Do you want to start a hotel business successfully? If YES, here is a complete guide to starting a hotel business with NO money and no experience.
Okay, so we have provided you an in-depth sample hotel business plan template. We also took it further by analyzing and drafting a sample hotel marketing plan backed up by actionable guerrilla marketing ideas for hotels. In this article, we will be considering all the requirements for starting a hotel business. So put on your entrepreneurial hat and let’s proceed.
Why Start a Hotel Business?
All over the world, the hospitality business is seen as a very serious trade and the reason for this is not far-fetched. The reason the hospitality business, especially the hotel business, is taken seriously is because of its relationship with the tourism industry.
Either locally or internationally, one of the ways to make people who arrive at unknown places at ease is by having a very relaxed hotel in place for them to lodge in. This is one of the reasons why the hotel business continues to witness a boom.
The hospitality industry has been in existence from time immemorial and it is still waxing strong because people can’t do away with the services they offer. When you talk about a hotel, you are talking about an establishment that provides lodging for guests/travelers, tourists, visitors et al, on a short-term basis for a fee.
When people lodge in hotels, they have the option of subscribing to other services the hotel offers; services like feeding, drinks, laundry, fitness center, swimming pool, conference room and business room, amongst others.
Starting a hotel business could eventually be one of the best businesses for an entrepreneur. This is because of the lucrative nature and the prosperity involved in this industry. Every day, foreigners as well as local migrants and business people travel from one point to the other and the option they are faced with is staying in hotels.
It is pertinent to note that there are different categories of hotels, the 5 star, 4 star or even 3 star hotels. One of the essential things that is unique to each category of hotels is the facilities that make up each.
Indeed, starting a hotel business is capital intensive and it is considered a long-term investment because it takes a while for the owners to breakeven and starts making profits. It takes a big-time investor to consider starting his or her own hotel business, which is why loads of hotels are owned by groups of investors.
It’s one thing to put up the physical hotel structure (building) but the real challenge is running it profitably. This is why you must take into consideration the cost of starting a hotel business. One good thing about the hotel business is that the business can grow so big that it will not only have active presence in key cities in the country where it started from, but in major cities in all the continents of the world.
If indeed you want to start a hotel business, then you should read through this article keenly, it will help you establish your own hotel facility from the scratch and build it to profitability within the shortest time possible.
Starting a Hotel Business With No Money – A Complete Guide
- Industry Overview
The hospitality industry has been in existence from time immemorial and it is still waxing strong because people can’t do away with the services they offer. When you talk about a hotel, you are talking about an establishment that provides lodging for guests/travelers, tourists, visitors et al on a short-term basis for a fee.
When people lodge in hotels, they have the option of subscribing to other services the hotel offers; services like feeding, drinks, laundry, fitness center, swimming pool, conference room and business room et al. It is important to state that hotel operations vary in size, function, and cost which is why hotels are classified into different grades (two-star hotel, five-star hotel, seven-star hotel et al).
As a matter of fact, the facilities provided by some hotels may range from a basic bed and storage wardrobe, to luxury features such as en-suite bathrooms, mini parlor et al. It is the norm for big hotels to provide additional guest facilities like swimming pool, conference center, business center, childcare, self-service laundry, fitness center and social function services.
In some countries, hotels are required by law to serve food and drinks to all clients that lodged in their facility while in some countries, you would have to choose the additional services you want from the hotel. The bottom line is the higher the amount you pay in hotels, the more the services you are entitled to.
In recent time, the Hotels industry has experienced steady growth as several consumer trends supported demand for the services offered by hotel operators. For instance, consumer confidence and spending have both experienced steady increase over the period, allowing rates of both domestic and international travel to increase.
Another consumer trend has been the gravitation toward unique lodging and experiences which establishments in the Hotel industry offer. Going forward, the Hotels industry will continue experiencing this robust growth as domestic and non-US resident trips increase.
The Hotels/Hospitality industry is a thriving sector of the economy of the United States, United Kingdom, France, Italy, and Canada and in most countries of the world. Statistics has it that in the United States of America, The Hotels / Hospitality industry generates a whooping sum of $7 billion annually from more than 1,997 registered and licensed standard hotels scattered all around the United States of America.
The industry is responsible for the employment of well over 60,106 people. Experts project the Hotels/Hospitality industry to grow at a 5.0 percent annual rate. InterContinental Hotels and Starwood are leaders in this industry; they have a lion share of the available market.
