A well-crafted hotel business plan is a comprehensive road map for your property’s growth and development, that can increase visibility, drive bookings, and ultimately improve your bottom line.
In this episode, I will provide the key elements that should be included in your hotel business plan.
Welcome to another edition of Hospitality Property School.
I am your instructor, Gerry MacPherson.
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Why create a hotel business plan
Every new company should really think about writing a business plan, and this is especially true for hotels. If you want to take out a loan to start your business or raise money from other investors, you will need one.
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Many get nervous about the thought of starting a business plan or don’t know where to start. You don’t have to get bogged down in the process. Following the guideline I am laying out for you is an excellent way to get your thought juices flowing.
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If you don’t need to seek funding, it is still a good idea to write a hotel business plan, as it can be used as a tool to strategically manage your business as it gets up and running and starts to grow.
The hotel business plan guideline
This guideline is to be used as an example. Customize it to fit your requirements, and just so you know, the numbers I will be using as examples are fictitious.
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I will be reading the guideline for you, please note there will be sections you will have to fill in the blanks. To make it easier to follow, visit keystonehpd.com and search for episode #327.
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Section I. Executive Summary
Company Overview
[Company Name], located in [insert location here], is a new, small Hotel focused on providing modern rooms for leisure visitors to the area. The Company’s rooms will feature modern furniture, high-end technology and modern accessories.
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Services
[Company Name] offers all the standard Hotel services, including daily room cleaning, free local calls, cable TV, and a free wireless network. Additionally, the Hotel will include a restaurant lounge serving breakfast, lunch, and dinner, as well as Afternoon Tea and Cocktails.
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Customer Focus
[Company Name] primarily serves leisure travellers seeking comfort, amenities, and simplicity of services. In general, the market for hotel segments tends to be relatively affluent and well-educated.
- The single largest segment of the hotel market is guests on pleasure trips. These trips are usually short, weekend breaks to relieve work-related stress. Special events, such as weddings, are important revenue drivers.
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- Group travel and business meetings/seminars are important revenue drivers during weekdays and increasingly access points at a central point or in rooms, to attract this latter market.
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- *150,000 visitors to the area according to our regional Tourism Office
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- 55% between the ages of 40 and 49, 16% between 18 and 29, 18% between 50-59, and 10% 60+according to the National Household Survey of Travel
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- Average household income of *$75,000 according to our Hotel Association
*These are fictitious numbers
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Management Team
[Company Name] is led by [Founder’s Name], who has been in the Hotel industry for 20 years. While [Founder] has never developed a Hotel from the ground up, they have worked in the Hotel industry most recently as a general manager and have held various positions in the management chain over the last 20 years. [Founder] has in-depth knowledge of the Hotel business, including the operations side (e.g., running day-to-day operations) and the business management side (e.g., staffing, marketing, etc.).
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Success Factors
[Company Name] is distinctively qualified to succeed due to the following reasons:
- There is presently no Hotel in the community we are entering. In addition, we have surveyed the area and determined there is a demand from frequent visitors who would use our Hotel location when launched.
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- Our location is central to the downtown, airport, tourist attractions and corporate district of the city.
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- The management team has a positive record of success in the Hotel industry.
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- The city announced plans to invest over *$1 billion in tourist attractions over the next two years, and existing hotels will not be able to handle the increased capacity of visitors travelling to the city.
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Financial Highlights
[Company Name] is currently seeking *$2,000,000 to launch. Specifically, these funds will be used as follows:
- Hotel design/build: *$1,500,000
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- Working capital: *$500,000 to pay for marketing, salaries, and land costs until [Company Name] breaks even.
*These are fictitious numbers
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If you are a member of the Hospitality Property School Group, you will see an example of the projections chart over the next five years.
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Section II. Company Overview
Who is [Company Name]?
[Company Name], located in [insert location here], is a new, small Hotel focused on providing modern rooms for leisure visitors to the area. The Company’s rooms will feature modern furniture, high-end technology and modern accessories.
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[Company Name] was founded by [Founder’s Name]. While [Founder’s Name] has been in the Hotel industry for some time, it was in [month, date] that they decided to launch [Company Name].
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Specifically, during this time, [Founder] took a business trip to [Insert Location Town, City, Region]. During his trip, [Founder’s Name] could not find a mid-level, Hotel in the area. After visiting the Hotel options in the [Insert Location Town, City, Region] and learning of the expected growth in travel to [Insert Location Town, City, Region], [Founder’s Name] clearly recognized an opportunity that a Hotel would enjoy significant success in this area.
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Specifically, the local demographics, business demographics and competitive situations in the [Insert Location Town, City, Region] were so favourable to the success of this Hotel idea that they knew it would work.
