How to Start a Hotel Business

How to Start a Hotel Business


  1. How to Start a Hotel Business?
  2. How Big is the Hotel Market?
  3. What are the key segments of the Hotel Market?
  4. Introduction to Hotel Revenue Management
  5. How do hotels generate revenues and benefits?
  6. What external factors affect the Hotel Market?
  7. Who are the key competitors in the Hotel Market?
  8. Online Hotel Marketing Strategies
  9. What are the key financial metrics and costs in the Hotel Market?
  10. What are the keys to launching a new Hotel?
  11. What are the typical Startup costs for a new Hotel?
  12. How much do hotel operators make?
  13. Steps to Starting a Hotel
  14. Additional resources in the Hotel Market
  15. 5 Keys to Success to Start a Hotel

How to Start a Hotel Business?

In case you’re hoping to start a hotel business, you’ve gone to the ideal place. Since we’re going to show you exactly how to do it. We’ll start with key hotel industry fundamentals like how enormous the market is, what the key fragments are, and how revenues and benefits are generated. At that point we’ll talk about keys to starting a hotel business, yet prevailing in it!

How Big is the Hotel Market?

According to IbisWorld, there are 74,372 hotels, and the hotel business generated $166.5 billion in revenue in the United States alone last year. This speaks to an annual development rate of 4.7% in the course of recent years. 

Industry benefits were $26.0 billion, and wages paid to hotel representatives totaled $42.7 billion.

What are the key segments of the Hotel Market?

A building is an institution that gives lodging and, typically times, meals and alternative services for travelers and alternative paying guests. A motel, on the opposite hand, provides lodging for motorists in rooms typically having direct access to Associate in Nursing open park.

A particular building or motor inn may be classified by a variety of characteristics, together with whether or not it provides full or restricted service, whether or not or not it’s settled during a metropolitan space, the state or region within which it’s settled, its worth or rate level, the quantity of rooms, and whether or not it’s freelance or a part of a series operation.

Hotels and motels also can be segmented by space worth rates. The institutions with space rates within the highest thirty score that square measure settled in native or metropolitan markets square measure classified as upmarket or luxury. the center thirty score is assessed as mid-priced, and also the lowest forty score as either economy or budget.

Overall, sales from hotels account for eighty seven.4% of trade revenue and eighty two.0% of trade employment, tho’ they account for under forty four.0% of trade institutions.

Hotels that accommodates twenty five or a lot of rooms offer eighty three.6% of trade revenue (with sixty two.7% of trade revenue returning from guest space rentals, 12.5% returning from food and alcohol sales, 4.2% returning from conference and meeting rooms and four.2% returning from alternative charges), whereas hotels that supply fewer than twenty five rooms solely represent three.8% of trade revenue.

Motels offer regarding twelve.6% of trade revenue. The relative proportion of revenue from every of those segments has been comparatively stable over the past 5 years, though motels intimate with some growth at the expense of higher-priced hotels throughout the recession.

Introduction to Hotel Revenue Management

How do Hotels generate revenues and benefits?

Clearly hotels generate revenues and benefits from marketing out their rooms. 

However, as determined above, other key wellsprings of revenue to consider are nourishment and alcohol sales, and marketing gathering and meeting rooms.

What external factors affect the Hotel Market?

Various factors affect the performance of the hotel business. These drivers include: 

  • Local outings by US occupants: Trends in household travel, especially business travel, and the total evenings spent away from home straightforwardly affect demand for accommodation. As the quantity of excursions made by US residents rises, demand for hotels and motels to house them increases. 
  • Shopper Confidence file: Changes in customer certainty impact choices that individuals make concerning consumption on entertainment and traveling, particularly during a subsidence. 
  • Shopper spending: Consumer spending levels have an immediate impact on travel demand. At the point when shoppers are spending increasingly overall, they are bound to invest a portion of their cash on travel and accommodations.

  • Inbound excursions by non-US occupants: Trends in international visitor arrivals and their lengths of stay impact demand for accommodation. An ascent in inbound outings decidedly affects demand for hotels and motels.

Who are the key competitors in the Hotel Market?

As indicated above, there are 74,372 hotels in the United States. 

The market leaders (as far as market share) incorporate Hilton Worldwide Holdings Inc. (13.7%), Marriott

International Inc. (13.5%) and Inter Continental Hotels Group PLC (7.5%). 

