How to Start a Hotel as a Business

Thursday, June 27, 2013

How to Start a Hotel as a Business

Starting a hotel as a business can be a challenging but profitable undertaking. Whether you’re envisioning no-nonsense accommodation for business travelers, high-end boutiques or a comfortable bed-and-breakfast, you’ll want to spend ample time researching and planning before taking the plunge because there’s plenty of competition. In 2008, the Bureau of Labor Statistics reported 64,300 establishments providing overnight accommodation in the U.S.

Step 1

The options for starting a hotel can be overwhelming, so decide early on what type of hotel accommodation you’ll offer: upscale, affordable or budget. Decide whether the hotel business will provide rooms-only service, or whether additional amenities including a restaurant, conference hall, swimming pool, beauty spa or fitness center will be included. This is also the time to make decisions about location. Some states, including New York, Florida, Hawaii and California, are home to the country’s top tourist attractions, according to The Traveler’s Zone, but hospitality competition may be stiff.

Step 2

Write a business plan. Because many hotel businesses will require initial outside financial backing, it might be a good idea to work with a professional consultant when composing your business plan. The Small Business Administration recommends that business plans include a summary of the company’s offerings, market analysis, operating procedures outline, long-term goals statements and an appeal for financial investment. If you’ve visited competitor hotels and can summarize how your services will coincide or differ with their strategies for room amenities, restaurant services or niche offerings, include this information here.

Step 3

Apply for permits and licenses. To start a hotel as a business, you’ll need to apply for a business license and tax identification number. Many cities have additional permitting requirements, including a permit to operate, manager’s license for the person working behind the front desk and licenses for selling food and alcohol. Hotels offering beauty spa services or a swimming pool will need to acquire additional licenses for those amenities. Liability insurance is a must.

Step 4

Remodel and refurbish. After securing your hotel location, you’ll likely want to remodel and refurbish the building to distinguish the business from its predecessor. Make sure that electricity, plumbing and cable function seamlessly. Consider hiring an interior design firm to assist in color choices for carpet, walls, bedding and lobby areas.

Step 5

Advertise and market. Register with travel agencies, travel websites, national reservation systems and tour leaders. Invite travel professionals for a courtesy stay at the hotel business so that they’re familiar with your offerings. Invest in a professional, attractive website with photos, video tours and technology for booking rooms online.

Things Needed

Tips

It’s possible to get started in the hotel business by buying into a well-known franchise.This can be less expensive than starting from scratch, but will still require yearly franchise fees.
The hotel industry attracts a high number of immigrant workers, according to the Bureau of Labor Statistics. When hiring staff, ensure that all employees hold appropriate work permits.

Warning

Hotel owners may not see any return on their significant financial investment for several years or during poor economies, according to hotel industry writer Robert Mandelbaum in a Hotel Online article. Have promotional plans in place to generate foot traffic early on, and set money aside as a safety net during the start-up years.

References (6)

Resources (2)

About the Author

Bettina Drew is a California editor and writer specializing in news, travel, community features and the arts. She's written for the "Los Angeles Times," the Scripps Howard News Service in Washington, D.C. and a number of literary publications since 2000. Drew holds a Bachelor of Arts degree from the University of California, San Diego.

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Easy Tips and Ideas to Start Business

Although anyone can start a business, many people fail because of a bad product or improper research. If you want to start your own business, you can improve your chances for success before you even begin. In order to make your business successful, start strong and make sure that your idea will hold out for the long haul.

Have a Good Product

Ensure that you plan to sell something useful. Although you may think that your product is important or special, that doesn't mean the general public will agree. Ask friends, family and strangers what they think of your product. If they don't seem that interested, ask them why. With their suggestions, you can either improve the product or scrap the idea completely. According to Brad Sugars of Entrepreneur magazine, most small businesses fail because they sold a product that didn't have an adequate market. This also applies to small businesses that provide a service. A lawn-care business might be useful for part of the year in a northern state, but it is in-demand year-round in the south. Consider whether people will actually want to use your service and get constructive advice from those not afraid to give their opinion.

Research Local Businesses

Research local companies before starting up your own business. This will not only give you an idea of the amount of competition you will have, but it will also help you price your product or service. If you're looking to start a wedding photography business, you may find during your research that the market is over-saturated in your area. If not over-saturated, you should contact each business and ask them for a price list. Alter your prices so you can stay competitive with the competition in town. Researching similar local businesses will also help you decide where to locate your business location. Try not to start up a store or office close to another business of your type. If your small business is located away from similar business types, this will cause locals to choose you over businesses that are farther away from where they live.

Get Professional Advice

You may know someone who has started their own successful business. Ask him for advice and listen to his stories of how he started his company. You may gain useful advice on the good and bad ways to start a business. Local entrepreneurs can also introduce you to local product providers or advertisers that you may not have met without their help. Accept any advice with open arms, especially if the advice is coming from someone successful in the area.

How to Calculate Business Start Up Costs

Starting a business in no easy endeavor. It takes a great deal of research, perseverance and hard work. While sweat equity will make your small business more successful, you will most likely need real capital to get the business started. Before you start raising capital and/or investing your own funds, the first thing you need to do is determine the total start-up costs.

Step 1

Determine your costs of sales. For most small businesses this means inventory, the cost of raw materials, manufacturing equipment, shipping, packaging, and warehousing. However, not all businesses sell products. In this case, the cost of sales is primarily the direct labor involved in making the sale. For example, to open a small shoe business entails purchasing enough inventory ($10,000) to stock the store.

Step 2

Determine professional fees. Planning your business structure, i.e., limited liability corporation or general partnership, means hiring an attorney. There may also be the need to pay an attorney for help with establishing trademarks, copyrights, and patents. In this scenario, that puts total professional fees at an estimated $20,000.

Step 3

Determine technology costs. Technology can greatly reduce the cost of labor for small business if used effectively. Most small businesses require computers, printers, cell phones, website development, Internet access, software applications, information security, data storage, and outsourced information technology (IT) consulting. If the cost of technology is $10,000 to start, add an additional $5,000 a year for maintenance (hint: maintenance is not included in start-up costs).

Step 4

Determine administrative costs. This varies with business types and may include items such as business insurance, office supplies, product packaging, parking, rent, express shipping, desks, chairs, fax machines, phones, or anything else necessary to operate the business daily. A good estimate for start-up administrative costs would be $5,000 for the first six months.

Step 5

Determine initial sales and marketing costs. Now that you have your product, you need to let folks know about it. Sales and marketing costs generally include marketing materials for presentations, printing stationery, business cards, advertising, trade show events, and public relations. These initial sales and marketing costs can add up to $3,000.

Step 6

Determine the wages and benefits needed to secure a staff. This includes employee salaries, benefits, workers compensation, and payroll taxes. Let's put the cost of wages and benefits estimated at $20,000 for the first three months of business.

Step 7

Add all costs associated with starting the business for a total. Be sure to only include business start-up costs that will be incurred in the first three to six months of operations. For this example, the calculation is: $10,000 + $20,000 + $10,000 + $5,000 + $3,000 + $20,000 = $68,000.

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Thursday, June 27, 2013