A recent report research conducted by IBISWorld shows that the Hotels/Hospitality industry has a low-level concentration, with the top four players expected to account for about 33.0 percent of the available market share in 2015. The report further stated that the hotels benefit from being able to convert buildings not normally suitable for hotel use using low-cost luxurious materials (e.g. slate instead of imported marble).
Furthermore, independent hotels do not have franchise fees, and some boutique hotel brands offer limited partnerships with investors. On the other hand, capital expenditure remains high. Labor costs are lower for boutique hotels because of their smaller size in relation to chain hotels.
Lastly, the hotel business will continue to blossom because people will always have need to lodge for various reasons especially when they are out of their base.
Starting a Hotel Business – Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who need the services provided by hotels is wide and far reaching; it involves everyone who has any reason to lodge in a hotel or patronize services and products offered by hotels.
As such if you are looking in the line of defining the demographics of your hotel facility business, then you should make it all encompassing; it should include corporate executives, business people, sports men and women, government officials, college students, tourists, travelers, travelling agencies, event managers and religious organizations et al in and around your target location.
List of Niche ideas Within the Hotel Business That You Can Specialize in
Most hotel facility businesses tend to operate general services that a standard hotel facility provider is expected to offer. That is why it seems like there are no niche areas in the industry. But the truth is that there are various niche ideas in the hotel and hospitality industry.
These are some of the niche ideas within the hotel and hospitality industry that an aspiring investor who intend launching a hotel business can choose from;
- Boutique Hotel
- Conventional Hotels (2 Stars, 3 Stars, 4 Stars, 5 Stars, 6 Stars and 7 Stars)
- Bed and Breakfast
The Level of Competition in the Hotel and Hospitality Industry
The level of competition in the hotel and hospitality industry to some extent depends on the location of the business, your niche area of operation and of course the capacity of your hotel facility. If you can successfully create a unique niche for your hotel facility business, you are likely going to experience little or no competition.
For instance, if you are the only boutique hotel facility or 7-star hotel in your location, you can successfully monopolize the market for a long time before you start having competitions. It is important to also state that the competition in the hotel line of business is not restricted to the line of business alone, but also you will be competing against all players in the hotels and hospitality industry.
List of Well – Known Brands in the Hospitality Industry
It is important to point out the fact that in every industry, there are always brands that perform better or are better regarded by customers and the general public than others. Some of these brands are those that have been in the industry for a long while and so are known for that, while others are best known for how they conduct their businesses and the results they have achieved over the years.
These are some of the leading hotel facilities in the United States of America and in the globe;
- Wyndham Hotels and Resorts
- Hilton Hotels & Resorts
- Marriott International
- InterContinental Hotels
- Mandarin Oriental, Las Vegas
- The Langham, Chicago
- Montage Palmetto Bluff
- The Peninsula Beverly Hills
- Four Seasons Resort
- The Jefferson, Washington, DC.
- The Lodge at Sea Island
- The Nantucket Hotel & Resort, Nantucket, Massachusetts
- The Roof Garden at The Peninsula
- Lord Elgin Hotel
- Sofitel Chicago Magnificent Mile
- The Hermitage Hotel
- DoubleTree by Hilton Hotel & Conference Centre Regina
- MGM Grand Las Vegas
- Grand Hyatt San Antonio
- Monte Carlo Hotel And Casino
When starting a hotel facility business, you just have to get your costing cum economic analysis right if your intention of building the business is to generate profits, grow the business and perhaps expand the business and start competing at the national level.
When conducting costing and economic analysis for your hotel facility business, you have to critically examine these key factors; place, pricing, and promotion. As a matter of fact, you would have to continue to review these key factors at regular intervals while running your hotel facility business.
It is important to note that acquiring a facility, construction and furnishing the facility, providing overhead and running cost are some of the most important factors contributing to the overall cost of running a hotel facility business and should be considered as a major factor when carrying out your costing and economic analysis.
Starting Your Hotel Facility from the Scratch vs Buying a Franchise
There is no hard and fast rule when it comes to choosing how you intend starting a business. Basically, you should be guided by your overall business vision and mission statement.
When it comes to starting a business of this nature, it will pay you to buy the franchise of a successful and well – established hotel chain as against starting from the scratch. Even though it is relatively expensive buying the franchise of an established hotel chain, but it will definitely pay you in the long run.
