Opening a small hotel is the dream of many people who want to start their own business and who like to be in contact with people. Unfortunately, it's impossible to open the doors and expect the hotel to succeed on its own - it takes careful research, good management, and focused financial planning to make it into the hotel business. If you are planning to open your own hotel, keep these factors in mind.
Steps
Part 1 of 4: Doing a Market Research
Step 1. Determine where you would like to open the hotel
Before worrying about the exact street, you need to think broadly and decide in which city you want to open the hotel. To start, you need to consider how the tourism sector is doing in a particular area. Since this is a small hotel or guesthouse and not a large chain, your target audience is probably more visitors and tourists than business travelers. Consequently, you have to choose an area that people enjoy visiting. Read travel websites or books to find some of the most popular tourist destinations and start searching the area to find a suitable place for your hotel.
Step 2. Determine if you will buy an existing hotel or build a new one
After choosing a city, you need to move on to this decision. You may be looking for a hotel for sale or building one from scratch. Both solutions have pros and cons that you should carefully consider before making a decision.
- Buying an existing hotel is a cheaper option than building a new one, unless the property requires major renovations. You can also retain some of the staff - this will simplify the hiring process at a later time. However, if the property you purchase has a bad reputation, your profits will suffer. You have to work hard to let people know that the hotel is under new management.
- Building a hotel from scratch is generally the most expensive option. However, you can build it the way you want, so you could orient yourself based on a specific target audience. Also remember that a new hotel involves some promotional work to announce the opening to potential customers. Before starting, check that the construction of hotels and guesthouses is allowed in the area.
Step 3. Investigate other hotels, guesthouses, and bed & breakfasts in the area
You have to know the competition well enough and understand how to carve out a slice of the market that allows you to collect good profits. When researching potential competitors, you need to look at several factors. This will help you understand how to make your property stand out from the rest.
- Find out about competitor rates. Look at all the hotels in the area and look at the prices per night. But remember that price isn't everything: if a hotel is cheap but has bad reviews, you don't have to try to lower prices to compete with it.
- Read the reviews online to learn about the praise or complaints expressed by customers, to understand what guests want during their stay. This will help you meet the needs of your target audience.
- Consider the additional services offered by other hotels. Do they have restaurants? Swimming pools? Gyms? Breakfast included?
- Book in some hotels in the area to better analyze their offer. Staying there for one night will allow you to thoroughly investigate the competition and look for ideas for your hotel.
Step 4. Understand your target market
This will help you propose suitable services to potential customers. Small hotels usually attract visitors who only stay for a few nights. If your hotel is located in a rural area or a town, you will probably receive many guests who live in big cities, eager to take a break from the chaos. In this case, you should furnish the hotel with elements that reflect the classic lifestyle of a village.
Step 5. Determine which additional services you would like to offer
Customers of these structures are usually looking for a certain friendliness, so try to offer services that will help them feel at ease, like at home. Guests of small hotels generally want to relax: you could therefore organize a secluded outdoor space to help you unplug. In general, small establishments do not offer gyms or restaurants, but nothing prevents you from doing so. Just remember that additional services come with other costs, both for construction and maintenance. Make sure you budget well to avoid making any losses.
Part 2 of 4: Managing the Finances of the Hotel
Step 1. Hire an accountant
Of course, you will open a hotel because you have been dreaming of it for a lifetime, but you still have to remember that it is a financial investment. Unless the facility is really very small or you have not studied accounting, you will need an expert to manage the finances. All hotels - even small ones - have many costs to consider, such as staffing, bills, rent, taxes and equipment, to name just a few. An accountant can help you find your way around this complicated world and have a bright economic future. U. S. Small Business Administration recommends doing the following to find one:
- A personal recommendation is usually the best way to find a trusted accountant. Ask other small business owners in the area for advice to find out who they are targeting and if they are happy with it. You could also look for events organized in your city designed for small business owners, in order to create a network of acquaintances and find potential accountants.
- Make an appointment with a potential accountant. Some offer a free presentation meeting for prospective clients. Once you've made a shortlist of candidates, get together with them to discuss their experience and qualifications to see if they're right for your hotel.
- Ask applicants if they have experience in the hospitality industry. It is a unique world that requires special knowledge. An experience in this field would be ideal, especially if they have worked with independent structures. This will ensure that they are able to help you resolve certain situations you may face.
- Find out if the candidate is trustworthy. In addition to experience, you need an accountant with whom you can collaborate on a long-term basis. If he's late for appointments, doesn't answer phone calls, and does a poor job, he's not the right person for you, no matter how well experienced he is. Remember that your goal is to build a long-term relationship with a professional who can help you thrive in the business world.
