business Successful!
In this article, you will learn how to implement and start a hotel business step by step and achieve the expected return better.
As a company specializing in smart hotel lock system products, ShineACS Locks have helped hundreds of customers start their hotel businesses.
While providing the necessary hotel lock system products and hotel elevator control system products, we will also give some customers specific suggestions for starting a hotel business.
After summarizing the most successful hotel business cases and some failed ones, we try to give the most satisfactory hotel business plan.
As of 2020-2021, with more than 700,000 hotels and resorts and 16.4 million hotel rooms, the hotel industry is worth over $570 billion globally.
The rise of the global per capita income level and the rise of the tourism boom have also driven the development of the hotel industry. The hotel business also provides an excellent opportunity for many people to make money.
But opening a hotel is tricky; you must develop and implement a detailed hotel business.
When you find that the hotel business in your area is profitable, or when you find that the hotel business is good as far as you know, even when you say that you love the hotel business and want to own your hotel, you could start a hotel business.
But in any case, the ultimate goal is to make money by investing in hotel sound.
So in this article, let’s talk about how to start a hotel business step by step, but first, let us look at the return on investment for the hotel business.
Hotels can potentially have a payback of 4-5 years if the product is built to suit the market and is managed well. The most practical answer to this question is that it is required.
So if you are thinking about whether the hotel business is good or bad, let us tell you it is good. The lack of facilities to stay in makes it essential to build hotels.
Why start a hotel business? That’s a frequent question. If we talk about the ROI of hotels in India, they get up to 10 to 12% per annum revenue. Considering the typical factors, the payback time will be more than ten years.
But the case can differ slightly when we talk about building smart hotels. The payback period of hotels can be around 4 to 5 years if they are produced according to the market need and good hotel business management.
However, once the payback has been achieved, the annual cash flows provide excellent returns. High ROI is also seen when a hotel asset is sold, especially a stabilized, well-performing hotel.
There are several reasons; for instance when the pandemic gets over and regular life resumes, people will be more excited than ever to travel and go out.
Hence, developing the business during the slowdown will help the hoteliers make the most of the situation.
Because if we talk about the hotel business and covid, hotel business growth has got affected, but it’s coming back on track.
You may also think you need to start a hotel business now; let us discuss how to create a hotel business step by step.
First, please think like a hotelier!
A hotelier’s prime responsibility is to provide excellent service to its customers and guests. The service should be well-mannered and pleasing, which helps the guests de-stress.
LLet’ssee what the preparations you will require before starting your hotel business are. Can anyone start a hotel business? Of course not!
Here are what you need to do before starting a hotel business.
Of course, you have to research your hotel business target market. After going through a series of market research, you will be better able to decide to start a hotel business
The hospitality sector has changed a lot in the last few years. The trends are constantly changing. If we try to reflect the customer’s needs, we can easily find essential aspects like security, peace, and a good experience.
But the needs don’t end here; there is much more you will need to do in the hotel business. It would help if you determined the right plan for spending your budget.
Because the constantly changing circumstances also affect the priorities that should be focused on in the hotel business under the marketing plans.
The Verified Hotel Market Research says that the luxury hotel market size cost was around USD 93.37 Billion in 2019. This will soon go to USD 123.49 Billion by the end of 2027.
The growth rate CAGR data is around 4.1% from 2020 to 2027. The luxury hotel market revenue has increased, and the leading cause behind this is the rise in leisure travel worldwide; improved living standards and the growth of the tourism industry are also important factors responsible for the development of luxury hotel revenue.
You can also try hotel business rental properties.
Co-founder and CEO of Positive Luxury, Diana Verde Nieto, says, “millennials are twice as likely to support brands with strong management of environmental and social issues and expect brands to manage their impact and communicate it.”
Companies are trying to reformulate their working systems and stand up again after the blows of COVID-19, which made social distancing, stoppage of commercial activities, and remote working the most severe hurdles for businesses.
These all are collectively promoting hotel business development. The question may arise about how profitable the hotel business is; we will discuss it too. The online hotel business market is also huge.
External factors that affect organizational behavior and decision-making of other industries also affect the hospitality industry. Various factors come into play, but political, economic, and social factors affect them.
1) Nature of the market and demand: The costs decide the lower prices, while the need chooses the upper limit.