But if you truly want to build your own brand after you must have proved your worth in the hotel and hospitality industry, then you might just want to start your own hotel business from the scratch. The truth is that it will pay you in the long run to start your hotel business from the scratch. Starting from the scratch will afford you the opportunity to conduct thorough market survey and feasibility studies before choosing a location to launch the business.
Please note that most of the big and successful hotel brands around started from the scratch and they were able to build a solid business brand.
Possible Threats and Challenges You Will Face When Starting a Hotel Facility Business
If you decide to open your own hotel facility today, one of the major challenges you are likely going to face is the presence of well – established hotel facilities and of course other players in the hotels and hospitality industry in your target market location. The only way to avoid this challenge is to create your own market.
Other threats and challenges that you are likely going to face when you start your hotel facility are mature markets, bad economy (economy downturn), stiff competition, volatile costs, and rising furniture prices.
So also, unfavorable government policies, seasonal fluctuations, demographic/social factors, downturn in the economy which is likely going to affect consumers spending and of course emergence of new competitors within the same location where yours is located. There is hardly anything you can do as regards these threats and challenges other than to be optimistic that things will continue to work for your good.
Starting a Hotel Business With No Money – Legal Matters
- Best Legal Entity to use for this Type of Business
You have the options of either choosing a general partnership, limited liability Company which is commonly called an LLC, or even a sole proprietorship for a business such as hotel facility. Ordinarily, sole proprietorship should have been the ideal business structure for a small – scale hotel facility business especially if you are just starting out with moderate start – up capital and you want to operate a motel or bed and breakfast. But people prefer limited liability Company for obvious reasons.
As a matter of fact, if your intention is to grow the business and have chains of your hotels via franchising all across the United States of America, then choosing sole proprietor is not an option for you. Limited Liability Company, LLC or even general partnership will cut it for you.
For example, setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. It is not so for sole proprietorships and general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholders meetings and other managerial formalities.
These are some of the factors you should consider before choosing a legal entity for your hotel facility business; limitation of personal liability, ease of transferability, admission of new owners, investors’ expectation and of course taxes.
If you take your time to critically study the various legal entities to use for your hotel facility business, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or an ‘S’ corporation especially when you have the plans of going public.
Upgrading to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your hotel facility business so as to compete with major players in the industry; you will be able to generate capital from venture capital firms, you will enjoy separate tax structure, and you can easily transfer ownership of the company; you will enjoy flexibility in ownership and in your management structures.
In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. Thus, it is imperative to create a budget for insurance policy cover and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your hotel facility business.
Here is some of the basic insurance policy covers that you should consider purchasing if you want to start your own hotel facility business in the United States of America;
- General insurance
- Health insurance
- Liability insurance
- Risk Insurance
- Workers compensation
- Building/Property insurance
- Overhead expense disability insurance
- Business owner’s policy group insurance
- Payment protection insurance
Intellectual Property Protection/Trademark
If you are considering starting your own hotel facility business, usually you may not have any need to file for intellectual property protection/trademark. This is so because the nature of the business makes it possible for you to successfully run the business without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
On the other hand, if you just want to protect your company’s logo and other documents or software that are unique to you or even operation concepts, then you can go ahead to file for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO. The final approval of your trademark is subjected to the review of attorneys as required by USPTO.
Is Professional Certification Needed to Run a Hotel Business?
If you intend starting a hotel facility in the United States of America, you are encouraged to pursue professional certifications; it will go a long way to show your commitment towards the business. Certification validates your competency and shows that you are highly skilled, committed to your career, and up-to-date in the competitive market. Besides it is almost impossible to run a hotel facility business in the United States without the proper professional certification.
These are some of the certifications you can work towards achieving if you want to run your own hotel facility business in the United States of America;
- AHLEI Professional Certification
- Eco-Friendly Hotel Certifications
- Certified Hotel Administrator (CHA)
- Certification in Hotel Industry Analytics (CHIA)
- Certified Hospitality Revenue Manager (CHRM®)
- Green Globe Certification
Please note that you cannot successfully run a standard hotel in most developed countries of the world if you do not acquire the required certifications, licensing and permits from the appropriate authority.
List of Legal Documents You Need to Run a Hotel Facility Business
The essence of having the necessary documentation in place before launching a business in the United States of America cannot be overemphasized. It is a fact that you cannot successfully run any business in the United States without the proper documentations. If you do, it won’t be too long before the long hands of the law catch up with you.