Step 2. Write a business plan
To open a hotel, you need start-up capital, which can be paid in by a bank or private investors. It doesn't matter who you turn to, what is certain is that a potential investor must read your business plan to understand if it's worth it. Additionally, this document helps you organize your goals and get yourself a concrete picture to determine how to be successful in the industry. For a hotel, a business plan should include at least the following elements:
- A description of the services offered by the hotel. Explain how you intend to distinguish yourself from other hotels in the area. Will you offer cheaper rates? Better services? Investors want to know why your hotel will be unique.
- Define your potential market. Explain what the target demographics are and why they would prefer your hotel to another.
- A projection of future earnings. Investors want to make sure your hotel guarantees a profit. With the help of your accountant, roughly calculate the annual revenue. Also define how long after you expect to start earning profits and what your goals are within 5-10 years.
- Break down the costs in detail. Between buying or renting a property, renovations and furnishing, starting a hotel involves a lot of costs. Before applying for a loan, try to estimate your total expenses as accurate as possible. Also be sure to include a fairly accurate calculation of daily operating costs. It can take several months for the hotel to start attracting enough customers to cover expenses, so you'll need some cash to stay open during that time.
Step 3. Acquire Startup Capital
After writing the business plan, present it to potential investors. If it is valid, it will allow you to demonstrate that your hotel will be a profitable business venture. This will convince investors to lend you the money you need. You have two options for acquiring capital. You will probably use both.
- Banks. It is possible to apply for a bank loan for a few months or years, depending on the situation. This can cover the costs involved in opening and the operating expenses of the first months.
- Private Investors. This can be friends, family or other entrepreneurs interested in making an investment. Make sure you define whether they are just lending you a loan that you will have to repay with interest or whether they are actually buying part of your hotel. It would be helpful to draft a contract to define the terms of the agreement and authenticate it to prevent future problems.
Step 4. Set your rates
Once you open the hotel, the prices will determine your profits. Overnight rates will vary depending on local competition, operating costs, season, and many other factors. In general, to fix prices, keep them low enough to attract customers and high enough to make a profit. To define the rates, there are several aspects to keep in mind.
- Know the costs. You should calculate exactly how much it will cost you to keep the hotel open every day. Then, multiply this number to figure out how much it will cost you to manage it monthly. The income must cover at least the monthly expenses, otherwise the hotel will not be able to remain open.
- Find out how much customers are willing to pay. It will be necessary to make several attempts. If you're just starting out, operating costs will be your only guideline. If after a few months you realize that all the rooms are constantly booked, you can afford to raise the prices. If, on the other hand, you are having a hard time attracting customers, turn them down. You can also do a post-stay survey to ask guests if they found the rate right.
- Adjust prices according to the season. In the high season, you can afford to raise them as more people go on vacation. In the off-season, lower them to attract more customers.
Step 5. Cut costs when needed
Even with good financial management, your hotel will almost certainly have deadlocks. You should regularly analyze the costs to decide which ones are needed and which you can do without. In downtime, eliminate unnecessary expenses to save. For example, if it's a quiet week and only a few rooms are booked, there's no point in having a receptionist all day. Do it yourself to cut costs and save the money you need to pay someone to stay at the front desk.
Part 3 of 4: Managing the Hotel Staff
Step 1. Hire all necessary staff
The size of the staff will vary depending on the hotel. For a small bed & breakfast it is possible to hire only a few helpers. Hotels with many rooms, even smaller ones like yours, usually require a full team of insiders for proper management. When looking for people to hire, you should at least consider the following positions:
- Cleaners. Cleanliness should be your number one priority for running the property. A dirty hotel will quickly get a bad reputation, turning customers away. Depending on the space, a single cleaner or a whole team may be needed. Usually, one person can clean around 10-15 rooms a day, keep this in mind when hiring.
- Reception. Even in small hotels it is generally necessary that there is always someone at the reception. You could do this yourself for a few hours, but you will need a team that is exclusively dedicated to this around the clock.
- Maintenance experts. One or two should suffice for a small hotel. Look for handymen: they need to be able to do plumbing, paint, repair, troubleshoot the electrical system, and so on. These employees have the function of dedicating themselves to smaller assignments. If they can't do something, you can hire a trained professional for more complex jobs.
- Cook. If you are going to serve food, you need at least one cook. Smaller hotels may only offer breakfast, so it may be necessary to hire someone for only a few hours a day.
Step 2. Do research on all candidates
Interviews must be thorough. Also, check their references and discuss them; you should also check your criminal background. Remember that your employees have access to guest rooms and their properties - you need to make sure they are all trustworthy before granting such a freedom.
Step 3. Write a manual for all employees
You should implement specific regulations for all the people you hire. In this way, it is possible to guarantee a service that is always of a high quality level for your guests. Ask them to read the manual - it will be part of their training. Explain exactly what you expect from each employee.
