How to OPEN A Hotel  

How to Start a Hotel Business

The tourism industry is growing more than ever. So, opening a hotel is one of the most success-promising businesses, if done right. We are here to help you make your hotelier-dream come true. We want to make this journey as easy and successful for you, as it can be.

About Hotels: Definition, Ownership Options & Types

1. Starting with the basics of a hotel

hotel definition

1.1 Knowing the definition

If you want to open a hotel, you need to know its definition first, because the definition holds up some criteria. Only if these criteria are fulfilled, it is really a hotel that you are opening, and not a guesthouse or something else. A hotel meets the following characteristics:

  • A reception
  • Daily room cleaning
  • A minimum of one restaurant for the guests
  • At least 20 guest rooms

Hotel ownership options

1.2 Finding the right option

Whoever wants to open a hotel has several options to start from. This decision is very important as it points the way for every step that comes after. Here are some options.

  • Business takeover: Here, you just keep on managing an already existing hotel. Pros: you know exactly what the takeover will cost you and all the hardships of the founding fall away. Also, you already have your customers. Cons: you have limited possibilities to implement your business idea.
  • New foundation: You start your hotel from scratch. Pros: you have all the capacities to bring your concept, ideas, and imagination into life. Cons: it will require more time, effort, and money and the process is harder to follow through, Also, you will have to think about a good marketing strategy to get the business going.
  • Franchise system: A franchise is a method of opening a hotel in cooperation with a specific brand. Pros: you will gain the trust of the customers of this brand. Also, international marketing will help you with the start-up and the brand will give you financial support. Cons: just like a business takeover, that you are limited in bringing in your ideas. Also, part of your intake will go to the franchise partner.

Choosing hotel type

1.3 Defining a concept

A Hotel is not just a hotel. It can be anything. Yes, they all have one thing in common: they host guests. But there are still many types of hotels, defined by category.

  • Business hotels: This type mainly targets business travelers and is usually located downtown or in popular business districts. But even tourists and small conference groups like to stay in a business hotel. They usually offer conference rooms, morning coffee, free local telephone calls, etc.
  • Airport hotels: These hotels primarily cater to business clientele and airline passengers, who have long transit hours or whose flights got canceled. Also, airline crews or staff stay here.
  • Suite hotels: This type of hotel is trending right now. The hotel offers a suite with a living room and a separate bedroom. Suite hotels mostly attract businessmen, lawyers, and so on.
  • Resort hotels: These structures are in places away from cities such as mountains, beaches, or islands. Therefore, they have many recreational facilities. Some include Sports playgrounds, swimming pools, gyms, spas and beauty centers, many different types of restaurants, discos, etc. They have a large entertainment program so that guests can find everything they need on the resort.
  • Motels: This is a hotel located near a major motorway. It is a cheap option for people car travelers to rest if they are traveling for a long period.

Putting your Ideas on Paper

2. Writing a perfect business plan for the hotel

Writing a good business plan is essential when seeking financial support from banks or business partners. But it is also useful for the foundation of a hotel. It serves as a guide throughout the process and helps define further plans. When it comes to writing it, you should consider the following points.

Hotel business plan

2.1 Considering the legal form

When it comes to choosing the legal form for your business, you should ask yourself: Am I founding the business on my own or with a team? How much equity capital is available for the hotel? Am I considering investors and business partners to support me with the foundation of the hotel? After choosing a suitable legal form, mark this in your business plan and describe it in detail.


2.2 Choosing a location

Here you should clearly and thoughtfully describe why you chose a specific location. Before making any decision, think about the following aspects:

  • Sightseeing spots: Depending on the type of hotel you choose, these might be classic city attractions, mountains, seas and oceans, shopping streets, discotheques, and many more.
  • Quiet location: Hotels are made for travelers seeking rest, and rest requires quietness. Therefore, even if the hotel is in the middle of the town, try to find a place that is not directly located on big streets and crossings. A motel is an exception, for sure.
  • Good infrastructure: Make sure the location has good transport connections and other facilities such as shopping possibilities and doctors nearby. This is easy to manage in a city, but harder on the landside. If you choose a location that is far away from the city, there should be at least one bus station nearby, because not everyone travels by car.
  • Competition: It is ideal to open your hotel in a place where there are no other hotels. If that’s not possible, ensure your hotel is special and different from your competition.