These are some of the basic legal documents that you are expected to have in place if you want to legally run your own hotel facility in the United States of America;
- Business and liability insurance
- Federal Tax Payer’s ID
- State Permit
- Certificate of Incorporation
- Business License
- Business Plan
- Health inspection Certificate
- Copy of license for the service support facility and/or a recent inspection report
- Non – disclosure Agreement
- Employment Agreement (offer letters)
- Employee’s Handbook
- Operating Agreement for LLCs
- Insurance Policy
- Company Bylaws
- Memorandum of Understanding (MoU)
- Building License
- Franchise or Trademark License (optional)
Financing Your Hotel Facility Business
Starting a standard, equipped and well – furnished hotel facility business is capital intensive even if you choose to launch the business on a small scale and you only have a handful of full – time employees on your payroll. Leasing of a standard facility that can accommodate your guests and staff members and of course the purchase of daily supplies (toiletries and food ingredients et al) are part of what will consume a large chunk of your startup capital, in essence, if you choose to start the business on a small scale, you will still have the need to go source for fund to finance the business.
When it comes to financing a business, one of the major factors that you should consider is to write a good business plan. If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for startup capital for your hotel facility business;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell of shares to interested investors
- Applying for loan from your bank/banks
- Pitching your business idea and applying for business grants and seed funding from government, donor organizations and angel investors
- Source for soft loans from your family members and your friends
Choosing a Suitable Location for your Hotel Business
Starting a hotel facility business comes with its own challenges; it is a business that cannot be started in any location. As a matter of fact, you will need approval from the local council and other regulating authorities in the city you intend opening your hotel facility business.
Hotels are part of the human lifestyle hence it must be located in good location; a location that is that is highly secured and easily accessible from airports and business districts if indeed you want to maximize profits from the business.
Generally, in business, it cannot be overemphasized that the location you chose to start your business is key to the success of the business, hence entrepreneurs are willing to rent or lease a facility in a visible location; a location where the demography consists of the people who are always looking for a place to lodge and of course people with the require purchasing power and lifestyle.
If you make the mistake of renting or leasing a facility for your hotel facility business in a not too visible or hidden location simply because it is cheap, then you must be prepared to spend more in promoting the business.
Most importantly, before choosing a location for your hotel facility business, ensure that you first conduct a thorough feasibility studies and market survey. The possibility of you coming across similar business that just closed shop in the location you want to open yours can’t be ruled out.
These are some of the key factors that you should consider before choosing a location for your hotel facility business;
- The demography of the location
- The demand for hotel facilities and other services provided by hotels in the location
- The purchasing power of the residents of the location
- Accessibility of the location and closeness to airports, event centers, tourist locations and train stations et al
- The number of hotel facilities and lodging related service businesses in the location
- The local laws and regulations in the community/state
- Traffic, parking and security et al
Starting a Hotel Business – Technical and Manpower Details
It is important to state that there are no special technologies needed when it comes to opening a standard hotel facility, but you will need the following start-up inventory and equipment (flat screen TVs, sound systems, supply of food ingredients and drinks, beds and pillows, cabins, racks, fridges, kitchen gadgets, washing machines, and bar equipment amongst others.
Washing machines, dryers, industrial pressing irons, ironing boards, washer hook-up fees (sewer connection), cleaning supplies, soap, washing powder, bleach, starch/adhesive, laundry bags, invoices for wash-and-fold, bathroom supplies, racks, hooks/hangers et al).
It is important to state that these equipment can be purchased as fairly used if you are operating on a low budget. In setting up a small office for your hotel facility, you will also need computer, printer, relevant software apps, telephones, pager, photocopier, scanner, fax machine, first aid kit and uniform.
When it comes to choosing between renting and leasing a facility for your hotel facility business, the size of the hotel facility you want to own, and your entire budget for the business should influence your choice. Besides, you will need a facility that is in a serene environment, a facility that is big enough to accommodate the number of rooms you have in mind.
As regards the number of employees that you are expected to kick start the business with, you would need to consider your finance before making the decision. When it comes to starting a standard hotel facility business on a large scale, you would need the services of the following professionals; Chief Operating Officer (you can occupy this position), Hotel Managers, Bartender/Baristas, Marketing and Sales Executive (Business Developer), Accountant, Facility/Maintenance Manager, Human Resources and Admin Manager, Customer Services Executive/Front Desk Officer, Security Guards and Cleaners.
Over and above, you would need a minimum of 10 to 15 key staff members to effectively run a medium scale but standard hotel facility.