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[Company Name]’s History
Upon returning from [Insert Location Town, City, Region], surveying the local customer base and online market, estimating travel growth, and finding a potential Hotel location, [Founder’s Name] incorporated [Company Name] as an S-Corporation on [date of incorporation].
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The Hotel development operations are currently being run out of [Founder’s Name] home office. Once the land rights have been purchased, operations will be run from an on-site location to ensure that every detail is being thought out and completed.
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Since incorporation, the company has achieved the following milestones:
- Found site location and signed the land deed, purchasing rights to the land.
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- Developed the company’s name, logo, and website located at www…
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- Hired an architecture firm to create a blueprint for the Hotel
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- Taking bids from construction crews and electrical engineering firms
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- Determined equipment leasing and financing requirements
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- Began recruiting key employees with experience in the Hotel industry
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[Company Name]’s Services
Below are [Company Name]’s initial service offerings and amenities provided.
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If you are a member of the Hospitality Property School Group, you will see an example of the initial service offerings and amenities provided chart over the next five years.
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Hotel Design
[Company Name] will develop a 20,000-square-foot Hotel with key elements that will include the following:
- Upper and Lower Floors with 18 Single rooms
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- 2 Studio Apartment Rooms
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- Restaurant Lounge
Located below is a rough sketch of the Hotel design plan:
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The Hotel location will have 15 dedicated parking spots which should suffice even in peak parts of the travel season as guests will often not have cars with them.
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[Company Name] plans to be open 7 days a week, 24 hours a day, to take care of all guests’ inquiries and issues as they may arise. As demand dictates, we may extend or reduce our services and hours.
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Section III. Industry Analysis
[Company Name] directly or indirectly competes with all Hotels nearby our Hotel locations. The competition will come from inns, motels, and hotels.
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Industry Statistics & Trends
The Hotel Accommodations industry is expected to perform at a slightly slower rate over the next five years than the past five-year period. The resurgence of travel rates Post COVID-19 is expected to continue, while travel spending is projected to increase over the next five years as the economy improves. Consumer spending is expected to increase *2.7% per year on average over the next five years. IBIS World estimates that over the same period, international arrivals will increase at an average rate of *4.3% per year, while domestic travel will increase an average of *1.7% per year. The influx of tourist dollars will likely bolster revenue for hotels.
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With increased competition from different facilities, the hospitality property industry often faces difficult times ahead. Sites like Airbnb have been a thorn in their side as they offer a more affordable alternative to hotel stays. While it is unlikely that a mass exodus of enterprises leaving the industry to operate exclusively through Airbnb will occur, a number of non-employing establishments that are unable to afford the investment it takes to develop an effective internet presence may exit to capitalize on Airbnb’s exposure.
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As millennials comprise a larger portion of the workforce and, in turn, consumer spending, many larger hotel chains have also expressed interest in entering the Hotel Accommodations industry to increase their overall market share in the travel accommodation sector.
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These trends are expected to result in slower revenue growth over the next five years, despite relatively consistent trends that are expected to facilitate growth. Over the five years, revenue is forecast to increase an annualized 1.7% to $2.9 billion.
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Section IV. Customer Analysis
Profile of Target Market
[Company Name] will serve the leisure travel market of [insert location] and its immediate surrounding area.
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The market we serve is value-conscious and desires high comfort and amenities geared toward families and comfort travellers.
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Leisure travellers are more likely to book a trip this year, relying on new resourcefulness fostered by the last couple of years of COVID-19.
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The number of domestic trips by residents has turned the corner since COVID-19.
- Direct spending on leisure travel by domestic and international travellers totalled *$550.8 billion in 2019.
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- Spending on leisure travel generated *$104.6 billion in tax revenue.
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- Nearly 4 out of 5 domestic trips taken are for leisure purposes (79%).
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- Residents logged *1.2 billion person‑trips for leisure purposes last year
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- Top leisure travel activities for domestic travellers: (1) visiting relatives; (2) shopping; (3) visiting friends; (4) fine dining; and (5) beaches.
*These are fictitious numbers
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If you are a member of the Hospitality Property School Group, you will see an example of the demographic profile of the target market.
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The demographic profile of the target market can be seen below:
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Customer Segmentation
We will primarily target the following three market segments:
The Leisure Travel Market: Travellers to [Insert Area or City] tourist attractions such as the Fine Art Museum and the Annual Jazz Festival, as well as visitors to social events such as weddings.
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The Business Travel Market: Travellers to [Insert Area, City] corporations and events.
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International Tourists: Last year, there were over *879 million international tourist arrivals worldwide, with a growth of *2%. International tourist receipts were *$736 billion, according to tourismtoday.com.
