How to Write a Hotel Business Plan

Create A Hotel Business Plan for Success

Writing a hotel business plan before investing any money in the venture is important to help you identify what-if any-opportunities you have in the lodging industry. A properly written business plan will address your target market, what capital you need, and how long it will take for your operation to be successful. Your hotel business plan can be broken down into the following major sections: Executive Summary, Market Summary, Financials, and Operational Plan.

Before writing a full-blown business plan, strongly consider why you are writing the plan. Is it an internal document to determine the feasibility of your idea? Is it going to be used to obtain funding? If you are seeking financing, your document needs to function as a prospectus or sales document in addition to a business plan. An internal document can be more informative and less focused on selling the idea to a third party.

Once you determine the audience for your business plan, start compiling data about the hotel industry and economic factors in the region you want to locate your hotel. If you want to buy an existing motel, obtain as much information as you can about its current occupancy rates, labor, and operational costs. This information should be readily available if the property is already listed on the market. Even if you want to build your hotel from the ground up, look for hotels in your area for sale. It will provide you with valuable insight into the profitability of a hotel in your region.

Next, summarize who your hotel will cater to attracting a budget-conscious traveler is significantly different from appealing to a business traveler or a honeymooning couple. Define your niche. Go online and visit the websites of hotels that service your target clientele. Take note of the look/feel of the hotel, the appointments in the rooms, and the amenities available for the price point.

Once you have summarized your target market, briefly consider how you will locate your niche. Think about the costs associated with your marketing ideas. A large billboard on the highway, radio advertising, newspaper ads, search engines factor in the costs and briefly outline a plan of action.

Now you have defined your target market and need to think about costs. Business travelers will expect more frills than a road-weary traveler just looking for a place to spend the night. Determine how cost-effective it is to add nicer linens, high-speed internet access, a fitness or laundry area and a dining area. Consider the costs of room service, maids, janitors, front desk attendants, a general manager, and a marketing staff member. Remember to add in the costs of workers compensation, employer-contributed taxes, and benefits to your labor costs. Calculate water and electricity consumption, maintenance, taxes, and insurance expenses you will incur in the operation of your hotel. These operational expenses form the basis for your financial section.

Many times your investor will flip straight to the financial portion of your presentation. It is best to keep the bottom line simple, easy to understand, and straightforward. This overview is not the place to identify individual small expenses. For instance, paper clips should not be a line item, but instead included in Office Supplies Other categories may include appliances, room furnishings, linens, decor, and landscaping.

Projections are very important. Even if your venture will lose money for the first several months, it is important to address that so your investor understands why the long-term outlook is so good for your hotel. Your financials should include a month-by-month accounting for one year, then an annual summary for years 2-5. While anything after the third year is pure speculation, an investor will want to see your long-term thought process.

Now you have completed a market summary and financials, revisit the operation section. Do the numbers still make sense? Can you afford a better level of service? Do you need to shave expenses? Keep sharpening your pencil and revising your Operations/Financials Summary until the two sections jibe perfectly with your Market Summary. Now you are ready to tackle the Executive Summary.

The Executive Summary is the last thing you write although it is the first thing your investor will read. This section is the road map you provide to the reader to walk him through your plan. This is where you need to sell the reader on your vision. If you cannot entice the investor to read the Executive Summary in its entirety, you might as well not bother with the other sections. Your plan is a sales document. Each line needs to compel the reader to keep going. It should not read like stereo instructions. Try to infuse your grand idea into the heart and mind of your investor using your Executive Summary.

Now that you have completed your plan, organize any supporting information into an appendix. Census data, competing hotels marketing pamphlets, web-published data, and anything else that supports your position should be accessible here. Many investors don’t view it, but it shows you did your homework which all investors will appreciate.

Finally, have a trusted friend or colleague edit your plan. A grammatically correct plan free of typos can make the difference in whether your plan gets green light from investors. If you have not taken care to present a quality document, an investor may view you as sloppy and not a good risk. These details add credibility to your document and ensure the best possible outcome.

Use a good quality printer when making copies of your business plan and use at least 24-lb paper. Binding your document is always more professional than stapling it together, and consider using a presentation folder to make a great first impression.

If you follow these steps in building a hotel business plan, you are certain to find success.


Leave a Comment