The Service Delivery Process of a Hotel Facility Business
The service delivery as it relates to a hotel facility to a large extent depends on the organization, the facilities they have to offer and what they stand to achieve.
Basically, a hotel facility business sources for clients. Once they are able to win the client over based on the services they intend offering and the facility available; the clients either make payment directly to the hotel, specifying the type of rooms, services and the number of days they intend lodging in the hotel. If it is a full service that a client paid for, it then means that the client will enjoy all the services and facilities available in the hotel.
The services and facilities will include food delivery to rooms, laundry, gym, conference hall, internet facility, photocopier, telephone and fax services and swimming pool et al.
It is important to state that a hotel facility business may decide to improvise or adopt any business process and structure that will guarantee them efficiency and flexibility; the above stated hotel facility business process is not cast on stone.
Starting a Hotel Business – The Marketing Plan
- Marketing ideas and strategies
The fact that the services and facilities provided by hotels are key to our social life means that there is bound to be more players in the industry no matter the location you choose to start yours. In essence, you must come up with creativity and innovations if you must carve out a market for yourself within the available market in your community, city, state or country.
So, when you are drafting your marketing plans and strategies for your hotel facility, make sure that you create a compelling personal and company profile. Aside from your qualifications and experience, it is important to clearly state in practical terms what you have been able to achieve in time past as it relates to your line of business. This will help boost your chances in the market place when marketing your services.
Here are some of the platforms you can utilize to market your hotel facility;
- Introduce your business by sending introductory letters alongside your brochure to traveling agencies, households, hospitals, religious organizations, clubs/organizations, campuses and NGOs et al within and outside the location where your hotel facility is located
- Open your hotel facility with a party so as to capture the attention of residents who are your first targets
- Engage in roadshows in targeted communities from time to time to market your services and facilities
- Advertise your hotel in community based newspapers, local TV and radio stations
- List your hotel on yellow pages ads (local directories)
- Leverage on the internet to promote your hotel facility
- Engage in direct marketing and sales
- Encourage the use of word of mouth marketing (referrals)
- Leverage on the internet to promote your business
- Join local chambers of commerce and industries around you with the main aim of networking and marketing your facilities and services; you are likely going to get referrals from such networks
- Engage the services of marketing executives and business developers to carry out direct marketing for you
Factors That Will Help You Get the Right Product Pricing
One key factor that will help you offer your facilities and services at the right price is to ensure that you cut operational cost to the barest minimum, and channel your efforts towards marketing and promoting your brand name. Aside from the fact that this strategy will help you save cost, it will also help you get the right pricing for your facility and services.
You can also try as much as possible to work with independent contractors and marketers; it will help you save cost for paying sales and marketing executives. So also, if you are able to secure business partnership with travel and tour companies as it relates to getting referrals, then you will be able to get the right pricing and of course maximize profits from your hotel facility business.
As regards toiletries, cooking ingredients and other supplies that you need to effectively run your hotel facility; you need to ensure that you purchase your items directly from the manufacturers or from wholesale distributors in pretty large quantities.
Strategies to Boost Your Hotel Brand Awareness and Create Your Corporate Identity
If your intention of starting a hotel facility business is to grow the business beyond the city where you are going to be operating from to become a national and international brand by opening chains of hotel facilities and franchising, then you must be ready to spend money on promotion and advertisement of your brand.
No matter the industry you belong to, the truth is that the market is dynamic and it requires consistent brand awareness and brand boosting cum promotion to continue to appeal to your target market. Here are the platforms you can leverage on to boost your brand awareness and create corporate identity for your hotel facility business;
- Place adverts on both print (newspapers and travels and tours magazines) and electronic media platforms
- Sponsor relevant community based events
- Leverage on the internet and social media platforms like Instagram, Facebook, Twitter, YouTube, Google + et al to promote your facilities and services
- Install your billboards in strategic locations all around your city or state
- Engage in roadshows from time to time in targeted neighborhoods to create awareness of your hotel facility
- Distribute your fliers and handbills in target areas
- Contact traveling agencies, households, hospitals, religious organizations, clubs/organizations, campuses and NGOs et al within and outside the location where your hotel facility is located informing them of the facilities and services you offer
- List your hotel facility in local directories
- Advertise your hotel facility in your official website and employ strategies that will help you pull traffic to the site
- Position our Flexi Banners at strategic positions in the location where your hotel facility is located
- Ensure that all your staff members wear your branded shirts and all your vehicles and trucks/vans are well branded with your company logo et al.