2.3 Analyzing the market situation

This point goes hand in hand with choosing the right location. If you want to open a hotel, you have to know its potential for success. Look out for places where there is a lack of hotels. If you cannot find such places, get to know your location a little bit more. Become acquainted with the hotels surrounding and know what kind of competitors you are dealing with. For this purpose, it is very helpful to choose five to seven hotels nearby and analyze them. Study their strategy and their target audience Also, get yourself a picture on the spot. You can check in in some of these hotels and get in touch guests and employees to get some first-hand information.


2.4 Being unique

When it comes to your competitors, it is important to offer something that they do don’t offer. You have to be unique and stand out to keep up with them on the market. At this point, you should define that one thing that makes your business special. For example, you could offer an outstanding design, a childcare program, or an eased check-in and check-out system.


2.5 Specifying the target group

We have already stressed enough the importance of target audience, especially when it comes to choosing the concept and location. But here you should think about them in-depth and make a demographic analysis about them. Evaluate their age, income, jobs, and what they look for in that type of hotel.


2.6 Designing a marketing strategy

This point requires an in-depth target analysis because if you know the expectations and preferences of your target audience, you can choose the best marketing strategy.

In any case, you shouldn’t miss out on having a website with all the important information. Also, being present on Social Media networks is never a bad idea.

For the opening, try handing out flyers. Also, offering opening deals and discounts attracts customers. You could also try to work with booking websites. They might even promote your hotel in exchange for good payment. Add these expenses to your cost projection.

Learn how to write a gastronomy business plan
Hotel Finance & Funding Sources

3. writing a Financial Plan for the hotel

Hotel financial plan

3.1 Making a cost projection

Opening a hotel is not cheap. Therefore, you need a good overview of how much it will cost and what you are spending the money on. Keep in mind that you will not only buy real estate but also invest in employees and a team for your hotel. You can cut down your cost into three categories:

  • Start-up costs: They include costs for education, getting licenses and permits, and buying the real estate.
  • Fixed costs: If you are renting real estate then the rent falls into this category. Also, you should think about insurance, electricity, gas, internet, water bills and many more. Even the money for the employees belongs here.
  • Variable costs: These include all the costs that rise along with the income. Bear in mind that nothing goes exactly like planned. Unpredictable events can always occur. So, always have a specific budget for events like that.


3.2 Generating a financial budget

This is, just like making a cost projection, a very difficult task to do. Here you should define what your price ranges are and how much the guests are willing to pay for sleeping over, services, food, and drinks. Also, you should bring to paper how much the working expenses are. You should compare earning and spending. You can help yourself by analyzing other hotel’s financial budgets.


3.3 Mapping out a financial plan

It is nearly impossible to open a hotel with your own money due to the high sums for furniture and investments. There are three possible ways of financing a hotel opening:

  • Take out a loan from a bank
  • Attract investors
  • Taking part in public support programs

Choosing a credit will put you at a higher risk but gives you the possibility of choice. Investors, however, might limit your ideas and imagination.

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Getting the Hotel Up and Running

4. Getting ready for opening the hotel

Preparing hotel opening

4.1 Signing up the business

After thoughtfully fulfilling the planning process and choosing the right location, it’s about time to make your business official. Make sure to get all the licenses and permits needed for your hotel. Bear in mind that you will also have a restaurant in your hotel that requires paperwork. Because the needed papers differ from city to city, inform yourself about everything you need and hand everything in as neatly and soon as possible to save time and money. Also, do not forget insurance.


4.2 Taking the last steps

Now you can start setting up the final elements in your hotel. Also, now is the time to search for staff and build up a resistant team, who you can share your success with.

To Sum Up

5. Summary – Opening the hotel

After creating the concept, months of hard work, planning, and preparations it is about time to open the hotel for the first guests. Be flexible. Ask your customers for their opinion on their residence and adapt to their needs. This is the final and crucial step for becoming a successful hotelier and keeping the business alive.
Frequently Asked Questions

6. FAQ - How to open a hotel

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