How To Start a Hotel Business?
A study to see if the idea can be materialised
It is important that a critical step in starting a hotel is to complete the business plan or otherwise the feasibility study which proves that this investment option is advantageous.
A hotel is a facility that provides accommodation and, often, meals and other services for guests inside and outside. It can be classified according to several characteristics, such as whether it provides full or limited services, whether it is in a residential area or not in other words the location, the price, the number of rooms, whether it is independent or part of a chain, and if it meets the specifications of a certain category.
Hotels with 25 or more rooms receive 62% of their revenue from rooms’ sales, 30% from food and beverage sales, 4% from meeting rooms and 4% from other revenue.
Main elements for starting the idea of the hotel
Construction cost: The construction cost varies depending on the category of the hotel. For example, for a 5 * hotel in Greece, it is estimated at approximately 120,000 - 125,000 € / room, cost which includes the entire construction, i.e., a 30-room 5 * hotel will cost its construction (rooms, shared, swimming pools, spa, etc.) approximately 3,600,000 € (excluding vat).
Hotel revenue management. Hotels generate revenue and profits from the sale of their rooms. However, as explained above, other key sources of revenue to consider are food and beverage sales, conference & meetings, spas, shops, etc.
External factors affecting the hotel market: The general trends in domestic or foreign travel of each country, category and type or purpose (business travel, mice, etc.). As the number of trips made by Europeans increases, in the meta-covid era, the demand for hotels is also increasing. Finally, the fact that there are subventions aiming to the construction or renovation of hotels, is also an important reason to increase capacity, at least in the Greek hotel ecosystem.
Consumer Confidence Index: Changes in consumer confidence affect individuals' spending and travel decisions. Consumer spending levels also have a direct impact on travel demand. When consumers spend more overall, they are more likely to spend some of their money on travel and hotel accommodation.
Stages for the construction of a new hotel.
The following are the stages to projecting a new hotel investment:
Specify the type of hotel you would like to create category, departments, swimming pools, restaurants, bars, other services, according to a specific type of clientele.
Determine the location where the hotel will be constructed. The most significant aspect for success in the hotel business, has always been its location. Do it in the right place, where competitors do not meet all the needs of customers, there, a hotel can thrive. However, in an area that is highly competitive with existing hotels, success may not be so certain unless a conceptual hotel is ought to be created that will draw from the existing pool of customers, due to diversification or creation of a new market due to accessibility.
Investment capital: Whether you are buying an existing hotel, building one from scratch or renovating a hotel building, you will need a significant amount of capital to invest. Assuming you do not have this money, you will need to look for bank loans or another source of credit.
Business Plan: A business plan is necessary not only to think about how to seize the opportunity, but also to convince any investor or lender that you can do it. No smart investor will be attracted to lack of planning.
Selection of partners for the project: The team that will be composed must be competent and properly organized to meet the set schedule, quality of construction and the given result, in other words, proper project management.
Following to the project management team and the realisation of the project, an operations’ team must be implemented, with responsibilities in hiring and training the hotel staff, create standards of procedures (sops’), purchase the required systems (e.g. booking system, accounting software, etc.) for the efficient management of the hotel and aplly the marketing plan of the hotel which is already in use in advance.
Do not forget to take 5 important steps that will determine your success
Provide excellent customer service. Hotels achieve this crucial factor by ensuring that human resources are trained, up to date, polite and able to resolve any conflicts that arise.
Implement a proper and sustainable sales strategy. A successful pricing strategy maximizes the presence and ability to sell your hotel unit. Set smart pricing that increases hotel occupancy without incurring EBITDA. Determine room rates based on cost and market research by constantly monitoring trends.
Be flexible. Customers may have completely different expectations of a hotel, so your team needs to be able to make flexible decisions during the operation of the unit.
Focus on Quality Management. Quality management includes employee satisfaction and participation. A hotel's exceptional customer service is more likely to be appreciated if it prioritizes the happiness of its employees as well as the pleasure of its guests. Sir R. Branson has said the same.
Invest in a Strategic Marketing Plan. The goal of the marketing plan is to ensure maximum, long-term success. Implement a comprehensive strategy that will reach your target market segments. Use marketing tools such as public relations, advertising, and sales to gain recognition.
And something about the end that is missed by many hoteliers.
Do not forget that the human factor, your partners, and your staff as we usually call it, must have an ingrained sense of how you want to treat customers. You are responsible for instilling this mentality in the management of the hotel which must prove that it is not just capable of being able to teach it to your staff but also do far more than that.
Who I am
My name is Kostas Falangas, and I am an expert hotel consultant with more than 25 years of experience in the hotel sector field. My mission is to guide hoteliers and hotel partners or investment parties, to perform strongly in this ever-changing environment and also connect hotel units with interested parties to substantially innovate in the hotel services brought out of a common relationship. The most important managerial areas of my specialisation are financial management, marketing, hotel operations, business planning, general consulting of hotel operations as well as sustainable management planning.
My values are honesty, reliability, trust, knowledge, professionalism, punctuality and result-oriented with a sense of responsibility towards the society and the environment.