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If you are a member of the Hospitality Property School Group, you will see an example of a travel market pie chart.
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Section V. Competitive Analysis
Direct & Indirect Competitors
The following Hotels are located within a 10-mile radius of [Company Name], thus providing either direct or indirect competition for customer acquisition:
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The Fairy Tale Hotel
The Fairy Tale Hotel in [Insert Location Town, City, Region] is a leading Hotel that has been in business for 20 years. The Hotel offers a wide array of services and amenities that you typically find at a Hotel.
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The Fairy Tale Hotel offers luxury amenities, many of which are not necessary for travellers, and charges a high price for those amenities ($200-300 per night). Furthermore, the Hotel does not offer a small conference room, only larger meeting spaces. Additionally, this Hotel does not offer wireless internet in sleeping rooms.
The Saltwater Hotel
The Saltwater Hotel has been in business for 15 years. The Saltwater Hotel offers a variety of services and amenities, all typical of the Hotel and hospitality industry.
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However, [Company Name] has several advantages over The Saltwater Hotel, including:
- Saltwater Hotel is priced at a premium because of its waterfront location
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- Saltwater Hotel rooms are ageing and in need of renovation
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- Saltwater Hotel does not have studio apartment options for long-term stay
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- Saltwater Hotel does not have meeting space
Willow Tree Hotel
Willow Tree Hotel is located four miles to the east of our intended location. Willow Tree Hotel has been in business for the past 10 years and is part of the ABC family of Hotels, allowing it to use centralized booking with ABC and the ABC loyalty points system.
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[Company Name] has several advantages over Willow Tree Hotel, including:
- Willow Tree Hotel does not have a central downtown location
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- Despite the rooms being more modern than most existing, Willow Tree Hotel is still behind the time, with no LCD TVs or Wireless Network.
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While we expect that Willow Tree Hotel will continue to thrive based on the ABC loyalty program, we expect that more and more customers will frequent [Company Name] based on the value offered for a similar price and more central location.
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If you are a member of the Hospitality Property School Group, you will see an example of a competitive pricing chart.
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Competitive Pricing
Competitive Advantage
[Company Name] enjoys many advantages over its competitors. These advantages include:
- Location: [Company Name]’s location in the downtown area, gives the best access to the airport, tourist attractions, corporate centre, downtown, shopping, and restaurants. The Company also offers suitable parking, making it easy for customers to relax upon arrival.
- Business Amenities: Wi-Fi throughout the Hotel will make working remotely simple for business visitors.
- Management: Our management team has years of business and marketing experience that allows us to market and serve customers in the same manner as our most high-level competitors.
- Relationships: Having visited the community for several years, [Founder’s Name] knows all the local leaders, newspapers and other influences. As such, it will be relatively easy for us to build the brand and awareness of the Hotel.
Do those make sense so far?
Let me know by leaving a comment.
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Section VI. Marketing Plan
The Marketing Plan describes the type of brand [Company Name] seeks to create and the Company’s planned promotions and pricing strategies.
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The [Company Name] Brand
The [Company Name] brand will focus on the Company’s exclusive value proposition:
- Offering rooms suited for families and business travellers and services
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- Offering a central location in the downtown area
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- Providing excellent customer service
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Promotions Strategy
[Company Name] expects its target market to leisure travellers, mainly from our country and the surrounding locations. The Company’s promotions strategy to reach these individuals includes:
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Phone Prospecting
[Company Name] will assign salespeople to contact area corporations to arrange for bulk corporate rates for their visitors depending on the volume of visitors they will have.
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Public Relations
We will contact all local and regional area newspapers and television stations to tell them about the Hotel opening and the unique value proposition of [Company Name].
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Advertising
[Company Name] will initially advertise on travel websites, which are frequently used these days to book travel due to their ease of use and reviews.
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Ongoing Customer Communications
[Company Name] will maintain a website and publish a monthly email newsletter to tell local corporations and past customers about promotions and events.
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Pre-Opening Events
Before opening the Hotel, [Company Name] will organize pre-opening events designed for prospective national customers, local customers and press contacts. These events will generate buzz and awareness for [Company Name] in the area.
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Pricing Strategy
[Company Name]’s pricing will vary based on the season and occupancy percentages using a computerized yield management system, but pricing will always place the Hotel in the mid-range, below luxury offerings and above Hotels and motels in the area. Customers will feel they receive great value when utilizing the Hotel.
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Section VII. Operations Plan
Functional Roles
To execute on [Company Name]’s business model, the Company needs to perform many functions, including the following:
Administrative Functions
- General & Administrative functions including legal, marketing, bookkeeping, etc.
