How To Run A Small Hotel Or Guest House

How To Run A Small Hotel Or Guest House

Opening a small hotel is a dream for many who enjoy interacting with people and want to run their own businesses. Unfortunately, you can’t just open your doors and expect the hotel to automatically be successful. Making a hotel a success requires careful research, management, and financial planning. Keep all of this in mind when planning to open your own hotel.

Do market research

Determine where you want to locate your hotel. Before worrying about exact locations, you have to think more broadly and decide which city or town you want your hotel to be in. At a minimum, you have to consider what the tourism industry is like in a given area. Because this is a small hotel or guest house and not a chain, you are likely to cater to hikers and tourists rather than employees on business trips. Therefore, you will have to choose an area that people want to visit. Check websites or travel books to find out about some destinations that tourists frequent and start looking around that place for a good place for your hotel.

Decide if you are going to buy an existing hotel or build a new one. This is the first decision you will have to make when deciding on a city. You can either search for a hotel that an owner is looking to sell or you can build a new one from scratch. There are pros and cons to each option that you should carefully weigh before making a decision.

  • If you buy an existing hotel, it’s likely to be cheaper than building a new one, unless the property needs major renovations. You may also be able to keep some of the staff, which will simplify your search for employees later on. However, if the hotel you are buying has a bad reputation, your profits may suffer. You will have to work hard to advertise that the hotel is under new management.
  • If you build a new hotel, it will likely be more expensive. However, you will be able to build it any way you want, which means you could redesign it for a specific market niche. Also keep in mind that if you build a new hotel, you will have to work hard to advertise your grand opening to get customers. When building a new hotel, also make sure the area is zoned for hotels and guest houses.

Find out about other hotels, guest houses, and B&Bs in the area. You’ll need to get a good idea of ​​the competition you’ll be up against and how you can successfully carve out a market for yourself. There are several things to look for when researching the potential competition. This will give you an idea of ​​how you can make your hotel stand out. 

  • Find out what competitors charge. Look at all the local hotels and find out their nightly rates. However, remember that price is not everything. If a hotel is cheap but all the reviews are terrible, you shouldn’t try to lower prices to compete with it.
  • Read customer reviews online. This will give you an idea of ​​any compliments or complaints customers have had. This way, you can get an idea of ​​what visitors are looking for in the hotels they stay in, which will allow you to serve that market.
  • See what local hotels offer besides rooms. Do they have restaurants? Swimming pools? Gyms? breakfast service?
  • Book a stay at a few local hotels to get a feel for what they have to offer. Staying one night will allow you to closely research the competition and get ideas for your own hotel.
Understand your core market. This will help you target your services to your likely customers. Small hotels and guest houses generally attract tourists who stay only for a few nights. If your hotel is located in a rural area or a town, you will likely see a lot of people from the city trying to get away from the hustle and bustle for a while. If this is the case, you should decorate your hotel with items that reflect simple village life.
Determine what additional services you want to offer together with the hotel. Customers at these establishments are typically looking for a great personal touch, so plan to offer services that make their stay more enjoyable and comfortable. Tourists at small hotels are generally looking for relaxation, so you could set up a secluded outdoor area for guests to lounge around. Smaller hotels usually don’t offer things like gyms or restaurants, but you could include those as well. Just keep in mind that each additional service you decide to offer is an additional economic cost, both to build and maintain. Be sure to budget carefully to avoid losing money on these efforts. 

Manage the economy of your hotel

Hire an accountant. Even if you are going to open a hotel because it is the dream of your life, you have to remember that it is an economic investment anyway. Unless your hotel is very small or you are a trained accountant, you will likely need an accountant to help you manage your finances. All hotels, even small ones, have many costs that you have to account for, such as staffing, utilities, rent, taxes, and equipment, to name just a few. An accountant can help you navigate the complicated world of financing a hotel and help you secure your financial future. For example, many small and medium business secretaries recommend taking the following steps to find an accountant:

  • A personal reference is usually the best way to find a reliable accountant. Ask other business owners who their accountants are and if they are satisfied with their work. You can also find out if your local chamber of commerce hosts networking events for small business owners where you can connect with potential accountants.
  • Schedule an appointment with potential accountants. Most accountants offer a free introductory meeting for prospective clients. When you compile a list of candidates, meet with them and discuss their experience and qualifications to see if they would be a good fit for your hotel.
  • Find out if a candidate has experience working with hotels. Hotels are unique businesses that require particular knowledge. It would be ideal if your candidate has worked in hotels before, preferably with independent managers. This will ensure that they have experience with the particular situations you might face.
  • Decide if the candidate is trustworthy. In addition to experience, you need an accountant with whom you can work long-term. If he’s late for meetings, doesn’t return your calls, and does sloppy work, he’s probably not the best partner for you, even if he has a good background. Remember that you will be trying to form a long-term partnership with someone who will help your business grow.
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Make a business plan. When opening a hotel, you will likely need to raise start-up capital, either from a bank or from private investors. Any of these will want to see a business plan to determine if yours is worth investing in. Also, a good business plan is beneficial to organize your goals for your hotel and get a clear picture of how to make it a success. A business plan for a hotel should include at least the following:

  • A description of the services that your hotel will offer. Describe how these differentiate you from other hotels in the area: will you offer better rates? A more personal service? Investors want to see what makes your hotel unique.
  • Who is your potential market? Explain what demographic you are targeting and why they would choose your hotel over another.
  • A projection of your future earnings. Investors will want to see that your hotel is profitable. With the help of your accountant, calculate what you expect your annual income to be. He also states how long it will be before you expect to start turning a profit and where your hotel will be in the next few years.
  • A full breakdown of your costs. Between buying or renting the property, renovating it, and furnishing it, you will incur a lot of costs to get your hotel up and running. Present the most accurate estimate you can of your total expenses when applying for loans. Also, be sure to include a good estimate of your daily operating costs. It can take several months for your hotel to start attracting enough customers to break even, so you’ll need money to stay open during that time.

Acquire initial capital. When you have written your business plan, present it to potential investors. With a good business plan, you can demonstrate that your hotel will be a profitable business, which will convince investors to provide you with the money you need. You have two options for acquiring starting capital, and you will likely end up using a combination of both.

  • Banks: you can apply for a bank loan for a few months to a few years, depending on the type of loan. This can cover your start-up costs and your first few months of operating expenses.
  • Private Investors – These can be friends, family, or other business owners interested in investing. Be sure to define if these people will only give you a loan that you will pay with interest or if they are going to invest in your company. We recommend that you draw up a contract that defines the terms of your agreement and legalize it through a notarized act to prevent problems in the future.

Set your prices. Once you have opened your hotel, the prices will determine your profit level. Your nightly rates will vary depending on local competition, your operating costs, the season, and a myriad of other factors. The general rule of thumb when setting prices is to keep them low enough to attract customers and high enough to make a profit. There are several things to keep in mind when setting prices:

  • Know your costs. You need to calculate exactly how much it will cost to keep your hotel open every day. Then multiply it to find out how much it will cost to run your hotel every month. Your income will at least have to cover your monthly expenses, otherwise, you will not be able to stay operational.
  • Find out what customers are willing to pay. This will take some trial and error. When you first start, your only guide may be your operating costs. If after a few months you notice that your rooms are constantly booked, you can raise the prices. If you’re having trouble getting customers, lower your prices. You can also survey customers after their stay and ask if the rate seemed fair to them.
  • Adjust prices based on the season. In high seasons, you can raise prices because more people will be looking to go on vacation. In low seasons, lower your rates to attract off-season customers.
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Reduce costs where necessary. Even with good financial management, your hotel will almost certainly experience slower times. You should review costs regularly and decide which ones are necessary and which ones you can do without. During off-peak times, cut unnecessary costs to save money. For example, if you have a slow week and only a few rooms are booked, you probably won’t have to put someone at the front desk all day. Do this task yourself to cut costs and save money you would spend paying someone to man the front desk. 

Manage hotel staff

Hire all the necessary staff. The size of your staff will vary depending on the size of the hotel. For a small B&B, you may be able to run the place with just a few helpers. Hotels with multiple rooms, even small ones like yours, often need a team of workers to keep them running smoothly. When looking for staff, you should consider at least the following positions:

  • Chambermaids: Cleanliness should be your top priority when running a hotel. A dirty hotel will quickly get a bad reputation and customers won’t come. Depending on the size of the hotel, you may only need one chambermaid or a team of them. A maid can usually cover around 10-15 rooms a day, so keep that in mind when hiring.
  • Front Desk Staff – Even in small hotels it is generally expected that someone will be at the front desk at all times. You can do it yourself for a few hours, but you’ll need a team to staff the reception 24 hours a day.
  • Maintenance workers: One or two maintenance workers should be enough for a small hotel. They have to be general-purpose workers who can perform a wide range of tasks: plumbing, painting, repairs, electrical work, etc. That way, you can let maintenance workers take care of the smaller tasks, and if they can’t handle something, you can hire a professional to do a full job.
  • A cook: if you plan to offer food in your hotel, you will need at least one cook. Smaller hotels may only offer breakfast, so you may only have to cook for a few hours a day.
Screen all applicants. Thoroughly interview all of your potential employees and talk about their references as well. You should also check their background. Remember: your employees will have access to the rooms and personal property of your guests. You must ensure that all employees are trustworthy before giving them this type of access.

Prepare a manual for all employees. You must establish specific systems for all employees to follow. This way you can ensure a consistent level of service for your guests. Ask all employees to read this manual as part of their training. In the handbook, explain exactly what you’ll expect from each employee.