Consumers and buyers are responsible for balancing product price and its benefits. TThat’swhy marketers need to understand the price and demand of a product before setting the prices.
2), Consumer perception of price and value: While setting the costs for the hotel, the management must see the prices and the way consumers take them. The process should be decided after considering the customer.
3), Analyzing the price-demand relationship: The high price of a product may cause its lower demand. So, the hotel should also consider this point to decide the prices.
4) Price elasticity of demand: The hotel should also consider the effects of change in the price on the request of the product. If a difference in the cost to a small extent doesn’t affect the demand, then it is said to be inelastic. But if the change in the cost affects the request, then the price is elastic.
The competitors can be divided into two categories.
First, direct competitors who directly affect your business.
Second, indirect competitors, like restaurants, affect the business in broader ways. They both involve the hotel business together in various ways. You will need to plan to make your business stand out according to these factors.
You must add a unique presence for your hotel among your competitors. Major participators of the hospitality industry like Four Seasons Holdings Inc., Intercontinental Hotels Group, Marriott International Inc., Hyatt Corporation., ITC Hotels Limited, Shangri-La International Hotel Management Ltd., and Jumeirah International LLC work on crafting a portfolio to make themselves stand out and flourish in the industry.
For instance, Jumeirah Group and members of Dubai Holding launched Jumeirah Inside in 2015. This enables the customers to pre-book their rooms from online mediums.
What Kind Of Person Should You Be To Thrive In The hotel business?
Communication skills are essential in the hospitality industry to become successful.
Also, you need to be a good listener. This is a must in the hospitality industry, where the main motive is to serve the customers.
Your Skills And Experience
Hospitality skills are essential to managing a hotel. But skills don’t come just by studying or learning a night. You need to be patient and work consistently towards developing your skills.
Also, it is essential that you continuously try to improve your learning concepts through practice. Experience also plays a significant role and also enhances your skills further.
With time, you will realize the business’s essential and trivial things. Constant learning is the only key to success in the hospitality industry.
Starting a hotel business means not hosting a few people at your place and charging them. It takes way more than that. A good hotel should be where guests feel relaxed and enjoy their time.
It is essential to focus on the guest to make your hotel business successful. The satisfaction of your customers decides the goodwill of your hotel.
Customers can easily show their feelings towards your hotel through positive or negative reviews in digitalization. There are also various hotel business review magazines.
The most essential and fundamental step of your hotel business is making a plan for it. When someone wonders how to start a hotel business, the answer is simple: prepare the best hotel business plan.
It helps in strategizing as well as in saving time for your business. Without a proper hotel business plan, you won’t understand the direction you should go in.
TThat’swhy planning is significant for your hotel business.
According to the data of entrepreneur.com, a franchise hotel costs around $195,000. This is just the startup cost; several more hotel business expenses exist.
After buying the place, you will need to look after the payroll, taxes, utility payments, etc. Also, you can’t forget the upgrades, furniture, etc. Owning a hotel is not that easy to start.
Like any other industry, the hotel can earn profits after paying its expenses, but in the case of hotels, the high cost is the rent.
The structure for rents will depend upon the risk appetite of the investor. There are options for lease and renting also. A lease is an amount the tenant pays for a property to its owner.
The hotel company takes all the financial obligations, and the place owner only provides the building. The benefits are also obviously all under the control of the hotel company, along with all financial matters.
The hotel just needs to pay the rent for the place, and the area owner has no share of the profit.
Also, all losses are taken care of by the hotel itself, not the owner, and all the profits.
The hotel can be of several types. The type also determines the kind of customers because your hotel communicates the essence of your business to its potential customers.
Size: USA Today says that the optimal size of a hotel room is around 325 square feet and interior dimensions of about 13 and 25, including the bathroom space.
Any average hotel in the US conducts 115 rooms, which means that it will require around 48,000 square feet of space.
If we consider large hotels, they conduct more than 100 rooms regardless of the engagement of several rooms.
Design: Several factors have to be considered while designing a hotel. Design considerations include a Captivating Appearance, an Efficient plan, Good site location, appropriate material, Good artistry, Management, and Budgeting.
Design is important as the looks and appearance of the hotel also play an essential role in attracting customers. The design should be based on universally accepted principles to target many potential customers.