The remainder of the market is included many smaller players.

Online Hotel Marketing Strategies

As mobile technology advances and the world of social media expends, more and more hotels are turning towards the internet to increase revenue and generate greater brand awareness. In this wild world of twitter, SEO and analytics, failure to adopt early is social suicide – see how the most social-savvy hotels are marketing themselves in this exploding market.

  • Residential recreation travelers: 48.5% 
  • Business travelers: 24.0% 
  • International recreation travelers: 14.0% 
  • Gatherings, occasions and motivation travelers: 13.5%

What are the key financial metrics and costs in the Hotel Market?

The key money metrics within the building market square measure as follows:


Industry profit is measured as earnings before interest and taxes. business profits have averaged fifteen.5% of sales in recent years.


The industry’s major expenses square measure purchases and value of sales, like bedding and area provides. several hotels additionally offer meals and liquor, either in individual rooms or in separate restaurants or feeding areas.

Last year, purchases were calculable to account for twenty nine.9% of a mean operator’s revenue.


Labor is needed in several aspects of building management, from front-of-house activities, like front table, caretaker and connected activities, to any or all back-of-house activities, as well as general management, accounting, marketing, area cleanup and union the kitchens, bars and restaurants.

Many building jobs have a coffee ability and coaching demand, and workers are often employed on a part-time or casual basis. thanks to this follow, several hotels have high employee turnover.

Therefore, there’s a relentless would like for accomplishment and coaching, which may be pricey. Some operators have outsourced a part of their employees services to specialist staff-recruitment agencies to lower accomplishment prices.

Last year, business wages accounted for about twenty five.7% of total business revenue.

Rent and Utilities:

Rent and utilities on the average comprise seven.6% of building revenue.

Other Expenses:

Other major prices embrace repairs and maintenance, promotional prices, commission paid to agents, bookings and net fees, accounting and legal prices, car expenses, writing paper and printing, insurance and different body and overhead prices.

What are the keys to launching a new Hotel?

1. Determine the most effective Location

Location has historically been the foremost vital crucial success issue. within the right location, wherever competitors don’t seem to be fulfilling all client desires, a building will thrive. However, during a neighborhood that has significant competition from existing hotels, success might not be thus forthcoming.

2. Plan for Capital

Whether you get associate existing building, build one from scratch, or renovate a building into a building, you’ll want a lot of bucks to take a position. assumptive you are doing not have this cash, you’ll have to be compelled to ask for bank loans and/or angel investment in your building.

3. Have a Business arrange

A simple, clear, however persuasive building business arrange is important not just for you to assume through however you’ll strive against the chance, except for you to win over any capitalist or loaner that you just have the flexibility to try to to thus. No savvy capitalists are going to be attracted by an absence of designing.

4. Provide Exceptional Service

Hotels deliver the goods this crucial success issue by guaranteeing the workers is knowledgeable, courteous and capable of breakdown any conflicts that arise. Providing quality service additionally entails memory the names and preferences of repeat guests and giving recommendation regarding attractions and surroundings.

5. Implement a sensible E-commerce Strategy

A sure-fire e-commerce strategy maximizes the quantity of your web site and depends on 3 key factors:

  • Your website’s visibility
  • Your website’s sales focus
  • The reserved offers you promote on your web site

6. Structure a sensible evaluation Strategy

Set a sensible evaluation strategy that will increase occupancy rate. verify area rates supported prices and research. evaluation factors include:

  • Staffing prices
  • Room class
  • Time and length of keep
  • Maintenance prices
  • Competitor evaluation

7. Be Flexible

Customers will have utterly completely different expectations of a building, thus your team must run the authority to form choices to accommodate them once attainable.

A manager with the authority to form exceptions will flip a scenario around and earn a decent name for quality client service.

8. Differentiate

There are 2 basic ways in which to differentiate and gain a competitive edge: be higher and be different:

  1. Be considerably higher at one thing that everybody provides by doing the underlying activities otherwise.
  2. Create an important product attribute that the competition doesn’t provide.

9. Focus on Quality Management

Quality management includes worker satisfaction and involvement.

By concentrating on worker satisfaction yet as client service, a building will increase the chance that workers are happy and, in turn, offer wonderful client service.

