Independent hotels are becoming a more attractive business proposition, even though they enter into what seems like an extremely competitive market. How can a small hotel startup even hope to compete with massive chains like Hilton, Marriott, or IHG? Ironically, it’s the smallness of an independent hotel that can be its biggest USP: travelers want a more personal and toned-down experience, and independent hotels are more likely to provide this than a massive chain with hundreds of rooms.
It’s a business idea that’s picking up speed, and this has led to many budding entrepreneurs querying what should be covered in a business plan for a hotel startup.
1. Executive Summary
All business plans need an executive summary, and for a hotel business, this needs to cover your concept and the core business objectives. Some questions to ask that will help you write this section include:
- What type of hotel are you opening?
- Where will your hotel be located?
- Who is your target market?
- What’s your USP or competitive advantage?
- How much will it cost?
- What is the early projected revenue?
This is basically a summary of everything else you’ll go into detail in your business plan, so some entrepreneurs prefer to write it last when everything else is fleshed out.
2. Market Research
There must be a clear and detailed section that explains your market research. Think of this as the part where you prove that there’s a need for your hotel startup. Perhaps your research will pinpoint a distinct lack of boutique hotels in a certain location – or maybe your hotel provides a service that’s not catered to.
You’ll have to conduct competitor analysis of other hotels in the area for this section, but it is all about showcasing that you’ve actually researched this and can demonstrate that it is a viable business idea.
3. Proposed Business Model
This is where a hotel business plan may differ greatly from other business plans you’ve written in the past. Here, you should explain how your hotel will generate money:
- Detail the number of rooms and projected room rates
- Outline additional revenue sources – restaurants, bars, spa facilities, conference room rental, parking charges, etc.
You should also talk about how your hotel will handle bookings or if you plan on creating any loyalty programs to target repeat bookings. It’s a very in-depth section that shows you have an actual plan for how you’ll make money.
4. Marketing Strategy
Some say that an average business plan can be elevated to a great one with a killer marketing strategy. For a hotel, you need a clear plan of action that shows how you intend to promote your new business in a very saturated industry. Demonstrate what you intend to do differently from your competitors and underline the key areas to focus on.
- Direct booking through websites should be a major focus here. Hotel marketing experts Gourmet Marketing always recommend that direct bookings are a big part of strategies because they help you generate the most revenue
- Social media marketing is also a huge one these days; a lot of guests find out about hotels through social ads or organic content that pops up on their feeds
- A good review management plan to help your hotel generate lots of positive reviews early on also goes a long way to marketing the establishment
Your marketing strategy needs to include lots of detail and should show that you have a very obvious plan of attack. If you can also point to some case studies that prove why your approach will work, then that helps.
5. Operational Plan
The operational plan will be another technical section that details how your hotel will function. How many people are needed to keep the hotel running, and what other resources are essential to keep it afloat?
You are covering many things, such as:
- Recruitment and training costs/requirements
- Guest services
- Housekeeping and maintenance
- Security systems
- Booking systems
- Supplier relationships
The list is vast, but this part is necessary to help you (and potential investors) see what will go into operating a hotel startup. It may actually be beneficial to do this section first so you can work out if this is a good business idea or not. You may realize that the operational requirements are far too much for you, in which case you can call it a day before going to the effort of writing a full-on business plan.
6. Location Information
When you want to start a hospitality business, you need to take the location into account. You should explain where your hotel will be, what type of property you’re investing in, and whether or not it will require extensive renovation work.
The goal is to outline everything about the property itself, including any planning permissions you’ll need to begin work.
7. Financial Plan
When you have written everything else, you can come to the financial plan. Now, if you have composed a business plan before, you will know that this is every entrepreneur’s worst nightmare. The financial planning section basically shows how much the business will cost to:
- Set up
- Run
You’ll have to work with financial experts to help you create accurate estimates for everything here, but the core goal is to show what it costs to run your business, how much money you need to fund it, and what your revenue projections are.
Unfortunately, this is where a lot of hotel business plans fall apart. One common problem is that the financial plan details the overhead costs and then outlines how much the hotel will need to make to generate profit. However, the profit projections may depend on an outrageously high average occupancy for the hotel, which isn’t realistic. For example, the hotel will make money if it is at 90% occupancy on average. That may not be possible, so the business would need to either raise room rates to make money with a lower occupancy, or figure something else out. You can see how this can be a dealbreaker for any investors reading the plan.
The good thing to remember is that hotel startups have potential. Depending on where your hotel will be located, there’s every chance you’re entering a gap in the market and your independent hotel can offer something that bigger rivals aren’t capable of. It’s all about getting this across in your business plan so you can secure the funding you need to get started.