Various factors come into play for deciding the type of design for a hotel, like pleasing appearance, efficient planning, good site region, material, human resource, budget, management, etc.
The hotel plan template also comes under design construction.
Style: There are currently available options for the customers, and it can get confusing to choose one.
The hotels describe their amenities in particular ways; you can quickly see this on their online pages and intros. They use descriptions like eco, design, boutique, etc. The capsule design of hotels provides small areas or tiny accommodations for its customers.
It also provides an advantage for them. There is also a new type of hotel named a pop-up hotel. Mostly such hotel setups are arranged around the regions where a huge event is happening.
Next on our list is the Poshtel hotel, an upmarket hotel. They are similar to boutique hotels. So if you are thinking of setting up a hotel, you should consider getting in touch with hotel business brokers. They can help you understand the current market trends.
How Much Does It Cost To Start A Hotel Business?
The answer varies according to the expenses of buying or building a hotel, the type of hotel, whether it’s a budget hotel or luxury hotel, the size of the hotel, etc.
Why is the hotel business good? Because you get many chances to get profit. If you want to register for the USA hotel, it will cost around $750.
And the price increases in multi-folds for the five-star deluxe properties cost around Rs 75 lakh to Rs 1.8 crores issued by the Federation of Hotel and Restaurant Association of India [FHRAI].
You can set up the establishment for 1 yen through the Companies Act of Japan in Japan. However, you are still required to invest more than 5 million yen to get the entitlement of “business manager visa status.
The cost of a hotel business license varies according to the different states and their rules. LLet’ssee all the hotel business rate calculations and answer your question about how to get into the hotel business.
Location: The decision regarding the setup of your hotel business structure in a particular place is also essential, as it will decide the position of your hotel in the market and how guests will find your hotel attractive.
Quality: This talks about how the service will be more costly, like a five-star hotel, than an ordinary roadside hotel.
Size: The size of the hotel also plays a significant role in determining the cost of the hotel. The number of rooms, spaces, or restaurants will be the price.
Land: This is mainly about the real estate price of the hotel.
Soft Cost: If a hotel uses more software, the cost also increases. If the hotel is small, the price might seem like a considerable surplus to get all the needed software to run the business.
Software programs are used for property management, hotel management, communication, bookings, etc. It also includes hotel business facilities or games, hotel business lounges, hotel business suites, etc.
FF&E: FF&E means Furniture, Fixtures & Equipment. This encompasses all the entities like building desks, electronic equipment, hotel lock system, computers, etc. Sometimes it is also referred to as hard cost.
Pre-Opening & Working Capital: Before the hotel’s opening, you will need to hire staff for various operations and other pre-opening management tasks.
This will require a salary fund and preparation fund. Also, there is specific hotel business law that needs to be followed.
You will also need to create a sample hotel business plan; you can search online for references for hotel business plan examples. The hotel business GST should be considered too.
Construction Cost: A hotel business structure’s cost per square foot varies greatly.
Because there are various types of hotels, they require different factors to perform optimally, like amenities, areas, etc. Hotels located in urban areas have a higher cost than hotels in rural, remote, or suburban areas.
So the range of hotel business rates goes from $134 to $550 per square foot. These are some hotel business tips that will undoubtedly help you. You can also contact a hotel business analyst for better estimation.
Also, here is a video about Hotel Budgeting & Forecasting Online Cours for your reference.
What Is The Ongoing Cost Of The Hotel Business?
The price of food, beverage, utility, etc., comes under operating expenses. Such expenses are required in every department, whether rooms, sales, marketing, etc.
How Does The Hotel Business Make Money?
The primary source of income for hotels is by charging for rooms, but things like food sales, beverage sales, alcohol sales, conference room sales, etc., add to the revenue.
A suitable profit-giving hotel business investment will be defined as continuously allowing returns on invested capital and increased promoter cost of capital.
It should also provide the chance to quit the advantage when a better investment return opportunity arises. It is essential for hotel owners to evaluate their assets timely, maybe once a year.
This allows them to know how they are managing their capital.
How Much Money Can I Earn By Opening A Hotel?
The most available earnings of hotel owners are around $40,000 to $60,000 annually.
Suppose we consider the inflation because there has been no further updating in the data since 2009. In that case, we can say that the owner’s average hotel business profit margin will be around $49,000 to $74,000 annually.
