Hotel business plan is not only for you to think about how to take advantage of the opportunity, but also to convince you that you have the ability to do so against any investor or borrower.
This question may witness many different answers, so I would appreciate it if you add your comments after you have finished reading.
I have prepared this article for those who are outside the Hotel sector and who dream of owning a hotel.
Let’s start by remembering the main reasons for those who own the hotel:
- The hotel is an institution that creates a social environment by itself, the target audience of the hotel’s are the massive audience you may contact directly. Thanks to this feature, asset owners, whose commercial volume has reached a certain level, choose to own a hotel to use the marketing effect and to use it as a basis for new business opportunities.
- The service sector has an irresistible growth potential for those who do their job correctly and with high quality. A tourism company (agency, airline, small hotel business) decides to become a hotel owner one day by aiming to serve its customers in the continuation of the same brand and gain more from the customer base.
- And the most well-known reason in our country; When the owners of the big business come to the peak of their earnings, the time comes to pay the tax on the money earned, but since the tax to be paid is high enough to invest, a decision is made to make a new investment with the hotel business.
These are examples of business owners who consciously decide to own a hotel, and there are other indirect owners (foreclosures, inheritance, clearing, etc.) and my article is definitely for their benefit as well.
What are the key segments of the hotel market?
The hotel is a facility that provides accommodation for travelers and other services, usually meals and the the other services. (On the other hand, the word motel does not mean the small hotel as it is wrongly known; it is the facilities that accommodate drivers traveling on the road, often with rooms with direct access to an open parking area.)
Hotels can be classified by a number of characteristic features;
- Provide full or limited service,
- City center, location or area,
- Price level,
- Number of rooms,
- Independent or part of an operating chain.
Hotels and motels can also be divided according to room rates.
- The first tranche of 30% in the sales price rankings of hotels in a region is classified as luxury.
- The next 30% in the ranking can be classified as middle class and the last 40% in economic class.
Hotels with 25 or more rooms provide 83.6% of the hotel industry’s revenue. If we distribute these revenues according to their sources
- Room 62.7%
- Food and alcohol sales 12.5%
- Conference and meeting rooms 4.2%
- Other 4.2%
Hotels that offer less than 25 rooms make up only 3.8% of the sector’s revenue.
How do Hotels earn Income and Profit?
Obviously, the hotels sell their rooms and make a profit. However, other important sources of income to consider are food and alcohol sales, conference and meeting room sales.
What are the external factors affecting the hotel market?
There are many factors that affect the performance of the hotel industry. To summarize the main factors:
- Trends in domestic travel: Business travel and nights away from home directly affect the demand for accommodation. As the number of domestic trips increases, the demand for hotels increases.
- Consumer Confidence Index: Changes in consumer confidence affect individuals’ decisions regarding spending on entertainment and travel, especially during recession.
- Consumer spending: Consumer spending levels have a direct impact on travel demand. When consumers generally spend more, they are more likely to spend some of their money on travel and accommodation.
- International tourism: Trends and length of stay on international visitor arrivals affect the demand for accommodation. The increase in incoming trips positively affects the demand for hotels.
What are the Key Financial Indicators and Costs in the Hotel Market?
Sectoral profit; interest and income before tax. The sector’s profit constituted approximately 15.5% of sales in recent years.
Industry’s main costs are the cost of purchases and sales, such as accommodation and room materials. In general, hotels also offer meals and alcoholic beverages in a restaurant or dining room.
Purchases are estimated to account for 29.9% of average hotel revenue.
All hotel activities, including hotel management, front desk, concierge and related activities, general management, accounting, marketing, room cleaning and service, kitchens, bars and restaurants, are essential for hotel management.
Many hotel jobs require low skills and training, and employees can be hired part-time or temporarily. Through this application, the income of hotel employees can be relatively high. In addition, recruitment and training is a costly and continuous need. Some operators may outsource some of their personnel services to specialized personnel recruitment agencies to reduce recruitment costs.
Salaries account for about 25.7% of total sector income.