- Emphasize that all guests are treated with warmth. If the service is poor, customers won't come back and your business venture will fail.
- In addition, explain what types of activities are prohibited in the facility and define in which cases it is possible that infringement of the rules will lead to dismissal.
Step 4. Organize regular staff meetings
The weekly or monthly meetings will help you maintain a good relationship with the staff. You should take this opportunity to clarify what can be improved and ask for suggestions in this regard. Also, be sure to praise a job well done, so that employees feel part of a team. Listen carefully to advice - as much as you are the owner, your employees may have industry experience that you lack, so they are in the right position to suggest changes.
Step 5. Try to be available to the staff
Remind your employees that they can reach out to you whenever they want to talk about a problem or share a concern. If they do, listen to them. You should be in the facility often and play an active role in management. The staff will feel so comfortable with you and will be more willing to open up. If you are never there, you will seem distant and the staff may have a hard time talking honestly with you.
Part 4 of 4: Advertise the Hotel
Step 1. Create a website
If the hotel is not on the internet, it is practically invisible to potential customers. You could create a site yourself, but it would be better to make an investment and hire a professional. In fact, it's often easy to tell if a webpage is botched. At a minimum, the site should indicate the name, address, contact details and nightly rates of the hotel. Small hotels often attract guests looking for a certain sense of familiarity and warmth, so you can leverage this by adding special information. Whatever data you write on the site, make sure it is accurate and up to date. An abandoned web page will make your hotel look inactive or unprofessional and this can be bad for business.
- Post images of properties. Customers will want to see where they will stay. Include photos of the rooms and views of the surroundings.
- Add biographical information to your account. To customize the site, put your face on it. If the staff is willing to do the same, you can include your employees as well. This will provide that touch of warmth that tends to appeal to the typical bed & breakfast and guest house clientele.
- Write a history of the hotel. Some historic houses are used as small hotels. In this case, you will attract a market niche made up of history buffs. To do this, offer a complete history of the property and the surrounding area.
- Post special offers or discounts.
- Offer lists and descriptions of nearby attractions. If the hotel is located near tourist areas, advertise this information. Tourists will understand that it is a practical place to stay.
Step 2. Advertise on travel sites such as Expedia, Viator or Hotels.com
These web pages have been designed for those looking for hotels and tourist destinations. By promoting yourself on them, you will attract guests from all over Italy and also from abroad.
Step 3. Leave brochures in service areas and tourist information offices
But first ask. Sometimes tourists decide at the last minute to stay in a hotel. By advertising in this way, you will take care of this potential market slice.
Step 4. Offer discounts and special offers
Group discounts, free breakfast, and a drop in prices on longer stays are effective ways to attract customers who don't have a large budget. Make sure you advertise all offers on your site. Also, when making discounts, you need to be sure that you can cover all operating costs.
Step 5. Host events
Occasions such as weddings and corporate conferences will attract a lot of people. If you have a few rooms it can be difficult, however, even a small hotel can have enough space to host these types of events. You probably can't hold a big conference, but it's increasingly common for companies to have more intimate meetings for their executives or managers. A small town guesthouse can be the right setting for this type of event. Using your website or other travel web pages, advertise that your hotel can organize events and that special offers are available for attendees.
Step 6. Collaborate with local companies
Small hotels often operate near tourist attractions. Take advantage of it to advertise yourself better. Get in touch with the managers of parks, historic sites, restaurants and theaters. Try to propose a profitable deal. For example, if they recommend your hotel to tourists, you will promote their attraction with brochures that you will place at the reception. This way, you can attract customers who haven't seen your ads elsewhere.
Step 7. Make sure all guests have an enjoyable experience
In addition to other advertising methods, word of mouth is essential. Customers may talk about your hotel to friends and family, advertise it on social networks and review it online, so you need to do everything you can to make sure the reviews are positive. Even a single dissatisfied guest could hurt your business if they express their disappointment on the internet. If you are committed to satisfying every single guest, you will cultivate a loyal clientele that will give you great publicity.
Step 8. Cultivate good relationships with customers to get them to come back
Guests who have enjoyed your hotel are a great source of business. In addition to providing good service during their stay, there are several ways to entice a guest to return.
- Send e-mail. With a mailing list, you can inform customers of special offers and discounts. It is best that guests subscribe to this list, not email everyone who has stayed at your hotel. Otherwise, you risk annoying people by having the opposite effect.
- Reward returning customers by offering discounts. There are several ways to do this. You could discount the second stay, or offer a free night if they book for a certain number of days. You could also implement a points system, so that customers can accumulate them and get discounts.
- Respond to customer opinions. Several travel sites allow hotels to respond to guest reviews. You should take advantage of this to respond to both positive and negative opinions. This will show guests that you take their opinion seriously, so they may feel tempted to return. You will also make potential customers understand that good service is important to you.