How Much Can You Charge Customers?
The best way to set hotel prices is by considering demand value. This indicates that the cost of the hotel will depend on the demand for its rooms or services.
If the demand is high, the prices can also become high for increased revenue.
Where To Raise Funds For Starting a Hotel?
Borrow from friends and family: If you wonder if taking a loan from vendors, various stressful factors come with it. Borrowing money from friends or family will be better that way.
Put your savings on the table: If you have and borrow from your friends, then using your savings will be needed in most cases.
Get a commercial mortgage for a hotel: It is also a practical way of getting funds, but you must make a great hotel business plan. The banks will determine the amount and time of repayment according to the project.
Crowdfunding is a new and modern way of connecting with customers and getting funds. It is quick as well as beneficial in economic terms.
Angel Investors: Angel investors are the best way to get funds as they don’t just provide the funds but also provide precious knowledge that can be helpful for your business.
Breakfast: Hotels also provide customers with an open-buffet breakfast that complements hotel business room bookings or regular room bookings.
Room Service: Most hotels offer 24 hours room service to make the guests comfortable. You can click here to look at the room service menu.
Internet Access: Whether in rooms or public areas, hotels provide fast-speed free internet services.
Free Shuttle Service: The hotels also offer free accommodation service for the guests, which they can use for shopping or entertainment.
There are other services like:
When we talk about hotel marketing, we often forget the term value proposition, but it is essential. It is integral to making your hotel stand out and attract more guests.
1. A Clear Headline: When a potential guest visits your website, the heading is the first that comes to mind. If it’s interesting enough to get her attention, she might stay. Similarly, your hotel business name is also essential.
2. A Visual Element: Images are essential in communicating your brand message. Use images to improve communication with your guests and get their attention. This also includes your hotel business card template.
3. A 2-4 sentence paragraph: It signifies the description of your services, like what you provide and to whom and why it’s different from others, etc. But make sure not to overcrowd your website with irrelevant stuff.
4. Bullet Points: It is where you will describe the benefits and key features of your hotel. Make sure not to make it look more detailed than required.
The hotel industry thrives on location.: if you are considering where to start a hotel business, let us tell you that the place or region where your hotel is situated plays a significant role.
Keep an eye on those reviews. Feedback is vital to improve your services but doesn’t just rely on feedback forms. Many other places where your guests might review your hotel, like review sites, social media, etc.
You will need all kinds of hotel business news about your business. The hotel business reviews are important to consider.
Give customers an innovative experience. The modernized hotel industry is just not about accommodations and room services anymore.
Nowadays, it is essential to provide an all-inclusive experience of the hotel to your guests. Young travelers may get interested in other hotel activities like live concerts, pools, spas, etc.
The hotel business card design, hotel business outlook, etc., also should be focused on. Many people wonder why the hotel business fails; let us tell you, it is one of the leading causes.
Over 6000 new building projects have been completed in the last two years.
Among them, 5000 were residential buildings, while 200 were hotels and retail establishments. TRD says that the average time for completing a hotel project is around three years and 11 months.
Other questions come to mind, like how to do or how the hotel business works. We will answer them too.
Marketing is critical for your hotel to launch a good business, optimize the bookings, create brand awareness, and manage the hotel’s image.
To increase the revenues of a hotel, the hotel manager is responsible.
The marketing manager looks after the hotel’s marketing and image and participates in other operations like satisfying the hotel service’s customers; regular customers bring a big part of the revenue.
So the marketing strategy should target both. It should focus on creating new relationships with clients while managing the past ones. The business manager is responsible for managing the business and employees of the company.
They try to implement various policies to ensure that productivity is maintained, supervise the employees, manage business policies and strategies, etc. The business hotel vs. hotel can be seen as an essential factor. B
because we want to focus on the revenue mainly.
To fulfill the legal entities for the business, you will need to register with tax and discuss with Open Commercial Bank Accounts and Credit Cards and other business accounting-related operations.
Having specific licenses and registrations in India is essential to start a hotel. Many of them are needed before the initiation of the hotel business process.
They also need to get renewed after a certain period. All hotel business licenses and registrations require the hotel to follow specific rules and regulations.