10. Invest during a Strategic Marketing arrange

The goal of a hotel’s marketing arrange is to confirm semi permanent success. use associate integrated strategy that may reach your target market segments. Utilize marketing, packaging, advertising and sales efforts to realize whole recognition and ultimately drive revenue.

How to Start a Hotel Business

What are the typical Startup costs for a new Hotel?

The typical startup costs for another hotel include: 

  • Building or purchasing the hotel 
  • Working capital for staffing, marketing and other operational costs 

The percentages of sale for costs are detailed above. With regards to the expense of structure or purchasing a hotel, this varies immensely based on the sort (e.g., spending versus extravagance) and size (e.g., 5 rooms versus 500 rooms) of the hotel.

How much do hotel operators make?

Hotel operators and administrators get varied pay amounts based on the achievement of their hotel. According to Glassdoor, the typical Starwood Hotels and Resorts Vice President salary is $244,472, which is 45% above the national average.

Steps to Starting a Hotel

If you would like to start a hotel, follow these steps:

  1. Determine the kind of hotel you’d wish to begin (e.g., what number rooms, luxury vs reasonable, etc.)
  2. Determine the best location(s) for your hotel
  3. Determine whether or not you’ll build your hotel from scratch or renovate associate degree existing structure
  4. Speak with architects agency that are concerned in building/renovating your hotel to see prices
  5. Speak with authorities to grasp partition and allow problems and associated prices
  6. Develop your hotel business set up that details your strategy, plans and money projections
  7. Present your conceive to investors and lenders to boost the desired funding
  8. Build/renovate your hotel
  9. Recruit and train your hotel employees
  10. Purchase the desired systems (e.g., reservation system, accounting code, etc.) to effectively manage your hotel
  11. Launch your pre-opening hotel marketing set up
  12. Open your hotel to the general public

Additional resources in the Hotel Market

For additional information on the hotel market, think about these industry resources:

  • American Hotel & Lodging Association
  • Hospitality Net 

5 Keys to Success to Start a Hotel

Starting a hotel needs careful selection of a location and strategy, a business set up, access to sizable money resources, and a client service outlook.

1. Location and Opportunity

The location of your hotel is extremely coupled with the chance that you just feel there’s for your hotel. within the right location, wherever competitors aren’t fulfilling all client wants, a hotel will thrive. However, during a stunning neighborhood that happens to own significant competition from existing hotels, success might not be thus forthcoming. Likewise, if the neighborhood leaves an excessive amount of to be desired, you’ll not be able to value the rooms low enough to encourage travelers to remain at your hotel, even though you’re at intervals walking distance of key attractions.

2. Strategy

The next step is to understand however customers can answer the question “why is my hotel?” however can you tailor your services to the purchasers you would like to draw in, whether or not they square measure families with children, couples on romantic vacations, business people, or international tourists? contemplate the mix of amenities, atmosphere, location, and services that may be right for your customers. perpetually detain mind that strategy suggests that creating tradeoffs – it’s virtually not possible to be everything to everybody and succeed. you would possibly need to forgo bound client target markets so as to create your service providing excellent for your most desired customers.

3. Planning

A simple, clear, however persuasive hotel business set up are going to be necessary not just for you to suppose through however you’ll battle the chance, except for you to convert any capitalist or investor that you just have the power to try to to thus. No savvy capitalists are going to be attracted by a scarcity of planning. there’s no excuse to not produce {a set up|an idea|a thought|a concept|an inspiration} with the wealth of knowledge obtainable on writing business plans and even business plan templates tailored to the hotel sector.

4. Fundraising

Whether you purchase Associate in Nursing existing hotel, build one from scratch, or renovate a hotel into a hotel, you’ll would like uncountable bucks to speculate. presumptuous you are doing not have this cash, you’ll got to ask for bank loans and/or angel investment in your hotel. As you’ll be operating with sizable assets, dependable and tough legal and accounting assistance is a requirement as you produce deals with investors.

5. Hospitality Mindset

Finally, you want to have Associate in Nursing constituted sense of however you would like your guests to be treated in order that {you will|you’ll|you’ll be able to} instill this outlook in your high management and that they can, in turn, teach this to the employees. Staying at a hotel are often disagreeable and uncomfortable, and guests demand the best attention to their wants or they’ll haven’t any drawback gurgling loudly and publicly. If staff sense you have got higher motives than client satisfaction, client service could fall by the edge and your hotel business could fail or ne’er commence within the initial place.

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