In this article, you will learn how to implement and start a hotel business step by step and achieve the expected return better.
Last Updated on May 2, 2024 by Vincent Zhu
As a company specializing in electronic door lock systems for hotels, ShineACS Locks has helped hundreds of customers start their hotel businesses.
While providing the necessary RFID hotel locks and 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 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 tourism boom have also driven the development of the hotel industry. The hotel business provides an excellent opportunity for many people to make money.
However, 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 that it 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 4-5-year payback 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 considering 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. The payback time will be more than ten years, considering the typical factors.
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 ends 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.
Regarding the hotel business and COVID-19, hotel business growth has been affected, but it’s returning 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.
Let’s see 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.
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. Luxury hotel revenue has increased. 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 developing 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 collectively promote hotel business development. Questions may arise about the hotel business’s profitability; we will discuss them, 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 benefits. That’s why marketers need to understand a product’s price and demand before setting prices.
2)Consumer perception of price and value: When setting the hotel’s costs, management must consider the prices and how consumers perceive them. The process should be decided after considering the customer.
3) Analyzing the price-demand relationship: A product’s high price may cause its lower demand. So, the hotel should also consider this when deciding 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 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 broadly. They both involve the hotel business together in various ways. It would be best if you planned 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, it would help if you were 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.
Focusing on guests is essential to making 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 planning it. When someone wonders how to start a hotel business, the answer is simple: prepare the best 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.
That’s why 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 must 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 of rents will depend upon the investor’s risk appetite. There are also options for leasing and renting. A lease is the 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 needs to pay the rent for the place, and the area owner has no share of the profit.
Also, all losses are handled 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 has 115 rooms, meaning 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, a 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 when deciding the type of design for a hotel, such as pleasing appearance, efficient planning, a good site region, materials, human resources, budget, and management.
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. Such hotel setups are mostly arranged around the regions where a huge event occurs.
Next on our list is the Poshtel Hotel, an upmarket hotel similar to a boutique hotel. If you are setting up a hotel, you should consider contacting 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 or luxury hotel, and its size.
The hotel business is good because there are many chances to profit. Registering for a USA hotel will cost around $750.
The Federation of Hotel and Restaurant Association of India [FHRAI] issued multi-fold price increases for five-star deluxe properties costing around Rs 75 lakh to Rs 1.8 crores.
You can set up the establishment for 1 yen through the Companies Act of Japan in Japan. However, you must still 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 determine your hotel’s position in the market and how guests will find it 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 significantly influences its cost. The price will depend on the number of rooms, spaces, or restaurants.
Land: This is mainly about the real estate price of the hotel.
Soft Cost: The cost increases if a hotel uses more software. 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. Hotel business facilities or games, hotel business lounges, hotel business suites, etc.
FF&E: FF&E stands for Furniture, Fixtures, and equipment. It encompasses all entities such as building desks, electronic equipment, hotel lock systems, computers, etc. Sometimes, it is also referred to as hard cost.
Pre-Opening & Working Capital: Before the hotel’s opening, you must hire staff for various operations and other pre-opening management tasks.
This will require a salary fund and preparation fund. Also, a specific hotel business law 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 in urban areas are more expensive than those in rural, remote, or suburban areas.
The range of hotel business rates is $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 and Forecasting Online courses 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. Hotel owners need 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.
Getting a commercial mortgage for a hotel 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 offer customers an open-buffet breakfast that complements hotel business or regular room bookings.
Room Service: Most hotels offer 24-hour room service to make guests comfortable. Click here to view 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 for the guests, which they can use for shopping or entertainment.
There are other services like:
When discussing hotel marketing, we often forget the term value proposition, which 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: This paragraph describes your services, such as what you provide and to whom, and why they differ from others. However, do not overcrowd your website with irrelevant material.
4. Bullet Points: This is where you will describe your hotel’s benefits and key features. Make sure not to make it look more detailed than required.
The hotel industry thrives on location. If you are considering starting 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 don’t rely on feedback forms. There are 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 hotel experience to your guests. Young travelers may be interested in other hotel activities like live concerts, pools, spas, etc.
Focus should also be on hotel business card design, business outlook, etc. 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 in a big part of the revenue.
So, the marketing strategy should target both. It should focus on creating new client relationships 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 maintain productivity, 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.
Hotel buildings are usually very costly. Check your insurance amount to cover the construction expenses if your hotel is damaged by 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 require around 400 to 600 people to manage the hotel efficiently. This also helps in understanding the hotel business valuation.
Create a detailed staffing plan outlining every role you’ll hire to ensure you recover all your bases and do not leave anything out. Once you know the staff you need, hiring the team and the number is the next step.
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 also post about hotel business jobs on your website.
Hotels are inclusively very complicated and energy-driven, where the information isn’t easily 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 be compromised.
Connected hotels are more helpful 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
3. Speed
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 managing the hotel’s communication, whether internal or external. Internal calls mainly occur between guests and hotel staff at the front desk, laundry, housekeeping, etc. They also include conversations between hotel employees.
External calls occur between outside the hotel leads and hotel employees, such as calls with guests, suppliers, etc. Hotel phone systems incorporate IVR to help callers and 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 success in the hospitality business. Uplifting the skills of your staff also makes them feel valued, and they show more loyalty to the brand.
Make a professional development budget for the staff to help them enhance their skills.
You can also create an online database management system to list 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 check-in 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!
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