You should try to raise startup capital for your business if you can. This will need a good hotel business plan. There are many methods for doing it; let’s see some of them here;
When you ask for money from someone, always be clear about the amount and numbers required. Make a good plan to present before the investors while looking for funds.
Commercial property insurance includes the real estate held by businesses from threats like fire and wind. Many also cover the tools and supplies stored on the insured property.
The hotel buildings are mostly very costly. Check your insurance amount covering the construction expenses if it gets damaged due to any peril.
A budget property hotel requires approximately .25 employees per room, while mid-range hotels need 0.5 employees per room. If we talk about large-scale hotels, they need 1.5 to 2 people per room.
So if we try to estimate employees for a 300-room large hotel, it will be around 400 to 600 people to manage the hotel efficiently. This also helps in understanding the hotel business valuation.
Create a detailed staffing plan that outlines every role you’ll hire for to ensure you are recovering all your bases and not leaving anything out. Once you know the entire staff you need, the next step is hiring the team and the number.
You can try the WETCO approach for skill set determination, which tells hospitality employees the most important five skills: warmth, empathy, teamwork, conscientiousness, and optimism.
Understanding an ideal candidate’s needs will help you hire suitable candidates. You can post about hotel business jobs on your website too.
Hotels are inclusively very complicated and energy-driven, where the information doesn’t easily get communicated. Hotel maintenance is also not easy.
The goals for a good hotel are decreasing complexity, increasing hotel efficiency, and decreasing energy use. But the service for the guests must not get compromised.
Connected hotels are more helpful in such cases as they reduce expenses while enhancing proactive maintenance.
In digitalization, creating a website is essential for your business. While making the website, hotel owners can choose a simple website builder or select a web designer to start a custom website.
The hotel business logo is also essential. The hotel business design theme makes a significant impact on the customers.
Your hotel website needs to have the following:
1. Responsive design
2. Great photography
4. Direct booking engine
5. Lead capture
6.COVID-19 info page
7. Consistent branding
8. Social proof
9. Useful, relevant content
10. Tracking and analytics
11. SEO functionality
Hotel phone systems are responsible for looking after the communication of the hotel, whether internal or external. Internal calls mainly happen between the guests and the hotel staff at the front desk, laundry, housekeeping, etc. It also includes a conversation between hotel employees.
External calls occur between outside the hotel leads and hotel employees, like calls with guests, suppliers, etc. IVR is incorporated into hotel phone systems to help callers; call center-like features like call statistics, etc.
The training of the employees begins at the time of orientation mainly. The direction helps tell the employees about their responsibilities, culture, and guidelines.
It should also introduce employees to the brand story, like its history, foundation, vision, mission, etc.
It would be best to tell them about the hotel business objectives, the business vocabulary used, the hotel business report, the hotel business description, the hotel business continuity plan, etc.
A right and efficient orientation will help your hotel business go on the right track. The hotel business is profitable if managed well.
Continuous learning is the key to becoming successful in the hospitality business. When you try to uplift the skills of your staff, then it also makes them feel valued, and they show more loyalty towards the brand.
Make a professional development budget for the staff to help them enhance their skills.
You can also create online database management to enlist all the training courses given by Tipsy, which will help them enhance their skills and hospitality.
You can offer courses in hotel business schools, hotel business books, and hotel business journals.
For taking inspiration for your hotel business, you can study various other hotel businesses like:
Hotel business in the UK, hotel business Jihlava, hotel business life Istanbul, hotel business Villa Omori Tokyo, Sunrise Business Hotel Ximen, business hotel Yamashiro Shinjuku, Business hotel Yokohama, business hotel Yamashiro Tokyo, business hotel Yamashiro Pantip, hotel business Zug, Marcian business hotel Zamboanga, Hamilton business hotel Zamboanga, hotel union business Ljubljana, business hotel Yamashiro, business hotel Kota Damansara, hotel business Zug Ag, business hotel Zurich, business hotel Jakarta, hotel business the UK, etc.
If you have completed all the step-by-step hotel business plans, you can try to open your hotel with some promotional activities to get your first batch of guests.
Please remember that we must communicate with customers promptly and solve various problems customers encounter during the check-in process to improve the quality of hotel services in the early stage.
I hope this comprehensive hotel business guide will help you build your hotel business and win successfully!