Starting a Hotel Business: A Guide

Starting and managing a hotel is a complex task which is not suited to every entrepreneur, but for some, it can be a lucrative and rewarding project with the opportunity for creativity alongside hospitality. A hotel business can be a stand-alone luxury villa, cottage or house, a large building with multiple rooms up to something more like a skyscraper with hundreds if not thousands of rooms. Regardless of the size of the venture, a hotel needs to be able to satisfy a variety of needs from catering to leisure as well as offering something unique so it can stand apart from its competitors.

Is the hotel business right for you?

On a day-to-day basis a hotel owner will be faced with a number of responsibilities ranging from hiring and managing staff, scheduling shifts, setting prices for rooms (including different rates for different days or seasons), paperwork, administration, financial management and continuing to research new ways to innovate and improve the hotel’s service. The hotel will also need to work with external service providers depending on the amenities on offer. For example, if the hotel has a pool, the owner may need to contract experienced water treatment specialists, or the hotel may need the services of a commercial laundry service for bedding and towels.

Many owners choose to hire a hotel manager to take on the everyday management of staff and looking after the guests.

The majority of people who start their own hotel business have some experience in the hospitality sector and are familiar with the potential problems they may run into. It’s also possible to study an MBA in hospitality management which equips people with essential business skills such as financial management and marketing.
Who is the target customer?

Broadly a hotel could target any traveler who needs a place to stay, but the most successful will target their offering to a specific demographic. This may be influenced by the location of the hotel. For example, if the hotel is in a rural setting, it could seek to attract couples or families looking for a relaxing and homely retreat. If the hotel is in the middle of a busy city center, it may be better suited to business professionals or groups. It could even offer conferencing facilities, which could be an additional revenue stream.

How much does it cost to start a hotel business?

Whether you are opening a large hotel with many hundreds of rooms or a smaller hotel with just a few rooms, you need to have a substantial amount of hotel financing capital behind you to get things off the ground. The cost of the land and buildings will be substantial as will the furniture and equipment needed, but these will vary widely depending on the size of the venture, so it is almost impossible to estimate.

Is a hotel business a good investment for the future?

With newer platforms like Airbnb hitting the market, there is a concern that traditional hotels will drop in popularity. While there is an appeal for some travelers looking for a more ‘authentic’ or intimate travel experience, hotels still hold a lot of appeal for people who prefer don’t want to stay in the homes of strangers or with hosts which aren’t regulated by corporate structure.