  • Emphasize that all guests should be treated cordially. Without good service, customers won’t come back and your business will fail.
  • It also details what types of activities are prohibited on the premises and explains when dismissal is a possible outcome.
Hold regular staff meetings. Weekly or monthly meetings will help you maintain a good relationship with your staff. You should use these meetings to tell your staff if there’s anything they can improve on and ask for suggestions on how to do it. Also, be sure to praise good work so your employees feel like they’re part of a team. Listen carefully if they give you suggestions, because even though you are the owner, your employees have experience at the hotel that you may not have, and they are in a good position to suggest changes.
Make sure you are available to your staff. Tell the staff that they can come to you at any time to discuss any problems or concerns they have, and listen if they do. You must be on the hotel premises often and play an active role in the administration. This will make the staff comfortable with you and more willing to open up. If you are never present, you will seem distant and your staff may not be comfortable talking to you.

Promote your hotel

Design a web pageIf your hotel is not on the Internet, it will be invisible to your potential customers. You can design your website, but it may be worth investing in a professional to do it because low-priced websites are often easy to spot. At a minimum, your website should list the hotel’s name, location, contact information, and nightly rates. Small hotels often attract guests looking for a more personal touch, so you can target them by adding some particular information to your website. Whatever you put on your website, make sure it’s accurate and up to date. An outdated website will make your hotel look sluggish and unprofessional, which can hurt your business. You can also include:

  • Photos of the property. Guests will want to see where they will stay. Include photos of the rooms, as well as any scenic views that may be nearby.
  • Biographical information about you. Make your website more personal by including yourself. If the staff is willing, you can include that too. This will provide the kind of personal service that draws guests to bed and breakfasts and rooming houses.
  • The history of the hotel. Some small hotels are located in historic houses. If so, you will appeal to a specific market of history buffs and could target them by providing the full history of the building and the area around it.
  • Any special offers or promotions that your hotel offers.
  • Lists and descriptions of nearby attractions. If you are near a tourist spot, publicize this information. This will make travelers see your hotel as a convenient place to stay.
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Post ads on travel websites like Expedia or These sites and others are designed for people to find hotels and travel destinations. By posting on these websites, you will attract guests from all over the country and maybe even from other countries.
Leave flyers at rest stops on interstate highways. Most rest stops have areas with brochures and tourist information. Contact your local chamber of commerce to find out how to leave your brochures there. Small hotels are sometimes snap decisions for travelers. By advertising in this way, you will capture this potential market.
Offer special promotions. Group discounts, free breakfasts, and lower rates for multi-day stays are good ways to attract customers on a budget. Be sure to advertise any promotions you are offering on your website. Also, make sure you can still cover all your operating costs by offering discounts.
Organize events. Events like weddings and business retreats will bring you plenty of guests. Although if you only have a few small rooms, it may not be possible. However, even a small hotel can have enough space to host these types of events. While you probably won’t have room for a large business conference, it’s becoming more common for companies to send a few executives or managers on more intimate retreats. A guest house in a village can be the ideal setting for this type of event. Advertise on your website and other travel websites that you are willing to host events and that you will offer special rates to attendees.
Partner with local businesses. Small hotels often operate near local attractions. To take advantage of it, ask those attractions to help you promote yourself. Contact the managers of local parks, historic sites, restaurants, and theaters and see if you can work out a deal. Offer to place brochures for their attractions in your hotel lobby if they recommend your hotel to travelers. This way you can capture travelers in the area who may not have seen your other ads.
Make sure all guests have a great experience. In addition to other advertising methods, word of mouth will be crucial. All your guests can tell their friends and family about your hotel, post about it on social media, and review it online. You should do everything you can to make sure their reviews are positive. Even a disgruntled guest can hurt your business if they take it online. If you commit to making every guest have a good time, you will establish customer loyalty that will get you great publicity.

Cultivate repeat visits. Past guests who enjoyed their stay are a great source of future business. In addition to providing them with good service during their stay, there are several methods you can use to persuade past guests to return.

  • Establish an email list. With a contact list, you can let your previous guests know about special offers and promotions that you are going to offer. It’s better to let guests sign up for this list instead of just emailing everyone who has stayed. If not, you run the risk of upsetting them and may talk them out of coming back.
  • Reward repeat visits by offering special promotions to past guests. There are many ways to do it. You can give guests discounts on their second stay or offer them a free night after a set minimum number of nights. You can also set up a points system so that guests can collect points and get promotions this way.
  • Respond to customer evaluation. Several travel websites allow hotels to respond to customer reviews. You should take advantage of this option and respond to both the good review and the bad reviews. This will show guests that you’ve taken their opinions seriously and they might be more likely to return. It will also show potential guests that you are committed to good customer service.


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