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- Sourcing and storing supplies for the Hotel and conference space
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- Hiring and training staff
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- Corporate sales to individuals and groups
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Hotel Services
- Housekeeping
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- Check-in focused on customer service
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- Janitor/maintenance personnel to keep the Hotel clean and in working order
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Milestones
[Company Name] expects to achieve the following milestones in the following [] months:
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If you are a member of the Hospitality Property School Group, you will see an example of the following milestones in the following [] months.
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Section VIII. Management Team
Management Team Members
[Company Name]is led by [Founder’s Name] who has been in the Hotel industry for 20 years.
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While [Founder] has never developed a Hotel from the ground up, he has worked in the Hotel industry most recently as a general manager and has held various positions in the management chain over the last 20 years. As such, [Founder] has in-depth knowledge of the Hotel business including the operations side (e.g., running day-to-day operations) and the business management side (e.g., staffing, marketing, etc.).
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[Founder] has also worked as a consultant on a part-time basis over the past 10 years. Specifically, he has worked in contracting positions to help other developers with their Hotel launch plans, as well as their operations plans once the Hotel has been launched.
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[Founder] graduated from the University of ACME, where he majored in Hotel Management.
Hiring Plan
[Founder] will serve as the Hotel president. To launch our Hotel, we need to hire the following personnel:
- Housekeeping staff (5 to start)
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- Hotel Manager (will manage day-to-day operations of the Hotel)
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- Assistant Manager (will manage Hotel operations nights and weekends)
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- Service Staff (4 full-time to work check-in and guest services – allowing for at least 1 staff person to be on duty at all times)
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- Sales Staff (2 full-time) will target and book corporate clients in sleeping rooms and the meeting space
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- Legal, Bookkeeping, and other administrative functions (3 staff)
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Section IX. Financial Plan
Revenue and Cost Drivers
[Company Name]’s revenue will come from Hotel room occupancy, food and beverage.
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The major costs for the company will be salaries and the cost to maintain the standard of the Hotel. In the initial years, the company’s marketing spending will be high, as it establishes itself in the market.
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Capital Requirements and Use of Funds
[Company Name] is seeking a total funding of *$2,000,000 to launch the Hotel. The capital will be used for funding capital expenditures, manpower costs, marketing expenses and working capital.
Specifically, these funds will be used as follows:
- Hotel design/build: approximately *$1,500,000
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- Working capital: approximately *$500,000 to pay for Marketing, salaries, and lease costs until [Company Name] reaches break-even
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Key Assumptions & Forecasts
Below please find the key assumptions that went into the financial forecast and a summary of the financial projections over the next five years.
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If you are a member of the Hospitality Property School Group, you will see an example of the key assumptions that went into the financial forecast and a summary of the financial projections over the next five years, a 5-year annual income statement, 5-year annual balance sheet, 5-year annual cash flow statement.
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In conclusion
Developing a business plan for a hotel is essential for driving bookings and increasing revenue. A well-crafted hotel business plan should include a clear understanding of your target market, specific and measurable objectives, strategies tailored to your property’s unique needs, a realistic budget and allocated resources, and a system for tracking and measuring the performance of your marketing efforts. By following these steps and staying current on the latest trends and technologies, you can ensure that your hotel is well-positioned to succeed in today’s competitive market.
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Are you considering opening a hotel?
Let me know in the comments.
We cover more on independent hotels, resorts, inns, bed & breakfasts, vacation rentals in
“The Guide to Owning & Operating a Hospitality Property – Successfully” course.
You find more information at KeystoneHPD.com/course
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You will have access to this episode for as long as you would like, but if you would like to see all the bonuses you would have access to as a member of the Hospitality Property School Group, have a look at the short video in this episode post-show notes.
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In our next episode, I will be talking about 6 Strategies for Contending with Hotel Staff Shortages.
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That’s it for today’s episode,
Until next time, have a fun day.
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If you haven’t done so yet, make sure to sign up for the INNsider Tips, say hi on social and join one of our groups. And make sure you get your free copy of the “How to Improve Your Hospitality Properties Success” e-book.
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You can find all the links in the show notes.
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⇒ TO READ OR LISTEN TO THIS EPISODE ON KEYSTONE HOSPITALITY PROPERTY DEVELOPMENT:
https://keystonehpd.com/the-authentic-hotel-business-plan-verified-techniques-327
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“The Guide to Owning & Operating a Hospitality Property – Successfully” course.
https://KeystoneHPD.com/Course
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Did you get your copy of the “How to Improve Your Hospitality Properties Success” ebook?
KeystoneHPD.com/How-to-Improve-Your-Hospitality-Properties-Success
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Get Your INNsider Tips
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Join one of your private groups
https://keystonehpd.com/private-groups
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