Rent and Energy, Fuel Expenses
On average, rent and energy (electricity, water, gas, etc.) account for 7.6% of hotel revenue.
Marketing costs and royalties are another important cost for franchisee operators. Franchisees typically receive between 4.0% and 6.0% of total revenue.
Other significant costs include repair and maintenance, promotional costs, commission paid to agencies, reservation and internet fees, accounting and legal costs, motor vehicle expenses, stationery and printing, insurance and other administrative and general costs.
What are the tricks of building a new hotel business?
Determining the Best Location
Location has traditionally been the most important critical success factor. A hotel located in the right place where competitors do not meet all customer needs can succeed. However, in a neighborhood where competition from existing hotels is intense, success may not be as expected.
Planing for Capital
You’ll need millions of dollars to buy an existing hotel, build a building from scratch, or invest in converting a building into a hotel. Assuming you do not have this money, you will need to find a bank loan and / or angel investor in your hotel.
You must have a business plan
A simple, clear but convincing hotel business plan is not only for you to think about how to take advantage of the opportunity, but also to convince you that you have the ability to do so against any investor or borrower. No conscious investor will tolerate the lack of planning.
Focus on Exceptional Service
Hotels achieve this critical success factor by recruiting staff who are knowledgeable, courteous, and capable of resolving the conflict. Providing quality service also requires remembering the names and preferences of repetitive visitors and offering interesting suggestions and environmental advice.
Implementing a Smart E-Commerce Strategy
A successful eCommerce strategy maximizes the business value of your website and achieves it based on three key factors:
Visibility of your website
- Your website must be sales-oriented
- Reservation offers, promotions that you promote on your website.
Configuring an Intelligent Pricing Strategy
Choose a smart pricing strategy that increases hotel occupancy. Determine room rates based on costs and market research. Pricing factors include:
- Personnel costs,
- Room category,
- Expected average length of stay,
- Maintenance costs,
- Competitive pricing strategies.
Customers may have completely different expectations from a hotel, so your team should be empowered to make decisions that will keep them available whenever possible. A manager with the authority to make exceptions can reverse a situation and cause your business to be heard about quality customer service.
There are two main ways to gain and differentiate from competitive advantage: to be better and different:
- By doing basic activities differently, be significantly better at something that everyone provides.
- Create a meaningful product feature that competitors don’t offer.
Focus on Quality Management
Quality management includes employee satisfaction and participation. By focusing on a hotel, employee satisfaction and customer service, you can increase the likelihood of employee happiness and therefore provide excellent customer service.
Invest in Strategic Marketing Plan
The purpose of a hotel’s marketing plan is to ensure long-term success. Use an integrated strategy to reach your target market segments. Take advantage of marketing, public relations, advertising and sales efforts to gain brand awareness and ultimately generate revenue.
What is the Typical Startup Cost for a New Hotel?
- To rebuild or buy the hotel,
- Working capital for personnel, marketing and other operating expenses.
We have detailed the sales percentages above for expenses. With respect to the cost of building or buying a hotel, this varies considerably depending on the type of hotel (eg economic or luxury hotel) and size (eg, 25 rooms to 500 rooms).
Steps to Build a Hotel Business
If you decide to own the hotel, follow these steps:
- Select the type of hotel you want to start (for example, how many rooms, luxury or economically priced, etc.)
- Identify the ideal locations for your hotel,
- Decide whether to build your hotel from scratch or renovate an existing building,
- To determine your expenses; talk to architects and subcontractors in charge of building / renovating your hotel,
- Discuss with local government to understand zoning issues and accept problems and associated costs,
- Develop your hotel business plan detailing your strategy, plans and financial projections,
- Present your Business Plan to provide / raise funds to investors and lenders,
- Build / renovate your hotel,
- Hire and train your hotel staff,
- Buy the necessary systems to manage your hotel effectively (eg reservation system, accounting software, etc.),
- Start your hotel marketing plan before opening,
- To accept customers to your hotel
Bizix Hospitality experts can complete your renovation projects in a short time. After being assigned to your project, it follows a strict work schedule. Your customer representative will help you get 100% satisfaction from our service.
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